-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nyk0XLk/W1isFKsYLeamyNSnIRji7tgSpcu5xgqExueQsuJpSqoyIz8+6RM7R0rY UJAJ5Imm30qEQHI9Ij1YsA== 0000950131-02-005043.txt : 20021230 0000950131-02-005043.hdr.sgml : 20021230 20021230172528 ACCESSION NUMBER: 0000950131-02-005043 CONFORMED SUBMISSION TYPE: 20-F PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20021230 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANSELL LTD CENTRAL INDEX KEY: 0000791440 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED RUBBER PRODUCTS, NEC [3060] IRS NUMBER: 000000000 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 20-F SEC ACT: 1934 Act SEC FILE NUMBER: 000-15850 FILM NUMBER: 02872565 BUSINESS ADDRESS: STREET 1: LEVEL 3 STREET 2: 678 VICTORIA ST CITY: RICHMOND VICTORIA STATE: C3 ZIP: 3121 BUSINESS PHONE: 01161392707215 MAIL ADDRESS: STREET 1: LEVEL 3 STREET 2: 678 VICTORIA ST CITY: RICHMOND VICTORIA STATE: C3 ZIP: 3121 20-F 1 d20f.txt FORM 20-F UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) [ ] REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended 30 June 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to __________ Commission file number 0-15850 ANSELL LIMITED ------------------------------------------------------ (Australian Company Number 004 085 330) (Exact name of Registrant as specified in its charter) ANSELL LIMITED ----------------------------------------------- (Translation of Registrant's name into English) VICTORIA, AUSTRALIA ----------------------------------------------- (Jurisdiction of incorporation or organisation) Level 3, 678 Victoria Street, Richmond, Victoria, 3121, Australia ----------------------------------------------------------------- (Address of principal executive offices) Securities registered or to be registered pursuant to Section 12(b) of the Act. Title of each class Name of each exchange on which registered None None Securities registered or to be registered pursuant to Section 12(g) of the Act. Ordinary Shares --------------------------- American Depositary Shares* --------------------------- * Evidenced by American Depositary Receipts, each American Depositary Share representing four (4) Ordinary Shares Securities registered or to be registered pursuant to Section 15(d) of the Act. None ---------- Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report. Ordinary Shares - 186,395,200 (at 30 June 2002)** ** This figure includes 825,276 shares represented by the 206,319 American Depositary Shares outstanding on 30 June 2002. ---------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate by check mark which financial statement item the registrant has elected to follow [ ] Item 17 [X] Item 18 CONTENTS - BUSINESS DESCRIPTION AND FINANCIAL STATEMENTS - --------------------------------------------------------------------------------
SEC ITEM PAGE NO PART I ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS..............................1 ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE............................................2 ITEM 3: KEY INFORMATION....................................................................3 3A Selected Financial Data..........................................................3 3B Capitalisation and Indebtedness..................................................5 3C Reasons for the Offer and use of Proceeds........................................5 3D Risk Factors.....................................................................5 ITEM 4: INFORMATION ON THE COMPANY.........................................................8 4A History and Development of the Company...........................................8 4B Business Overview...............................................................10 4C Organisational Structure........................................................16 4D Property, Plant and Equipment...................................................16 ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS......................................17 5A Operating Results...............................................................17 5B Liquidity and Capital Resources.................................................24 5C Research and Development........................................................26 5D Trend Information...............................................................26 5E Critical Accounting Policies....................................................26 ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES........................................28 6A Directors and Senior Management.................................................28 6B Compensation....................................................................30 6C Board Practices.................................................................32 6D Employees.......................................................................36 6E Share Ownership.................................................................37 ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS.................................39 7A Major Shareholders..............................................................39 7B Related Party Transactions......................................................39 ITEM 8: FINANCIAL INFORMATION.............................................................40 8A Consolidated Statements and other Financial Information.........................40 8B Significant Changes.............................................................40 ITEM 9: THE OFFER AND LISTING.............................................................41 ITEM 10: ADDITIONAL INFORMATION...........................................................42 10A Share Capital...................................................................42 10B Constitution....................................................................42 10C Material Contracts..............................................................44 10D Exchange Controls...............................................................45 10E Australian Taxation.............................................................54 10F Dividends and Paying Agents.....................................................56 10G Statement by Experts............................................................56 10H Documents on Display............................................................56 ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................57 Derivative Financial Instruments.....................................................57 ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES...........................63 PART II ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES..................................64 ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS.........................65
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SEC ITEM PAGE NO PART III ITEMS 17 & 18: FINANCIAL STATEMENTS...................................................... 66 Statements of Financial Performance................................................. 66 Statements of Financial Position.................................................... 67 Industry Segments................................................................... 68 Statements of Cash Flows............................................................ 70 Notes to Financial Statements....................................................... 71 1. Summary of Significant Accounting Policies..................................... 71 2. Change in Accounting Policy.................................................... 78 3. Total Revenue.................................................................. 78 4. Profit/(Loss) from ordinary activities before income tax....................... 79 5. Contributed Equity............................................................. 80 6. (Accumulated Losses)/Retained Profits and Reserves............................. 82 7. Total Equity Reconciliation.................................................... 83 8. Income Tax..................................................................... 83 9. Dividends Paid and Declared.................................................... 84 10. Outside Equity Interests....................................................... 84 11. Cash........................................................................... 84 12. Receivables.................................................................... 85 13. Inventories.................................................................... 85 14. Investments.................................................................... 86 15. Property, Plant and Equipment.................................................. 87 16. Intangibles.................................................................... 89 17. Deferred Tax Assets............................................................ 89 18. Payables....................................................................... 90 19. Interest Bearing Liabilities................................................... 91 20. Provisions..................................................................... 93 21. Other Liabilities.............................................................. 94 22. Dissection of Liabilities...................................................... 94 23. Expenditure Commitments........................................................ 95 24. Superannuation................................................................. 96 25. Ownership-Based Remuneration Schemes........................................... 97 26. Contingent Liabilities......................................................... 99 27. Financial Instruments..........................................................101 28. Directors' and Executives' Remuneration........................................105 29. Service Agreements.............................................................107 30. Notes to the Business Segments Report..........................................107 31. Notes to the Statements of Cash Flows..........................................108 32. Acquisition of Controlled Entities and Material Businesses.....................110 33. Disposal of Controlled Entities and Material Businesses........................110 34. Related Party Disclosures......................................................110 35 Earnings per Share.............................................................114 36. Environmental Matters..........................................................115 37. Particulars Relating to Controlled Entities....................................116 38. Investments in Associates......................................................120 39. Major differences between Australian GAAP and US GAAP..........................121 40. Reconciliation to United States Generally Accepted Accounting Principles (U.S. GAAP).........................................................127 DIRECTORS' DECLARATION...................................................................133 INDEPENDENT AUDIT REPORT.................................................................134 SIGNATURE................................................................................135
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SEC ITEM PAGE NO PART III (continued) CERTIFICATIONS...........................................................................136 SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002.........................140 Directors Report....................................................................140 Statement of Financial Performance..................................................144 Statement of Financial Position.....................................................145 Statement of Cash Flows.............................................................146 Notes to the Financial Statements...................................................147 Directors' Declaration..............................................................169 Independent audit report............................................................170 ITEM 19: EXHIBITS........................................................................171 Exhibit Index.......................................................................171
PART I ITEM 1 : IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS - -------------------------------------------------------------------------------- Not Applicable 1 PART I ITEM 2 : OFFER STATISTICS AND EXPECTED TIMETABLE - -------------------------------------------------------------------------------- Not Applicable 2 PART I ITEM 3 : KEY INFORMATION - -------------------------------------------------------------------------------- 3A SELECTED FINANCIAL DATA The following selected financial data for the five year period ended 30 June 2002 has been derived from Ansell Limited's audited consolidated financial statements (the "Financial Statements") and should be read in conjunction with and are qualified in their entirety by reference to those statements and accompanying notes thereto. Such Financial Statements have been audited by KPMG, independent accountants. Except as set forth below, Ansell Limited's consolidated financial statements are prepared in accordance with Australian GAAP, which varies in certain material respects from U.S. GAAP. For discussion of the major differences and a reconciliation of the material differences between Australian GAAP and US GAAP as they relate to Ansell Limited, see Notes 39 and 40 to the Financial Statements.
IN MILLIONS OF A$, EXCEPT PER SHARE FOR YEARS ENDED 30 JUNE & PER ADS AMOUNTS 2002 2001 2000 1999 1998 - ---------------------------------------------------------------------------------------------------------------------------------- STATEMENT OF FINANCIAL PERFORMANCE DATA AMOUNTS PREPARED IN ACCORDANCE WITH AUSTRALIAN GAAP : Sales revenue (excluding South Pacific Tyres) 2,223 4,157 5,726 5,680 5,473 Depreciation and amortization 53 95 149 156 155 Net profit before minority interest, goodwill amortization, net interest expense including borrowing costs and income tax expense from continuing operations 135 115 100 125 106 Net profit/(loss) before minority interest, goodwill amortization, net interest expense including borrowing costs and income tax expense from non recurring activities (108) 79 (9) 276 260 Goodwill amortization 29 41 41 41 40 Net Interest expense including borrowing costs 55 99 103 106 103 Net profit/(loss) before income tax (57) 54 (53) 163 68 Income tax expense 56 190 30 51 44 Outside equity interest after tax (3) (3) (4) (6) 1 Net profit after income tax (116) (139) (87) 106 25 AMOUNTS PREPARED IN ACCORDANCE WITH US GAAP : Sales revenue from continuing operations 1,414 1,412 1,173 1,185 1,078 Income/(loss) from continuing operations (75) (223) (31) 37 11 Net income/(loss) (184) (195) (42) 119 (118) SHARE INFORMATION /(1)/ AMOUNTS PREPARED IN ACCORDANCE WITH AUSTRALIAN GAAP : Number of shares on issue (millions) 188 188 209 206 206 Basic Earnings per share ($'s) (0.62) (0.72) (0.42) 0.51 0.12 Basic Earnings per ADS ($'s) (2.48) (2.88) (1.68) 2.04 0.48 Dividends provided for or paid - 47 103 144 144 Dividends per ordinary share ($'s) - 0.05 0.10 0.14 0.14 Dividends per ADS ($'s) - 0.20 0.40 0.56 0.56 Dividends per ADS - US$ /(2)/ - 0.10 0.23 0.35 0.35 AMOUNTS PREPARED IN ACCORDANCE WITH US GAAP : /(3)/ Basic Earnings per share - continuing operations/(4)/ ($'s) (0.40) (1.15) (0.15) 0.18 0.05 Basic Earnings per ADS - continuing operations ($'s) (1.60) (4.60) (0.60) 0.72 0.20 Basic Earnings per share - net income/(loss) ($'s) (0.98) (1.01) (0.20) 0.58 (0.57) Basic Earnings per ADS - net income/(loss) ($'s) (3.92) (4.04) (0.80) 2.32 (2.28) STATEMENT OF FINANCIAL POSITION DATA (AT YEAR END) AMOUNTS PREPARED IN ACCORDANCE WITH AUSTRALIAN GAAP : Current assets 822 1,803 3,344 3,071 3,056 Total assets 1,833 3,476 5,086 5,219 5,599 Current liabilities 389 1,450 2,863 2,581 2,780 Non-current liabilities 568 960 723 1,004 1,127 Shareholders' equity 876 1,066 1,500 1,634 1,692 AMOUNTS PREPARED IN ACCORDANCE WITH US GAAP /(2)/ : Current assets 821 1,802 3,342 3,070 3,055 Total assets 1,847 3,561 5,193 5,321 5,680 Current liabilities 389 1,427 2,797 2,512 2,686 Long term debt (including leases) 517 862 628 783 850 Shareholders' equity 877 1,154 1,656 1,786 1,829
3 PART I ITEM 3 : KEY INFORMATION - -------------------------------------------------------------------------------- 3A SELECTED FINANCIAL DATA (continued) (1) Effective 12 April 2002, Ansell Limited reduced the number of ordinary shares and exercisable options on issue by means of a 1 for 5 share consolidation, which received shareholder approval at an Extraordinary General Meeting held on 12 April 2002. Where appropriate prior year comparatives have been adjusted to take into account this share consolidation. (2) US$ amount of A$ dividends translated at the Noon Buying Rate on the respective A$ dividend payment dates, which represents approximately the actual US$ dividend paid to holders of American Depositary Shares (ADSs) by the Depositary. (3) The principle differences between Australian GAAP and US GAAP are explained in Notes 39 and 40 to the Financial Statements. (4) Diluted earnings per share have not been disclosed, as they are not materially different from basic earnings per share. EXCHANGE RATES Ansell Limited publishes its consolidated financial statements in Australian dollars (A$ or $). Unless specified or the context otherwise requires, references to US$ or US dollars are to United States dollars and references to $ or A$ are to Australian dollars. For the convenience of the reader, this Annual Report contains translations of certain Australian dollar amounts into US dollars at specified exchange rates. These translations should not be construed as representations that the Australian dollar amounts actually represent such US dollar amounts or could be converted into US dollars at the rate indicated. Unless otherwise stated, the translations of Australian dollars into US dollars have been made at the noon buying rate in New York City for cable transfers in Australian dollars as certified for customs purposes by the Federal Reserve Bank of New York (the "noon buying rate") on specified dates. The rate of exchange of A$1.00 to US$ based on the noon buying rate on 30 November 2002 was 0.5617 The following table sets forth, for the periods and dates indicated, information concerning the rates of exchange of A$1.00 to US$ based on the noon buying rate. For the last six months US$ PER A$1.00 HIGH LOW - ------------------------------------------------------------------------------ November 2002 0.5663 0.5562 October 2002 0.5596 0.5405 September 2002 0.5535 0.5410 August 2002 0.5547 0.5225 July 2002 0.5710 0.5340 June 2002 0.5796 0.5554 For the last five fiscal years US$ PER A$1.00 2002 2001 2000 1999 1998 - ------------------------------------------------------------------- Average Rate /(1)/ 0.5221 0.5377 0.6280 0.6248 0.6820 /(1)/ The daily average of the noon buying rate on the last business day of each calendar month during the period. Fluctuations in the A$/US$ exchange rate will affect the US$ equivalent of the A$ price of the ordinary shares on the Australian Stock Exchange Limited, and as a result, are likely to affect the market price of Ansell Limited's ADSs in the United States. Such fluctuations would also affect the US$ amounts received by holders of ADSs on conversion by the Depositary of cash dividends paid in A$ on the ordinary shares underlying the ADSs. 4 PART I ITEM 3 : KEY INFORMATION - -------------------------------------------------------------------------------- 3A SELECTED FINANCIAL DATA (continued) Ansell's borrowings are significantly US dollar based, reflecting the major currency of the foreign investments of the company and its subsidiaries. Ansell does not have a program to hedge foreign assets, but aligns the currency of its borrowings to the currency of its assets and underlying cash flows. Ansell Limited purchases forward exchange contracts to cover exchange rate risks on import/export transactions. The Company believes it has reduced substantially its exposure to movements in exchange rates with respect to these transactions. The Company remains exposed, however, to fluctuations in exchange rates to the extent that the results of operations of its foreign subsidiaries are denominated in currencies other than Australian dollars and are translated for each relevant financial period into Australian dollars at the average exchange rate for the period. To partially offset this exposure, the Company instigated in April 2001 a six-month rolling hedge of 75% of Ansell's anticipated Euro revenues against the US dollar, which is the principal functional currency of Ansell. This program was suspended in June 2002 while management examined a number of alternative approaches. 3B CAPITALISATION AND INDEBTEDNESS Not Required 3C REASONS FOR THE OFFER AND USE OF PROCEEDS Not Required 3D RISK FACTORS The following list of risks and uncertainties may not be exhaustive. Additional risks and uncertainties that we do not currently know about or that we currently believe are immaterial may also harm Ansell's business, results of operations and financial condition. Since a substantial portion of Ansell's costs and net sales are incurred and realised in currencies other than Australian dollars, fluctuations in currency exchange rates could have a material effect on the results of operations. Due to the worldwide locations of Ansell's manufacturing facilities, a substantial portion of costs are incurred in currencies other than Australian dollars, primarily the U.S. dollar and currencies of various Southeast Asian countries. In fiscal years 2000, 2001 and 2002, all Ansell's manufacturing costs were denominated in currencies other than Australian dollars. Similarly, due to the worldwide presence of Ansell's customer base, a substantial portion of net sales is realised in various currencies other than Australian dollars, primarily U.S. dollars, euros and to a lesser extent British pounds, Canadian dollars and several other currencies. For each of fiscal years 2000, 2001 and 2002, approximately 95% of net sales were denominated in currencies other than Australian dollars. Net sales and costs are not aligned in certain regions, which limits natural currency hedges. We expect that a large part of Ansell's costs and sales will continue to be in non-Australian currencies. As a result, fluctuations in currency exchange rates, particularly of the U.S. dollar, various Southeast Asian currencies and the euro relative to the Australian dollar could have a material positive or negative effect on the results of operations. Ansell's board of directors determines the currency and hedging strategies. These strategies should reduce but not eliminate the risks of currency exchange rate fluctuations and will result in transaction costs associated with hedging transactions. 5 PART I ITEM 3 : KEY INFORMATION - -------------------------------------------------------------------------------- 3D RISK FACTORS (continued) The public market for Ansell Limited's shares may fluctuate. The market price of Ansell Limited's shares could fluctuate significantly in response to various factors, including: .. actual or anticipated variations in semi-annual operating results, including currency translation, .. announcements of technological innovations or new services or products by Ansell or Ansell's competitors, .. the operating and stock price performance of other comparable companies, .. changes in financial estimates by securities analysts, .. changes in Ansell's expected capital needs, and .. announcements relating to strategic relationships, mergers or consolidations by Ansell's competitors or us. The stock markets have experienced extreme price and volume fluctuations that have affected the market prices of equity securities. These fluctuations have often been unrelated or disproportionate to operating performance. These broad market factors may materially affect the trading price of Ansell Limited's common stock. General economic, political and market conditions, like recessions and interest rate fluctuations, may also have an adverse effect on the market price of Ansell Limited's shares. Ansell's manufacturing operations are based, and revenues originate, in many different countries and are, therefore, subject to instability and fluctuation in political, diplomatic and economic conditions, including changes in policies regarding taxation. In fiscal year 2002, approximately 68% of the Ansell's manufacturing operations, measured in terms of cost of production, and approximately 52% of Ansell's net sales were outside the United States. As a company with worldwide presence, we are subject to economic, political and diplomatic factors in countries where we have operations that could adversely affect the financial results, restrict Ansell's ability to expand or limit the current operations. Ansell's latex product factories and latex concentrate manufacturing and processing plants outside the United States are located in Malaysia, Thailand, Sri Lanka, India and Mexico, as are those of many of Ansell's competitors. As a result, we are directly affected by the political and economic conditions, to the extent that they affect on the export of product from manufacturing plants that exist in those parts of the world. Any political or economic instability, a significant increase in the rate of corporate taxation, a discontinuance or reduction in export tax rebates or any other change in a country's policies regarding foreign ownership of manufacturing facilities could adversely affect the results of operations. We expect that non-U.S. production costs will continue to represent the major portion of such costs. We also expect that we will be subject to the risks of conducting business internationally, including foreign currency exchange rate fluctuations, unexpected changes in regulatory requirements, tariffs and other barriers. The results of operations may be adversely affected by these factors. Several of Ansell Limited's subsidiaries, and the Company in some instances, are defendants in product liability lawsuits related to products manufactured and sold by subsidiaries. Although we cannot quantify Ansell's exposure in these cases, we are incurring and expect to incur additional expenses in defending these. Some of those expenses, as well as judgements that could be entered against us, may not be covered by insurance. Ansell, and other companies in its industry, are currently defendants in numerous product liability lawsuits alleging fault for allergic reactions to natural rubber latex gloves experienced by some users. As of 30 June 2002, Ansell was a defendant along with other manufacturers and distributors of latex gloves in 367 lawsuits filed in the United States and 1 in Australia on behalf of individuals alleging wrongful death, personal injuries and lost wages as a result of their exposure to natural rubber latex gloves. 6 PART I ITEM 3 : KEY INFORMATION - -------------------------------------------------------------------------------- 3D RISK FACTORS (continued) The lawsuits allege, among other things, that the defendants were negligent in the design and manufacture of the gloves and failed to adequately warn users of the possibility of allergic reactions to latex products. As of 30 June 2002, the 367 lawsuits pending against us in the United States represented approximately 50% of latex-related cases filed against all defendants in the United States. In the United States, we had 332 and 379 latex allergy lawsuits pending against us at 30 June 2000 and 30 June 2001, respectively. We are unable to anticipate how many additional plaintiffs may file similar lawsuits or how many lawsuits may be filed in other countries. Ansell is subject to regulation by governments around the world, and if these regulations are not complied with, existing and future operations may be curtailed, and could be subject to liability. The design, development, manufacturing, marketing and labelling of Ansell's products are subject to regulation by governmental authorities in the United States, Europe and other countries, including the Food and Drug Administration and the European Committee for Standardisation, known as the FDA and CEN, respectively. The regulatory process can result in required modification or withdrawal of existing products and a substantial delay in the introduction of new products. Also, it is possible that regulatory approval may not be obtained for a new product. Failure to comply with applicable regulatory requirements can result in actions that could adversely affect Ansell's business and financial performance. Ansell is heavily dependent upon the rubber crop and the availability of latex concentrate, and a material disruption in the regular supply of rubber for latex concentrate or increases in the price of latex concentrate could negatively affect the results of operations. Ansell accounted for approximately 6% of worldwide liquid natural latex consumption in fiscal 2002. Ansell's ability to produce natural latex products is heavily dependent upon the regular availability of raw rubber harvested by independent growers in Southeast Asia and processed into latex concentrate. A material disruption in the regular supply of rubber for latex concentrate due to weather or other natural phenomena, labour or transportation stoppages or shortages, political unrest or otherwise, would cause adverse effects to Ansell's business, financial condition and results of operations. In addition, rubber is a commodity traded on world commodities exchanges and is subject to price fluctuations driven by changing market conditions. 7 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- OVERVIEW The fiscal year of Ansell Limited ("Ansell Limited" or the "Company", which, unless the context otherwise requires, includes Ansell Limited and its consolidated subsidiaries) ends on 30 June. The fiscal year ended 30 June 2002 is referred to herein as "2001-2002" or "fiscal year 2002" and other fiscal years are referred to in a similar manner. This Annual Report contains forward looking statements (within the meaning of the Securities Exchange Act of 1934, as amended) and information that is based on management's beliefs as well as assumptions made by and information currently available to management. When used in this Annual Report the words "anticipate," "estimate," "believe," "expect," "potential," "should" and similar expressions are intended to identify forward looking statements. These forward looking statements necessarily make numerous assumptions with respect to the Company's operations, potential exposure, industry performance, general business, economic and regulatory conditions, access to markets and materials and other matters, all of which are inherently subject to significant uncertainties and contingencies and many of which are beyond the Company's control. Should one or more of these risks or uncertainties materialise or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, planned for, estimated, expected or projected. The Company believes that a number of important factors could cause the Company's actual results to differ from those that may have been or may be projected in forward looking statements made by or on behalf of the Company from time to time. These factors include the economic situation in those areas of the world where the Company has substantial operations, customers or consumers, foreign currency exchange rates, the success of the Company's business strategies including cost cutting and consolidations, ability of the Company to take advantage of growth opportunities through acquisitions, positioning of business segments, future production output capacity, litigation, environmental risks, and risks of derivative instruments. See also "Risk Factors" in Item 3 of this Annual Report. The forward looking statements in this Annual Report are contained principally under Item 5 - "Operating and Financial Review and Prospects." 4A HISTORY AND DEVELOPMENT OF THE COMPANY Ansell Limited's business originated in 1893 as a branch of Dunlop of the United Kingdom ("Dunlop UK") conducting an Australian bicycle tire business. The Company was incorporated under the Corporations Act of Australia (the "Corporations Act") on 16 August 1920 in Victoria, Australia under the name of Dunlop Rubber Company of Australia Limited, at which time it acquired the rights in Australia to the trademark and tradename Dunlop and the right to use certain technology of Dunlop UK. Until the 1960s the Company was engaged primarily in the manufacture of rubber based products. During the 1960s and the 1970s, the Company undertook a geographic and product diversification program, including the addition of clothing and footwear businesses (which were the foundation for the Pacific Brands Group) and the establishment of manufacturing facilities in Malaysia, New Zealand and the Philippines. In 1980, the Company merged with another Australian industrial company, Olympic Consolidated Industries Limited ("Olympic"), which was engaged in the tire, polyurethane foam, cable and polystyrene businesses. Both the Company and Olympic had substantial tire manufacturing operations in an industry with over capacity, and the merger led to significant consolidation. After the merger, the Company operated under the name Dunlop Olympic Limited until 1986, when it changed its name to Pacific Dunlop Limited. In 1984, the Company acquired the New Zealand businesses of Canzac Cables Ltd and Dunlop New Zealand Ltd. With their cables, tire manufacturing and retailing, industrial products and sporting goods operations fitting in well with the Company's operations in Australia. During the course of the 1980s, the Company further expanded its operations in Australia and internationally through acquisitions, increased international marketing activity and the construction of new manufacturing facilities, particularly in Asia and North America. The Company also completed a series of joint ventures which complemented and strengthened its prior activities, the most significant of which was the combination of its Australian and New Zealand tire manufacturing and retailing activities with those of The Goodyear Tire and Rubber Company in March 1987. See "Information on the Company - South Pacific Tyres Group." 8 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4A HISTORY AND DEVELOPMENT OF THE COMPANY (continued) In addition, during the 1980s, the Company significantly expanded its battery operations through the acquisition of the battery operations of Chloride Group Plc in the United States, Australia and New Zealand and the acquisition of GNB Technologies Inc., a United States battery manufacturer. During 1988 - 89, the Company acquired certain health and medical businesses, which led to the creation of the Medical Group. The Company also acquired during 1988 - 89 the automotive parts distribution businesses of Repco Limited in Australia. Shortly thereafter, the Company acquired the Edmont industrial glove business ("Edmont") and in 1995 acquired the Perry medical gloves business. These two acquisitions significantly increased the size of the Ansell Healthcare business. Sales during 1995-1996 included adidas, a number of businesses in the Industrial Foam and Fibre Group and the public float of Cochlear Ltd. In 1996 - 97 Loscam Ltd and the Telectronics business of the Medical Group were sold and Ansell Healthcare acquired the Golden Needles Knitting business. On 29 November 1996, the Telectronics implantable medical device business was sold for US$135 million ($166 million net proceeds) to St Jude Medical, Inc. of the United States. Responsibility for products manufactured prior to the sale of the business (including the Accufix Pacing Leads Litigation) was not assumed by the purchaser. During the 1998 fiscal year the Olex Communications division of the Cables and Engineered Products Group was sold for $23 million. GNB Environmental Services Inc. (ESI), a subsidiary of GNB was also sold in that year. The Australian, New Zealand and Sri Lankan cable businesses were sold on 2 June 1999. Proceeds from the sale, including certain property sales of the Cables Group, amounted to $300 million. The sale generated a breakeven result after providing for appropriate write-downs for the Chinese and Indonesian facilities, which were sold during the 2000 fiscal year. During that year the Company also purchased the Medical Glove business of Johnson & Johnson for US$86 million and announced the intention to sell its Electrical Distribution business and GNB Technologies Group. The sales of the Electrical Distribution business and GNB Technologies Group were finalised during the 2001 fiscal year for $343 million and US$333 million respectively. Other key events that occurred during the 2001 fiscal year were: .. resolution of the outstanding Accufix Pacing Leads class action litigation in the United States within the previously provided provisions, .. the strengthening of Ansell Healthcare's global leadership and competitiveness in barrier protection products by continuing the integration of the Johnson & Johnson medical gloves business, fully commissioning the new Thailand condom plant and commencing a major manufacturing and marketing restructure, .. the acquisition and integration by Pacific Brands of Clarks Shoes and the Sara Lee Apparel business in Australasia and Fiji, .. the closure of South Pacific Tyres heavy truck tire plant and the realignment of the marketing function along consumer and commercial lines, .. effective 1 August 2000, the Novare joint venture between the Company and Andersen Consulting (now Accenture) for the provision of business support services and information technology solutions to companies across the manufacturing, distribution and retail industries in Australia and New Zealand formally commenced operation. In addition to the above, the Company also released announcements concerning a restructuring of its activities including the sale of the Pacific Automotive and Pacific Brands businesses, the acquisition of Accenture's 50% interest in the Novare joint venture and an agreement with the Goodyear Tire and Rubber Company of the United States governing the restructure of the South Pacific Tyres Joint Venture. 9 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4A HISTORY AND DEVELOPMENT OF THE COMPANY (continued) During the 2002 fiscal year the sales of the Pacific Automotive and Pacific Brands businesses were finalised for $251.5 million and $730 million respectively. The agreement with the Goodyear Tire and Rubber Company of the United States was also completed. This agreement included reducing manufacturing facilities from five to two and franchising a number of company owned stores. As part of the agreement, an option in favour of the Company was executed (exercisable in four to five years) which enables the Company to put the business to Goodyear. If the option is not exercised, Goodyear has a call option exercisable in the following six months. Under these agreements the Company is not required to contribute any further cash, its contribution being limited to its current loans of $56.3 million. Also effective 31 August 2001 the Company acquired Accenture's 50% interest in the Novare joint venture for $19.3 million. In April 2002 the Company changed its name from Pacific Dunlop Limited to Ansell Limited and reduced the number of ordinary shares and exercisable options on issue by means of a 1 for 5 share consolidation. The Company's registered head office is located at 678 Victoria Street Richmond, Victoria, Australia. Its telephone number is (61 3) 9270 -7270 and fax number is (61 3) 9270-7300. Further information can be found by viewing the Company's website www.ansell.com. However, such information is not part of this Annual Report. 4B BUSINESS OVERVIEW ORGANIZATION Following the downsizing of the Company and the significant shift of operational activity away from Australia, a number of the services formerly provided by the Company's head office in Australia are now undertaken at the Ansell Healthcare head office in Red Bank, New Jersey, USA. The Group's Chief Executive Officer is based in New Jersey. All financing and cash management for the Group is still arranged by the Australian head office. ANSELL HEALTHCARE Ansell Healthcare is a leading global producer and marketer of gloves and condoms and its products provide essential barrier protection for many millions of people at work, in the home and in environments such as food preparation and microelectronics. The following table sets forth certain information with respect to Ansell Healthcare for the periods and dates indicated. FOR YEARS ENDED 30 JUNE $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------ Sales 1,414 1,412 1,173 Operating Profit 162 144 138 Gross Assets /(1)/ 921 1,130 1,086 Employees 12,118 12,076 13,477 /(1)/ Gross assets exclude cash, goodwill and brand names. Ansell Healthcare is organised across three broad market segments and three geographic regions, supported by a common Operations and Supply Chain team and Science and Technology (S&T) group. The market segments in which Ansell Healthcare operate are Occupational Healthcare, which accounts for 45% of Ansell Healthcare's sales and covers the market for protective gloves in industry; Professional Healthcare (39% of sales) which supplies medical, surgical and examination gloves for hand barrier protection and infection control; and Consumer Healthcare (16% of sales) which covers the markets for condoms, household gloves and other personal products. 10 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4B BUSINESS OVERVIEW (continued) ANSELL HEALTHCARE (continued) Medical gloves are marketed principally under the umbrella brands of Ansell and Ansell Perry and specific product brands include Gammex, Conform, Encore, Nutex, MicrOptic, X-AM, Synsation, Dermaclean, Nitratouch, Allergard, Surgikos, Maxxus, Neutralon, Ultralon, Dispos-a-Glove, Micro Touch Ultra and Micro Touch Plus. Condom brands include Lifestyles, Mates, Mannix, Contempo, Primex, Checkmate and Kama Sutra. Ansell Healthcare believes it is the world's largest manufacturer and marketer of synthetic dipped and sewn industrial gloves, which are principally branded Ansell Edmont. Specific product brands include Ansell, Nitrilite, Solvex, Hycron, Golden Needles and Hyflex. With the exception of most types of industrial gloves and some medical gloves, Ansell Healthcare's products are predominantly made of natural and synthetic latex and, accordingly, share common manufacturing processes and polymer dipping technology. Ansell Healthcare believes that the expertise it has developed in proprietary latex process and engineering technology enables it to produce high quality natural and synthetic latex gloves and condoms at low cost and that it has a flexible supply and logistics infrastructure that allows it to switch production between various products to take advantage of changes in market demand. Over 56% of Ansell Healthcare's $1.4 billion sales for the year ended 30 June 2002 were in the Americas region, with another 31% in the European region and the balance in the Asia Pacific region. Over the last two years, management has been actively consolidating and restructuring both the Americas and European sales and marketing regions. This will result in fewer locations and greater focus on customers and market channels, with shared functions supporting each region. The Operations and Supply Chain group support product flows to the markets through 17 global production facilities located in Asia, North America and the UK. Approximately 80% of the product sold is manufactured at these facilities with the balance outsourced under strict quality and performance specifications. Ansell Healthcare's commitment to continuing product cost competitiveness has been illustrated over the last two years with the announcements of the closure of a number of plants in North America. Ansell faces competition with each of its products from a variety of sources, including international and local producers. Major international competitors include Seaton Scholl Limited, which competes with most of Ansell's latex product range; Allegiance (a Division of Cardinal Healthcare), which manufactures and distributes medical examination and surgical gloves; MAPA, (a subsidiary of the French Elf Petroleum group) which produces household and light industrial gloves and condoms; Kimberley Clark Corporation, a U.S. company that manufactures and markets disposable latex and synthetic glove products; Sempermed (a Division of Austria's Semperit), which produces disposable medical gloves; and Church & Dwight, which is a major producer of condoms in the United States. Ansell Healthcare's operations are not impacted by seasonal factors. SOUTH PACIFIC TYRES South Pacific Tyres manufactures and distributes a range of passenger car, recreational, truck and agricultural vehicle tires and imports to supplement its requirements. South Pacific Tyres' marketing efforts are complemented by offering retreading facilities for truck and aircraft tires. The major product brand names used by the partnership are Dunlop, Goodyear and Olympic. Access to those brand names is through license agreements with the Company and Goodyear. The license agreement relating to the Goodyear brand name grants South Pacific Tyres an exclusive right to sell tires or related services under the Goodyear name in the area south of the equator from Australia east to Tahiti. Similarly, under the license from the Company, South Pacific Tyres has the exclusive right to sell tires or related services under the Dunlop or Olympic names in the same area. 11 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4B BUSINESS OVERVIEW (continued) SOUTH PACIFIC TYRES (continued) South Pacific Tyres also sells tires to Goodyear on a wholesale basis for resale outside this area. South Pacific Tyres operates a distribution network of 668 retail outlets in Australia and New Zealand. The retail outlets use a range of trading names, including Beaurepaire for Tyres, Goodyear Auto Service Centres and Frank Allens Stores. During the year the Company and The Goodyear Tire & Rubber Company of the United States, entered into a major restructuring agreement. This agreement included reducing manufacturing facilities from five to two and franchising a number of Goodyear Auto Service Centres and Beaurepaires for Tyres stores. These changes are on target with the plan, with the three manufacturing facilities now closed and a number of stores franchised. As part of the agreement, an option in favour of Ansell Limited was executed (exercisable in four to five years), which enables Ansell to put the business to Goodyear. If the option is not exercised, Goodyear has a call option exercisable in the following six months. Under these agreements, Ansell is not required to contribute any further cash, its contribution being limited to its current loans. As a result of this agreement, the Company, effective 1 July 2001, discontinued its past practice of including 50% of the result of South Pacific Tyres (after elimination of inter company items) in its statements of income. The Company's interest in the South Pacific Tyres partnership is carried as an investment. DISCONTINUED OPERATIONS Over the last three years the Company has pursued a policy of divesting major businesses to enable greater focus on the Ansell Healthcare operations. The following table sets forth certain information with respect to these discontinued operations for the periods and dates indicated. FOR YEARS ENDED 30 JUNE $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------ Sales 809 2,745 4,553 Operating Profit 61 163 241 Gross Assets /(1)/ 46 1,160 1,969 Employees - 11,333 18,058 /(1)/ Gross assets exclude cash, goodwill and brand names. The major business groups divested during the last three years are as follows: PACIFIC BRANDS The Pacific Brands business was sold in November 2001 for $730 million to an investor consortium led by CVC Asia Pacific and co-led by Catalyst Investment Managers Pty Ltd. Pacific Brands was a large Australian consumer goods business marketing many brands that are household names and was organised into four key operating groups; Clothing, Household Products, Footwear and Sport, Leisure and Workwear. PACIFIC AUTOMOTIVE The Company sold its Australian and New Zealand automotive parts business effective 31 August 2001 for $251.5 million to a company owned and funded by GS Private Equity, Gresham Private Equity and Macquarie Direct Investment. Pacific Automotive traded under the trade names of Repco Auto Parts, CarParts, Autopro, Motospecs, Ashdown and Appco and was a supplier of general autoparts selling to the trade, service stations and reseller markets. 12 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4B BUSINESS OVERVIEW (continued) DISCONTINUED OPERATIONS (continued) GNB TECHNOLOGIES GROUP The Company completed the sale of the GNB Technologies Group to Exide Corporation, a US corporation, effective 30 September 2000 for US$333 million cash and 4 million Exide shares. GNB Technologies manufactured industrial and automotive lead acid batteries. Its batteries were used in the telecommunications, power control, automotive and power markets. GNB Technologies consisted of two business units; Automotive and Industrial. In addition, GNB Technologies was a recycler of lead. THE ELECTRICAL GROUP The company completed the sale of the Electrical Distribution business in Australia and New Zealand to Hagemeyer Group effective 31 July 2000 for $343 million. The Electrical Group comprised Australia's largest distributor of electrical installation products. Lawrence & Hanson, Wattmaster, Auslec in Australia and Corys Frasers in New Zealand had a combined total of more than 220 outlets. The business supplied electrical contractors, mining, government and industrial customers. RAW MATERIALS Raw materials are a significant manufacturing cost for many of Ansell Healthcare's products, the most significant being latex. Latex prices can be volatile and are dependent upon world supply and demand and currency movements. Ansell Limited attempts to obtain raw materials from the most economical and reliable sources wherever situated, with regard to world supply, prices and commodity markets. The Company has multiple suppliers for its major raw materials to minimise the risks associated with sole suppliers. No material shortages are anticipated in any of Ansell Healthcare's operations. The Company attempts to pass on to its customers raw material price fluctuations. Careful monitoring and management of raw material costs is carried on throughout Ansell Healthcare's business segments. REGULATION AND ENVIRONMENTAL MATTERS GOVERNMENT REGULATION The products Ansell Limited manufactures are subject to regulations of varying degrees in each of the countries in which the Company markets its products. These regulations have been particularly advanced in the United States by the Safe Medical Devices Act of 1990 and in Europe, with the completion of the work required by the Single European Act of 1986 and its on-going implementation. In addition, harmonisation of regulatory requirements on an international basis has led to the adoption of an international quality management system standard, which is being implemented progressively by various regulatory authorities including the FDA and the Commission of the European Union. Changes in existing requirements or adoption of new requirements could adversely affect Ansell Healthcare's ability to comply with regulatory requirements. Failure to comply with regulatory requirements could have a material adverse effect on the business, financial condition and results of operations. UNITED STATES In the United States, products offered through Ansell's Professional Healthcare and Personal Healthcare segments are regulated as medical devices under the Federal Food, Drug and Cosmetic Act (the FDC Act) by the FDA. We believe that all of the Company's products regulated by the FDC Act are in compliance in all material respects with the relevant sections of the FDC Act and the advice and guidance provided by the FDA. Medical device manufacturers are subject to periodic inspection by the FDA for compliance with the FDA's current Quality System Regulation, which specifies good manufacturing practices (known as QSR/GMP requirements) for medical devices. The FDA has a number of compliance and enforcement procedures when deviations from QSR/GMP requirements are observed during such inspections. Which procedures are used depends upon the seriousness of the observations as well as the compliance history of the facility inspected and the company owning it. 13 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4B BUSINESS OVERVIEW (continued) REGULATION AND ENVIRONMENTAL MATTERS (continued) UNITED STATES (continued) As a general matter, the FDA often seeks to resolve observed QSR/GMP deficiencies on a voluntary basis without resorting to formal administrative enforcement action. In many cases, the FDA and the affected company enter into an agreement whereby the company retains one or more recognised, expert consultants to assist the company in achieving substantial compliance with the relevant QSR/GMP requirements and to certify that such efforts have been successful. When observed QSR/GMP deficiencies cannot be resolved through voluntary action, the FDA has the option of initiating further enforcement action, including warning letters, import alerts, product bans, field corrections, seizures, recalls, injunctions, civil penalties, fines based on the equitable remedy of disgorgement, adverse publicity issued by the FDA and criminal prosecutions. Each manufacturing operation of Ansell Healthcare has a Quality Assurance/Quality Control (QA/QC) department with its own budget. Also, we operate in a total quality environment where all participants in the manufacturing process are responsible for quality. It is the responsibility of the QA/QC department along with manufacturing to maintain the quality systems and records. The FDA has periodically inspected most of Ansell Healthcare's manufacturing facilities, including Ansell Healthcare's overseas manufacturing facilities and has made observations on how manufacturing operations could be improved. In upgrading manufacturing facilities to address the FDA's observations and evolving technology and to otherwise comply with QSR/GMP requirements, we have and will continue to expend time, monies and efforts in the areas of product and quality control. The FDA currently requires manufacturers intending to market a new medical examination glove, surgical glove or condom or to modify significantly a previously cleared medical examination glove, surgical glove or condom or the labelling of one of these products to obtain prior clearance. Although we typically have not experienced delays in obtaining clearance for new medical examination glove, surgical glove or condom products, there can be no assurance that we will not experience such delays for future products. An adverse determination by the FDA or a request for additional data or information could have the effect of delaying or precluding clearance and, at the same time, could materially delay or block the commencement of marketing new medical examination glove, surgical glove or condom products. The FDA examines medical examination gloves, surgical gloves and condoms that are imported into the United States by randomly testing some but not all shipments for defects. If a shipment of any of these products is found to be defective, the manufacturing facility that produced the defective product will be subject to a Level 1 import alert. Under Level 1, no further shipments will be cleared for import unless tested and shown not to be defective. A facility will be removed from Level 1 if five consecutive shipments are tested and shown not to be defective. The facility can then import shipments without prior testing but subject to possible FDA testing on a random basis. If a second shipment is found to be defective during testing while on Level 1 or in random FDA testing during the 24 months after removal from Level 1, the manufacturing facility will be placed on Level 2 import alert. On Level 2, no further shipments will be cleared for import unless tested and shown not to be defective. A facility will be removed from Level 2 if ten consecutive shipments are tested and shown not to be defective. The facility can then import shipments without prior testing but subject to possible FDA testing on a random basis. If a second shipment is found to be defective during testing while on Level 2 or in random FDA testing during the 24 months after removal from Level 2, the manufacturing facility may be placed on Level 3 import alert. A facility on Level 3 cannot import further shipments even if they have been tested and shown not to be defective. A facility can be removed from Level 3 only by showing FDA that the facility complies with QSR/GMP requirements based on an acceptable FDA inspection or a certification by the facility based on an independent audit by a qualified third party. After this, the facility will be placed on Level 1 detention and must seek removal from that status as described above. Ansell facilities in Bangalore, India and Surat Thani, Thailand are currently on Level 2 detention. Thus, if any shipment from any of these facilities is found to be defective during the 24-month period after removal from Level 2, the facility responsible for the shipment may be placed on Level 3 import alert, resulting in a ban on imports of additional shipments from that facility into the United States. 14 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4B BUSINESS OVERVIEW (continued) REGULATION AND ENVIRONMENTAL MATTERS (continued) UNITED STATES (continued) Labelling and promotional material for medical examination gloves, surgical gloves, and condoms are regulated by the FDA under the FDC Act and violations are subject to enforcement action as described above. Advertising for medical examination gloves, surgical gloves, and condoms is regulated by the Federal Trade Commission (FTC) under the Federal Trade Commission Act and violations are subject to enforcement action by the FTC including orders prohibiting objectionable claims, civil monetary penalties, monetary consumer redress, and orders requiring corrective advertising. We believe that the labelling and advertising of all Ansell products complies in all material respects with FDA and FTC requirements. EUROPE Condoms and medical gloves are regulated by Directive 93/42/EEC of the European Commission on medical devices that came into effect on 1 January 1995 and became a mandatory requirement for sales in Europe in June 1998. This directive regulates the sale of all medical devices throughout the European Union and the European Economic Area (which comprises the fifteen states of the European Union plus Iceland, Norway and Liechtenstein). Ansell Healthcare's condoms and medical gloves are in compliance with the requirements of this directive and all relevant standards (including rules for the affixing and use of CE conformity marking set forth by Directive 93/465/EEC of the European Commission) allowing these products to carry the CE mark and to be sold in all European countries except, with respect to condoms, France, without further approval. Pursuant to Article 8 of Directive 93/42/EEC, France requires testing of condoms in addition to the requirement necessary to obtain a CE mark. Occupational gloves are governed under the directive for personal protective equipment, Directive 89/686/EEC. Ansell Healthcare's occupational gloves are in compliance with the requirements of this directive and all relevant standards (including rules for the affixing and use of CE conformity marking set forth by Directive 93/465/EEC of the European Commission) allowing these products to carry the CE mark and to be sold in all European countries without further approval. Ansell Healthcare is also required to comply with regulations governing packaging waste, including Directive 94/62/EEC, which requires that certain percentages of waste material must be reused or recycled in every European Union country. The required percentage will increase over the next few years, and Ansell Healthcare must show compliance with Directive 46/95/EEC, which regulates the privacy of personal data on customers and individuals submitting complaints. OTHER GOVERNMENT REGULATION Whether or not the FDA clearance is obtained for a new product, approval or clearance of a product by regulatory authorities in foreign countries may be required prior to the commencement of sales of the product in such countries. The requirements governing product approvals or clearances vary widely from country to country, and the time required for approval may be longer or shorter than that required for FDA approval. There are also several local country quality marks that, although not required, are essential to sales in various countries. Additionally, Ansell Healthcare operates plants in the United Kingdom, Malaysia, Sri Lanka, Thailand, Mexico and India. The occupational, health and safety laws and regulations vary dramatically within these countries. Ansell Healthcare's policy is to operate a more stringent Ansell-wide approach to occupational health and safety regardless of these prescribed regulations and to ensure that an internationally acceptable work environment is provided for employees. We coordinate an international occupational health and safety program through Ansell Healthcare's Global Safety, Health and Environment Director. All plants are required to report on all occupational health and safety issues on a monthly basis to senior management. Details of other regulatory and environmental matters are referred to in Note 36 to the Financial Statements contained within Items 17 and 18. 15 PART I ITEM 4 : INFORMATION ON THE COMPANY - -------------------------------------------------------------------------------- 4C ORGANISATIONAL STRUCTURE Note 37 to the Financial Statements included in Items 17 and 18 contains a listing of the Company's subsidiaries, their countries of incorporation and the Company's proportion of ownership interest in each. 4D PROPERTY, PLANT AND EQUIPMENT Set out below is a breakdown by geographic location of the Company's manufacturing facilities (with distribution facilities attached to manufacturing facilities not counted separately), as at 30 June 2002. NO. OF MANUFACTURING GEOGRAPHIC REGION FACILITIES - ---------------------------------------------------------- United States 5 Malaysia 3 United Kingdom 1 Thailand 2 Mexico 2 Sri Lanka 1 India 3 - ---------------------------------------------------------- Total 17 ========================================================== The Company's material leased properties are as set forth below: Country City Floor Space (Sq ft) Use - ------- ---- ------------------- --- Premises/Property: Australia Glen Waverly 13,000 Marketing Australia Richmond 28,000 Corporate England Tamworth 26,000 Manufacturing, Warehousing England Surbiton 9,000 Marketing England Newark 12,000 Marketing Germany Munich 7,000 Marketing France Paris 27,000 Marketing Belgium Brussels 22,000 Marketing Belgium Aalst 56,000 Warehousing USA Red Bank 21,000 Marketing, Corporate Mexico Juarez 219,000 Manufacturing Property only: Sri Lanka Colombo 1,080,000 Manufacturing All of the above-listed leased properties are fully utilized, except for the Richmond, Australia facility, which is 25% utilized. The Company believes that its facilities are suitable and adequate for its present needs and are in good operating condition. Ansell Limited has in place insurance covering casualty and certain other risks to which its worldwide facilities and operations may be subject. Generally, the current insurance policies do not cover political risks. Pursuant to Company policy, the Company's principal capital intensive and strategic manufacturing and distribution facilities are owned. Those facilities that are not owned are generally leased by the Company for periods varying from 1 to 10 years, and comprise certain warehouse/distribution centres and sales and administration office accommodation. The Company does not believe its business is dependent on any single facility. 16 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS The following discussion and analysis is based upon or derived from the Financial Statements included in this Annual Report, which are prepared in accordance with Australian GAAP. Notes 39 and 40 to the Financial Statements contain a discussion of the major differences between Australian GAAP and U.S. GAAP and reconciliation to U.S. GAAP. The following tables set forth the contributions of each business group to sales revenue and operating profit of the Company for the fiscal years ended 30 June 2000, 2001 and 2002:
OPERATING REVENUE BY BUSINESS GROUP /(1)/ (EXCLUDING UNALLOCATED & NON RECURRING ITEMS) FOR YEARS ENDED 30 JUNE $ IN MILLIONS 2002 % 2001 % 2000 - ---------------------------------------------------------------------------------------------------------------- Occupational Healthcare/(2)/ 640 (1.7%) 651 15.2% 565 Professional Healthcare/(2)/ 547 0.4% 545 26.2% 432 Consumer Healthcare/(2)/ 227 5.0% 216 22.7% 176 Discontinued Businesses/(3)/ 809 (70.5%) 2,745 (39.7%) 4,553 - ---------------------------------------------------------------------------------------------------------------- Total Operating Revenue 2,223 (46.5%) 4,157 (27.4%) 5,726 ================================================================================================================
/(1)/ The sales figures in this table exclude intergroup sales. There were no significant intergroup sales during any of these three fiscal years. /(2)/ In prior years the Ansell Healthcare Group was reported as a single business segment. As a result of the downsizing of the Company the major continuing business segments are Occupational Healthcare, Professional Healthcare and Consumer Healthcare. /(3)/ Discontinued Businesses have been restated to include the Pacific Brands Group and the Pacific Automotive Group, both of which were sold during the year.
OPERATING PROFIT BEFORE TAX /(1)/ FOR YEARS ENDED 30 JUNE $ IN MILLIONS 2002 % 2001 % 2000 - ------------------------------------------------------------------------------------------------------ Occupational Healthcare/(2)/ 37 (15.9%) 44 (12.0%) 50 Professional Healthcare/(2)/ 93 30.9% 71 1.4% 70 Consumer Healthcare/(2)/ 33 13.8% 29 61.1% 18 South Pacific Tyres JV Share/(3)/ (30) (2) Unallocated Items and Eliminations/(4)/ (57) (70) (79) Non Recurring/Discontinued Businesses/(5)/ (108) 109 (7) Net Interest, including borrowing costs/(6)/ (55) (99) (103) - ---------------------------------------------------------------------------------------------------- Total Operating Profit Before Tax (57) 54 (53) ====================================================================================================
/(1)/ The operating profit figures in this table exclude unrealised operating profit on inventory which has been purchased by one business group from another. /(2)/ In prior years the Ansell Healthcare Group was reported as a single business segment. As a result of the downsizing of the Company, the major continuing business segments are Occupational Healthcare, Professional Healthcare and Consumer Healthcare. /(3)/ Effective 1 July 2001 Ansell Limited discontinued including 50% of the result of South Pacific Tyres in its statements of income (refer Note 2 to the Financial Statements contained within Items 17 and 18). /(4)/ Prior year comparatives have been restated to include costs of Ansell Healthcare's Corporate Head Office. /(5)/ Discontinued Businesses have been restated to include the Pacific Brands Group and the Pacific Automotive Group, both of which were sold during the year. /(6)/ Prior year comparatives have been restated to include Borrowing Costs within Net Interest. 17 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS (continued) SALES REVENUE BY GEOGRAPHIC MARKET The following table sets forth the Company's sales revenue from continuing businesses by geographic market for the fiscal years ended 30 June 2000, 2001 and 2002. The revenue has been classified by location of the customer and excludes intergroup sales. FOR YEARS ENDED 30 JUNE $ IN MILLIONS 2002 2001/(1)/ 2000/(1)/ - -------------------------------------------------------------------------------- Australia, New Zealand and Southeast Asia 170 161 137 North, Central and South America 800 813 664 Europe 444 438 372 - -------------------------------------------------------------------------------- Total 1,414 1,412 1,173 ================================================================================ /(1)/ Prior year values have been restated to exclude the Sales Revenue of businesses transferred to Discontinued Businesses during the year. RESULTS OF OPERATIONS CONSOLIDATED Ansell Limited recorded a pretax profit of $195.6 million for the year ended 30 June 2002, compared to a $247.8 million pre-tax profit in the previous year. After allowing for interest, borrowing costs, goodwill amortisation and substantial one-off non-recurring items after tax of $184.6 million, the result attributable to Ansell shareholders was a loss of A$115.8 million. The result reflects the final stages of the transformation from a conglomerate to essentially a single global business. OPERATING REVENUE Total revenue in 2001/2002 of $3,190.4 million included other revenue of $939.7 million, which related to proceeds from the sale of businesses. Sales revenue in 2001/2002 was $2,222.8 million compared with $4,156.8 million in 2000/2001 and $5,725.8 million in 1999/2000. Sales revenue was lower as a result of the divestiture of the Pacific Automotive business in August 2001 and Pacific Brands business in November 2001. Sales from continuing Ansell Healthcare operations (Occupational, Professional and Consumer divisions) of $1,414.2 million increased marginally over the previous year, with improvements in both the Professional and Consumer divisions, offset by lower sales recorded in Occupational. Sales for the 2000/2001 year of $1,412.2 million represented an increase of 20% or $239.5 million over the 1999/2000 year due largely to a full year contribution from the Johnson & Johnson medical business (4 months in 1999/2000). On a geographic basis, sales in the Americas region for 2001/2002 were $799.5 million, a reduction of 1.7% over the 2000/2001 level of $813.0. This was primarily due to the downturn in the manufacturing sector in the USA that comprises a significant part of the Occupational Healthcare customer base. Revenues in both Australia and S.E. Asia and Europe were ahead of the previous year. OPERATING PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE Ansell Limited recorded an Operating Loss of $57.2 million for 2001/2002 compared to a profit of $54.1 million in 2000/2001 and a loss of $52.6 million in 1999/2000. The Group continued its rationalisation and restructuring programs with the closure of certain manufacturing plants predominantly in the USA and the transfer of production to Malaysia and Mexico. The programs that commenced in the previous year saw an additional element added, with the announced closure of the manufacturing facility at Troy in the USA. This resulted in a $63.1 million write down. A review of the carrying value of all assets resulted in the write down of all amounts owing by and shares held in Exide Technologies of the USA. This company, which had previously purchased the GNB Battery operations was placed in Chapter 11, the reorganisation chapter of the US Bankruptcy Code on 15 April 2002, causing a $99.9 million write down. The 2001/2002 result also includes a net gain of $25.7 million on the divestiture of businesses. 18 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS (continued) RESULTS OF OPERATIONS (continued) The 2000/2001 result included the gain on the sale of the Electrical Distribution business of $145 million, the write down of the assets of the Pacific automotive business of $97.7 million and rationalisation and restructuring charges of $111.0 million. The 1999/2000 result was impacted by the write down of the GNB assets of $160 million, a provision for the restructure of the Group's supply chain operations of $54.1 million and a reduction in Ansell Healthcare's result of $35 million primarily due to unfavourable currency movements. INCOME TAX EXPENSE Income tax expense for the year was $55.8 million compared with $189.9 million for 2000/2001 and $29.8 million for 1999/2000. The current year tax expense included the write off of tax balances attributable to the Australian operations of $15.2 million compared to $158.5 million in 2000/2001. A further major item in the difference between the prima facie tax benefit on the operating loss of $17.2 million and the income tax expense of $55.8 million for 2001/2002 was the tax attributable to the non-deductible write down of assets of $48.9 million compared to $43.2 million in 2000/2001. The 2000/2001 balance also included non-deductible provisions for rationalisation and restructuring costs of $19.6 million and tax attributable to a non-taxable gain on the sale of the Electrical Distribution business of $49.3 million. In 1999/2000 the difference between the prima facie tax benefit of $19 million and the income tax expense was primarily due to the tax attributable to the non-deductible write down of the assets of the GNB Technologies business of $57.6 million, the impact of restating the Australian future income tax benefit resulting from a change in Australian income tax rates of $18.8 million and non-deductible goodwill amortisation of $6.8 million, partially offset by the tax attributable to investment and export incentive allowances of $9.7 million. ANSELL HEALTHCARE YEAR ENDED JUNE 2002 V JUNE 2001 Ansell Healthcare's sales of $1,414.2 million were essentially flat with 2000/2001, while Operating Profit of $162.3 million was 12.5% higher. Ansell Healthcare held or increased market share in most of its markets and products in a difficult trading environment. OCCUPATIONAL HEALTHCARE Sales of $640.2 million were lower than the previous year by 1.7% while Operating Profit of $37.0 million was lower by 16.5%. Operating Profit margin decreased from 6.8% to 5.8%. Ansell Healthcare's Occupational business is the recognised global leader for Occupational Health and Safety gloves, holding over 20% of the market for the non-cotton and leather categories. This segment accounts for approximately 45% of Ansell Healthcare's total revenues and 23% of operating profit. With significant resources and expertise in the field of Occupational Health and Safety, the business offers consulting advisory services to industry, and provides measurable reductions in the occurrence and severity of hand injuries in the workplace, as well as increased hygiene for processed foods and other "clean" products. The rollout of the Ford Global Distribution Alliance contract in USA is a good example of leveraging of these advisory services. One of the major Ford plants has reported a 50% reduction in the incidence of hand injuries in the first six months following the implementation of the Company's product and supply recommendations. Ansell Occupational Healthcare is the only supplier able to capitalise on this procurement trend towards inclusion of savings in workplace injuries in assessing total cost of the product. The Hyflex TM family or ergonomic globes combines the polymer science and dipping process know-how of Ansell Healthcare with the fibre and knitting technology of Golden Needles (acquired in 1997). This family of products provides for the manufacturing trend in developed economies towards lighter assembly work, which requires a greater level of dexterity. 19 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS (continued) ANSELL HEALTHCARE (continued) OCCUPATIONAL HEALTHCARE (continued) Aside from replacement of existing usage of heavier style gloves, a large number of workers have had to use bare hands to allow for dexterity. This family of products now offers the necessary hand protection for these workers. Despite difficult economic conditions during the period, sales in this product range increased by 27%. The economic recession that has affected most industrialised countries during the period negatively impacted the Occupational Healthcare segment. A significant part of this segment's customer base is in the manufacturing sector, and this has been particularly hard hit, especially in the USA and Germany. In the face of the economic downturn, Occupational Healthcare has increased its share of the available market in all major categories. This segment is presently undergoing a major restructuring which was announced last year involving the transfer of most manufacturing activity from USA to Mexico and Asia. The anticipated benefits to profit in the period from the move of knitted products from Wilkesboro, USA to Juarez, Mexico were delayed and manufacturing inefficiencies were incurred during the move and ramp up in both the old and new plants. While profit was adversely impacted in the period, we believe that benefits will begin to flow through the results in the New Year, in addition to benefits from the other plants' restructuring, including the closure of Troy. PROFESSIONAL HEALTHCARE Sales of $546.9 million were essentially flat with the prior period, while Operating Profit of $92.7 million improved by 31.3%. Operating Profit margin increased from 13.0% to 17.0%. The Professional Healthcare segment supports healthcare providers with medical, surgical and examination gloves for hand barrier protection and infection control. It accounts for approximately 39% of Ansell Healthcare's revenue, and 57% of operating profit. Ansell Healthcare's Professional segment is the undisputed world leader in market share of natural latex and synthetic surgeon's gloves with more than 20% and ranks in the top three in the world examination glove market with around 12% share. Global marketing programs focused on the new powder-free and synthetic latex ranges of both surgeons' and examination gloves continued to drive sales growth in all regions. Conversion rates to powder free products range from above 60% in Australia to 35% in USA and somewhat less in Europe. Improved profit margins have been achieved in the period as a result of this marketing strategy. Acceptance of the Company's flagship Encore TM surgeons' glove during hospital evaluation trials in USA was strong, with Professional Healthcare winning over 65% of head to head trials against competitive gloves. Europe launched the new Gammex PFTM (powder free) surgeons' glove in the period and market trials show rapid user acceptance. In Australia, where the segment holds a clear leadership position, the growth in powder free and synthetic latex surgeons' gloves continued its positive momentum. During the period production of surgeons' gloves ceased at the Massillon, USA facility and the volume was transferred to the Shah Alam facility in Malaysia at 30% lower costs. This contributed to the improved operating profit. New synthetic latex surgeons' gloves are also gaining increasing acceptance in the fast growing and profitable but still relatively small sector. Gains in the overall market share for surgeons' gloves occurred during the period as sales of PF surgeons' gloves increased by 11%. Professional Healthcare's focus in examination gloves continued to shift towards higher margin powder free and synthetic latex products, and away from more commoditised powdered gloves. With the exception of one site that produces a high margin and unique product, all Professional Healthcare's examination glove manufacturing facilities are now fully converted to powder free production. However, world over supply remains a factor depressing prices in this segment which supports its strategy of out sourcing powdered gloves and concentrating production on the higher margin powder free synthetic products. Sales of examination gloves were 5% lower in the period with only sales at attractive margins being retained. As a result of this approach, examination gloves now represent less than 16% of Ansell Healthcare's total sales revenue. 20 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS (continued) ANSELL HEALTHCARE (continued) CONSUMER HEALTHCARE Sales of $227.1 million improved by 5% over the prior year, while Operating Profit of $32.6 million was higher by 10.9%. Operating profit margin increased from 13.6% to 14.4%. Consumer Healthcare covers the markets for condoms and other personal products, and is approximately 16% of Ansell Healthcare's revenues and 20% of operating profit. Consumer Healthcare ranks in the global top 3 in the condom segment, with a 12% share of the world market, covering both retail and public sectors. The segment also markets a range of housekeeping gloves through a small number of selected partners in international markets. This range is now being reported in the Consumer segment rather than Occupational. Significant improvement in performance is being driven by steady gains in market share in the growing world market for condoms, as well as the initial benefits from the transfer of manufacturing to Asia, which was fully implemented in this period. Consumer Healthcare's marketing teams in USA, Europe and Australia have again won a number of awards for innovative packaging and advertising, and the division's leading brands include LifeStyles, CheckMate, Mates, Prime, Contempo, Kama Sutra and Akuel. A United Nations Agency recently projected a significant increase in the need for condoms supplied by Public Sector authorities in the fight against HIV/AIDS in Asia and Africa over the next decade. Consumer Healthcare's reputation for quality, competitive costs and recognised brands ensure that it is well placed to participate in any new opportunities that arise from this projection. YEAR ENDED JUNE 2001 V JUNE 2000 Sales increased by 20% over the prior period largely due to a full year contribution from the Johnson & Johnson medical business (4 months in prior year) and the devaluation of the Australian dollar against the US dollar and Euro. Operating Profit increased by 4.6% over the prior period. A majority of product costs are denominated in US dollars or currencies linked to the US dollar and the strength of the US dollar against the Euro significantly reduced the profitability of European sales. Sales for the Occupational Healthcare segment increased by 15%. Excellent volume growth was achieved in new product ranges, which include the Hyflex ergonomic glove range and disposable nitrile examination gloves. Improved volumes in core products were also achieved. The economic slowdown in the USA adversely affected sales in the second half of the year in that region however results were strong in both Europe, excluding the effects of the Euro devaluation, and Australia and South East Asia. Sales for the Professional Healthcare segment increased by 26% assisted by an additional 8 months reporting of results from the medical business acquired from Johnson & Johnson. Organic volume growth of over 10% in both powder free surgical and examination glove categories was achieved. While average prices for powder free examination gloves reduced by a further 10% during the period, prices stabilised in the second half of the year. Sales for the Consumer Healthcare segment increased by 23%. Global volume growth of 8% for condoms was driven by 18% gains in both the USA retail branded market and the global tender business. Major profitability improvements were achieved as the new condom plant in Thailand ramped up to full capacity during the year. Over half of Ansell Healthcare's sales were in North America with another third in Europe and the balance in the Australia and South East Asia region. Overall performance was affected by the over-capacity and pricing competition, particularly in the first half, in the US$1 billion world market for examination gloves. Notwithstanding this Ansell Healthcare maintained full plant utilisation. In the US$600 million growing world market for surgical gloves, Ansell's Professional Healthcare business maintained its market share with very strong growth in the emerging powder-free segment. 21 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS (continued) ANSELL HEALTHCARE (continued) YEAR ENDED JUNE 2000 V JUNE 1999 Sales were flat for the year compared to the prior year. Operating Profit reduced by 19% to $138.0 million mainly due to the weakening of European currencies and lower examination glove prices driven by a world oversupply position. Sales for the Occupational Healthcare Segment were adversely impacted by weak European currencies and price pressure on synthetic examination gloves and remained flat with the prior year. Strong sales growth was recorded in new products in both North America and Europe, especially the "Hynit" polymer on knit ergonomic glove, the new "Hyflex" light duty glove and the cut resistant range of knitted products. The core products within the General Purpose/Chemical resistance category also recorded an underlying 3% growth. Sales for the Professional Healthcare segment were adversely impacted by lower latex examination glove prices and weak European currencies; however, sales in the powder free latex surgical glove segment grew by 35% in North America, Europe and Australia. Consistent with this was Ansell's emphasis on surgical gloves, which was further augmented by the acquisition of Johnson and Johnson's medical glove business on 27 February 2000. Unit volume sales of latex examination gloves remained in line with the prior year. Sales for the Consumer Healthcare Segment were flat and were adversely impacted by weak European currencies. Increased market share was achieved in several key markets in Europe and in North America. Operating profit was favourably impacted by the underlying sales growth and lower product costs from manufacturing efficiency gains. Offsetting these gains were the impact of weaker European currencies, lower examination glove prices due to world oversupply and start up costs at newly commissioned lines in Thailand and the USA. DISCONTINUED BUSINESSES PACIFIC BRANDS YEAR ENDED JUNE 2002 V JUNE 2001 The Pacific Brands business was sold in November 2001. The results for the five months that it was owned by the Company were ahead of the previous year, assisted by the acquisition of the Sara Lee business in March 2001. Sales of $662 million were up on the corresponding period of $595.5 million. Operating profit for the period was $52.4 million, up 7.8% on the previous corresponding period of $48.6 million. YEAR ENDED JUNE 2001 V JUNE 2000 Whilst sales increased 6.5% to $1,359 million profit fell by 7.4% to $100 million. The softer result in 2000/2001 was largely driven by a contraction in profit margins in what was a difficult trading environment within the Australian retail sector, exacerbated by a number of external factors, most notably the depreciation of the Australian dollar, introduction of the Goods and Services Tax (GST) and the impact of the Sydney Olympics. This was largely offset by the contribution from acquisitions and strong performance of overseas businesses together with Pacific Brands' ability to push through price increases. One of the key features of the year was the successful integration and rejuvenation of Sara Lee's Australian brands following their acquisition for $59.8 million in March 2001 giving Pacific Brands leadership in the new markets of hosiery and workwear and expanding its position in the clothing and intimate apparel markets. Clarks Shoes and its range of premium children's and adult footwear including Hush Puppies, acquired in September 2000, benefited from its access to the infrastructure of the Footwear Group and was returned to profitability. The Sport Leisure & Workwear Group, the largest Australian-owned sporting business, performed strongly. Growth continued in the Dunlop and Everlast brands. 22 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS (continued) DISCONTINUED BUSINESSES (continued) PACIFIC BRANDS (continued) The downturn in the housing market led to a difficult year for the Household Products Group. The bedding market remained subdued however the new Tontine pillow plant in Melbourne operated at capacity. Restructuring continued with the sale of Bonds spinning and the Vita Pacific upholstered furniture business. The closure of four clothing plants in Australia and New Zealand was also announced. Warehousing was further reorganised as part of the supply chain improvement program. YEAR ENDED JUNE 2000 V JUNE 1999 Sales increased by 8.2%* to $1,289* million while profit increased 11.4%* to $104* million. Australian retail demand was generally solid notwithstanding softness in some apparel categories. Demand in the homewares market was strong throughout the year leveraging from the significant upsurge in the housing sector in the lead up to the introduction of the Goods and Services Tax. There were good performances across most major product categories. The branded outerwear business and household products had outstanding years. The Pierre Fontaine, Grosby and relaunched Julius Marlow footwear brands performed strongly. Socks, underwear and bras made market share gains with Berlei bras increasing exports to the USA. Dunlop and Everlast sporting footwear and clothing brands performed well. The successful introduction of new branded products including the Bonds Hipster and Berlei Touched Bra, the relaunching of the Julius Marlow footwear brand and the acquisition of the Amco and Lightning Bolt clothing brands for the growing surf and streetwear apparel market, were all initiatives undertaken and implemented in the year. * These values are as reported for fiscal year 2000 and do not reflect the transfer of certain businesses to Discontinued Businesses in fiscal year 2001 or thereafter. PACIFIC AUTOMOTIVE YEAR ENDED JUNE 2002 V JUNE 2001 The Pacific Automotive business was sold effective 31 August 2001. Revenue for the two months that Pacific Automotive was owned by the Company was $132 million, which compared with the $130 million in the corresponding period of the previous year. Operating Profit was $7.5 million, compared with $4.5 million for the previous corresponding period. YEAR ENDED JUNE 2001 V JUNE 2000 Market conditions remained difficult during fiscal year 2001 with sales down 4% to $762 million and operating profit down 13.3% to $39 million. The results were after including restructuring and acquisition costs and the impact on sales and margins of the introduction of the Goods and Services Tax in Australia. Sales improved in the second half including a strong performance by Repco New Zealand. The year's main focus was consolidation of the Group's five operating businesses into a stronger operational platform as the largest wholesale and retail distributor of its kind in Australia and New Zealand. This included the successful establishment of Motospecs as a specialty Australian importing and kitting business and ongoing rationalisation of the distribution network which included closure of a further five distribution centres. During the year the rollout of the new style of Repco retail store continued with nearly one-third of Repco's 301 Australian stores now operating in this format. Repco also launched an innovative Team Repco customer loyalty program, which attracted 13,000 members in the first nine months. 23 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5A OPERATING RESULTS (continued) DISCONTINUED BUSINESSES (continued) PACIFIC AUTOMOTIVE (continued) YEAR ENDED JUNE 2000 V JUNE 1999 Despite market conditions being difficult sales increased by 3.5% to $794 million however operating profit was down 6.3% to $45 million. The replacement Automotive Parts businesses remained relatively subdued during the period 1999-2000. Increased warranty periods and continued growth of Fleet Management utilising OEM parts continued to affect the after market parts business. To help overcome this lack of increased demand in the more traditional areas of the business, the rollout of new format stores together with the establishment of a new retail focused store continued during the period. The customer base target here is the "Do-It-Yourself" market and the more general retail consumer. During the fiscal year 16 of these stores were commissioned. The refining of the express parts centre concept (ie trade focused facilities carrying a larger number of stock items offering fast and efficient delivery to the trade customer) continued throughout the year. The cost of operation of these individual centres was reduced and the rationalisation of the older, less effective trade outlets continued. An Automotive Joint Venture was established with another supplier to the reseller market to better service this sector and bring about significant product rationalisation and a reduced cost base. 5B LIQUIDITY AND CAPITAL RESOURCES The Company operates internationally and in many different economic climates but inflation has not had a material effect on the Company's results of operations. The Company does not have material subsidiaries in any economies that have been subject to hyperinflation. The Company operates a Central Treasury from its office in Melbourne, Australia. The Treasury manages Ansell's external debt, invests excess cash held centrally and acts to hedge all foreign exchange exposures world wide. Treasury does take minor foreign exchange positions for trading purposes for short periods. The company has small bank borrowings outside Australia and cash is generated in operating subsidiaries around the world in a number of currencies. Where possible excess funds are accumulated at the Central Treasury. Cash and deposits at 30 June 2002 were $276.9 million compared with $337.9 million at 30 June 2001 and $1,077.9 million at 30 June 2000. Cash and deposits at 30 June 2002 included restricted deposits of $18.4 million ($27.0 million at 30 June 2001 and $26.3 million at 30 June 2000) which have been set aside to cover the provisions established to address any remaining liability of members of the Group to claims arising with respect to the Accufix Pacing Lead. NET CASH FROM OPERATING ACTIVITIES Net cash provided by operating activities for 2001/2002 was $113.1 million compared to $226.6 million in 2000/2001 and $190.3 million in 1999/2000. This included $82.7 million on non-recurring payments compared to $54.5 million in the previous year and $20.3 million in 1999/2000. Payments in respect of Ansell Healthcare's restructuring program of $38.6 million were a major component of these non-recurring payments. Payments in respect of the Accufix Pacing Leads litigation and settlement totalled $10.7 million compared with $24.3 million in 2000/2001 and $11.7 million in 1999/2000. NET CASH FROM INVESTING ACTIVITIES Net cash provided by investing activities was $874.5 million compared to $628.7 million in 2000/2001 and a cash usage of $288.8 million 1999/2000. The current year included $936.4 million of proceeds from the sale of the Pacific Automotive and Pacific Brands businesses. Capital expenditure for the year of $34.3 million was considerably lower than the two prior years of $76.0 million and $156.8 million, due to the Group's smaller size. There are no material commitments for capital expenditure at 30 June 2002. The following table presents a summary of capital expenditure by Business Segment for the past three years: 24 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5B LIQUIDITY AND CAPITAL RESOURCES (continued) FOR YEARS ENDED 30 JUNE $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------ Occupational Healthcare 7 9 21 Professional Healthcare 13 8 10 Consumer Healthcare 2 5 14 Discontinued Businesses 12 39 105 Corporate Services - 15 7 - ------------------------------------------------------------------ Total 34 76 157 ================================================================== NET CASH FROM FINANCING ACTIVITIES Net cash used in financing activities was $1,041.1 million compared to $1,585.9 million in 2000/2001 and cash provided of $75.9 million in 1999/2000. During the year, the Company made net repayments of borrowings of $936.9 million the bulk of which was Australian dollar denominated debt reflecting the sale of Australian based assets. This compares to net repayments of $1,213.9 million in 2000/2001 and net proceeds from borrowings of $329.9 million in 1999/2000. Net debt (ie borrowings including trade bills less cash) reduction was significant in the current year falling from $1,299.8 million in 2000/2001 to $365.6 million at the end of 2001/2002. This occurred as a result of business sale proceeds of $936.4 million being applied to debt reduction. Debt reduction was further assisted by the strong Australian dollar, which reduced borrowings by $41.0 million, offset by the impact of dividend payments and net interest and borrowing costs. The reduced net debt improved balance sheet ratios for the Group with Net Debt to Equity falling from 121.9% last year to 41.8%. Net Liabilities to Equity decreased from 196.9% to 79.7% The Company's long-term debt has been rated by the U.S. credit rating agencies Standard & Poor's Rating Group and Moody's Investors Service Inc. since 1988-89. The Company's ratings are as follows: LONG TERM OUTLOOK SHORT TERM --------- -------- ---------- Moody's Ba2 Negative Not Prime Standard & Poor's BB+ Negative B The current ratings from both rating organisations were announced in August 2001 and were reviewed subsequent to the half year profit announcement in February 2002. In fiscal year 2001, the Company changed its hedge policy to more closely match the currency of the Group's borrowings to the currency of the Group's assets and underlying cash flows. As a result approximately two thirds of the borrowings at 30 June 2002 are denominated in US dollars. The company's borrowing portfolio at 30 June 2002 had an average maturity of 949 days (previous year 829 days), was 83.4% fixed and 16.6% floating, with an average duration of 711 days, compared to the previous years 110 days. The average cost of debt for 2001/2002 was 5.63% down from the previous year's levels of 6.76%. Net interest expense and borrowing costs for the year were $54.7 million compared to the previous years $99.4 million and $102.5 million in 1999/2000. This fall was due to the reduction in net debt, lower interest rates and stronger Australian dollar. The Company completed a US$100 million three-year revolving credit facility with four core banks in January 2002. This facility remains unused and the company believes that working capital is sufficient for its present requirements. CURRENCY RESTRICTIONS The Company operates in a number of countries such as China, India, Sri Lanka and Malaysia where Central Banks in those countries have imposed currency restrictions and Malaysia has pegged its currency rate to the US dollar. These restrictions do not affect the daily operations of the relevant subsidiaries and to date have not restricted the flow of capital, interest or dividends. The Company anticipates that these restrictions will not have a material adverse affect on its operations. 25 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5C RESEARCH AND DEVELOPMENT Ansell Healthcare spends about 1.25% of sales on research and development. Product and process innovation is essential to continuing profitable growth, and more than 15% of total sales currently come from products developed in the previous three years. The Company's commitment to innovation and new product development will be further enhanced with the establishment of Ansell Healthcare's new world-class Science and Technology Centre in Shah Alam, outside Kuala Lumpur, Malaysia. Ten PhDs, two MScs and 23 graduates staff the facility in Malaysia, and a smaller fibre-technology centre at South Carolina State University in the USA. We have established relationships with several medical research institutions, such as Georgetown University, Drexel University and Johns Hopkins University in the USA, and we made annual contributions to scientific research programs at the University of Tampere in Finland and the Medical College of Wisconsin, USA. Ansell Healthcare's sponsored research includes the identification and isolation of natural rubber latex proteins, which may contribute to latex allergies in some people. We use the results of this research to improve the product quality, and we encourage the researchers to publish their findings in the scientific journals as part of the AnsellCares program. The AnsellCares Scientific Advisory Board, established in 1992, is composed of some of the leading latex allergy researchers worldwide. The Advisory Board's charter is to direct research into critical hand barrier protection issues, such as latex and chemical allergy, factors affecting glove barrier integrity and the development of synthetic glove polymers. Research groups on three continents are responsible for numerous scientific breakthroughs, and have presented their work at many national and international allergy conferences. The output from Ansell Healthcare's Advisory Board has paved the way for a greater understanding of these complex issues and, through publication and dissemination, has allowed us to reduce the allergen content of Ansell Healthcare's products. It has also provided clinicians with guidelines on how to better manage latex-sensitive healthcare workers and patients, and to reduce the risk of sensitisation for future generations. The AnsellCares program includes accredited continuing medical education programs, video presentations, technical bulletins, newsletters, and periodic lectures and seminars. While the Science and Technology group was devoted to implementing the operational restructuring plan for much of the year, a number of new products were brought to market or passed on to manufacturing for the new year. New products that generate, or will generate, significant sales are surgeons' gloves, Gammex PF and Dermaprene Ultra, and a number of line extensions for the HyFlex family of ergonomic gloves. 5D TREND INFORMATION Please refer to Item 4B - Business Overview. 5E CRITICAL ACCOUNTING POLICIES The preparation of the company's financial statements requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported turnover and costs during the reported period. On an ongoing basis, our management evaluates its estimates and judgements in relation to assets, liabilities, contingent liabilities, turnover and costs. Management bases its estimates and judgements on historical experience and on other various factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our management has identified the following critical accounting policies under Australian GAAP. TURNOVER Turnover from the sale of goods and disposal of other assets is recognised when persuasive evidence, usually in the form of an executed sales agreement, of an arrangement exists indicating there has been a transfer of title, risks and rewards to the customer, no further work or processing is required by the Ansell Group, the quantity and quality of the goods has been determined with reasonable accuracy, the price is fixed or determinable, and collectibility is reasonably assured. In the majority of sales for most commodities, sales agreements specify that title passes on the invoice date which is the date the commodity is generally delivered. Revenue is recognised on the delivery date. 26 PART I ITEM 5 : OPERATING AND FINANCIAL REVIEW AND PROSPECTS - -------------------------------------------------------------------------------- 5E CRITICAL ACCOUNTING POLICIES (continued) TANGIBLE ASSETS - VALUATION Fixed assets and goodwill are assessed to ensure carrying values do not exceed estimated recoverable amounts. The carrying value of each long-lived asset is reviewed annually to evaluate whether the carrying amount is recoverable. Assets may be reviewed more regularly if an event or change in circumstances indicates that the carrying amount of an asset may not be recoverable. If the asset is determined to be impaired, an impairment loss will be recorded, and the asset written down, based upon the amount by which the asset carrying amount exceeds the higher of net realisable value and value in use. Value in use is generally determined by discounting expected future cash flows using a risk-adjusted discount rate. Future cash flows are estimated based on production and sales plans, commodity prices (considering current and historical prices, price tends and related factors), operating costs, and planned capital costs. These estimates are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter these projections, which may impact the recoverability of these assets. TAXATION Full provision is made for deferred taxation on all timing differences which have arisen but not reversed at the balance sheet date, except as follows: .. tax payable on the future remittance of the past earnings of subsidiaries, associates and joint ventures is provided only to the extent that dividends have been accrued as receivable or a binding agreement to distribute all past earnings exists; .. deferred tax is not recognised on the difference between book values and fair values of non-monetary assets arising on acquisitions or purchased fixed assets which have subsequently been revalued unless there is a binding agreement to sell such an asset and the gain or loss expected to arise has been recognised; and .. deferred tax assets are recognised only to the extent that it is more likely than not that they will be recovered. 27 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6A DIRECTORS AND SENIOR MANAGEMENT The business of Ansell Limited is managed by a Board of Directors of such number of not fewer than four and not more than eight as the Directors determine. At present there are six Directors in office, of which Mr H. Boon is Chief Executive Officer and Managing Director. There are no family relationships (within the meaning of Item 6 of Form 20-F) between any director or executive officer and any other director or executive officer. As of 30 June 2002 the Directors of Ansell Limited were as follows:
YEAR OF INITIAL EXPIRATION OF NAME AGE POSITION APPOINTMENT CURRENT TERM /(1)/ - ----------------------------------------------------------------------------------------- Edward Tweddell 61 Chairman 2001 2004 Peter L Barnes 59 Director 2001 2004 Harry Boon 54 Chief Executive Officer 2002 - Herbert J. Elliott 64 Director 2001 2004 Stanley P Gold 59 Director 2001 2004 S. Carolyn H. Kay 41 Director 2000 2003
/(1)/ Other than the Chief Executive Officer, the directors are subject to re-election at the Annual General Meeting next following their appointment and retirement by rotation every three years. At least one third of the Company's Directors (those whom have served the longest since last being re-elected) retire each year and may offer themselves for re-election by the shareholders. As of 30 June 2002 the Executive Officers (1) who were not Directors were:
COMMENCED YEAR OF INITIAL EMPLOYMENT NAME AGE POSITION APPOINTMENT WITH ANSELL LIMITED - --------------------------------------------------------------------------------------------------- William G Reilly 50 Senior Vice President & 2000 2000 General Counsel Phil Corke 48 Senior Vice President, Human 1998 1998 Resources & Communications
/(1)/ Executive Officers serve at the discretion of the Board of Directors. The following is a brief biography of each of the Directors and Executive Officers of Ansell Limited as at 1 October 2002: EDWARD TWEDDELL, BSC, MBBS (HONS.), FRACGP, FAICD Chairman and Non-executive Director since October 2001. A Director of National Australia Bank, Australia Post and CSIRO. He is also Chairman of the Nepenthe Group Pty Ltd. Resident Adelaide. Age 61 HARRY BOON, LLB (HONS), B.COM Managing Director and Chief Executive Officer of Ansell Limited since April 2002. He has been with Ansell since 1976, and has been President, Chief Executive Officer and Managing Director of Ansell Healthcare since February 1989. Resident USA. Age 54 PETER L BARNES, B.COM, MBA MELB Appointed Non-executive Director in October 2001. He is chairman of Samuel Smith & Son Pty Limited and a Director of Metcash Trading Limited. He is also President of the Winemakers Federation of Australia and a Member of the National Food Industry Council. Resident Sydney. Age 59 HERBERT J ELLIOTT, AC, MBE, MA CANTAB Non-executive Director since February 2001. Chairman of the Telstra Foundation Limited and Director of Sydney Olympic Parks Authority. Resident Perth. Age 64 28 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6A DIRECTORS AND SENIOR MANAGEMENT (continued) STANLEY P GOLD, AB, JD Non-executive Director since October 2001. President of Shamrock Holdings, Inc., and President and Managing Director of Shamrock Capital Advisors Inc., Director of The Walt Disney Company and Chairman of Tadiran Communications Ltd. Resident USA. Age 59 S CAROLYN H KAY, BA, LLB, MAICD Non-executive Director since May 2000. She is an Advisor with Morgan Stanley, a Director of Mayne Group and the Treasury Corporation of Victoria. She is also Deputy Chair of the Art Foundation of the National Gallery of Victoria and the Victorian Funds Management Corporation. Resident Melbourne. Age 41 MICHAEL J MCCONNELL, (ALTERNATE TO MR STANLEY GOLD SINCE OCTOBER 2001) Managing Director of Coolmain Capital Advisors LLC and Shamrock Capital Advisors, Inc. He is also a Director of Newport Technology Fund, Nuplex Industries and Port-Link International. Resident USA. Age 36 EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS WILLIAM G. REILLY Senior Vice President and General Counsel With Ansell since 2000 when he was appointed Vice President & General Counsel. Prior to joining Ansell, Mr Reilly was Associate General Counsel of C.R. Bard Inc. from 1990 to 2000. Prior to Bard, Mr Reilly held increasingly responsible positions as senior counsel with The Hertz Corporation, McKesson Corporation, Dresser Industries and GAF Corporation. PHIL CORKE Senior Vice President Human Resources and Communications Phil Corke has been with Ansell since 1998 when he was appointed Senior Vice President of Human Resources. Prior to joining Ansell, Mr Corke was Vice President of Human Resources of Alpharma Inc (generic pharmaceuticals) from 1996 to 1997 and was Director of Training and International Compensation for Textran Inc from 1994 until 1996. Mr Corke was hired by Bristol-Myers in the United Kingdom in 1988 as Personnel Director and was transferred to the United States in September 1990 as Human Resources Director, Europe for Bristol-Myers Squibb Pharmaceutical Group. ROBERT J BARTLETT Company Secretary and General Manager - Corporate Robert Bartlett was appointed Company Secretary and General Manager - Corporate in 2001 and has had over 37 years experience with the Company. Robert has previously held senior finance and administrative positions with the Corporate Head Office, as well as with operating units, both in Australia and overseas. DAVID M GRAHAM General Manager, Finance & Accounting David Graham joined the Company in 1982 after eight years in chartered accounting with Ernst & Whinney (now Ernst & Young). David commenced as Assistant Treasurer and in 1985 was appointed Group Treasurer, a position he held until December 2001. David held the position of Acting Chief Financial Officer from December 2001 until September 2002 and is currently General Manager, Finance & Accounting and is based in Melbourne, Australia. RUSTOM JILLA Chief Financial Officer Mr Jilla joined Ansell Limited on 23 September 2002. Mr Jilla has extensive experience in financial roles with global companies and was most recently Vice President Financial Operations of Perkin Elmer Inc. This followed a successful international career with BOC Group Plc, both in the United States and New Zealand. 29 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6B COMPENSATION The aggregate amount of remuneration paid or accrued by the Company on a worldwide basis during 2001-2002 as compensation to its Directors and its continuing executive officers named below as a group was $3,821,000. In accordance with the provisions of Australian law, amounts notionally attributed to pension and retirement benefits are deemed to be remuneration and such amounts are included in the total amount set out in the preceding paragraph. The following table sets out the remuneration provided to the Directors and the most highly remunerated officers of the Company and the Group (including those based overseas) for the financial year.
FIXED SUPERANNUATION REMUNERATION /(a)/ FEES /(b)/ INCENTIVES /(c)/ CONTRIBUTIONS /(d)/ TOTAL A$ A$ A$ A$ A$ - ---------------------------------------------------------------------------------------------------------------------------- NON-EXECUTIVE DIRECTORS - CONTINUING E D Tweddell /(e)/ /(f)/ Chairman 173,021 114,240 8,803 296,064 P L Barnes /(e)/ 44,976 3,598 48,574 H J Elliott 62,815 5,025 67,840 S P Gold /(e)/ /(g)/ 41,014 3,281 44,295 S C H Kay 67,536 5,403 72,939 NON EXECUTIVE DIRECTORS - FORMER J T Ralph /(h)/ 86,990/(i)/ 6,007 92,997 A B Daniels /(j)/ /(k)/ 360,000 73,370 8,803 442,173 N A D'Aquino /(l)/ 16,565 1,325 17,890 R J McLean /(m)/ 4,993 399 5,392 I E Webber /(j)/ 46,690 3,735 50,425 MANAGING DIRECTOR AND OFFICERS/(t)/ OF THE COMPANY AND THE GROUP H Boon /(n)/ /(u)/ Managing Director 1,190,483 142,782 292,326/(o)/ 1,625,591 P Corke /(p)/ /(u)/ 423,649 84,575 32,175/(o)/ 540,399 P R Gay /(q)/ 1,640,293 45,321 1,685,614 R P Hulstrom /(q)/ 523,693 21,055 544,748 P R Moore(R) 256,571 702,500/(s)/ 47,175 1,006,246 W G Reilly /(p)/ /(u)/ 404,489 78,523 33,516/(o)/ 516,528 I D Veal /(q)/ 1,537,196 28,193 1,565,389
/(a)/ Comprises the cost to the Company of cash salary, non-cash benefits such as motor vehicles, housing loans and home office expenses, and expatriate assignment costs. /(b)/ Includes fees in connection with Board and Board Committee responsibilities. /(c)/ Performance-based payment. /(d)/ Includes for Australian-based Directors and Officers, and one U.S. - based Officer, an imputed notional contribution calculated at an actuarial rate or to satisfy Superannuation Guarantee requirements. No amounts were required to be paid to the Australian superannuation fund in respect of the year ended 30 June 2002 upon advice of the Trustee. The notional contribution amounts do not form part of the remuneration of Directors and Executives set out in Note 28 to the Financial Statements contained in Items 17 & 18. /(e)/ Appointed 26 October 2001. /(f)/ Includes remuneration for extra services related to the strategic review of Ansell Healthcare and the resolution of matters carried over from the Pacific Dunlop structure. /(g)/ Mr M J McConnell was appointed alternate director for Mr Gold on 26 October 2001. In accordance with the Company's constitution, Mr McConnell receives no separate emoluments from the Company for acting as Mr Gold's alternate. 30 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6B COMPENSATION (continued) /(h)/ Retired 30 November 2001. /(i)/ Includes provision of vehicle. /(j)/ Retired 20 March 2002. /(k)/ Includes remuneration paid for extra services as Acting Chief Executive Officer for the period to 31 December 2001. /(l)/ Retired 30 September 2001. /(m)/ Retired 27 July 2001. /(n)/ US-based Officer. Appointed Chief Executive Officer on 12 April 2002 and Managing Director on 30 April 2002. /(o)/ Includes contributions to US non-qualified pension or benefit plan. /(p)/ US-based Officers. /(q)/ Ceased employment during year. Payments include statutory and previously negotiated contractual amounts due on termination of employment, including accumulated annual leave and long service leave. /(r)/ Ceased employment with the Group during the year upon the sale of the Pacific Brands business. /(s)/ Includes retention incentive relating to sale of business. /(t)/ The officers included in this disclosure are those executives having, during the year, the greatest authority for managing the Group. Other executives who have not had such authority may have received remuneration at a level in excess of that shown for the executives named above. /(u)/ US based Officers are paid in US$. The average exchange rate for the period as set out in the financial statements is US$0.52214 = A$1.00. The Company at 30 June 2002 had agreements with each of the Directors who are not executive officers, which provide for benefits upon termination. The full extent of the liabilities of the Company under these agreements has been undertaken by a superannuation fund of which the Company is employer sponsor. The Company has operated two share plans for employees and Directors. .. the Pacific Dunlop Executive Share Plan ("Executive Plan"); and .. the Pacific Dunlop Employee Share Plan ("Employee Plan"). No issue of shares has been made under either Plan since February 1994. The Board determined during 1996 that no further issues of shares would be made under the Executive Plan. Shares issued under the Executive Plan to selected employees ("Executives") were paid up to 5 cents and were subject to restrictions for a determined period (for the 1993/94 issue - 8 1/4 years). While partly paid, the shares are not transferable, carry no voting rights and no entitlement to dividends (but are entitled to participate in bonus or rights issues as if fully paid). The price payable for shares issued under the Executive Plan varies according to the event giving rise to a call being made. Market price at the date of the call is payable if an Executive ceases employment with the Company (other than for death, retrenchment, retirement or upon the sale of a business) prior to expiration of the restriction period. Once restrictions cease, the price payable upon a call being made will be the lesser of $10.00 ($2.50 for issues prior to 13 September 1991) or the last sale price of the Company's ordinary shares on the Australian Stock Exchange Limited. As of 30 June 2002, no offers to Executives were outstanding and as noted above, no further issues will be made under this Plan. The aggregate number of Executive Plan Shares on issue could not exceed 5% of the total issued capital of the Company. The number of Executive Plan Shares outstanding at 30 June 2002 was 1,174,600 and as of 30 September 2002 was 1,116,100 shares. At 30 September 2002, no Executive Plan Shares outstanding were held by the Directors and executive officers of Ansell Limited named above as a group. During the fiscal year, the amounts outstanding on 307,100 existing Executive Plan Shares were fully paid. From the end of the fiscal year through 30 September 2002, the amounts outstanding on an additional 58,500 Executive Plan Shares were fully paid. 31 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6B COMPENSATION (continued) Under Australian law, the Company is not required to disclose and does not otherwise disclose the number of Executive Plan Shares held by each executive officer individually, unless such executive officer is also a Director. There were no Executive Plan Shares held by Directors of Ansell Limited as of 30 June 2002. In addition to the Executive Plan, the Company maintains an Employee Plan under which 678,300 fully paid Ordinary Shares were held as of 30 June 2002 by employees of the Company and 676,667 shares (including Ordinary Shares issued as bonus shares) were held as of 30 September 2002. The Employee Plan permits full-time and part-time employees, who have completed three or more years continuous service with the Company and who do not participate in the Executive Plan, to acquire 20 ordinary shares in the capital of the Company for each completed year of service. The shares are issued at market value as of the date of issue, payable as to 50 cents per share by the employee, the balance financed by an interest free loan from the Company repayable, at latest, on cessation of employment. Loans under this plan have been made, and any future loans under this plan will be made, only if permitted under the relevant securities laws. The shares are not transferable while a loan remains outstanding, but carry voting rights and entitlement to dividends (although dividends are applied in reduction of the loan). Invitations are made under the Employee Plan from time to time. As of 30 June 2002, no offer to employees was outstanding. The aggregate number of Employee Plan Shares on issue may not exceed 5% of the total issued capital of the Company. Issues of shares under the Employee Plan to date have been in 1986-1987 at $23.60 per share, in 1987-1988 at $20.05 per share, in 1988-1989 at $20.65 per share, in 1990-1991 at $22.10 per share, in 1991-1992 at $21.50 per share and in 1993-1994 at $25.00 per share. Holders of Employee Plan Shares at June 1987, May 1989 and October 1993 became entitled to bonus shares (stock dividends) totalling 1,960,062 shares in respect of bonus issues (stock dividends) declared in June 1987, May 1989 and October 1993. (Note: These $ values have been amended from those reported in prior years to take into account the one for five share consolidation that took place during fiscal year 2002) During the 2001-2002 fiscal year, the loan liability of members in respect of 77,866 fully paid ordinary shares of $2.50 each was discharged. From the end of the fiscal year through 30 September 2002 the loan liability in respect of an additional 1,633 fully paid shares was discharged. No new shares were issued during 2001-2002 under the Employee Plan. The Company's accounting policy in respect of the Employee Plan is to recognise the paid-up capital and share premium upon allotment and the receivable created by the loan to employees to acquire the shares. In respect of the Executive Plan, no amount is recognised upon issue, apart from the capital paid-up on the shares, as the amount of the call payable is not known at the time of issue. Once a call has been made upon the shares and paid, the Company recognises the increase in paid-up capital and share premium. A loss of $535,381 pre tax in respect of the Employee Share Plan was recognised for the year 2001-2002, compared to a loss of $206,567 after tax for the year 2000-2001 and in 1999-2000 a loss after tax of $219,712. 6C BOARD PRACTICES The Board works under a set of well-established corporate governance policies that reinforce the responsibilities of all Directors in accordance with the requirements of the Corporations Act and the Australian Stock Exchange (ASX). In addition, many of the governance elements are enshrined in the Company's constitution. The Board regularly reviews and updates its corporate governance policies, to ensure that the Company's policies remain in accordance with best practice. RESPONSIBILITIES The Board's responsibilities and duties include the following: .. review and determine strategic direction and policies, allocation of resources, planning for the future and plan for succession; .. to appoint a Chief Executive Officer for the ongoing management task of developing and implementing suitable business strategies, consistent with the Company's policies and strategic direction; 32 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6C BOARD PRACTICES (continued) RESPONSIBILITIES (continued) .. regularly evaluate the performance of the Chief Executive Officer and senior management, and determine their remuneration; .. monitor and oversee the Company's financial position, including the audit process; and .. ensure that the conduct of the Company and its officers are legally and ethically of the highest order, and that work practices in all operations give priority to safety. Ansell places high priority on risk identification and management throughout all its operations and has processes in place to review their adequacy. These include: .. a comprehensive risk control program that includes property protection and health, safety and environmental audits using underwriters, self-audits, engineering and professional advisers; and .. a process to identify and measure business risk. The Company has also developed procedures to ensure that employees are aware of and discharge their obligations under relevant privacy laws in their handling of information provided to the Group. The Company has procedures in place to ensure that Directors, executives, management and employees carry out their duties and responsibilities to the highest ethical standards. These procedures and practices set high standards for ethical behaviour and business practice beyond complying with the law, and are based on the following key principles: .. acting with fairness, honesty and integrity; .. being aware of and abiding by laws and regulations; .. individually and collectively contributing to the well-being of shareholders, customers, the economy and the community; .. maintaining the highest standards of professional behaviour; .. avoiding or managing conflicts of interest; and .. striving to be a good corporate citizen, and to achieve community respect. The Company's ethical practices and procedures are reviewed regularly, and processes are in place to promote and communicate these policies within the Company. In carrying out its duties, the Board meets formally over one or two days at least six times a year, with additional meetings held as required to address specific issues. Directors also participate in meetings of various Board Committees that assist the full Board in examining particular areas or issues. It is also the Company's practice that Directors visit a number of the Company's facilities in each year. BOARD COMPOSITION The Board's policy is that there should be a majority of independent, Non-executive Directors. This is a requirement embodied in the Company's constitution, ensuring that all Board discussions or decisions have the benefit of predominantly outside views and experience, and that the majority of Directors are free from interests and influences that may create a conflict with their duty to the Company. Maintaining a balance of experience and skills is an important factor in Board composition. The requirement under the constitution is for at least twice as many Non-executive Directors as Executive Directors. As an additional safeguard in preserving independence, an Executive Director cannot hold the office of Chairman. Any Director can seek independent professional advice at the Company's expense in the furtherance of his or her duties, subject to prior discussion with the Chairman. If this occurs, the Chairman must notify the other Directors of the approach, with any resulting advice received to be generally circulated to all Directors. BOARD AND ELECTION PROCESSES The Ansell Board currently has six Directors. In addition, one alternate Director has been appointed to represent an overseas-based Director. Of those, five have been appointed as Non-executive Directors (including the Chairman) and one is an Executive Director (the Chief Executive Officer who is also Managing Director). 33 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6C BOARD PRACTICES (continued) BOARD AND ELECTION PROCESSES (continued) New Directors are nominated by the Board, as described below, and then must face a vote of shareholders at the next Annual General Meeting in order to be confirmed in office. All Directors other than the Managing Director are required to seek re-election at least once in every three years on a rotating basis. APPOINTMENT TERMS In order to ensure that composition of the Board will change over time, the Board has a general policy that Non-executive Directors should not serve for a period exceeding 12 years, and that the Chairman should not serve in that role for more than 10 years. The Board also has a general policy that Non-executive Directors should retire from the Board at the age of 70, and that Executive Directors should, in general, retire by the age of 60. In order to ensure that Directors are able to fully discharge their duties to the Company, all Directors must consult with the Chairman or the Board prior to accepting a position as a Non-executive Director of another company. REMUNERATION Non-executive Directors are paid an annual fee within a fixed amount approved for all Non-executive Directors by shareholders. The total annual amount approved for Ansell is currently $750,000, which was set in 1989. This is a maximum aggregate amount, and the Company does not, at this time, intend distributing all of this amount by way of fees. In addition, reflecting the assets divested and the refocussing of the Company, the normal annual fee payable to each Director has not increased since 1994. Directors receive an annual fee of $60,000 for Board duties, with the Chair receiving $180,000. A fee of $5,000 per annum is paid to Directors appointed to the Audit Committee with the Committee Chair receiving an additional $2,500. No fees are currently payable for participation on other committees. The fees paid to Directors take into account what is paid by comparable companies, and what is necessary to attract high-calibre people. Retirement benefits based on period of service are paid in accordance with the Corporations Act and a schedule previously approved by shareholders. In line with general industry practice, the Board reviews its remuneration strategies in relation to Non-executive Directors from time to time. Each Non-executive Director is required to reinvest a minimum 10% of his or her annual gross fee in acquiring shares in the Company until their shareholding is equal to at least one year's fees, pursuant to a Non-executive Directors' Share Plan. At an Extraordinary General Meeting on 12 April 2002, shareholders approved the issue to Non-executive Directors of shares in the Company, in accordance with amended rules of the Plan that now enable Non-executive Directors to elect to apply up to 100% of their fees in acquiring shares in the Company. As members of management, Executive Directors, when appointed, do not receive fees or Directors' retirement benefits. They are members of the Company's Superannuation Fund and, as such, receive Company retirement benefits. DEALINGS IN SHARES Subject to the restriction that persons may not deal in any securities when they are in possession of price-sensitive information, Directors and employees generally may only buy or sell Ansell shares in the periods immediately following any price-sensitive announcements, including the half-year and full year results and Annual General Meeting. At other times, Directors dealing in Ansell shares must obtain prior approval from the Chairman. CONFLICT OF INTEREST In order to ensure that any 'interests' of a Director in a particular matter to be considered by the Board are known by each Director, the Company has developed protocols, consistent with obligations imposed by the Corporations Act and the ASX Listing Rules, to require each Director to disclose any contracts, offices held, interests in transactions and other directorships held to signal any potential conflict. Appropriate procedures have been adopted to ensure that, where the possibility of a material conflict arises, information is not provided to the Director, and the Director does not participate in, or vote at, the meeting where the matter is considered. BOARD COMMITTEES As a result of the changing focus and the smaller size of the Company, the Board has reorganised its committee arrangements such that the previous five committees have been reduced to two, being the Audit Committee and a combined Nominations, Remuneration and Evaluation Committee. 34 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6C BOARD PRACTICES (continued) BOARD COMMITTEES (continued) The reduced size of the Board has meant that it is now capable of dealing with a range of committee issues in full session. Accordingly, the former Corporate Conduct and Donations committees were discontinued during the year, and the Board has assumed responsibility for their function. The two ongoing committees are made up of Non-executive Directors only. The Board reviews the charter of each committee periodically. Senior executives attend Board and committee meetings by invitation, whenever particular matters arise that require management presentations or participation. AUDIT COMMITTEE The Audit Committee reviews the financial statements, adequacy of financial controls and the annual audit arrangement. It monitors the controls and financial reporting systems, applicable Company policies, national and international accounting standards and other regulatory or statutory requirements. The Committee also liaises with the Company's internal and external auditors, reviews the scope of their activities, reviews the external auditors' remuneration, and advises the Board on their remuneration and appointment. The Committee reviews the processes in place for the identification, management and reporting of business risk, and reviews the findings reported. The Chief Executive Officer, General Manager - Finance & Treasury, Group Chief Accountant and principal external audit partner participate at meetings by invitation. The current members of the Audit Committee are Mr P.L. Barnes (Chair), Mr H.J. Elliott and Mr L.D. Crandall (a newly appointed Director). NOMINATIONS, REMUNERATION AND EVALUATION COMMITTEE This Committee now combines the functions of the previously separate Nominations Committee and Remuneration and Evaluation Committee. Because of the significant number of changes that were occurring at both Board and senior management level during the year, the functions of the Committee were handled at meetings of the full Board. Responsibility for those duties will now be re-assumed by the Committee, the composition of which is yet to be determined. This Committee's charter provides for it to periodically review the structure of the Board, and recommend changes when necessary. This includes identifying suitable candidates for appointment as Non-executive Directors. In doing so, the Committee establishes the policies and criteria for Non-executive Director selection. The criteria include the candidate's personal qualities, professional and business experience, and availability and time to commit to all aspects of the Board's program. The Committee also considers matters including succession and senior executive compensation policy, including short- and long-term incentive plans, and advises the Board accordingly. The Committee has available independent professional advisers in supporting Ansell's policy of attracting high calibre people at all levels, and to ensure that the terms and conditions offered by the Company are competitive with those offered by comparable companies. 35 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6C BOARD PRACTICES (continued) ATTENDANCE AT BOARD AND BOARD COMMITTEE MEETINGS DURING THE YEAR ENDED 30 JUNE 2002
BOARD AUDIT CORPORATE CONDUCT DONATIONS HELD ATTD HELD ATTD HELD ATTD HELD ATTD ------------------------------------------------------------------------------ DIRECTORS - CONTINUING E D Tweddell 6 6 1 1 P L Barnes 5 5 3 3 H Boon 1 1 H J Elliott 10 9 1 1 S P Gold 6 6 S C H Kay 10 9 5 4 1 1 DIRECTORS - FORMER J T Ralph 6 6 2 2 A B Daniels 8 8 4 4 1 1 1 1 N A D'Aquino 3 3 2 2 R J McLean 1 1 I E Webber 8 8 1 1
Held - Indicates the number of meetings held while each Director was in office. Attd - Indicates the number of meetings attended during the period that each Director was in office. In the case of Mr R J Mclean to 27 July 2001, Mr N A D'Aquino to 30 September 2001, Mr J T Ralph to 30 November 2001, and Messrs A B Daniels and I E Webber to 20 March 2002. For Dr E D Tweddell, Mr P L Barnes and Mr S P Gold from the date of their appointments on 26 October 2001, and Mr H Boon from 30 April 2002. Mr S P Gold attended one meeting in person, and was represented at each other meeting by his alternate, Mr M J McConnell. A meeting of a special Board Committee comprising Dr E D Tweddell and Mr P L Barnes was convened on 26 April 2002 in relation to the one for five share consolidation. A special Board Committee meeting comprising Dr E D Tweddell, Mr P L Barnes and Mr H J Elliott was convened on 30 April in connection with the appointment to the Board of Mr H Boon. The Corporate Conduct and Donations Committees met on one occasion during the year prior to being discontinued and their functions being assumed by the Board. 6D EMPLOYEES As of 30 June 2002 Ansell Limited employed 12,160 full time equivalent employees. Of these employees, less than 1% were located in Australia following the sale of the Pacific Automotive and Pacific Brands businesses. Approximately 17% of the total workforce of Ansell, who are predominantly located outside of Australia, belong to trade unions, while the length of the union contracts is typically 3 years. Management believes it has good relations with its unions. 36 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6E SHARE OWNERSHIP The relevant interests of each Director in the share capital of the Company as at 3 September 2002, as notified to the Australian Stock Exchange Limited pursuant to the provisions of section 235 of the Corporations Act, were: 1 2 3 - ---------------------------------------------------------------- E D Tweddell 27,979 P L Barnes 3,787 H Boon 10,340 120,000 H J Elliott 3,761 S P Gold 721 24,428,841 S C H Kay 3,248 (1) Beneficially held in own name, or in the name of a trust, nominee company or private company. (2) Beneficial, Executive Share Options. These were granted in 1997, had an exercise price of $16.50, were subject to performance hurdles which had not been satisfied and expired on 11 December 2002. (3) Non-beneficial. Mr Gold has an indirect interest in these shares by virtue of a 10% economic interest in the holding of Trefoil International III, SPRL, of which he is also a Director. Trefoil International III, SPRL is a related body corporate of Shamrock Holdings of California Inc. Each Director owns less than 1% of the shares outstanding except for Mr Gold's non-beneficial shareholding which amounts to 13%. Messrs Corke and Reilly (listed in Item 6B) do not own shares in the Company. NON-EXECUTIVE DIRECTORS' SHARE PLAN Shareholders approved the participation by Non-executive Directors in the plan in October 2000 and April 2002 (on amended terms). Since receiving shareholder approval, shares have been purchased on ASX under the Plan at the prevailing market price on behalf of each of the then current Non-executive Directors. Details of securities acquired on ASX on behalf of Non-executive Directors under the Ansell Non-executive Directors' Share Plan during the financial year and included in the Relevant Interest above, are as follows: NUMBER OF SHARES DATE OF ACQUISITION PRICE ACQUIRED ACQUISITION A$ - -------------------------------------------------------------------------- 2,535 17/12/2001 $ 0.95 Dr E D Tweddell 3,900 14/03/2002 $ 1.15 692 18/06/2002 $ 6.48 - -------------------------------------------------------------------------- 1,251 17/12/2001 $ 0.95 P L Barnes 1,408 14/03/2002 $ 1.15 255 18/06/2002 $ 6.48 - -------------------------------------------------------------------------- 2,294 14/09/2001 $ 0.72 1,704 17/12/2001 $ 0.95 H J Elliott 1,300 14/03/2002 $ 1.15 230 18/06/2002 $ 6.48 - -------------------------------------------------------------------------- 1,155 17/12/2001 $ 0.95 S P Gold 1,300 14/03/2002 $ 1.15 230 18/06/2002 $ 6.48 - -------------------------------------------------------------------------- 2,417 14/09/2001 $ 0.72 1,770 17/12/2001 $ 0.95 S C H Kay 1,462 14/03/2002 $ 1.15 254 18/06/2002 $ 6.48 - -------------------------------------------------------------------------- Note: All acquisitions of shares after 12 April 2002 relate to shares in Ansell Limited following the consolidation of the Company's share capital, approved by shareholders at a General Meeting, on the basis that five existing shares were consolidated into one new share. 37 PART I ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES - -------------------------------------------------------------------------------- 6E SHARE OWNERSHIP (continued) In addition, Messrs A B Daniels, J T Ralph and I E Webber participated in the Plan prior to their respective retirements as Directors of the Company. Details of the shares they acquired under the Plan are as follows: .. on 14 September 2001, Mr J T Ralph 6,229 shares, Mr A B Daniels 2,458 shares and Mr I E Webber 2417 shares, each at $0.72 per share; and .. on 17 December 2001, Mr A B Daniels 1,836 shares and Mr I E Webber 1,770 shares, each at $0.95 per share. 38 PART I ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS - -------------------------------------------------------------------------------- 7A MAJOR SHAREHOLDERS To the best of its knowledge, Ansell Limited is not directly, or indirectly, controlled by any corporation, or any foreign government. Ansell Limited does not know of any arrangement, the operation of which may result in a change of control of Ansell Limited. The names of substantial shareholders in the Company and the number of fully paid ordinary shares in which each has an interest are as follows:
NO. OF FULLY % OF ISSUED PAID SHARES CAPITAL Shamrock Holdings of California and its related bodies corporate 24,428,841 13.13% Perpetual Trustees Australia Limited 20,542,631 10.98% Maple-Brown Abbott Ltd. 19,139,772 10.23% Harris Associates L.P. 9,358,209 5.00%
Voting rights as governed by the constitution of the Company provide that each ordinary shareholder present in person or by proxy at a meeting shall have: (a) on a show of hands, one vote only; (b) on a poll, one vote for every fully paid ordinary share held. On 30 June 2002, 206,319 ADSs (equivalent to 825,276 Ordinary Shares, which represents approximately 0.4% of the Ordinary Shares then outstanding) were outstanding and held by 131 registered holders with addresses in the United States. 7B RELATED PARTY TRANSACTIONS During the period from 30 June 1999 to 30 June 2002, the largest aggregate amount of indebtedness owed by Directors or senior management to Ansell Limited was $1,050,000. This indebtedness was outstanding under the Housing Loan Plan, which has allowed certain individuals to borrow money to purchase a residence. The rate of interest paid or charged on such indebtedness was 4.00%, 4.00% and 3.25% for fiscal years 2002, 2001 and 2000 respectively. As at the date of this report, all amounts owing under the Plan have been repaid. Refer to Note 34 to the Financial Statements included in Items 17 and 18 for additional details of Related Party Transactions. 39 PART I ITEM 8 : FINANCIAL INFORMATION - -------------------------------------------------------------------------------- 8A CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION The Financial Statements are included herein as Items 17 and 18. Refer to Note 26 to the Financial Statements for details of legal proceedings. The Company has no fixed policy on dividend distribution. The payment of dividends is at the discretion of the Board. 8B SIGNIFICANT CHANGES There have been no significant events that have occurred subsequent to the end of the financial year. 40 PART I ITEM 9: THE OFFER AND LISTING - -------------------------------------------------------------------------------- The principal trading market for Ansell Limited's Ordinary Shares ("Ordinary Shares"), is the Australian Stock Exchange Limited (ASX). The Ordinary Shares are also listed on the London Stock Exchange and the Stock Exchange of New Zealand. The Company's American Depositary Shares ("ADSs"), represented by American Depositary Receipts ("ADR's") issued by Morgan Guaranty Trust Company of New York, as Depositary (the "Depositary"), are traded in the United States in the over-the-counter market and are quoted on the NASDAQ National Market System. The stock market operated by the ASX is the principal stock exchange in Australia. The exchange operates by way of the Stock Exchange Automated Trading System (SEATS) which is a fully computerised system. Trading on SEATS takes place each business day between the hours of 10:00am and 4:00pm, Australian Eastern Standard Time or Australian Eastern Summer Time. At 4:05pm each day, the ASX subsequently matches any buy and sell orders in the system, which are at the same price. The prices of all listed Shares are continuously quoted while the market is open and the system prioritises the orders first by price and second by placement in the system. Exchange participants can cross stock between buying and selling orders, at the buy or sell quote provided those quotes are no more than one marketable bid apart and can cross outside this range in amounts of A$1 million or more. Transactions on the ASX are settled on the third business day following the trade date. The following table sets out for the periods indicated ($A) the highest and lowest market quotation for the Ordinary Shares reported on the Daily Official List of The Australian Stock Exchange Limited and (US$) the highest and lowest bid prices for ADSs quoted on the NASDAQ National Market System.
$A US$ ORDINARY SHARES PER ADS/(1)/ PERIOD HIGH/(2)/ LOW/(2)/ HIGH/(2)/ LOW/(2)/ - ---------------------------------------------------------------------------------------- LAST 5 FINANCIAL YEARS Fiscal Year 2002 7.010 3.400 15.310 6.550 Fiscal Year 2001 8.400 4.000 19.375 8.205 Fiscal Year 2000 12.400 6.850 31.875 14.220 Fiscal Year 1999 16.250 10.800 38.750 28.125 Fiscal Year 1998 19.950 11.850 58.125 28.125 BY QUARTER 2002-2003 First Quarter 7.150 6.450 15.480 13.800 BY QUARTER 2001-2002 First Quarter 4.300 3.400 9.145 6.550 Second Quarter 5.200 3.550 10.750 7.402 Third Quarter 6.200 5.150 13.000 10.005 Fourth Quarter 7.010 6.000 15.310 12.650 BY QUARTER 2000-2001 First Quarter 8.400 7.000 19.375 15.155 Second Quarter 8.250 7.150 17.815 14.690 Third Quarter 7.550 5.950 17.815 12.190 Fourth Quarter 6.400 4.000 13.125 8.205 LAST 6 MONTHS November 2002 7.690 7.030 17.200 15.600 October 2002 7.070 6.670 15.410 14.500 September 2002 7.150 6.710 15.260 14.410 August 2002 7.050 6.590 15.480 13.800 July 2002 6.770 6.450 15.000 13.900 June 2002 6.580 6.250 15.160 14.000
/(1)/ Each ADS represents four Ordinary Shares. /(2)/ Previously reported prices have been adjusted to reflect the one for five share consolidation that took place in fiscal 2002. The total market capitalisation of Ansell Limited at 30 June 2002 was $1,171 million. The total market capitalisation of Ansell Limited at 30 November 2002, was $1,393 million and the closing price for Ansell Limited ordinary shares on the ASX on that date was $7.457. 41 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10A SHARE CAPITAL Not applicable. 10B CONSTITUTION The Company replaced its memorandum and articles of association with a new constitution on 12 April 2002. Recent changes to the Corporations Act 2001 (Cth) ("the Corporations Act") and the ASX Listing Rules reflected in the new constitution include: .. there is no longer a statement regarding the authorised capital of the Company as the concept of authorised capital has been abolished for Australian companies; .. references to par value, share premium and share premium account have been deleted and the "amount paid" on a share has been clarified following the abolition of par value in Australia; .. the non-marketable parcel sale provision has been amended to include a power for the Company to divest holdings of less than one marketable parcel where the relevant holding is created by a transfer of shares registered after the adoption of the new constitution (this is consistent with the ASX Listing Rules); .. the provisions dealing with general meetings and proxies have been amended to reflect the requirements of the Corporations Act; .. the provisions dealing with access, indemnity and insurance have been amended to reflect the changes to the Corporations Act; and .. the dividend provisions have been expanded and clarified in light of changes to the Corporations Act and confirms the power of the directors to pay, rather than declare, interim and final dividends. In addition, the maximum number of directors has been reduced from 15 to 8 and the minimum number of directors has been reduced from 5 to 4. Under Australian company law, a company is permitted, but not required, to have an objects clause or statement of purposes in its constitution. The Company deleted its previous objects clause from its constitution on 16 November 1992. Pursuant to the provisions of the Corporations Act, the Company has the legal capacity of an individual and all of the powers of a body corporate. Rule 37(f) of the Company's constitution permits a director who has an interest in a matter that is being considered at a meeting of directors to, despite that interest, vote, be present and be counted in a quorum at the meeting, unless prohibited by the Corporations Act. The Corporations Act prohibits a director of the Company from being present at a meeting of directors during consideration of, or voting upon, a matter in which that director has a material personal interest. This does not apply to voting on directors compensation. However, the total aggregate remuneration payable to the non-executive directors may not exceed the maximum amount approved by shareholders in general meeting from time to time pursuant to rule 35 of the Company's constitution. Rule 38(b) of the Company's constitution permits the directors, to exercise all the powers of the Company, at their discretion, including: (a) to raise or borrow money; (b) to charge any of the Company's property or business or any amount unpaid on its shares; and (c) to issue debentures or give any other security for a debt, liability or obligation of the Company or of any other person. These borrowing powers, as with any provision of the constitution, can be amended by the Shareholders of the Company passing a special resolution at a general meeting. There is no age limit prescribed in the Company's constitution for directors. However, the Corporations Act requires that any director of a public company who has attained the age of 72 must submit him or herself for re-election at each annual general meeting after attaining that age. Re-election requires the passing of a special resolution (75% majority) of those present and voting at the meeting. 42 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10B CONSTITUTION (continued) Rule 5 permits the Company to issue shares and grant options for shares on such terms and with such rights and restrictions decided by the directors. The issue and terms of issue, of preference shares must be approved by the Company's shareholders in general meeting as required by the Corporations Act. Rule 53 provides that, subject to any rights or restrictions attached to any shares or class of shares, the profits of the Company are divisible amongst the holders of ordinary shares (being the only class of shares currently on issue) in proportion to the capital paid up, or credited as paid, upon the shares held by them respectively. Rule 30(a) provides, subject to any rights or restrictions attached to any shares or class of shares, every shareholder present at a meeting has one vote on a show of hands and each share, on a poll is: (a) if fully paid - entitled to one vote; (b) if partly paid - entitled to a fraction of one vote which the amount paid (not credited) on the share bears to the total amounts paid and payable (excluding amounts credited). All directors of the Company, other than the Managing Director, are required to seek re-election at least once in every three years on a rotating basis. As previously indicated, rule 53 provides for each share to participate in those of the Company's profits the Board determines to distribute in proportion to the amount paid up on those shares, subject to any right or restriction attaching to a share or class of shares. In the event of liquidation, rule 59 permits the liquidator, with the sanction of a special resolution to divide among shareholders the whole or any part of the Company's property and decide how the division is to be carried out as between the members or different classes of members. Rule 58 provides that where the assets available upon a winding up are insufficient to repay all of the capital paid on shares, the losses will be borne by shareholders in proportion to the capital paid or that ought to have been paid on the shares at the commencement of the winding up. If surplus assets remain upon a winding up after having repaid the whole of the capital paid up, the excess is to be distributed amongst shareholders in proportion to the capital paid or that ought to have been paid on the shares at the commencement of the winding up. There are no redemption or sinking fund provisions in the constitution. However, the Corporations Act requires the approval of shareholders to the issue of preference shares with a right of redemption (or authorisation of the Board to issue such shares). Any amount of the issue price of a share that remains unpaid may, subject to any rights or restrictions attaching to a share, be called for payment by the Board pursuant to rule 10. However, once the full amount of the issue price of a share has been paid, a shareholder is not liable to contribute any further capital to the Company in respect of that share. The Company's constitution does not contain any provision discriminating against any existing or prospective shareholder as a result of such shareholder owning a substantial number of shares, nor does it contain any provisions pertaining to the changing of the rights of shareholders. The Company is required by the Corporations Act to hold an annual general meeting at least once in each calender year. In addition, the Corporations Act and rule 23 provide that the directors (including any single director) may at any time convene a general meeting of shareholders and the directors must convene a general meeting upon the requisition of at least 100 shareholders or the holders of 5% of the votes that may be cast at the meeting. The constitution does not impose any conditions upon the admission of shareholders to a general meeting, however, rule 25(a) permits the chair of a general meeting to take any action he or she considers appropriate for the safety of persons attending the meeting and the orderly conduct of the meeting and may refuse a person admission to, or require a person to leave and remain out of, the meeting if the person is disruptive. The constitution contains no limitations on the rights to own securities. In the event of a partial or proportional takeover bid being made for shares in the Company, rule 69 requires that a resolution to approve the takeover scheme be passed at a general meeting of shareholders before any registration of a transfer giving effect to the proportional takeover can be made. The constitution contains no governing by-law provisions governing the ownership threshold above which shareholder ownership must be disclosed. 43 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10B CONSTITUTION (continued) In addition to the information contained above, the Corporations Act: (a) provides a code that regulates "takeovers" (changes in control) of Australian companies that applies, in general, where a shareholder becomes entitled to 20% or more of the issued shares of a company; and (b) provides for disclosure of share ownership once a person and his or her associates become entitled to 5% or more of the issued shares in a company. The Foreign Acquisition and Takeovers Act (Cth) regulates the acquisition of interests in Australian companies by foreign nationals in excess of 15% of the issued shares of a company. There are no conditions imposed under the constitution governing changes in capital that are more stringent than required by Australian company law. 10C MATERIAL CONTRACTS The following is a summary of the material contracts entered into by the Company over the last two years: .. Sale of Business Agreement dated 30 November 2001 made between the following Ansell Limited Group companies: Textile Industrial Design and Engineering Pty Ltd, Union Knitting Mills Pty Ltd, Boydex International Pty Ltd, Foamlite (Australia) Pty Ltd, Ativ Pac Pty Ltd, Pacific Dunlop Holdings (NZ) Limited, Pacific Dunlop Holdings (Europe) Ltd, Pacific Dunlop Holdings (USA) Inc, PD International Pty Limited, Pacific Dunlop Holdings (Singapore) Pte Ltd, PD Holdings (Malaysia) Sdn Bhd, PD Licensing Pty Ltd, Niblick Pty Ltd, Cliburn Investments Pty Ltd, PD Shared Services Holdings Pty Ltd and Ansell Limited (as sellers) and PB Holdings NV, Pacific Brands Holdings Pty Ltd, Pacific Brands Household Products Pty Ltd, Pacific Brands Footwear Pty Ltd, Pacific Brands Sports & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd and Pacific Brands Holdings (NZ) Ltd (as buyers) in relation to the sale of the business of manufacturing, marketing, selling and distribution of clothing and related apparel, foam, bedding accessories and products, footwear and sporting and leisure equipment carried on by the sellers and known as "Pacific Brands." The total consideration payable under the sale of business agreement and under related documents for the sale of equivalent businesses in New Zealand, Fiji, Indonesia, Hong Kong, Malaysia, USA, and the United Kingdom was approximately A$730 million. .. Australian Deed dated 19 October 2001 made between The Goodyear Tire & Rubber Company, Goodyear Tyres Pty Ltd, Goodyear Australia Pty Ltd, Ansell Limited, Pacific Dunlop Tyres Pty Ltd and Tyre Marketers (Australia) Limited under which the parties agreed that the restructuring of the South Pacific Tyres ("SPT") joint venture will not require any further cash contribution from Ansell Limited. Under the Australian Deed, Ansell Limited's future funding is limited to the loans of A$56 million currently advanced to SPT. The Agreement contains a put option in favour of Ansell Limited, exercisable in four to five years, to sell Ansell Limited's interest in SPT at a price determined by the profits achieved in the two year period prior to the exercise of the option. If this put option is not exercised, Goodyear has a call option, exercisable in the following six months, on the same pricing basis. The put and call options are subject to certain conditions set out in a Co-ordination Deed dated 19 October 2001 made between The Goodyear Tire & Rubber Company, Goodyear Tyres Pty Ltd, Goodyear Australia Pty Ltd, Ansell Limited, Pacific Dunlop Tyres Pty Ltd and Tyre Marketers (Australia) Limited, Goodyear New Zealand Limited, Pacific Dunlop Holdings (NZ) Limited and South Pacific Tyres NZ Limited. .. Sale of Business Agreement dated 20 September 2001 made between the following Ansell Limited Group companies: Ashdown Enterprise (Wholesale) Pty Ltd, The Distribution Group Pty Limited, The Distribution Group Holdings Pty Limited, PD Licensing Pty Limited, TDG Warehousing Pty Ltd and Ansell Limited (as sellers) and Automotive Parts Group Limited and Automotive Parts Group Holdings Limited (as buyers) in relation to the sale of the business of sourcing, kitting, re-manufacturing, reconditioning, selling, marketing and distributing automotive products and materials carried on by the sellers in Australia and known as "Pacific Automotive." 44 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10C MATERIAL CONTRACTS (continued) The total consideration payable under the sale of Business Agreement and under related documents for the sale of the equivalent business in New Zealand was approximately A$251.5 million. .. Agreement for the Sale of Australian Business dated 26 February 2001 made between Sara Lee Apparel (Australasia) Pty Limited, Sara Lee Corporation and Ansell Limited in relation to the acquisition by Ansell Limited of the hosiery, intimate apparel, commercial workwear and casual clothing business known as "Sara Lee Apparel." The total consideration payable under this agreement and under related documents for the purchase of the New Zealand & Fijian arms of the Sara Lee Apparel business was approximately A$59.8 million. .. Business Sale Agreement dated 8 August 2000 made between The Distribution Group Limited and Ansell Limited (as sellers) and Hagemeyer NV and Hagemeyer Electrical Distribution Group (as buyers) in relation to the sale of the business of sourcing, manufacturing, developing, selling, marketing and distributing electrical based products and materials carried on by the sellers in Australia and known as the "Pacific Dunlop Electrical Group." The total consideration payable under the Business Sale Agreement and under related documents for the sale of the equivalent business in New Zealand was approximately A$343 million. 10D EXCHANGE CONTROLS Except for restrictions on foreign exchange transactions with Iraq, the National Union for the Total Independence of Angola (UNITA) and the supporters of the former Milosevic regime, the Reserve Bank of Australia ("RBA") does not inhibit the import and export of funds, and no permission is required by Ansell Limited for the movement of funds in and out of Australia. The Australian Minister of Foreign Affairs has the express power under the Charter of the United Nationals (Anti-terrorism Measures) Regulations 2001 (Cth) ("Regulations") to freeze funds and other financial assets of, and prevent foreign exchange dealings between persons or entities associated with terrorist acts. Accordingly, at the present time, remittance of any dividends, interest or other payment by Ansell Limited to non-resident holders of Ansell Limited's securities in the United States is not restricted by exchange controls or other limitations, unless the non-resident holder is a person or entity listed by the Minister under the Regulations. Ansell Limited has 186,395,200 Ordinary Shares (excluding Employee Plan Shares, as defined in "Compensation of Directors and Executive Officers") on issue at 30 June 2002. Non-residents of Australia may freely hold and vote Ordinary Shares, subject to compliance with the Foreign Acquisitions and Takeovers Act 1975 of Australia (the "Foreign Takeovers Act"). Takeovers of Australian companies by foreign interests are subject to review and approval by the Treasurer of the Commonwealth of Australia under the Foreign Takeovers Act. Technically, the statute applies to any acquisition of 15% or more of the outstanding shares of an Australian company that has total assets valued $5 million or more ($3 million or more if greater than 50% of the assets of the company are in the form of rural land) or any acquisition which results in one foreign person or group of associated foreign persons controlling 15% or more of total voting power. In addition, the statute applies to any acquisition by non-associated foreign persons resulting in foreign persons controlling, in the aggregate, 40% or more of total voting power or ownership. Since the Australian government's Economic Statement of February 1992, the policy of the body which reviews foreign investment (the Foreign Investment Review Board) is that only acquisitions of shares in companies which have assets in excess of $50 million will require approval. The Corporations Act also regulates acquisitions giving rise to ownership of substantial amounts of a company's shares. The Corporations Act prohibits any person (including a corporation), whether foreign or not, from acquiring voting shares if after the acquisition that person's or any other person's entitlement would exceed 20% of the issued ordinary shares of a company. A person is considered to be entitled to a share under the Corporations Act if the person or an associate (as defined in the Corporations Act) has, or is deemed under the Corporations Act to have, power (whether direct or indirect and whether legally enforceable or not and irrespective of certain restrictions and restraints on such powers and other matters and things as specified in the Corporations Act): 45 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) (1) to exercise, or to control the exercise of, the right to vote attached to that share; (2) to dispose of that share; and a person is considered to have acquired a share when the person has acquired such power over such share. This prohibition is subject to certain exceptions which must be strictly complied with to be applicable. Some of the more significant exceptions are as follows: .. Section 616 of the Corporations Act permits a person who proposes to become entitled to more than 20% of the voting shares of a company to make a formal takeover offer, in registered form, to the shareholders of the target company to acquire their shares. Separate takeover schemes are required for each class of shares sought; .. under Section 618 of the Corporations Act, a person who is already entitled to not less than 20% of the voting shares is permitted to acquire not more than 3% of the voting shares in any period of six months; and .. under Section 617 of the Corporations Act, a person who is already entitled to not less than 30% of the voting shares can acquire in excess of 20% of the company's issued capital by causing a takeover announcement to be made on the person's behalf by his/her sharebroker on the home exchange of the target company; a takeover announcement must offer to acquire all the shares in the class which the person seeks to acquire. Dividends paid to holders of Ordinary Shares who are non-residents of Australia are subject to certain Australian withholding tax requirements. See "Taxation-Australian Taxation." Dividends paid to United States Holders (as defined below) are also subject to United States federal income tax requirements, although those paid to non-United States Holders generally are not. AMERICAN DEPOSITARY RECEIPTS The following is a summary of all material provisions of the Second Amended and Restated Deposit Agreement (including any exhibits thereto, the "Deposit Agreement") dated as of 26 March 1999 among the Company, Morgan Guaranty Trust Company of New York, as depositary (the "Depositary"), and the registered Holders from time to time of the ADR's issued thereunder ("ADR's"). This summary does not purport to be complete and is qualified in its entirety by reference to the Deposit Agreement. Copies of the Deposit Agreement are available for inspection at the principal office of the Depositary in New York, New York (the "Principal New York Office"), which is presently located at 60 Wall Street, New York, New York 10260. Terms used herein and not otherwise defined shall have the respective meanings set forth in the Deposit Agreement. ADR's evidencing ADSs ("ADSs") are issuable by the Depositary pursuant to the terms of the Deposit Agreement. Each ADS represents, as of the date hereof, the right to receive four Shares deposited under the Deposit Agreement (together with any additional Shares deposited thereunder and all other securities, property and cash received and held thereunder at any time in respect of or in lieu of such deposited Shares, the "Deposited Securities") with the Custodian under the Deposit Agreement (together with any successor or successors thereto, the Custodian). An ADR may evidence any number of ADSs. Only persons in whose names ADR's are registered on the books of the Depositary will be treated by the Depositary and the Company as Holders. As the context requires, the term ADR refers to certificated receipts as well as to ADSs reflected on the direct registration system maintained by the Depositary. DEPOSIT, TRANSFER AND WITHDRAWAL In connection with the deposit of Shares under the Deposit Agreement, the Depositary or the Custodian may require the following in form satisfactory to it: 46 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) DEPOSIT, TRANSFER AND WITHDRAWAL (continued) (a) a written order directing the Depositary to issue to, or upon the written order of, the person or persons designated in such order an ADR or ADR's evidencing the number of ADSs representing such deposited Shares (a "Delivery Order"); (b) proper endorsements or duly executed instruments of transfer in respect of such deposited Shares; (c) instruments assigning to the Custodian or its nominee any distribution on or in respect of such deposited Shares or indemnity therefor; and, (d) proxies entitling the Custodian to vote such deposited Shares until such Shares are transferred and recorded on the register of shareholders of the Company in the name of the Depositary or its nominee. As soon as practicable after the Custodian receives Deposited Securities pursuant to any such deposit or pursuant to the form of ADR, the Custodian shall present such Deposited Securities for registration of transfer into the name of the Depositary or its nominee, to the extent such registration is practicable, at the cost and expense of the person making such deposit (or for whose benefit such deposit is made) and shall obtain evidence satisfactory to it of such registration. Deposited Securities shall be held by the Custodian for the account and to the order of the Depositary at such place or places and in such manner as the Depositary shall determine. Deposited Securities may be delivered by the Custodian to any person only under the circumstances expressly contemplated in the Deposit Agreement. After any such deposit of Shares, the Custodian shall notify the Depositary of such deposit and of the information contained in any related Delivery Order by letter, first class airmail postage prepaid, or, at the request, risk and expense of the person making the deposit, by cable, telex or facsimile transmission. After receiving such notice from the Custodian, the Depositary, subject to the terms and conditions of the Deposit Agreement, shall properly issue at the Transfer Office, (the "Transfer Office") which is presently located at the Principal New York Office, to or upon the order of any person named in such notice, an ADR or ADR's registered as requested and evidencing the aggregate ADSs to which such person is entitled. Subject to the terms and conditions of the Deposit Agreement, the Depositary may so issue ADR's for delivery at the Transfer Office only against deposit with the Custodian of: (a) Shares in form satisfactory to the Custodian; (b) rights to receive Shares from the Company or any registrar, transfer agent, clearing agent or other entity recording Share ownership or transactions; or, (c) other rights to receive Shares (until such Shares are actually deposited pursuant to (a) or (b) above, "Pre-released ADR's") only if (i) Pre-released ADR's are fully collateralised (marked to market daily) with cash or U.S. government securities held by the Depositary for the benefit of Holders (but such collateral shall not constitute "Deposited Securities"), (ii) each recipient of Pre-released ADR's agrees in writing with the Depositary that such recipient (a) owns such Shares, (b) assigns all beneficial right, title and interest therein to the Depositary, (c) holds such Shares for the account of the Depositary and (d) will deliver such Shares to the Custodian as soon as practicable and promptly upon demand therefore; and (iii) all Pre-released ADR's evidence not more than 30% of all ADSs (excluding those evidenced by Pre-released ADR's), provided, however, that the Depositary reserves the right to change or disregard such limit from time to time as it deems appropriate. The Depositary may retain for its own account any earnings on collateral for Pre-released ADR's and its charges for issuance thereof. 47 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) DEPOSIT, TRANSFER AND WITHDRAWAL (continued) At the request, risk and expense of the person depositing Shares, the Depositary may accept deposits for forwarding to the Custodian and may deliver ADR's at a place other than its office. Every person depositing Shares under the Deposit Agreement is deemed to represent and warrant that such Shares are validly issued and outstanding, fully paid, non-assessable and free of pre-emptive rights, that the person making such deposit is duly authorised so to do and that such Shares (A) are not "restricted securities" as such term is defined in rule 144 under the Securities Act of 1933, as amended (the "Securities Act of 1933") unless at the time of deposit they may be freely transferred in accordance with rule 144(k) and may otherwise be offered and sold freely in the United States or (B) have been registered under the Securities Act of 1933. Such representations and warranties shall survive the deposit of Shares and issuance of ADR's. Subject to the terms and conditions of the Deposit Agreement, upon surrender of an ADR in form satisfactory to the Depositary at the Transfer Office, the Holder thereof is entitled to delivery at the Custodian's office of the Deposited Securities at the time represented by the ADSs evidenced by such ADR. At the request, risk and expense of the Holder thereof, the Depositary may deliver such Deposited Securities at such other place as may have been requested by the Holder. Notwithstanding any other provision of the Deposit Agreement or the ADR's, the withdrawal of Deposited Securities may be restricted only for the reasons set forth in General Instruction I.A. (1) of Form F-6 (as such instructions may be amended from time to time) under the Securities Act of 1933. DISTRIBUTIONS ON DEPOSITED SECURITIES Subject to the terms and conditions of the Deposit Agreement, to the extent practicable, the Depositary will distribute by mail to each Holder entitled thereto on the record date set by the Depositary therefor at such Holder's address shown on the ADR Register, in proportion to the number of Deposited Securities (on which the following distributions on Deposited Securities are received by the Custodian) represented by ADSs evidenced by such Holder's ADR's: (a) Cash : Any U.S. dollars available to the Depositary resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof authorised in the Deposit Agreement ("Cash"), on an averaged or other practicable basis, subject to: (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain Holders, and (iii) deduction of the Depositary's expenses in (1) converting any foreign currency to U.S. dollars by sale or in such other manner as the Depositary may determine to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or U.S. dollars to the United States by such means as the Depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner. (b) Shares: (i) Additional ADR's evidencing whole ADSs representing any Shares available to the Depositary resulting from a dividend or free distribution on Deposited Securities consisting of Shares (a "Share Distribution") and (ii) U.S. dollars available to it resulting from the net proceeds of sales of Shares received in a Share Distribution, which Shares would give rise to fractional ADSs if additional ADR's were issued therefor, as in the case of Cash. 48 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) DISTRIBUTIONS ON DEPOSITED SECURITIES (continued) (c) Rights: (i) Warrants or other instruments in the discretion of the Depositary representing rights to acquire additional ADR's in respect of any rights to subscribe for additional Shares or rights of any nature available to the Depositary as a result of a distribution on Deposited Securities ("Rights"), to the extent that the Company timely furnishes to the Depositary evidence satisfactory to the Depositary that the Depositary may lawfully distribute the same (the Company has no obligation to so furnish such evidence), or (ii) to the extent the Company does not so furnish such evidence and sales of Rights are practicable, any U.S. dollars available to the Depositary from the net proceeds of sales of Rights as in the case of Cash, or (iii) to the extent the Company does not so furnish such evidence and such sales cannot practicably be accomplished by reason of the non-transferability of the Rights, limited markets therefor, their short duration or otherwise, nothing (and any Rights may lapse). Subject to Australian law, the Company will, in connection with any offer of such Rights, make such Rights generally transferable or consent to the transfer thereof by foreign investors not resident in Australia; and (d) Other Distributions: (i) Securities or property available to the Depositary resulting from any distribution on Deposited Securities other than Cash, Share Distributions and Rights ("Other Distributions"), by any means that the Depositary may deem equitable and practicable, or (ii) to the extent the Depositary deems distribution of such securities or property not to be equitable and practicable, any U.S. dollars available to the Depositary from the net proceeds of sales of Other Distributions as in the case of Cash. Such U.S. dollars available will be distributed by checks drawn on a bank in the United States for whole dollars and cents (any fractional cents being withheld without liability for interest and added to future Cash distributions). To the extent that the Depositary determines in its discretion that any distribution is not practicable with respect to any Holder, the Depositary may make such distribution as it so determines is practicable, including the distribution of foreign currency, securities or property (or appropriate documents evidencing the right to receive foreign currency, securities or property) or the retention thereof as Deposited Securities with respect to such Holder's ADR's (without liability for interest thereon or the investment thereof). There can be no assurance that the Depositary will be able to effect any currency conversion or to sell or otherwise dispose of any distributed or offered property, subscription or other rights, Shares or other securities in a timely manner or at a specified rate or price, as the case may be. DISCLOSURE OF INTERESTS To the extent that the provisions of or governing any Deposited Securities may require disclosure of or impose limits on beneficial or other ownership of Deposited Securities, other Shares and other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, Holders and all persons holding ADR's agree to comply with all such disclosure requirements and ownership limitations and to cooperate with the Depositary in the Depositary's compliance with any Company instructions in respect thereof, and, in the Deposit Agreement, the Depositary has agreed to use reasonable efforts to comply with such Company instructions. RECORD DATES The Depositary may, after consultation with the Company if practicable, fix a record date (which shall be as near as practicable to any corresponding record date set by the Company) for the determination of the Holders who shall be entitled to receive any distribution on or in respect of Deposited Securities, to give instructions for the exercise of any voting rights, to receive any notice or to act in respect of other matters and only such Holders shall be so entitled. 49 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) VOTING OF DEPOSITED SECURITIES As soon as practicable after receipt from the Company of notice of any meeting or solicitation of consents or proxies of holders of Shares or other Deposited Securities, the Depositary shall mail to Holders a notice stating: (a) such information as is contained in such notice and any solicitation materials, (b) that each Holder on the record date set by the Depositary therefor will be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented by the ADSs evidenced by such Holder's ADR's; and (c) the manner in which such instructions may be given, including instructions to give a discretionary proxy to a person designated by the Company. Upon receipt of instructions of a Holder on such record date in the manner and on or before the date established by the Depositary for such purpose, the Depositary shall endeavour in so far as practicable and permitted under the provisions of or governing Deposited Securities to vote or cause to be voted the Deposited Securities represented by the ADSs evidenced by such Holder's ADR's in accordance with such instructions. The Depositary will not itself exercise any voting discretion in respect of any Deposited Securities. INSPECTION OF TRANSFER BOOKS The Deposit Agreement provides that the Depositary will keep books at its Transfer Office for the registration, registration of transfer, combination and split-up of ADR's, which at all reasonable times will be open for inspection by the Holders and the Company for the purpose of communicating with Holders in the interest of the business of the Company or a matter related to the Deposit Agreement. REPORTS AND OTHER COMMUNICATIONS The Depositary shall make available for inspection by Holders at the Transfer Office any reports and communications received from the Company which are both (a) received by the Depositary as the holder of the Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company. The Depositary shall also send to the Holders copies of such reports when furnished by the Company. Any such reports and communications furnished to the Depositary by the Company shall be furnished in English. On or before the first date on which the Company makes any communication available to holders of Deposited Securities or any securities regulatory authority or stock exchange, by publication or otherwise, the Company shall transmit to the Depositary a copy thereof in English or with an English translation or summary. The Company has delivered to the Depositary, the Custodian and any Transfer Office, a copy of all provisions of or governing the Shares and any other Deposited Securities issued by the Company or any affiliate of the Company and, promptly upon any change thereto, the Company shall deliver to the Depositary, the Custodian and any Transfer Office, a copy (in English or with an English translation) of such provisions as so changed. The Depositary and its agents may rely upon the Company's delivery thereof for all purposes of the Deposit Agreement. CHANGES AFFECTING DEPOSITED SECURITIES Subject to the terms and conditions of the Deposit Agreement, the Depositary may, in its discretion, amend the form of ADR or distribute additional or amended ADR's (with or without calling the ADR's for exchange) or cash, securities or property on the record date set by the Depositary therefor to reflect any change in par value, split-up, consolidation, cancellation or other reclassification of Deposited Securities, any Share Distribution or Other Distribution not distributed to Holders or any cash, securities or property available to the Depositary in respect of Deposited Securities from (and, in the Deposit Agreement, the Depositary is authorised to surrender any Deposited Securities to any person and to sell by public or private sale any property received in connection with) any recapitalisation, reorganisation, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all the assets of the Company, and to the extent the Depositary does not so amend the ADR or make a distribution to Holders to reflect any of the foregoing, or the net proceeds thereof, whatever cash, securities or property results from any of the foregoing shall constitute Deposited Securities and each ADS shall automatically represent its pro rata interest in the Deposited Securities as then constituted. 50 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT The ADR's and the Deposit Agreement may be amended by the Company and the Depositary, provided that any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or that shall otherwise prejudice any substantial existing right of Holders, shall become effective 30 days after notice of such amendment shall have been given to the Holders. Every Holder of an ADR at the time any amendment to the Deposit Agreement so becomes effective shall be deemed, by continuing to hold such ADR, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. In no event shall any amendment impair the right of the Holder of any ADR to surrender such ADR and receive the Deposited Securities represented thereby, except in order to comply with mandatory provisions of applicable law. Any amendments or supplements which: (i) are reasonably necessary (as agreed by the Company and the Depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act of 1933 or (b) the ADSs or Shares to be traded solely in electronic book-entry form; and (ii) do not in either such case impose or increase any fees or charges to be borne by Holders, shall be deemed not to prejudice any substantial rights of Holders. Notwithstanding the foregoing, if any governmental body should adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement or the form of ADR to ensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and the ADR at any time in accordance with such changed rules. Such amendment or supplement to the Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to Holders or within any other period of time as required for compliance. The Depositary may, and shall at the written direction of the Company, terminate the Deposit Agreement and the ADR's by mailing notice of such termination to the Holders at least 30 days prior to the date fixed in such notice for such termination. After the date so fixed for termination, the Depositary and its agents will perform no further acts under the Deposit Agreement and the ADR's, except to receive and hold (or sell) distributions on Deposited Securities and deliver Deposited Securities being withdrawn. As soon as practicable after the expiration of six months from the date so fixed for termination, the Depositary shall sell the Deposited Securities and shall thereafter (as long as it may lawfully do so) hold in a segregated account the net proceeds of such sales, together with any other cash then held by it under the Deposit Agreement, without liability for interest, in trust for the pro rata benefit of the Holders not theretofore surrendered. After making such sale, the Depositary shall be discharged from all obligations in respect of the Deposit Agreement and the ADR's, except to advise Holders of such termination, account for such net proceeds and other cash. After the date so fixed for termination, the Company shall be discharged from all obligations under the Deposit Agreement except for its obligations to the Depositary and its agents. CHARGES OF DEPOSITARY The Depositary may charge each person to whom ADR's are issued against deposits of Shares including deposits in respect of Share Distributions, Rights and Other Distributions and each person surrendering ADR's for withdrawal of Deposited Securities, U.S. $5.00 for each 100 ADSs (or portion thereof) evidenced by the ADR's delivered or surrendered. The Company will pay all other charges and expenses of the Depositary and any agent of the Depositary (except the Custodian) pursuant to agreements from time to time between the Company and the Depositary, except: (i) stock transfer or other taxes and other governmental charges (which are payable by Holders or persons depositing Shares), (ii) cable, telex and facsimile transmission and delivery charges incurred at the request of persons depositing, or Holders delivering Shares, ADR's or Deposited Securities (which are payable by such persons or Holders), 51 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) CHARGES OF DEPOSITARY (continued) (iii) transfer or registration fees for the registration of transfer of Deposited Securities on any applicable register in connection with the deposit or withdrawal of Deposited Securities (which are payable by persons depositing Shares or Holders withdrawing Deposited Securities; there are no such fees in respect of the Shares as of the date of the Deposit Agreement) and (iv) expenses of the Depositary in connection with the conversion of foreign currency into U.S. dollars (which are paid out of such foreign currency). LIABILITY OF HOLDERS FOR TAXES If any tax or other governmental charge shall become payable by or on behalf of the Custodian or the Depositary with respect to the ADR's, any Deposited Securities represented by the ADSs evidenced thereby or any distribution thereon, such tax or other governmental charge shall be paid by the Holder thereof to the Depositary. The Depositary may refuse to effect any registration, registration of transfer, split-up or combination thereof or, subject to the terms and conditions of the Deposit Agreement, any withdrawal of such Deposited Securities until such payment is made. The Depositary may also deduct from any distributions on or in respect of Deposited Securities, or may sell by public or private sale for the account of the Holder thereof any part or all of such Deposited Securities (after attempting by reasonable means to notify the Holder thereof prior to such sale), and may apply such deduction or the proceeds of any such sale in payment of such tax or other governmental charge, the Holder thereof remaining liable for any deficiency, and shall reduce the number of ADSs evidenced thereby to reflect any such sales of Deposited Securities. In connection with any distribution to Holders, the Company will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Company; and the Depositary and the Custodian will remit to the appropriate governmental authority or agency all amounts (if any) required to be withheld and owing to such authority or agency by the Depositary or the Custodian. If the Depositary determines that any distribution in property other than cash (including Shares or rights) on Deposited Securities is subject to any tax that the Depositary or the Custodian is obligated to withhold, the Depositary may dispose of all or a portion of such property in such amounts and in such manner as the Depositary deems necessary and practicable to pay such taxes, by public or private sale, and the Depositary shall distribute the net proceeds of any such sale or the balance of any such property after deduction of such taxes to the Holders entitled thereto. GENERAL LIMITATIONS The Depositary, the Company, their agents and each of them shall: (a) incur no liability (i) if law, regulation, the provisions of or governing any Deposited Securities, act of God, war or other circumstance beyond its control shall prevent, delay or subject to any civil or criminal penalty any act which the Deposit Agreement or the form of ADR provides shall be done or performed by it, or (ii) by reason of any exercise or failure to exercise any discretion given it in the Deposit Agreement or the form of ADR; (b) assume no liability except to perform its obligations to the extent they are specifically set forth in the ADR and the Deposit Agreement without gross negligence or bad faith; (c) in the case of the Depositary and its agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or the ADR; (d) in the case of the Company and its agents under the Deposit Agreement be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities or the ADR's, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it against all expense (including fees and disbursements of counsel) and liability be furnished as often as many be required; and 52 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10D EXCHANGE CONTROLS (continued) GENERAL LIMITATIONS (continued) (e) not be liable for any action or inaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, any Holder, or any other person believed by it to be competent to give such advice or information. The Depositary, its agents and the Company may rely and shall be protected in acting upon any written notice, request, direction or other document believed by them to be genuine and to have been signed or presented by the proper party or parties. The Depositary and its agents will not be responsible for any failure to carry out any instructions to vote any of the Deposited Securities (so long as any such inaction is in good faith), for the manner in which any such vote is cast (so long as any such action is in good faith) or for the effect of any such vote. The Depositary and its agents may own and deal in any class of securities of the Company and its affiliates and in ADR's. The Company has agreed to indemnify the Depositary and its agents under certain circumstances and the Depositary has agreed to indemnify the Company against losses incurred by the Company to the extent such losses are due to the negligence or bad faith of the Depositary. No disclaimer of liability under the Securities Act of 1933 is intended by any provision hereof. Prior to the issue, registration, registration of transfer, split-up or combination of any ADR, the delivery of any distribution in respect thereof, or, subject to the terms and conditions of the Deposit Agreement, the withdrawal of any Deposited Securities, the Company, the Depositary or the Custodian may require: (a) payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in effect for the registration of transfers of Shares or other Deposited Securities upon any applicable register, and (iii) any applicable charges as provided in the form of ADR; (b) the production of proof satisfactory to it of (i) the identity and genuineness of any signature and (ii) such other information, including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities, compliance with applicable law (including, but not limited to evidence of compliance with the Corporations Act, the Banking (Foreign Exchange) Regulations or the Foreign Acquisitions and Takeovers Act 1975 of Australia), regulations, provisions of or governing Deposited Securities and terms of the Deposit Agreement and the ADR's, as it may deem necessary or proper; and (a) compliance with such regulations as the Depositary may establish consistent with the Deposit Agreement. The issuance of ADR's, the acceptance of deposits of Shares, the registration, registration of transfer, split-up or combination of ADR's or, subject to the terms of the Deposit Agreement, the withdrawal of Deposited Securities may be suspended, generally or in particular instances, when the ADR Register or any register for Deposited Securities is closed or when any such action is deemed advisable by the Depositary or the Company. GOVERNING LAW The Deposit Agreement is governed by and shall be construed in accordance with the laws of the State of New York. 53 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10E AUSTRALIAN TAXATION The following discussion outlines certain Australian tax considerations relevant to United States persons who are ADS holders or holders of Ordinary Shares. However, the discussion is by no means exhaustive of all possible Australian tax considerations. The analysis regarding the Australian tax laws set forth below is based on laws in force as of the date of this report and is subject to change in Australian law, as well as any changes to the double taxation convention concluded between the US and Australia, occurring after that date. The Australian Government has progressively implemented, and is continuing to implement, a number of business tax reform and integrity measures (the details of which are not yet finalised). In this respect, certain aspects relating to investment into Australia have been proposed regarding new arrangements for collecting withholding tax from non-residents in respect of Australian source dividends and gains from the disposal of assets. No legislation has been passed to give effect to these changes, but is likely to form part of Australia's international tax review process. This may impact on the tax analysis below (the taxation of company dividends, and capital gains, may change as a result of the review). ADS holders and/or holders of Ordinary Shares are advised to consult their own tax advisors as to the Australian tax consequences of their ownership of the ADSs and/or Ordinary Shares. TAXATION OF DISTRIBUTIONS Under the current double taxation convention concluded between Australia and the United States, dividends paid to a shareholder of Ansell Limited who is a resident of the United States within the meaning of the convention, including an ADS holder who is beneficially entitled to the dividends, may be subject to Australian withholding tax at a rate not exceeding 15% of the gross dividend. As withholding tax is a final tax, no other Australian tax is payable on the dividend. This withholding tax limitation does not apply to a shareholder whose holding is effectively connected with a permanent establishment in Australia or through which the shareholder carries on business in Australia, or in the case of a shareholder who performs independent personal services in Australia, with a "fixed base" situated in Australia. Dividends paid to a non-resident of Australia will not be subject to Australian dividend withholding tax to the extent that the dividends have been franked. The concept of franking reflects that the underlying profits from which the dividends have been sourced are subject to Australian corporate income tax. No other Australian tax is payable on a dividend freed of withholding tax by franking. Any dividend withholding tax suffered on the unfranked amount of the dividend is reduced to the extent that the dividend consists of a Foreign Dividend Account amount (FDA amount). A dividend will consist of an FDA amount to the extent to which it is declared to consist of an FDA amount by the corporation paying the dividend. A corporation is able to declare an FDA amount where it has a surplus in its Foreign Dividend Account at the time of paying the dividend. The main component of the Foreign Dividend Account will be tax exempt dividends received from foreign companies in which the corporation has a voting interest amounting to at least 10% of the voting power, as well as dividends received from 100% owned Australian companies to the extent they are declared to consist of an FDA amount. Dividends received by a United States citizen who is resident in Australia, or a United States corporation that is resident in Australia, will be treated as assessable income for Australian income tax purposes. If the dividends are wholly or partly franked, the additional amount representing the franking credits is also included in assessable income, with a "tax offset" being available equal to the franking credits. The tax offset acts to reduce the tax liability on the dividend income. In order to be entitled to claim the tax offset in relation to the franked dividend amount, the recipient of the dividend must be a "qualified person." Broadly, to be a qualified person, two tests must be satisfied namely the "holding period rule" and the "related payments rule." Ansell Limited will provide all shareholders with a dividend notice which specifies the franked and unfranked amount of each dividend, and the amount (if any) of dividend withholding tax deducted. As at the date of this report, the US and Australia have negotiated a Protocol to the 1982 double tax convention. In Australia, the Protocol has been given the force of the law pursuant to domestic legislation, but will only enter into force upon the exchange of instruments of ratification by both countries which has not yet occurred. 54 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10E AUSTRALIAN TAXATION (continued) TAXATION OF DISTRIBUTIONS (continued) The Protocol amends the existing convention in a number of ways and with respect to dividends they continue to be taxable in both countries, but with changed limits on the tax that the source country may charge residents of the other country who are beneficially entitled to the income. The dates upon which Protocol will have effect in Australia depend on the type of tax referred to and when both countries have formally ratified it. However, the Protocol is likely to be effective from 1 July 2003. The dividend paid on 2 July 2001 was unfranked and comprised a nil FDA amount. It is likely that in the foreseeable future Ansell Limited will pay dividends which are less than fully franked due to the increase in profit contributed by the overseas operations (only Australian tax paid creates franking credits) and the recovery of tax losses in Australia. TAXATION OF CAPITAL GAINS A United States citizen who is resident in Australia, or a United States corporation that is resident in Australia may be liable to pay Australian income tax in respect of the profit or capital gain (if any) derived upon disposal of the ADSs or Ordinary Shares. No income or other tax is payable in Australia on any profit arising from the disposal of the ADSs or Ordinary Shares held by persons not resident in Australia except in the following circumstances. First, Australian tax may arise if the ADSs or Ordinary Shares are trading stock of the holder, or if an ordinary incident of the holder's business represents the sale of securities for a profit, and, in either case, the profit is attributable to sources in Australia. Second, Australian tax may arise if the sale is subject to Australian capital gains tax. Any gain arising upon disposal by a non-resident of the ADSs or Ordinary Shares may be subject to Australian capital gains tax if the asset has the necessary connection with Australia. The ADS or ordinary shares will be taken to have the necessary connection with Australia if at any time during the period of 5 years preceding the disposal (of ADSs or Ordinary Shares acquired after 19 September 1985) the non-resident (together with associates, if any) owns or owned 10% or more of the issued capital of Ansell Limited. These two exceptions are subject to the operation of the double taxation convention between Australia and the United States which may affect Australia's right to tax non-residents of Australia who hold ADSs or Ordinary Shares. Owners of ADSs and Ordinary Shares are advised to consult their own tax advisors as to the tax consequences of the operation of the convention. OTHER TAXES No Australian State or Federal estate duty or other inheritance taxes will be payable in respect of ADSs or Ordinary Shares upon the death of the holder thereof, regardless of the holder's domicile. For capital gains purposes, the death of the holder will not produce a deemed disposal, except if the ADSs or ordinary shares are bequeathed to a tax exempt entity or to a beneficiary who is not an Australian resident. In all other circumstances, the liability for tax on any gain is effectively transferred to the deceased's legal representatives or beneficiaries for payment following disposal of the ADSs or Ordinary Shares by that person, subject to those matters referred to above. A deemed disposal or a disposal subsequently by the beneficiary will have the consequences set out above. STAMP DUTY No Australian stamp duty will be payable on the acquisition of ADSs or on any subsequent transfer of an ADS, provided that the ADR evidencing such ADS remains at all times outside Australia, that the instrument of transfer is not executed in Australia and remains at all times outside Australia, and that the Depository and the Custodian maintain no register of ADSs in Australia. 55 PART I ITEM 10: ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- 10E AUSTRALIAN TAXATION (continued) STAMP DUTY (continued) No stamp duty is payable on a transfer of Ordinary Shares, whilst the Ordinary Shares are quoted on the Australian Stock Exchange (ASX) or a recognised stock exchange. If the Ordinary Shares cease to be quoted on the ASX or a recognised exchange, any transfer of Ordinary Shares will ordinarily be subject to stamp duty at the rate of 0.6% of the consideration paid or the unencumbered value of the shares at the time of such transfer. Such stamp duty will need to be paid prior to the transfer of the Ordinary Shares being registered by Ansell Limited. If the transfer of Ordinary Shares is effected by stockbrokers on the Australian Stock Exchange, each of the transferor and the transferee will be required to pay half of the stamp duty payable. If the transfer of the Ordinary Shares is not effected by stockbrokers on the Australian Stock Exchange, the transferee of the Ordinary Shares will generally be required to pay the stamp duty payable. AUSTRALIAN TAX CREDIT SYSTEM Australia has a dual foreign tax credit/exemption system for relief from double taxation of dividends, whereby dividends received from foreign companies are either fully taxable in Australia, (with a credit available for both the foreign withholding tax paid and the income tax paid by the companies on their underlying profits) or exempt (with no foreign tax credit). Further, the taxation of the income of Ansell Limited's foreign subsidiaries may be affected by the provisions of Australia's Controlled Foreign Companies (CFC) legislation. Under the Australian CFC provisions, income earned by foreign subsidiaries in certain specified countries, being "comparably taxed" countries generally would be exempt from Australian tax. However, certain forms of income earned by foreign subsidiaries in all other countries, could be "attributed" to Ansell Limited or its Australian subsidiaries and be subject to Australian tax on an accruals basis, with a foreign tax credit available for relief from double taxation. This accruals-based system does, however, provide exemptions for foreign subsidiaries which are engaged predominantly in an active business. All dividends received from comparable tax countries, and certain other countries on the limited exemption list, will be exempt from Australian tax. Because these dividends are exempt, no credit is allowed for foreign taxes paid. Dividends received from other countries will generally be taxed in Australia, with a foreign tax credit available for relief from double taxation for foreign taxes paid. 10F DIVIDENDS AND PAYING AGENTS Not applicable 10G STATEMENT BY EXPERTS Not applicable 10H DOCUMENTS ON DISPLAY The documents referred to in this report can be inspected at the Company's Head Office at 678 Victoria Street, Richmond, Victoria, Australia. 56 PART I ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS The Company uses derivative financial instruments, principally foreign exchange and interest rate related, to reduce its exposure to movements in foreign exchange rate and interest rate movements. The Company has adopted certain principles in relation to derivative financial instruments: (i) it does not trade in a derivative that is not used in the hedging of an underlying business exposure of the Company; (ii) derivatives acquired must be able to be recorded on the Company's treasury management systems, which contain extensive internal controls; and (iii) the Company does not deal with counter-parties rated lower than A- by Standard and Poor's or A3 by Moody's Investors Service for any overnight transactions. The Company follows the same credit policies, legal processes, monitoring of market and operational risks in the area of derivative financial instruments, as they do in relation to financial assets and liabilities on the Statement of Financial Position, where internal controls operate. Derivative instruments are not recorded on the Statement of Financial Position. The Company is involved in a range of derivative financial instruments, which can be defined in the following broad categories: (i) FORWARD / FUTURE CONTRACTS These transactions enable the Company to buy or sell specific amounts of foreign exchange, financial instruments or commodities at an agreed rate/price at a specified future date. Maturities of these contracts are principally between six months and two years. (ii) OPTIONS This is a contract between two parties, which gives the buyer of a put or call option the right, but not the obligation, to transact at a specified interest rate/exchange rate or commodity price at a future date, generally for a premium. Maturities of these contracts are principally between three months and two years. (iii) SWAPS These agreements enable parties to swap interest rate (from or to a fixed or floating basis) or currency (from one currency to another currency) positions for a defined period of time. Maturities of the contracts are principally between two and five years. DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING Gains and losses on derivatives used as hedges are accounted for on the same basis as the underlying physical exposures they hedge. Accordingly, hedge gains and losses are included in the Statement of Financial Performance when the gain or loss arising on the related physical exposures are recognised in the Statement of Financial Performance. When hedging an underlying interest rate exposure, with a derivative financial instrument, all gains and losses are accounted for on an accrual basis, thereby adjusting the underlying physical cost to the hedged rate over the life of the transaction. Gains or losses resulting from the termination of an interest rate swap contract where the underlying borrowing remains, are deferred on the Statement of Financial Position and then amortised over the life of the borrowing. Where the transaction is a single event, such as a foreign exchange exposure, the hedge gain or loss is taken to account on the actual exposure date. Gains and losses on derivative financial instruments which hedge anticipated transactions are in the first instance deferred and later recognised in the Statement of Financial Performance when the hedged transaction occurs. Such deferrals only occur where the future transaction remains assured. Where an actual or anticipated transaction is modified or extinguished any associated derivative financial instrument is also modified or extinguished and any gain or loss that no longer relates to an actual or anticipated exposure is immediately taken to the Statement of Financial Performance. 57 PART I ITEM 11 : QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS (continued) DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING (continued) Gains and losses that arise prior to and upon the maturity of transactions entered into under rollover strategies are deferred and included in the measurement of the hedge, if the transaction is still expected to continue. If the transaction is no longer expected to continue, the gains and losses are recognised immediately in the Statement of Financial Performance. DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES The Company also enters into a limited number of exchange rate related derivative contracts for trading purposes. These transactions are undertaken under strict guidelines, limits and internal controls and with appropriate stop loss parameters. Trading activities include taking positions within authorised and clearly defined limits to benefit from expected movements in prices. The portfolio of derivative financial instruments held for trading purposes is valued at market rates with all gains and losses being recognised in the Statement of Financial Performance for the current period. ANTICIPATED TRANSACTIONS On a continuing basis, the Company monitors its anticipated future exposures and on some occasions hedges all or part of these exposures. The transactions which may be covered are future profits of overseas controlled entities and future foreign exchange requirements. These exposures are then monitored against continuing analysis of anticipated positions and may be modified from time to time. These transactions predominantly do not exceed 12 months duration and hedge transactions the Company expects to occur in this time frame. The following table shows the Company's deferred gains and (losses), both realised and unrealised, that are currently held on the Statement of Financial Position and the expected timing of recognition as revenue or expense:
INTEREST RATE FOREIGN EXCHANGE COMMODITY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------- Anticipated Exposures Less than 1 year - - - (0.5) 1.4 (1.7) - - - Realized Swaps Deferred Less than 1 year 0.1 (0.5) 0.5 1 to 2 years 0.7 0.2 (0.2) 2 to 5 years 2.2 (0.5) (1.0) Greater than 5 years - 1.6 2.0
58 PART I ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS (continued) INTEREST RATE RISK The Company's exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:
WEIGHTED INTEREST RATE AVERAGE FIXED MATURITIES EFFECTIVE NON INTEREST 1 YEAR 1 TO 5 OVER 5 INTEREST $ IN MILLIONS RATE FLOATING OR LESS YEARS/(1)/ YEARS BEARING TOTAL - ------------------------------------------------------------------------------------------------------------------------------ NET FINANCIAL ASSETS/(LIABILITIES) 2002 % FINANCIAL ASSETS On-Balance Sheet Cash on hand and at bank 1.1% 72.2 - - - - 72.2 Short-term deposits 3.3% 174.1 30.6 - - - 204.7 Receivables - trade N/A - - - - 232.5 232.5 Receivables - other 2.6% 32.9 25.0 - - 70.0 127.9 Investments (excl. associated companies) N/A - - - - 145.8 145.8 - ------------------------------------------------------------------------------------------------------------------------------ Total Financial Assets 2002 279.2 55.6 - - 448.3 783.1 - ------------------------------------------------------------------------------------------------------------------------------ FINANCIAL LIABILITIES Recognised Payables - trade N/A - - - - 166.6 166.6 Payables - other N/A - - - - 29.8 29.8 Bank overdraft 3.3% 14.6 - - - - 14.6 Bank and other loans 6.1% 466.0 20.8 122.7 - - 609.5 Provisions (including certain employee entitlements) N/A - - - - 85.4 85.4 Unrecognised Net interest rate swaps 5.1% (375.9) - 375.9 - - - - ------------------------------------------------------------------------------------------------------------------------------ Total Financial Liabilities 2002 104.7 20.8 498.6 - 281.8 905.9 - ------------------------------------------------------------------------------------------------------------------------------ Net Financial Assets/(Liabilities) 2002 174.5 34.8 (498.6) - 166.5 (122.8) ============================================================================================================================== NET FINANCIAL ASSETS/(LIABILITIES) 2001 % FINANCIAL ASSETS Recognised Cash on hand and at bank 2.7% 116.3 - - - - 116.3 Short-term deposits 3.8% 102.5 119.1 - - - 221.6 Receivables - trade 6.1% 1.5 - - - 521.6 523.1 Receivables - other 6.5% 62.5 - - - 150.2 212.7 Investments (excl. associated companies) N/A - - - - 212.0 212.0 - ------------------------------------------------------------------------------------------------------------------------------ Total Financial Assets 2001 282.8 119.1 - - 883.8 1,285.7 - ------------------------------------------------------------------------------------------------------------------------------ FINANCIAL LIABILITIES Recognised Payables - trade N/A - - - - 363.5 363.5 Payables - other N/A - - - - 55.9 55.9 Payables - bills 9.7% 1.5 - - - 5.1 6.6 Bank overdraft 6.4% 9.5 - - - - 9.5 Bank and other loans 5.3% 696.6 785.6 119.0 - - 1,601.2 Provisions (including certain employee entitlements) 3.0% - - - - 207.7 207.7 Amounts due under contractual arrangements N/A - - - - 17.8 17.8 Unrecognised Net interest rate swaps 5.2% 144.1 (122.8) (21.3) - - - - ------------------------------------------------------------------------------------------------------------------------------ Total Financial Liabilities 2001 851.7 662.8 97.7 - 650.0 2,262.2 - ------------------------------------------------------------------------------------------------------------------------------ Net Financial Assets/(Liabilities) 2001 (568.9) (543.7) (97.7) - 233.8 (976.5) - ------------------------------------------------------------------------------------------------------------------------------ /(1)/ Analysis of Fixed Rate Maturities 1 to 5 years 1-2 yrs 2-3 yrs 3-4 yrs 4-5 yrs Total --------------------------------------------------------- 2002 Bank & Other Loans 17.7 105.0 - - 122.7 Net Interest Rate Swaps 189.9 154.1 - 31.9 375.9 --------------------------------------------------------- 207.6 259.1 - 31.9 498.6 --------------------------------------------------------- 2001 Bank & Other Loans - 19.8 99.2 - 119.0 Net Interest Rate Swaps 77.4 (98.7) - - (21.3) --------------------------------------------------------- 77.4 (78.9) 99.2 - 97.7 ---------------------------------------------------------
59 PART I ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS (continued) INTEREST RATE RISK (continued) Provisions, including amounts contained within income tax, deferred income tax, contingencies, rationalisation and restructure, Accufix Pacing Lead related expenses and insurance claims amounting to $49.6 million (2001 - $144.2 million; 2000 - $114.6 million) are not included within the table above as it is considered that they do not meet the definition of a financial instrument. A separate analysis of debt by currency can be found at Note 19 to the Financial Statements - Interest Bearing Liabilities. CREDIT RISK AND NET FAIR VALUE RECOGNISED FINANCIAL INSTRUMENTS (i) CREDIT RISK The credit risk on financial assets, excluding investments, of the Company which have been recognised on the Statement of Financial Position, is the carrying amount, net of any provision for doubtful debts. The Company minimises concentrations of credit risk by undertaking transactions with a large number of customers and counter parties in various countries. The Company is not materially exposed to any individual overseas country or individual customer. (ii) NET FAIR VALUE The Directors consider that the carrying amount of recognised financial assets and financial liabilities approximates their net fair value. Refer to Note 1 to the Financial Statements for accounting policies in respect of the carrying values of financial assets and financial liabilities. UNRECOGNISED FINANCIAL INSTRUMENTS Credit risk on unrecognised derivative contracts is minimised, as counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency. It is not felt that there is a material exposure to any single counterparty or group of counterparties. The Company's exposure is almost entirely (over 99%) to banks. 60 PART I ITEM 11 : QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS (continued) CREDIT RISK AND NET FAIR VALUE (continued) The following table displays: (i) FACE VALUE: This is the contract's value upon which a market rate is applied to produce a gain or loss, which becomes the settlement value of the derivative financial instrument. (ii) CREDIT RISK: This is the maximum exposure to the Company in the event that all counterparties who have amounts outstanding to the Company under derivative financial instruments, fail to honour their side of the contracts. The Company's exposure is almost entirely to banks (see (v) below). Amounts owed by the Company under derivative financial instruments are not included. (iii) NET FAIR VALUE: This is the amount at which the instrument could be extinguished between willing parties in a normal market in other than a liquidation or forced sale environment. The net amount owed by / (owing to) financial institutions under all derivative financial instruments would have been ($23.8) million (2001 - $5.9 million, 2000 - $47.3 million) if all contracts were closed out on 30 June 2002.
FACE VALUE CREDIT RISK NET FAIR VALUE $ IN MILLIONS 2002 2001 2000 2002 2001 2000 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------- FOREIGN EXCHANGE CONTRACTS Purchase/Sale Contracts: - -U.S. dollars 329.7 1,231.7 496.7 1.6 22.0 4.9 (7.3) 17.6 1.6 - -Australian dollars 49.4 237.2 637.2 - - - - - - - -Other currencies 216.5 186.5 141.1 2.5 1.7 0.9 2.4 (1.5) (3.3) Cross Currency Swaps: - -U.S. dollars 96.5 240.2 137.3 2.2 0.7 16.5 (1.5) (16.5) 16.5 - -New Zealand dollars - - 95.0 - - - - - - - -Other currencies 16.5 35.2 98.6 - 5.8 25.3 (2.1) 5.8 24.4 INTEREST RATE CONTRACTS Interest Rate Swaps: - -U.S. dollars 435.1 452.7 1,113.8 3.0 6.6 11.7 (14.5) 0.5 6.4 - -Australian dollars 300.0 300.0 450.0 - 1.2 0.3 (0.8) 0.3 0.2 - -New Zealand dollars - - 119.9 - - 1.1 - - 1.0 - -Other currencies 17.5 16.7 47.6 - - 0.4 - (0.3) 0.4 Forward Rate Agreements: - -U.S. dollars - - 83.2 - - - - - - COMMODITY CONTRACTS Commodity Futures: - -U.S. dollars - - 15.9 - - 0.1 - - 0.1 - -------------------------------------------------------------------------------------------------------------- Total 1,461.2 2,700.2 3,436.3 9.3 38.0 61.2 (23.8) 5.9 47.3 ==============================================================================================================
From time to time in the ordinary course of business, the Company enters into forward exchange contracts to hedge a proportion of anticipated purchase and sale commitments denominated in foreign currencies (principally US dollars). The amount of anticipated future purchases and sales is forecast in light of current market conditions and commitments from customers. Hedge contracts are used to cover the next available trading exposure until all contracts are fully utilised. Hedge cover generally does not exceed 3 months. (iv) MARKET/LIQUIDITY RISK: The Company seeks to reduce the risk of: (a) being forced to exit derivative financial instrument positions at below their real worth; or (b) finding it cannot exit the position at all, due to lack of liquidity in the market; by (a) dealing only in liquid contracts dealt by many counterparties; and (b) dealing only in large and highly liquid and stable international markets. 61 PART I ITEM 11 : QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------------------- DERIVATIVE FINANCIAL INSTRUMENTS (continued) CREDIT RISK AND NET FAIR VALUE (continued) (v) CREDIT RISK BY MATURITY: The following table indicates the value of amounts owing by counterparties by maturity. Based on the Group policy of not having overnight exposures to an entity rated lower than A- by Standard & Poor's or A3 by Moody's Investors Service, it is felt the risk to the Company of the counterparty default loss is not material.
FOREIGN EXCHANGE INTEREST RATE COMMODITY RELATED CONTRACTS CONTRACTS CONTRACTS TOTAL $ IN MILLIONS 2002 2001 2000 2002 2001 2000 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ TERM 0 to 6 mths 4.1 27.0 31.8 - 1.2 0.7 - - 0.1 4.1 28.2 32.6 6 to 12 mths - 2.5 2.5 - - 0.2 - - - - 2.5 2.7 1 to 2 yrs - - 3.1 3.0 0.8 1.3 - - - 3.0 0.8 4.4 2 to 5 yrs 2.2 - 5.0 - 5.8 11.3 - - - 2.2 5.8 16.3 5 to 10 yrs - 0.7 5.2 - - - - - - - 0.7 5.2 - ---------------------------------------------------------------------------------------------------------------- Total 6.3 30.2 47.6 3.0 7.8 13.5 - - 0.1 9.3 38.0 61.2 ==================================================================================================================
(vi) HISTORICAL RATE ROLLOVERS: It is the Company's policy not to engage in historical rate rollovers except in circumstances where the maturity date falls on a bank holiday. In these instances, settlement occurs on the next trading day. 62 PART I ITEM 12 : DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES - -------------------------------------------------------------------------------- Not applicable 63 PART II ITEM 13 : DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES - -------------------------------------------------------------------------------- Not applicable 64 PART II ITEM 14 : MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS - -------------------------------------------------------------------------------- Not applicable 65 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF FINANCIAL PERFORMANCE of Ansell Limited and Controlled Entities for the year ended 30 June 2002
CONSOLIDATED THE COMPANY 2002 2001 2000 2002 2001 2000 NOTES $M $M $M $M $M $M - ------------------------------------------------------------------------------------------------------------------ REVENUE Total revenue 3 3,190.4 5,267.3 5,811.2 1,257.4 1,904.7 1,957.9 EXPENSES Cost of goods sold 1,493.3 2,895.4 4,080.2 354.4 1,054.7 1,060.0 Selling, distribution and administrative 587.1 1,136.3 1,460.6 150.2 467.7 578.4 Write-down of assets 176.5 97.7 160.0 82.4 890.7 186.0 Net assets of businesses disposed 922.4 895.2 11.6 514.5 36.2 - - ------------------------------------------------------------------------------------------------------------------ Total expenses, excluding borrowing costs 3,179.3 5,024.6 5,712.4 1,101.5 2,449.3 1,824.4 Borrowing costs 4 70.2 144.3 149.5 67.0 129.5 124.5 Share of net profit/(loss) of associates' and joint venture entities 1.9 (44.3) (1.9) - - - - ------------------------------------------------------------------------------------------------------------------ Profit/(loss) from ordinary activities before income tax expense (57.2) 54.1 (52.6) 88.9 (674.1) 9.0 Income tax expense attributable to ordinary activities 8 55.8 189.9 29.8 17.3 81.8 13.0 - ------------------------------------------------------------------------------------------------------------------ Net profit/(loss) from ordinary activities after income tax expense (113.0) (135.8) (82.4) 71.6 (755.9) (4.0) Outside equity interests in net profit/(loss) after income tax 2.8 3.6 4.1 - - - - ------------------------------------------------------------------------------------------------------------------ Net profit/(loss) after income tax attributable to Ansell Limited shareholders (115.8) (139.4) (86.5) 71.6 (755.9) (4.0) ================================================================================================================== Non-owner transaction changes in equity Increase/(decrease) in asset revaluation reserve - (14.1) 1.2 - - 0.2 Net exchange difference on translation of financial statements of self-sustaining foreign operations (69.6) (73.0) 61.3 - - - - ------------------------------------------------------------------------------------------------------------------ Total valuation adjustments attributable to Ansell Limited shareholders recognised directly in equity (69.6) (87.1) 62.5 - - 0.2 - ------------------------------------------------------------------------------------------------------------------ Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders (185.4) (226.5) (24.0) 71.6 (755.9) (3.8) ================================================================================================================== Earnings per share is based on net loss after income tax attributable to Ansell Limited shareholders /(a)/ CENTS CENTS CENTS Basic earnings per share 35 (61.9) (71.8) (41.9) Diluted earnings per share 35 (61.7) (71.4) (41.6)
/(a)/ Effective 12 April 2002, Ansell Limited reduced the number of ordinary shares and exercisable options on issue by means of a 1 for 5 share consolidation, which received shareholder approval at an Extraordinary General Meeting held on that date. Basic and diluted earnings per share for the current year, and prior year comparatives, take into effect this share consolidation. The above statements of financial performance should be read in conjunction with the accompanying notes. 66 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF FINANCIAL POSITION of Ansell Limited and Controlled Entities as at 30 June 2002
CONSOLIDATED THE COMPANY 2002 2001 2000 2002 2001 2000 NOTES $M $M $M $M $M $M - ------------------------------------------------------------------------------------------------------------------ CURRENT ASSETS Cash 11 258.5 310.9 1,051.6 4.2 28.3 28.0 Cash - restricted deposits 11 18.4 27.0 26.3 - - - Receivables 12 293.7 643.8 784.7 821.0 2,147.0 2,798.0 GNB assets held for sale - - 591.2 - - 18.8 Inventories 13 235.1 794.3 848.7 13.7 205.9 162.8 Prepayments 15.8 27.4 41.5 3.6 6.6 21.8 - ------------------------------------------------------------------------------------------------------------------ Total Current Assets 821.5 1,803.4 3,344.0 842.5 2,387.8 3,029.4 - ------------------------------------------------------------------------------------------------------------------ NON-CURRENT ASSETS Receivables 12 66.7 92.0 39.2 33.4 84.1 29.7 Investments in associates and partnerships (equity accounted) 14 13.3 14.6 2.3 0.2 0.2 0.2 Other financial assets 14 145.8 212.0 125.3 1,547.2 1,826.3 2,853.4 Property, plant and equipment 15 332.5 669.9 658.2 0.4 98.9 93.0 Intangibles 16 403.2 556.5 627.8 - 10.7 18.5 Deferred tax assets 17 49.7 106.8 272.0 - 32.2 145.3 Other - 21.0 16.9 0.2 13.5 16.4 - ------------------------------------------------------------------------------------------------------------------ Total Non-Current Assets 1,011.2 1,672.8 1,741.7 1,581.4 2,065.9 3,156.5 - ------------------------------------------------------------------------------------------------------------------ Total Assets 1,832.7 3,476.2 5,085.7 2,423.9 4,453.7 6,185.9 - ------------------------------------------------------------------------------------------------------------------ CURRENT LIABILITIES Payables 18 192.7 420.9 566.4 761.0 1,722.9 1,881.2 Interest bearing liabilities 19 107.6 748.8 1,889.4 66.7 715.7 1,485.7 Provisions 20 85.4 264.4 395.0 7.9 131.8 203.7 Current tax liabilities 20 1.9 10.5 8.9 - - 0.1 Other 21 1.2 5.2 3.3 - 1.8 1.4 - ------------------------------------------------------------------------------------------------------------------ Total Current Liabilities 388.8 1,449.8 2,863.0 835.6 2,572.2 3,572.1 - ------------------------------------------------------------------------------------------------------------------ NON-CURRENT LIABILITIES Payables 18 3.7 5.1 5.7 - 0.3 0.4 Interest bearing liabilities 19 516.5 861.9 627.7 516.3 861.5 626.0 Provisions 20 23.3 54.9 50.7 0.4 4.8 5.7 Deferred tax liabilities 20 24.4 22.1 21.1 - - - Other 21 - 16.2 17.6 - 16.2 17.6 - ------------------------------------------------------------------------------------------------------------------ Total Non-Current Liabilities 567.9 960.2 722.8 516.7 882.8 649.7 - ------------------------------------------------------------------------------------------------------------------ Total Liabilities 956.7 2,410.0 3,585.8 1,352.3 3,455.0 4,221.8 - ------------------------------------------------------------------------------------------------------------------ Net Assets 876.0 1,066.2 1,499.9 1,071.6 998.7 1,964.1 ================================================================================================================== EQUITY Contributed equity 5 1,455.5 1,454.3 1,617.2 1,455.5 1,454.3 1,617.2 Reserves 6 (176.2) (118.0) (31.2) 10.2 10.2 10.2 (Accumulated losses)/retained profits 6 (417.0) (289.9) (103.6) (394.1) (465.8) 336.7 - ------------------------------------------------------------------------------------------------------------------ TOTAL EQUITY ATTRIBUTABLE TO ANSELL LIMITED SHAREHOLDERS 862.3 1,046.4 1,482.4 1,071.6 998.7 1,964.1 Outside equity interests 10 13.7 19.8 17.5 - - - - ------------------------------------------------------------------------------------------------------------------ Total Equity 876.0 1,066.2 1,499.9 1,071.6 998.7 1,964.1 ==================================================================================================================
The above statements of financial position should be read in conjunction with the accompanying notes. 67 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- INDUSTRY SEGMENTS of Ansell Limited and Controlled Entities for the year ended 30 June 2002
OPERATING OPERATING REVENUE RESULT 2002 2001 2000 2002 2001 2000 NOTES $M $M $M $M $M $M - ------------------------------------------------------------------------------------------------------------------ INDUSTRY ANSELL HEALTHCARE Occupational Healthcare 640.2 651.0 564.8 37.0 44.3 50.3 Professional Healthcare 546.9 544.9 432.1 92.7 70.6 69.6 Consumer Healthcare 227.1 216.3 175.8 32.6 29.4 18.1 ----------------------------------------------------------- Total Ansell Healthcare 1,414.2 1,412.2 1,172.7 162.3 144.3 138.0 Unallocated Items 30(b) 27.9 60.6 73.8 (27.7) (29.4) (37.6) ----------------------------- 134.6 114.9 100.4 AUTOMOTIVE South Pacific Tyres JV Share /(a)/ (29.7) (2.1) discontinued businesses Trading 808.6 2,744.6 4,553.1 61.0 162.6 240.9 ----------------------------- OPERATING EBITA 195.6 247.8 339.2 NON RECURRING Discontinued Businesses Proceeds/Net gain/(loss) on sale of Controlled Entities and Businesses 939.7 1,049.9 11.6 25.7 155.2 (4.6) RATIONALISATION/RESTRUCTURING Ansell Healthcare (11.6) (60.2) Engineered Products (27.4) Tyres (16.2) Other (6.5) (7.2) (80.3) WRITE-DOWN OF ASSETS Ansell Healthcare (63.1) Exide (99.9) Other (13.5) (97.7) (160.0) Y2K Compliance Costs (3.5) ----------------------------- 26.7 194.3 90.8 Goodwill amortisation (29.2) (40.8) (40.9) ----------------------------- Earnings before Net Interest and Tax (EBIT) (2.5) 153.5 49.9 Net Interest, including Borrowing Costs (54.7) (99.4) (102.5) ----------------------------- Operating Profit before Tax (57.2) 54.1 (52.6) Income Tax Expense (55.8) (189.9) (29.8) Outside Equity Interests 30(c) (2.8) (3.6) (4.1) - ------------------------------------------------------------------------------------------------------------------ Total Consolidated 3,190.4 5,267.3 5,811.2 (115.8) (139.4) (86.5) ================================================================================================================== REGIONS Australia & S.E. Asia 170.7 160.5 136.9 32.9 30.7 28.3 America 799.5 813.0 664.0 99.1 98.7 77.4 Europe 444.0 438.7 371.8 30.3 14.9 32.3 - ------------------------------------------------------------------------------------------------------------------ 1,414.2 1,412.2 1,172.7 162.3 144.3 138.0 ==================================================================================================================
68 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- INDUSTRY SEGMENTS (continued)
ASSETS EMPLOYED LIABILITIES 2002 2001 2000 2002 2001 2000 NOTES $M $M $M $M $M $M - ------------------------------------------------------------------------------------------------------------------ INDUSTRY ANSELL HEALTHCARE Occupational Healthcare 376.0 512.6 456.1 124.7 117.3 100.0 Professional Healthcare 404.3 457.8 477.8 114.3 96.9 89.9 Consumer Healthcare 140.8 160.0 152.5 54.6 57.5 42.9 ----------------------------------------------------------- Total Ansell Healthcare 921.1 1,130.4 1,086.4 293.6 271.7 232.8 Unallocated Items 49.0 157.5 209.3 622.2 1,716.8 2,705.8 AUTOMOTIVE South Pacific Tyres Investment 136.5 134.2 115.6 Discontinued Businesses 46.0 1,159.7 1,968.7 40.9 421.5 647.2 Goodwill and Brand names 403.2 556.5 627.8 Cash 30(d) 276.9 337.9 1,077.9 - ------------------------------------------------------------------------------------------------------------------ Total Consolidated 1,832.7 3,476.2 5,085.7 956.7 2,410.0 3,585.8 ================================================================================================================== REGIONS Australia & S.E. Asia 318.4 359.4 339.8 83.0 80.6 66.9 America 398.6 572.0 529.0 181.9 165.8 137.9 Europe 204.1 199.0 217.6 28.7 25.3 28.0 - ------------------------------------------------------------------------------------------------------------------ 921.1 1,130.4 1,086.4 293.6 271.7 232.8 ==================================================================================================================
Prior year comparatives have been adjusted for reclassification of former Industry Segment businesses which have been sold or abandoned and hence classified as Discontinued Businesses. /(a)/ Effective 1 July 2001 Ansell Limited discontinued equity accounting for the interest in the South Pacific Tyres operation. (Refer Note 2 - Change in Accounting Policy) The above industry segments report should be read in conjunction with the accompanying notes. 69 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- STATEMENTS OF CASH FLOWS of Ansell Limited and Controlled Entities for the year ended 30 June 2002
CONSOLIDATED THE COMPANY 2002 2001 2000 2002 2001 2000 NOTES $M $M $M $M $M $M - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS RELATED TO OPERATING ACTIVITIES Receipts from customers (excluding non-recurring and Accufix Research Institute) 2,356.5 4,404.8 5,711.3 532.8 1,637.8 1,670.8 Payments to suppliers and employees (excluding non-recurring and Accufix Research Institute) (2,124.8) (4,090.4) (5,460.9) (540.0) (1,725.0) (1,522.2) - ------------------------------------------------------------------------------------------------------------------- Net receipts from customers (excluding non-recurring and Accufix Research Institute) 231.7 314.4 250.4 (7.2) (87.2) 148.6 Income taxes paid (25.5) (34.7) (28.2) - - (2.0) Dividends received 0.3 0.1 0.1 196.8 26.2 169.7 - ------------------------------------------------------------------------------------------------------------------- Net cash provided by/(used in) Operating Activities (excluding non-recurring and Accufix Research Institute) 206.5 279.8 222.3 189.6 (61.0) 316.3 Non-recurring payments to suppliers and employees (82.7) (54.5) (20.3) (39.7) (44.9) (20.3) Payments to suppliers and employees net of customer receipts (Accufix Research Institute) (10.7) (24.3) (11.7) - (1.8) (1.2) Amounts refunded from Accufix Settlement Funds (United States) by the Court - 25.6 - - 7.6 - - ------------------------------------------------------------------------------------------------------------------- Net Cash Provided by/(Used in) Operating Activities 31(c) 113.1 226.6 190.3 149.9 (100.1) 294.8 - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS RELATED TO INVESTING ACTIVITIES Payments for businesses, net of cash acquired 31(a) (40.9) (94.3) (155.9) - (70.0) - Payments for property, plant and equipment (34.3) (76.0) (156.8) (7.7) (16.4) (17.0) Payments for brand names/trademarks - (0.5) (5.0) - - (5.0) Proceeds from sale of businesses, net of cash disposed* 31(a) 936.4 906.8 3.4 517.4 211.5 - Proceeds from sale of plant and equipment in the ordinary course of business 12.1 15.1 26.7 2.0 6.4 5.0 Loans (made)/repaid 1.2 (63.1) (7.1) - (63.1) (1.4) Net loans to controlled entities 31(e) - - - 331.5 833.4 (460.8) Proceeds from sale of other investments - 0.8 6.4 - 0.8 - Payments for investments in controlled entities - - - - - (19.1) Payments for other investments - (60.1) (0.5) - (2.2) - - ------------------------------------------------------------------------------------------------------------------- Net Cash Provided by/(Used in) Investing Activities 874.5 628.7 (288.8) 843.2 900.4 (498.3) - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS RELATED TO FINANCING ACTIVITIES Proceeds from borrowings 737.0 10,093.6 5,541.4 738.9 8,135.4 5,279.5 Repayments of borrowings (1,673.9) (11,307.5) (5,211.5) (1,680.2) (8,667.1) (4,904.1) - ------------------------------------------------------------------------------------------------------------------- Net (repayments of)/ proceeds from borrowings (936.9) (1,213.9) 329.9 (941.3) (531.7) 375.4 Proceeds from issues of shares 1.2 2.5 1.3 1.2 2.5 1.3 Payments for share buy-back - (165.4) - - (165.4) - Lease payments - (0.5) (2.3) - - (0.3) Dividends paid (48.3) (108.5) (150.1) (46.5) (103.3) (144.4) Interest received 13.1 44.6 47.4 36.5 130.3 91.3 Interest and borrowing costs paid (70.2) (144.7) (150.3) (67.0) (129.5) (124.5) - ------------------------------------------------------------------------------------------------------------------- Net Cash (Used in)/Provided by Financing Activities (1,041.1) (1,585.9) 75.9 (1,017.1) (797.1) 198.8 - ------------------------------------------------------------------------------------------------------------------- Net (Decrease)/Increase in Cash Held (53.5) (730.6) (22.6) (24.0) 3.2 (4.7) Cash at the beginning of the financial year 328.4 1,019.8 1,021.3 27.3 24.1 28.8 Effects of exchange rate changes on the balances of cash held in foreign currencies at the beginning of the financial year (12.6) 39.2 21.1 - - - - ------------------------------------------------------------------------------------------------------------------- Cash at the End of the Financial Year 31(d) 262.3 328.4 1,019.8 3.3 27.3 24.1 ===================================================================================================================
* The Company 2001 includes a distribution from the Distribution Trust arising from the sale of the Electrical Distribution business (refer Note 4(b)). The above statements of cash flows should be read in conjunction with the accompanying notes. 70 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES GENERAL Ansell Limited is a multinational healthcare solutions provider of barrier protection products against injury, infection and contamination. The Company's principal line of business, determined and reported on the basis of differing products and services, is the manufacture and supply of barrier protection products into the Occupational, Professional and Consumer healthcare markets. The Ansell Healthcare group manufactures industrial gloves, medical gloves and consumer products including household gloves and condoms in the Asia Pacific region and America, and markets these products globally. The significant policies which have been adopted in the preparation of this financial report are: BASIS OF PREPARATION OF FINANCIAL REPORT 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 basis of historical costs and except where stated, does not take into account changing money values or fair values of non-current assets. The accounting policies adopted in preparing the financial report have been consistently applied by each entity in the consolidated entity and, except where there is a change in accounting policy as set out in Note 2, are consistent with those of the previous year. Comparative information is reclassified where appropriate to enhance comparability. PRINCIPLES OF CONSOLIDATION The consolidated financial statements of the Ansell Limited Group ("the consolidated entity") include the financial statements of Ansell Limited ("the Company"), being the parent entity, and its controlled entities. The consolidated financial statements incorporate the assets and liabilities of all entities controlled by the Company as at balance date and the results of all controlled entities for the year then ended. The effects of all transactions between entities in the consolidated entity are eliminated in full. Outside interests in the results and equity of controlled entities are shown separately in the consolidated Statement of Financial Performance and Statement of Financial Position respectively. Where control of an entity is obtained during a financial year, its results are included in the consolidated Statement of Financial Performance from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control exists. RECLASSIFICATION OF FINANCIAL INFORMATION INVESTMENTS IN PARTNERSHIPS As a result of the change in the accounting treatment of the consolidated entity's interest in the South Pacific Tyres partnership (refer Note 2 - 'Change in Accounting Policy'), the investment in the South Pacific Tyres partnership has been reclassified from Note 14(b) - 'Investments Accounted for Using the Equity Method' to Note 14(a) - 'Share in Controlled Entities and Other Financial Assets'. INVESTMENTS IN ASSOCIATED ENTITIES As a result of the change in the accounting treatment of the consolidated entity's interest in South Pacific Tyres N.Z. Ltd (refer Note 2 - 'Change in Accounting Policy'), the investment in South Pacific Tyres N.Z. Ltd has been reclassified from Note 14(b) - 'Investments Accounted for Using the Equity Method' and Note 38 - 'Investments in Associates' to Note 14(a) - 'Share in Controlled Entities and Other Financial Assets'. Refer to Note 38 for further details of the financial effect on investments in associates. 71 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) REVENUE RECOGNITION Revenues are recognised at fair value of the consideration received net of the amount of goods and services tax (GST). SALES REVENUE Sales revenue comprises revenue earned (net of returns, discounts and allowances) from the provision of products to entities outside the consolidated entity. Sales revenue is recognised when the goods are shipped and title passes. INTEREST INCOME Interest income is recognised as it accrues. ASSET SALES The net proceeds of asset sales are included as revenue of the consolidated entity. The profit or loss on disposal of assets is brought to account at the date a contract of sale is signed. The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of the disposal and the net proceeds on disposal. Any related balance in the asset revaluation reserve is transferred to retained profits/accumulated losses on disposal. BORROWING COSTS Borrowing costs include interest, amortisation of ancillary costs incurred in connection with arrangement of borrowings and other related charges. Ancillary costs incurred in connection with the arrangement of term borrowings are capitalised and amortised over the life of the borrowings. GOODS AND SERVICES TAX Revenues, expenses and assets are recognised net of the amount of 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. INCOME TAX The consolidated entity adopts the income statement liability method of tax effect accounting. Income tax expense is calculated at current rates on the accounting profit adjusted for permanent differences and income tax over/under provided in the previous year. The estimated liability for income tax outstanding in respect of the period's operations is included in the Statement of Financial Position as a current liability. Future income tax benefits and liabilities arising because some items are included in accounting profit in a period different from that in which the items are assessed for income tax, are included in the Statement of Financial Position as a non-current asset and a non-current liability respectively. As provided for in Accounting Standard AASB 1020, these deferred tax balances have been offset, where applicable, in the financial statements of the individual entities. The eventual recoverability of future income tax benefits and payment of the non-current tax liability is contingent upon taxable income being earned in future periods, continuation of the relevant taxation laws and each relevant company continuing to comply with the appropriate legislation. 72 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) INCOME TAX (continued) Future income tax benefits attributable to tax losses (including capital losses) are only recorded where virtual certainty of recovery exists. Provision is made for overseas taxes, which may arise in the event of retained profits of foreign controlled entities being remitted to Australia, when the dividend is declared. Provision is made for capital gains tax, which may arise in the event of sale of revalued assets, only when such assets are sold. RECEIVABLES TRADE DEBTORS Trade debtors are recognised as at the date goods are shipped and invoiced and are principally on 30 day terms. A provision for doubtful debts is recognised when collection of the full nominal amount is no longer probable. OTHER AMOUNTS RECEIVABLE Other amounts receivable comprise amounts due as a result of transactions outside the normal course of trading. INVENTORIES STOCK ON HAND AND WORK IN PROGRESS Stock on hand and work in progress are consistently valued on the basis of the lower of cost and net realisable value. The methods generally adopted throughout the consolidated entity in determining costs are: RAW MATERIALS AND OTHER STOCK Actual costs, determined on a first in, first out basis or standard costs approximating actual costs. FINISHED GOODS AND WORK IN PROGRESS Standard costs approximating actual costs include an appropriate allocation of overheads. Merchant lines are valued at actual cost into store, determined on a first in, first out or average cost basis. Obsolete and slow moving stocks are written down to net realisable value where such value is below cost. Net realisable value is determined on the basis of each inventory line's normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and are deducted to establish net realisable value. INVESTMENTS CONTROLLED ENTITIES All investments are valued at the lower of cost and recoverable value. Dividends and distributions are brought to account in the Statement of Financial Performance when they are paid by the controlled entities. ASSOCIATED COMPANIES An associate is an entity, other than a partnership, over which the consolidated entity exercises significant influence, where the investment in that entity is material and has not been acquired with a view to disposal in the near future. In the consolidated financial statements, investments in associates (with the exception of South Pacific Tyres N.Z. Ltd - refer to Note 2 'Change in Accounting Policy') are accounted for using equity accounting principles. Investments in associates are carried at the lower of the equity accounted amount and recoverable amount. The consolidated entity's share of the associates' net profit after tax is recognised in the consolidated Statement of Financial Performance after adjusting for: revisions in depreciation of depreciable assets and amortisation of goodwill arising from adjustments made as at the date of acquisition; dissimilar accounting policies; and the elimination of unrealised profits and losses on transactions between the associate and any entities in the consolidated entity, or another associate of the consolidated entity. Other movements in reserves are recognised directly in consolidated reserves. Revenue from dividends from associates is recognised by the parent entity when dividends are received. Refer to Change in Accounting Policy for accounting treatment of South Pacific Tyres N.Z. Ltd. 73 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) INVESTMENTS (continued) OTHER COMPANIES Investments in other listed and unlisted companies are carried at cost less any amount provided for diminution in value as determined by the Directors. Dividends are recognised when they are received. INTEREST IN PARTNERSHIP Refer to Note 2 'Change in Accounting Policy'. PROPERTY, PLANT AND EQUIPMENT ACQUISITION Items of property, plant and equipment are initially recorded at cost and depreciated as set out below. The cost of property, plant and equipment constructed by the consolidated entity includes the cost of materials and direct labour and capitalised interest. DEPRECIATION AND AMORTIZATION Depreciation and amortisation is calculated on a straight line basis so as to write off the net cost of each item of property, plant and equipment, excluding land, over its estimated useful life. The expected useful lives are as follows: Freehold buildings of the Company and all Australian controlled entities - 40 years Freehold buildings of overseas controlled entities - 20 to 40 years Leasehold buildings - Life of lease Owned and leased plant and equipment - 3 to 10 years
Depreciation and amortisation rates and methods are reviewed annually for appropriateness. LEASES Finance leases are capitalised at the present value of the minimum lease payments. A corresponding lease liability is also established and each lease payment is allocated between the liability and finance charges. Operating lease payments are expensed as incurred. RECOVERABLE AMOUNT OF NON-CURRENT ASSETS VALUED ON COST BASIS The carrying amounts of non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amount at balance date. 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 recognised as an expense in the net profit or loss in the reporting period in which it occurs. In assessing recoverable amounts of non-current assets the relevant cash flows have not been discounted to their present value, except where specifically stated. BRAND NAMES Brand names acquired since 1 July 1987 are recorded in the financial statements at cost. No amortisation is provided against the carrying value of these brand names on the basis that the lives of these assets are considered unlimited at this point in time. Brand names have an unlimited legal life and the brand names recorded in the financial statements are not currently associated with products which are likely to become commercially or technically obsolete. PAYABLES TRADE AND OTHER CREDITORS Trade and other creditors are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Company or the consolidated entity. Trade liabilities are normally settled on 60 day terms. 74 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) PAYABLES (continued) BILLS PAYABLE Bills payable are carried at the principal amount plus accrued interest. INTEREST BEARING LIABILITIES Bank and other loans are carried at their principal amount, subject to set-off arrangements. Interest is charged as an expense as it accrues. PROVISIONS WAGES, SALARIES AND ANNUAL LEAVE The provisions for employee entitlements to wages, salaries and annual leave represent the amount which the consolidated entity has a present obligation to pay resulting from employees' services provided up to the balance date. The provisions have been calculated at nominal amounts based on current wage and salary rates and include related on-costs. LONG SERVICE LEAVE AND POST RETIREMENT HEALTH BENEFITS The liability for employee entitlements to long service leave and post retirement health benefits represents the present value of the estimated future cash outflows to be made by the Company and the consolidated entity resulting from employees' services provided up to the balance date. The provision is calculated using estimated future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using rates attaching to national government securities at balance date which most closely match the terms of maturity of the related liabilities. RATIONALISATION AND RESTRUCTURING Provisions for rationalisation and restructuring are only recognised when a detailed plan has been approved and the restructuring has either commenced or been publicly announced. Costs related to ongoing activities are not provided for. CONTINGENCIES, ACCUFIX PACING LEAD RELATED EXPENSES AND INSURANCE CLAIMS The consolidated entity provides for certain specifically identified or obligated costs when these amounts are reasonably determinable. OTHER LIABILITIES AMOUNTS DUE UNDER CONTRACT Amounts due under contract are carried at the outstanding consideration payable. SUPERANNUATION CONTRIBUTIONS The Company and other controlled entities contribute to various defined benefit and accumulation superannuation funds as set out in Note 24. Employer contributions to these funds are charged against the operating profit when due and payable. EMPLOYEE AND EXECUTIVE SHARE PLANS The Company currently maintains two plans for employees of the consolidated entity - the Pacific Dunlop Employee Share Plan and the Pacific Dunlop Executive Share Option Plan. A further Plan, the Pacific Dunlop Executive Share Plan, was discontinued in 1996. Further information on these plans is set out in Note 25. ACCOUNTING FOR ACQUISITIONS (GOODWILL & BRAND NAMES) Acquired businesses are accounted for on the basis of the cost method. Fair values are assigned at date of acquisition to all the identifiable underlying assets acquired and to the liabilities assumed. Specific assessment is undertaken at the date of acquisition of any appropriate additional costs to be incurred. A liability for restructuring costs is only recognised as at the date of acquisition when there is a demonstrable commitment to restructuring together with a detailed plan. Further, the liability is only recognised when there is little or no discretion to avoid payment to other parties to settle such costs and a reliable estimate of the amount of the liability can be made. 75 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ACCOUNTING FOR ACQUISITIONS (GOODWILL & BRAND NAMES) (continued) Brand names acquired are recorded in the financial statements at cost. Goodwill represents the excess of the purchase consideration plus incidental costs over the fair value of the identifiable net assets acquired. Acquired goodwill is capitalised and amortised to the Statement of Financial Performance on a straight line basis over the future period of expected benefit. The benefits from the goodwill acquired may exceed 20 years but the goodwill is written off over periods not exceeding 20 years in compliance with Australian Accounting Standards. The unamortised balance of goodwill is reviewed at least at each reporting date and any material diminution in value is charged to the Statement of Financial Performance. FOREIGN CURRENCY TRANSLATIONS Transactions in foreign currencies are recorded at the rate of exchange ruling on the date of each transaction. At balance date, amounts payable and receivable in foreign currencies are converted at the rates of exchange ruling at that date. Where forward currency contracts have been arranged, the contract settlement rate is used. The financial statements of overseas controlled entities that are self sustaining foreign operations are converted using the current rate method. Variations occurring from year to year arising from this translation method are transferred to the foreign currency translation reserve. Exchange differences arising on foreign currency amounts payable and receivable are brought to account in the Statement of Financial Performance. On consolidation, exchange differences on long term foreign currency amounts payable and receivable that hedge a net investment in an overseas controlled entity are transferred to the foreign currency translation reserve. DERIVATIVES The Company and consolidated entity use derivative financial instruments, principally foreign exchange and interest rate related, to reduce their exposure to movements in foreign exchange rate and interest rate movements. The consolidated entity has adopted certain principles in relation to derivative financial instruments: (i) it does not trade in a derivative that is not used in the hedging of an underlying business exposure of the consolidated entity; (ii) derivatives acquired must be able to be recorded on the consolidated entity's treasury management systems, which contain extensive internal controls; and (iii) the consolidated entity does not deal with counter-parties rated lower than A- by Standard and Poor's or A3 by Moody's Investors Service for any overnight transactions. The Company and consolidated entity follow the same credit policies, legal processes, monitoring of market and operational risks in the area of derivative financial instruments, as they do in relation to financial assets and liabilities on the Statement of Financial Position, where internal controls operate. Derivative instruments are not recorded on the Statement of Financial Position. DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING On a continuing basis, the consolidated entity monitors its anticipated future exposures and on some occasions hedges all or part of these exposures. The transactions which may be covered are future profits of overseas controlled entities and future foreign exchange requirements. These exposures are then monitored against continuing analysis of anticipated positions and may be modified from time to time. These transactions predominantly do not exceed 12 months duration and hedge transactions the consolidated entity expects to occur in this time frame. 76 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR PURPOSES OTHER THAN TRADING (continued) Gains and losses on derivatives used as hedges are accounted for on the same basis as the underlying physical exposures they hedge. Accordingly, hedge gains and losses are included in the Statement of Financial Performance when the gain or loss arising on the related physical exposures are recognised in the Statement of Financial Performance. When hedging an underlying interest rate exposure, with a derivative financial instrument, all gains and losses are accounted for on an accrual basis, thereby adjusting the underlying physical cost to the hedged rate over the life of the transaction. Gains or losses resulting from the termination of an interest rate swap contract where the underlying borrowing remains, are deferred on the Statement of Financial Position and then amortised over the life of the borrowing. Where the transaction is a single event, such as a foreign exchange exposure, the hedge gain or loss is taken to account on the actual exposure date. Gains and losses on derivative financial instruments which hedge anticipated transactions are in the first instance deferred and later recognised in the Statement of Financial Performance when the hedged transaction occurs. Such deferrals only occur where the future transaction remains assured. Where an actual or anticipated transaction is modified or extinguished any associated derivative financial instrument is also modified or extinguished and any gain or loss that no longer relates to an actual or anticipated exposure is immediately taken to the Statement of Financial Performance. Gains and losses that arise prior to and upon the maturity of transactions entered into under rollover strategies are deferred and included in the measurement of the hedge, if the transaction is still expected to continue. If the transaction is no longer expected to continue, the gains and losses are recognised immediately in the Statement of Financial Performance. DERIVATIVE FINANCIAL INSTRUMENTS HELD OR ISSUED FOR TRADING PURPOSES The Company and the consolidated entity also enter into a limited number of exchange rate related derivative contracts for trading purposes. These transactions are undertaken under strict guidelines, limits and internal controls and with appropriate stop loss parameters. Trading activities include taking positions within authorised and clearly defined limits to benefit from expected movements in prices. The portfolio of derivative financial instruments held for trading purposes is valued at market rates with all gains and losses being recognised in the Statement of Financial Performance for the current period. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure on contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. 77 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 2. CHANGE IN ACCOUNTING POLICY ACCOUNTING FOR INTEREST IN PARTNERSHIP Effective 1 July 2001, the consolidated entity discontinued equity accounting for its interest in the South Pacific Tyres partnership pursuant to an agreement with Goodyear Tyres Pty Ltd which contains put and call options which provide the consolidated entity with an actionable exit strategy in respect of the investment in the South Pacific Tyres partnership. The consolidated entity's interest in the South Pacific Tyres partnership is carried as an investment. Prior to 1 July 2001, the equity method of accounting had been applied in accounting for the interest in the South Pacific Tyres partnership. ACCOUNTING FOR INTEREST IN ASSOCIATED COMPANIES Effective 1 July 2001, the consolidated entity discontinued equity accounting for its interest in South Pacific Tyres N.Z. Ltd pursuant to an agreement with Goodyear New Zealand Ltd which contains put and call options which provide the consolidated entity with an actionable exit strategy in respect of the investment in South Pacific Tyres N.Z. Ltd. The consolidated entity's interest in South Pacific Tyres N.Z. Ltd is carried as an investment. Prior to 1 July 2001, the equity method of accounting had been applied in accounting for the interest in South Pacific Tyres N.Z. Ltd. 3. TOTAL REVENUE
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ REVENUE FROM THE SALE OF GOODS 2,222.8 4,156.8 5,725.8 498.9 1,527.0 1,691.2 Revenues From Other Operating Activities Dividend income From shares in wholly owned controlled entities - - - 195.5 25.2 169.7 From shares in associated companies - - - 1.3 1.0 - From shares in other companies 0.3 0.6 0.1 - - - INTEREST RECEIVED OR DUE AND RECEIVABLE From wholly owned controlled entities - - - 34.3 127.7 88.7 From related parties 2.5 0.8 0.3 2.0 0.8 0.1 From others 13.0 44.1 46.7 1.9 1.8 2.5 - ------------------------------------------------------------------------------------------------------------------ TOTAL REVENUE FROM OTHER OPERATING ACTIVITIES 15.8 45.5 47.1 235.0 156.5 261.0 - ------------------------------------------------------------------------------------------------------------------ Revenue from Outside Operating Activities Proceeds from the Sale of Non-Current Assets 12.1 15.1 26.7 2.0 6.4 5.7 Proceeds Received from the Sale of Businesses and Investments* 939.7 1,049.9 11.6 521.5 214.8 - - ------------------------------------------------------------------------------------------------------------------ TOTAL REVENUE FROM OUTSIDE OPERATING ACTIVITIES 951.8 1,065.0 38.3 523.5 221.2 5.7 - ------------------------------------------------------------------------------------------------------------------ TOTAL REVENUE 3,190.4 5,267.3 5,811.2 1,257.4 1,904.7 1,957.9 ==================================================================================================================
* The Company 2001 includes a distribution from The Distribution Trust arising from the sale of the Electrical Distribution business (refer to Note 4(b)). 78 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4. PROFIT/(LOSS) FROM ORDINARY ACTIVITIES BEFORE INCOME TAX
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------ (a) PROFIT/(LOSS) FROM ORDINARY ACTIVITIES BEFORE INCOME TAX HAS BEEN ARRIVED AT AFTER CHARGING/(CREDITING) THE FOLLOWING ITEMS: Borrowing Costs Interest Paid or Due and Payable: To others 61.8 140.8 146.2 59.4 127.4 122.2 Finance Charges on Finance Leases - - 0.2 - - - Other Borrowing Costs 8.4 3.5 3.1 7.6 2.1 2.3 - ------------------------------------------------------------------------------------------------------------------------ Total Borrowing Costs 70.2 144.3 149.5 67.0 129.5 124.5 Depreciation Buildings 3.9 4.8 8.6 0.9 0.4 0.3 Plant & equipment 46.4 85.4 134.3 7.0 16.3 31.2 Amortization Leasehold land and buildings 2.8 5.1 6.0 0.2 0.7 1.0 Leased plant and equipment - - 0.1 - - 0.1 Goodwill 29.2 40.8 40.9 0.3 1.4 1.0 Deferred costs - 3.7 3.3 - 3.7 3.3 Research and Development Costs Expensed as Incurred 17.0 23.9 38.8 0.4 0.3 0.5 Net Bad Debts Expense 0.8 1.9 1.3 0.4 0.9 1.2 Amounts Set Aside to Provision for: Doubtful trade debts (2.9) 7.9 7.3 1.0 (0.1) 1.2 Employee entitlements 29.2 60.9 102.3 8.5 26.7 36.4 Contingencies 9.4 (4.6) (9.7) 3.5 (4.6) (0.4) Rationalization and restructuring costs 10.9 65.6 62.5 (3.8) 3.3 57.0 Rebates, allowances and warranty claims 7.2 7.1 14.4 2.4 0.3 (2.8) Environmental remediation - (3.7) - - - - Net foreign exchange (gain)/loss (0.4) (2.4) 3.6 23.3 37.8 (32.7) Profits Arising from the Sale of Property, Plant and ) Equipment (7.6) (1.1) (6.1) (6.7) (0.4) (1.2) Losses Arising from Sale of Property, Plant and Equipment/(1)/ 13.2 8.5 163.8 7.7 7.8 0.4 Operating Lease Rentals 37.5 79.2 110.4 9.5 44.2 59.2 Write down in value of inventories 3.0 3.7 (0.5) 1.3 (1.0) (0.3) /(1)/ Includes non-recurring write down of certain GNB assets and other costs in 2000. - ------------------------------------------------------------------------------------------------------------------------ (b) INDIVIDUALLY SIGNIFICANT ITEMS INCLUDED IN PROFIT/(LOSS) FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE Write-down of Exide receivable/investment (99.9) - - - - - Write-down of Ansell Healthcare fixed assets (63.1) - - - - - Net gain on sale of controlled entities and businesses 25.7/(3)/ 155.2 - 7.0 152.4/(2)/ - Write-down of assets and write-down of investments and intercompany balances in subsidiaries - (97.7) (160.0) (82.4) (890.7) (186.0) Engineered Products restructure - (27.4) - - (27.4) - Ansell Healthcare restructure - (60.2) - - - - Supply Chain restructure - - (54.1) - - (54.1)
/(2)/ Represents the distribution from the Distribution Trust arising from the sale of the Electrical Distribution business. /(3)/ Includes additional gain on finalisation of the sale of Pacific Brands in the second half of the year ended 30 June 2002. 79 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 4. PROFIT/(LOSS) FROM ORDINARY ACTIVITIES BEFORE INCOME TAX (continued)
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------- (c) AUDITORS' REMUNERATION Audit and review of the financial reports: Auditors of Ansell Limited and Australian entities - KPMG 1,653 2,986 2,353 1,391 2,250 1,829 Other member firms of KPMG 1,891 1,940 2,581 - - - --------------------------------------------------------- 3,544 4,926 4,934 1,391 2,250 1,829 --------------------------------------------------------- Other services: Other audit and assurance services (including disposals and acquisitions) Auditors of Ansell Limited and Australian entities - KPMG 4,944 2,997 2,552 4,746 2,222 2,059 Other member firms of KPMG 25 1,110 3,569 - - - Taxation and other services Auditors of Ansell Limited and Australian entities - KPMG 439 847 314 331 725 223 Other member firms of KPMG 66 22 63 - - - Systems Implementation/Design Auditors of Ansell Limited and Australian entities - KPMG - 364 - - 282 - Other member firms of KPMG - - 97 - - - --------------------------------------------------------- Total other services 5,474 5,340 6,595 5,077 3,229 2,282 - ---------------------------------------------------------------------------------------------------------------- Total auditors remuneration 9,018 10,266 11,529 6,468 5,479 4,111 - ----------------------------------------------------------------------------------------------------------------
5. CONTRIBUTED EQUITY
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ ISSUED AND PAID UP CAPITAL 187,073,500 (2001 - 186,757,900; 2000 - 206,614,434) ordinary shares fully paid * 1,455.4 1,454.2 1,617.1 1,455.4 1,454.2 1,617.1 1,174,600 (2001 - 1,481,700; 2000 - 2,023,680) ordinary plan shares paid to 5 cents 0.1 0.1 0.1 0.1 0.1 0.1 - ------------------------------------------------------------------------------------------------------------------ Total Issued and Paid up Capital 1,455.5 1,454.3 1,617.2 1,455.5 1,454.3 1,617.2 ================================================================================================================== * includes 678,300 (2001 - 747,666; 2000 - 820,389) shares issued in accordance with the Employee Share Plan - ------------------------------------------------------------------------------------------------------------------ ORDINARY SHARES RECONCILIATION Balance at the beginning of the financial year 1,454.3 1,617.2 1,776.0 1,454.3 1,617.2 1,776.0 Increase in Contributed Equity: Additional capital issued 1.2 2.5 1.2 1.2 2.5 1.2 Decrease in Contributed Equity: Share buy-back - (165.4) - - (165.4) - Capital reduction - - (160.0) - - (160.0) - ------------------------------------------------------------------------------------------------------------------ Balance at the end of the financial year 1,455.5 1,454.3 1,617.2 1,455.5 1,454.3 1,617.2 ==================================================================================================================
Holders of ordinary shares are entitled to receive dividends as declared from time to time 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. Note 25 provides details of shares subject to options granted under the Pacific Dunlop Executive Share Option Plan. SHARE CONSOLIDATION Effective 12 April 2002, Ansell Limited reduced the number of ordinary shares and exercisable options on issue by means of a 1 for 5 share consolidation, which received shareholder approval at an Extraordinary General Meeting held on that date. The quantity of share capital on issue in prior periods has been adjusted for the effect of the share consolidation. 80 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 5. CONTRIBUTED EQUITY (continued) SHARE BUY-BACK On 13 November 2000 pursuant to its off market equal access tender buy-back, the Company bought back 101,992,570 shares at a buy-back price of $1.60 per share (pre-share consolidation), approximating 10% of shares on issue at that date. SHARE CAPITAL TRANSFER TO RETAINED PROFITS As previously reported, effective 30 June 2000, in accordance with section 258F of the Corporations Law, the Company's issued and paid up capital was reduced by the amount of $160 million, representing an amount of capital lost by the Company, and that reduction was effected by crediting the amount to the Company's retained profits account. EXECUTIVE SHARE PLAN As previously reported, the Pacific Dunlop Executive Share Plan was closed to new members effective 12 September 1996, and no further issues of Executive Plan Shares will be made. During the financial year, the amounts outstanding on 307,100 existing Executive Plan Shares were fully paid. Since the end of the financial year, the amounts outstanding on a further 52,100 Executive Plan Shares have been fully paid. Shares allotted under the Pacific Dunlop Executive Share Plan have been paid to 5 cents per share. Refer to Note 25 'Ownership-Based Remuneration Schemes' for details of price payable for shares issued under this plan. EMPLOYEE SHARE PLAN During the financial year, the loan liability of members in respect of 77,866 fully paid ordinary shares of $2.50 each was discharged. Since the end of the financial year, the amounts outstanding on a further 1,380 Employee Plan Shares have been fully paid. Under the Employee Share Plan, 50 cents was payable on subscription for each Plan share allotted to eligible employees, the balance of issue price being funded by way of interest free loans from the Company to the member. No new shares were issued during the financial year or up to the date of this Report under the Pacific Dunlop Employee Share Plan. 81 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 6. (ACCUMULATED LOSSES)/RETAINED PROFITS AND RESERVES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Asset revaluation reserve 14.7 6.2 20.2 10.2 10.2 10.2 General reserve 2.7 3.0 2.8 - - - Foreign currency translation reserve (193.6) (127.2) (54.2) - - - - ------------------------------------------------------------------------------------------------------------------ TOTAL RESERVES (176.2) (118.0) (31.2) 10.2 10.2 10.2 (Accumulated losses)/retained profits (417.0) (289.9) (103.6) (394.1) (465.8) 336.7 - ------------------------------------------------------------------------------------------------------------------ TOTAL (ACCUMULATED LOSSES)/RETAINED EARNINGS AND RESERVES (593.2) (407.9) (134.8) (383.9) (455.6) 346.9 ================================================================================================================== MOVEMENTS DURING THE YEAR: ASSET REVALUATION RESERVE Balance at beginning of the financial year 6.2 20.2 8.6 10.2 10.2 10.0 Adjustment upon adoption of AASB 1041 - (14.1) - - - - Transfer from/(to) retained profits 8.5 0.1 10.4 - - - Transfer to GNB assets held for sale - - 1.2 - - 0.2 - ------------------------------------------------------------------------------------------------------------------ BALANCE AT THE END OF THE FINANCIAL YEAR 14.7 6.2 20.2 10.2 10.2 10.2 ================================================================================================================== GENERAL RESERVE Balance at beginning of the financial year 3.0 2.8 4.8 - - - Transfer from/(to) retained profits (0.3) 0.2 (2.0) - - - - ------------------------------------------------------------------------------------------------------------------ BALANCE AT THE END OF THE FINANCIAL YEAR 2.7 3.0 2.8 - - - ================================================================================================================== FOREIGN CURRENCY TRANSLATION RESERVE Balance at the beginning of the financial year (127.2) (54.2) (115.5) - - - Transfers to retained profits 3.2 - - - - - Exchange fluctuations on assets and liabilities held in foreign currencies net gain/(loss) on translation of net assets (120.3) 279.1 154.2 - - - net gain/(loss) on hedge borrowings 50.7 (352.1) (92.9) - - - - ------------------------------------------------------------------------------------------------------------------ BALANCE AT THE END OF THE FINANCIAL YEAR (193.6) (127.2) (54.2) - - - ================================================================================================================== (ACCUMULATED LOSSES)/RETAINED PROFITS Balance at the beginning of the financial year (289.9) (103.6) (65.4) (465.8) 336.7 284.0 Transfer (to)/from reserves (11.4) (0.3) (8.4) - - - Net profit/(loss) after income tax attributable to Ansell Limited shareholders (115.8) (139.4) (86.5) 71.6 (755.9) (4.0) Amount transferred from contributed equity - - 160.0 - - 160.0 Dividends provided for or paid * 0.1 (46.6) (103.3) 0.1 (46.6) (103.3) - ------------------------------------------------------------------------------------------------------------------ Balance at the end of the financial year (417.0) (289.9) (103.6) (394.1) (465.8) 336.7 ==================================================================================================================
* 2002 dividends represents an over provision in the prior year. NATURE AND PURPOSE OF RESERVES ASSET REVALUATION The asset revaluation reserve includes the net revaluation increments and decrements arising from the revaluation of non-current assets in accordance with AASB 1041. The balance of $14.7 million (the Company: $10.2 million) is not available for future asset write-downs as a result of using the deemed cost election for land and buildings when adopting AASB 1041. GENERAL The amount standing to the credit of the general reserve resulted from prior period allocations of retained profits for non-specific purposes and is available for release to retained profits. FOREIGN CURRENCY TRANSLATION The foreign currency translation reserve records the foreign currency differences arising from the translation of self-sustaining foreign operations, the translation of transactions that hedge the Company's net investment in a foreign operation or the translation of foreign currency monetary items forming part of the net investment in a self-sustaining operation. Refer to Accounting Policy Note 1. 82 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 7. TOTAL EQUITY RECONCILIATION
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Total equity at the beginning of the financial year 1,066.2 1,499.9 1,634.3 998.7 1,964.1 2,070.0 Total changes in equity from non-owner related transactions attributable to Ansell Limited shareholders (185.4) (226.5) (24.0) 71.6 (755.9) (3.8) Transactions with owners as owners: Contributions of equity 1.2 2.5 1.2 1.2 2.5 1.2 Share buy-back - (165.4) - - (165.4) - Dividends 0.1 (46.6) (103.3) 0.1 (46.6) (103.3) Total changes in outside equity interest (6.1) 2.3 (8.3) - - - - ------------------------------------------------------------------------------------------------------------------ Total equity at the end of the financial year 876.0 1,066.2 1,499.9 1,071.6 998.7 1,964.1 ==================================================================================================================
8. INCOME TAX
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Prima facie income tax expense/(benefit) calculated at 30% (2001: 34%, 2000: 36%) on profit/(loss) from ordinary activities (17.2) 18.4 (19.0) 26.7 (229.2) 3.2 Increased taxation arising from: Write down of assets 48.9 43.2 57.6 - 7.8 67.0 Net restructuring costs 5.4 19.6 - - - - Write down of intergroup investments and intercompany balances - - - - 300.9 - Goodwill amortisation 1.4 4.8 6.8 - 0.5 3.2 Foreign losses and costs not deductible - 0.2 1.4 - - - Income tax under provided in prior years 0.2 1.6 - - 0.6 1.6 Net higher overseas tax rates 4.1 - - - - - Reduced taxation arising from: Net gain on sale of businesses (7.7) (49.3) - (2.1) (65.4) (8.2) Tax rebate on dividends from investments - - - - - (33.3) Tax exempt dividends from foreign companies - - - - (8.6) (2.8) Income tax over provided in previous years - - (0.7) (2.3) - - Investment and export incentive allowances (6.3) (8.9) (9.7) - - - Net lower overseas tax rates - (0.9) (5.7) - - - Other permanent differences * 12.4 3.8 (18.6) (22.3) (13.2) (33.3) Share of associates' net profit (0.6) (1.1) (1.1) - - - Income tax expense/(benefit) on profit from ordinary activities before individually significant items and effect of change in tax rate 40.6 31.4 11.0 - (6.6) (2.6) Individually significant income tax items: Write off of tax balances attributable to Australian operations 15.2 158.5 - 17.3 88.4 - Income tax expense/(benefit) on profit from ordinary activities before effect of change in tax rate 55.8 189.9 11.0 17.3 81.8 (2.6) Effect of tax rate change - - 18.8 - - 15.6 - ------------------------------------------------------------------------------------------------------------------ Income tax expense attributable to profit/(loss) from ordinary activities 55.8 189.9 29.8 17.3 81.8 13.0 ================================================================================================================== Income tax expense/(benefit) attributable to operating profit/(loss) is made up of: Provision attributable to current year 8.0 20.5 (24.1) (12.6) (31.9) 2.3 (Over)/Under provision in respect of previous years 0.2 1.6 (0.7) (2.3) 0.6 1.6 Provision attributable to future years Deferred income tax liability (2.0) 4.5 49.5 - - (0.1) Future income tax benefit 49.6 163.3 5.1 32.2 113.1 9.2 - ------------------------------------------------------------------------------------------------------------------ 55.8 189.9 29.8 17.3 81.8 13.0 ==================================================================================================================
* Includes tax benefit on loss from Australian trading operations not brought to account/recovery of tax losses not previously brought to account. 83 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 9. DIVIDENDS PAID AND DECLARED
THE COMPANY $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ DIVIDENDS PAID OR DECLARED BY THE COMPANY ARE: (a) no interim dividend (2001 - 5 cents, unfranked; 2000 - 7 cents, unfranked) has been declared by the Directors - 46.6 72.3 (b) no final dividend (2001 - nil; 2000 - 3 cents, unfranked) has been declared by the Directors - - 31.0
DIVIDEND FRANKING ACCOUNT The balance of available franking credits in the franking account as at 30 June 2002 was Nil (2001 - Nil; 2000 - Nil.) 10. OUTSIDE EQUITY INTERESTS
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ OUTSIDE EQUITY INTERESTS COMPRISE: Contributed equity 4.5 11.6 11.6 Reserves 2.4 4.6 0.7 Retained profits at the beginning of the financial year 3.6 5.2 6.9 Profits/(losses) for the year 2.8 3.6 4.1 Dividends provided for during the year (1.8) (5.2) (5.7) Outside equity interests (disposed)/acquired during the year 2.2 - (0.1) Retained profits at the end of the financial year 6.8 3.6 5.2 - ------------------------------------------------------------------------------------------------------------------ Total Outside Equity Interests 13.7 19.8 17.5 ==================================================================================================================
11. CASH
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Cash on hand 0.2 0.6 1.2 - 0.1 0.1 Cash at bank 72.0 115.7 187.8 4.2 21.0 23.5 Short-term deposits 186.3 194.6 862.6 - 7.2 4.4 - ------------------------------------------------------------------------------------------------------------------ 258.5 310.9 1,051.6 4.2 28.3 28.0 Restricted deposits 18.4 27.0 26.3 - - - - ------------------------------------------------------------------------------------------------------------------ Total Cash 276.9 337.9 1,077.9 4.2 28.3 28.0 ==================================================================================================================
Restricted deposits represent cash set aside to cover the provisions established to address any remaining liability of members of the Group for claims arising with respect to the Accufix Pacing Lead. 84 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 12. RECEIVABLES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ CURRENT Trade debtors 264.8 597.4 715.8 11.6 154.4 126.4 Less provision for doubtful debts 17.5 33.1 33.5 0.4 4.4 6.0 Less provision for rebates, allowances and warranty claims 14.8 41.2 34.1 1.6 9.7 9.4 - ------------------------------------------------------------------------------------------------------------------ 232.5 523.1 648.2 9.6 140.3 111.0 Amounts owing by South Pacific Tyres partnership - - 0.9 - - 0.6 Amounts owing by wholly owned controlled entities - - - 1,488.3 2,684.9 2,864.7 Less provision for doubtful debts - - - 691.4 707.9 196.4 Other amounts receivable 61.2 120.7 135.6 14.5 29.7 18.1 - ------------------------------------------------------------------------------------------------------------------ Total Current 293.7 643.8 784.7 821.0 2,147.0 2,798.0 ================================================================================================================== NON-CURRENT Interest bearing amount owing by South Pacific Tyres partnership 58.0 25.8 - 27.6 25.8 - Interest bearing amount owing by external entities 2.5 33.7 - 1.3 33.7 - Other amounts receivable 8.2 28.5 39.2 4.3 20.6 29.7 Amounts owing by other related parties 0.2 4.0 - 0.2 4.0 - Less provision for doubtful debts 2.2 - - - - - - ------------------------------------------------------------------------------------------------------------------ Total Non-Current 66.7 92.0 39.2 33.4 84.1 29.7 - ------------------------------------------------------------------------------------------------------------------ Total Receivables 360.4 735.8 823.9 854.4 2,231.1 2,827.7 ================================================================================================================== INCLUDED IN OTHER AMOUNTS RECEIVABLE ARE: (i) Loans to employees in relation to the employee share plan - current 0.7 1.0 2.4 0.7 1.0 2.4 - non-current 3.6 7.6 7.5 3.6 7.6 7.5 (ii) Loans to Executive Directors of Ansell Limited and Executives who are Directors of certain controlled entities secured under the Pacific Dunlop Housing Scheme repayable at a future date at concessional interest rates - non-current 0.2 0.4 0.6 0.2 0.4 0.6 Repayments received 0.2 0.2 0.5 0.2 0.2 0.5 THE RECONCILIATIONS OF PROVISION FOR DOUBTFUL DEBTS - TRADE ARE PRESENTED BELOW: Balance at the beginning of the financial year 33.1 33.5 40.2 4.4 6.0 9.5 Acquisitions/(disposals) of entities (8.2) (8.4) (5.9) (4.8) - - Amounts charged/(released) to profit/(loss) from operating activities (2.9) 7.9 7.3 1.0 (0.1) 1.2 Amounts utilised for intended purposes (4.0) (2.1) (9.1) (0.2) (1.5) (4.7) Net foreign currency differences on translation of self-sustaining operations (0.5) 2.2 1.0 - - - - ------------------------------------------------------------------------------------------------------------------ Balance at the end of the financial year 17.5 33.1 33.5 0.4 4.4 6.0 ==================================================================================================================
13. INVENTORIES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ At Cost Raw materials 31.9 78.8 69.3 0.9 32.6 34.9 Work in progress 17.0 32.9 38.9 - 9.7 11.9 Finished goods 181.1 592.7 594.8 12.8 128.2 95.8 Other stock 5.1 6.6 10.0 - 2.6 3.4 - ------------------------------------------------------------------------------------------------------------------ Total Inventory at Cost 235.1 711.0 713.0 13.7 173.1 146.0 - ------------------------------------------------------------------------------------------------------------------ Net Realizable Value (NRV) Raw materials - 6.0 2.8 - 2.4 0.1 Work in progress - 1.6 0.3 - - - Finished goods - 69.9 132.4 - 30.4 16.7 Other stock - 5.8 0.2 - - - - ------------------------------------------------------------------------------------------------------------------ Total Inventory at Net Realizable Value - 83.3 135.7 - 32.8 16.8 - ------------------------------------------------------------------------------------------------------------------ Total Inventory: At lower of cost and NRV 235.1 794.3 848.7 13.7 205.9 162.8 ==================================================================================================================
85 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 14. INVESTMENTS
CONSOLIDATED THE COMPANY 2002 2001 2000 2002 2001 2000 NOTES $M $M $M $M $M $M - ------------------------------------------------------------------------------------------------------------------ (A) SHARES IN CONTROLLED ENTITIES AND OTHER FINANCIAL ASSETS Controlled entities Not quoted on a prescribed stock exchange: At cost /(1)/ - - - 2,246.7 2,442.8 3,098.5 Less Provision for diminution in value - - - 699.5 618.7 245.1 Other financial assets Quoted on a prescribed stock exchange: At cost 9.3 71.6 - - - - Not quoted on a prescribed stock exchange: At cost - 5.3 4.8 - 2.2 - South Pacific Tyres N.Z. Ltd /(2)/ 20.1 18.7 16.7 - - - Investment in Partnerships South Pacific Tyres /(3)/ 116.4 116.4 103.8 - - - ----------------------------------------------------------- Total 145.8 212.0 125.3 1,547.2 1,826.3 2,853.4 ----------------------------------------------------------- (B) INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Shares in Unlisted Associated Companies Equity Accounted 38 13.3 14.6 2.3 - - - Cost - - - 0.2 0.2 0.2 ----------------------------------------------------------- 13.3 14.6 2.3 0.2 0.2 0.2 - ------------------------------------------------------------------------------------------------------------------ Total Investments 159.1 226.6 127.6 1,547.4 1,826.5 2,853.6 ==================================================================================================================
/(1)/ The Directors have adopted the cost basis of valuation in accordance with AASB 1041 'Revaluation of Non-Current Assets' /(2)/ Refer to Note 2 - Change in Accounting Policy for accounting treatment of investment in South Pacific Tyres N.Z. Ltd. /(3)/ Refer to Note 2 - Change in Accounting Policy for accounting treatment of investment in the South Pacific Tyres partnership 86 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 15. PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ (A) FREEHOLD LAND Independent valuation 31/12/1997 - - 35.0 - - 4.1 Directors' valuation 31/12/1997 - - 0.4 - - 0.4 At cost 16.3 43.3 2.3 - 9.7 - - ------------------------------------------------------------------------------------------------------------------ 16.3 43.3 37.7 - 9.7 4.5 - ------------------------------------------------------------------------------------------------------------------ (B) FREEHOLD BUILDINGS Independent valuation 31/12/1997 - - 60.6 - - 10.8 Directors' valuation 31/12/1997 - - 5.8 - - - ----------------------------------------------------------- - - 66.4 - - 10.8 Less provision for depreciation - - 3.1 - - 0.7 ----------------------------------------------------------- - - 63.3 - - 10.1 At cost 45.6 114.4 31.4 - 20.0 1.0 Less provision for depreciation 7.6 16.7 9.2 - 1.2 0.2 ----------------------------------------------------------- 38.0 97.7 22.2 - 18.8 0.8 - ------------------------------------------------------------------------------------------------------------------ 38.0 97.7 85.5 - 18.8 10.9 - ------------------------------------------------------------------------------------------------------------------ (C) LEASEHOLD LAND AND BUILDINGS Independent valuation 31/12/1997 - - 38.4 - - - Less provision for amortization - - 3.3 - - - ----------------------------------------------------------- - - 35.1 - - - At cost 62.6 99.1 63.6 - 6.3 7.1 Less provision for amortization 12.1 25.9 26.6 - 3.2 3.0 ----------------------------------------------------------- 50.5 73.2 37.0 - 3.1 4.1 - ------------------------------------------------------------------------------------------------------------------ 50.5 73.2 72.1 - 3.1 4.1 - ------------------------------------------------------------------------------------------------------------------ (D) PLANT AND EQUIPMENT At cost 502.5 979.2 992.1 2.4 179.1 201.4 Less provision for depreciation 286.7 555.3 559.2 2.0 115.8 130.4 - ------------------------------------------------------------------------------------------------------------------ 215.8 423.9 432.9 0.4 63.3 71.0 - ------------------------------------------------------------------------------------------------------------------ (E) LEASED PLANT AND EQUIPMENT At cost 0.1 0.5 0.5 - - - Less provision for amortization 0.1 0.5 0.5 - - - ----------------------------------------------------------- - - - - - - ----------------------------------------------------------- (F) BUILDINGS AND PLANT UNDER CONSTRUCTION At cost 11.9 31.8 30.0 - 4.0 2.5 - ------------------------------------------------------------------------------------------------------------------ Total property, plant and equipment 332.5 669.9 658.2 0.4 98.9 93.0 - ------------------------------------------------------------------------------------------------------------------
In accordance with the consolidated entity's policy of obtaining an independent valuation of land and buildings every three years, an independent valuation was carried out as at 31 December 2000 by CB Richard Ellis (Victoria) Pty Ltd. This valuation was on the basis of Fair Value - Existing Use, subject to continued occupation by the operating entity or, where this was not the case, Fair Value - Alternative Use. With respect to land and buildings owned as at 30 June 2002, this resulted in a valuation of land of $40,127,553 (the Company: Nil) and a valuation of buildings of $85,605,413 (the Company: Nil). As land and buildings are recorded at cost, the valuation has not been brought to account. 87 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 15. PROPERTY, PLANT AND EQUIPMENT (continued) RECONCILIATIONS Reconciliations of the balances for each class of property, plant and equipment are set out below:
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ FREEHOLD LAND Balance at the beginning of the financial year 43.3 37.7 85.4 9.7 4.5 4.6 Additions - 1.0 5.3 - 1.0 - Additions through entities acquired - 4.7 - - 4.7 - Disposal of entities (20.8) - (40.9) (8.1) - (0.1) Disposals/Write-downs (4.6) (0.5) (14.3) (1.6) (0.5) - Transfers (to)/from related companies - - - - - - Transfer from capital works in progress - - 0.9 - - - Net foreign currency differences on translation of self-sustaining operations (1.6) 0.4 1.3 - - - ----------------------------------------------------------- Balance at the end of the financial year 16.3 43.3 37.7 - 9.7 4.5 FREEHOLD BUILDINGS Balance at the beginning of the financial year 97.7 85.5 151.6 18.8 10.9 12.3 Additions 0.3 0.2 0.6 - - 0.2 Additions through entities acquired - 8.2 0.5 - 8.2 - Disposal of entities (33.3) (0.1) (86.8) (14.9) - (0.9) Disposals/Write-downs (19.4) (0.7) (3.2) (3.0) - (0.8) Transfers (to)/from related companies - - - - 0.1 0.6 Transfer from capital works in progress - 2.9 11.4 - - - Transfers to leased assets - - (0.2) - - (0.2) Depreciation (3.9) (4.8) (8.6) (0.9) (0.4) (0.3) Net foreign currency differences on translation of self-sustaining operations (3.4) 6.5 20.2 - - - ----------------------------------------------------------- Balance at the end of the financial year 38.0 97.7 85.5 - 18.8 10.9 LEASEHOLD LAND & BUILDINGS Balance at the beginning of the financial year 73.2 72.1 65.2 3.1 4.1 3.6 Additions 1.1 1.6 2.9 0.1 0.2 0.7 Additions through entities acquired 1.9 0.2 13.0 - 0.2 - Disposal of entities (14.8) (8.8) (12.7) (2.7) (0.3) - Disposals/Write-downs (2.7) (0.4) (0.1) (1.6) (0.4) - Transfers (to)/from related companies - - - - - 0.5 Transfers from capital works in progress 1.4 0.2 0.9 1.3 - 0.1 Transfers from fixed assets - - 0.2 - - 0.2 Amortization (2.8) (5.1) (6.0) (0.2) (0.7) (1.0) Net foreign currency differences on translation of self-sustaining operations (6.8) 13.4 8.7 - - - ----------------------------------------------------------- Balance at the end of the financial year 50.5 73.2 72.1 - 3.1 4.1 PLANT & EQUIPMENT Balance at the beginning of the financial year 423.9 432.9 646.4 63.3 71.0 94.2 Additions 11.4 37.6 46.1 4.6 8.9 10.9 Additions through entities acquired 3.4 11.1 30.6 - 9.6 - Disposal of entities (104.4) (34.5) (345.9) (48.8) (3.3) (19.2) Disposals/Write-downs (74.4) (20.3) (18.4) (13.1) (12.4) (4.2) Transfers (to)/from related companies - - - - 1.5 12.3 Transfers from capital works in progress 30.5 36.6 155.0 1.4 4.3 8.1 Transfers from leased assets - - 0.1 - - 0.1 Depreciation (46.4) (85.4) (134.3) (7.0) (16.3) (31.2) Net foreign currency differences on translation of self-sustaining operations (28.2) 45.9 53.3 - - - ----------------------------------------------------------- Balance at the end of the financial year 215.8 423.9 432.9 0.4 63.3 71.0
88 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 15. PROPERTY, PLANT AND EQUIPMENT (continued)
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ LEASED PLANT & EQUIPMENT Balance at the beginning of the financial year - - 0.2 - - 0.2 Transfers to fixed assets - - (0.1) - - (0.1) Amortization - - (0.1) - - (0.1) ----------------------------------------------------------- Balance at the end of the financial year - - - - - - BUILDINGS AND PLANT UNDER CONSTRUCTION Balance at the beginning of the financial year 31.8 30.0 117.0 4.0 2.5 6.0 Additions 21.5 35.6 101.8 3.0 6.2 5.3 Additions through entities acquired - 0.4 0.1 - 0.4 - Disposal of entities (7.0) (0.1) (38.1) (3.8) - (0.6) Disposals/Write-downs (0.4) (0.5) - (0.5) (0.4) - Transfers (to)/from related companies - - - - (0.4) 0.3 Transfers to the statement of financial performance - (0.3) (1.2) - - (0.2) Transfers to property, plant & equipment (31.9) (39.7) (168.1) (2.7) (4.3) (8.3) Net foreign currency differences on translation of self-sustaining operations (2.1) 6.4 18.5 - - - ----------------------------------------------------------- Balance at the end of the financial year 11.9 31.8 30.0 - 4.0 2.5
16. INTANGIBLES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ BRAND NAMES At cost 142.5 217.5 219.5 - 7.3 8.7 ----------------------------------------------------------- GOODWILL Directors' valuation 30/06/1996 - 4.0 3.4 - - - ----------------------------------------------------------- - 4.0 3.4 - - - Less provision for amortization - 2.0 1.4 - - - ----------------------------------------------------------- - 2.0 2.0 - - - ----------------------------------------------------------- At cost 445.9 536.8 622.2 - 8.4 20.0 Less provision for amortization 185.2 199.8 215.9 - 5.0 10.2 ----------------------------------------------------------- 260.7 337.0 406.3 - 3.4 9.8 ----------------------------------------------------------- Total Goodwill 260.7 339.0 408.3 - 3.4 9.8 ----------------------------------------------------------- Total Intangibles 403.2 556.5 627.8 - 10.7 18.5 ===========================================================
17. DEFERRED TAX ASSETS
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Future income tax benefit arising from: Accumulated timing differences 32.2 75.4 147.9 - 32.2 145.3 Accumulated tax losses 17.5 31.4 124.1 - - - ----------------------------------------------------------- 49.7 106.8 272.0 - 32.2 145.3 ===========================================================
The Group has unrecognised capital tax losses relating to controlled entities of $331.3 million (2001 - $242.5 million; 2000 - $42.5 million). Future income tax benefits of $455.1 million (2001 - $461.8 million; 2000 - $197.8 million) relating to trading tax losses of controlled entities have not been recognised in the financial statements. The benefit of those trading losses will only be obtained if: (a) the relevant company derives future assessable income of a nature and an amount sufficient to enable the benefit to be realised, or the benefit can be utilised by another company in the consolidated entity; (b) the relevant company and/or the consolidated entity continues to comply with the conditions for deductibility imposed by the law; and (c) no changes in tax legislation adversely affect the relevant company and/or consolidated entity in realising the benefit. 89 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 17. DEFERRED TAX ASSETS (continued) The tax effect of temporary differences that give rise to significant portions of the future income tax benefit are presented below:
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Trading stock tax adjustments 4.0 13.0 44.2 Depreciation on plant adjustments - 1.5 (2.4) Provisions 21.4 82.2 39.4 Accruals 3.0 (1.0) - Unrealized foreign exchange losses 0.5 0.2 49.8 Accumulated tax losses 17.5 31.4 124.1 Other 3.3 (20.5) 16.9 - ------------------------------------------------------------------------------------------------------------------ Total temporary differences 49.7 106.8 272.0 ==================================================================================================================
18. PAYABLES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ CURRENT Amounts owing to wholly owned controlled entities - - - 739.1 1,623.3 1,620.8 Trade creditors 166.6 363.2 476.7 8.1 77.9 78.8 Bills payable - 6.6 1.5 - 1.5 - Other creditors 26.1 51.1 88.2 13.8 20.2 181.6 - ------------------------------------------------------------------------------------------------------------------ Total Current 192.7 420.9 566.4 761.0 1,722.9 1,881.2 - ------------------------------------------------------------------------------------------------------------------ NON-CURRENT Trade creditors - 0.3 0.2 - 0.1 0.1 Other creditors 3.7 4.8 5.5 - 0.2 0.3 - ------------------------------------------------------------------------------------------------------------------ Total Non-Current 3.7 5.1 5.7 - 0.3 0.4 - ------------------------------------------------------------------------------------------------------------------ Total Payables 196.4 426.0 572.1 761.0 1,723.2 1,881.6 - ------------------------------------------------------------------------------------------------------------------
90 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 19. INTEREST BEARING LIABILITIES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ CURRENT Bank overdrafts 14.6 9.5 58.1 0.9 1.0 3.9 Bank loans repayable in: Belgian francs - - 27.5 - - - Canadian dollars 5.8 6.5 4.5 - - - Euro dollars 14.9 16.7 - - - - Malaysian ringgits 5.8 - - - - - U.S. dollars - - 0.5 - - - Other currencies 0.7 1.6 7.0 - - - Other loans repayable in: Australian dollars - 578.1 71.2 - 578.3 71.2 Canadian dollars - - 16.8 - - 16.8 Euro dollars - 15.7 15.9 - 15.7 15.9 New Zealand dollars - - 87.2 - - 59.9 Sterling Pounds 16.2 - 43.7 16.2 - 43.7 U.S. dollars 49.6 120.7 1,551.6 49.6 120.7 1,268.9 Other currencies - - 5.4 - - 5.4 - ------------------------------------------------------------------------------------------------------------------ 107.6 748.8 1,889.4 66.7 715.7 1,485.7 - ------------------------------------------------------------------------------------------------------------------ NON-CURRENT Bank loans repayable in: Other currencies 0.2 0.5 1.7 - - - Other loans repayable in: Australian dollars 116.0 346.8 64.2 116.0 346.9 64.2 Euro dollars 34.0 16.7 30.9 34.0 16.7 30.8 New Zealand dollars - - 35.1 - - 35.1 Sterling Pounds - 16.7 17.7 - 16.7 17.7 U.S. dollars 366.3 481.2 478.1 366.3 481.2 478.2 - ------------------------------------------------------------------------------------------------------------------ 516.5 861.9 627.7 516.3 861.5 626.0 - ------------------------------------------------------------------------------------------------------------------ 624.1 1,610.7 2,517.1 583.0 1,577.2 2,111.7 ==================================================================================================================
The Group does not, as a rule, pledge assets as security for borrowings, however, at 30 June 2002 bank overdraft and other loans totalling $8.2 million (2001: $3.8 million, 2000: $5.2 million) were secured, principally against Group property, plant and equipment items having carrying values slightly in excess of the secured amounts payable. These security arrangements relate to acquired controlled entities and were in place prior to the companies concerned becoming part of the Ansell Limited Group. The Group established a 3 year US$100 million revolving credit bank facility in January 2002. This facility can be accessed by the parent company and certain USA subsidiaries. This facility was not utilised at 30 June 2002. 91 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 19. INTEREST BEARING LIABILITIES (continued) The following table sets out detail in respect of the major components of Interest Bearing Liabilities at 30 June 2002. AMOUNT INTEREST RATE NATURE OF BORROWING $ MILLION % P.A. MATURITY DATE - ------------------------------------------------------------------------------- BANK OVERDRAFTS Australian dollars 1.7 8.00 At call Indian rupees 1.5 8.80 At call Euro dollars 4.3 4.90 At call Sterling pounds 2.8 5.50 At call United States dollar 3.4 4.00 At call Other currencies 0.9 Various At call - ------------------------------------------------------------------------------- Total Bank Overdrafts 14.6 =============================================================================== BANK LOANS CURRENT Canadian dollars 5.8 3.81 2003 Malaysian ringgits 5.8 3.00 2003 Euro dollars 14.9 4.07 2003 Other currencies 0.7 Various 2003 - ------------------------------------------------------------------------------- 27.2 - ------------------------------------------------------------------------------- NON-CURRENT Other currencies 0.2 Various 2004 - ------------------------------------------------------------------------------- Total Bank Loans 27.4 =============================================================================== OTHER LOANS CURRENT Sterling pounds 16.2 4.60 2003 United States dollars 49.6 2.21 2003 - ------------------------------------------------------------------------------- 65.8 - ------------------------------------------------------------------------------- NON-CURRENT Australian dollars 50.0 5.68 2005 Australian dollars 50.0 5.95 2007 Australian dollars 16.0 6.87 2007 Euro dollars 34.0 4.40 2005 United States dollars 157.6 2.95 2004 United States dollars 125.5 5.74 2005 United States dollars 35.3 2.98 2006 United States dollars 32.0 2.33 2007 United States dollars 15.9 2.74 2010 - ------------------------------------------------------------------------------- 516.3 - ------------------------------------------------------------------------------- Total Other Loans 582.1 - ------------------------------------------------------------------------------- Total Interest Bearing Liabilities 624.1 =============================================================================== MATURITY SCHEDULE - ------------------------------------------------------------------------------- Term to maturity: Within one year 107.6 One to two years 157.8 Two to three years 209.5 Three to four years 35.3 Four to five years 98.0 Greater than five years 15.9 - ------------------------------------------------------------------------------- Total 624.1 =============================================================================== 92 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 19. INTEREST BEARING LIABILITIES (continued)
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ NET INTEREST BEARING DEBT Cash at bank and short-term deposits (net of restricted deposits) 258.3 310.3 1,050.4 4.2 28.2 27.9 Current borrowings 107.6 748.8 1,889.4 66.7 715.7 1,485.7 Current bills payable - 6.6 1.5 - 1.5 - Non-current borrowings 516.5 861.9 627.7 516.3 861.5 626.0 - ------------------------------------------------------------------------------------------------------------------ Net interest bearing debt 365.8 1,307.0 1,468.2 578.8 1,550.5 2,083.8 - ------------------------------------------------------------------------------------------------------------------
20. PROVISIONS
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ CURRENT Provision for employee entitlements 25.2 80.3 88.3 3.4 31.4 33.5 Provision for contingencies 17.1 9.9 63.4 2.7 (0.4) 14.0 Provision for rationalization and restructuring costs 15.7 105.2 108.4 1.8 47.7 52.2 Provision for Accufix Pacing Lead related expenses 18.6 11.5 17.6 - 6.5 0.6 Provision for claims 8.8 10.9 14.0 - - 0.1 Provision for dividend - 46.6 103.3 - 46.6 103.3 - ------------------------------------------------------------------------------------------------------------------ 85.4 264.4 395.0 7.9 131.8 203.7 Provision for income tax 1.9 10.5 8.9 - - 0.1 - ------------------------------------------------------------------------------------------------------------------ Total Current 87.3 274.9 403.9 7.9 131.8 203.8 - ------------------------------------------------------------------------------------------------------------------ NON-CURRENT Provision for employee entitlements 23.3 37.1 46.4 0.4 4.8 5.7 Provision for Accufix Pacing Lead related expenses - 17.8 4.3 - - - - ------------------------------------------------------------------------------------------------------------------ 23.3 54.9 50.7 0.4 4.8 5.7 Provision for deferred income tax 24.4 22.1 21.1 - - - - ------------------------------------------------------------------------------------------------------------------ Total Non-Current 47.7 77.0 71.8 0.4 4.8 5.7 - ------------------------------------------------------------------------------------------------------------------ Total Provisions 135.0 351.9 475.7 8.3 136.6 209.5 ==================================================================================================================
The reconciliations of provision for rationalisation and restructuring costs are set out below:
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Balance at the beginning of the financial year 105.2 108.4 109.1 47.7 52.2 1.9 Acquisitions/(disposals) of entities (11.5) - (2.4) (11.5) - - Amounts charged/(released) to profit/(loss) from operating activities 10.9 65.6 62.5 (3.8) 3.3 57.0 Amounts utilised for intended purposes (86.2) (77.4) (63.5) (30.6) (7.8) (6.7) Net foreign currency differences on translation of self-sustaining operations (2.7) 8.6 2.7 - - - - ------------------------------------------------------------------------------------------------------------------ Balance at the end of the financial year 15.7 105.2 108.4 1.8 47.7 52.2 - ------------------------------------------------------------------------------------------------------------------
The tax effect of temporary differences that give rise to significant portions of the provision for deferred income tax are presented below:
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Trading Stock tax adjustments - 0.4 0.6 Depreciation on plant adjustments 4.1 1.4 2.1 Provisions - (1.4) (2.9) Accruals - (1.1) (0.5) Unrealized foreign exchange gains - 0.9 - Other 20.3 21.9 21.8 - ------------------------------------------------------------------------------------------------------------------ Total 24.4 22.1 21.1 ==================================================================================================================
93 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 20. PROVISIONS (continued) The present values of employee entitlements not expected to be settled within twelve months of balance date have been calculated using the following weighted averages:
CONSOLIDATED THE COMPANY EMPLOYEE ENTITLEMENTS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Assumed rate of increase in wage and salary rates 4.0% 3.0% 3.0% 4.0% 3.0% 3.0% Discount rate 2.3% 3.0% 3.0% 2.3% 3.0% 3.0% Settlement term (years) 10-15 10-15 10-15 10-15 10-15 10-15 Number of employees at year end 12,160 23,482 32,485 42 4,222 4,289
21. OTHER LIABILITIES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ CURRENT Deferred income 1.2 3.6 1.8 - 0.4 - Amounts due under contractual arrangements - 1.6 1.5 - 1.4 1.4 - ------------------------------------------------------------------------------------------------------------------ 1.2 5.2 3.3 - 1.8 1.4 - ------------------------------------------------------------------------------------------------------------------ NON-CURRENT Amounts due under contractual arrangements - 16.2 17.6 - 16.2 17.6 - ------------------------------------------------------------------------------------------------------------------ - 16.2 17.6 - 16.2 17.6 - ------------------------------------------------------------------------------------------------------------------ Total Other Liabilities 1.2 21.4 20.9 - 18.0 19.0 ==================================================================================================================
22. DISSECTION OF LIABILITIES
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ SECURED Bank overdrafts and other loans 1.5 2.2 2.2 - - - Bank loans 6.7 1.6 3.0 - - - UNSECURED Amounts owing to wholly owned controlled entities - - - 739.1 1,623.3 1,620.8 Bank overdrafts 13.1 7.3 55.9 0.9 1.0 3.9 Bank loans 20.7 23.7 38.0 - - - Other loans 582.1 1,575.9 2,418.0 582.1 1,576.2 2,107.8 Trade creditors 166.6 363.5 476.9 8.1 78.0 78.9 Bills payable - 6.6 1.5 - 1.5 - Other creditors 29.8 55.9 93.7 13.8 20.4 181.9 Provisions (as per Note 20) 135.0 351.9 475.7 8.3 136.6 209.5 Other liabilities (as per Note 21) 1.2 21.4 20.9 - 18.0 19.0 - ------------------------------------------------------------------------------------------------------------------ Total Unsecured Liabilities 948.5 2,406.2 3,580.6 1,352.3 3,455.0 4,221.8 - ------------------------------------------------------------------------------------------------------------------ Total Liabilities 956.7 2,410.0 3,585.8 1,352.3 3,455.0 4,221.8 ==================================================================================================================
94 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 23. EXPENDITURE COMMITMENTS
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ (a) CONTRACTS FOR CAPITAL EXPENDITURE FOR WHICH NO AMOUNTS HAVE BEEN PROVIDED Land and buildings - 0.1 0.5 - - - Plant 0.2 2.6 4.7 - 0.4 1.1 ------------------------------------------------------------ 0.2 2.7 5.2 - 0.4 1.1 ------------------------------------------------------------ Within one year 0.2 2.7 3.2 - 0.4 1.1 One year or later and no later than five years - - 2.0 - - - ------------------------------------------------------------------------------------------------------------------ 0.2 2.7 5.2 - 0.4 1.1 ------------------------------------------------------------------------------------------------------------------ (b) LEASE COMMITMENTS OPERATING LEASES: Expenditure contracted but not provided for Within one year 11.0 38.0 61.5 5.5 16.2 16.3 One year or later and no later than two years 8.9 27.7 41.3 4.5 13.1 12.6 Two years or later and no later than three years 7.0 21.8 32.5 3.0 8.7 8.4 Three years or later and no later than four years 6.6 20.6 30.6 3.0 8.7 8.4 Four years or later and no later than five years 6.6 20.6 30.6 3.0 8.7 8.4 Later than five years 15.6 28.3 55.8 3.6 16.2 19.8 ------------------------------------------------------------------------------------------------------------------ 55.7 157.0 252.3 22.6 71.6 73.9 ==================================================================================================================
The consolidated entity leases property under operating leases expiring from one to twenty years. Leases generally provide the consolidated entity with a right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria. 95 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 24. SUPERANNUATION Ansell Limited and certain controlled entities contribute to certain defined benefit and accumulation Superannuation Funds maintained to provide superannuation benefits for employees. A total of 10 Superannuation Funds have been established worldwide. The major defined benefit fund is listed below. Where applicable, amounts shown have been proportionately determined and are based on values extracted from the most recent financial report of the fund. PACIFIC DUNLOP SUPERANNUATION FUND $ IN MILLIONS 2002 2001 2000 - --------------------------------------------------------------------- CONSOLIDATED Net assets 281.0/(3)/ 281.0/(3)/ 371.7/(2)/ Accrued benefits 295.3/(1)/ 295.3/(1)/ 295.3/(1)/ ----------------------------- Excess/(Deficiency) (14.3) (14.3) 76.4 ----------------------------- Vested benefits 256.0/(3)/ 256.0/(3)/ 316.2/(2)/ THE COMPANY Net assets 151.5/(3)/ 151.5/(3)/ 184.4/(2)/ Accrued benefits 125.1/(1)/ 125.1/(1)/ 125.1/(1)/ ----------------------------- Excess 26.4 26.4 59.3 ----------------------------- Vested benefits 126.5/(3)/ 126.5/(3)/ 133.7/(2)/ Country Australia Benefit type Defined Benefit/Accumulation Basis of contribution Balance of Cost/Defined Contribution Date of last actuarial valuation 1/07/1999 Actuary Mercer Human Resource Consulting Pty. Ltd /(1)/ Amounts shown are values as at 30 June 1999 /(2)/ Amounts shown are values as at 30 June 2000 /(3)/ Amounts shown are values as at 30 June 2001 The assets and liabilities of the Pacific Dunlop Executive Superannuation Fund were transferred into the Pacific Dunlop Superannuation Fund when the two Australian Funds were merged effective from 6 October 2000. Members of the Pacific Dunlop Superannuation Fund who have terminated employment with the Company as a result of business sales, have transferred out of the fund and into superannuation arrangements set up by the new owners of the businesses which have been sold. Assets supporting the benefits of those members have been transferred to the new superannuation arrangements. A majority of existing members of the Pacific Dunlop Superannuation Fund are employees of South Pacific Tyres. The deficiencies shown above for years 2001 and 2002 are due to the last actuarial review of the Fund having been carried out as at 30 June 1999 whilst values shown for net assets are stated at 30 June 2001 which have been impacted by the above noted transfers. A further review is under way as at 30 June 2002. Preliminary estimates from the actuary indicate that as at 30 June 2002, the assets of the Fund were sufficient to meet all benefits payable in the event of the Fund's termination or the voluntary or compulsory termination of employment of each employee in the Fund. The Company and the controlled entities are obliged to contribute to the Superannuation Funds as a consequence of legislation or Trust Deeds; legal enforceability is dependent on the terms of the legislation or the Trust Deeds. The directors, based on the advice of the trustees of the funds, are not aware of any changes in circumstances since the date of the most recent financial statements of the funds which would have a material impact on the overall financial position of the funds. 96 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 24. SUPERANNUATION (continued) DEFINITIONS Balance of cost The consolidated entity's contribution is assessed by the actuary by taking into account the members' contribution and the values of the assets. Defined contribution The consolidated entity's contribution is set out in the appropriate fund rules, usually as a fixed percentage of salary. Accrued benefits The present value of benefits which the fund is presently obliged to transfer in the future to members and beneficiaries as a result of membership of the fund to the calculation date. Vested benefits Benefits which are not conditional upon the continued membership of the respective fund or any factor other than resignation from the fund. Details of contributions paid to the funds are as follows:
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------- Contributions made to defined benefit funds during the year 3.2 6.9 22.6 3.2 4.0 10.4 Contributions made to accumulation funds during the year 0.8 4.0 5.9 - 0.7 0.6
25. OWNERSHIP-BASED REMUNERATION SCHEMES EXECUTIVE AND EMPLOYEE SHARE PLANS The Company has operated two share plans for employees and Directors of the consolidated entity: .. the Pacific Dunlop Executive Share Plan ("Executive Plan"), and .. the Pacific Dunlop Employee Share Plan ("Employee Plan"). No issue of shares has been made under either Plan since February 1994 and the Board determined during 1996 that no further issues of shares would be made under the Executive Plan. The employee plan permits full time and part time employees, who have completed three or more years continuous service within the consolidated entity and who do not participate in the Executive Plan to acquire 20 ordinary shares in the capital of the Company for each completed year of service. The shares are issued at market value as at the date of issue, payable as to 50 cents per share by the employee, the balance financed by an interest free loan from the Company repayable, at latest, on cessation of employment. The shares are not transferable while a loan remains outstanding, but carry a voting right and an entitlement to dividends (although dividends are applied in reduction of the loan). Invitations are made under the Employee Plan from time to time. As at reporting date no offer to employees was outstanding. The aggregate number of Employee Plan Shares on issue may not exceed 5% of the total issued capital of the Company. As stated above, the Executive Plan is no longer available for new issues. Shares issued under that Plan to selected employees ("Executives") were paid up to 5 cents and were subject to restrictions for a determined period (for the 1993/1994 issue- 8 1/4 years). While partly paid, the shares are not transferable, carry no voting right and no entitlement to dividends (but are entitled to participate in bonus or rights issues as if fully paid). The price payable for shares issued under the Executive Plan varies according to the event giving rise to a call being made. Market price at the date of the call is payable if an Executive ceases employment within the consolidated entity (other than for death, retrenchment or retirement) prior to expiration of the restriction period. Once restrictions cease the price payable upon a call being made will be the lesser of $10.00 ($2.50 for issues prior to 13 September 1991) and the last sale price of the Company's ordinary shares on Australian Stock Exchange Limited. The aggregate number of Executive Plan Shares on issue could not exceed 5% of the total issued capital of the Company. 97 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 25. OWNERSHIP-BASED REMUNERATION SCHEMES (continued) The Company's accounting policy in respect of the Employee Plan is to recognise the paid up capital upon allotment and the receivable created by the loan to employees to acquire the shares. In respect of the Executive Plan, no amount was recognised upon issue, apart from the capital paid up on the shares, as the amount of the call payable was not quantifiable at the time of issue. Once a call had been made upon the shares and paid, the Company recognised the increase in paid up capital. The number of Employee Share Plan Shares and the number of Executive Plan Shares (ordinary plan shares paid to five cents) as at balance date are shown in Note 5. A loss of $535,381 pre-tax in respect of the Employee Share Plan was recognised in the Company and the consolidated financial statements for 2002 (2001 - $206,567 loss after tax; 2000 - $219,712 loss after tax). The market price of the Company's shares as at 30 June 2002 was $6.28. OPTIONS - GENERALLY At the date of this report 207,000 unissued ordinary shares in the Company remain under option. During the year ended 30 June 2002, 315,000 options expired. EXECUTIVE SHARE OPTION PLAN 207,000 unissued ordinary shares are subject to options granted under the Pacific Dunlop Executive Share Option Plan. The exercise price of each option, which may be increased by the amount (if any) by which the increase in the Consumer Price Index over the period of the options exceeds the dividend yield upon the Company's shares, was $16.50. The options expire on 11 December 2002, and are exercisable in three tranches of equal amount during a period commencing, in the case of tranche 1 on 13 November 2000; in the case of tranche 2 on 13 November 2001; and in the case of tranche 3 on 13 November 2002, and in each case ending on the expiry date, subject to satisfaction of a separate performance hurdle attaching to each tranche. The condition or 'hurdle' that must be satisfied before the options can be exercised is that the total return to shareholders (i.e. growth in share price plus dividends reinvested) in respect of Ansell Limited shares exceeds the simple average total return to shareholders in a selected group of major listed companies over comparable periods in respect of each tranche of options. Upon exercise the options carry the right to any bonus share issued by the Company during the life of the option, but do not carry any right to participate in any other share issue of the Company or any other body corporate and no options have been exercised at the date of this Report. No determinable value has been ascribed to these options, nor included within the disclosed Executive remuneration details set out in Note 28 to the Financial Statements under Australian Generally Accepted Accounting Principles (GAAP). Under United States GAAP the compensation fair value, at grant date, of all options which are outstanding has been calculated at $0.7 million. 98 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 26. CONTINGENT LIABILITIES INDEMNITIES AND GUARANTEES The Company has entered into Deeds of Indemnity with each of the Directors of the Company and has previously entered into Deeds of Indemnity with certain officers of controlled entities, in relation to liabilities that they may incur (other than to Group companies) as Directors of the Company and Directors of certain controlled entities respectively, to the extent permitted by law and the Company's constitution. Ansell Limited has also guaranteed the performance of certain wholly owned controlled entities which have negative shareholders' funds. At this time, no liabilities the subject of any such indemnity have been identified and, accordingly, it is not possible to quantify any financial obligation of the consolidated entity under these indemnities and of the Company pursuant to its guarantee. ACCUFIX LITIGATION Claims have been made against Accufix Research Institute, Inc. (formerly TPLC, Inc.) ('ARI'), certain other wholly-owned controlled entities of Ansell Limited and, in some instances, Ansell Limited (then Pacific Dunlop Limited) relating to the Accufix Pacing leads manufactured by ARI which were withdrawn in late 1994 (the 'Accufix Pacing Leads'). All lawsuits in relation to the Accufix Pacing Leads had been resolved by 30 June 2002, save for: .. two lawsuits in France: one involving the claims of 19 plaintiffs and the 16 subrogated insurers' claims and a second lawsuit recently initiated by three individual claimants; and .. any claims to be subsequently made by any of the 150 persons who opted out of the class settlement in the United States mentioned below. The US District Court approved the settlement of all previous claims relating to the Accufix Pacing Leads in the US on 8 March 2001. That approval is now binding on the Defendants and all persons entitled whom elected to participate in the settlement (and their families). Now only the 150 persons who chose not to participate in the settlement may bring lawsuits in the US in respect of the Accufix Pacing Lead. As of 30 June 2002 none of the 150 persons had done so. The settlement in the United States requiring payments totalling US$62.4 million (consisting of a fund established for the benefit of persons entitled to the settlement, and a fund for the benefit of persons who opted out of the settlement), and the sums required for the earlier settlements in Australia and elsewhere in the world, were fully covered by the provisions made in the financial statements for the year ending 30 June 1998. The balance of these provisions as at 30 June 2002 (approximately $18.6 million) represents the balance of cash held by ARI and its related companies, and is considered adequate to address any remaining liability of members of the Ansell Group to claims made by individuals with respect to the manufacture of the Accufix Pacing Lead. ENCOR LEAD LITIGATION In 1997, a putative class action lawsuit was filed in the United States District Court for the Eastern District of California, against ARI and affiliates, including Ansell Limited (then Pacific Dunlop Limited), on behalf of all United States implantees of certain Encor bipolar Telectronics passive fixation atrial 'J' pacemaker leads manufactured by ARI ('Encor Pacing Leads'). The Court in Sacramento denied the plaintiffs' application for class certification on 3 May 1999. On 11 June 2002, the parties filed a stipulation of dismissal with prejudice for this action and the plaintiffs' claim has been compromised and released. This matter is now concluded. 99 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 26. CONTINGENT LIABILITIES (continued) LATEX ALLERGY LITIGATION Ansell Healthcare Products Inc., Ansell Protective Products Inc., Ansell Limited (formerly Pacific Dunlop Limited) and other Group companies (collectively "the Ansell Defendants") (along with a wide variety of manufacturers and distributors of natural rubber latex gloves), are defendants in lawsuits filed in the United States since 1996 on behalf of individuals alleging wrongful death, personal injuries and lost wages as a result of their exposure to natural rubber latex gloves. The lawsuits claim that the Ansell Defendants and other manufacturers of natural rubber latex gloves, were negligent in the design and manufacture of the gloves and failed to give adequate warnings of the possibility of allergic reactions. As of 30 June 2002, there were approximately 367 such cases pending against one or more of the Ansell Defendants, representing some 50 percent of cases filed against all defendants. Of these cases 271 have been consolidated for discovery pursuant to the rules on multi-district litigation before the US District Court for the Eastern District of Pennsylvania. The remaining 96 cases are spread through state courts in 45 states, with the greatest concentration in New York (20 cases). The Company remains a defendant in one Australian case and one case in the United States. Since the inception of this litigation in 1996, the Ansell Defendants have been dismissed as defendants from approximately 112 cases in the United States. With this pattern of dismissal and with the complications, case by case, caused by the multiplicity of defendants and the difficulties of determining whose natural rubber latex gloves were utilised by particular plaintiffs, it is not possible to predict which, if any, of the cases they currently face, the Ansell Defendants will have to defend at trial. In those circumstances the liability of the Ansell Defendants, if any, in relation to these claims cannot be quantified. BUSINESS AND ASSET SALES The Company and various Group companies have, as part of the Group's asset and business sale program, provided warranties, indemnities and other undertakings and, in some instances, the Company has guaranteed the warranties, indemnities and other obligations of various Group companies, to the purchasers of Group assets and businesses. At this time, it is not possible to quantify the potential financial impact of those warranties, indemnities, undertakings or guarantees upon the economic entity. In particular, a Group company has received a notice from a purchaser of one of its businesses in relation to an indemnity under a sale agreement. No formal proceedings have been initiated and, accordingly, it is not possible at this time to quantify the potential financial impact on the Group. Simplot Australia Pty Ltd instituted proceedings against the Company and other Group companies in the Supreme Court of Victoria in relation to the sale of the Edgell-Birds' Eye and Herbert Adams Bakeries businesses. Simplot has claimed $20.8 million in damages in relation to alleged breaches of warranty and sought unspecified damages in respect of separate alleged breaches of the Trade Practices Act. The matter remains at the preliminary stage and the substantive issues of the claim are unlikely to proceed to trial this year. The Company believes that it has good grounds for resisting these protracted claims. 100 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 27. FINANCIAL INSTRUMENTS DERIVATIVE FINANCIAL INSTRUMENTS The consolidated entity is involved in a range of derivative financial instruments, which can be defined in the following broad categories: (i) Forward / Future Contracts These transactions enable the consolidated entity to buy or sell specific amounts of foreign exchange, financial instruments or commodities at an agreed rate/price at a specified future date. Maturities of these contracts are principally between six months and two years. (ii) Options This is a contract between two parties, which gives the buyer of a put or call option the right, but not the obligation, to transact at a specified interest rate/exchange rate or commodity price at a future date, generally for a premium. Maturities of these contracts are principally between three months and two years. (iii) Swaps These agreements enable parties to swap interest rate (from or to a fixed or floating basis) or currency (from one currency to another currency) positions for a defined period of time. Maturities of the contracts are principally between two and five years. 101 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 27. FINANCIAL INSTRUMENTS (continued) INTEREST RATE RISK The Company's exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:
WEIGHTED INTEREST RATE AVERAGE FIXED MATURITIES EFFECTIVE NON INTEREST 1 YEAR OR 1 TO 5 OVER 5 INTEREST $ IN MILLIONS RATE FLOATING LESS YEARS YEARS BEARING TOTAL - ------------------------------------------------------------------------------------------------------------------ NET FINANCIAL ASSETS/(LIABILITIES) 2002 % FINANCIAL ASSETS Recognised Cash on hand and at bank 1.1% 72.2 - - - - 72.2 Short-term deposits 3.3% 174.1 30.6 - - - 204.7 Receivables - trade N/A - - - - 232.5 232.5 Receivables - other 2.6% 32.9 25.0 - - 70.0 127.9 Investments (excl. associated companies) N/A - - - - 145.8 145.8 - ------------------------------------------------------------------------------------------------------------------ Total Financial Assets 2002 279.2 55.6 - - 448.3 783.1 - ------------------------------------------------------------------------------------------------------------------ FINANCIAL LIABILITIES Recognised Payables - trade N/A - - - - 166.6 166.6 Payables - other N/A - - - - 29.8 29.8 Bank overdraft 3.3% 14.6 - - - - 14.6 Bank and other loans 6.1% 466.0 20.8 122.7 - - 609.5 Provisions (including certain employee entitlements) N/A - - - - 85.4 85.4 Unrecognised Net interest rate swaps 5.1% (375.9) - 375.9 - - - - ------------------------------------------------------------------------------------------------------------------ Total Financial Liabilities 2002 104.7 20.8 498.6 - 281.8 905.9 - ------------------------------------------------------------------------------------------------------------------ Net Financial Assets/(Liabilities) 2002 174.5 34.8 (498.6) - 166.5 (122.8) ================================================================================================================== NET FINANCIAL ASSETS/(LIABILITIES) 2001 % FINANCIAL ASSETS Recognised Cash on hand and at bank 2.7% 116.3 - - - - 116.3 Short-term deposits 3.8% 102.5 119.1 - - - 221.6 Receivables - trade 6.1% 1.5 - - - 521.6 523.1 Receivables - other 6.5% 62.5 - - - 150.2 212.7 Investments (excl. associated companies) N/A - - - - 212.0 212.0 - ------------------------------------------------------------------------------------------------------------------ Total Financial Assets 2001 282.8 119.1 - - 883.8 1,285.7 - ------------------------------------------------------------------------------------------------------------------ FINANCIAL LIABILITIES Recognised Payables - trade N/A - - - - 363.5 363.5 Payables - other N/A - - - - 55.9 55.9 Payables - bills 9.7% 1.5 - - - 5.1 6.6 Bank overdraft 6.4% 9.5 - - - - 9.5 Bank and other loans 5.3% 696.6 785.6 119.0 - - 1,601.2 Provisions (including certain employee entitlements) 3.0% - - - - 207.7 207.7 Amounts due under contractual arrangements N/A - - - - 17.8 17.8 Unrecognised Net interest rate swaps 5.2% 144.1 (122.8) (21.3) - - - - ------------------------------------------------------------------------------------------------------------------ Total Financial Liabilities 2001 851.7 662.8 97.7 - 650.0 2,262.2 - ------------------------------------------------------------------------------------------------------------------ Net Financial Assets/(Liabilities) 2001 (568.9) (543.7) (97.7) - 233.8 (976.5) - ------------------------------------------------------------------------------------------------------------------
Provisions, including amounts contained within income tax, deferred income tax, contingencies, rationalisation and restructure, Accufix Pacing Lead related expenses and insurance claims amounting to $49.6 million (2001 - $144.2 million; 2000 - $114.6 million) are not included within the table above as it is considered that they do not meet the definition of a financial instrument. A separate analysis of debt by currency can be found at Note 19 - Interest Bearing Liabilities. 102 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 27. FINANCIAL INSTRUMENTS (continued) CREDIT RISK AND NET FAIR VALUE RECOGNISED FINANCIAL INSTRUMENTS (i) Credit Risk The credit risk on financial assets, excluding investments, of the consolidated entity which have been recognised on the Statement of Financial Position, is the carrying amount, net of any provision for doubtful debts. The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counter parties in various countries. The consolidated entity is not materially exposed to any individual overseas country or individual customer. (ii) Net Fair Value The Directors consider that the carrying amount of recognised financial assets and financial liabilities approximates their net fair value. Refer to Note 1 for accounting policies in respect of the carrying values of financial assets and financial liabilities. UNRECOGNISED FINANCIAL INSTRUMENTS Credit risk on unrecognised derivative contracts is minimised as counterparties are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency. It is not felt that there is a material exposure to any single counterparty or group of counterparties. The consolidated entity's exposure is almost entirely (over 99%) to banks. The following table displays: (i) Face Value This is the contract's value upon which a market rate is applied to produce a gain or loss which becomes the settlement value of the derivative financial instrument. (ii) Credit Risk This is the maximum exposure to the consolidated entity in the event that all counterparties who have amounts outstanding to the consolidated entity under derivative financial instruments, fail to honour their side of the contracts. The consolidated entity's exposure is almost entirely to banks (see (v) below). Amounts owed by the consolidated entity under derivative financial instruments are not included. (iii) Net Fair Value This is the amount at which the instrument could be realised between willing parties in a normal market in other than a liquidation or forced sale environment. The net amount owed by / (owing to) financial institutions under all derivative financial instruments would have been ($23.8) million (2001 - $5.9 million; 2000 - $47.3 million), if all contracts were closed out on 30 June 2002. 103 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 27. FINANCIAL INSTRUMENTS (continued) (iii) Net Fair Value (continued)
FACE VALUE CREDIT RISK NET FAIR VALUE $ IN MILLIONS 2002 2001 2000 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ FOREIGN EXCHANGE CONTRACTS Purchase/Sale Contracts: - -U.S. dollars 329.7 1,231.7 496.7 1.6 22.0 4.9 (7.3) 17.6 1.6 - -Australian dollars 49.4 237.2 637.2 - - - - - - - -Other currencies 216.5 186.5 141.1 2.5 1.7 0.9 2.4 (1.5) (3.3) Cross Currency Swaps: - -U.S. dollars 96.5 240.2 137.3 2.2 0.7 16.5 (1.5) (16.5) 16.5 - -New Zealand dollars - - 95.0 - - - - - - - -Other currencies 16.5 35.2 98.6 - 5.8 25.3 (2.1) 5.8 24.4 INTEREST RATE CONTRACTS Interest Rate Swaps: - -U.S. dollars 435.1 452.7 1,113.8 3.0 6.6 11.7 (14.5) 0.5 6.4 - -Australian dollars 300.0 300.0 450.0 - 1.2 0.3 (0.8) 0.3 0.2 - -New Zealand dollars - - 119.9 - - 1.1 - - 1.0 - -Other currencies 17.5 16.7 47.6 - - 0.4 - (0.3) 0.4 Forward Rate Agreements: - -U.S. dollars - - 83.2 - - - - - - COMMODITY CONTRACTS Commodity Futures: - -U.S. dollars - - 15.9 - - 0.1 - - 0.1 - ------------------------------------------------------------------------------------------------------------------ Total 1,461.2 2,700.2 3,436.3 9.3 38.0 61.2 (23.8) 5.9 47.3 ==================================================================================================================
From time to time in the ordinary course of business, the consolidated entity enters into forward exchange contracts to hedge a proportion of anticipated purchase and sale commitments denominated in foreign currencies (principally US dollars). The amount of anticipated future purchases and sales is forecast in light of current market conditions and commitments from customers. Hedge contracts are used to cover the next available trading exposure until all contracts are fully utilised. Hedge cover generally does not exceed 3 months. (iv) Market/Liquidity Risk The consolidated entity seeks to reduce the risk of: (a) being forced to exit derivative financial instrument positions at below their real worth; or (b) finding it cannot exit the position at all, due to lack of liquidity in the market; by (a) dealing only in liquid contracts dealt by many counterparties; and (b) dealing only in large and highly liquid and stable international markets. (v) Credit Risk by Maturity The following table indicates the value of amounts owing by counterparties by maturity. Based on the Group policy of not having overnight exposures to an entity rated lower than A- by Standard & Poor's or A3 by Moody's Investors Service, it is felt the risk to the consolidated entity of the counterparty default loss is not material.
FOREIGN EXCHANGE INTEREST RATE COMMODITY RELATED CONTRACTS CONTRACTS CONTRACTS TOTAL $ IN MILLIONS 2002 2001 2000 2002 2001 2000 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ TERM 0 to 6 mths 4.1 27.0 31.8 - 1.2 0.7 - - 0.1 4.1 28.2 32.6 6 to 12 mths - 2.5 2.5 - - 0.2 - - - - 2.5 2.7 1 to 2 yrs - - 3.1 3.0 0.8 1.3 - - - 3.0 0.8 4.4 2 to 5 yrs 2.2 - 5.0 - 5.8 11.3 - - - 2.2 5.8 16.3 5 to 10 yrs - 0.7 5.2 - - - - - - - 0.7 5.2 - ------------------------------------------------------------------------------------------------------------------ Total 6.3 30.2 47.6 3.0 7.8 13.5 - - 0.1 9.3 38.0 61.2 ==================================================================================================================
104 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 27. FINANCIAL INSTRUMENTS (continued) (vi) Historical Rate Rollovers It is the consolidated entity's policy not to engage in historical rate rollovers except in circumstances where the maturity date falls on a bank holiday. In these instances, settlement occurs on the next trading day. HEDGES AND ANTICIPATED FUTURE TRANSACTIONS The following table shows the consolidated entity's deferred gains and (losses), both realised and unrealised, that are currently held on the Statement of Financial Position and the expected timing of recognition as revenue or expense:
INTEREST RATE FOREIGN EXCHANGE COMMODITY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------- Anticipated Exposures Less than 1 year - - - (0.5) 1.4 (1.7) - - - Realized Swaps Deferred Less than 1 year 0.1 (0.5) 0.5 1 to 2 years 0.7 0.2 (0.2) 2 to 5 years 2.2 (0.5) (1.0) Greater than 5 years - 1.6 2.0
28. DIRECTORS' AND EXECUTIVES' REMUNERATION
THE COMPANY $ IN THOUSANDS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ DIRECTORS Aggregate remuneration paid or payable to Directors: (a)(c)(d) Directors' fees and salaries of Ansell Limited Executive Directors 1,225 1,313 1,715 Performance-based bonuses - 100 - Other benefits (d) 111 2,791 1,606 - ------------------------------------------------------------------------------------------------------------------ Total remuneration of Directors of Ansell Limited 1,336 4,204 3,321 ==================================================================================================================
Consolidated remuneration of directors of all Group Companies 2002 $ 26,153,000 2001 $ 35,713,000 2000 $ 34,534,000
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Executives Aggregate remuneration of the thirteen Senior Executives: (a)(b)(c)(d)(e)(f) Salaries 3,788 4,322 5,417 1,688 3,253 4,043 Performance-based bonuses 2023 3,128 1,420 1,631 100 285 Other benefits (d) 3,871 4,411 4,202 3,232 3,871 2,951 - ------------------------------------------------------------------------------------------------------------------ Total remuneration of Executives 9,682 11,861 11,039 6,551 7,224 7,279 ==================================================================================================================
105 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 28. DIRECTORS' AND EXECUTIVES' REMUNERATION (continued) The number of Directors and Senior Executives whose total remuneration fell within the following bands (a)(b)(c)(d)(e)(f).
EXECUTIVES DIRECTORS CONSOLIDATED THE COMPANY THE COMPANY DOLLARS 2002 2001 2000 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ 0 10,000 1 1 10,001 20,000 1 20,001 30,000 2 40,001 50,000 3 60,001 70,000 2 1 2 70,001 80,000 2 1 80,001 90,000 1 1 1 90,001 100,000 1 190,001 200,000 1 1 200,001 210,000 1 1 1 210,001 220,000 1 230,001 240,000 1 1 260,001 270,000 1 280,001 290,000 1 320,001 330,000 1 1 370,001 380,000 1 1 380,001 390,000 1 1 420,001 430,000 2 2 430,001 440,000(d) 1 2 1 2 1 440,001 450,000 1 1 460,001 470,000(d) 1 1 1 1 510,001 520,000 1 520,001 530,000(d) 1 1 1 1 1 1 540,001 550,000(d) 1 550,001 560,000 1 560,001 570,000 1 1 580,001 590,000 1 1 590,001 600,000 1 1 800,001 810,000 1 1 1 920,001 930,000(d) 1 1 950,001 960,000 1 1 1,130,001 1,140,000 1 1,300,001 1,310,000(d) 1 1 1,380,001 1,390,000 1 1,510,001 1,520,000(f) 1 1 1,530,001 1,540,000(d) 1 1 1,640,001 1,650,000(d) 1 1 1,910,001 1,920,000(d) 1 1 1 2,620,001 2,630,000 1 3,250,001 3,260,000 1 3,380,001 3,390,000(d) 1 1 1 - ------------------------------------------------------------------------------------------------------------------ Total no. of Dir & Execs 13 11 12 9 9 10 11 9 9 ==================================================================================================================
(a) The above values for Directors and Executives include amounts actually paid to superannuation funds in respect of their retirement. (b) Includes Executive Directors of the Company disclosed within the remuneration of Directors. 106 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 28. DIRECTORS' AND EXECUTIVES' REMUNERATION (continued) (c) Any benefit arising from the grant of options to the Managing Director or other Executives, which may subsequently be derived, is not quantified and accordingly, has not been included in remuneration disclosed above. For details in relation to the options, refer Note 34(c). (d) Includes retirement and/or statutory benefits paid to Directors and Executives. (e) Executives for this disclosure include only those persons who, during the year, had the greatest authority for managing the group. These executives numbered up to seven at any one time in 2002, eleven in 2001 and twelve in 2000. The disclosure includes four permanently overseas-based Executives whose total remuneration in 2002 was $3.1 million (two in 2001 - $4.6 million, two in 2000 - $3.8 million). (f) Executive was appointed a Director on 30 April 2002. Includes total remuneration received for the full year. 29. SERVICE AGREEMENTS PROVIDED FOR IN THE FINANCIAL STATEMENTS The Company at 30 June 2002 had agreements with each of the Non-executive Directors which provide for benefits upon termination. The full extent of the liabilities of the Company under these agreements has been undertaken by a superannuation fund of which the Company is employer sponsor. 30. NOTES TO THE BUSINESS SEGMENTS REPORT (a) OPERATING REVENUE The Operating Revenue of Discontinued Businesses represents the external sales to the date of disposal and the cash received from the sale of such businesses (net of disposal costs). (b) UNALLOCATED REVENUE AND COSTS Represents costs of Corporate Head Office, costs of Ansell Healthcare's Corporate Head Office and non-sales revenue. (c) TAX Includes the write off of tax balances attributable to Australian operations of $15.2 million and tax attributable to Discontinued Businesses. (d) CASH Represents Cash of Ansell Healthcare and Corporate. (e) INTER-SEGMENT TRANSACTIONS Operating revenue is shown net of inter-segment values. Accordingly, the Operating revenues shown in each segment reflect only the external sales made by that segment. The only significant inter-segment sales were made by Australia & S.E. Asia - $304.9 million (2001 - $303.8 million: 2000 - $189.3 million) and America - $188.3 million (2001 - $220.6 million: 2000 - $128.3 million). (f) INDUSTRY SEGMENTS The consolidated entity comprises the following main business segments: Occupational Healthcare - manufacture and sale of occupation health and safety gloves. Professional Healthcare - manufacture and sale of medical, surgical and examination gloves for hand barrier protection and infection control. Consumer Healthcare - manufacture and sales of condoms, household gloves and other personal products. Discontinued Businesses - represents former Industry Segment businesses which have been sold or abandoned. (g) REGIONS The allocations of Operating Revenue and Operating Results reflect the geographical regions in which the products are sold to external customers. Assets Employed are allocated to the geographical regions in which the assets are located. Australia & S.E. Asia - manufacturing facilities in 4 countries and sales activities. America - manufacturing facilities in USA and Mexico and significant sales activities. Europe - principally a sales region with one manufacturing facility in the UK. 107 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 30. NOTES TO THE BUSINESS SEGMENTS REPORT (continued)
$ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ (h) SEGMENT CAPITAL EXPENDITURE (INCLUDING FINANCE LEASES) Occupational Healthcare 6.7 9.0 20.5 Professional Healthcare 12.7 7.7 10.1 Consumer Healthcare 1.5 4.4 14.4 Discontinued Businesses 12.0 38.8 104.9 (i) REGION CAPITAL EXPENDITURE (INCLUDING FINANCE LEASES) Australia & S.E. Asia 13.5 12.7 29.9 America 5.3 7.1 14.5 Europe 2.0 1.4 0.7 (j) SEGMENT DEPRECIATION (INCLUDING AMORTISATION OF FINANCE LEASES) Occupational Healthcare 15.7 16.7 16.2 Professional Healthcare 18.8 18.9 17.6 Consumer Healthcare 5.6 5.7 5.8 Discontinued Businesses 11.1 52.1 100.3 (k) SEGMENT OTHER NON CASH EXPENSES (EXCLUDING PROVISION FOR RATIONALISATION AND WRITE-DOWN OF ASSETS SEPARATELY DISCLOSED) Occupational Healthcare 8.9 7.9 5.9 Professional Healthcare 1.9 6.4 2.4 Consumer Healthcare 5.1 1.9 4.5 Discontinued Businesses 14.8 49.7 91.7
31. NOTES TO THE STATEMENTS OF CASH FLOWS (a) BUSINESSES ACQUIRED AND DISPOSED During the year a number of controlled entities and businesses were acquired and disposed. The details are as follows:
CONSOLIDATED THE COMPANY $ IN MILLIONS ACQUISITIONS DISPOSALS ACQUISITIONS DISPOSALS - ------------------------------------------------------------------------------------------------------------------ FAIR VALUE OF NET ASSETS ACQUIRED/(DISPOSED) Property, plant and equipment 5.3 (180.3) - (79.7) Investments - (2.8) - (188.9) Future income tax benefit - (17.0) - (15.5) Trade debtors and other amounts receivable 31.4 (403.2) - (199.4) Inventories - (519.7) - (203.1) Cash (net of bank overdraft) 3.7 (3.3) - (4.1) Goodwill - (21.3) - (3.1) Brand names - (40.5) - (7.3) Other assets 0.3 (30.7) - (10.2) Bank and other loans - 0.1 - 0.1 Creditors and other liabilities (11.9) 296.3 - 196.7 - ------------------------------------------------------------------------------------------------------------------ Goodwill on acquisition 28.8 (922.4) - (514.5) Net gain/(a)/ 15.8 - - - (17.3) - (7.0) - ------------------------------------------------------------------------------------------------------------------ 44.6 (939.7) - (521.5) - ------------------------------------------------------------------------------------------------------------------ CONSIDERATION Cash paid/(received) 44.6 (939.7) - (521.5) - ------------------------------------------------------------------------------------------------------------------ 44.6 (939.7) - (521.5) - ------------------------------------------------------------------------------------------------------------------ OUTFLOW/(INFLOW) OF CASH Cash consideration 44.6 (939.7) - (521.5) Less: Cash balances (acquired)/disposed (net of overdrafts) (3.7) 3.3 - 4.1 - ------------------------------------------------------------------------------------------------------------------ 40.9 (936.4) - (517.4) ==================================================================================================================
/(a)/ Excludes gain on recognition in the consolidated entity of the investment in Ambri Ltd of $8.4 million 108 PART III ITEMS 17 & 18 : Financial Statements - -------------------------------------------------------------------------------- 31. NOTES TO THE STATEMENTS OF CASH FLOWS (continued) (b) FINANCING FACILITIES Refer Note 19 (c) RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO NET PROFIT/(LOSS) AFTER INCOME TAX
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Net profit/(loss) after income tax (113.0) (135.8) (82.4) 71.6 (755.9) (4.0) Add/(less) non-cash items: Depreciation 50.3 90.2 142.9 7.9 16.7 31.5 Amortization 32.0 49.6 50.3 0.5 5.8 5.4 Goodwill written off - - - - 5.7 - Provision for doubtful debts - trade (2.9) 7.9 7.3 1.0 0.1 1.2 Write off of FITB attributable to Australian tax losses 15.2 158.5 - 17.3 88.4 - Provision for doubtful debts - wholly owned controlled entities - - - (16.3) 644.7 (8.3) Write down of assets and investments in wholly owned controlled entities 75.2 97.7 160.0 96.6 240.3 186.0 Write down of property, plant and equipment 69.3 - - 2.2 - - Share of net loss/(gain) of associate and joint venture entities (1.9) 44.3 1.9 - - - Add/(less) items classified as investing/financing activities: Interest revenue (15.5) (44.9) (47.4) (38.2) (130.3) (91.3) Borrowing costs 70.2 144.3 149.5 67.0 129.5 124.5 Loss/(gain) on sale of investments, properties, plant and equipment 5.6 4.6 (2.3) 1.0 4.2 (23.5) Loss/(gain) on sale of controlled entities and businesses /(1)/ (25.7) (154.7) 4.5 (7.0) (178.6) - ----------------------------------------------------------- Net cash provided by operating activities before change in assets and liabilities 158.8 261.7 384.3 203.6 70.6 221.5 Change in assets and liabilities net of effect from acquisitions and disposals of controlled entities and businesses: (Increase)/Decrease in debtors (0.3) (176.5) 215.7 (26.5) (20.3) 47.0 (Increase)/Decrease in inventories 39.4 (13.8) 129.2 (10.9) 16.9 13.0 Decrease/(Increase) in prepaid expenses (2.4) 19.2 17.3 4.5 16.1 6.5 (Increase)/Decrease in deferred expenses 4.3 (4.2) (16.8) 13.6 2.8 (16.3) Increase/(Decrease) in creditors and bills 78.3 52.2 (118.6) 5.3 (2.5) (29.0) payable (Decrease)/Increase in provisions and other (203.1) (128.4) (167.5) (38.8) (230.7) 70.6 liabilities Increase/(Decrease) in provision for deferred 2.3 1.0 (47.6) - - - income tax (Increase)/Decrease in future income tax benefit 24.7 (6.0) 8.4 (0.7) 27.1 9.4 (Decrease)/Increase in provision for income tax (8.5) 1.2 8.0 - - (2.2) (Increase)/Decrease in GNB net operating assets held for sale - 182.3 (182.3) - 20.7 (20.7) Other non-cash items (including foreign currency impact) 19.6 37.9 (39.8) (0.2) (0.8) (5.0) - ------------------------------------------------------------------------------------------------------------------ Net cash provided by operating activities 113.1 226.6 190.3 149.9 (100.1) 294.8 ==================================================================================================================
(1) Refer to Note 4(b) for further details on the Company 2001. 109 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 31. NOTES TO THE STATEMENTS OF CASH FLOWS (continued) (d) COMPONENTS OF CASH For the purposes of the Statements of Cash Flows, cash includes cash on hand and at banks and investments in money market instruments, net of outstanding bank overdrafts. Cash, at the end of the financial year, as shown in the Statements of Cash Flows, comprises:
CONSOLIDATED THE COMPANY $ IN MILLIONS NOTES 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ Cash on hand 11 0.2 0.6 1.2 - 0.1 0.1 Cash at bank 11 72.0 115.7 187.8 4.2 21.0 23.5 Short-term deposits 11 186.3 194.6 862.6 - 7.2 4.4 Restricted deposits* 11 18.4 27.0 26.3 - - - Bank overdrafts 19 (14.6) (9.5) (58.1) (0.9) (1.0) (3.9) - ------------------------------------------------------------------------------------------------------------------ 262.3 328.4 1,019.8 3.3 27.3 24.1 ==================================================================================================================
* Refer to note 11 for further details on these amounts. (e) NET LOANS TO CONTROLLED ENTITIES In the Statements of Cash Flows of the Company, loan movements with controlled entities are disclosed as a net movement due to such transactions being large in number and rapid in turnover. 32. ACQUISITION OF CONTROLLED ENTITIES AND MATERIAL BUSINESSES
VOTING SHARES COST OF NET TANGIBLE DESCRIPTION OF DURING THE YEAR THE FOLLOWING DATE OF ACQUIRED ACQUISITION ASSETS ACQUIRED PURCHASE BUSINESSES WERE ACQUIRED: ACQUISITION % $ MILLION $ MILLION CONSIDERATION - ------------------------------------------------------------------------------------------------------------------ No material acquisitions were made during the year
33. DISPOSAL OF CONTROLLED ENTITIES AND MATERIAL BUSINESSES
VOTING SHARES CONSIDERATION NET TANGIBLE PROFIT /(LOSS) DURING THE YEAR THE FOLLOWING MATERIAL DATE OF DISPOSED (CASH) ASSETS DISPOSED ON DISPOSAL BUSINESSES WERE DISPOSED OF: DISPOSAL % $ MILLION $ MILLION $ MILLION - ------------------------------------------------------------------------------------------------------------------ Pacific Automotive 31 Aug 01 100 238.7 247.9 (9.2) Pacific Brands 30 Nov 01 100 701.0 674.5 26.5
34. RELATED PARTY DISCLOSURES Ansell Limited is the parent entity of all those entities detailed in Note 37 and from time to time has dealings on normal commercial terms and conditions with those related entities, the effects of which are eliminated in the consolidated financial statements. Disclosures in respect of certain transactions with controlled entities and related parties and amounts paid to or received therefrom are as set out in the details below. Other transactions with related entities, which are eliminated on consolidation, include the lease of certain properties, the supply of materials and labour and the provision of both short and long term finance in the form of varying financial instruments, all of which are conducted on normal commercial terms and conditions. The Directors of the Company during the year were: Edward D Tweddell Peter L Barnes Harry Boon Herbert J Elliott Stanley P Gold S Carolyn H Kay John T Ralph Anthony B Daniels Nuno A D'Aquino Robert J McLean Ian E Webber 110 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 34. RELATED PARTY DISCLOSURES (continued) Details of transactions with these Directors or other Directors of other related entities (including entities deemed to be related to such Directors) and details of other related party transactions and amounts are set out in: Note 3 as to interest and dividends received from controlled entities. Note 4 as to interest paid to controlled entities. Note 12 as to amounts receivable from controlled entities and loans to Directors of entities in the consolidated entity. Note 18 as to amounts payable to controlled entities. Note 28 as to remuneration paid or payable to Directors of the Company and the allocation of those amounts to individual directors within the bands of $10,000. Note 29 as to agreements with certain Non-Executive Directors. (a) TRANSACTIONS WITH ASSOCIATED COMPANIES The Company and the consolidated entity hold investments in associated companies as set out in Note 38. During the course of the year, the Company and the consolidated entity conducted financial transactions with these associated companies on normal commercial terms and conditions. The nature and amounts of these transactions are detailed as follows:
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ SALE OF GOODS AND SERVICES Car Parts Distribution Pty Ltd 7.5 97.3 84.0 - - - South Pacific Tyres N.Z. Ltd. - 0.5 1.6 - - - ----------------------------------------------------------- 7.5 97.8 85.6 - - - ----------------------------------------------------------- ROYALTY REVENUE ----------------------------------------------------------- South Pacific Tyres N.Z. Ltd. 0.4 1.9 1.8 - - - ----------------------------------------------------------- DIVIDEND REVENUE Pacific Marine Batteries Pty. Ltd. - - - 1.3 1.0 - ----------------------------------------------------------- - - - 1.3 1.0 - ----------------------------------------------------------- AGGREGATE CURRENT AMOUNTS RECEIVABLE/(1)/ Car Parts Distribution Pty Ltd - 5.4 10.9 - - - South Pacific Tyres N.Z. Ltd. - - 0.2 - - - ----------------------------------------------------------- - 5.4 11.1 - - - -----------------------------------------------------------
/(1)/ Amounts included within Trade Debtors and Other Amounts Receivable (Note 12) (b) TRANSACTIONS WITH PARTNERSHIPS The consolidated entity carries on a partnership with Goodyear in Australia and Papua New Guinea under the name of South Pacific Tyres. In addition the consolidated entity carried on a partnership with Accenture in Australia and New Zealand under the name Novare Asia Pacific until 31 August 2001, at which time the consolidated entity acquired Accenture's share of Novare Asia Pacific. During the course of the year (and to 31 August 2001 in respect of Novare Asia Pacific), the Company and the consolidated entity conducted financial transactions with these partnerships on normal commercial terms and conditions being: 111 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 34. RELATED PARTY DISCLOSURES (continued) (b) TRANSACTIONS WITH PARTNERSHIPS (continued)
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ SALE OF GOODS AND SERVICES Novare Asia Pacific - 1.1 - - 1.1 - South Pacific Tyres 1.3 6.6 18.8 - 6.6 8.4 ----------------------------------------------------------- 1.3 7.7 18.8 - 7.7 8.4 ----------------------------------------------------------- PURCHASES OF GOODS AND SERVICES Novare Asia Pacific 5.5 54.2 - 3.4 52.7 - South Pacific Tyres - 1.1 1.4 - 0.9 1.4 ----------------------------------------------------------- 5.5 55.3 1.4 3.4 53.6 1.4 ----------------------------------------------------------- OTHER REVENUE South Pacific Tyres 2.5 0.8 0.3 2.0 0.8 0.1 ----------------------------------------------------------- OTHER EXPENSES South Pacific Tyres - - 0.1 - - 0.1 ----------------------------------------------------------- AGGREGATE CURRENT AMOUNTS RECEIVABLE/(1)/ South Pacific Tyres. - - 0.9 - - 0.6 ----------------------------------------------------------- AGGREGATE NON-CURRENT AMOUNTS RECEIVABLE Novare Asia Pacific - 3.0 - - 3.0 - South Pacific Tyres 58.0 25.8 - 27.6 25.8 - ----------------------------------------------------------- 58.0 28.8 - 27.6 28.8 - ----------------------------------------------------------- AGGREGATE CURRENT AMOUNTS PAYABLE/(2)/ Novare Asia Pacific - 4.7 - - 4.5 - South Pacific Tyres - 0.4 0.1 - 0.4 0.1 ----------------------------------------------------------- - 5.1 0.1 - 4.9 0.1 -----------------------------------------------------------
/(1)/ Amount included within Other Amounts Receivable (Note 12) /(2)/ Amount included within Other creditors (Note 18) LOANS On 20 December 2000, the Company agreed to make available to the South Pacific Tyres partnership a loan for $56.3 million for a period of two years. The loan was drawn down in two tranches, $31.3 million on 20 December 2000 and $25.0 million on 5 January 2001. On 20 December 2000, the Company was assigned a South Pacific Tyres receivable due from Goodyear of $31.3 million as partial settlement of the above loan. During the year Goodyear repaid $30 million of its loan which was in turn on lent to South Pacific Tyres by a controlled entity. Under the terms of the agreement with Goodyear containing put and call options providing the consolidated entity an actionable exit strategy in respect of its investment in the South Pacific Tyres partnership, the terms of the loans were extended for a period of four to five years. Interest is charged at market rate and is payable quarterly in arrears. Interest brought to account by the Company in relation to this loan during the year:
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2002 - -------------------------------------------------------------------------------- Interest revenue 2.5 2.0
In addition, under the partnership agreement, South Pacific Tyres leases certain properties on a basis of equitable rentals mutually agreed by the partners. Lease payments of $0.2 million (2001 -$0.2 million; 2000 -$0.3 million) were made by South Pacific Tyres to the consolidated entity. The Company, through its corporate treasury operations, also provided on the basis of normal commercial terms and conditions, forward exchange cover on behalf of the partnership. 112 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 34. RELATED PARTY DISCLOSURES (continued) (c) TRANSACTIONS OF DIRECTORS AND DIRECTOR-RELATED ENTITIES CONCERNING SHARES OR SHARE OPTIONS The aggregate number of shares acquired(1) by Directors of the Company and their director-related entities in entities in the consolidated entity during the year ended 30 June 2002 was: The Company -6,160 fully paid ordinary shares (2001 - 5,515; 2000 - Nil). The aggregate number of shares and share options disposed of by Directors of the Company and their director-related entities in the Company was Nil (2001 - Nil; 2000 - Nil). The aggregate number of shares and share options held directly, indirectly or beneficially by the Directors of the Company and their director-related entities in the Company as at balance date were: 24,478,677/(2)/ fully paid ordinary shares (2001 - 132,808; 2000 - 123,293) Nil ordinary plan shares paid to five cents (2001 - Nil; 2000 - 42,000) 120,000 share options (2001 - Nil; 2000 - 1,200,000). (1) The above reflects the position in the financial statements of the Company and upon consolidation of the controlled entities. It only includes shares acquired from or disposed to an entity in the consolidated entity. (2) Includes 24,428,841 shares owned by Trefoil International III, SPRL. Mr S Gold has a non-beneficial indirect interest in these shares as he has a 10% economic interest in that entity, of which he is also a director. As stated at Note 5 - Contributed Equity, a 1 for 5 share consolidation was effected during the year. The quantity of shares and share options disclosed above, for both the current year and prior years, are stated as post-share consolidation quantities. (d) OTHER TRANSACTIONS OF DIRECTORS AND DIRECTOR-RELATED ENTITIES In addition to the transactions referred to above, the consolidated entity entered into the following transactions with Directors and former Directors and their director-related entities. All transactions were on normal commercial terms and conditions except where otherwise stated:- .. Pellen was a Director of PacDun (Singapore) Pte Ltd. and Pacific Dunlop Holdings (Singapore) Pte. Ltd. A director-related entity of A. Pellen, Richard Oliver International Pte. Ltd. provided management services to PacDun (Singapore) Pte Ltd. and Pacific Dunlop Holdings (Singapore) Pte. Ltd.; .. H. Ng is a Director of PacDun (Singapore) Pte Ltd. and Pacific Dunlop Holdings (Singapore) Pte. Ltd. A director-related entity of H. Ng, Richard Oliver International Pte. Ltd. provided management services to PacDun (Singapore) Pte Ltd. and Pacific Dunlop Holdings (Singapore) Pte. Ltd.; .. S. Bagaria is a Director of Ansell Kemwell Ltd. A director-related entity of S. Bagaria, North East Gas (P) Ltd. leased premises to Ansell Kemwell Ltd.; .. J. Eady was a Director of Ambri Pty Ltd. A director-related entity of J. Eady, Eady Family Discretionary Trust provided management services to Ambri Pty. Ltd. AGGREGATE AMOUNTS OF EACH OF THE ABOVE TYPES OF OTHER TRANSACTIONS WITH DIRECTORS AND THEIR DIRECTOR-RELATED ENTITIES WERE AS FOLLOWS:
CONSOLIDATED THE COMPANY $ IN MILLIONS 2002 2001 2000 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------- TRANSACTION TYPE Provision of management and consulting services 0.2 0.3 0.2 0.1 - - Rent of premises received by Directors and their director-related entities - - 0.4 - - - Sales of goods to Directors and their director-related entities - 0.2 1.0 - - - Provision of legal services - 13.2 11.9 - 0.7 1.7 ----------------------------------------------------- Aggregate amounts payable to Directors and their director-related entities/(1)/ Current - 2.1 1.9 - 0.2 0.1 -----------------------------------------------------
/(1)/ Amount included within Other Creditors (Note 18) 113 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 34. RELATED PARTY DISCLOSURES (continued) (d) Other Transactions of Directors and Director-Related Entities (continued) In addition to the transactions referred to above, transactions were entered into during the year with Directors of the Company and its controlled entities or with director-related entities which: .. occurred within a normal employee customer or supplier relationship on terms and conditions no more favorable than those which it is reasonable to expect would have been adopted if dealing with the Director or director-related entity at arm's length in the same circumstances; .. do not have the potential to affect adversely decisions about the allocation of scarce resources or the discharge of accountability of the Directors; and are trivial or domestic in nature; include: .. provision of company services which have been fully reimbursed; .. minor purchases of goods at discount rates which are also available to other employees; .. purchases of Company owned motor vehicles at a value or net return to the Company or the consolidated entity of written down value; .. contracts of employment with relatives of Directors on either full time, casual or work experience basis on normal commercial terms and conditions. 35 EARNINGS PER SHARE
Consolidated $ in millions 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------- Earnings Reconciliation Net loss (113.0) (135.8) (82.4) Net loss attributable to outside equity interests 2.8 3.6 4.1 ---------------------------- Basic earnings (115.8) (139.4) (86.5) After tax effect of interest on convertible notes - - - ---------------------------- Diluted earnings (115.8) (139.4) (86.5) ---------------------------- Weighted average number of ordinary shares used as the denominator Number for basic earnings per share Ordinary shares 186.9 194.0 206.5 Effect of executive share options on issue 0.7 1.2 1.6 ---------------------------- Number for diluted earnings per share 187.6 195.2 208.1 ----------------------------
Partly paid Executive Shares have been classified as potential ordinary shares issued for no consideration and have been included in diluted earnings per share. The following Executive Share Options have not been included in the calculation of diluted EPS as they are not dilutive: .. Issue date 11 December 1997: 207,000 options CONVERSION, CALL, SUBSCRIPTION OR ISSUE AFTER 30 JUNE 2002 Refer to Note 5 for further information. 114 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 36. ENVIRONMENTAL MATTERS In September 2000, the Company sold its worldwide GNB battery business to Exide Corporation ("Exide"). This transaction was effected by way of a series of stock and asset purchase agreements with various entities and divisions comprising the GNB business. Under the sale agreements, Pacific Dunlop Holdings (USA) Inc ("PDH(USA)") made certain representations and gave certain warranties about the condition of the GNB facilities and the existence or non-existence of environmental liabilities in the GNB business and agreed to indemnify Exide against costs and expenses incurred as a result of breaches of the representations and warranties or the existence of environmental contamination at or around GNB facilities. Liability for indemnities relating to warranties regarding the environmental condition of the GNB properties sold are contractually limited to the purchase price paid by Exide for GNB, while liabilities relating to unknown or undisclosed conditions on GNB properties sold that may give rise to environmental liabilities are contractually capped at US$40 million. Although the representations and warranties were made by PDH(USA) and other Ansell entities around the world, to avoid multiple and confusing actions under the various agreements, it was agreed that Exide would have recourse for indemnification only against PDH(USA) in the United States. The Company and various Group Companies as the occupiers of property receive, from time to time, notices from relevant authorities pursuant to various environmental legislation. On receiving such notices, the Company evaluates potential remediation options and the associated costs. At this time, the Company does not believe that the potential financial impact of such remediation upon the economic entity is material. In the ordinary course of business, the consolidated entity has maintained comprehensive general liability insurance policies covering its operations and assets. Generally such policies exclude coverage for most environmental liabilities. 115 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 37. PARTICULARS RELATING TO CONTROLLED ENTITIES
BENEFICIAL INTEREST COUNTRY OF 2002 2001 2000 PARTICULARS RELATING TO CONTROLLED ENTITIES INCORPORATION % % % - -------------------------------------------------------------------------------------------------------------- Ansell Limited (formerly Pacific Dunlop Limited) Australia Ansell GmbH *Germany 100 100 100 Ansell Healthcare Japan Co. Ltd. (formerly Pacific Dunlop Japan K.K.) *Japan 100 100 100 Ativ Pac Pty. Ltd. (formerly Vita Pacific Pty. Ltd. ) Australia 100 100 100 BNG Battery Technologies Pty. Ltd. (formerly GNB Battery Technologies Ltd.) Australia 100 100 100 Cliburn Investments Pty. Ltd. Australia 100 100 100 Dexboy International Pty. Ltd. (formerly Boydex International Pty. Ltd.) Australia 100 100 100 Corrvas Insurance Pty. Ltd. Australia 100 100 100 Dunlop Olympic Manufacturing Pty. Ltd. Australia 100 100 100 Duratray Pty. Ltd. Australia 100 100 100 FGDP Pty. Ltd. Australia 100 100 100 H.C. Sleigh Services Pty. Ltd. Australia 100 100 100 N Harvesters Pty. Ltd. Australia 100 100 100 PSL Industries Pty. Ltd. Australia 100 100 100 International Better Brands Pty Ltd Australia 100 100 100 Licknib Pty. Ltd. (formerly Niblick Pty. Ltd.) Australia 100 100 100 Nucleus Ltd. Australia 100 100 100 Lifetec Project Pty. Ltd. (formerly AMBRI Project Pty. Ltd.) Australia 100 100 100 Medical TPLC Pty. Ltd. Australia 100 100 100 N&T Pty. Ltd. Australia 100 100 100 Nucleus Trading Pte. Ltd. *Singapore 100 100 100 THLD Ltd. Australia 100 100 100 TNC Holdings Pte. Ltd. *Singapore 100 100 100 TPLC Pty. Ltd. Australia 100 100 100 Societe de Management Financier S.A. *France 100 100 100 TPLC S.A. *France 100 100 100 Olympic General Products Pty. Ltd. Australia 100 100 100 Foamlite (Australia) Pty. Ltd. Australia 100 100 100 Pacific Distribution Properties Pty. Ltd. (formerly Pacific Distribution Properties Ltd.) Australia 100 100 100 Pacific Dunlop Finance Pty. Ltd. Australia 100 100 100 Pacific Dunlop Holdings (China) Co. Ltd. *China 100 100 100 Pacific Dunlop Holdings (N.Z.) Ltd. *New Zealand 100 100 100 Pacific Dunlop Linings Pty. Ltd. Australia 100 100 100 Pacific Dunlop Tyres Pty. Ltd. Australia 100 100 100 Pacific Dunlop (U.K.) Ltd. *UK 100 100 100 P.D. Holdings Pty. Ltd. Australia 100 100 100 P.D. International Pty. Ltd. Australia 100 100 100 Ansell Belgium Holdings SPRL N.V. *Belgium 100 100 - Ansell Canada Inc. *Canada 100 100 100 Llesna Healthcare Pty. Ltd. (formerly Ansell Healthcare Pty. Ltd.) Australia 100 100 - Ansell Italy Srl *Italy 100 100 - Ansell Kemwell Ltd. (formerly Kemwell International Ltd.) *India 74.9 74.9 74.9 Ansell Lanka (Pvt.) Ltd. *Sri Lanka 100 100 100 Ansell S.A. *France 100 100 100 Ansell (Thailand) Ltd. *Thailand 100 100 100 Ansell Protective Products Europe N.V. *Belgium 100 100 100 Medical Telectronics N.V. *Netherlands Ant. 100 100 100 Medical Telectronics Holding & Finance (Holland) B.V. *Netherlands 100 100 100 Mt Waverley Estates Pty. Ltd. Australia 100 100 100 Pacific Dunlop (Hong Kong) Limited. *Hong Kong 100 - - PacDun (Singapore) Pte. Ltd. (formerly Pacific Dunlop Insurances Pte. Ltd.) *Singapore 100 100 100 Pacific Dunlop Investments (USA) Inc. *USA 100 100 100 Ansell Brazil LTDA *Brazil 100 100 - Ansell Edmont Industrial de Mexico S.A. de C.V. *Mexico 100 100 100 Ansell Perry de Mexico S.A. de C.V. *Mexico 100 100 100 Commercializadora GNK S.A de C.V. *Mexico 100 100 100
116 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 37. PARTICULARS RELATING TO CONTROLLED ENTITIES (continued)
BENEFICIAL INTEREST COUNTRY OF 2002 2001 2000 PARTICULARS RELATING TO CONTROLLED ENTITIES INCORPORATION % % % - ---------------------------------------------------------------------------------------------------------------- Golden Needles de Mexico S.A de C.V. *Mexico 100 100 100 Pacific Dunlop Holdings (USA) Inc. *USA 100 100 100 Ansell Healthcare Products Inc. (formerly Ansell Incorporated) *USA 100 100 100 Ansell Protective Products Inc. (formerly Ansell Edmont Industrial Inc.) *USA 100 100 100 Ansell Services Inc. (formerly Olex Cables USA Inc.) *USA 100 100 100 Pacific Chloride Inc. *USA 100 100 100 Pacific Dunlop Holdings Inc. *USA 100 100 100 Pacific Dunlop USA Inc. *USA 100 100 100 TPLC Holdings Inc. *USA 100 100 100 Accufix Research Institute Inc. *USA 100 100 100 Cotac Corporation *USA 100 100 100 Pacific Dunlop Finance Company Inc. *USA 100 100 100 Pacific Dunlop Holdings (Europe) Ltd. (formerly Pacific Dunlop (Holdings) Ltd.) *U.K. 100 100 100 Ansell Glove Company Ltd. *U.K. 100 100 100 Golden Needles Knitting & Glove Co. Ltd. *U.K. 100 100 100 Ansell UK Limited *U.K. 100 100 100 Mates Vending Ltd. *U.K. 100 100 100 Pacific Dunlop Holdings (Singapore) Pte. Ltd. *Singapore 100 100 100 JK Ansell Ltd. *India (a)50 (a)50 (a)50 P.D. Holdings (Malaysia) Sdn. Bhd. *Malaysia 100 100 100 Ansell Ambi Sdn. Bhd. *Malaysia 100 100 100 Ansell (Kedah) Sdn. Bhd. *Malaysia 100 100 100 Ansell (Kulim) Sdn. Bhd. *Malaysia 100 100 100 Ansell Malaysia Sdn. Bhd. *Malaysia 75 75 75 Ansell Medical Sdn. Bhd. *Malaysia 75 75 75 Ansell N.P. Sdn. Bhd. *Malaysia 75 75 75 Ansell Shah Alam Sdn. Bhd. *Malaysia 100 100 100 PDOCB Pty. Ltd. Australia 100 100 100 Ansell Medical Products Pvt. Ltd. *India 100 100 100 Suretex Ltd. *Thailand 100 100 100 Latex Investments Ltd. Mauritius 100 100 100 Suretex Prophylactics (India) Ltd. *India 100 100 100 STX Prophylactics S.A. (Pty.) Ltd. (formerly GP Prophylactics S.A.) *Sth Africa 100 100 100 PD Licensing Pty. Ltd. (formerly PD Licensing Ltd.) Australia 100 100 100 PD Shared Services Pty. Ltd. Australia 100 100 100 PD Shared Services Holdings Pty. Ltd. Australia 100 - - Siteprints Pty. Ltd. Australia 100 100 100 S.T.P. (Hong Kong) Ltd. *Hong Kong 100 100 100 Pacific Dunlop Holdings N.V. *Netherlands Ant 100 100 100 Pacific Dunlop (Netherlands) B.V. *Netherlands 100 100 100 Textile Industrial Design & Engineering Pty. Ltd. (formerly Textile Industrial Design & Engineering Ltd) Australia 100 100 100 The Distribution Group Holdings Pty. Ltd. (formerly The Distribution Group Holdings Ltd.) Australia 100 100 100 The Distribution Group Pty. Ltd. (formerly The Distribution Group Ltd.) Australia (b)100 (b)100 (b)100 Nwodhsa Enterprises (Wholesale) Pty. Ltd. (formerly Ashdown Enterprises (Wholesale) Pty. Ltd.) Australia 100 100 100 TDG Warehousing Pty. Ltd. Australia 100 100 100 The Distribution Trust Australia 100 100 100 Union Knitting Mills Pty. Ltd. Australia 100 100 100 Xelo Pty. Ltd. (formerly Olex Pty. Ltd.) Australia 100 100 100 Xelo Sacof Pty. Ltd.(formerly Olex FocasPty. Ltd.) Australia 100 100 100
117 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 37. PARTICULARS RELATING TO CONTROLLED ENTITIES (continued)
BENEFICIAL INTEREST COUNTRY OF 2002 2001 2000 CONTROLLED ENTITIES SOLD IN YEAR ENDED 30 JUNE 2002 INCORPORATION % % % - -------------------------------------------------------------------------------------------------------------- AMBRI Pty. Ltd. Australia 100 100 100 Bonds Industries Pty. Ltd. (formerly Bonds Industries Ltd.) Australia 100 100 100 Carparts Distribution Pty. Ltd. Australia 100 50 - Dream Crafts Sdn. Bhd. *Malaysia 50 50 50 Dream Products Sdn. Bhd. *Malaysia 50 50 50 Dreamland (Singapore) Pte. Ltd *Singapore 50 50 50 Dreamland Corporation (M) Sdn. Bhd. *Malaysia 50 50 50 Dreamland Spring Manufacturing Sdn. Bhd. *Malaysia 50 50 50 Eurocoir Products Sdn. Bhd. *Malaysia 50 50 50 Grosby (China) Ltd. *Hong Kong 100 100 100 P.T. Berlei Indonesia *Indonesia 100 100 100 PACBRANDS USA Inc. *USA 100 100 100 Pacific Brands (Fiji) Ltd. (formerly Luxafoam (Fiji) Ltd.) *Fiji 100 100 100 Pacific Brands (UK) Ltd. (formerly Nicks Sports & Leisure Footwear Ltd.) *U.K. 100 100 100 Pacific Dunlop Brands (Asia) Ltd. (formerly Shoe Talk Ltd.) *Hong Kong 100 100 100 Pacific Dunlop Holdings (Hong Kong) Ltd. *Hong Kong 100 100 100 Pacific Dunlop Marketing (Hong Kong) Ltd. *Hong Kong 50 50 50 PD Shared Services LSM Pty. Ltd. Australia 100 - - Pellias Pty. Ltd. Australia 100 100 100 Restonic (M) Sdn. Bhd. *Malaysia 50 50 50 Sleepmaker Sdn. Bhd. *Malaysia 50 50 50 CONTROLLED ENTITIES IN VOLUNTARY LIQUIDATION AT 30 JUNE 2002 - -------------------------------------------------------------------------------------------------------------- BNG Sub Pty. Pty. (formerly Australian Battery Co. (Aust.) Pty. Ltd.) Australia 100 100 100 F.J.'s Auto Plus Pty. Ltd. (formerly F.J.'s Auto Plus Ltd.) Australia 100 100 100 Gardenland Frozen Food Pty. Ltd. Australia 100 100 100 General Jones Pty. Ltd. Australia 100 100 100 H.C. Sleigh Investments Pty. Ltd. Australia 100 100 100 Herbert Adams Holdings Pty. Ltd. Australia 100 100 100 Jetbase Pty. Ltd. Australia 100 100 100 Lifetec R&D Pty. Ltd. (formerly AMBRI R & D Pty. Ltd.) Australia 100 100 100 Maspas Pty. Ltd. (formerly Ausonics Pty. Ltd.) Australia 100 100 100 Novare Partnership Pty. Ltd. (formerly Ateb Pty. Ltd.) Australia 100 100 100 PA Furniture Pty. Ltd. (formerly Park Avenue Furniture Pty. Ltd.) Australia 100 100 100 Pacific Distribution Pty. Ltd. Australia 100 100 100 Pacific Dunlop Belting Pty. Ltd. Australia 100 100 100 Project (X92) Pty. Ltd. Australia 100 100 100 Project Array Pty. Ltd. Australia 100 100 100 Ocper Auto Parts Pty. Ltd. (formerly Repco Auto Parts Pty. Ltd.) Australia 100 100 100 Retsamttaw Ocla Pty. Ltd. (formerly Wattmaster Alco Pty. Ltd.) Australia 100 100 100 Robur Tea Company Pty. Ltd. Australia 100 100 100 Slumberland (Australia) Pty. Ltd. Australia 100 100 100 Softwood Towns Pty. Ltd. Australia 100 100 100 Sport Australia (Export) Pty. Ltd. Australia 100 100 100 Super Cycle Pty. Ltd. Australia 100 100 100 TPLC Ltd. *UK 100 100 100 TPLC Medizinprodukte GmbH. *Germany 100 100 100 Xdds Pty. Ltd. Australia 100 100 100 Kcilc Pty. Ltd. (formerly Click Pty. Ltd.) Australia 100 100 100
118 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 37. PARTICULARS RELATING TO CONTROLLED ENTITIES (continued)
BENEFICIAL INTEREST COUNTRY OF 2002 2001 2000 CONTROLLED ENTITIES VOLUNTARILY LIQUIDATED DURING THE YEAR INCORPORATION % % % - -------------------------------------------------------------------------------------------------------------- ACN 000 757 924 Pty. Ltd. (formerly Domedica) Australia 100 100 100 Ansell Canada Holdings Inc. *Canada 100 100 - Ansell France Holdings S.A. *France 100 100 - Ansell Healthcare Holdings Sdn. Bhd. *Malaysia 100 100 - Ansell Healthcare Inc. *USA 100 100 - Ansell Holdings (BVJ) Inc. *USA 100 100 - Ansell International Holdings Inc. *USA 100 100 - Ansell LUX Holdings S.A. *Luxembourg 100 100 - Ansell MAT Holdings B.V. *Netherlands 100 100 - Ansell Overseas Inc. *USA 100 100 - Ansell UK (Holdings) Ltd. *UK 100 100 - Dunlop Shelter Hong Kong Ltd. *Hong Kong 100 100 100 New Enpak Inc. *USA 100 100 100 Pacific Dunlop Capital Inc. *USA 100 100 100 Pacific Dunlop Finance (Aust) Pty. Ltd. Australia 100 100 100 Pacific Dunlop Footwear Inc. *USA 100 100 100 Roberts Flooring (Malaysia) Sdn. Bhd. *Malaysia 100 100 100 Sleepmaker Europe S.A.R.L. *France 100 100 100 TPL Holdings Inc. *USA 100 100 100 TPLC (Canada) Pty. Ltd. *Canada 100 100 100
* Controlled Entities incorporated outside Australia carry on business in those countries (a) Ansell Healthcare has day to day management control of this entity (b) The trustee of The Distribution Trust is The Distribution Group Pty Ltd. The beneficiary of the trust is Ansell Limited 119 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 38. INVESTMENTS IN ASSOCIATES
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------- RESULTS OF ASSOCIATES Share of associates' profit from ordinary activities before income tax 2.7 5.0 4.7 Share of associates' income tax expense relating to profit from ordinary activities (0.8) (1.7) (1.7) - -------------------------------------------------------------------------------------------------------------- Share of associates' net profit - as disclosed by associates 1.9 3.3 3.0 SHARE OF POST ACQUISITION RETAINED PROFITS AND RESERVES ATTRIBUTABLE TO ASSOCIATES RETAINED PROFITS Share of associates' retained profits at the beginning of the financial year 8.5 6.2 5.0 Share of associates' net profit 1.9 3.3 3.0 Dividends from associates (1.3) (1.0) (1.8) Retained profits of Associates disposed of during the financial year and entity no longer equity accounted (9.2) - - - -------------------------------------------------------------------------------------------------------------- Share of associates' retained profits at the end of the financial year (0.1) 8.5 6.2 - -------------------------------------------------------------------------------------------------------------- ASSET REVALUATION RESERVE Share of associates' asset revaluation reserve at the beginning of the financial year 0.9 0.9 0.9 Share of asset revaluation reserve of entity no longer equity accounted (0.9) - - - -------------------------------------------------------------------------------------------------------------- Share of associates' asset revaluation reserve at the end of the financial year - 0.9 0.9 - -------------------------------------------------------------------------------------------------------------- FOREIGN CURRENCY TRANSLATION RESERVE Share of associates' foreign currency translation reserve at the beginning of the financial year 2.3 2.1 1.6 Share of foreign currency translation reserve of entity no longer equity accounted (2.3) - - Share of exchange fluctuations on assets and liabilities held in foreign currencies - 0.2 0.5 - -------------------------------------------------------------------------------------------------------------- Share of associates' foreign currency translation reserve at the end of the financial year - 2.3 2.1 - -------------------------------------------------------------------------------------------------------------- MOVEMENTS IN CARRYING VALUE OF INVESTMENTS Carrying amount of investments in associates at the beginning of the financial year 33.3 19.0 17.3 Share of associates' net profit 1.9 3.3 3.0 Dividends received from associates (1.3) (1.0) (1.8) - -------------------------------------------------------------------------------------------------------------- 33.9 21.3 18.5 - -------------------------------------------------------------------------------------------------------------- Share of movement in associates' foreign currency translation reserve - 0.2 0.5 Add carrying value of investment in associate acquired during the year 11.8 - Less carrying value of investment in associate disposed of during the financial year (0.8) - - Less write-down and carrying value of investment no longer equity accounted (19.8) - - - -------------------------------------------------------------------------------------------------------------- Carrying amount of investment in associates at the end of the financial year 13.3 33.3 19.0 - -------------------------------------------------------------------------------------------------------------- COMMITMENTS Share of associates' capital expenditure commitments contracted but not provided for and payable: Within one year - 1.8 - - -------------------------------------------------------------------------------------------------------------- - 1.8 - - -------------------------------------------------------------------------------------------------------------- SHARE OF ASSOCIATES' OPERATING LEASE COMMITMENTS PAYABLE: Within one year 0.1 5.3 1.4 One year or later and no later than five years 0.1 8.8 3.2 Later than five years - 0.5 - - --------------------------------------------------------------------------------------------------------------- 0.2 14.6 4.6 - ---------------------------------------------------------------------------------------------------------------
CONTINGENT LIABILITIES There are no material contingent liabilities in respect of associates at 30 June 2002 120 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 38. INVESTMENTS IN ASSOCIATES (continued) Details of investments in associates are as follows:
CONSOLIDATED CONSOLIDATED OWNERSHIP INVESTMENT INTEREST CARRYING AMOUNT PRINCIPAL BALANCE 2002 2001 2000 2002 2001 2000 NAME ACTIVITIES DATE % % % $ MILLION $ MILLION $ MILLION - ---------------------------------------------------------------------------------------------------------------------- South Pacific Tyres N.Z. Ltd./(1)/ Manufacturing 30 June 50 50 50 - 18.7 16.7 Pacific Marine Batteries Pty. Ltd. Manufacturing 30 June 50 50 50 2.7 2.0 1.5 BT Equipment Pty Ltd Manufacturing 30 June 45 45 - 10.6 11.8 - Car Parts Distribution Pty Ltd Manufacturing 30 June - 50 50 - 0.8 0.8 - -------------------------------------------------------------------------------------------------------------------- 13.3 33.3 19.0 ====================================================================================================================
Dividends received from associates for the year ended 30 June 2002 by the Company amounted to $1.3 million (2001 -$1.0 million; 2000 - Nil). /(1)/ Effective 1 July 2001, Ansell Limited discontinued equity accounting for its interest in South Pacific Tyres N.Z. Ltd. Refer to Note 2 - Change in Accounting Policy. SUMMARY OF PERFORMANCE AND FINANCIAL POSITION OF ASSOCIATES
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- THE CONSOLIDATED ENTITY'S SHARE OF AGGREGATE ASSETS, LIABILITIES AND PROFITS OF ASSOCIATES ARE AS FOLLOWS: Net profit -as reported by associates 1.9 3.3 3.0 Current assets 24.0 61.6 45.5 Non-current assets 4.7 22.8 21.8 ------------------------------ Total assets 28.7 84.4 67.3 ------------------------------ Current liabilities 15.2 42.3 34.5 Non-current liabilities 0.2 10.8 15.8 ------------------------------ Total liabilities 15.4 53.1 50.3 ------------------------------ Net assets -as reported by associates 13.3 31.3 17.0 ------------------------------ Adjustments arising from equity accounting Preference Share adjustment - 2.0 2.0 - --------------------------------------------------------------------------------------------------------------- Net assets - equity adjusted 13.3 33.3 19.0 ===============================================================================================================
39. MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP Australian generally accepted accounting principles (AGAAP) vary in certain significant respects from generally accepted accounting principles in the United States (US GAAP). Application of US GAAP would have affected shareholders' equity as at 30 June 2002, 2001, and 2000 and operating profit after income tax expense attributable to the Ansell Limited shareholders for each of the years in the three year period ended 30 June 2002, to the extent quantified below. A description of the material differences between AGAAP, as followed by Ansell Limited, and US GAAP are as follows: (a) PROPERTY, PLANT AND EQUIPMENT Certain property, plant and equipment has been revalued by Ansell Limited at various times in prior financial periods. Revaluation increments have increased the carrying value of the assets and accordingly the depreciation charges have been increased above those which would be required on a historical cost basis. These adjustments eliminate this effect. The above policy also causes differences in reported gains and losses on the sale of property, plant and equipment. Gains and losses for Australian GAAP are based on consideration less revalued amounts net of accumulated depreciation and amortisation. For US GAAP purposes gains and losses are determined having regard to depreciated historical cost, and revaluation reserves applicable to assets sold are reported as Income. In March 1995, the United States Financial Accounting Standards Board issued SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." SFAS 121 requires entities to perform separate calculations for assets to be held and used to determine whether recognition of an impairment loss is required, and if so, to measure the impairment. 121 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 39. MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP (continued) (a) PROPERTY, PLANT AND EQUIPMENT (continued) If the sum of expected future cash flows, undiscounted and without interest charges, is less than an asset's carrying value, an impairment loss is recognised; if the sum of the expected future cash flows is greater than an asset's carrying value, an impairment loss cannot be recognised. Measurement of an impairment loss is based on the fair value of the asset. SFAS 121 also generally requires long-lived assets and certain identifiable intangibles to be disposed of, to be reported at the lower of the carrying value or fair value less cost to sell. The Company adopted SFAS 121 for the Group's 1997 fiscal year end. An adjustment of $11.5 million was made at 30 June 1998 (following an assessment of the fair values of properties at 31 December 1997) to reflect the total amount by which certain properties were revalued below their depreciated historical cost. Subsequent to 30 June 1998, properties have been sold which had previously been revalued below depreciated historical cost by $7.4 million. Therefore, the adjustment has been reduced to $4.1 million as at 30 June 2002 ($8.0 million as at 30 June 2000 and 30 June 2001). (b) MINORITY INTERESTS Minority interests are included as part of total Shareholders Equity under AGAAP. The reconciliation to US GAAP in Note 40 has excluded these from Shareholders' Equity consistent with US GAAP treatment. (c) PROVISIONS The term "provisions" is used in AGAAP to designate accrued expenses with no definitive payment date. Classification between current and non-current is generally based on management assessments, as subject to audit. For AGAAP purposes dividends declared by the Company are provided for in the financial statements at year end if declaration date is prior to financial statements being signed. For US GAAP these amounts provided are added back to shareholders' equity where declaration has not occurred within the financial year. Included within the result for AGAAP are amounts charged to income in respect of future costs associated with rationalisation and restructuring within existing business segments (provision for rationalisation and restructuring costs). Any plans to reorganise or exit a business are approved by the Board of Directors. Once committed to, accruals are made for the estimated costs associated with the reorganisation or exit. The US GAAP criteria for accruing costs associated with business restructure are fundamentally consistent with those of AGAAP but do contain certain very specific qualifying criteria. Where these criteria are not satisfied an adjustment to earnings is included in the reconciliation to US GAAP. (d) EXECUTIVE SHARE PLAN AND OPTIONS Company executives participated in an executive share plan scheme which allowed them to purchase allocated shares at $2.50 per share, or in respect of approximately 35% of the shares, at $10.00 per share. Shares issued under the plan are not listed, cannot be traded and do not rank for dividends until the above amounts have been paid. The determined compensation expense in respect of the partly paid shares had been fully amortised as at 30 June 1996, and no further shares have been issued. The Company has adopted, for financial years ending after 30 June 1997, the provision of SFAS 123 to determine compensation cost in respect of options. No options have actually been exercised. Loans granted to employees in respect of the Employee Plan are classified as a reduction of Shareholders' Equity for US GAAP purposes. Such loans are classified as an asset for Australian GAAP. (e) EARNINGS PER SHARE Under Australian GAAP earnings per share is calculated by dividing operating profit after tax, minority shareholders interest and any preference dividend by the weighted average number of shares on issue for the year. Methods of computing Earnings per Share in accordance with US GAAP are documented in SFAS 128. Earnings per Share computations recognise the effect of all bonus issues (stock splits) and bonus elements of rights issues made up to 30 June 2002, and also give effect to the stock consolidation (reverse split) approved by shareholders in April 2002. 122 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 39. MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP (continued) (f) PENSION PLANS The Company and its controlled entities are party to 10 pension plans worldwide, principally established by trust deed, covering substantially all of their employees. Of the pension plans within the Group, only one plan, being the Pacific Dunlop Superannuation Fund, has been considered material for the year ended 30 June 2002. The Group sponsors contributory and non-contributory accumulation and defined benefit pension plans covering substantially all employees. The defined benefit plans generally provide benefits based on salary in the period prior to retirement. All defined benefit plans are funded based on actuarial advice on a regular basis. Actuarial calculations have been carried out for the above funds and the material fund aspects are as detailed in Note 24. The majority of assets of the funds are invested in pooled superannuation trusts in the case of the Australian funds and equity securities for other major funds. A detailed level of reporting in respect of pension plans is not presently required by AGAAP. Under AGAAP the contributions to the various pension plans are recorded as an expense in the income statement. The disclosure requirements of Statement of Financial Accounting Standards No. 87 and No. 132 (SFAS 87, SFAS 132) have been included in these financial statements. The Group reports pension plans aggregated where allowed by SFAS 87. Additionally, an adjustment is made to recognise the measurement principles of SFAS 87 in determining net income and shareholders' equity under US GAAP. (g) STATEMENT OF CASH FLOWS Profit from operations determined under AGAAP differs in certain respects from the amount determined in accordance with US GAAP. A reconciliation of US GAAP profits to Cash Flows from operations is provided. Under AGAAP, cash is defined as cash on hand and deposits repayable on demand, less overdrafts repayable on demand. Under US GAAP, cash and cash equivalents are defined as cash and investments with original maturities of three months or less, and do not include bank overdrafts or restricted deposits. (h) INCOME TAXES Accounting under AGAAP is under the liability method, and is equivalent in all material respects to Statement of Financial Accounting Standards No. 109 (SFAS 109). For each tax jurisdiction, after reclassification of deferred tax liabilities (net of deferred tax assets arising from timing differences) the net tax asset meets the criteria set out in SFAS 109. There have been no variations in the application of the qualifying criteria under US GAAP and AGAAP. Valuation allowances of approximately $455.1 million (2001 - $461.8 million; 2000 - $197.8 million) in respect of operating losses and $331.3 million of capital losses (2001 - $242.5 million; 2000 - $42.5 million) have been recorded against available deferred tax assets. Reversal of these valuation allowances and the realisation of the unrecorded assets is dependent upon obtaining qualifying assessable income in the relevant tax jurisdictions. At 30 June 2002 the expiry dates of gross tax losses for which future tax benefits (deferred tax assets) have been brought to account are as follows - in respect of financial years ending on 30 June; A$ YEAR MILLION 2005 33.6 2006 1.5 2007 1.8 2010 2.5 Additionally, certain deferred tax assets have been brought to account in respect of losses which have no prescribed expiry date. 123 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 39. MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP (continued) (i) ACCOUNTING FOR GOODWILL Shares in controlled entities are valued on acquisition at the holding company's cost. Any difference between the fair value of net assets and cost is recognised as an asset. Under AGAAP, goodwill is amortised on a straight line basis over varying periods not exceeding 20 years. Although the benefits from the goodwill acquired may exceed 20 years the goodwill is written off over periods not exceeding 20 years to comply with AGAAP. In 1989 and prior years, for AGAAP, goodwill was written off in the year of acquisition. For US GAAP purposes, such goodwill has been reinstated and is being amortised. For US GAAP, where the useful life is considered to be 20 years or longer, the Group has adopted the method of straight-line amortisation over a maximum of 40 years. The unamortised balance of goodwill is reviewed semi-annually and any material diminution in value is charged to the Statement of Financial Performance. Goodwill attributable to sold businesses is brought to account in determining the gain or loss on sale (refer to Note 39(p) for recent changes under US GAAP). (j) BRAND NAMES Brand names acquired since 1 July 1990, are recorded in the accounts at cost based on independent valuation. No amortisation has been charged on these assets under Australian GAAP as no event has occurred to cause a reduction in the values or limit their useful lives. For US GAAP purposes and for purposes of this reconciliation, brand names are, effective 1 July 1994 amortised over a period of 40 years using the straight line method. Brand names attributable to sold businesses are brought to account in determining the gain or loss on sale (refer to Note 39(p) for recent changes under US GAAP). (k) HEDGING OF ANTICIPATED TRANSACTIONS Included within Note 27 is detail of amounts deferred related to hedging of anticipated exposures. For US GAAP purposes certain of these transactions (primarily related to forward exchange contracts) do not qualify as hedges as they relate to anticipated transactions. These amounts are adjusted in determining US GAAP income. The amount adjusted, by decreasing US GAAP net income by $1.3 million (2001 - $1.1 million decrease; 2000 - $1.4 million decrease), is in respect of forward contracts hedging future foreign currency sales of product. The contracts are related to budgeted sales and are not in relation to firm commitments. (l) DISCONTINUED OPERATION Under AGAAP a business or segment is included as discontinued upon completion of the transaction, whereas US GAAP presentation as discontinued is determined in accordance with APB 30 or subsequent to July 1 2002, in accordance with SFAS 144. These standards basically require presentation as discontinued at the measurement date, which will generally pre-date completion. Sales revenue under US GAAP as disclosed in Note 40 and in Item 3A - Selected Financial Data represents the sales revenue for the periods shown of the continuing Ansell Healthcare operations. Certain retained liabilities relating to Accufix Pacing Lead related expenses are reported in Note 20 to the financial statements as a current provision of $18.6 million. As set out in Note 26 to the financial statements the expected outcome of the material litigation actions outstanding in respect of the Medical Products Group have been provided for. Certain deferred tax assets previously reported in respect of the results of the Medical Products Group were written off in 1996, and income tax benefits attributable to the losses from operations and loss from sale have not been brought to account as recovery is not, at this time, considered to be more likely than not. (m) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES The Financial Accounting Standards Board ("FASB") issued then subsequently amended, Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, which became effective for Ansell Limited on 1 July 2000. Under SFAS No. 133, as amended, all derivative instruments are recognised in the balance sheet at their fair values and changes in fair value are recognised immediately in earnings, unless the derivatives qualify as hedges of future cash flows. For derivatives qualifying as hedges of future cash flows, the effective portion of changes in fair value is recorded temporarily in equity, then recognised in earnings along with the related effects of the hedged items. Any ineffective portion of hedges is reported in operating earnings as it occurs. 124 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 39. MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP (continued) (m) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued) The nature of Ansell Limited's business activities necessarily involves the management of various financial and market risks, including those related to changes in interest rates, currency exchange rates, and commodity prices. Ansell Limited uses derivative financial instruments to mitigate or eliminate certain of those risks. All derivatives are recognised on the balance sheet at their fair value. On the date the derivative is entered into, Ansell Limited designates the derivative as either a hedge of the fair value of a recognised asset or liability or firm commitment (fair value hedge) or of the variability of cash flows to be paid or received related to a recognised asset, liability or forecasted transaction (cash flow hedge). Hedges of future cash flows The ineffective portion of the changes in cash flow values of hedge positions reported in the current period amounts to nil (2001 - loss of $0.3 million before income taxes). There is no portion of any derivative instruments excluded from the assessment of hedge effectiveness. Amounts classified in Other Comprehensive Income (OCI) during the period relate to cash flow hedges and will be released to earnings as the hedged items mature. During the period, no amount was reclassified from OCI and realised in earnings due to the discontinuation of cash flow hedges. During the next 12 month period ending 30 June 2003, no amounts will be reclassified to earnings as a result of hedged items maturing. At 30 June 2002, the maximum term of derivative instruments that hedge forecasted transactions was 49 months. Hedges of recognised assets, liabilities and firm commitments All fair value hedges have been assessed for their effectiveness in accordance with SFAS 133 guidelines. A gain of $1.8 million (2001 - loss of $2.7 million), before income taxes, which was recognised in 'other expenses' related to the change in fair value of fair value hedges and associated hedged item. A reconciliation of current period changes in Other Comprehensive Income within equity is as follows: $ MILLIONS Opening balance of accumulated net loss on cash flow hedges (2.5) Net gain / (loss) on cash flow hedges (12.0) Add reclassification adjustments to earnings 0.8 ---------- Closing balance of accumulated net loss on cash flow hedges (13.7) ========== (n) INVESTMENTS For US GAAP purposes investments held in publicly listed companies have been marked-to-market in accordance with SFAS No 115 "Accounting for Certain Investments in Debt and Equity Securities" with the difference from cost reflected in Comprehensive Income. Under A GAAP investments are carried at cost. Accounting for the Investment in South Pacific Tyres (SPT) The accounting for the investment in SPT under AGAAP is detailed in Note 2 to the Financial Statements. For US GAAP purposes the existing provisions contained within the amended partnership agreement - notwithstanding the substance of the revised arrangements and actual process in respect of the operational control of SPT, which has ultimately determined the AGAAP treatment - continue to provide the company with the legal ability to significantly influence the partnership. Accordingly, equity accounting is applied for the purpose of reporting in accordance with the requirements under US GAAP. There are no material differences between AGAAP and US GAAP within the partnership's financial statements. (o) REVENUE RECOGNITION Under AGAAP, interest revenue and proceeds from the sale of non current assets are recorded as other revenues from ordinary activities and the basis of the assets sold is included in expenses. Under US GAAP, interest revenue is classified as other income and the difference between the sale proceeds and the basis of the assets sold would be presented as a net gain or loss and included in the determination of operating income. 125 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 39. MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP (continued) (p) RECENT CHANGES IN US GAAP In June 2001, the FASB issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations completed after 30 June 2002. Statement 141 also specifies the types of acquired intangible assets that are required to be recognised and reported separately from goodwill and those acquired intangible assets that are required to be included in goodwill. Statement 142 will require that goodwill no longer be amortised, but instead tested for impairment at least annually. Statement 142 will also require recognised intangible assets to be amortised over their respective estimated useful lives and reviewed for impairment in accordance with Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Any recognised intangible assets determined to have an indefinite useful life will not be amortised, but instead tested for impairment in accordance with the Standard until its life is determined to no longer be indefinite. An estimate of the expected impact on the adoption of SFAS No. 142 will approximate the current year's US GAAP amortisation of : $ MILLIONS Goodwill 18.9 Brand names 4.5 ---------- 23.4 ========== Brand names of the Company have been determined to have indefinite useful lives. Refer to Note 1 to the Financial Statements. In June 2001, the FASB also issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs, and applies to legal obligations associated with the retirement of long-lived assets and/or the normal operation of a long-lived asset. Under SFAS No. 143, the fair value of a liability for an asset retirement obligation is recognised in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalised as part of the carrying amount of the long-lived asset. The liability is discounted and accretion expense is recognised using the credit-adjusted risk-free interest rate in effect when the liability was initially recognised. SFAS No. 143 will be effective for the Group as of 1 July 2002. In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses financial accounting and reporting for the impairment of long-lived assets, and will supersede (a) SFAS No. 121 with respect to the accounting for the impairment or disposal of long-lived assets and (b) Accounting Principles Board Opinion No. 30 for the disposal of a segment of a business. SFAS No. 144 retains the requirements of SFAS No. 121 to (a) recognise an impairment loss if the carrying amount of a long-lived asset is not recoverable from its undiscounted cash flows and (b) measure an impairment loss as the difference between the carrying amount and fair value of the asset. SFAS No. 144 also requires that a long-lived asset to be abandoned, exchanged for a similar productive asset, or distributed to owners in a spin-off be considered held and used until the asset is disposed of, exchanged or distributed. SFAS No. 144 retains the basic provisions of Opinion 30 for the presentation of discontinued operations in an income statement but broadens that presentation to include a component of an entity (rather than a segment of a business). A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. A component of an entity that is classified as held for sale or that has been disposed of is presented as a discontinued operation if the operations and cash flows of the component will be (or have been) eliminated from the ongoing operations of the entity and the entity will not have any significant continuing involvement in the operations of the component. 126 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 39. MAJOR DIFFERENCES BETWEEN AUSTRALIAN GAAP AND US GAAP (continued) (p) RECENT CHANGES IN US GAAP (continued) In addition, discontinued operations are no longer measured on a net realisable value basis, and future operating losses are no longer recognised before they occur. SFAS No. 144 will be effective for the Group as of 1 July 2002. In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections." As a result of the rescission of SFAS No. 4, a loss on extinguishment of debt will no longer be presented as an extraordinary item upon the adoption of SFAS No. 145, which is effective for the Group in the fiscal year beginning 1 July 2002. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 is based on the general principle that a liability for a cost associated with an exit or disposal activity should be recorded when it is incurred and initially measured at fair value. SFAS No. 146 applies to costs associated with (1) an exit activity that does not involve an entity newly acquired in a business combination or (2) disposal activity within the scope of SFAS No. 144. These costs include certain termination benefits, costs to terminate a contract that is not a capital lease, and other associated costs to consolidate facilities or relocate employees. Because the provisions of this statement are to be applied prospectively to exit or disposal activities initiated after 31 December 2002, the effect of adopting this statement cannot be determined. 40. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP)
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------------- PROFIT AND LOSS STATEMENT (FOR YEARS ENDED 30 JUNE) Net loss of the consolidated entity per Australian GAAP (113.0) (135.8) (82.4) Less interest of outside equity holders 2.8 3.6 4.1 ------------------------------------- Net loss attributable to members (115.8) (139.4) (86.5) Adjustments required to accord with US GAAP: add/(deduct): (67.8) (55.6) 44.7 - ------------------------------------------------------------------------------------------------------------------------- Loss according to U.S. GAAP (183.6) (195.0) (41.8) - ------------------------------------------------------------------------------------------------------------------------- Weighted average number of shares per basic EPS calculations (millions) 186.9 194.0 206.5 Weighted average number of Executive shares (millions) 0.6 0.5 0.5 ------------------------------------- Weighted average number of shares per diluted EPS calculations (millions) 187.5 194.5 207.0 Continuing Operations Loss from continuing operations Before income tax (48.2) (75.8) (28.4) Income tax expense (26.9) (147.2) (2.6) Discontinued Operations Income/loss from discontinued operations Before income tax /(1)/ (89.0) 63.1 34.9 Income tax expense (19.5) (35.1) (45.7) ------------------------------------- Net loss per US GAAP (183.6) (195.0) (41.8) ------------------------------------- Earnings per share -basic and diluted (Australian Cents) Continuing operations -basic (40)Cent (115)Cent (15)Cent -diluted (40)Cent (115)Cent (15)Cent Discontinued operations-basic (58)Cent 14Cent (5)Cent -diluted (58)Cent 14Cent (5)Cent CONDENSED US GAAP CONSOLIDATED STATEMENT OF INCOME DATA EXCLUDING DISCONTINUED OPERATIONS Sales Revenue 1,414.2 1,412.2 1,172.7 Total costs and expenses 1,407.7 1,388.6 1,098.6 Net interest expense 54.7 99.4 102.5 Tax expense 26.9 147.2 2.6 - -------------------------------------------------------------------------------------------------------------------------
Loss from continuing operations (75.1) (223.0) (31.0) /(1)/ Includes net gain on disposal of businesses and controlled entities 25.7 155.2 -
127 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 40. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) (continued)
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES PER AUSTRALIAN GAAP FINANCIAL STATEMENTS TO PROFIT AFTER TAX UNDER US GAAP Net Cash Provided by Operating Activities 113.1 226.6 190.3 Write-down of non-current assets (144.5) - (160.0) Depreciation (50.1) (89.9) (142.5) Amortisation (24.3) (40.1) (45.6) Provision for doubtful debts 2.9 (7.9) (7.3) Write down of FITB (15.2) (158.5) - Repco goodwill and brandnames written off - (97.7) - Share of net (loss)/gain of associate and joint venture entities (60.1) (44.3) (1.9) Items classified as financing activities: Interest Received 15.5 44.9 47.4 Interest Paid (70.2) (144.3) (149.5) Change in assets and liabilities net of effect from acquisition and disposals of subsidiaries and businesses: (Decrease)/Increase in trade debtors 0.3 176.5 (215.7) (Decrease)/Increase in inventories (39.4) 13.8 (129.2) (Decrease)/Increase in prepaid expenses 2.4 (19.2) (17.3) (Decrease)/Increase in deferred expenditure (4.3) 4.2 16.8 (Increase)/Decrease in creditors and bills payable (78.3) (52.2) 118.6 Decrease in lease liabilities, provisions, and other liabilities 187.9 98.3 205.2 (Increase)/Decrease in provision for deferred income tax (2.3) (1.0) 47.6 Increase/(Decrease) in future income tax benefit (24.7) 6.0 (8.4) (Increase)/Decrease in provision for income tax 8.5 (1.2) (8.0) (Decrease)/Increase in GNB net operating assets held for sale - (182.3) 182.3 (Loss)/Gain on sale of investments, properties, plant and equipment (5.6) (4.6) 4.2 Gain/(loss) on sale of subsidiaries and businesses 27.2 154.7 (4.5) Outside equity interest in loss/(profit) for the year (2.8) (3.6) (4.1) Goodwill written off - (35.3) - Other (19.6) (37.9) 39.8 - ------------------------------------------------------------------------------------------------------------------ Loss after tax (183.6) (195.0) (41.8) - ------------------------------------------------------------------------------------------------------------------
128 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 40. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) (continued)
CONSOLIDATED $ IN MILLIONS NOTE 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------- ADJUSTMENTS TO REFLECT U.S. GAAP Add/(Deduct): Reduced goodwill amortization charge as a result of differences in useful lives 39(i) 12.7 18.5 14.1 Amortization of goodwill capitalised for US GAAP 39(i) purposes only (2.4) (3.7) (4.1) Amortization of brand names capitalized 39(j) (4.5) (5.3) (5.3) Amortization of compensation component of executive 39(d) share plan and options 1.9 - (0.8) Pension Plans /(1)/ 39(f) 5.4 (12.3) 7.1 Income tax (expense)/benefit (1.9) 4.3 (2.5) Depreciation of asset increment included in 39(a) depreciation charge 0.2 0.3 0.4 Revaluation of asset increment realized on sale of controlled entities and businesses 39(a) 20.5 - 1.9 Net hedge (losses)/gains (brought to account)/ deferred for Australian GAAP 39(k) (1.9) (1.7) (2.2) Income tax benefit 0.6 0.6 0.8 Rationalization and restructuring provision 39(c) (30.0) (17.8) 51.2 Income tax (expense)/benefit 8.1 6.0 (18.4) Goodwill capitalised for US GAAP purposes written off on sale of controlled entities and businesses 39(i) (34.5) (41.7) - Write back of US GAAP amortisation of brandnames on sale of controlled entities and businesses 39(j) 15.5 6.4 - Net change in fair value hedges, hedged items and cash flow hedges 39(m) 2.6 (4.9) - Income tax (expense)/benefit (0.8) 1.7 - Equity accounted loss of South Pacific Tyres 39(n) (62.0) - - Income tax benefit 14.6 - - Valuation adjustment for above income tax (benefit)/expense amounts (11.9) (6.0) 2.5 ------------------------------ (67.8) (55.6) 44.7 ------------------------------ Shareholders' Equity of the Group as at 30th June 876.0 1,066.2 1,499.9 Deduct: Outside equity interests 39(b) (13.7) (19.8) (17.5) - ------------------------------------------------------------------------------------------------------------------ Shareholders' Equity attributable to Ansell Limited 862.3 1,046.4 1,482.4 - ------------------------------------------------------------------------------------------------------------------ ADJUSTMENTS REQUIRED TO ACCORD WITH U.S. GAAP: Add/(Deduct): Goodwill not capitalized for Australian GAAP - net of amortization and amortization adjustments on Australian GAAP goodwill 39(h) 123.7 155.6 175.1 Amortization of brand names - cumulative 39(j) (26.1) (40.1) (39.5) Pension Plans 39(f) 6.2 0.8 13.2 Dividends 39(c) - - 31.0 Hedging adjustments - after tax 39(k) (0.3) 1.0 2.0 Reserves attributable to Asset Revaluation 39(a) (20.2) (29.3) (43.4) Rationalization and Restructuring provisions 39(c) - 21.9 32.8 Depreciation charged on Revaluation increments 39(a) 12.6 12.4 12.1 Loans outstanding under ownership based remuneration scheme 39(d) (4.3) (8.6) (9.9) Net change in fair value hedges, hedged items and cash flow hedges 39(m) (2.3) (4.9) - Net gains/(losses) on cash flow hedges residing in Comprehensive Income 39(m) (13.7) (1.6) - Gain on equity securities residing in comprehensive - - income 39(n) 1.0 Equity accounted loss of South Pacific Tyres 39(n) (62.0) - - ------------------------------ Total Adjustments 14.6 107.2 173.4 ------------------------------ Ansell Limited Shareholders' Equity according to U.S. GAAP (including Comprehensive Income) 876.9 1,153.6 1,655.8 - ------------------------------------------------------------------------------------------------------------------ Note: All US GAAP adjustments are in respect of 100% owned operations STATEMENT OF COMPREHENSIVE INCOME: Net loss per U.S. GAAP (121.6) (195.0) (41.8) Foreign Currency Translation Reserve: Movement per A GAAP (69.6) (73.0) 61.3 Movement per U.S. GAAP (4.5) 5.2 1.6 Net loss on cash flow hedges (12.1) (1.6) - Gain on equity securities 1.0 - - - ------------------------------------------------------------------------------------------------------------------ Comprehensive Income (206.8) (264.4) 21.1 ==================================================================================================================
/(1)/ Pension Plans - includes curtailment gains of $6.1 million, $3.3 million and $4.4 million for 2002, 2001 and 2000 respectively, resulting from the sale of businesses. 129 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 40. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) (continued)
2002 2001 2000 MAJOR MAJOR MAJOR AUSTRALIAN AUSTRALIAN AUSTRALIAN $ IN MILLIONS FUNDS FUNDS FUNDS GNB INC./(1)/ - ------------------------------------------------------------------------------------------------------------------ Pension Plan data supporting Note 39(f) Plan's funded status at 30 June is summarised as follows: Actuarial present value of accumulated obligations: . Vested 222.5 458.1 520.0 180.0 . Non Vested 0.8 1.7 1.8 15.6 Total accumulated benefit obligation 223.3 459.8 521.8 195.6 Projected benefit obligation 225.1 464.1 525.6 207.9 Plan assets at fair value 237.6 506.0 604.9 227.6 Excess of assets over benefit obligations 12.5 41.9 79.3 19.7 Unrecognised net (gain) (4.1) (37.1) (56.6) (45.0) Unrecognised prior service costs - - - 12.6 Unrecognised net transition obligation/(asset) and other deferrals (2.3) (7.1) (9.5) 1.1 Net Pension (Liability)/Asset 6.1 (2.3) 13.2 (11.6) NET PENSION COST Defined Benefit Plans: Service cost-benefits earned during the year 22.8 39.8 44.2 6.7 Interest cost on projected benefit obligation 26.0 35.4 31.5 15.5 Actual return on plan assets (35.4) (45.3) (88.1) (22.2) Net amortisation and deferral (2.2) (5.7) 43.0 2.3 Net Pension Cost of Defined Benefit Plans 11.2 24.2 30.6 2.3 ASSUMPTIONS Weighted average discount rate 6.0% 6.0% 6.0% 7.0% Rate of increase in compensation level 3.5% 3.5% 3.5% 5.0% Expected long term rate of return 7.0% 7.5% 7.5% 11.0% CHANGE IN BENEFIT OBLIGATION Projected Benefit Obligation at beginning of year 464.1 525.6 482.1 203.3 Service cost 22.8 39.8 44.2 6.7 Interest cost 26.0 36.6 55.7 15.5 Transfers from/(to) other funds 4.2 7.4 (0.3) - Member contributions 5.4 8.2 12.5 - Actuarial (gain)/loss (27.8) 16.9 5.4 (29.7) Plan Amendments - - - 2.0 Benefits paid (266.4) (166.9) (67.3) (10.8) Expenses and tax paid (3.2) (3.5) (6.7) - Foreign currency exchange rate changes - - - 20.9 Projected Benefit Obligation at end of year 225.1 464.1 525.6 207.9 CHANGE IN PLAN ASSETS Market value of assets at beginning of year 506.0 604.9 545.4 204.9 Adjustment to fair value at beginning of the year (10.6) - - - Member/Employer Contributions 15.8 18.8 45.7 - Transfers from other funds 4.3 7.4 (0.3) - Benefits paid (266.4) (166.9) (67.3) (10.8) Expenses and tax paid (3.2) (3.5) (6.7) - Actual return on plan assets (8.3) 45.3 88.1 12.8 Foreign currency exchange rate changes - - - 20.7 Market value of assets at end of year 237.6 506.0 604.9 227.6
/(1)/ Amounts relating to the GNB Inc. pension plan were transferred to Exide on the sale of GNB. 130 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 40. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) (continued) INFORMATION FOR UNITED STATES INVESTORS
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ PROCEEDS RECEIVED FROM THE SALE OF BUSINESSES AND INVESTMENTS PER NOTE 3 .. Pacific Automotive business 238.7 .. Pacific Brands business 701.0 .. GNB Battery business 692.0 .. Electrical Distribution business 341.6 .. Other minor businesses 16.3 11.6 ------------------------------ 939.7 1,049.9 11.6 ------------------------------ MATERIAL WRITE-DOWN OF ASSETS PER INDUSTRY SEGMENTS .. Exide Receivable/Investment /(i)/ (99.9) As a result of Exide Inc filing for chapter 11 bankruptcy protection and subsequent demise of Exide Inc's share price the company has fully written off its investment in and all amounts receivable from Exide Inc. .. Ansell Healthcare fixed assets /(ii)/ (63.1) Following the announcement to close Ansell Healthcare's manufacturing facility in Troy, Alabama the company has written down the value of plant and equipment at the site to estimated recoverable value. In addition, certain other values attributed to land & buildings within the USA have been written down to independently appraised values. .. Other(iii) (13.5) Represents the write-down of various assets to recoverable amount as determined by the company. .. Automotive Distribution Business /(i)/ (97.7) Following the announcement to sell the Automotive Distribution business the assets were written down to the estimated sales proceeds. .. GNB Battery Assets /(i)/ (160.0) Additional write-down in respect of the GNB Battery assets was required in order to achieve a contract outcome in respect of the sale of the GNB Battery operations to Exide Inc.
(i) Included within Income/Loss from discontinued operations (ii) Included within Loss from continuing operations (iii) Of this amount $3.6m is included within loss from continuing operations and $9.9m included within Income/Loss from discontinued operations.
US GAAP EQUITY ROLLFORWARD /(1)/ Opening Balance US GAAP equity 1,153.6 1,655.8 1,786.5 US GAAP Loss (121.6) (195.0) (41.8) Proceeds from issue of shares 1.2 2.5 1.3 Dividends (77.6) (144.5) Share buy back (165.4) Movement in Aust GAAP FCTR (69.6) (73.0) 61.3 Net gain/(loss) on cashflow hedges in OCI (12.1) (1.6) Movement in Loans outstanding under Employee Share Plan 4.3 1.3 2.6 Equity accounted loss of South Pacific Tyres (62.0) - - Other (including FX on US GAAP adjustments) (16.9) 6.6 (9.6) ------------------------------ Closing balance US GAAP equity 876.9 1,153.6 1,655.8 ------------------------------
/(1)/ Prior year comparatives have been adjusted for the inclusion of Loans outstanding under the Employee Share Plan as a contra equity item for US GAAP purposes. 131 PART III ITEMS 17 & 18 : FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 40. RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (U.S. GAAP) (continued) INFORMATION FOR UNITED STATES INVESTORS (continued)
CONSOLIDATED $ IN MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ GOODWILL Australian GAAP goodwill - written down value 30 June 260.7 339.1 408.2 Add: Net Goodwill recognised for US GAAP only 38.3 75.2 105.2 Add: Adjustment for different amortization basis on Australian GAAP goodwill 85.4 80.4 69.9 ------------------------------ US GAAP goodwill - written down value 30 June 384.4 494.7 583.3 ------------------------------ US GAAP GOODWILL COMPRISES: Gross Goodwill 516.7 666.2 793.0 Accumulated Amortization (132.3) (171.5) (209.7) ------------------------------ Written down value 384.4 494.7 583.3 ------------------------------ BRAND NAMES Australian GAAP Brand names - 30 June 142.5 217.7 219.7 (Deduct): US GAAP amortisation (26.1) (40.1) (39.5) ------------------------------ US GAAP Brand names - 30 June 116.4 177.6 180.2 ------------------------------ PROPERTY, PLANT & EQUIPMENT Property, plant & equipment at cost and valuation (net of accumulated depreciation) 332.5 669.9 658.2 (Deduct): Asset revaluation reserves applicable (20.2) (29.3) (43.4) Add: Adjustment to add back depreciation charged on the revaluation increments (cumulative) 12.6 12.4 12.1 ------------------------------ Property, plant & equipment at cost (net of accumulated depreciation) 324.9 653.0 626.9 ------------------------------ ANALYSIS OF LONG-LIVED ASSETS BY COUNTRY .. Australia 72.5 385.7 490.7 .. USA 430.4 672.8 530.9 .. Malaysia 98.6 117.2 103.7 .. Thailand 80.2 89.1 89.8 .. Sri Lanka 61.0 71.4 62.8 .. Other Countries 85.2 116.8 135.6 ------------------------------ 827.9 1,453.0 1,413.5 ------------------------------
EXECUTIVE SHARE OPTION DATA SUPPORTING NOTE 39 (d) AND NOTE 25 SFAS123 "Accounting for Stock Based Compensation" encourages the adoption of a fair value based method of determining compensation costs. For US GAAP purposes, the company has adopted the fair value provision of SFAS123. The compensation fair value of all options which are outstanding has been calculated at $0.7 million. 132 PART III DIRECTORS' DECLARATION - -------------------------------------------------------------------------------- In the opinion of the directors of Ansell Limited: (a) the financial statements and notes, set out on pages 66 to 132 are in accordance with the Corporations Act 2001, including: (i) giving a true and fair view of the financial position of the Company and consolidated entity as at 30 June 2002 and of their performance, as represented by the results of their operations and their cash flows, for the year ended on that date; and (ii) complying with Accounting Standards in Australia and the Corporations Regulations 2001; and (b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the directors: /s/ Edward D Tweddell /s/ Harry Boon - --------------------- -------------- Edward D Tweddell Harry Boon Director Director Dated in Melbourne this 3rd day of September 2002 133 PART III INDEPENDENT AUDIT REPORT - -------------------------------------------------------------------------------- The Board of Directors and Shareholders Ansell Limited: We have audited the accompanying consolidated statements of financial position of Ansell Limited and its controlled entities (Ansell Limited) as of June 30, 2002, 2001 and 2000, and the related consolidated statements of financial performance, cash flows, and changes in stockholders' equity for each of the years in the three-year period ended June 30, 2002 as set out on pages 66 to 133. 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 Ansell Limited as of June 30, 2002 and 2001, and the results of its operations and its cash flows for each of the years in the three-year period ended June 30, 2002, in conformity with generally accepted accounting principles in Australia. Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted in the United States of America. An explanation of the significant differences between the two sets of principles as they relate to Ansell Limited is presented in Note 39 to the consolidated financial statements. The application of accounting principles generally accepted in the United States of America would have affected consolidated net loss for each of the years in the three-year period ended June 30, 2002 and shareholders' equity as of June 30, 2002, 2001 and 2000, to the extent summarized in Note 40 to the consolidated financial statements. /s/ KPMG Dated in Melbourne this 3rd day of September 2002 134 PART III SIGNATURE - -------------------------------------------------------------------------------- Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant certifies that it meets all of the requirements for filing on Form 20-F and has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorised. Ansell Limited Registrant /s/ David M. Graham David M. Graham Chief Financial Officer Dated: 23 December 2002 135 PART III CERTIFICATIONS - -------------------------------------------------------------------------------- I Harry Boon certify that: 1. I have reviewed this annual report on Form 20-F of Ansell Limited; 2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report. Dated: 23 December 2002 /s/ Harry Boon ------------------------------------- Name: Harry Boon Title: Chief Executive Officer 136 PART III CERTIFICATIONS - -------------------------------------------------------------------------------- I David M. Graham certify that: 1. I have reviewed this annual report on Form 20-F of Ansell Limited; 2. Based on my knowledge, this annual report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report. Dated: 23 December 2002 /s/ David M. Graham ------------------------------------- Name: David M. Graham Title: Chief Financial Officer 137 PART III CERTIFICATIONS - -------------------------------------------------------------------------------- PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18 UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Ansell Limited, an Australian corporation (the "Company"), hereby certifies, to such officer's knowledge, that: The Annual Report of Form 20-F for the year ended June 30, 2002 (the "Report") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: 23 December 2002 /s/ Harry Boon ------------------------------ Name: Harry Boon Title: Chief Executive Officer The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as separate disclosure document. 138 PART III CERTIFICATIONS - -------------------------------------------------------------------------------- PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (SUBSECTIONS (a) AND (b) OF SECTION 1350, CHAPTER 63 OF TITLE 18 UNITED STATES CODE) Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), the undersigned officer of Ansell Limited, an Australian corporation (the "Company"), hereby certifies, to such officer's knowledge, that: The Annual Report of Form 20-F for the year ended June 30, 2002 (the "Report") of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: 23 December 2002 /s/ David M. Graham ------------------------------- Name: David M. Graham Title: Chief Financial Officer The foregoing certification is being furnished solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and is not being filed as part of the Report or as separate disclosure document. 139 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- Statements filed in accordance with Rule 309 and Item 17. DIRECTORS REPORT The directors of South Pacific Tyres (a partnership between Pacific Dunlop Tyres Pty. Ltd. and Goodyear Tyres Pty. Ltd.) present their report together with the financial report of South Pacific Tyres ("the partnership") and the consolidated financial report of the consolidated entity, being the partnership and its controlled entities, for the year ended 30th June 2002 and the auditor's report thereon. (a) The names of the directors, appointed pursuant to the Partnership Agreement dated 30th March 1987, at any time during or since the end of the financial year are:
NAMES EXPERIENCE, SPECIAL RESPONSIBILITIES Mr. Robert Bartlett Appointed as director December 14th 2001 Resigned April 30th 2002 Mr. Paul Devereux General Manager Business Development B. Bus. 18 years service with the Company Appointed as director December 14th 2001 Mr. Herbert J. Elliott Non Executive Director of Ansell Ltd. MBE, MA. (Cantab.) Former President of Puma North America and Chief Executive Officer of Puma Australia. Appointed as director April 30th 2001 Mr. Phillip Gay Appointed as director 1996. Resigned December 14th 2001. Mr. Samir G. Gibara Chairman & Chief Executive Officer of The Masters - International Bus & Finance - Goodyear Tire & Rubber Company. Harvard 38 years service with the Company. Appointed as director 1995 Mr. David Graham General Manager, B. Bus., CA, FCPA. Finance & Treasury with Ansell Ltd. 20 years service with the company. Appointed as director October 31st 2001. Mr. Hugh D. Pace President Asia Region of The Goodyear Tire Masters in International Management & Rubber Company. 27 years service with the Company. Appointed as director December 1st 1998 Mr. John Rennie Appointed as director 1996. Resigned December 14th 2001 Mr. Ernie J. Rodia Appointed as director 1999. Resigned September 30th 2001. Mr. Clark E. Sprang Senior Vice President for Business Graduate Ohio State University Development & Integration of The Goodyear Tire & Rubber Company. 36 years service with the Company. Appointed as director October 1st 2001. Mr. Robert W. Tieken Executive Vice President & Chief Financial Graduate Illinois Wesleyan University Officer of The Goodyear Tire & Rubber Company 8 years service with the Company. Appointed director 1995 Dr Edward Tweddell Executive Chairman of Ansell Ltd. BSc., MBBS. (Hons), FRACGP, FAICD. 1 years service with the company. 25 years in the pharmaceutical and healthcare industries Appointed director December 14th 2001 Mr. Ian Veal Appointed as director 1990 Resigned October 31st 2001
140 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- DIRECTORS REPORT (continued) (b) The number of directors' meetings and number of meetings attended by each director of the partnership during the financial year are: DIRECTOR DIRECTORS MEETINGS A B Mr. R. Bartlett 1 1 Mr. P. Devereux 0 1 Mr. H. Elliott 0 0 Mr. P. Gay 2 2 Mr. S. Gibara 0 3 Mr. D. Graham 1 1 Mr. H. Pace 3 3 Mr. J. Rennie 1 2 Mr. E. Rodia 0 1 Mr. C. Sprang 1 2 Mr. R. Tieken 2 3 Dr. E. Tweddell 1 1 Mr. I. Veal 1 2 A = Number of meetings attended B = Number of meetings held during the time the director held office during the year. (c) The principal activities of the consolidated entity during the period were: . Manufacture of tyres for vehicles . Wholesaling and retailing of vehicle and aircraft tyres; There were no significant changes in the nature of the principal activities of the consolidated entity during the year. (d) The net loss of the consolidated entity for the year after deducting outside equity interests and after providing for income tax was $130,027,170. The comparative figure for the previous year ended 30th June 2001, was a net loss of $92,056,394. The contribution to profits by each entity in the consolidated entity is set out in Note 28 to the financial statements. The directors have apportioned the loss to the partners in accordance with the Partnership Agreement. (e) For the year ended 30th June 2002, South Pacific Tyres paid nil (2001 : $nil) to the partners by way of a distribution of profits. (f) The directors' review of the operations of the consolidated entity during the year, and the results of those operations is as follows: With the initiatives, restructuring, plant consolidation and modernisation plans announced over the past two years in effect, SPT is now experiencing a return to more stable trading and market share improvements. The Footscray plant ceased production on schedule with product being resourced from overseas suppliers. The Thomastown plant closure in July 2002 and the consolidation of passenger and light truck production at Somerton (Australia) and Upper Hutt (New Zealand) are on schedule to plan. 141 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- DIRECTORS REPORT (continued) With the significant restructuring changes taking effect during this financial year, SPT returned an operating loss before tax of $143,606,153 compared with the previous year's operating loss of $96,849,149. All truck, farm, passenger, light truck and sport utility product ranges have been revitalised to industry and market leading standards and include the introduction of silica technology. Significant new supply contracts for original equipment fitment have been finalised with Ford, Toyota and Mitsubishi motor vehicle companies. With the favourable operating cost structure resulting from plant closures and the consolidation of the remaining manufacturing facilities, South Pacific Tyres is on plan to return to sustained trading profits in the July 2002 to June 2003 financial year. (g) In the opinion of the directors, other than referred to in this report, there were no significant changes in the state of affairs of the consolidated entity that occurred during the year. (h) There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the partnership to affect significantly the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in future financial years. (i) The operations of the partnership are subject to various environmental regulations under both Commonwealth and State legislation. The partnership has an Environmental Specialist who monitors compliance with environmental regulations. The directors are not aware of any breaches of the legislation during the financial year which are material in nature. (j) Information about likely developments in the operations of the consolidated entity and the expected results of those operations in future financial years, has not been included in this report because disclosure of the information would be likely to result in unreasonable prejudice to the consolidated entity. (k) No director of the partnership, since the end of the previous financial year, has received or become entitled to receive a benefit (other than a benefit included in the aggregate amount of remuneration received or due and receivable by directors shown in the financial statements or the fixed salary of a full time employee of the partnership or of a related corporation) by reason of a contract made by the partnership or a related corporation with the director or with a firm of which he is a member, or with an entity in which the director has a financial interest. (l) This special purpose financial report has been drawn up in accordance with Section 11 of the Partnership Agreement. As required by that section, the financial report has been prepared as if the partnership were a public company under the provisions of the Corporations Act 2001. The financial report complies with the Corporations Act 2001, Urgent Issues Group Consensus Views, other authoritative pronouncements of the Australian Accounting Standards Board, and, except as stated below, applicable Accounting Standards. The directors do not consider the partnership to be a reporting entity and the matters required to be disclosed by AASB 1017 - Related Party Disclosures, and AASB 1029 - Accounting for Employee Entitlements ( disclosure requirements only ), have not been included in the financial report, as the directors do not consider those matters to be relevant. (m) INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS Since the end of the previous financial year, the partnership has not indemnified or made a relevant agreement for indemnifying against a liability any person who is or has been an officer or auditor of the partnership. 142 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- DIRECTORS REPORT (continued) During the financial year the partnership has paid premiums in respect of directors' and officers' liability and legal expenses insurance contracts for the year ended 30th June 2002. Such insurance contracts insure against certain liability (subject to specific exclusions) persons who are or have been directors or executive officers of the partnership. The directors have not included details of the nature of the liabilities covered or the amount of the premium paid in respect of the directors' and officers' liability and legal expenses' insurance contracts, as such disclosure is prohibited under the terms of the contract. Dated at Melbourne, this day of 2002 Signed in accordance with a resolution of the directors: /s/ ............................................................. Director /s/ ............................................................. Director 143 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- Statements filed in accordance with Rule 309 and Item 17. STATEMENT OF FINANCIAL PERFORMANCE For the year ended 30th June 2002
CONSOLIDATED PARTNERSHIP NOTES 2002 2001 2000 2002 2001 2000 $ $ $ $ $ $ - ----------------------------------------------------------------------------------------------------------------------------------- Revenue from sale of goods 3 769,790,943 774,668,166 871,392,335 489,234,884 483,486,879 501,900,862 Revenue from rendering services 3 59,595,043 59,426,109 63,415,235 - - - Other revenues from ordinary activities 3 7,615,697 60,935,622 4,392,022 9,467,600 61,824,135 6,264,258 -------------------------------------------------------------------------------------------- Total revenue from ordinary activities 837,001,683 895,029,897 939,199,592 498,702,484 545,311,014 508,165,120 Changes in inventories of finished goods and work in progress 7,833,830 (9,386,419) (15,897,755) 209,099 (5,306,693) (10,323,639) Raw materials and consumables used 124,780,654 145,679,698 176,882,512 108,531,527 129,514,359 157,188,607 Employee expenses 218,153,093 243,283,796 265,671,039 100,506,921 130,898,250 150,381,852 Depreciation and amortisation expenses 4(b) 28,533,334 36,599,361 40,488,722 18,771,037 25,929,707 29,079,650 Borrowing costs 4(b) 13,660,548 16,340,214 15,848,050 12,811,968 15,381,376 15,018,729 Other expenses from ordinary activities 587,646,377 559,362,396 467,752,875 354,668,727 326,295,632 186,272,310 Expenses from ordinary activities 980,607,836 991,879,046 950,745,443 595,499,279 622,712,631 527,617,509 -------------------------------------------------------------------------------------------- Profit/(loss) from ordinary activities before related income tax expense (143,606,153) (96,849,149) (11,545,851) (96,796,795) (77,401,617) (19,452,389) Income tax expense/(benefit) relating to ordinary activities 6(a) (13,579,453) (4,793,040) 4,055,314 - - - -------------------------------------------------------------------------------------------- Profit/(loss) from ordinary activities after related income tax expense (130,026,700) (92,056,109) (15,601,165) (96,796,795) (77,401,617) (19,452,389) Net profit/(loss) attributable to outside equity interests 21 (470) (285) (38,303) - - - -------------------------------------------------------------------------------------------- Net profit/(loss) after income tax attributable to the partnership (130,027,170) (92,056,394) (15,639,468) (96,796,795) (77,401,617) (19,452,389) ============================================================================================
The statements of financial performance are to be read in conjunction with the notes to the financial statements set out on pages 147 to 168 144 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- STATEMENT OF FINANCIAL POSITION For the year ended 30th June 2002
NOTES CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash assets 7 37,100,672 19,031,203 29,798,257 9,507,000 Receivables 8 134,679,141 144,857,771 85,484,047 161,347,428 Inventories 9 160,741,965 167,246,533 130,215,751 129,392,966 Other 10 2,258,575 2,521,577 857,597 147,388 ------------------------------------------------------------ TOTAL CURRENT ASSETS 334,780,353 333,657,084 246,355,652 300,394,782 ------------------------------------------------------------ NON-CURRENT ASSETS Receivables 8 30,384,952 29,091,771 97,765,964 56,622,712 Other financial assets 11 - - 21,496,245 21,496,245 Property, plant and equipment 12 202,827,093 232,748,495 164,649,685 188,444,967 Intangible assets 13 5,204,262 5,467,324 - - Deferred tax assets 6(c) 22,441,327 8,897,006 - - ------------------------------------------------------------ TOTAL NON-CURRENT ASSETS 260,857,634 276,204,596 283,911,894 266,563,924 ------------------------------------------------------------ TOTAL ASSETS 595,637,987 609,861,680 530,267,546 566,958,706 ------------------------------------------------------------ CURRENT LIABILITIES Payables 14 161,782,718 144,136,341 135,897,172 102,305,181 Interest bearing liabilities 15 142,395,212 150,693,198 60,285,370 137,252,397 Current tax liabilities 6(b) 58,887 167,096 - - Provisions 16 95,859,342 50,702,253 78,054,372 36,397,096 ------------------------------------------------------------ TOTAL CURRENT LIABILITIES 400,096,159 345,698,888 274,236,914 275,954,674 ------------------------------------------------------------ NON-CURRENT LIABILITIES Payables 14 28,491,815 26,807,256 28,062,524 26,413,382 Interest bearing liabilities 15 61,095,014 - 61,095,014 - Provisions 16 7,978,203 8,561,903 4,025,842 4,946,604 ------------------------------------------------------------ TOTAL NON-CURRENT LIABILITIES 97,565,032 35,369,159 93,183,380 31,359,986 ------------------------------------------------------------ TOTAL LIABLITIES 497,661,191 381,068,047 367,420,294 307,314,660 ------------------------------------------------------------ NET ASSETS 97,976,796 228,793,633 162,847,252 259,644,046 ============================================================ PARTNERS' EQUITY Contributed equity 18 317,675,138 317,675,137 317,675,138 317,675,137 Reserves 19 12,570,229 9,220,023 11,409,810 11,409,810 Retained profits/(accumulated losses) 20 (232,268,571) (98,587,215) (166,237,696) (69,440,901) ------------------------------------------------------------ TOTAL PARTNERS' EQUITY 97,976,796 228,307,945 162,847,252 259,644,046 Outside equity interest 21 - 485,688 - - ------------------------------------------------------------ TOTAL PARTNERS' EQUITY 97,976,796 228,793,633 162,847,252 259,644,046 ============================================================
The statements of financial position are to be read in conjunction with the notes to the financial statements set out on pages 147 to 168 145 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS For the year ended 30th June 2002
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 NOTES $ $ $ $ INFLOWS INFLOWS INFLOWS INFLOWS (OUTFLOWS) (OUTFLOWS) (OUTFLOWS) (OUTFLOWS) - -------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Cash receipts in the course of operations 856,792,111 797,250,016 470,996,064 453,977,589 Cash payments in the course of operations (869,810,717) (810,226,386) (419,944,120) (469,572,050) Interest received 3,689,606 1,442,101 6,871,624 5,473,572 Borrowing costs paid (14,463,889) (19,316,863) (13,615,309) (18,358,025) Income taxes (paid)/refunded 6(b) (112,184) 1,960,747 - - ------------------------------------------------------- Net cash provided by/(used in) operating activities 30(c) (23,905,073) (28,890,385) 44,308,259 (28,478,914) ------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Proceeds on disposal of controlled entities 1,983,805 - - - Proceeds on disposal of property, plant and equipment 2,919,839 34,493,521 2,595,976 31,350,563 Payments for businesses, (net of cash acquired) 30(b) (1,246,831) (85,200) - - Payments for property, plant and equipment (14,750,236) (15,637,266) (10,740,966) (11,591,038) ------------------------------------------------------- Net cash provided by/(used in) investing activities (11,093,423) 18,771,055 (8,144,990) 19,759,525 ------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from partner contributions - 117,675,137 - 117,675,137 Proceeds from borrowings 136,589,773 - 61,095,014 - Repayment of borrowings (79,935,051) (103,363,095) (74,470,749) (99,837,337) Dividends paid (2,146) (30,990) - - ------------------------------------------------------- Net cash provided by/(used) in financing activities 56,652,576 14,281,052 (13,375,735) 17,837,800 ------------------------------------------------------- Net increase/(decrease) in cash held 21,654,080 4,161,722 22,787,534 9,118,411 Cash at the beginning of the financial year 14,170,702 9,831,097 7,010,723 (2,107,688) Effects of exchange rate fluctuations on the balances of cash held in foreign currencies 273,082 177,883 - - ------------------------------------------------------- Cash at the end of the financial year 30(a) 36,097,864 14,170,702 29,798,257 7,010,723 -------------------------------------------------------
The statements of cash flows are to be read in conjunction with the notes to the financial statements set out on pages 147 to 168 146 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS 1 STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The significant policies which have been adopted in the preparation of this financial report are: (a) BASIS OF PREPARATION In accordance with Section 11 of the Partnership Agreement, South Pacific Tyres ("the partnership") is required to prepare a financial report as if it were a public company under the provisions of the Corporations Act 2001. In the opinion of the directors, the partnership is not a reporting entity. The financial report of the partnership has been drawn up as a special purpose financial report for distribution to the members and for the purpose of fulfilling the requirements of the Corporations Act 2001. The financial reports have been prepared in accordance with the Corporations Act 2001, the recognition and measurements aspects of all applicable accounting standards and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) that have a material effect. The financial report does not include disclosure requirements of the following pronouncements having a material effect: (i) AASB 1005 Financial Reporting by Segments (ii) AASB 1017 Related Party Disclosures (iii) AASB 1028 Accounting for Employee Entitlements (disclosure requirements only) It has been prepared on the basis of historical costs and except where stated, does not take into account changing money values or fair values of non-current assets. These accounting policies have been consistently applied by each entity in the consolidated entity and, except where there is a change in accounting policy, are consistent with those of the previous year. (b) PRINCIPLES OF CONSOLIDATION CONTROLLED ENTITIES The financial statements of controlled entities are included from the date control commences until the date control ceases. Outside interests in the equity and results of the entities that are controlled by the partnership are shown as a separate item in the consolidated financial statements. TRANSACTIONS ELIMINATED ON CONSOLIDATION Unrealised gains and losses and inter-entity balances resulting from transactions with or between controlled entities are eliminated in full on consolidation. (c) REVENUE RECOGNITION - NOTE 3 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. SALE OF GOODS Revenue from the sale of goods is recognised (net of returns, discounts and allowances) when control of the goods passes to the customer. RENDERING OF SERVICES Revenue from rendering services is recognised when the service has been completed. INTEREST REVENUE Interest revenue is recognised as it accrues, taking into account the effective yield on the financial asset. OTHER REVENUE Supply agreement revenue relating to tyre purchasing commitments is recognised at the date of the agreement with the supplier. 147 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) SALE OF NON-CURRENT ASSETS The gross proceeds of non-current asset sales are included as revenue at the date control of the asset passes to the buyer, usually when an unconditional contract of sale is signed. The gain or loss on disposal is calculated as the difference between the carrying amount of the asset at the time of disposal and the net proceeds on disposal. Any related balance in the asset revaluation reserve is transferred to the capital profits reserve on disposal. (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 current 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. (e) FOREIGN CURRENCY TRANSACTIONS Foreign currency transactions are translated to Australian currency at the rates of exchange ruling at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are translated at the rates of exchange ruling on that date. Exchange differences relating to amounts payable and receivable in foreign currencies are brought to account as exchange gains or losses in the statement of financial performance in the financial year in which the exchange rates change. TRANSLATION OF CONTROLLED FOREIGN ENTITIES The assets and liabilities of foreign operations that are self-sustaining are translated at the rates of exchange ruling at balance date. Equity items are translated at historical rates. The statements of financial performance are translated at a weighted average rate for the year. Exchange differences arising on translation are taken directly to the foreign currency translation reserve until the disposal, or partial disposal, of the operations. The balance of the foreign currency translation reserve relating to a foreign operation that is disposed of, or partially disposed of, is transferred to retained earnings in the year of disposal. (f) DERIVATIVES The consolidated entity is exposed to changes in interest rates, foreign exchange rates and commodity prices from its activities. The consolidated entity uses the following derivative financial instruments to hedge these risks: interest rate swaps and forward foreign exchange contracts. Derivative financial instruments are not held for speculative purposes. Where transactions are designated as a hedge of the purchase or sale of goods or services, purchase of qualifying assets, or an interest transaction, gains and losses on the hedge arising up to the date of the transaction, together with any costs or gains arising at the time of entering into the hedge, are deferred and included in the measurement of the transaction when it has occurred as designated. Any gains or losses on the hedge transaction after that date are included in the statement of financial performance. The net amounts receivable or payable under open swaps and forward rate agreements and the associated deferred gains or losses are not recorded in the statement of financial position until the hedge transaction occurs. The net receivables or payables are then revalued using the foreign currency and interest rates current at reporting date. Refer to Note 22. 148 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) (g) BORROWING COSTS Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings and amortisation of ancillary costs incurred in connection with arrangement of borrowings. Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of the asset. Where funds are borrowed specifically for the acquisition, construction or production of a qualifying asset, the amount of borrowing costs capitalised is those incurred in relation to that borrowing, net of any interest earned on those borrowings. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate. (h) TAXATION - NOTE 6 PARTNERSHIP Income tax is not provided for in the financial statements of South Pacific Tyres, as the partnership does not pay tax. The partners are taxable in their individual capacities on their share of the net partnership income. CONTROLLED ENTITIES The controlled entities adopt the income statement liability method of tax effect accounting. Income tax expense is calculated on operating profit adjusted for permanent differences between taxable and accounting income. The tax effect of timing differences, which arise from the items being brought to account in different periods for income tax and accounting purposes, is carried forward in the statement of financial position as a future income tax benefit or a provision for deferred income tax. Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually certain. The tax effects of capital losses are not recorded unless realisation is virtually certain. (i) ACCOUNTING FOR ACQUISITIONS Acquired businesses are accounted for on the basis of the cost method. Fair values are assigned at the date of acquisition to all the identifiable underlying assets acquired and to the liabilities assumed. Specific assessment is undertaken at the date of acquisition of any additional costs to be incurred. Goodwill, representing the excess of the purchase consideration plus incidental costs over the fair value of the identifiable net assets acquired on the acquisition of the business, is amortised to the statement of financial performance using the following criteria: GOODWILL ACQUIRED WRITE-OFF PERIOD Up to $1.25m Written off over 5 years in equal instalments, but at a rate of not less than $250,000 pa $1.25m to $10m Written off over 20 years on a straight line basis, but at a rate of not less than $250,000 pa The unamortised balance of goodwill is reviewed at least annually. Where the balance exceeds the value of expected future benefits, the difference is charged to the statement of financial performance. RESEARCH AND DEVELOPMENT COSTS Research and development expenditure is expensed as incurred. SUBSEQUENT ADDITIONAL COSTS Costs incurred on assets 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. Costs that do not meet the criteria for capitalisation are expensed as incurred. (j) REVISIONS OF ACCOUNTING ESTIMATES Revisions of accounting estimates are recognised prospectively in current and future periods only. 149 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) (k) RECEIVABLES - NOTE 8 The collectibility of debts is assessed at balance date and specific provision is made for any doubtful accounts. TRADE DEBTORS Trade debtors to be settled within agreed terms are carried at amounts due. (l) INVENTORIES - NOTE 9 Inventories are carried at the lower of cost and net realisable value. Costs include direct materials, direct labour, other direct variable costs and allocated production overheads necessary to bring inventories to their present location and condition, based on normal operating capacity of the production facilities. MANUFACTURING ACTIVITIES The cost of manufacturing inventories and work-in-progress are assigned on a first-in, first-out basis. Costs arising from exceptional wastage are expensed as incurred. NET REALISABLE VALUE Net realisable value is determined on the basis of each inventory line's normal selling pattern. Expenses of marketing, selling and distribution to customers are estimated and are deducted to establish net realisable value. (m) INVESTMENTS - NOTE 11 Investments in controlled entities are carried in the financial statements of the partnership at the lower of cost and recoverable amount. (n) LEASED ASSETS 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. Also refer to Note 23. (o) RECOVERABLE AMOUNT OF NON-CURRENT ASSETS VALUED ON COST BASIS The carrying amount of non-current assets valued on the cost basis are reviewed to determine whether they are in excess of their recoverable amount at balance date. 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. Where a group of assets working together supports the generation of cash inflows, recoverable amount is assessed in relation to that group of assets. In assessing recoverable amount of non-current assets the relevant cash flows have not been discounted to their present value, except where specifically stated. COST VERSUS FAIR VALUE Except where specifically stated, non-current assets are recorded at the lower of cost and recoverable amount. (p) DEPRECIATION AND AMORTISATION COMPLEX ASSETS The components of major assets that have materially different useful lives, are effectively accounted for as separate assets, and are separately depreciated. USEFUL LIVES All non-current assets have limited useful lives and are depreciated/amortised using the straight line method over their estimated useful lives. Assets are depreciated or amortised from the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and held ready for use. Depreciation and amortisation rates and methods are reviewed annually for appropriateness. When changes are made, adjustments are reflected prospectively in current and future periods only. Depreciation and amortisation are expensed, except to the extent that they are included in the carrying amount of another asset as an allocation of production overheads. 150 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) The depreciation/amortisation rates used for each class of asset are as follows: 2002 2001 .. Freehold buildings 2.50% 2.50% .. Leasehold buildings and improvements 2.5%-40% 2.5%-40% .. Plant and equipment 6.7%-33.33% 6.7%-33.33% .. Leased plant and equipment 15%-20% 15%-20% (q) PAYABLES - NOTE 14 Liabilities are recognised for the amounts to be paid in the future for goods or services received. Trade accounts payable are settled within agreed terms. (r) INTEREST BEARING LIABILITIES - NOTE 15 Bank loans are recognised at their principal amount, subject to set-off arrangements. Interest expense is accrued at the contracted rate and included in "Other creditors and accruals." Debentures, bills of exchange and notes payable are recognised when issued at the net proceeds received, with the premium or discount on issue amortised over the period of maturity. Interest expense is recognised on an effective yield basis. (s) EMPLOYEE ENTITLEMENTS WAGES, SALARIES, ANNUAL LEAVE AND SICK LEAVE Liabilities for employee entitlements to wages, salaries, annual leave and sick leave represent present obligations resulting from employees' services provided up to the reporting date, calculated at undiscounted amounts based on current wages and salary rates including related on-costs. Related on-costs are recorded in trade creditors. LONG SERVICE LEAVE The provision for employee entitlements to long service leave represents the present value of the estimated future cash outflows to be made resulting from employees' services provided to reporting date. The provision is calculated using the estimated future increases in wage and salary rates including related on-costs and expected settlement dates based on turnover history and is discounted using the rates attaching to national government securities at balance date which most closely match the terms of maturity of the related liabilities. SUPERANNUATION PLAN The partnership and other controlled entities contribute to various defined benefit and accumulation superannuation plans. Contributions are charged against income as they are made, as set out in Note 26. (t) PROVISIONS A provision is recognised when a legal or constructive obligation exists as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, 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 the risks specific to the liability, except where noted below. RESTRUCTURING Provisions for restructuring are only recognised when a detailed plan has been approved and the restructuring has either commenced or been publicly announced. Costs related to ongoing activities are not provided for. SURPLUS LEASED PREMISES Provision is made for rentals payable on surplus leased premises when it is determined that no substantive future benefit will be obtained by the consolidated entity from its occupancy. This arises where premises are currently leased under non-cancellable operating leases and either the premises are not occupied, are being sub-leased for lower rentals than the consolidated entity pays or there will be no substantive benefits beyond a known future date. Any necessary provision is calculated on the basis of discounted net future cash flows, using the interest rate implicit in the lease or an estimate thereof. 151 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 2. ACCOUNTING POLICIES There are no changes in accounting policy to disclose for the year ended 30 June, 2002. 3. REVENUE FROM ORDINARY ACTIVITIES
CONSOLIDATED PARTNERSHIP 2002 2001 2000 2002 2001 2000 $ $ $ $ $ $ - ----------------------------------------------------------------------------------------------------------------- Sale of goods revenue from operating activities 769,790,943 774,668,166 871,392,335 489,234,884 483,486,879 501,900,862 Rendering of services revenue from operating activities 59,595,043 59,426,109 63,415,235 - - - OTHER REVENUE FROM OPERATING ACTIVITIES DIVIDENDS: Associated entities - - - - - - Other parties - - - - - - INTEREST: Controlled entities - - - 3,598,712 4,141,000 2,943,654 Associated entities 1,828,580 969,471 4,433 1,828,580 969,471 4,433 Other parties 1,861,026 472,630 93,206 1,444,332 363,101 92,025 REVENUES FROM OUTSIDE OPERATING ACTIVITIES Gross proceeds from sale of non-current assets 3,926,091 34,493,521 2,450,608 2,595,976 31,350,563 1,380,371 Supply agreement consideration - 25,000,000 - - 25,000,000 - Insurance proceeds received - - 1,843,775 1,843,775 ---------------------------------------------------------------------------- Total other revenue 7,615,697 60,935,622 4,392,022 9,467,600 61,824,135 6,264,258 ---------------------------------------------------------------------------- Total revenue from ordinary activities 837,001,683 895,029,897 939,199,592 498,702,484 545,311,014 508,165,120 ============================================================================
152 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 4. PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE
CONSOLIDATED PARTNERSHIP 2002 2001 2000 2002 2001 2000 $ $ $ $ $ $ - ----------------------------------------------------------------------------------------------------------------- (a) INDIVIDUALLY SIGNIFICANT EXPENSES/(REVENUES) INCLUDED IN PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE Closure of Footscray & Thomastown tyre factories 94,900,000 - 94,900,000 - Closure of BA Hamill 2,900,000 - - - - Retail store restructure programme 1,924,813 - - - Closure of radial truck tyre factory (3,516,017) 51,325,856 (3,516,017) 51,325,856 Supply agreement consideration - (25,000,000) - (25,000,000) Overhead reduction programme (4,600,437) 6,000,000 (4,600,437) 5,267,121 GST Implementation costs - - 906,342 - - 906,342 ---------------------------------------------------------------------------- 91,608,359 32,325,856 906,342 86,783,546 31,592,977 906,342 ---------------------------------------------------------------------------- (b) PROFIT FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE HAS BEEN ARRIVED AT AFTER CHARGING/(CREDITING) THE FOLLOWING ITEMS Cost of goods sold 644,149,590 657,564,347 679,736,099 483,937,136 506,770,316 489,779,294 DEPRECIATION OF: Buildings 104,319 231,770 342,315 - 104,529 209,059 Plant and Equipment 26,628,428 33,609,742 36,248,232 17,716,624 24,194,389 26,669,353 ---------------------------------------------------------------------------- 26,732,747 33,841,512 36,590,547 17,716,624 24,298,918 26,878,412 ---------------------------------------------------------------------------- AMORTISATION OF: Leasehold land and buildings 1,315,525 1,266,474 1,289,452 1,054,413 1,055,695 1,051,050 Leased plant and equipment - - 135,687 - - - Goodwill 485,062 916,281 1,322,848 - - - Capitalised interest - 575,094 1,150,188 - 575,094 1,150,188 ---------------------------------------------------------------------------- 1,800,587 2,757,849 3,898,175 1,054,413 1,630,789 2,201,238 ---------------------------------------------------------------------------- Total depreciation and amortisation 28,533,334 36,599,361 40,488,722 18,771,037 25,929,707 29,079,650 ---------------------------------------------------------------------------- BORROWING COSTS Associated Entities 3,164,641 1,183,238 68,017 3,164,641 1,183,238 68,017 Bank loans and overdrafts 10,495,907 15,156,976 15,764,117 9,647,327 14,198,138 14,950,712 Finance charges on capitalised leases - - 15,916 - - - ---------------------------------------------------------------------------- Total borrowing costs 13,660,548 16,340,214 15,848,050 12,811,968 15,381,376 15,018,729 ---------------------------------------------------------------------------- RESEARCH AND DEVELOPMENT EXPENDITURE Capitalised and written off 1,938,620 2,771,437 2,400,000 1,938,620 2,771,437 2,400,000 Net bad and doubtful debts expense including movements in provision for doubtful debts 1,487,774 3,577,421 2,250,489 (7,248) 162,752 90,000 NET EXPENSE FOR MOVEMENTS IN PROVISION FOR: Employee entitlements 83,347,032 70,069,314 27,385,170 67,617,203 57,546,824 15,908,352 Rationalisation and restructuring costs 31,475,000 7,400,000 - 30,700,000 7,400,000 - Rebates, allowances and warranty claims 19,979,619 16,554,727 9,709,528 - - - NET FOREIGN EXCHANGE (GAIN)/LOSS: Borrowings (13,907) (82,387) (60,365) (18,407) (82,387) (60,365) NET (GAIN)/LOSS ON DISPOSAL OF NON-CURRENT ASSETS: Property plant & equipment 13,327,002 4,151,257 (380,928) 13,260,833 4,583,063 (208,658) Investments 625,815 - - - - - OPERATING LEASE RENTAL EXPENSE Minimum lease payments 31,589,141 30,721,754 31,010,933 2,799,403 3,455,549 3,965,696
153 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 5. AUDITORS' REMUNERATION
CONSOLIDATED PARTNERSHIP 2002 2001 2000 2002 2001 2000 $ $ $ $ $ $ - ------------------------------------------------------------------------------------------------------------------ AUDIT SERVICES Auditors of the company - KPMG 388,622 405,013 413,599 118,405 121,400 125,869 FOR OTHER SERVICES Auditors of the company - KPMG 2,550 9,988 16,249 500 8,000 -
6. TAXATION
CONSOLIDATED 2002 2001 2000 $ $ $ - ----------------------------------------------------------------------------------------------------------------- (a) INCOME TAX EXPENSE Prima facie income tax expense/(benefit) calculated at 30% (2001 : 34%, 2000: 36%) on the profit/(loss) from ordinary activities (43,081,846) (32,928,711) (4,156,506) INCREASE IN INCOME TAX EXPENSE DUE TO: Depreciation on buildings 61,316 67,305 77,102 Amortisation of goodwill 145,519 311,536 476,225 Sundry items 415,404 348,130 363,891 DECREASE IN INCOME TAX EXPENSE DUE TO: Tax exempt dividends from foreign companies - (81,026) - Effects of lower/higher rates of tax on overseas income 157 168 28,087 Tax at standard rate on partnership profits attributed to partners (29,039,039) (26,316,550) (7,002,860) Sundry items - 17,000 - Income tax expense/(benefit) on operating profit/(loss) before individually significant income tax items (13,420,725) (5,821,332) 3,735,485 INDIVIDUALLY SIGNIFICANT INCOME TAX ITEMS: Restatement of deferred tax balances due to change in company tax rate - 1,020,693 392,281 ------------------------------------- (13,420,725) (4,800,639) 4,127,766 Add: Income tax under/(over) provided in prior year (158,728) 7,599 (72,452) ------------------------------------- Income tax expense/(benefit) attributable to operating profit (13,579,453) (4,793,040) 4,055,314 ------------------------------------- INCOME TAX EXPENSE/(BENEFIT) ATTRIBUTABLE TO OPERATING PROFIT IS MADE UP OF: Current income tax provision (11,560,219) (4,673,630) 1,980,817 Under/(over) provision in prior year (158,728) 7,599 (72,452) Changes in tax rates - 1,020,693 392,281 Future income tax benefit (1,860,506) (1,147,702) 1,754,668 ------------------------------------- (13,579,453) (4,793,040) 4,055,314 ------------------------------------- (b) CURRENT TAX LIABILITIES PROVISION FOR CURRENT INCOME TAX MOVEMENTS DURING THE YEAR: Balance at the beginning of year 167,096 336,975 3,840,269 Other debtor tax receivable reclassified - (3,059,756) 3,059,756 Income tax (paid)/received (112,184) 1,960,747 (8,428,895) Under provision in prior year (72,516) 659,116 21,027 Current year's income tax expense on operating profit (11,560,219) (4,673,630) 1,844,818 Disposal of controlled entity 78,048 - - Tax loss transferred to FITB 11,558,662 4,943,644 - ------------------------------------- 58,887 167,096 336,975 ===================================== (c) DEFERRED ASSETS FUTURE INCOME TAX BENEFIT Future income tax benefit comprises the estimated future benefit at the applicable rate of 30% (2001 : 34%) on the following items: Accumulated non-allowable provisions 6,499,991 4,534,967 3,173,605 Accumulated tax losses 15,941,336 4,362,039 - ------------------------------------- 22,441,327 8,897,006 3,173,605 =====================================
154 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 7. CASH ASSETS
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- Cash 8,400,672 9,531,203 1,098,257 7,000 Bank short term deposits, maturing daily and paying interest at a weighted average interest rate of 4.7% (2001 : 5.3% ) 28,700,000 9,500,000 28,700,000 9,500,000 ---------------------------------------------------- 37,100,672 19,031,203 29,798,257 9,507,000 ==================================================== 8. RECEIVABLES CURRENT Gross debtors 138,762,403 144,342,429 24,849,049 32,347,783 Less : Securitisation - - 11,365,764 - ---------------------------------------------------- Trade debtors 138,762,403 144,342,429 13,483,285 32,347,783 Less : Provision for doubtful trade debtors 3,050,317 2,978,136 - 7,248 Less : Provision for rebates, allowances and warranty claims 6,978,516 6,236,155 - - ---------------------------------------------------- 128,733,570 135,128,138 13,483,285 32,340,535 - Amounts owing by controlled entities - - 68,602,978 121,569,174 Other debtors 5,945,571 9,729,633 3,397,784 7,437,719 ---------------------------------------------------- 134,679,141 144,857,771 85,484,047 161,347,428 NON-CURRENT Other receivables from controlled entities and owners 30,384,952 29,091,771 97,765,964 56,622,712 ---------------------------------------------------- 165,064,093 173,949,542 183,250,011 217,970,140 ==================================================== Other receivable amounts generally arise from transactions outside the usual operating activity of the consolidated entity. 9. INVENTORIES CURRENT Raw materials and stores at cost 10,302,933 8,586,621 8,568,591 7,171,153 Less : Provision for stock obsolescence 490,527 687,974 490,527 687,974 ---------------------------------------------------- Raw materials and stores 9,812,406 7,898,647 8,078,064 6,483,179 ---------------------------------------------------- Work in progress at cost 4,950,537 10,049,660 4,934,215 10,036,443 Less : Provision for stock obsolescence 70,301 - 70,301 - ---------------------------------------------------- Work in progress 4,880,236 10,049,660 4,863,914 10,036,443 ---------------------------------------------------- Finished goods at cost 142,658,001 146,653,991 113,780,984 110,174,879 Less : Provision for stock obsolescence 1,816,842 3,148,426 1,642,676 3,000,000 ---------------------------------------------------- Finished goods 140,841,159 143,505,565 112,138,308 107,174,879 ---------------------------------------------------- Other stocks at cost 6,390,959 6,482,468 6,280,260 6,385,272 Less : Provision for stock obsolescence 1,182,795 689,807 1,144,795 686,807 ---------------------------------------------------- Other stocks 5,208,164 5,792,661 5,135,465 5,698,465 ---------------------------------------------------- 160,741,965 167,246,533 130,215,751 129,392,966 ==================================================== 10. OTHER CURRENT ASSETS Prepayments 2,258,575 2,521,577 857,597 147,388 ==================================================== 11. OTHER FINANCIAL ASSETS NON-CURRENT INVESTMENTS IN CONTROLLED ENTITIES Unlisted shares at cost - - 21,496,245 21,496,245 ---------------------------------------------------- - - 21,496,245 21,496,245 ====================================================
155 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 12. PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ----------------------------------------------------------------------------------------------------------------- FREEHOLD LAND At cost 3,350,000 3,350,000 609,000 609,000 ----------------------------------------------------- 3,350,000 3,350,000 609,000 609,000 ----------------------------------------------------- FREEHOLD BUILDINGS At cost 11,841,455 12,644,461 8,362,347 8,362,347 Accumulated depreciation (1,008,840) (1,105,417) (627,168) (627,168) ----------------------------------------------------- 10,832,615 11,539,044 7,735,179 7,735,179 ----------------------------------------------------- LEASEHOLD LAND AND BUILDINGS At cost 57,096,991 57,359,594 54,544,116 54,525,141 Accumulated depreciation (6,667,761) (5,634,349) (4,720,005) (3,665,593) ----------------------------------------------------- 50,429,230 51,725,245 49,824,111 50,859,548 ----------------------------------------------------- PLANT AND EQUIPMENT At cost 369,419,397 400,274,271 260,033,784 286,379,746 Accumulated depreciation (242,149,279) (248,977,499) (163,111,821) (170,595,183) ----------------------------------------------------- 127,270,118 151,296,772 96,921,963 115,784,563 ----------------------------------------------------- Buildings and plant under construction At cost 10,945,130 14,837,434 9,559,432 13,456,677 ----------------------------------------------------- Total property, plant and equipment net book value 202,827,093 232,748,495 164,649,685 188,444,967 ===================================================== RECONCILIATIONS Reconciliations of the carrying amounts for each class of property, plant and equipment are set out below: FREEHOLD LAND Carrying amount at the beginning of year 3,350,000 4,580,000 609,000 609,000 Additions - - - - Disposals - (1,230,000) - - ---------------------------------------------------- Carrying amount at the end of year 3,350,000 3,350,000 609,000 609,000 ---------------------------------------------------- BUILDINGS Carrying amount at the beginning of year 11,539,044 12,814,218 7,735,179 7,839,708 Currency conversion (101,481) (125,248) - - Additions 11,706 25,621 - - Transfer from capital works in progress 30,818 28,895 - - Transfer from related companies/divisions - (341) - - Disposal of businesses / subsidiary (net) (543,153) - - - Disposals - (972,331) - - Depreciation (104,319) (231,770) - (104,529) ---------------------------------------------------- Carrying amount at the end of year 10,832,615 11,539,044 7,735,179 7,735,179 ---------------------------------------------------- LEASEHOLD LAND AND BUILDINGS Carrying amount at the beginning of year 51,725,245 52,716,895 50,859,548 51,758,844 Additions - - - - Transfer from capital works in progress 39,515 302,772 18,976 156,399 Disposals (20,005) (27,948) - - Depreciation (1,315,525) (1,266,474) (1,054,413) (1,055,695) ---------------------------------------------------- Carrying amount at the end of year 50,429,230 51,725,245 49,824,111 50,859,548 ---------------------------------------------------- PLANT AND EQUIPMENT Carrying amount at the beginning of year 151,296,772 203,667,295 115,784,563 163,555,493 Currency conversion (31,013) (42,312) - - Acquired businesses/subsidiaries - - - - Additions 188,971 76,744 - - Transfer from leased to fixed assets - - - - Transfer from capital works in progress 16,242,450 18,193,833 12,032,131 12,962,920 Transfer from related companies/divisions - 547 91,590 (30,741) Disposals (13,639,725) (36,414,499) (13,269,697) (35,933,626) Disposal of businesses / subsidiary (net) (158,909) - - - Amortisation of capitalised interest - (575,094) - (575,094) Depreciation (26,628,428) (33,609,742) (17,716,624) (24,194,389) ---------------------------------------------------- Carrying amount at the end of year 127,270,118 151,296,772 96,921,963 115,784,563 ----------------------------------------------------
156 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 12. PROPERTY, PLANT AND EQUIPMENT (continued)
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- CAPITAL WORKS IN PROGRESS Carrying amount at the beginning of year 14,837,434 17,803,033 13,456,677 14,984,959 Additions 15,007,591 15,559,901 10,740,966 11,591,038 Transfer to property, plant and equipment (16,312,783) (18,525,500) (12,051,099) (13,119,320) Other disposals (2,587,112) - (2,587,112) - ---------------------------------------------------- Carrying amount at the end of year 10,945,130 14,837,434 9,559,432 13,456,677 ---------------------------------------------------- 13. INTANGIBLES Goodwill - at cost 7,768,104 7,546,103 - - Accumulated amortisation (2,563,842) (2,078,779) - - ---------------------------------------------------- 5,204,262 5,467,324 - - ====================================================== 14. PAYABLES CURRENT Trade creditors 160,979,937 144,000,065 135,888,649 102,296,485 Other creditors 802,781 136,276 8,523 8,696 ---------------------------------------------------- 161,782,718 144,136,341 135,897,172 102,305,181 NON-CURRENT Trade creditors 871,199 936,640 441,908 542,766 Other creditors 27,620,616 25,870,616 27,620,616 25,870,616 ---------------------------------------------------- 28,491,815 26,807,256 28,062,524 26,413,382 ---------------------------------------------------- 190,274,533 170,943,597 163,959,696 128,718,563 ====================================================== 15. INTEREST BEARING LIABILITIES CURRENT Bank overdrafts - unsecured 1,002,808 4,860,501 - 2,496,277 Bank loans - unsecured 65,897,645 145,832,697 60,149,693 134,756,120 Securitisation 75,494,759 - 135,677 - ---------------------------------------------------- 142,395,212 150,693,198 60,285,370 137,252,397 NON-CURRENT Partner Loan - Pacific Dunlop Tyres Pty Ltd 30,547,507 - 30,547,507 - Partner Loan - Goodyear Tyres Pty Ltd 30,547,507 - 30,547,507 - ---------------------------------------------------- 61,095,014 - 61,095,014 - ---------------------------------------------------- 203,490,226 150,693,198 121,380,384 137,252,397 ==================================================== FINANCING ARRANGEMENTS THE CONSOLIDATED ENTITY HAS ACCESS TO THE FOLLOWING LINES OF CREDIT: TOTAL FACILITIES AVAILABLE: Bank overdrafts 6,500,000 8,421,909 5,000,000 5,000,000 Bank loans 105,500,000 140,500,000 100,000,000 135,000,000 Trade bills 6,000,000 7,000,000 - - Money market line - 1,137,527 - - ---------------------------------------------------- 118,000,000 157,059,436 105,000,000 140,000,000 ---------------------------------------------------- FACILITIES UTILISED AT BALANCE DATE: Bank overdrafts 1,012,585 2,332,579 - - Bank loans 63,500,000 140,000,000 60,000,000 135,000,000 Trade bills 2,247,952 6,076,577 - - Money market line - 478,640 - - ---------------------------------------------------- 66,760,537 148,887,796 60,000,000 135,000,000 ---------------------------------------------------- FACILITIES NOT UTILISED AT BALANCE DATE: Bank overdrafts 5,487,415 6,089,330 5,000,000 5,000,000 Bank loans 42,000,000 500,000 40,000,000 - Trade bills 3,752,048 923,423 - - Money market line - 658,887 - - ---------------------------------------------------- 51,239,463 8,171,640 45,000,000 5,000,000 ----------------------------------------------------
Interest on bank overdrafts is charged at prevailing market rates. The effective interest rates for all overdrafts as at 30 June 2002 is 8.6% (2001: 8.75%). within one year. The effective interest rate on bank loans is 6.56% (2001: 5.58%). All 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. The effective interest rate on trade bills is 5.32% (2001: 5.33%). 157 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 16. PROVISIONS
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- CURRENT Employee entitlements 72,463,386 43,855,274 55,433,416 29,550,117 Rationalisation and restructuring 23,395,956 6,846,979 22,620,956 6,846,979 ---------------------------------------------------- 95,859,342 50,702,253 78,054,372 36,397,096 ==================================================== NON-CURRENT Employee entitlements 7,978,203 8,561,903 4,025,842 4,946,604 ---------------------------------------------------- 7,978,203 8,561,903 4,025,842 4,946,604 ==================================================== Number of employees 3,730 4,323 1,154 1,565 17. AMOUNTS PAYABLE/RECEIVABLE IN FOREIGN CURRENCIES The Australian dollar equivalents of unhedged amounts payable or receivable in foreign currencies, calculated at year-end exchange rates, are as follows: UNITED STATES DOLLARS Amounts payable : Current 1,382,011 2,922,742 1,366,138 2,709,191 DEUTSCHE MARKS Amounts payable : Current 69,881 69,881 JAPANESE YEN Amounts payable : Current 1,432,379 1,432,379 EURO DOLLAR Amounts payable : Current 195,889 1,230,277 195,889 1,230,277 ---------------------------------------------------- Total 3,010,279 4,222,900 2,994,406 4,009,349 ==================================================== 18. CONTRIBUTED EQUITY GOODYEAR TYRES PTY LTD Contributed equity at the beginning of year 158,837,569 100,000,000 158,837,569 100,000,000 Additional contributed equity - 58,837,569 - 58,837,569 ---------------------------------------------------- Contributed equity at the end of year 158,837,569 158,837,569 158,837,569 158,837,569 ==================================================== PACIFIC DUNLOP TYRES PTY LTD Contributed equity at the beginning of year 158,837,569 100,000,000 158,837,569 100,000,000 Additional contributed equity - 58,837,568 - 58,837,568 ---------------------------------------------------- Contributed equity at the end of year 158,837,569 158,837,568 158,837,569 158,837,568 ---------------------------------------------------- 317,675,138 317,675,137 317,675,138 317,675,137 ==================================================== 19. RESERVES Asset revaluation 12,570,229 12,561,891 11,409,810 11,409,810 Foreign currency translation - (3,341,868) - - ---------------------------------------------------- 12,570,229 9,220,023 11,409,810 11,409,810 ==================================================== MOVEMENTS DURING THE YEAR ASSET REVALUATION RESERVE Balance at the beginning of year 12,561,891 12,420,308 11,409,810 11,409,810 Transferred to retained profits 8,338 141,583 - - ---------------------------------------------------- Balance at the end of year 12,570,229 12,561,891 11,409,810 11,409,810 ---------------------------------------------------- FOREIGN CURRENCY TRANSLATION RESERVE Balance at the beginning of year (3,341,868) (2,956,331) - - Translation adjustment on assets and liabilities held in foreign currencies (303,980) (385,537) - - Transferred to retained profits 3,645,848 - - - ---------------------------------------------------- Balance at the end of year - (3,341,868) - - ----------------------------------------------------
158 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 19. RESERVES (continued) NATURE AND PURPOSE OF RESERVES ASSET REVALUATION The asset revaluation reserve includes the net revaluation increments and decrements arising from the revaluation of non-current assets. FOREIGN CURRENCY RESERVE The foreign currency translation reserve records the foreign currency differences arising from the translation of self-sustaining foreign operations, the translation of transactions that hedge the Entity's net investment in a foreign operation or the translation of foreign currency monetary items forming part of the net investment in a self-sustaining operation. Refer to accounting policy Note 1(e). 20. RETAINED PROFITS/(ACCUMULATED LOSSES)
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- GOODYEAR TYRES PTY LTD Retained profits/(accumulated losses) at the beginning of year (49,795,200) (3,696,211) (35,222,044) 3,478,764 Net profit/(loss) attributable to partners (65,013,585) (46,028,197) (48,398,398) (38,700,808) Amounts transferred from reserves (1,827,093) (70,792) - - Distribution of profits to partners - - - - ---------------------------------------------------- Retained profits/(accumulated losses) at the end of year (116,635,878)(49,795,200) (83,620,442) (35,222,044) ---------------------------------------------------- PACIFIC DUNLOP TYRES PTY LTD Retained profits/(accumulated losses) at the beginning of year (48,792,015) (2,693,027) (34,218,857) 4,481,952 Net profit/(loss) attributable to partners (65,013,585) (46,028,197) (48,398,397) (38,700,809) Amounts transferred from reserves (1,827,093) (70,791) - - Distribution of profits to partners - - - - ---------------------------------------------------- Retained profits/(accumulated losses) at the end of year (115,632,693)(48,792,015) (82,617,254) (34,218,857) ---------------------------------------------------- (232,268,571)(98,587,215) (166,237,696) (69,440,901) ====================================================
21. OUTSIDE EQUITY INTEREST
CONSOLIDATED 2002 2001 2000 $ $ $ - ---------------------------------------------------------------------------------------------------------------- OUTSIDE EQUITY INTEREST IN CONTROLLED ENTITIES COMPRISE: Interest in retained profits at the beginning of the financial year after adjusting for outside equity interests in entities 1,034,550 1,065,255 1,026,952 Interest in operating profit after income tax 470 285 38,303 Interest in dividends provided for or paid (2,146) (30,990) - Disposal of Interest in Retained Profits (1,032,874) - - --------------------------------------- Interest in retained profits at the end of the financial year - 1,034,550 1,065,255 Interest in share capital - 95,458 95,458 Interest in reserves - (644,320) (547,934) --------------------------------------- Total outside equity interest - 485,688 612,779 =======================================
22. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (a) INTEREST RATE RISK The consolidated entity enters into interest rate swaps to manage cash flow risks associated with the floating interest rates on borrowings. Interest rate swaps and forward rate agreements Interest rate swaps allow the consolidated entity to swap floating rate borrowings into fixed rates. Maturities of swap contracts are principally between one to five years. Each contract involves quarterly payment or receipt of the net amount of interest. At 30 June 2002 the fixed rates varied from 5.5% to 5.9% (2001: 5.5% to 7.2%) and floating rates were at bank bill rates plus the consolidated entity's credit margin. The weighted average effective floating interest rate at 30 June 2002 was 5.7% (2001: 6.3%). 159 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 22. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued) Interest rate risk exposures The consolidated entity's exposure to interest rate risk and the effective weighted average interest rate for classes of financial assets and financial liabilities is set out below:
FIXED INTEREST MATURITY IN: WEIGHTED AVERAGE FLOATING OVER MORE NON- INTEREST INTEREST 1 YEAR 1 YEAR TO THAN 5 INTEREST 2002 NOTE RATE RATE OR LESS 5 YEARS YEARS BEARING TOTAL Financial assets Cash 7 4.70% 37,092,372 8,300 37,100,672 Receivables 8 - 165,064,093 165,064,093 ------------------------------------------------------------------------------------ 37,092,372 165,072,393 202,164,765 ------------------------------------------------------------------------------------ Financial liabilities Bank overdrafts and loans 15 6.59% 64,652,501 64,652,501 Securitisation 15 5.06% 75,494,759 75,494,759 Partner Loans 15 5.46% 61,095,014 61,095,014 Trade bills 15 5.32% 2,247,952 2,247,952 Accounts payable 14 190,274,533 190,274,533 Employee entitlements 16 2.00% 72,463,386 4,278,361 3,699,842 80,441,589 ------------------------------------------------------------------------------------ 203,490,226 72,463,386 4,278,361 3,699,842 190,274,533 474,206,348 ------------------------------------------------------------------------------------ Interest rate swaps (50,000,000) 20,000,000 30,000,000 ------------------------------------------------------------------------------------ 2001 Financial assets Cash 7 5.30% 18,919,043 112,160 19,031,203 Receivables 8 - 173,949,542 173,949,542 ------------------------------------------------------------------------------------ 18,919,043 - - - 174,061,702 192,980,745 ------------------------------------------------------------------------------------ Financial liabilities Bank overdrafts and loans 15 5.80% 144,616,621 144,616,621 Trade bills 15 5.33% 6,076,577 6,076,577 Accounts payable 14 - 170,943,597 170,943,597 Employee entitlements 16 3.00% 43,855,274 5,435,984 3,125,919 52,417,177 ------------------------------------------------------------------------------------ 150,693,198 43,855,274 5,435,984 3,125,919 170,943,597 374,053,972 ------------------------------------------------------------------------------------ Interest rate swaps (40,000,000) 20,000,000 20,000,000 ------------------------------------------------------------------------------------
(b) FOREIGN EXCHANGE RISK The consolidated entity enters into forward foreign exchange contracts to hedge foreign currency purchases expected in each month within the following six months within Board approval limits. The amount of anticipated future purchases and sales are forecast in light of current conditions in foreign markets, commitments from customers and experience. 160 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 22. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued) The following table sets out the gross value to be received under foreign currency contracts, the weighted average contracted exchange rate and the settlement periods of outstanding contracts for the consolidated entity
2002 2001 2002 2001 AVERAGE RATE $ $ ------------------------------------------------ BUY US DOLLARS Not later than one year 0.56 0.51 43,978 11,865,049 Later than one year but not later than two years - - Later than two years but not later than three years - - ------------------------- 43,978 11,865,049 ------------------------- BUY EURO DOLLARS Not later than one year 0.60 0.60 1,096,037 4,444,162 Later than one year but not later than two years - - Later than two years but not later than three years - - ------------------------- 1,096,037 4,444,162 ------------------------- BUY JAPANESE YEN Not later than one year 67.3 62.42 223,131 551,735 Later than one year but not later than two years - - Later than two years but not later than three years - - ------------------------- 223,131 551,735 ------------------------- BUY ENGLISH POUND Not later than one year 0.37 0.36 71,779 164,002 Later than one year but not later than two years - - Later than two years but not later than three years - - ------------------------- 71,779 164,002 -------------------------
As these contracts are hedging anticipated purchases, any unrealised gains and losses on the contracts, together with the costs of the contracts, will be deferred and then recognised in the financial statements at the time the underlying transaction occurs as designated. The gross deferred gains and losses on hedges of anticipated foreign currency purchases are:
CONSOLIDATED 2002 2001 GAINS LOSSES GAINS LOSSES $ $ $ $ Not later than one year 54,818 - 130,010 - Later than one year but not later than two years - - - - Later than two years but not later than three years - - - -
When the underlying transaction has occurred as designated, the effect of the hedge has been recognised in the financial statements. (c) COMMODITY PRICE RISK The consolidated entity does not enter into futures contracts to hedge (or hedge a proportion of ) commodity purchase prices on anticipated specific purchase commitments of natural rubber. 161 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 22. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued) (d) CREDIT RISK EXPOSURES Credit risk represents the loss that would be recognised if counterparts failed to perform as contracted. Recognised Financial Instruments The credit risk on financial assets, excluding investments, of the consolidated entity which have been recognised on the statement of financial position, is the carrying amount, net of any provision for doubtful debts. The consolidated entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counterparties in various countries. The consolidated entity is not materially exposed to any individual overseas country or individual customer. Concentrations of credit risk on trade debtors and term debtors due from customers are the motor vehicle and transport industries. Unrecognised Financial Instruments Credit risk on derivative contracts which have not been recognised on the statement of financial position is minimised as counterparts are recognised financial intermediaries with acceptable credit ratings determined by a recognised rating agency. Interest rate swaps and foreign exchange contracts are subject to credit risk in relation to the relevant counterparties, which are principally large banks. As all future contracts are transacted through a recognised futures exchange, there is no credit risk associated with these contracts. (e) NET FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES VALUATION APPROACH Net fair value of financial assets and liabilities are determined by the consolidated entity on the following basis: Recognised Financial Instruments The carrying amounts of bank term deposits, trade debtors, other debtors, bank overdrafts, accounts payable, bank loans and employee entitlements approximate net fair value. Unrecognised Financial Instruments The valuation of financial instruments not recognised on the statement of financial position detailed in this note reflects the estimated amounts which the consolidated entity expects to pay or receive to terminate the contracts (net of transaction costs) or replace the contracts at their current market rates as at reporting date. This is based on independent market quotations and determined using standard valuation techniques. 162 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 22. ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURE (continued) NET FAIR VALUES Recognised Financial Instruments The carrying amounts and net fair values of financial assets and financial liabilities as at the reporting date are as follows:
CONSOLIDATED 2002 2001 CARRYING NET FAIR CARRYING NET FAIR AMOUNT VALUE AMOUNT VALUE $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- FINANCIAL ASSETS Cash assets 37,100,672 37,100,672 19,031,203 19,031,203 Receivables 165,064,093 165,064,093 173,949,542 173,949,542 FINANCIAL LIABILITIES Payables 190,274,533 190,274,533 170,943,597 170,943,597 Bank overdrafts and loans 64,652,501 64,652,501 144,616,621 144,616,621 Securitisation 75,494,759 75,494,759 - - Partner Loans 61,095,014 61,095,014 - - Trade bills 2,247,952 2,247,952 6,076,577 6,076,577 Employee entitlements 80,441,589 80,441,589 52,417,177 52,417,177
UNRECOGNISED FINANCIAL INSTRUMENTS The net fair value of financial instruments not recognised on the statement of financial position held at the reporting date are:
2002 2001 $ $ - ---------------------------------------------------------------------------------------------------------------- Forward foreign exchange contracts gains/(losses) 54,818 130,010 Futures commodity contracts ------------------------- 54,818 130,010 -------------------------
23. COMMITMENTS
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ---------------------------------------------------------------------------------------------------------------- CAPITAL EXPENDITURE COMMITMENTS Plant Contracted but not provided for and payable within one year 4,505,841 3,443,409 4,505,841 3,443,409 ---------------------------------------------------- 4,505,841 3,443,409 4,505,841 3,443,409 ==================================================== LEASE COMMITMENTS OPERATING LEASE EXPENSE COMMITMENTS FUTURE OPERATING LEASE COMMITMENTS NOT PROVIDED FOR IN THE FINANCIAL STATEMENTS AND PAYABLE: Within one year 25,799,409 24,943,656 - 45,803 One year or later and no later than five years 48,518,490 52,461,006 - - Later than 5 years 10,596,215 11,994,208 - - ==================================================== 84,914,114 89,398,870 - 45,803 ====================================================
South Pacific Tyres leases property under non=cancellable operating leases expiring from one to ten years. Leases generally provide the company with a right of renewal at which time all terms are renegotiated. Lease payments comprise a base amount plus an incremental contingent rental. Contingent rentals are based on either movements in the Consumer Price Index or operating criteria. 163 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 24. CONTINGENT LIABILITIES There were no contingent liabilities as at 30 June 2002 and 30 June 2001 25. RELATED PARTY TRANSACTIONS The partnership from time to time has dealings with Ansell Limited Group Companies and Goodyear Tire & Rubber Co. Group Companies. Under the partnership agreement, South Pacific Tyres leases certain properties from Ansell Limited and Goodyear Australia Limited (a wholly owned subsidiary of Goodyear Tire & Rubber Co.) on the basis of equitable rentals between the partners. The amounts of these transactions are detailed below:
CONSOLIDATED 2002 2001 LEASE PAYMENTS $ $ - ---------------------------------------------------------------------------------------------------------------- Ansell Limited Group Companies 217,885 238,094 Goodyear Tire & Rubber Co. Group Companies 75,273 82,254
During the financial year the partnership received loans from the partners that are subject to interest at market rates compounding quarterly as detailed in Note 15. On 29/12/2000, the partnership entered into a supply agreement whereby Goodyear will be (subject to certain conditions) the exclusive supplier of certain tyres for a period of ten years commencing 01/01/2001. The partnership will receive $25.0m plus interest in consideration for this exclusivity of supply. On 20/12/2000, the partnership received a loan of $25.0m from Ansell Limited on which interest is charged quarterly in arrears.
CONSOLIDATED 2002 2001 $ $ - ---------------------------------------------------------------------------------------------------------------- INTEREST BROUGHT TO ACCOUNT BY THE PARTNERSHIP IN RELATION TO THESE LOANS DURING THE YEAR: Interest expense 1,750,000 848,630 Interest revenue 1,750,000 848,630 The amounts included in receivables and payables in relation to these loans are: NON-CURRENT RECEIVABLES Goodyear Tire & Rubber Co. Group Companies 27,598,630 25,848,630 NON-CURRENT PAYABLES Ansell Limited Group Companies 27,598,630 25,848,630
All other dealings with the above parties are on normal commercial terms and involve the purchase and/or supply of materials from/to both parties and the provision of forward exchange cover and commodity hedging by Ansell Limited Group Companies. 164 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 25. RELATED PARTY TRANSACTIONS (continued) The amounts of these transactions are detailed below:
CONSOLIDATED 2002 2001 SALE OF GOODS AND SERVICES $ $ - ---------------------------------------------------------------------------------------------------------------- Ansell Limited Group Companies 37,791 1,069,123 Goodyear Tire & Rubber Co. Group Companies 4,396,011 1,651,599 PURCHASE OF GOODS AND SERVICES Ansell Limited Group Companies 1,252,256 6,341,537 Goodyear Tire & Rubber Co. Group Companies 107,439,259 97,095,319 Details of interest received/paid to related parties are set out in Notes 3 & 4 The amounts included in receivables and payables in relation to South Pacific Tyres are set out in the notes to the financial statements and the amounts relating to the other parties are: CURRENT RECEIVABLES Ansell Limited Group Companies - 366,461 Goodyear Tire & Rubber Co. Group Companies 526,745 838,112 CURRENT PAYABLES Ansell Limited Group Companies 81,767 1,032,402 Goodyear Tire & Rubber Co. Group Companies 23,663,413 22,124,586
The names of each person holding the position of director of the company during the year were: Mr R Bartlett Mr D Graham Mr R Tieken Mr P Devereux Mr H Pace Mr E Tweddell Mr H Elliott Mr J Rennie Mr I Veal Mr P Gay Mr E Rodia Mr S Gibara Mr C Sprang At the time of holding the office of director of the company each director was an executive of the South Pacific Tyres partnership, and held the office of director of the company in order to discharge, in whole or in part, the duties as an executive officer of the partnership. 26. SUPERANNUATION COMMITMENTS EMPLOYER PLANS The partnership and its controlled entities participate in the Pacific Dunlop Superannuation Fund for employees.
DATE OF LAST ACTUARIAL BENEFIT TYPE BASIS OF CONTRIBUTION VALUATION ACTUARY Defined Balance of cost/Defined benefit/accumulation contribution 30/6/1999 William M Mercer Pty Ltd
The liabilities of the superannuation fund is covered by the assets in the fund or by specific provisions created by the partnership or its controlled entities. The partnership and its controlled entities are obliged to contribute to the superannuation fund as a consequence of Legislation or Trust Deed. Legal enforceability is dependent on the terms of the Legislation and the Trust Deed. 165 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 26 SUPERANNUATION COMMITMENTS (continued) DEFINITIONS Balance of cost The Group's contribution is assessed by the Actuary after taking into account the member's contribution and the value of assets. Defined contribution The Group's contribution is set out in the appropriate fund rules, usually as a fixed percentage of salary. INDUSTRY/UNION PLANS The partnership participates in industry and union plans on behalf of certain employees. These plans operate on an accumulation basis and provide lump sum benefits for members on resignation, retirement or death. The partnership has a legally enforceable obligation to contribute at varying rates to the plans. 27. SEGMENT REPORTING The principal activity of the group during the year was the manufacture and sale of motor vehicle and aircraft tyres in Australia and Papua New Guinea. 28. PARTICULARS RELATING TO CONTROLLED ENTITIES Details of controlled entities, including the extent that each contributed to the period's result are given below:
Tyre South South Marketers Sacrt Pacific Pacific (Australia) Trading Pty Tyres (PNG) Dunlop PNG Consolidated Tyres Limited Ltd Pty Ltd Pty Ltd adjustments Place of Incorporation Vic Vic PNG PNG Beneficial Interest held by Partnership 100% 100% 80% 80% Class of shares Ordinary Ordinary Ordinary Ordinary Book value of partnership's investment 2002 21,496,245 2001 21,496,245 Dividends received or receivable by partnership: 2002 2001 Dividends credited to investment account 2002 2001 Contribution to the consolidated profit after tax inclusive of abnormal items and after deducting the amount attributable to Outside Equity Interest: 2002 (96,796,795) (33,840,907) 365,417 27,119 (25,244) 243,240 2001 (77,401,617) (17,107,153) 217,544 12,315 (11,172) 2,233,689
29. EVENTS SUBSEQUENT TO BALANCE DATE There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material nature likely, in the opinion of the directors of the company, to affect significantly the operations, or the state of affairs of the company in subsequent financial years. 30. NOTES TO THE STATEMENTS OF CASH FLOWS (a) RECONCILIATION OF CASH For the purposes of the statement of cash flows, cash includes cash on hand and at bank and investments in money market instruments net of outstanding bank overdrafts. Cash as at the end of the financial year as shown in the statement of cash flows is reconciled to the related items in the statement of financial position as follows: CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ------------------------------------------------------------------------- Cash assets 8,400,672 9,531,203 1,098,257 7,000 Cash on deposit 28,700,000 9,500,000 28,700,000 9,500,000 Bank overdrafts (1,002,808) (4,860,501) - (2,496,277) --------------------------------------------------- 36,097,864 14,170,702 29,798,257 7,010,723 --------------------------------------------------- 166 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 30. NOTES TO THE STATEMENTS OF CASH FLOWS (continued) (b) ACQUISITION/DISPOSAL OF BUSINESSES AND ENTITIES During both the 2001 and 2002 financial years the partnership purchased no businesses. During the year the consolidated entity purchased 100% of businesses of which the details are as follows: CONSOLIDATED 2002 2001 ACQUISITIONS OF BUSINESSES $ $ - ---------------------------------------------------------------------------- Net assets acquired/disposed Property, plant and equipment 458,033 25,000 Inventories 298,112 7,000 Receivables 268,685 - Creditors - (9,077) ------------------------- 1,024,830 22,923 Goodwill 222,001 62,277 CONSIDERATION ------------------------- Cash paid/(received) 1,246,831 85,200 ------------------------- OUTFLOW/(INFLOW) OF CASH ------------------------- Cash consideration 1,246,831 85,200 ------------------------- DISPOSAL OF ENTITIES During the year, the consolidated entity disposed of all of its 80% share of South Pacific Tyres PNG Ltd. Details of the disposal is as follows: Consideration ( Cash ) 1,983,805 - Net assets of entity disposed of Property, plant and equipment 702,062 - Inventories 2,174,162 - Receivables 1,096,993 - Other assets 60,964 - Prepayments 82,822 - Creditors (952,514) - Other liabilities and provisions (146,852) - Outside equity (408,017) - ------------------------- 2,609,620 - ------------------------- Profit / (loss) on disposal (625,815) - ------------------------- 167 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- NOTES TO THE FINANCIAL STATEMENTS (continued) 30. NOTES TO THE STATEMENTS OF CASH FLOWS (continued) (c) RECONCILIATION OF PROFIT/(LOSS) FROM ORDINARY ACTIVITIES AFTER INCOME TAX TO NET CASH PROVIDED BY OPERATING ACTIVITIES
CONSOLIDATED PARTNERSHIP 2002 2001 2002 2001 $ $ $ $ - ----------------------------------------------------------------------------------------------------------------- Loss from ordinary activities after income tax (130,026,700) (92,056,109) (96,796,795) (77,401,617) ADD /(LESS) ITEMS CLASSIFIED AS INVESTING/FINANCING ACTIVITIES: (Profit)/loss on sale of non-current assets 13,327,002 4,151,257 13,260,833 4,583,063 (Profit)/loss on sale of controlled entities 625,815 - - - ADD(LESS) NON-CASH ITEMS: Amortisation 1,800,587 2,757,849 1,054,413 1,630,789 Depreciation 26,732,747 33,841,512 17,716,624 24,298,918 Amounts set aside to provisions 134,902,663 94,962,097 98,309,955 64,849,718 (Decrease)/increase in income taxes payable (180,144) (169,879) - - Decrease/(increase) in future income tax benefit (13,605,285) (5,723,401) - - Write-off bad trade debts 1,386,762 2,639,365 - 259,858 ------------------------------------------------------ Net cash provided by operating activities before change in assets and liabilities 34,963,447 40,402,691 33,545,030 18,220,729 ------------------------------------------------------ CHANGE IN ASSETS AND LIABILITIES ADJUSTED FOR EFFECTS OF PURCHASE AND DISPOSAL OF CONTROLLED ENTITIES DURING THE FINANCIAL YEAR: (Increase)/decrease in receivables (13,406,489) (36,514,319) 34,727,376 (25,893,987) (Increase)/decrease in inventories 4,628,518 (3,729,448) (822,786) (292,656) (Increase)/decrease in prepayments 180,180 4,960,263 (710,209) 1,029,887 (Decrease)/increase in accounts payable 20,283,451 33,917,471 35,149,537 33,496,399 (Decrease)/increase in provisions (70,029,855) (67,430,296) (57,580,689) (55,039,286) (Decrease)/increase in reserves (524,325) (496,747) - - ------------------------------------------------------ (58,868,520) (69,293,076) 10,763,229 (46,699,643) ------------------------------------------------------ Net cash provided by / (used in) operating activities (23,905,073) (28,890,385) 44,308,259 (28,478,914) ------------------------------------------------------
31. RECONCILIATION TO US GAAP No adjustments have been made to the Financial Statements of South Pacific Tyres and Controlled Entities for the year ended 30 June 2002 to ensure compliance with US GAAP. The only adjustment of a non material nature, which would be required would be the elimination of the Asset Revaluation Reserve recorded within equity under AGAAP, and the elimination of the impact of the incremental depreciation charge which emanated therefrom. The annual depreciation charge under US GAAP would be $125,000 lower than the amount reflected in the AGAAP financials. This adjustment would result in a reduction in US GAAP equity and a reduction in property, plant and equipment of $10.7 million at 30 June 2002 ($10.8 million at 30 June 2001). 168 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- DIRECTORS' DECLARATION In the opinion of the directors of South Pacific Tyres ("the partnership"): (a) the partnership is not a reporting entity; (b) the financial statements and notes, set out on pages 140 to 168 are in accordance with the Corporations Act 2001, as required by Section 11 of the Partnership Agreement, including: (i) giving a true and fair view of the financial position of the partnership as at 30 June 2002 and of its performance, as represented by the results of its operations and its cash flows, for the year ended on that date, in accordance with the basis of accounting described in Note 1; and (ii) complying with Accounting Standards in Australia to the extent described in Note 1 and the Corporations Regulations 2001; and (c) there are reasonable grounds to believe that the partnership will be able to pay its debts as and when they become due and payable. Signed in accordance with a resolution of the directors: /s/ - -------------------------------- Director /s/ - -------------------------------- Director 169 PART III SOUTH PACIFIC TYRES - STATUTORY ACCOUNTS YEAR ENDED 30 JUNE 2002 - -------------------------------------------------------------------------------- INDEPENDENT AUDIT REPORT The Partners South Pacific Tyres: We have audited the accompanying consolidated statements of financial position of South Pacific Tyres and its controlled entities comprising the South Pacific Tyres Partnership ("the Partnership) as of June 30, 2002 and 2001, and the related consolidated statements of financial performance, cash flows, and changes in stockholders' equity as set out on pages 144 to 169. These consolidated financial statements are the responsibility of the Partnership'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 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 South Pacific Tyres as of June 30, 2002 and 2001, and the results of its operations and its cash flows, in conformity with generally accepted accounting principles in Australia. Accounting principles generally accepted in Australia vary in certain respects from accounting principles generally accepted in the United States of America. An explanation of the significant difference between the two sets of principles as they relate to the Partnership is presented in Note 31 to the consolidated financial statements. The application of accounting principles generally accepted in the United States of America would have affected consolidated net loss for the years ended June 30, and shareholders' equity as of June 30, 2002 and 2001, to the extent summarized in Note 31 to the consolidated financial statements. /s/ KPMG Dated in Melbourne this 31st day of October 2002 170 PART III ITEM 19 : EXHIBITS - -------------------------------------------------------------------------------- EXHIBIT INDEX 1.1 Constitution of Ansell Limited. 4.1 Co-ordination Agreement--Sale of Pacific Brands dated November 30, 2001 made between Pacific Dunlop Limited, Textile Industrial Design and Engineering Pty Ltd, Union Knitting Mills Pty Ltd, Boydex International Pty Ltd, Foamlite (Australia) Pty Ltd, Vita Pacific Pty Ltd, Pacific Dunlop Holdings (NZ) Limited, Pacific Dunlop Holdings (Europe) Ltd, Pacific Dunlop Holdings (USA) Inc, PD International Pty Limited, Pacific Dunlop Holdings (Singapore) Pte Ltd, PD Holdings (Malaysia) Sdn Bhd, PD Licensing Pty Ltd, Niblick Pty Ltd, Cliburn Investments Pty Ltd, and PD Shared Services Holdings Pty Ltd (as sellers) and PB Holdings NV, Pacific Brands Holdings Pty Ltd, Pacific Brands Household Products Pty Ltd, Pacific Brands Footwear Pty Ltd, Pacific Brands Sport & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd and Pacific Brands Holdings (NZ) Ltd (as buyers). 4.2 Sale of Business Agreement, Pacific Brands--Australia dated November 30, 2001 made between Pacific Dunlop Limited, Textile Industrial Design and Engineering Pty Ltd, Union Knitting Mills Pty Ltd, Boydex International Pty Ltd, Foamlite (Australia) Pty Ltd, Vita Pacific Pty Ltd, PD Licensing Pty Ltd, Niblick Pty Ltd and Cliburn Investments Pty Ltd (as sellers) and Pacific Brands Holdings Pty Ltd, Pacific Brands Footwear Pty Ltd, Pacific Brands Sport & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd, Pacific Brands Household Products Pty Ltd, and PB Holdings NV (as buyers). 4.3 Sale of Business Agreement dated November 30, 2001 between Pacific Dunlop Limited, Pacific Dunlop Holdings (NZ) Limited, PD Licensing Pty Ltd and Pacific Brands Holdings (NZ) Ltd (as sellers) and PB Holdings NV (as buyer). 4.4 Letter Agreement dated November 30, 2001 between PB Holdings NV (as buyer) and PD Holdings (Malaysia) Sdn Bhd (as Seller) regarding proposed sale of shares of Restonic (M) Sdn Bhd. 4.5 Share Sale Agreement, PD Shared Services LSM Pty Ltd dated November 30, 2001 between PD Shared Services Holdings Pty Ltd and Pacific Dunlop Limited (as sellers) and Pacific Brands Holdings Pty Ltd (as buyer). 4.6 Share Sale Agreement, Pacific Brands (Fiji) Limited dated November 30, 2001 between P.D. International Pty Ltd and Pacific Dunlop Limited (as sellers) and PB Holdings NV (as buyer). 4.7 Share Sale Agreement, Pacific Dunlop Holdings (Hong Kong) Limited dated November 30, 2001 between Pacific Dunlop Limited and P.D. International Pty Ltd (as sellers) and PB Holdings NV (as buyer). 4.8 Share Sale Agreement, PT Barlei Indonesia dated November 30, 2001 between PD International Pty Ltd and Pacific Dunlop Holdings (Singapore) Pte Ltd (as sellers) and PB Holdings BV (as buyer). 4.9 Share Sale Agreement, Pacific Brands (UK) Ltd dated November 30, 2001 between Pacific Dunlop Holdings (Europe) Limited and Pacific Dunlop Limited (as sellers) and PB Holdings NV (as buyer). 4.10 Stock Purchase Agreement, PacBrands USA Inc dated November 30, 2001 between Pacific Dunlop Holdings (USA) Inc and Pacific Dunlop Limited (as sellers) and PB Holdings NV (as buyer). 171 PART III ITEM 19 : EXHIBITS - -------------------------------------------------------------------------------- 4.11 Share Sale Agreement, Bonds Industries Limited dated November 30, 2001 between Pacific Dunlop Limited (as seller) and Pacific Brands Holdings Pty Ltd and PB Holdings NV (as buyers). 4.12 Letter Agreement dated November 30, 2001 between Pacific Dunlop Limited and PB Holdings NV relating to the Shares Agreement Australia, Shares Agreement USA and Novare Shares Agreement. 4.13 Letter Agreement dated November 30, 2001 between Pacific Dunlop Limited and PB Holdings NV relating to the Shares Agreement Indonesia, Shares Agreement Fiji, Shares Agreement Hong Kong and Shares Agreement UK. 4.14* Australian Deed dated October 19, 2001 made between The Goodyear Tire & Rubber Company, Goodyear Tyres Pty Ltd, Goodyear Australia Pty Ltd, Pacific Dunlop Limited, Pacific Dunlop Tyres Pty Ltd and Tyre Marketers (Australia) Limited in relation to the restructuring of the South Pacific Tyres (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001). 4.15* Co-ordination Deed dated October 19, 2001 made between The Goodyear Tire & Rubber Company, Goodyear Tyres Pty Ltd, Goodyear Australia Pty Ltd, Pacific Dunlop Limited, Pacific Dunlop Tyres Pty Ltd and Tyre Marketers (Australia) Limited, Goodyear New Zealand Limited, Pacific Dunlop Holdings (NZ) Limited and South Pacific Tyres NZ Limited in relation to the restructuring of the South Pacific Tyres (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001). 4.16* Sale of Business Agreement dated September 20, 2001, made between the following Pacific Dunlop Group Companies: Ashdown Enterprise (Wholesale) Pty Ltd, The Distribution Group Pty Limited, The Distribution Group Holdings Pty Limited, PD Licensing Pty Limited, TDG Warehousing Pty Ltd and Pacific Dunlop Limited (as sellers) and Automotive Parts Group Limited and Automotive Parts Group Holdings Limited (as buyers) in relation to the sale of Pacific Automotive in Australia (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001). 4.17* Agreement for the Sale of Australian business dated February 26, 2001, made between Sara Lee Apparel (Australasia) Pty Limited and Sara Lee Corporation (the sellers) and Pacific Dunlop Ltd (the buyer) in respect of the Sara Lee Apparel business (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001). 4.18* Form of agreement with non-Executive Directors of Pacific Dunlop Limited in relation to benefits upon retirement (incorporated by reference to File No. 0-15850, Form 20-F, filed by the Registrant on November 9, 2001). 7.1 Computation of the Ratio of Earnings to Fixed Charges * Previously filed 172 EX-1.1 3 dex11.txt CONSTITUTION OF ANSELL LIMITED EXHIBIT 1.1 CONSTITUTION Ansell limited ABN 89 004 085 330 (Adopted by a special resolution of the members on 12 April 2002) [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference SJW:SLS Constitution TABLE OF CONTENTS Clause Page Preliminary 1 1 Definitions and interpretation 1 2 Application of other definitions 3 3 Exercising powers 3 4 Table A and other rules do not apply 4 Share capital 4 5 Shares 4 6 Implementing changes to share capital 5 7 Joint holders of shares 5 8 Equitable and other claims 5 9 Altering rights and class meetings 6 Calls, forfeiture, indemnities and lien 7 10 Calls 7 11 Proceedings to recover calls 8 12 Payments in advance of calls 8 13 Forfeiting partly paid shares 8 14 Payments by the company 9 15 Lien on shares 10 16 Procedures after sale, reissue or other disposal of shares by the company 11 17 General 12 Transferring and transmitting shares 12 18 Transferring shares 12 19 Power to decline to register transfers 13 20 Power to close register of members 14 21 Selling non-marketable parcels 14 22 Transmitting shares 15 General meetings 16 23 Calling general meetings 16 24 Notice of general meetings 16 25 Admission to general meetings 17 26 Quorum at general meetings 18 27 Chair of general meetings 18 28 Conduct at general meetings 19 29 Decisions at general meetings 20 30 Voting rights 21 31 Representation at general meetings 22 page 1 Constitution Directors 24 32 Number of directors 24 33 Appointing and retirement of directors 25 34 Vacating office 26 35 Remuneration 26 36 Disclosing directors' interests 28 37 Directors may contract with the company and hold other offices 28 38 Powers and duties of directors 29 39 Proceedings of directors 30 40 Calling meetings of directors 30 41 Quorum at meetings of directors 30 42 Chair and deputy chair of directors 31 43 Authority and decisions of directors 31 44 Circular resolutions 31 45 Alternate directors 32 46 Committees of directors 33 47 Validity of acts 33 Executive officers 34 48 Managing director and executive director 34 49 Secretary 34 50 Provisions applying to executive officers 34 Seals 35 51 Using the seal 35 52 Seal register 35 Distributions to members 35 53 Dividends 35 54 Capitalising profits 37 55 Ancillary powers 38 56 Reserves 39 57 Carrying forward profits 39 58 Distributing surplus 39 59 Dividing property 40 Records 40 60 Inspection of and access to records 40 Protection of officers and former officers 41 61 Indemnity and insurance 41 NOTICES 42 page 2 Constitution 62 Giving of Notices 42 63 Time of service 43 64 Other communications and documents 43 General 43 65 Submission to jurisdiction 43 66 Prohibition and enforceability 43 67 Transitional Provisions 44 Restricted Securities 44 68 Restricted Securities 44 Partial Takeovers 45 69 Partial Takeovers 45 page 3 ANSELL LIMITED ABN 89 004 085 330 A PUBLIC COMPANY LIMITED BY SHARES CONSTITUTION (AS ADOPTED ON 12 APRIL 2002) PRELIMINARY 1 DEFINITIONS AND INTERPRETATION (a) In this constitution: Act means Corporations Act 2001 (Cth); Exchange means Australian Stock Exchange Limited or such other body corporate that is declared by the directors to be the company's primary stock exchange for the purposes of this definition; Listing Rules means the listing rules of the Exchange as they apply to the company from time to time; record time means: (1) in the case of a meeting for which the caller of the meeting has decided, under the Act, that shares are to be taken to be held by the persons who held them at a specified time before the meeting, the specified time; and (2) in any other case, the time of the relevant meeting; representative, in relation to a member which is a body corporate and in relation to a meeting, means a person authorised by the body corporate in accordance with the Act (or a corresponding previous law) to act as its representative at that meeting; SCH means the Securities Clearing House of the Exchange; transmission event means: (1) for a member who is an individual: (A) the member's death; (B) the member's bankruptcy; or (C) the member becoming of unsound mind or a person who, or whose estate, is liable to be dealt with in any way under the law relating to mental health; and page 1 Constitution (2) for a member which is a body corporate, the dissolution of the member or the succession by another body corporate to the assets and liabilities of the member. (b) A reference in this constitution to: (1) a partly paid share is a reference to a share on which there is an amount unpaid; (2) an amount unpaid on a share includes a reference to any amount of the issue price which is unpaid; and (3) a call or an amount called on a share includes a reference to a sum that, by the terms of issue of a share, becomes payable on allotment or at a fixed date. (c) A reference in this constitution to a member for the purposes of a meeting of members is a reference to a registered holder of shares as at the relevant record time. (d) A reference in this constitution to a member present at a general meeting is a reference to a member present in person or by proxy, attorney or representative. (e) A reference in this constitution in general terms to a person holding or occupying a particular office or position is a reference to any person who occupies or performs the duties of that office or position. (f) A reference in this constitution to a monetary amount is a reference to that amount in Australian currency or such other currency as may be determined by the directors from time to time. (g) Unless the contrary intention appears, in this constitution: (1) headings are only for convenience and do not affect the meaning of this constitution; (2) words that refer to a singular number also refer to plural numbers, and the other way around; (3) words that refer to a gender also refer to the other genders; (4) words used to refer to persons generally, or to refer to a natural person, include a company, corporation, body corporate, body politic, partnership, joint venture, association, board, group or other body (whether or not the body is incorporated); (5) a reference to a person includes that person's successors and legal personal representatives; (6) a reference to a statute, regulation, proclamation, ordinance or by-law or a provision of any of them includes all statutes, regulations, proclamations, ordinances, by-laws or provisions varying, consolidating or replacing them, and a reference to a statute includes all regulations, proclamations, ordinances and by-laws issued under that statute; (7) a reference to the Listing Rules or the SCH business rules includes any variation, consolidation or replacement of those rules and is to page 2 Constitution be taken to be subject to any waiver or exemption granted to the company (or to the benefit of which the company is entitled) from compliance with those rules; and (8) where a word or phrase is given a particular meaning, other parts of speech and grammatical forms of that word or phrase have corresponding meanings. 2 APPLICATION OF OTHER DEFINITIONS Unless the contrary intention appears: (a) an expression in a rule that deals with a matter dealt with by a provision of the Act, the Listing Rules or the SCH business rules has the same meaning as in that provision; and (b) subject to paragraph (a), an expression in a rule that is defined in section 9 of the Act has the same meaning as in that section. 3 EXERCISING POWERS (a) The company may in any way the Act permits: (1) exercise any power; (2) take any action; or (3) engage in any conduct or procedure, which, under the Act a company limited by shares may exercise, take or engage in. (b) Where this constitution provides that a person may do a particular act or thing and the word "may" is used, the act or thing may be done at the person's discretion. (c) Where this constitution confers a power to do a particular act or thing, the power is, unless the contrary intention appears, to be taken as including a power exercisable in the same way and subject to the same conditions (if any) to repeal, rescind, revoke, amend or vary that act or thing. (d) Where this constitution confers a power to do a particular act or thing, the power may be exercised from time to time. (e) Where this constitution confers a power to do a particular act or thing concerning particular matters, the power is, unless the contrary intention appears, to be taken to include a power to do that act or thing as to only some of those matters or as to a particular class of those matters, and to make different provision concerning different matters or different classes of matters. (f) Where this constitution confers a power to make appointments to an office or position (except the power to appoint a director under rule 33(a)), the power is, unless the contrary intention appears, to be taken to include a power: page 3 Constitution (1) to appoint a person to act in the office or position until a person is permanently appointed to the office or position; (2) to remove or suspend any person appointed (without prejudice to any rights or obligations under any contract between the person and the company); and (3) to appoint another person temporarily in the place of any person removed or suspended or in the place of any sick or absent holder of the office or position. (g) To the extent the law permits, where this constitution gives power to a person to delegate a function or power: (1) the delegation may be concurrent with, or (except in the case of a delegation by the board of directors) to the exclusion of, the performance or exercise of that function or power by the person; (2) the delegation may be either general or limited in any way provided in the terms of delegation; (3) the delegation need not be to a specified person but may be to any person holding, occupying or performing the duties of a specified office or position; (4) the delegation may include the power to delegate; and (5) where performing or exercising that function or power depends on that person's opinion, belief or state of mind about a matter, that function or power may be performed or exercised by the delegate on the delegate's opinion, belief or state of mind about that matter. 4 TABLE A AND OTHER RULES DO NOT APPLY The regulations contained in the Table marked "A" in the Second Schedule to the Companies Act 1915 and any provisions of the Act that apply (or would but for this rule apply) internal management rules to the company as a replaceable rule are displaced by this constitution and do not apply to the company except insofar as they are repeated in this constitution. SHARE CAPITAL 5 SHARES Subject to this constitution, the directors may: (a) issue, grant options for, or otherwise dispose of, shares in the company; and (b) decide: (1) the terms on which shares are issued or options are granted; (2) the rights and restrictions attached to those shares or options; and page 4 Constitution (3) the terms on which the allotment of preference shares may be submitted for the approval of members, to the extent required by the Act. 6 IMPLEMENTING CHANGES TO SHARE CAPITAL (a) The company may reduce its share capital or alter its capital structure in any manner permitted by the Act or the Listing Rules. (b) Subject to any requirements in the Act, the directors may do anything necessary or desirable to give effect to any resolution altering the company's share capital, including, without limitation where a member becomes entitled to a fraction of a share on a consolidation any or all of: (1) making cash payments; (2) determining that all or any fractions may be disregarded; (3) appointing a trustee to deal with any fractions on behalf of members; and (4) rounding up each fractional entitlement to the nearest whole share. 7 JOINT HOLDERS OF SHARES Where 2 or more persons are registered as the holders of a share, they hold it as joint tenants with rights of survivorship, on the following conditions: (a) they are liable individually as well as jointly for all payments, including calls, in respect of the share; (b) subject to paragraph (a), on the death of any one of them the survivor or survivors is/are the only person(s) the company will recognise as having any title to the share; (c) any one of them may give effectual receipts for any dividend, bonus, interest or other distribution or payment in respect of the share; and (d) except where persons are jointly entitled to a share because of a transmission event, or where required by the Listing Rules, the company may limit to 3 the number of persons to be registered as joint holders of the share. 8 EQUITABLE AND OTHER CLAIMS Except where a law requires otherwise, the company is entitled to treat the registered holder of a share as the absolute owner of that share and need not: (a) recognise a person as holding a share on any trust, even if the company has notice of that trust; or (b) recognise, or be bound by, any equitable, contingent, future or partial claim to or interest in a share by any other person, except an absolute right of page 5 Constitution ownership in the registered holder, even if the company has notice of that claim or interest. 9 ALTERING RIGHTS AND CLASS MEETINGS (a) The Company may by resolution convert or reclassify shares from one class to another. (b) Unless the terms of issue of a class of shares provide otherwise: (1) all or any of the rights or privileges attached to a class of shares which does not exist at the date this constitution is adopted may be varied, whether or not the company is being wound up, only with the consent in writing of the holders of at least three-fourths of the issued shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of shares of that class; (2) the provisions of this constitution relating to general meetings apply, so far as they can and with such changes as are necessary, to each separate meeting of the holders of shares of that class; and (3) the rights conferred upon the holders of shares of that class are to be taken as not having been varied by the creation or issue of further shares ranking equally with them. (c) The following provisions of this rule 9(c) apply to a class of shares which exists at the date this constitution is adopted: (1) the rights attached to a class of shares will not be varied or abrogated and this constitution will not be altered so as to authorise the variation or abrogation of those rights unless consent to the variation or abrogation has first been given either by: (A) an instrument or instruments in writing executed by the holders of 75% of the issued shares included in the class; or (B) a special resolution of the holders of the issued shares included in the class. (2) Nothing in this rule will derogate from or affect any right to exercise any statutory or other power which would have existed if this rule were omitted Provided Always that the provisions of this rule will not apply to any variation or abrogation of such rights as a consequence of any increase of the capital of the company. (3) The provisions of this constitution relating to general meetings apply so far as they are capable of application and with such changes as are necessary to every meeting of the holders of the issued shares included in a class of shares which is convened for the purpose of considering a special resolution under this rule except that: (A) a quorum is constituted by members present representing 25% of the issued shares included in the class; and page 6 Constitution (B) any holder of shares included in the class, present in person or by proxy or attorney or, in the case of a holder which is a corporation, by representative, may demand a poll. CALLS, FORFEITURE, INDEMNITIES AND LIEN 10 CALLS (a) Subject to this constitution and to the terms on which any shares are issued, the directors may: (1) make calls on the members for any amount unpaid on their shares which is not by the terms of issue of those shares made payable at fixed times; and (2) on the issue of shares, differentiate between members as to the amount of calls to be paid and the time for payment. (b) The directors may require a call to be paid by instalments. (c) On receiving at least 14 days' notice (or any longer period required by the Listing Rules) specifying the time and place of payment, each member must pay to the company by the time and at the place specified the amount called on the member's shares. (d) A call is taken to have been made when the resolution of the directors authorising the call is passed. (e) The directors may revoke a call or extend the time for payment. (f) Failure of a member to receive a notice of a call, or accidental failure to give notice of a call to a member, does not invalidate the call. (g) If an amount called on a share is not paid in full by the time specified for payment, the person from whom the amount is due must, if the directors decide, pay: (1) interest on the unpaid part of the amount from the date specified for payment of the amount to the date of actual payment, at a rate determined under rule 17; and (2) if the share was issued after the date this constitution is adopted, any expenses or damages the company incurs because the amount has not been paid or has been paid late. (h) Any amount unpaid on a share that, by the terms of issue of the share, becomes payable on allotment or at a fixed date: (1) must be treated for the purposes of this constitution as if that amount were payable under a call duly made and notified; and (2) must be paid on the date on which it is payable under the terms of issue of the share. page 7 Constitution (i) The directors may, to the extent the law permits, waive or compromise all or part of any payment due to the company under the terms of issue of a share or under this rule 10. 11 PROCEEDINGS TO RECOVER CALLS (a) In an action or other proceedings to recover a call, or interest or costs or expenses incurred because of the failure to pay or late payment of a call, proof that: (1) the name of the defendant is entered in the register as the holder or one of the holders of the share on which the call is claimed; (2) the resolution making the call is recorded in the minute book; and (3) notice of the call was given to the defendant complying with this constitution, is conclusive evidence of the debt and it is not necessary to prove the appointment or committee membership of the directors who made the call or any other matter. (b) In paragraph (a), defendant includes a person against whom the company alleges a set-off or counterclaim, and action or other proceedings for the recovery of a call is to be interpreted accordingly. 12 PAYMENTS IN ADVANCE OF CALLS (a) The directors may accept from a member the whole or a part of the amount unpaid on a share even though no part of that amount has been called. (b) The directors may authorise payment by the company of interest on the whole or a part of an amount accepted under paragraph (a), until the amount becomes payable, at a rate agreed between the directors and the member paying the amount. (c) Unless a different agreement is made, the directors may repay to a member all or a part of the amount accepted under paragraph (a). 13 FORFEITING PARTLY PAID SHARES (a) If a member fails to pay the whole of a call or an instalment of a call by the time specified for payment, the directors may serve a notice on that member: (1) requiring payment of the unpaid part of the call or instalment, together with any interest that has accrued and all costs, expenses or damages that the company has incurred because of the failure to pay; page 8 Constitution (2) naming a further time (at least 14 days after the date of the notice) by which, and a place at which, the amount payable under sub-paragraph (1) must be paid; and (3) stating that, if the whole of the amount payable under sub-paragraph (1) is not paid by the time and at the place named, the shares on which the call was made will be liable to be forfeited. (b) If the requirements of a notice served under paragraph (a) are not complied with, the directors may by resolution forfeit any share concerning which the notice was given at any time after the day named in the notice and before the payment required by the notice is made. (c) A forfeiture under paragraph (b) includes all dividends, interest and other money payable by the company on the forfeited share and not actually paid before the forfeiture. (d) Where a share has been forfeited: (1) notice of the resolution must be given to the member in whose name the share stood immediately before the forfeiture; and (2) an entry of the forfeiture, with the date, must be made in the register of members. (e) Failure to give the notice or to make the entry required under paragraph (d) does not invalidate the forfeiture. (f) A forfeited share becomes the property of the company and the directors may sell, reissue or otherwise dispose of the share in the way they think fit and, in the case of reissue or other disposal, with or without crediting as paid up any money paid on the share by any former holder. (g) A person whose shares have been forfeited ceases to be a member as to the forfeited shares, but must, if the directors decide, pay to the company: (1) all calls, instalments, interest, costs, expenses and damages owing on the shares at the time of the forfeiture; and (2) interest on the unpaid part of the amount payable under sub-paragraph (1), from the date of the forfeiture to the date of actual payment, at a rate determined under rule 17. (h) The forfeiture of a share extinguishes all interest in, and all claims and demands against the company relating to, the forfeited share and, subject to rule 16(i), all other rights attached to the share. 14 PAYMENTS BY THE COMPANY If the company becomes liable for any reason under a law to make a payment: (a) in respect of shares held solely or jointly by a member; (b) in respect of a transfer or transmission of shares by a member; (c) in respect of dividends, bonuses or other money due or payable or which may become due and payable to a member; or page 9 Constitution (d) in any other way for, on account of or relating to a member, then, in addition to any right or remedy that a law gives the company the member or, if the member is dead, the member's legal personal representative must: (1) fully indemnify the company against that liability; (2) on demand reimburse the company for any payment made; and (3) pay interest on the unpaid part of the amount payable to the company under sub-paragraph (2), from the date the company makes the payment until the date the company is reimbursed in full for that payment under sub-paragraph (2), at a rate determined under rule 17. 15 LIEN ON SHARES (a) The company has a first and paramount lien on: (1) each partly paid share for all unpaid calls and instalments due on that share; (2) each share acquired under an employee incentive scheme for any amount which is owed to the company for the acquisition of that share; and (3) each share for any amounts the company is called on by law to pay and has paid in respect of that share. (b) The company's lien on a share extends to all dividends payable on the share and to the proceeds of sale of the share. (c) The directors may sell a share on which the company has a lien in the way they decide where: (1) an amount for which a lien exists under this rule 15 is presently payable; and (2) the company has, at least 14 days before the date of the sale, given the registered holder of the share a written notice stating the part of the amount for which the lien exists that is presently payable, and demanding payment of that amount. (d) The directors may do anything necessary or desirable under the SCH business rules to protect any lien, charge or other right to which the company is entitled under this constitution or a law. (e) When the company registers a transfer of shares on which the company has a lien without giving the transferee notice of its claim, the company's lien is released so far as it relates to amounts owing by the transferor or any predecessor in title on the shares transferred. page 10 Constitution 16 PROCEDURES AFTER SALE, REISSUE OR OTHER DISPOSAL OF SHARES BY THE COMPANY (a) A reference in this rule 16 to a sale of a share by the company is a reference to any sale, reissue or other disposal of a share under rule 13(f), rule 15(c) or rule 21. (b) After the company has sold a share, the directors may: (1) receive the purchase money or consideration given for the share; (2) appoint a person to effect a transfer of the share or execute a transfer of the share or any other document to give effect to the sale; and (3) register as the holder of the share the person to whom the share is sold. (c) A person to whom the company sells shares need not take any steps to investigate the regularity or validity of the sale, or to see how the purchase money or consideration on the sale is applied. That person's title to the shares is not affected by any irregularity by the company before the sale. A sale of a share by the company is valid even if a transmission event occurs to the member before the sale. (d) Damages is the only remedy of a person who suffers any loss because of a sale of shares by the company. The claim for damages can only be made against the company. (e) The proceeds of a sale, reissue or other disposal under rule 13(f) or a sale under rule 15(c) must be applied in paying: (1) first, the expenses of the sale, reissue or other disposal; (2) secondly, all money payable (whether presently or not) by the former holder whose shares have been sold, reissued or otherwise disposed of, and any balance must be paid to the former holder on the former holder delivering to the company such proof of title to the shares as the directors accept. (f) The proceeds of a sale under rule 21 must not be applied in payment of the expenses of the sale and must be paid to the former holder on the former holder delivering to the company such proof of title of the shares as the directors accept. (g) Until the proceeds of sale of a share sold by the company are claimed or otherwise disposed of according to law, the directors may invest or use the proceeds in any other way for the benefit of the company. (h) Money payable to a former holder under this rule does not bear interest as against the company. (i) On completion of a sale, reissue or other disposal of a share under rule 13(f), the rights attached to the share which were extinguished under rule 13(h) revive. page 11 Constitution (j) A written statement by a director or secretary of the company that a share in the company has been: (1) duly forfeited under rule 13(b); (2) duly sold, reissued or otherwise disposed of under rule 13(f); or (3) duly sold under rule 15(c) or rule 21, on a date stated in the statement is conclusive evidence of the facts stated as against all persons claiming to be entitled to the share, and of the right of the company or the directors to forfeit, sell, reissue or otherwise dispose of the share. 17 GENERAL (a) For the purposes of rules 10(g)(1), 13(g)(2) and 14(c)(3), the rate of interest payable to the company is: (1) if the directors have fixed a rate, the rate as fixed; or (2) in any other case, a rate per annum 2% higher than the rate fixed under section 2 of the Penalty Interest Rates Act 1983 of Victoria. (b) Interest payable under rules 10(g)(1), 13(g)(2) and 14(3) accrues and must be calculated daily and may be capitalised at the intervals the directors decide. (c) The directors may: (1) exempt a share from all or a part of rule 13, 14 or 15; (2) waive or compromise all or a part of any payment due to the company under rule 13, 14 or 15; and (3) in relation to rule 13, before a forfeited share has been sold, reissued or otherwise disposed of, cancel the forfeiture on the conditions they decide. TRANSFERRING AND TRANSMITTING SHARES 18 TRANSFERRING SHARES (a) Subject to this constitution, a member may transfer any of the member's shares by: (1) any manner permitted by law; or (2) a written transfer in any usual form or in any other form approved by the directors. (b) A transfer referred to in paragraph (a)(2) must be: (1) signed by or on behalf of both the transferor and the transferee unless: page 12 Constitution (A) the transfer relates only to fully paid shares and the directors have dispensed with signature by the transferee; or (B) the transfer of the shares is effected by a document which is, or documents which together are, a sufficient transfer of those shares under the Act; (2) if required by law to be stamped, duly stamped; and (3) left for registration at the company's registered office, or at any other place the directors decide, with any evidence the directors require to prove the transferor's title or right to the shares and to prove the transferee's right to be registered as the owner of the shares. (c) Subject to the powers vested in the directors under rules 19 and 20, where the company receives a transfer complying with paragraph (b), the company must register the transferee named in the transfer as the holder of the shares to which it relates. (d) A transferor of shares remains the holder of the shares until a proper SCH transfer has been effected or the transferee's name is entered in the register of members as the holder of the shares. (e) The company must not charge a fee for registering a transfer of shares. (f) The company may retain a registered transfer for any period the directors decide. (g) The directors may do anything that is necessary or desirable for the company to participate in any computerised, electronic or other system for facilitating the transfer of shares or operation of the company's registers. (h) The directors may, to the extent the law permits, waive any of the requirements of this rule 18 and prescribe alternative requirements instead, whether to give effect to paragraph (g) or for another purpose. 19 POWER TO DECLINE TO REGISTER TRANSFERS (a) The directors may decline to register, or prevent registration of, a transfer of shares or apply a holding lock to prevent a proper SCH transfer in accordance with the Act or the Listing Rules where: (1) the transfer is not in registrable form; (2) the company has a lien on any of the shares transferred; (3) registration of the transfer may breach a law of Australia; (4) the transfer is paper-based and registration of the transfer will create a new holding which, at the time the transfer is lodged, is less than a marketable parcel; (5) the transfer is not permitted under the terms of an employee share plan; or page 13 Constitution (6) the company is otherwise permitted or required to do so under the Listing Rules or, except for proper SCH transfers, under the terms of issue of the shares. (b) If the directors decline to register a transfer, the company must give notice of the refusal as required by the Act and the Listing Rules. Failure to give that notice will not invalidate the decision of the directors to decline to register the transfer. (c) The directors may delegate their authority under this rule to the share registrar or any other person. 20 POWER TO CLOSE REGISTER OF MEMBERS Subject to the SCH business rules, the directors may close the register of members or part of that register at any times and for any periods that they decide. 21 SELLING NON-MARKETABLE PARCELS (a) The directors may send a written notice to a member who holds on the date of the notice less than a marketable parcel of shares in a class of shares of the company which: (1) explains the effect of this rule 21; and (2) advises the holder that he or she may elect to be exempt from the provisions of this rule. A form of election for that purpose must be sent with the notice. (b) If, before 5 pm Melbourne time on a date specified in the notice which is no earlier than 6 weeks after the notice is sent: (1) the company has not received a notice from the member electing to be exempt from the provisions of this rule 21; and (2) the member has not increased his or her shareholding to a marketable parcel, the member is taken to have irrevocably appointed the company as his or her agent to proceed in accordance with paragraph (c). (c) The company may: (1) sell the shares constituting less than a marketable parcel as soon as practicable at a price which the directors consider is the best price reasonably available for the shares when they are sold; and (2) deal with the proceeds of sale under rule 16. (d) The costs and expenses of any sale of shares under this rule 21 (including brokerage and stamp duty, if applicable) will, if the Act permits, be payable by the company or, if the company is not permitted, be payable by the purchaser. page 14 Constitution (e) A notice under paragraph (a) may be given to a member only once in a 12 month period and may not be given during the offer period of a takeover bid. (f) If a takeover bid for the company is announced after a notice is given but before agreement is entered into for the sale of shares, this rule ceases to operate for those shares. However, despite paragraph (e), a new notice under paragraph (a) may be given after the offer period of the takeover bid closes. (g) If the holding of a member becomes a marketable parcel after a notice is given but before agreement is entered into for the sale of shares, this rule ceases to operate for those shares. (h) The directors may, before a sale is effected under this rule 21, revoke a notice given or suspend or terminate the operation of this rule either generally or in specific cases. (i) Subject to the Act and the Listing Rules, the directors may sell a share that is part of a holding that is less than a Marketable Parcel ("relevant holding") without giving notice to the holder of the share if the relevant holding was created by a transfer of shares registered after the adoption of this rule. 22 TRANSMITTING SHARES (a) Subject to paragraph (c), where a member dies, the only persons the company will recognise as having any title to the member's shares or any benefits accruing on those shares are: (1) the legal personal representative of the deceased, where the deceased was a sole holder; and (2) the survivor or survivors, where the deceased was a joint holder. (b) Paragraph (a) does not release the estate of a deceased member from any liability on a share, whether that share was held by the deceased solely or jointly with other persons. (c) The directors may, if the transfer complies with this constitution, register a transfer of shares signed by a member before the member's death, even though the company has notice of the member's death. (d) A person who becomes entitled to a share because of a transmission event may, on producing any evidence the directors require to prove that person's entitlement to the share, choose: (1) to be registered as the holder of the share by signing and giving the company a written notice stating that choice; or (2) nominate some other person to be registered as the transferee of the share by executing or effecting in some other way a transfer of the share to that other person. (e) The provisions of this constitution concerning the right to transfer shares, and the registration of transfers of shares apply, so far as they can and with page 15 Constitution any necessary changes, to a notice or transfer under paragraph (d) as if the relevant transmission event had not occurred and the notice or transfer was a transfer executed or effected by the registered holder of the share. (f) For the purpose of this constitution, where 2 or more persons are jointly entitled to a share because of a transmission event they will, on being registered as the holders of the share, be taken to hold the share as joint tenants and rule 7 will apply to them. GENERAL MEETINGS 23 CALLING GENERAL MEETINGS (a) A general meeting may only be called: (1) by directors' resolution; or (2) as otherwise permitted under the Act. (b) The directors may, by notice to the Exchange, postpone or cancel a general meeting if they consider that the meeting has become unnecessary, or change the place for a general meeting if they consider the meeting place would be unreasonable or impractical or a change is necessary in the interests of conducting the meeting efficiently, but: (1) a meeting which is not called by directors' resolution; and (2) a meeting which is called in accordance with a members' requisition under the Act, may not be postponed or cancelled without the prior written consent of the person or persons who called or requisitioned the meeting. 24 NOTICE OF GENERAL MEETINGS (a) Notice of a general meeting must be given to each person who is at the time of giving the notice a member, director or auditor of the company or entitled to a share because of a transmission event and who has satisfied the directors of his or her right to be registered as the holder of, or to transfer, the shares. (b) The content of a notice of a general meeting called by the directors is to be decided by the directors, but it must state the general nature of the business to be transacted at the meeting and any other matters required by the Act. (c) Unless the Act provides otherwise: (1) no business may be transacted at a general meeting unless the general nature of the business is stated in the notice calling the meeting and, if a resolution is set out in that notice, no business may be transacted that is not in substance the same as that resolution; and page 16 Constitution (2) no person may move any amendment to a proposed resolution the terms of which are set out in the notice calling the meeting or to a document which relates to such a resolution and a copy of which has been made available to members to inspect or obtain, except with the approval of the directors or the chair. (d) Failure of a member to receive a notice of a general meeting or a proxy form, or failure to give notice of a general meeting or a proxy form to any person entitled to receive notice of a general meeting, does not invalidate any act or thing done or resolution passed at the general meeting if: (1) the failure to receive or give the notice occurred by accident or error; or (2) before or after the meeting, the person has given or gives the company written notice of the person's agreement to that act, thing or resolution. 25 ADMISSION TO GENERAL MEETINGS (a) The chair of a general meeting may take any action he or she considers appropriate for the safety of persons attending the meeting and the orderly conduct of the meeting and may refuse admission to, or require to leave and remain out of, the meeting any person: (1) in possession of a pictorial-recording or sound-recording device; (2) in possession of a placard or banner; (3) in possession of an article considered by the chair to be dangerous, offensive or liable to cause disruption; (4) who refuses to produce or to permit examination of any article, or the contents of any article, in the person's possession; or (5) who behaves or threatens to behave in a dangerous, offensive or disruptive way. The chair may delegate the powers conferred by this rule to any person as he or she thinks fit. (b) If the person entitled to act as chair of a general meeting considers that there is not enough room for the number of members who wish to attend the meeting, he or she may arrange for any person whom he or she considers cannot be seated in the main meeting room, where the chair will be, to observe or attend the general meeting in a separate room. Even if the members present in the separate room are not able to participate in the conduct of the meeting, the meeting will nevertheless be treated as validly held in the main room. page 17 Constitution 26 QUORUM AT GENERAL MEETINGS (a) No business may be transacted at any general meeting, except the election of a chair and the adjournment of the meeting, unless a quorum of members is present when the meeting proceeds to business. (b) A quorum is 5 or more members present at the meeting and entitled to vote on a resolution at the meeting. (c) If a quorum is not present within 30 minutes after the time appointed for the general meeting: (1) where the meeting was called on the requisition of members, the meeting must be dissolved; or (2) in any other case: (A) the meeting stands adjourned to the day, and at the time and place, the directors present decide or, if they do not make a decision, to the same day in the next week at the same time and place; and (B) if, at the adjourned meeting, a quorum is not present within 30 minutes after the time appointed for the meeting, the meeting must be dissolved. 27 CHAIR OF GENERAL MEETINGS (a) The chair of directors or, in the absence of the chair of directors, the deputy chair of directors (if any) is entitled, if present within 15 minutes after the time appointed for the meeting and willing to act, to preside as chair at each general meeting. (b) The directors present at a general meeting may choose one of their number to preside as chair if, at a general meeting: (1) there is no chair or deputy chair of directors; (2) the chair or deputy chair of directors is not present within 15 minutes after the time appointed for the meeting; or (3) the chair or deputy chair of directors is present within that time but is not willing to act as chair of the meeting. (c) If the directors do not choose a chair under paragraph (b), the members present must elect as chair of the meeting: (1) another director who is present and willing to act; or (2) if no other director willing to act is present at the meeting, a member who is present and willing to act. (d) A chair of a general meeting may, for any item of business or discrete part of the meeting, vacate the chair in favour of another person nominated by him or her. page 18 Constitution 28 CONDUCT AT GENERAL MEETINGS (a) The chair of a general meeting is responsible for the general conduct of the meeting and for the procedures to be adopted at the meeting. The chair may: (1) at any time the chair considers it necessary or desirable for the proper and orderly conduct of the meeting, demand the cessation of debate or discussion on any business, question, motion or resolution being considered by the meeting and require the business, question, motion or resolution to be put to a vote of the members present; and (2) require any procedures to be adopted which are in the chair's opinion necessary or desirable for casting or recording votes at the meeting, whether on a show of hands or on a poll, in a proper and orderly way, including the appointment of scrutineers. (b) A decision by a chair under paragraph (a) is final. (c) A person present at a general meeting at the request of the directors or the chair is entitled to speak at the meeting if the chair allows. (d) The person entitled to act as chair of a general meeting may postpone the meeting before it has started, whether or not a quorum is present, if, at the time and place appointed for the meeting, he or she considers that: (1) there is not enough room for the number of members who wish to attend the meeting; or (2) a postponement is necessary in light of the behaviour of persons present or for any other reason so that the business of the meeting can properly be carried out. (e) A postponement under paragraph (d) will be to another time, which may be on the same day as the meeting, and may be to another place (and the new time and place will be taken to be the time and place for the meeting as if specified in the notice which called the meeting originally). (f) The chair of a general meeting may, without seeking approval of the members present at any time during the course of the meeting: (1) adjourn from time to time and place to place the meeting or any business, motion, question or resolution being considered or remaining to be considered by the meeting or any debate or discussion; (2) adjourn or defer any business, motion, question, resolution, debate or discussion either to a later time at the same meeting or to an adjourned meeting; and (3) for the purpose of allowing any poll to be taken or determined, suspend the proceedings of the meeting for such period or periods as he or she decides without effecting an adjournment. (g) Only unfinished business may be transacted at a meeting resumed after an adjournment. page 19 Constitution (h) Where a meeting is postponed or adjourned for more than 24 hours under this rule 28, notice of the postponed or adjourned meeting must be given to the Exchange, but need not be given to any other person. (i) Where a meeting is postponed or adjourned, the directors may, by notice to the Exchange, postpone, cancel or change the place of the postponed or adjourned meeting. (j) If a separate meeting place is linked to the main place of a general meeting by an instantaneous audio-visual communication device which, by itself or in conjunction with other arrangements: (1) gives the general body of members in the separate meeting place a reasonable opportunity to participate in proceedings in the main place; (2) enables the chair to be aware of proceedings in the other place; and (3) enables the members in the separate meeting place to vote on a show of hands or on a poll, a member present at the separate meeting place is taken to be present at the general meeting and entitled to exercise all rights as if he or she was present at the main place. (k) If the communication device encounters a technical difficulty, whether before or during the meeting, which results in the matters required by sub-paragraphs (j)(1), (2) or (3) at the separate meeting place not being satisfied, the meeting may still be held or continue in the main place (and any other place which is linked under paragraph (1)) and transact business, even if the members in the separate meeting place are unable to participate. No member may object to the meeting being held or continuing. However, if the effect of this paragraph (k) has not been referred to in the notice calling the meeting, the business the meeting may conduct is limited to adjourning the meeting. (l) Nothing in this rule 28 or in rule 25 is to be taken to limit the powers conferred on the chair by law. 29 DECISIONS AT GENERAL MEETINGS (a) Except where a resolution requires a special majority, questions arising at a general meeting must be decided by a majority of votes cast by the members present at the meeting. A decision made in this way is for all purposes a decision of the members. (b) If the votes are equal on a proposed resolution, the chair of the meeting has a casting vote, in addition to his or her deliberative vote. (c) A resolution put to the vote of a general meeting must be decided on a show of hands unless a poll is demanded: (1) before the show of hands is held; (2) before the result of the show of hands is declared; or page 20 Constitution (3) immediately after the result of the show of hands is declared. (d) A poll may be demanded by: (1) the chair of the meeting; or (2) members in accordance with the Act. (e) A demand for a poll does not prevent a general meeting continuing to transact any business except the question on which the poll is demanded. (f) Unless a poll is duly demanded, a declaration by the chair of a general meeting that a resolution has on a show of hands been carried or carried unanimously, or carried by a particular majority, or lost, and an entry to that effect in the book containing the minutes of the proceedings of the company, is conclusive evidence of the fact without proof of the number or proportion of the votes recorded for or against the resolution. (g) If a poll is duly demanded at a general meeting, it must be taken in a way and either at once or after an interval or adjournment or otherwise as the chair of the meeting directs. The result of the poll as declared by the chair is the resolution of the meeting at which the poll was demanded. (h) A poll cannot be demanded at a general meeting on the election of a chair of the meeting. (i) The demand for a poll may be withdrawn. 30 VOTING RIGHTS (a) Subject to this constitution and to any rights or restrictions attached to any shares or class of shares, at a meeting: (1) on a show of hands, every member present has one vote; and (2) on a poll, every member present has one vote for each share held as at the record time by the member and in respect of which the member is entitled to vote, except for partly paid shares, each of which confers on a poll only the fraction of one vote which the amount paid (not credited) on the share bears to the total amounts paid and payable (excluding amounts credited) on the share. An amount paid in advance of a call will be disregarded for this purpose. (b) If a person present at a general meeting represents personally or by proxy, attorney or representative more than one member, on a show of hands the person is entitled to one vote only, even though he or she represents more than one member. (c) A joint holder may vote at a meeting either personally or by proxy, attorney or representative as if that person was the sole holder. If more than one joint holder tenders a vote in respect of the relevant shares, the vote of the holder named first in the register who tenders a vote, whether in person or by proxy, attorney or representative, must be accepted to the exclusion of the votes of the other joint holders. page 21 Constitution (d) A person entitled to a share because of a transmission event may vote at a general meeting in respect of those shares in the same way as if that person were the registered holder of those shares if, at least 48 hours before the meeting, the directors have: (1) admitted that person's right to vote at that meeting in respect of those shares; or (2) been satisfied of that person's right to be registered as the holder of, or to transfer, those shares. Any vote duly tendered by that person must be accepted and the vote of the registered holder of those shares must not be counted. (e) Where a member holds a share on which a call or other amount payable to the company has not been duly paid: (1) that member is only entitled to be present at a general meeting and vote if that member holds, as at the relevant record time, other shares on which no money is then due and payable; and (2) on a poll, that member is not entitled to vote in respect of those shares but may vote in respect of any shares that member holds, as at the record time, on which no money is then due and payable. (f) An objection to the validity of a vote tendered at a general meeting must be: (1) raised before or immediately after the result of the motion is declared; and (2) referred to the chair of the meeting, whose decision is final. (g) A vote tendered, but not disallowed by the chair of a meeting under paragraph (f), is valid for all purposes, even if it would otherwise not have been valid. 31 REPRESENTATION AT GENERAL MEETINGS (a) Subject to this constitution, each member entitled to vote at a general meeting may vote: (1) in person or, where the member is a body corporate, by representative; (2) by not more than 2 proxies; or (3) by not more than 1 attorney. (b) A proxy, attorney or representative may, but need not, be a member of the company. (c) An appointment of a proxy or attorney must be in writing and: (1) in the case of a natural person, signed by the appointor or his or her attorney; or (2) in the case of a body corporate, executed under the seal of the appointor or under the hand of a duly authorised officer or agent. page 22 Constitution (d) An instrument appointing a proxy must satisfy the requirements of the Act and may be in any usual form or any other form (including electronic) approved by the directors. (e) Unless the instrument or resolution appointing a proxy, attorney or representative provides differently, the appointment is taken to give the relevant person the same rights to speak, demand a poll, join in demanding a poll or act generally at the meeting as the member would have had if he or she was present. (f) A proxy form issued by the company must allow for the insertion of the name of the person to be primarily appointed as proxy and may provide that, in circumstances and on conditions specified in the form that are not inconsistent with this constitution, the chair of the relevant meeting (or another person specified in the form) is appointed as proxy. (g) An instrument appointing a proxy or attorney is not effective in relation to a meeting or adjourned meeting or in relation to a poll taken subsequently to the date of a meeting or adjourned meeting unless it, and the original (or a certified copy) of the power of attorney or any other instrument under which it is signed or executed, are received by the company at least 48 hours (or, in the case of an adjournment or postponement of a meeting, including an adjourned meeting, any lesser time that the directors or chair of the meeting decides) before the time for holding the meeting or adjourned meeting or taking the poll, as applicable. (h) An instrument is received by the company under paragraph (g) when it is received in accordance with the Act and, to the extent permitted by the Act, if the instrument is produced or the transmission of the instrument is otherwise verified to the company in the way specified in the notice of meeting. (i) The appointment of a proxy or attorney is not revoked by the appointor attending and taking part in the general meeting but if the appointor votes on a resolution, the person acting as proxy or attorney for the appointor is not entitled to vote, and must not vote, as the appointor's proxy or attorney on the resolution. (j) Where, otherwise than in accordance with paragraph (f), a member appoints 2 proxies to vote at the same general meeting: (1) subject to sub-paragraph (2), the appointment is of no effect and a proxy may not vote unless each proxy is appointed to represent a specified proportion or number of the member's votes; (2) if the Act precludes the company from treating as invalid an appointment of 2 proxies which fails to specify the proportion or number of votes that each may exercise, each person appointed may exercise half the member's votes; (3) on a show of hands, a proxy may not vote if more than one proxy attends; and (4) on a poll, each proxy may only exercise votes in respect of those shares or voting rights the proxy represents. page 23 Constitution (k) Unless written notice of the matter has been received at the company's registered office (or at another place specified for lodging an appointment of a proxy for the meeting) at least 48 hours before the time for holding the meeting, adjourned meeting or poll at which a proxy or attorney votes, a vote cast by the proxy or attorney is valid even if, before the vote is cast: (1) a transmission event occurs to the member; or (2) the member revokes the appointment of the proxy or attorney or revokes the authority under which a third party appointed the proxy or attorney. (l) Where authority is given to a proxy, attorney or representative concerning a meeting to be held on or before a specified date or at a specified place and that meeting is postponed to a later date or the meeting place is changed, the authority is taken to include authority to act at the re-scheduled meeting unless the member granting the authority gives the company notice to the contrary under paragraph (g). (m) The chair of a meeting may permit a person claiming to be a representative to exercise the powers of a representative, even though the person is unable to produce written evidence to show that he or she has been validly appointed. (n) The chair of a meeting may require a person acting as a proxy, attorney or representative to establish to the chair's satisfaction that the person is the person duly appointed to act. If the person fails to satisfy the requirement, the chair may exclude the person from attending or voting at the meeting. (o) The chair may delegate his or her powers under paragraphs (m) and (n) to the share registrar or any other person. DIRECTORS 32 NUMBER OF DIRECTORS (a) The minimum number of directors is 4. (b) The maximum number of directors is to be fixed by the directors, but may not be more than 8 unless the company in general meeting resolves otherwise. (c) Until otherwise determined by the company in general meeting, no more than half the number of directors in office at the date of appointment of a new director may be executive directors and any nomination of a person pursuant to rule 33(h) which may result in a breach of this rule 32(c) will be ineffective. (d) The directors must not at any time determine a maximum which is less than the number of directors in office at the time the determination takes effect. page 24 Constitution 33 APPOINTING AND RETIREMENT OF DIRECTORS (a) The directors may appoint a person as a director, either in addition to the existing directors or to fill a casual vacancy, but so that: (1) the total number of directors does not exceed the maximum number fixed under this constitution; and (2) the number of executive directors in office following the appointment is not more than half the number of directors in office at that time. (b) A director appointed under paragraph (a), who is not a managing director, holds office only until the next annual general meeting following his or her appointment. (c) At every annual general meeting of the company, after excluding: (1) a director who is a managing director; (2) a director appointed under paragraph (a) and standing for election; and (3) a director who is required to vacate office as a result of having attained the maximum age prescribed by law, one third of those directors (disregarding any fractions) must retire from office. No director who is not the managing director may hold office without re-election beyond the third annual general meeting following the meeting at which the director was last elected or re-elected. A director due to retire under this paragraph (c) at a particular meeting retains office until the conclusion of the meeting. If there is more than one managing director, the directors must, where required by the Listing Rules, nominate one of them to not be subject to vacation of office under paragraph (b) or retirement under paragraph (c). (d) The directors to retire under paragraph (c) are those directors who elect to retire and not offer themselves for re-election and, so far as is necessary to obtain the number required, those who have been longest in office since the date of their last election or appointment. As between directors who were last elected or appointed on the same date, those to retire must, unless they agree among themselves, be decided by lot. (e) The directors to retire under paragraph (c) (both as to number and identity) is to be decided having regard to the composition of the board of directors at the date of the notice calling the annual general meeting. A director is not required to retire and is not relieved from retiring because of a change in the number or identity of the directors after the date of the notice but before the meeting closes. (f) The company may by resolution at an annual general meeting fill an office vacated by a director under paragraphs (b) or (c) by electing or re-electing an eligible person to that office. (g) If at a general meeting at which an election of directors ought to take place and no such election is made, the retiring directors or those retiring page 25 Constitution directors whose position on the board has not been filled, may, if willing to act, continue in office until the next annual general meeting of the company. (h) A person is eligible for election to the office of a director at a general meeting only if: (1) the person is in office as a director immediately before that meeting; (2) the person has been nominated by the directors for election at that meeting; (3) where the person is a member, he or she has, at least 35 business days (or such other period as may be stipulated for this purpose under the Listing Rules) before the meeting, given the company a notice signed by him or her stating his or her desire to be a candidate for election at that meeting; or (4) where the person is not a member, a member intending to nominate him or her for election at that meeting has, at least 35 business days (or such other period as may be stipulated for this purpose under the Listing Rules) before the meeting, given the company a notice signed by the member stating the member's intention to nominate the person for election, and a notice signed by the person and stating his or her consent to the nomination. 34 VACATING OFFICE In addition to the circumstances prescribed by the Act and this constitution, the office of a director becomes vacant if the director: (a) becomes of unsound mind or a person who is, or whose estate is, liable to be dealt with in any way under the law relating to mental health; (b) fails to attend meetings of the directors for more than 3 consecutive months without leave of absence from the directors and a majority of the other directors have resolved that his or her office is vacated; or (c) resigns or retires by written notice to the company. 35 REMUNERATION (a) Each director (excluding any director who is an executive) is entitled to such fees from the company for his or her services as a director as the directors decide, but the total amount provided to all such directors for their services as directors in any year, excluding any amounts paid under paragraphs (e), (f), (g) or (h) and under rule 61 (subject to any limitations in these provisions), must not exceed in aggregate the amount fixed by the company in general meeting, which at the date of adoption of this constitution is $750,000 per annum. In calculating the total amount provided in any year, no regard will be had to: page 26 Constitution (1) any amount payable by the company or any related body corporate to a superannuation retirement or pension fund for a director in respect of a superannuation guarantee charge or similar statutory charge; or (2) any insurance premium paid or agreed to be paid under rule 61. (b) Fees under paragraph (a) will be provided in such manner (including by way of non cash benefit, such as, but not limited to, a contribution to a superannuation fund or by way of salary sacrifice) that the directors decide. (c) Fees are taken to accrue from day to day. (d) The remuneration of a director must not include a commission on, or percentage of, profits or operating revenue. (e) The directors are also entitled to be paid out of the funds of the company all travelling and other expenses they properly incur concerning the company's affairs, including attending and returning from general meetings of the company or meetings of the directors or of committees of the directors. (f) If a director, with the concurrence of the directors, performs extra services or makes any special exertions for the benefit of the company, the directors may cause that director to be paid out of the funds of the company such special and additional remuneration in addition to that provided for under paragraph (a) as the directors decide is appropriate having regard to the value to the company of the extra services or special exertions. (g) The directors may, to the extent permitted by law or as otherwise approved by members: (1) at any time after a director dies or ceases to hold office as a director for any other reason, pay or provide to the director or a legal personal representative, spouse, relative or dependant of the director, in addition to the remuneration of that director under paragraph (a), a pension or benefit for past services rendered by that director; and (2) cause the company to enter into a contract with the director or a legal personal representative, spouse, relative or dependant of the director to give effect to such a payment or provide for such benefit. (h) The directors may establish, maintain and support or aid the establishment, maintenance or support of funds and trusts calculated to benefit directors or former directors, employees or ex-employees of the company or the dependants of those persons and grant pensions and allowances to those persons or their dependants (or both) either by periodic payment or lump sum. (i) Nothing in this rule 35 limits or diminishes the terms of any retirement benefit conferred or agreement to provide a retirement benefit existing at the date of adopting this constitution. page 27 Constitution 36 DISCLOSING DIRECTORS' INTERESTS (a) In addition to any disclosures required under the Act or the Listing Rules, the directors may make rules requiring disclosure of interests that a director, and any person deemed by the directors to be related to the director, may have in any matter that relates to the affairs of the company or a related body corporate or in any other matter. The extent to which, and the conditions on which, disclosure is required will be determined by the directors. Any rules made under this paragraph will bind all directors. (b) No act, transaction, agreement, instrument, resolution or other thing is invalid or voidable only because a person fails to comply with any requirement for disclosure under the Act or with any rules made under paragraph (a). 37 DIRECTORS MAY CONTRACT WITH THE COMPANY AND HOLD OTHER OFFICES (a) A director is not disqualified from contracting or entering into an arrangement with the company as vendor, purchaser or in another capacity, merely because the director holds office as a director or because of the fiduciary obligations arising from that office. (b) A contract or arrangement entered into by or on behalf of the company in which a director is in any way interested is not invalid, avoided or rendered voidable merely because the director holds office as a director or because of the fiduciary obligations arising from that office. (c) A director who is interested in any arrangement involving the company is not liable to account to the company for any profit realised by or under the arrangement merely because the director holds office as a director or because of the fiduciary obligations arising from that office. (d) A director may hold any other office or place of profit (except auditor) in the company or any related body corporate in conjunction with his or her directorship and may be appointed to that office or place on the terms as to remuneration, tenure of office and otherwise as the directors decide. (e) A director may be or become a director or other officer of, or interested in, any related body corporate or any other body corporate promoted by the company or in which the company may be interested as a shareholder or in any other way, and need not account to the company for any remuneration or other benefits the director receives as a director or officer of, or from having an interest in, that body corporate. (f) A director who has an interest in a matter that is being considered at a meeting of directors may, despite that interest, vote, be present and be counted in a quorum at the meeting, unless that is prohibited by the Act. No act, transaction, agreement, instrument, resolution or other thing is invalid or voidable only because a director fails to comply with that prohibition. (g) The directors may exercise the voting rights given by shares in any corporation held or owned by the company in any way and in all respects page 28 Constitution as the directors decide. This includes voting for any resolution appointing a director as a director of that corporation or voting for the payment of remuneration to the directors of that corporation. A director may, if the law permits, vote for the exercise of those voting rights even though he or she is, or may be about to be appointed, a director of that other corporation and, in that capacity, interested in the exercise of those voting rights. (h) A director who is interested in any contract or arrangement may despite that interest witness the fixing of the seal to any document evidencing or otherwise connected with that contract or arrangement. 38 POWERS AND DUTIES OF DIRECTORS (a) The management and control of the company's business and affairs are vested in the directors, who may exercise all powers and do all things that are within the company's power and are not expressly required by the Act or this constitution to be exercised by the company in general meeting. (b) The directors may exercise all the powers of the company: (1) to borrow or raise money in any other way; (2) to charge any of the company's property or business or any amount unpaid on its shares; and (3) to issue debentures or give any other security for a debt, liability or obligation of the company or of any other person. (c) Debentures or other securities may be issued on the terms and at prices decided by the directors, including bearing interest or not, with rights to subscribe for, or exchange into, shares or other securities in the company or a related body corporate or with special privileges as to redemption, participating in share issues, attending and voting at general meetings and appointing directors. (d) The directors may decide how cheques, documents, promissory notes, banker's drafts, bills of exchange or other negotiable instruments must be signed, drawn, accepted, endorsed or otherwise executed, as applicable, by or on behalf of the company. (e) The directors may: (1) appoint or employ any person (including a person identified only as one of a fluctuating body or class of persons) as an officer, agent or attorney of the company for the purposes and with the powers, discretions and duties (including powers, discretions and duties vested in or exercisable by the directors), for any period and on any conditions they decide; (2) authorise an officer, agent or attorney to delegate any of the powers, discretions and duties vested in the officer, agent or attorney; and (3) without prejudice to any rights or obligations under any agreement entered into with the relevant person or under any law, remove or page 29 Constitution dismiss any officer, agent or attorney of the company at any time, with or without cause. (f) A power of attorney may contain any provisions for the protection and convenience of the attorney or persons dealing with the attorney that the directors decide. (g) Nothing in this rule 38 limits the general nature of paragraph (a). 39 PROCEEDINGS OF DIRECTORS (a) The directors may meet together to attend to business and adjourn and regulate their meetings as they decide. (b) The contemporaneous linking together by telephone or other method of audio or audio visual communication of a sufficient number of the directors to constitute a quorum, constitutes a meeting of the directors. All the provisions in this constitution relating to meetings of the directors apply, as far as they can and with any necessary changes, to meetings of the directors by telephone or audio or audio visual communication. (c) A director taking part in a meeting by telephone or audio or audio visual communication is to be taken to be present in person at the meeting. (d) If, before or during the meeting, any technical difficulty occurs whereby one or more directors cease to participate, the chair may, where a quorum of directors remains present, continue with the meeting. 40 CALLING MEETINGS OF DIRECTORS (a) A director may, whenever he or she thinks fit, call a meeting of the directors. (b) A secretary must, on the requisition of a director, call a meeting of the directors. 41 QUORUM AT MEETINGS OF DIRECTORS (a) No business may be transacted at a meeting of directors unless a quorum of directors is present at the time the business is dealt with. (b) Until the directors decide differently, 3 directors constitute a quorum. (c) If there is a vacancy in the office of a director, the remaining directors may act. But, if their number is not sufficient to constitute a quorum, they may act only in an emergency or to increase the number of directors to a number sufficient to constitute a quorum or to call a general meeting of the company. page 30 Constitution 42 CHAIR AND DEPUTY CHAIR OF DIRECTORS (a) The directors may elect a director to the office of chair of directors and may elect one or more directors to the office of deputy chair of directors. The directors may decide the period for which those offices will be held. (b) The chair of directors is entitled (if present within 10 minutes after the time appointed for the meeting and willing to act) to preside as chair at each meeting of directors. (c) If at a meeting of directors: (1) there is no chair of directors; (2) the chair of directors is not present within 10 minutes after the time appointed for holding the meeting; or (3) the chair of directors is present within that time but is not willing or declines to act as chair of the meeting or of part of the meeting, the director present having been longest in office will chair the meeting or part of it. (d) Subject to rule 42(e), an executive director (including a managing director) is ineligible to be elected as chair or deputy chair of directors. (e) An executive director (including a managing director) may act as chair at a meeting of directors in relation to any particular item of business to be considered by the meeting of directors. 43 AUTHORITY AND DECISIONS OF DIRECTORS (a) A meeting of directors at which a quorum is present may exercise all the authorities, powers and discretions vested in or exercisable by the directors generally or under this constitution. (b) Questions arising at a meeting of directors must be decided by a majority of votes cast by the directors present and entitled to vote on the matter. The decision is for all purposes a decision of the directors. (c) If the votes are equal on a proposed resolution, the chair of the meeting has a casting vote, in addition to his or her deliberative vote. 44 CIRCULAR RESOLUTIONS A written resolution signed or consented to by all the directors, being directors who would at a meeting duly called constitute a quorum, but excluding any director: (1) on leave of absence approved by the directors; or (2) who is not able to be contacted using reasonable means; or (3) who has participated in a recommendation made to the Board by a duly constituted committee, where it is inappropriate for the director to vote; or page 31 Constitution (4) who, at a meeting of directors, would be prohibited by the Act from voting on the resolution, is as valid as if it had been passed at a meeting of directors duly called. A director may consent to a resolution by: (a) signing the document containing the resolution (or a copy of that document); (b) giving to the company at its registered office a written notice (including by facsimile or other electronic transmission) addressed to the secretary or to the chair of directors signifying assent to the resolution and either setting out its terms or otherwise clearly identifying them; or (c) communicating with the chair of directors, or in his or her absence, the secretary and signifying assent to the resolution and clearly identifying its terms. 45 ALTERNATE DIRECTORS (a) A director may, with the approval of a majority of his or her co-directors, appoint a person to be the director's alternate director for such period as the director decides. (b) An alternate director may, but need not, be a member or a director of the company. (c) An alternate director does not require any share qualification. (d) One person may act as alternate director to more than one director. (e) An alternate director is entitled to exercise all powers (except the power to appoint an alternate director) and perform all duties of a director, insofar as the director by whom he or she was appointed had not exercised or performed them. (f) An alternate director is entitled, if the appointor does not attend a meeting of directors, to attend and vote in place of and on behalf of the appointor. (g) An alternate director is entitled to a separate vote for each director the alternate director represents in addition to any vote the alternate director may have as a director in his or her own right. (h) An alternate director, whilst acting as a director, is responsible to the company for his or her own acts and defaults and is not to be taken to be the agent of the director by whom he or she was appointed. (i) The office of an alternate director is vacated if and when the appointor vacates office as a director. (j) The appointment of an alternate director may be terminated or suspended at any time by the appointor or by a majority of the other directors. (k) An appointment, or the termination or suspension of an appointment of an alternate director must be in writing signed and takes effect only when the company has received notice in writing of the appointment, termination or suspension. page 32 Constitution (l) An alternate director is not to be taken into account in determining the minimum or maximum number of directors allowed or the rotation of directors under this constitution. (m) An alternate director is to be counted for the purpose of determining whether a quorum is present at a meeting of directors attended by the alternate director at which the alternate director is entitled to vote. (n) An alternate director is not entitled to receive any remuneration as a director from the company otherwise than out of the remuneration of the director appointing the alternate director but is entitled to travelling, hotel and other expenses reasonably incurred for the purpose of attending any meeting of directors at which the appointer is not present and at which the alternate director is entitled to vote. 46 COMMITTEES OF DIRECTORS (a) The directors may delegate any of their powers to committees comprising any director or directors they decide. (b) A committee to which any powers have been delegated must exercise the powers delegated in accordance with any directions of the directors. (c) The provisions of this constitution applying to meetings and resolutions of directors apply, so far as they can and with any necessary changes, to meetings and resolutions of a committee of directors, except to the extent they are contrary to any direction given under paragraph (b). (d) Membership of a committee of directors may, if the directors so decide in circumstances where the role of the committee is limited to a specific task or discrete project, be treated as an extra service or special exertion performed by the members for the purposes of rule 35(f). 47 VALIDITY OF ACTS An act done by a meeting of directors, a committee of directors or a person acting as a director is not invalidated by: (a) a defect in the appointment of a person as a director, a member of a committee or to act as a director; or (b) a person so appointed being disqualified, having vacated office or not being entitled to vote, if that circumstance was not known by the directors, committee or person when the act was done. page 33 Constitution EXECUTIVE OFFICERS 48 MANAGING DIRECTOR AND EXECUTIVE DIRECTOR (a) The directors may appoint one or more persons as managing director who must be a director or who, if not already a director, must be appointed a director within 2 months after his or her appointment. (b) Subject to rules 32(c) and 42(d), the directors may also appoint one or more persons as executive director. (c) A managing director's appointment automatically terminates if he or she does not become a director within 2 months of his or her appointment or, unless the directors decide differently, at any time ceases to be a director. (d) Unless the directors decide differently, an executive director's appointment automatically terminates if he or she at any time ceases to be a director. (e) A managing director or other executive director may be referred to by any title the directors decide on. 49 SECRETARY (a) The directors must appoint at least one secretary and may appoint additional secretaries. (b) The directors may appoint one or more assistant secretaries. 50 PROVISIONS APPLYING TO EXECUTIVE OFFICERS (a) The appointment of a managing director, executive director or secretary (each in this rule an executive officer) may be for the period, at the remuneration and on the conditions the directors decide. (b) The remuneration payable by the company to a managing director or an executive director must not include a commission on, or percentage of, operating revenue. (c) The directors may: (1) delegate to or give an executive officer any powers, discretions and duties they decide; (2) withdraw, suspend or vary any of the powers, discretions and duties given to an executive officer; and (3) authorise the executive officer to delegate any of the powers, discretions and duties given to the executive officer. (d) Unless the directors decide differently, the office of a director who is employed by the company or by a subsidiary of the company becomes vacant if the director ceases to be so employed. page 34 Constitution (e) An act done by a person acting as an executive officer is not invalidated by a defect in the person's appointment as an executive officer, the person being disqualified to be an executive officer or having vacated office if he or she did not know that circumstance when the act was done. SEALS 51 USING THE SEAL Without limiting the ways in which the company can execute documents in accordance with the Act, if the company has a common seal the directors may determine whatever procedures they consider appropriate for the use of the seal. 52 SEAL REGISTER (a) The company must, for so long as it has a seal, keep a seal register and, on affixing the seal to any document (except a certificate for securities of the company), must enter in the register particulars of the document, giving in each case a short description of the document. (b) Failure to comply with paragraph (a) does not invalidate any document to which the seal is properly affixed. DISTRIBUTIONS TO MEMBERS 53 DIVIDENDS (a) The directors may pay any interim and final dividends that, in their judgment, the financial position of the company justifies. The directors may rescind a decision to pay a dividend if they decide at any time before the company's shares are quoted by the Exchange on an ex-dividend basis in relation to the dividend. (b) The directors may pay any dividend required to be paid under the terms of issue of a share. (c) Paying a dividend does not require confirmation by a general meeting. (d) Subject to any rights or restrictions attached to any shares or class of shares: (1) all dividends must be paid equally on all shares, except that a partly paid share does not confer an entitlement to a greater proportion of the dividend than the proportion which the amount paid (not credited) is of the total amounts paid and payable (excluding amounts credited); page 35 Constitution (2) all dividends must be apportioned and paid proportionately to the amounts so paid or credited during any portion of the period for which the dividend is paid; (3) a dividend may be paid at a rate per annum for a specified period; (4) for the purposes of sub-paragraphs (1) and (2), unless the directors decide differently, an amount paid or credited as paid on a share in advance of a call is to be taken as not having been credited as paid on the share until it becomes payable; and (5) interest is not payable by the company on any dividend. (e) A decision of the directors as to the amount of the net profits of the company is conclusive. (f) Subject to the SCH business rules, the directors may fix a books closing date or record date for a dividend, with or without suspending the registration of transfers from that date under rule 20. (g) Subject to the SCH business rules, a transfer of shares does not pass the right to any dividend to be paid on the shares unless the transfer is registered or left with the company for registration under rule 18(b): (1) where the directors have fixed a books closing date or record date for the dividend, on or before that date or before the company's shares are quoted by the Exchange on an ex-dividend basis in relation to the dividend; or (2) where the directors have not fixed a books closing date or record date for that dividend, on or before the date the dividend is paid. (h) The directors when resolving to pay a dividend may: (1) direct payment of the dividend wholly or partly by the distribution of specific assets, including paid-up shares or other securities of the company or of another body corporate, either generally or to specific members; and (2) unless prevented by the Listing Rules, direct payment of the dividend to particular shareholders wholly or partly out of any particular fund or reserve or out of profits derived from any particular source, and to the other shareholders wholly or partly out of any other particular fund or reserve or out of profits derived from any other particular source. (i) The directors may retain from any dividend payable to a member any money presently payable by the member to the company in relation to shares in the company, whether on account of calls or for any other reason, and apply the amount retained in or towards satisfaction of the money owing. (j) Without affecting any other method of payment the directors may adopt (including by cheque), any dividend, interest or other money payable in cash in respect of shares may be paid by electronic or other means approved by the directors directly to an account with a financial institution nominated in writing by the member being: page 36 Constitution (1) an account of the member or the joint holders; (2) an account of which the member or a joint holder is a joint account holder; (3) an account of which a joint holder is the sole account holder; or (4) any other account which the company in its absolute discretion determines is acceptable for the purposes of this rule. Any payment made under paragraph (j) is made at the member's risk. 54 CAPITALISING PROFITS (a) Subject to the Listing Rules, any rights or restrictions attached to any shares or class of shares and any special resolution of the company in general meeting, the directors may capitalise and distribute among those members who would be entitled to receive dividends, and in the same proportions, any amount: (1) forming part of the company's undivided profits; (2) representing profits arising from an ascertained accretion to capital or from a revaluation of the company's assets; (3) arising from the realisation of any of the company's assets; or (4) available for distribution as a dividend for any other reason. (b) The directors may resolve that any part of the capitalised amount is to be applied: (1) in paying up in full, at an issue price decided by the resolution, any unissued shares in or other securities of the company; (2) in paying up any amounts unpaid on shares or other securities held by the members; or (3) partly as specified in sub-paragraph (1) and partly as specified in sub-paragraph (2). The members entitled to share in the distribution must accept that application in full satisfaction of their interests in the capitalised amount. (c) Rules 53(f) and (g) apply, so far as they can and with any necessary changes, to capitalising an amount under this rule 54 as if references in those rules to: (1) a dividend were references to capitalising an amount; and (2) the date a dividend is declared were references to the date the directors resolve to capitalise the amount under this rule 54. page 37 Constitution 55 ANCILLARY POWERS (a) To give effect to any resolution to satisfy a dividend as set out in rule 53(h)(1) or by capitalising any amount under rule 54, the directors may: (1) settle as they think expedient any difficulty that arises in making the distribution or capitalisation and, in particular: (A) make cash payments in cases where shares or other securities in the company become issuable in fractions; and (B) decide that amounts or fractions of less than a particular value decided by the directors may be disregarded in order to adjust the rights of all parties; (2) fix the value for distribution of any specific assets; (3) pay cash or issue shares or other securities to any member in order to adjust the rights of all parties; (4) vest any of those specific assets, cash, shares or other securities in a trustee on the trusts for the persons entitled to the dividend or capitalised amount that seem expedient to the directors; and (5) authorise any person to make, on behalf of all the members entitled to any further shares or other securities as a result of the distribution or capitalisation, an agreement with the company or another body corporate which provides, as appropriate: (A) for the issue to them of those further shares or other securities credited as fully paid up; or (B) for payment by the company on their behalf of the amounts or any part of the amounts remaining unpaid on their existing shares or other securities by applying their respective proportions of the sum resolved to be capitalised. Any agreement made under an authority referred to in this sub-paragraph (5) is effective and binds all members concerned. (b) If the company distributes to members (either generally or to specific members) securities in the company or in another body corporate or trust (whether as a dividend or otherwise and whether or not for value), each of those members appoints the company as his or her agent to do anything needed to give effect to that distribution, including agreeing to become a member of that other body corporate. (c) The directors may: (1) determine that any dividend payable to some or all of the members will be paid in a currency other than Australian currency; (2) determine or provide for the determination of the exchange rate or exchanges rates at which the amount of dividend in Australian currency will be converted into the other currency or currencies for the purpose of payment; and page 38 Constitution (3) settle any difficulty arising in regard to any payment of a dividend in a currency or currencies other than Australian currency, as they consider expedient. (d) Payment in another currency or currencies of the amount of any dividend converted pursuant to this paragraph (c) is deemed between the company and any member to whom payment is made, and as against all other members, to be an adequate and proper payment of the amount of the dividend. 56 RESERVES (a) Subject to this constitution, the directors may set aside out of the company's profits any reserves or provisions for any purposes they decide. (b) The directors may appropriate to the company's profits any amount previously set aside as a reserve or provision. (c) Setting aside an amount as a reserve or provision does not require the directors to keep the amount separate from the company's other assets or prevent the amount being used in the company's business or being invested in any investments the directors decide. 57 CARRYING FORWARD PROFITS The directors may carry forward any part of the profits remaining that they consider should not be distributed as dividends or capitalised, without transferring those profits to a reserve or provision. 58 DISTRIBUTING SURPLUS (a) If the company is wound up and the surplus assets are insufficient to repay the whole of the paid up capital, the surplus assets must be distributed so that, as nearly as may be, the losses are borne by the members in proportion to the capital paid up or which ought to have been paid up on the shares held by them at the commencement of the winding up. (b) If in a winding up the assets available for distribution among the members are more than sufficient to repay the whole of the capital paid up at the commencement of the winding up, the excess must be distributed among the members in proportion to the capital paid up or which ought to have been paid up on the shares held by them at the commencement of the winding up. (c) Paragraphs (a) and (b) are subject to the rights of the holders of shares issued upon special terms and conditions. page 39 Constitution 59 DIVIDING PROPERTY (a) If the company is wound up, the liquidator may, with the sanction of a special resolution: (1) divide among the members the whole or any part of the company's property; and (2) decide how the division is to be carried out as between the members or different classes of members. .. (b) A division under paragraph (a) need not accord with the legal rights of the members and, in particular, any class may be given preferential or special rights or may be excluded altogether or in part. (c) Where a division under paragraph (a) does not accord with the legal rights of the members, a member is entitled to dissent and to exercise the same rights as if the special resolution sanctioning that division were a special resolution passed under section 507 of the Act. (d) If any of the property to be divided under paragraph (a) includes securities with a liability to calls, any person entitled under the division to any of the securities may, within 10 days after the special resolution referred to in paragraph (a) is passed, by written notice direct the liquidator to sell the person's proportion of the securities and to account for the net proceeds. The liquidator must, if practicable, act accordingly. (e) Nothing in this rule 59 takes away from or affects any right to exercise any statutory or other power which would have existed if this rule were omitted. (f) Rule 55 applies, so far as it can and with any necessary changes, to a division by a liquidator under paragraph (a) as if references in rule 55 to: (1) the directors were references to the liquidator; and (2) a distribution or capitalisation were references to the division under paragraph (a). RECORDS 60 INSPECTION OF AND ACCESS TO RECORDS (a) A person who is not a director does not have the right to inspect any of the board papers, books, records or documents of the company, except as provided by law, this constitution or as authorised by the directors or by a resolution of the members. (b) The company may enter into contracts with its directors agreeing to provide continuing access for a specified period after they cease to be a director to board papers, books, records and documents of the company which relate to the period during which the director was a director on such page 40 Constitution terms and conditions as the directors think fit and which are not inconsistent with this rule 60. (c) The company may procure that its subsidiaries provide similar access to board papers, books, records or documents as that set out in paragraphs (a) and (b). PROTECTION OF OFFICERS AND FORMER OFFICERS 61 INDEMNITY AND INSURANCE (a) Rule 61 applies: (1) to each person who is or has been a director, secretary or executive officer of the company; and (2) to such other officers or former officers of the company or of its related bodies corporate as the directors in each case determine. (b) The company will indemnify on a full indemnity basis and to the full extent permitted by law, each person to whom this rule 61 applies for all losses or liabilities incurred by the person as an officer of the company, a related body corporate or trustee of a company sponsored superannuation fund. (c) The company may, to the extent permitted by law: (1) purchase and maintain insurance; or (2) pay or agree to pay a premium for insurance, for any person to whom this rule 61 applies against any liability incurred by the person as an officer of the company or of a related body corporate. (d) Nothing in this rule 61: (1) affects any other right or remedy that a person may have in respect of any loss or liability referred to in those rules; or (2) limits the capacity of the company to indemnify or provide insurance for any person to whom those rules do not apply; or (3) limits or diminishes the terms of any indemnity conferred or agreement to indemnify entered into prior to the adopting of this constitution. (e) The company may enter into a deed with any person to whom this rule 61 applies to give effect to the rights conferred by this rule or the exercise of a discretion under this rule on such terms as the directors think fit which are not inconsistent with this rule 61. page 41 Constitution NOTICES 62 GIVING OF NOTICES (a) Any notice which must be given under this constitution may be given by: (1) personal delivery; (2) prepaid post; (3) sending it by facsimile or electronic transmission, to the address notified by the intended recipient, as the case may be, for that purpose. (b) The company may give a notice to the joint holders of a share by giving the notice in the way authorised by paragraph (a) to the joint holder who is named first in the register of members for the share. (c) The company may give a notice to a person entitled to a share because of a transmission event by delivering it or sending it in the way authorised by paragraph (a) addressed to the name or title of the person, to: (1) the address that person has supplied to the company for giving notices to that person; or (2) if that person has not supplied an address, to the address to which the notice might have been sent if that transmission event had not occurred. (d) A notice given to a member under paragraphs (a) or (b) is, even if a transmission event has occurred and whether or not the company has notice of that occurrence: (1) duly given for any shares registered in that person's name, whether solely or jointly with another person; and (2) sufficiently served on any person entitled to the shares because of the transmission event. (e) A notice given to a person who is entitled to a share because of a transmission event is sufficiently served on the member in whose name the share is registered. (f) A person who, because of a transfer of shares, becomes entitled to any shares registered in the name of a member, is taken to have received every notice which, before that person's name and address is entered in the register of members for those shares, is given to the member complying with this rule 62. (g) A signature to any notice given by the company to a member under this rule 62 may be in writing or a facsimile printed or affixed by some mechanical or other means. page 42 Constitution 63 TIME OF SERVICE (a) Where a notice (including notice of a general meeting) is sent by post, the notice is to be taken as served if the notice is properly addressed and placed in the post with postage paid and to have been served on the day after the date it is posted. (b) A certificate signed by a secretary or officer of the company to the effect that a notice was duly posted under this constitution is conclusive evidence of that fact. (c) Where a notice is sent by facsimile or electronic transmission, the notice is to be taken as served when: (1) the correct facsimile number appears on the facsimile transmission report produced by the sender's facsimile machine; or (2) a message indicating receipt has been received by the sender, and to have been served at the time the facsimile or electronic transmission is sent. (d) Where a given number of days' notice or notice extending over any other period must be given, the day of service is not to be counted in the number of days or other period, unless this constitution provides differently. 64 OTHER COMMUNICATIONS AND DOCUMENTS Rules 62 and 63 apply, so far as they can and with any necessary changes, to serving any communication or document. GENERAL 65 SUBMISSION TO JURISDICTION Each member submits to the jurisdiction of the Supreme Court of Victoria and the courts which may hear appeals from that court. 66 PROHIBITION AND ENFORCEABILITY (a) Any provision of, or the application of any provision of, this constitution which is prohibited in any place is, in that place, ineffective only to the extent of that prohibition. (b) If any provision of this constitution is unlawful or unenforceable, the unlawfulness or unenforceability of that provision does not affect the lawfulness, enforceability, operation, construction or interpretation of any other provision of this constitution, with the intent that the unlawful or unenforceable provision shall be treated for all purposes as severable from this constitution. page 43 Constitution 67 TRANSITIONAL PROVISIONS This constitution must be interpreted in such a way that: (a) every director, managing director and secretary in office in that capacity immediately before this constitution is adopted continues in office subject to, and is taken to have been appointed or elected under, this constitution; (b) the directors are taken, immediately after this constitution is adopted, to have decided under rule 32 a number which is equal to the number of persons in office as directors immediately after this constitution is adopted; (c) any register maintained by the company immediately before this constitution is adopted is taken to be a register maintained under this constitution; (d) any seal adopted by the company immediately before this constitution is adopted is taken to be a seal which the company has under a relevant authority given by this constitution; and (e) unless a contrary intention appears in this constitution, all persons, things, agreements and circumstances appointed, approved or created by or under the constitution of the company in force before this constitution is adopted continue to have the same status, operation and effect after this constitution is adopted. RESTRICTED SECURITIES 68 RESTRICTED SECURITIES Where at any time any of the share capital of the company is classified by the Exchange as "restricted securities" despite any other provision of this constitution: (a) the restricted securities must not be disposed of during the escrow period except as permitted by the Listing Rules or the Exchange; (b) the company must refuse to acknowledge a disposal (including registering a transfer) of the restricted securities during the escrow period except as permitted by the Listing Rules or the Exchange; and (c) during a breach of the Listing Rules relating to restricted securities, or a breach of a restriction agreement, the holder of the restricted securities is not entitled to any dividend or distribution, or voting rights, in respect of the restricted securities. page 44 Constitution PARTIAL TAKEOVERS 69 PARTIAL TAKEOVERS (a) Unless the context otherwise indicates or requires, expressions in this rule 69 have the meaning given to them by the Act. (b) Where offers have been made under a proportional takeover bid for securities of the company: (1) the registration of a transfer giving effect to a takeover contract for the bid is prohibited unless and until a resolution to approve the bid (in this rule 69 referred to as "an approving resolution") is passed in accordance with the provisions of this rule 69; (2) a person (other than the bidder or an associate of the bidder) who, as at the end of the day on which the first offer under the bid was made, held bid class securities is entitled to vote on an approving resolution; (3) an approving resolution must be voted on at a meeting, convened by the company, of the person entitled to vote on the resolution; and (4) an approving resolution that has been voted on is taken to have been passed if the proportion that the number of votes in favour of the resolution bears to the total number of votes on the resolution is greater than 50% and otherwise is taken to have been rejected. (c) The provisions of this constitution that apply in relation to a general meeting of members apply, with such modifications as the circumstances require, in relation to a meeting that is convened under this rule 69 as if the last-mentioned meeting were a general meeting of members. (d) This rule 69 ceases to have effect on 31 December 2004. (rule 69 replaced 12 April 2002) page 45 EX-4.1 4 dex41.txt CO-ORDINATION AGREEMENT EXHIBIT 4.1 CO-ORDINATION AGREEMENT Sale of Pacific Brands [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference BAE Co-ordination agreement TABLE OF CONTENTS Clause Page 1 Definitions and Interpretation 1 1.1 Definitions 1 1.2 Interpretation 10 1.3 Business Day 11 1.4 Paramountcy 11 2 Conditions precedent 11 2.1 Conditions 11 2.2 Best endeavours 11 2.3 Notice 12 2.4 Waiver 12 2.5 Cut-off date 12 3 Purchase Price 12 3.1 Calculation of Purchase Price 12 3.2 Payment of Purchase Price 13 3.3 Payment at Completion 13 3.4 Final Payment 13 3.5 Complete discharge 13 4 Completion 14 4.1 Date for Completion 14 4.2 Interdependency 14 4.3 Secondary Consents 14 4.4 ITO Services Agreement 16 4.5 Tax Indemnity Deed 17 5 Completion Statement 17 5.1 Stocktake 17 5.2 Completion Accounts, Completion Statement, Apportionment Statement and EBIT Statement 17 5.3 Valuer 20 5.4 Effect of Matters In Dispute 21 6 Warranties and Indemnities 22 6.1 Accounts 22 6.2 Management Accounts 22 6.3 Application of the Seller's Warranties 22 6.4 [Not used] 23 6.5 Time of Warranties 23 6.6 Disclosure 23 6.7 Matters of public record 23 6.8 Environmental Indemnity 23 6.9 Litigation Indemnity 25 page 1 Co-ordination agreement 7 Limitations on liability 26 7.1 Limitation to Claims under this agreement 26 7.2 Awareness 26 7.3 Limitation for insurance 26 7.4 Limitation for provisions 27 7.5 Limitation for future events 27 7.6 Time limits 27 7.7 Monetary limits 28 7.8 Maximum amount of Warranty Claims 28 7.9 Buyer Group Companies' obligations 28 7.10 Right to reimbursement 29 7.11 All Warranty Claims 29 8 Foreign Exchange Contracts 29 8.1 Financial adjustments 29 8.2 Interest 30 8.3 Indemnity 30 8.4 Prior to Completion 30 9 Strategic Investment Programme 30 9.1 Entitlements 30 9.2 Payment 30 9.3 Interest 31 9.4 Acknowledgment 31 9.5 Indemnity 31 10 Acknowledgements 31 10.1 Joyce Contract 31 10.2 Inter Group Debts 31 10.3 Restructuring Provision 32 10.4 General Provision 32 10.5 Restructuring 32 11 Announcements and confidentiality 33 11.1 Legal requirements 33 11.2 Disclosure to Officers, employees and professional advisers 33 11.3 Further publicity 33 11.4 Confidentiality 33 11.5 Return of information and documents 33 12 Duties, costs and expenses 34 12.1 Duties 34 12.2 Costs and expenses 34 12.3 Costs of performance 34 13 General 34 13.1 Notices 34 page 2 Co-ordination agreement 13.2 Governing law and jurisdiction 35 13.3 Prohibition and enforceability 35 13.4 Waivers 36 13.5 Variation 36 13.6 Assignment 36 13.7 Survival of certain provisions 36 13.8 Default interest 36 13.9 Further assurances 37 13.10 Entire agreement 37 13.11 Non-merger 37 13.12 Counterparts 37 13.13 Attorneys 37 14 Incorporation by reference 37 14.1 Linked Transaction Agreements 37 14.2 References to group companies 37 15 Guarantee and indemnity - Seller 39 15.1 Guarantee 39 15.2 Indemnity 39 15.3 Extent of guarantee and indemnity 39 15.4 Continuing guarantee and indemnity 39 15.5 Warranties of the Guarantor 40 15.6 Rights 40 15.7 Ansell 40 16 Guarantee and indemnity - Buyer 40 16.1 Guarantee 40 16.2 Indemnity 41 16.3 Extent of guarantee and indemnity 41 16.4 Continuing guarantee and indemnity 41 16.5 Warranties of the Guarantor 41 16.6 Rights 42 17 Speeds Receivable 42 Schedule 1 - Parties 43 Schedule 2 - Consents 45 Schedule 3 - Completion Statement 47 Schedule 4 - Notes for preparation of Completion Statement 49 Schedule 5 - Notes for preparation of the Apportionment Statement 51 Schedule 6 - Accounts 53 Schedule 7 - Bid Accounts 54 Schedule 8 - Senior Management 55 Schedule 9 - Earn Out 56 page 3 Co-ordination agreement 1 During Earn Out Period 57 1.1 Seller Nominee and information 57 1.2 Excluded Costs 57 1.3 Included Revenue 58 1.4 Determination 58 1.5 Covenants by Buyer 58 2 Early Termination of Earn Out Period 59 2.1 Early termination 59 2.2 Early payment 59 3 Earn Out Calculation 59 3.1 Review by Seller's Accountant 59 3.2 Attempt to resolve 59 3.3 Valuer 59 4 Earn out 60 4.1 Earn out amounts 60 4.2 Determination of earn out amount 60 4.3 Payment of earn out amount 60 Annexure A - ITO Services Agreement Annexure B - Tax Indemnity Deed Annexure C - Data Room page 4 Co-ordination agreement THIS CO-ORDINATION AGREEMENT is made on 2001 between the parties specified in schedule 1. RECITALS A. The parties have agreed that the Seller Group Companies will sell the assets and shares more particularly described in the Linked Transaction Agreements to the Buyer Group Companies on the terms of those agreements. B. In order to coordinate the transactions the subject of the Linked Transaction Agreements, the parties wish to record in a single document certain matters that have overarching effect on those transactions such as, without limitation: (a) the conditions precedent to Completion occurring; (b) the payments due from the Buyer Group Companies; (c) the giving of a warranty in relation to the Accounts; (d) the preparation and finalisation of the Completion Statement; and (e) the giving of warranties generally and the limitations on liability that apply in respect of such warranties. C. The Guarantor has agreed to guarantee the performance by the Seller Group Companies of their obligations under this agreement. D. The Buyer Guarantor has agreed to guarantee the performance by the Buyer Group Companies of their obligations under this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accounting Standards means: (a) accounting standards (as defined in section 9 of the Corporations Act) nominated in the notes to the Accounts; and (b) generally accepted Australian accounting principles, in each case as applied by PDL in the preparation of the Accounts; Accounts means the special purpose consolidated audited statement of net assets of the Pacific Brands Business (other than the Non-Hyperion Business) as at the Accounts Date and the special purpose consolidated audited profit and loss page 1 Co-ordination agreement statement of the Pacific Brands Business (other than the Non-Hyperion Business) for the year ended on the Accounts Date together with any notes attached to and forming part of those financial statements, all as set out in schedule 6; Accounts Date means 30 June 2001; Affected Shares has the meaning given to that term in clause 4.3(b)(3); Affected Shares Agreements means each of the Shares Agreements identified in part B of schedule 2 in respect of which all relevant Secondary Consents have not been obtained by Completion; Agreed Accounting Principles means the accounting principles and practices used by PDL in the preparation of the Accounts, consistently applied and assuming continuity of operation of the Pacific Brands Business, except: (a) that: (1) freehold property; and (2) plant and equipment, as those terms are defined in the relevant Assets Agreement or Shares Agreement will be valued at the values given in the Accounts adjusted only for accounting depreciation applying rates consistently applied and amounts attributable to acquisitions and disposals; (b) no restructuring provisions additional to those contained in the Accounts may be raised; (c) the asset amount contained in the Bid Accounts relating to the Joyce Contract is the agreed carrying value of that asset; (d) to the extent that any item is not dealt with by the Agreed Accounting Principles then generally accepted Australian accounting principles will apply; Agreed Adjustments means the adjustments to be made to the Completion Accounts in order to derive the Completion Statement, as described in Part A of schedule 4; Ansell means Ansell Healthcare Products Inc; Apportionment Statement means the statement to be prepared pursuant to clause 5.2(f); Assets Agreement Australia means the Business Sale Agreement executed on the same day as this agreement by certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to the Pacific Brands Business carried on by certain of the Seller Group Companies in Australia (excluding the Bonds Industries Business); Assets Agreement New Zealand means the Business Sale Agreement executed on the same day as this agreement by certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to the Pacific Brands Business carried on by certain of the Seller Group Companies in New Zealand; page 2 Co-ordination agreement Assets Agreements means the Assets Agreement Australia and the Assets Agreement New Zealand; Australia Assets Purchase Price has the meaning given to the term Purchase Price in the Assets Agreement Australia; Australia Share Purchase Price has the meaning given to that term in the Shares Agreement Australia; Australia Assets Completion has the meaning given to the term Completion in the Assets Agreement Australia; Australia Shares Completion has the meaning given to the term Completion in the Shares Agreement Australia; Authorisation means any certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency necessary to carry on the Business as currently operated; Bid Accounts means the statement set out in schedule 7 which disclosed, as at the Accounts Date, the consolidated net assets of the Pacific Brands Business as derived from the Accounts following specific adjustments as set out in schedule 7; Bonds Industries Business means that part of the Pacific Brands Business carried on by Bonds Industries Pty Ltd; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday, Sunday or public holiday; Buyer Group Companies means the entities listed in part 2 of schedule 1; Buyer Guarantor means PB Holdings NV; Buyer's Warranties means the: (a) warranties set out in part 1 of schedule 1 of the Assets Agreements; and (b) warranties set out in part 1 of schedule 2 of the Shares Agreements; Claim means any claim or cause of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement or any of the Linked Transaction Agreements; Completion means each of: (a) the Australia Assets Completion; (b) the Australia Shares Completion; (c) the New Zealand Completion; (d) the UK Completion; (e) the USA Completion; (f) the Indonesia Completion; (g) the Fiji Completion; (h) the Hong Kong Completion; (i) the Malaysia Completion; and page 3 Co-ordination agreement (j) the Novare Completion; Completion Accounts means the special purpose consolidated audited statement of net assets of the Pacific Brands Business (other than the Non-Hyperion Businesses) to be prepared as at the Effective Time, in accordance with the Agreed Accounting Principles and in the same form as the Accounts, pursuant to clause 5.2; Completion Date means the date on which Completion occurs; Completion Statement means the statement to be prepared as at the Effective Time pursuant to clause 5.2 and in the form set out in schedule 3; Conditions means that each Key Consent must be obtained; Current Speeds Receivable means the net receivable relating to Speeds as at the Effective Time as contained in the Completion Accounts (which is to be eliminated as an Agreed Adjustment to derive the Completion Statement), less the Non Current Speeds Receivable; Data Room means the data room made available by the Seller Group Companies for inspection by the Buyer containing the documents described in the indices attached as Annexure C; Disclosure Schedule means each of: (a) schedule 2 of the Assets Agreement Australia; (b) schedule 3 of the Shares Agreement Australia; (c) schedule 2 of the Assets Agreement New Zealand; (d) schedule 3 of the Shares Agreement UK; (e) schedule 3 of the Shares Agreement USA; (f) schedule 3 of the Shares Agreement Indonesia; (g) schedule 3 of the Shares Agreements Fiji; (h) schedule 3 of the Shares Agreement Hong Kong; (i) schedule 3 of the Shares Agreement Malaysia; and (j) schedule 3 of the Novare Shares Agreement; Dollars, A$ and $ means Australian dollars, unless otherwise specified; Earn Out Amount has the meaning given in schedule 9; EBIT Statement means the statement to be prepared pursuant to clause 5.2, setting out the First Period EBIT; Effective Time means, in the jurisdiction in which it is necessary to determine it, 11.59 pm on Friday, 30 November 2001; Environment means all or any of the following media, namely the air, water and land including within man-made or other natural structures either above or below ground; Environmental Law means any applicable law (whether civil, criminal or administrative), common law, statute, statutory instrument, treaty or by-law which page 4 Co-ordination agreement relates to the pollution or protection of the Environment and which law has effect as at Completion; Environmental Liability or Loss means any damage, loss, claim, liability, action, obligation, expense, penalty, order or fine under an Environmental Law which is imposed upon or suffered by any of the Buyer Group Companies, the Pacific Brands Foreign Entities and the Pacific Brands Foreign Entity Subsidiaries or any occupier in possession of the Properties; Escrow Account means an interest bearing account with Westpac Banking Corporation opened in the joint names of the Pacific Brands Holdings Pty Ltd and PDL and with terms and conditions of operation including that the account may only be operated jointly by those parties; Escrow Amount means that part of the Purchase Price allocated to the Affected Shares in the Apportionment Statement; Estimate means $8,892,500, being the estimate of the Escrow Amount agreed by the parties, made up as follows: (1) for the Shares Agreement Fiji, $317,000; (2) for the Shares Agreement Indonesia, $1,535,000; (3) for the Shares Agreement Malaysia, $5,189,500, less the amount specified in (1), (2) or (3) above as appropriate, if the Secondary Consents relevant to that Shares Agreement are obtained prior to Completion; Fiji Completion has the meaning given to the term Completion in the Shares Agreement Fiji; First Period EBIT has the meaning given to that term in schedule 9; Foreign Exchange Contracts means all foreign exchange contracts entered into by PDL which relate exclusively to the Pacific Brands Business which remain current as at Completion, details of which will be provided to the Principal Buyer at the date of this Agreement and at Completion; Freehold Properties means any freehold property to be transferred to any of the Buyer Group Companies under the Assets Agreement Australia and the Assets Agreement New Zealand; General Provision means the general provision of $10,000,000 contained in the Bid Accounts; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity; Guarantor means PDL; Hong Kong Completion has the meaning given to the term Completion in the Shares Agreement Hong Kong; ITO Services Agreement means the agreement in the form attached as Annexure A, to be entered into by the Principal Buyer and the Partnership in accordance with clause 4.4; page 5 Co-ordination agreement Immediately Available Funds means cash or bank cheque; Indonesia Completion has the meaning given to the term Completion in the Shares Agreement Indonesia; Inter Group Debts means any amount owing (including trade accounts payable and receivable): (a) by a member of the PDL Group in its capacity as an entity carrying on part of the Pacific Brands Business to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to a member of the PDL Group in its capacity as an entity carrying on any part of the Pacific Brands Business; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Joyce Contract means the Bonded Underlay Agreement between Joyce Corporation Limited and PDL dated 16 August 1994, as amended by its partial assignment by Joyce Corporation Limited to Permanent Trustee Company Limited (as trustee) under a Deed of Assignment between them and PDL dated 20 August 1996; Key Consents means the consents, permissions or waivers described in part A of schedule 2; Linked Transaction Agreements means each of the Assets Agreements and the Shares Agreements; Loss includes any damage, loss, claim, action, liability, cost, expense, penalty, outgoing or payment; LSM means PD Shared Services LSM Pty Ltd, ABN 75 092 811 080, being the company the shares in which are transferred under the Novare Shares Agreement; Malaysia Completion has the meaning given to the term Completion in the Shares Agreement Malaysia; Management Accounts means the unaudited management accounts prepared by PDL in respect of the Pacific Brands Business for July to October 2001 and, to the extent that such accounts are in existence, each subsequent month until Completion; Matters In Dispute has the meaning given in clause 5.2(i); Net Assets means the aggregate net assets of the Pacific Brands Business as shown in Part A of the Completion Statement; New Zealand Completion has the meaning given to the term Completion in the Assets Agreement New Zealand; page 6 Co-ordination agreement Non-Hyperion Business means the parts of the Pacific Brands Business being Pacific Dunlop Holdings (Hong Kong) Limited and the businesses described in the Agreed Adjustments as items 9 (Philippines investments) and 11 (Bonds Spinning), which, in each case, are not included in the Accounts but will be included in the Bid Accounts and the Completion Statement; Non Current Speeds Receivable means the net receivable of $16,846,154 relating to Speeds as set out in column 4 of the eliminations to the Accounts in the Bid Accounts; Novare Shares Agreement means the share sale agreement executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to shares in the capital of LSM; Novare Completion has the meaning given to the term Completion in the Novare Shares Agreement; Officers means, in relation to a body corporate, a director or secretary of that body corporate; Pacific Brands Business means the business carried on by the Seller Group Companies (except for PD Shared Services Holdings Pty Ltd) and the Pacific Brands Foreign Entities in Australia, New Zealand, United Kingdom, United States of America, Indonesia, China, the Philippines, Fiji, Hong Kong, Malaysia and Singapore comprising the manufacture, marketing, sale and distribution of: (a) clothing and related apparel including socks, underwear and intimate and outerwear garments; (b) foam, polyester fibre, mattresses and bedding accessories and products; (c) footwear; and (d) sporting and leisure equipment, related apparel and footwear and workwear; Pacific Brands Foreign Entities means: (a) Pacific Brands (UK) Ltd; (b) PacBrands USA Inc; (c) PT Berlei Indonesia; (d) Pacific Brands (Fiji) Limited; (e) Pacific Dunlop Holdings (Hong Kong) Limited; and (f) Restonic (M) Sdn Bhd; Pacific Brands Foreign Entity Subsidiaries means: (a) Grosby (China) Limited; (b) Pacific Dunlop Brands (Asia) Limited; (c) Pacific Brands Marketing (Hong Kong) Limited; (d) Dunlop Slazenger (Philippines) Inc; (e) Eurocoir Products Sdn Bhd; page 7 Co-ordination agreement (f) Dream Products Sdn Bhd; (g) Dream Crafts Sdn Bhd; (h) Dreamland Spring Manufacturing Sdn Bhd; (i) Dreamland (Singapore) Pte Ltd; (j) Dreamland Corporation (M) Sdn Bhd; and (k) Sleepmaker Sdn Bhd; Partnership has the meaning given to that term in the Novare Shares Agreement; Payment Date means the fifth Business Day after the Completion Statement has been finalised or is deemed to be finalised in accordance with clause 5.2; PDL means Pacific Dunlop Limited ABN 89 004 085 330 (also one of the Seller Group Companies); PDL Group means PDL and its Related Corporations immediately before Completion; Principal Buyer means PB Holdings NV; Property Leases means the leases of real property listed in schedule 7 of both the Assets Agreement Australia and Assets Agreement New Zealand; Properties means all Freehold Properties and all properties the subject of the Property Leases and all freehold and leasehold properties of the Pacific Brands Foreign Entities or Pacific Brands Foreign Entity Subsidiaries; Purchase Price means the amount calculated pursuant to clause 3.1(a); Receivables has the meaning given in the Assets Agreement Australia; Related Corporation means a "Related Body Corporate" as that expression is defined in the Corporations Act; Residual Provision means any balance of the General Provision remaining after the application of clause 5.2(c); Restructuring Provision means $27,969,845 less any amount expended up to Completion which relates to the restructuring associated with the acquisition of Sara Lee Apparel; Secondary Consents means the consents, permissions or waivers described in part B of schedule 2; Seller's Accountant means KPMG, Melbourne; Seller Group Companies means the entities listed in part 1 of schedule 1; Seller's Warranties means the: (a) warranties set out in clauses 6.1(b) and 6.2; (b) warranties set out in part 2 of schedule 1 of the Assets Agreements; and (c) warranties set out in part 2 of schedule 2 of the Shares Agreements; Senior Management means those persons listed in schedule 8; page 8 Co-ordination agreement Shares Agreement Australia means the Share Sale Agreement executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to the shares in the capital of Bonds Industries Pty Ltd; Shares Agreement Fiji means the Share Sale Agreement executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to shares in the capital of Pacific Brands (Fiji) Limited; Shares Agreement Hong Kong means the Share Sale Agreement executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to shares in the capital of Pacific Dunlop Holdings (Hong Kong) Limited; Shares Agreement Indonesia means the Share Sale Agreement executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to shares in the capital of PT Berlei Indonesia; Shares Agreement Malaysia means the share sale agreement referred to in the letter executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to 50% of the shares in the capital of Restonic (M) Sdn Bhd; Shares Agreement UK means the Share Sale Agreement executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to shares in the capital of Pacific Brands (UK) Ltd; Shares Agreement USA means the Share Sale Agreement executed on the same day as this agreement between certain of the Seller Group Companies and certain of the Buyer Group Companies in relation to shares in the capital of PacBrands USA Inc; Shares Agreements means the Shares Agreement Australia, the Shares Agreement Indonesia, the Shares Agreement Fiji, the Shares Agreement Hong Kong, the Shares Agreement Malaysia, the Shares Agreement UK, the Shares Agreement USA and the Novare Shares Agreement; SIP Excess means the amount (if any) by which the aggregate total of any receivables relating to the SIP Scheme as shown in the Completion Accounts, exceeds $5,000,000; SIP Registrations means each of the registrations of Pacific Dunlop Limited, Bonds Industries Pty Ltd and Union Knitting Mills Pty Ltd for the financial years ended 2001 and 2002 and of Boydex International Pty Ltd for the financial year ended 2001, under the SIP Scheme; SIP Scheme means the Textile, Clothing and Footwear Strategic Investment Program Scheme 1999 made under section 8 of the Textile, Clothing and Footwear Strategic Investment Program Act 1999 (Cwth); Speeds means Speeds Shoes Australia Pty Ltd ACN 005 230 802 and its subsidiaries; page 9 Co-ordination agreement Speeds Receivable means the Current Speeds Receivable and the Non Current Speeds Receivable; Stock means the stock of the Pacific Brands Business owned by the Seller Group Companies, the Pacific Brands Foreign Entities and the Pacific Brands Foreign Entity Subsidiaries as at the Effective Time and includes, but is not limited to, any stock in transit, raw materials, components, work-in-progress, finished goods, packaging materials, promotional materials and consumables; Stocktakes means the stocktakes to be carried out pursuant to clause 5.1(a); Target Date has the meaning given in clause 5.2(g); Tax Indemnity Deed means the agreement in the form attached as Annexure B, to be entered into by the relevant Buyer Group Companies and Seller Group Companies in accordance with clause 4.5; UK Completion has the meaning given to the term Completion in the Shares Agreement UK; USA Completion has the meaning given to the term Completion in the Shares Agreement USA; Valuer means the accounting firm, Ernst & Young or, if the appointment is not accepted by Ernst & Young, a top tier Australian accounting firm independent of and agreed by PDL on behalf of the Seller Group Companies and the Principal Buyer on behalf of the Buyer Group Companies; Warranties means the Seller's Warranties and the Buyer's Warranties; and Warranty Claim means any claim or cause of action in respect of any breach of the Warranties. 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) other parts of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (d) 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(d) implies that performance of part of an obligation constitutes performance of the obligation; (e) 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; (f) 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 page 10 Co-ordination agreement 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; (g) a reference to a document includes all amendments or supplements to, or replacements or novations of, that document; (h) a reference to a party to a document includes that party's successors and permitted assigns; (i) no provision of this agreement will be construed adversely to a party solely on the ground that the party was responsible for the preparation of this agreement or that provision; (j) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; (k) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally; (l) a reference to 'best endeavours' is an obligation imposed on a party but does not require that party to pay any money or enter into any unreasonably onerous undertakings or obligations. 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 next Business Day. 1.4 PARAMOUNTCY To the extent that any inconsistency arises between the provisions of this agreement and the provisions of a Linked Transaction Agreement, the provisions of this agreement prevail to the extent of the inconsistency. 2 CONDITIONS PRECEDENT 2.1 CONDITIONS Completion will not proceed unless each of the Conditions has been satisfied, or waived in accordance with clause 2.4. 2.2 BEST ENDEAVOURS The Buyer Group Companies and the Seller Group Companies must each use their best endeavours to satisfy the Conditions. page 11 Co-ordination agreement 2.3 NOTICE (a) The Buyer Group Companies and the Seller Group Companies must each promptly notify the other in writing if any of them discover that any Condition is satisfied or becomes incapable of being satisfied. (b) At Completion, the Principal Buyer will deliver to the Principal Seller a letter confirming that all Conditions have been satisfied or waived. 2.4 WAIVER The Conditions (other than the Key Consent set out in schedule 2 in respect of approval by the Foreign Investment Review Board) may only be effectively waived in writing by each party entitled to the benefit of any Condition being waived and will be effective only to the extent specifically set out in that waiver. 2.5 CUT-OFF DATE (a) Subject to clause 2.5(c), if any Condition is not waived in accordance with clause 2.4 or satisfied on or before 30 November 2001, then either PDL or the Principal Buyer may at any time before Completion occurs, by written notice to the other, terminate this agreement and the Linked Transaction Agreements. (b) A written notice given by PDL pursuant to clause 2.5(a) binds each Seller Group Company and a written notice given by the Principal Buyer pursuant to clause 2.5(a) binds each Buyer Group Company. (c) If any Seller Group Company has not complied with its obligations pursuant to clause 2.2 then PDL must not and is not entitled to give a notice pursuant to clause 2.5(a). If any Buyer Group Company has not complied with its obligations pursuant to clause 2.2 then the Principal Buyer must not and is not entitled to give a notice pursuant to clause 2.5(a). 3 PURCHASE PRICE 3.1 CALCULATION OF PURCHASE PRICE (a) The Purchase Price payable for the assets transferred under the Assets Agreements and the shares transferred under the Shares Agreements (not including the Novare Shares Agreement) is the amount calculated in accordance with the formula set out in paragraph 1 of Part B of schedule 3, together with the Earn Out Amount payable under schedule 9. (b) For the avoidance of doubt, the purchase price payable for the shares transferred under the Novare Shares Agreement is not included in the Purchase Price and is dealt with separately in the Novare Shares Agreement. page 12 Co-ordination agreement 3.2 PAYMENT OF PURCHASE PRICE The Purchase Price is payable in accordance with clauses 3.3 and 3.4, and in the case of the Earn Out Amount, in accordance with schedule 9. 3.3 PAYMENT AT COMPLETION (a) At Completion the Principal Buyer on behalf of the Buyer Group Companies must pay $572,942,000 to PDL on behalf of the Seller Group Companies (or as otherwise directed by it) in Immediately Available Funds. (b) In addition to the amount payable under clause 3.3(a), the Principal Buyer on behalf of the Buyer Group Companies who are parties to the Assets Agreement Australia must, at Completion, pay $156,658,000 to PDL on behalf of the Seller Group Companies who are parties to the Assets Agreement Australia (or as otherwise directed by it) in Immediately Available Funds on account of the receivables payment due under clause 7.3(a)(1) of that agreement. 3.4 FINAL PAYMENT (a) On the Payment Date, the Buyer Group Companies or the Seller Group Companies, as appropriate, must pay to the other any net amount referred to in clause 5.2(e) in Immediately Available Funds, plus interest on the amount to be paid at the Interest Rate from and including the Completion Date up to and including the date the amount is paid. (b) If the Buyer Group Companies must make a payment pursuant to clause 3.4(a) then the Principal Buyer on behalf of the Buyer Group Companies must pay the relevant amount to PDL on behalf of Seller Group Companies or as otherwise directed by PDL. (c) If the Seller Group Companies must make a payment pursuant to clause 3.4(a) then PDL on behalf of the Seller Group Companies must pay the relevant amount to the Principal Buyer on behalf of the Buyer Group Companies. (d) The Buyer must pay the Earn Out Amount to the Seller in accordance with the requirements of paragraph 4 of schedule 9. 3.5 COMPLETE DISCHARGE (a) A payment made by the Principal Buyer under this agreement on behalf of a Buyer Group Company is deemed to constitute a full and complete discharge, as between each Seller Group Company and each Buyer Group Company, of the relevant Buyer Group Company's obligation to make the payment under a Linked Transaction Agreement. (b) A payment made by PDL under this agreement on behalf of a Seller Group Company is deemed to constitute a full and complete discharge, as between each Buyer Group Company and each Seller Group Company, of the relevant Seller Group Company's obligation to make the payment under a Linked Transaction Agreement. page 13 Co-ordination agreement 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place at Level 42, 101 Collins Street, Melbourne, Victoria at 11.00am Australian Eastern Standard Time on 30 November 2001 or if the last of the Conditions has not been satisfied or waived by that date, another date agreed in writing by the parties. 4.2 INTERDEPENDENCY Subject always to clause 4.3: (a) notwithstanding any provision of a Linked Transaction Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of the Australian Assets Completion, the Australian Shares Completion, the New Zealand Completion, the UK Completion, the USA Completion, the Indonesia Completion, the Fiji Completion, the Hong Kong Completion, the Malaysia Completion and the Novare Completion are interdependent; and (b) all actions at the Australian Assets Completion, the Australian Shares Completion, the New Zealand Completion, the UK Completion, the USA Completion, the Indonesia Completion, the Fiji Completion, the Hong Kong Completion, the Malaysia Completion and the Novare Completion will take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at Completion have been made. 4.3 SECONDARY CONSENTS (a) Each of the parties must use all reasonable endeavours to obtain the Secondary Consents before or to the extent permissible by law as soon as practicable after Completion. (b) In the event that a Secondary Consent is not obtained by Completion, the parties acknowledge that: (1) the amount payable under clauses 3.3 and 3.4 will not be adjusted or affected except as specified in this clause4.3; (2) part of the amount payable under clause 3.3 will be payable into the Escrow Account in accordance with clause 4.3(c); (3) the shares which cannot be sold as a result (being shares to be sold under the Affected Shares Agreements) (Affected Shares), will not be sold at Completion but will be sold by the relevant Seller Group Company to the relevant Buyer Group Company without any further payment by the relevant Buyer Group Company on the same terms and conditions as set out in the relevant Affected Shares Agreement, as soon as practical after the Secondary Consents relevant to those Affected Shares are obtained; page 14 Co-ordination agreement (4) to the extent permitted by law, the Seller Group Company which owns the Affected Shares must hold the benefit (including without limitation any dividend or other payment rights and any voting rights) of any Affected Shares not sold on the Completion Date for the Buyer Group Companies and the Buyer Group Companies must properly perform to the extent possible the obligations of the relevant Seller Group Company with respect to such Affected Shares on behalf of that Seller Group Company; (5) the relevant Seller Group Company must declare a trust in favour of the relevant Buyer Group Company with respect to any dividends referred to in clause 4.3(b)(4) to the extent necessary to pass the benefit of those dividends under any applicable local law and comply with any written voting or disposal instructions from that Buyer Group Company with respect to any such Affected Shares; (6) the Principal Buyer indemnifies PDL against any liability or loss arising with respect to any of the Affected Shares as a result of any act or omission of the Buyer Group Companies from the Effective Time. (c) If a Seller Group Company is unable to transfer title of Affected Shares to the relevant Buyer Group Company at Completion due to any relevant Secondary Consent not being obtained, then: (1) on Completion, a portion of the amount payable under clause 3.3(a) by the Principal Buyer to PDL which is equal to the Estimate, will instead be paid into the Escrow Account; (2) within 2 Business Days of any Affected Shares being transferred under clause 4.3(b)(3) due to any relevant Secondary Consents being obtained, the parties will procure that the amount in the Escrow Account relating to those Affected Shares is paid to PDL, together with any accrued interest on that amount; (3) as soon as practicable after the Apportionment Statement has been agreed or determined in accordance with clause 5.2(h), (j) or (k), PDL will ascertain the Escrow Amount for each of the Affected Shares Agreements, based on the figures contained in the Apportionment Statement; (4) if funds remain in the Escrow Account (excluding interest accrued to that date on the Estimate) (Escrow Balance) at the time the Escrow Amount for each Affected Shares Agreement is determined, and the Escrow Balance: (A) is lower than the Escrow Amount relating to the Affected Shares which have not yet been transferred, PDL will pay the difference between those 2 amounts into the Escrow Account, together with interest equal to the interest that would have been earned on that amount had it been on deposit in the Escrow Account from Completion; page 15 Co-ordination agreement (B) is higher than the Escrow Amount relating to the Affected Shares which have not yet been transferred, the parties will procure that the difference between those 2 amounts is withdrawn from the Escrow Account and paid to PDL, together with any interest accrued on that amount; within 2 Business Days of the Escrow Amount being determined. (d) If: (1) the law does not permit compliance with clauses 4.3(b)(4) and (b)(5); or (2) a Secondary Consent is not obtained by the first anniversary of Completion or becomes incapable of being satisfied, in relation to the particular Affected Shares: (3) an adjustment will be made to the Purchase Price recognising that those Affected Shares will not be sold to the Buyer Group Companies, such adjustment to be equal to the portion of the Escrow Amount for such Affected Shares ; (4) the parties will procure that the Escrow Amount in the Escrow Account, together with interest accrued, is paid to the Principal Buyer, subject to clause 4.3(e); (5) any benefit received by the Buyer Group Companies in relation to the relevant Affected Shares after Completion, will be returned to the relevant Seller Group Company; and (6) all costs incurred in the ordinary course of business of the relevant company (in which the Affected Shares are issued) by the Buyer Group Companies after Completion, will be reimbursed to the relevant Buyer Group Company by the relevant Seller Group Company. (e) If the Escrow Amount has not been determined by the time of any refund becoming due to the Principal Buyer under clause 4.3(d)(4), then that refund will be made provided that it is subject to adjustment using the same principles as set out in clause 4.3(c)(4), as soon as practicable after the Escrow Amount has been determined. If any adjustment becomes payable, the party paying the additional amount will also pay interest equal to the interest that would have been earned on that amount had it been on deposit in the Escrow Account from Completion. 4.4 ITO SERVICES AGREEMENT (a) On the date of this agreement, the Principal Buyer will execute and PDL will procure that the Partnership executes the ITO Services Agreement. (b) For the period during which the ITO Services Agreement is in operation, PDL will not and will procure that the Partnership does not take any action which would prevent LSM from being able to obtain services from Hewlett page 16 Co-ordination agreement Packard through the Partnership as contemplated by the ITO Services Agreement. 4.5 TAX INDEMNITY DEED On the date of this agreement, the relevant Buyer Group Companies and Seller Group Companies will execute the Tax Indemnity Deed. 5 COMPLETION STATEMENT 5.1 STOCKTAKE (a) The Seller Group Companies and the Pacific Brands Foreign Entities must, commencing on or before the start of business on 29 November 2001 and ending on 2 December 2001, carry out a stocktake of the Stock (not including the stock of Dunlop Slazenger (Philippines) Inc, Restonic M Sdn Bhd, Dream Products Sdn Bhd, Dream Crafts Sdn, Bhd, Dreamland Spring Manufacturing Sdn Bhd, Dreamland (Singapore) Pte Ltd, Dreamland Corporation (M) Sdn Bhd and Sleepmaker Sdn Bhd) as at the Effective Time with the Stock to be valued in accordance with the Agreed Accounting Principles. (b) Representatives of the Buyer Group Companies may attend the Stocktakes. (c) On conclusion of the Stocktakes, representatives of the Buyer Group Companies and the Seller Group Companies must agree and initial the stock lists which must then be used in preparing the Completion Accounts. (d) PDL will ensure that the Principal Buyer receives at least 5 Business Days notice of all Stocktakes. 5.2 COMPLETION ACCOUNTS, COMPLETION STATEMENT, APPORTIONMENT STATEMENT AND EBIT STATEMENT (a) Promptly after the Effective Time and in any event not later than 40 Business Days after the Completion Date, PDL must: (1) cause to be prepared a draft of the Completion Accounts, in accordance with the Agreed Accounting Principles and using the same form as the form of the Accounts; (2) deliver the draft Completion Accounts to the Seller's Accountant and instruct the Seller's Accountant to audit those accounts; (3) instruct the Seller's Accountant to prepare a draft of the Completion Statement in accordance with the requirements set out in clause 5.2(b), (c) and (e), a draft of the Apportionment Statement in accordance with the requirements set out in clause 5.2(f) and a draft of the EBIT Statement setting out the First Period EBIT (calculated in accordance with the requirements set out in the definition of 'First Period EBIT' contained in schedule 9), promptly page 17 Co-ordination agreement after the Effective Time and in any event not later than 40 Business Days after the Completion Date; and (4) deliver the Completion Accounts, the draft Completion Statement, the draft Apportionment Statement and the draft EBIT Statement to the Principal Buyer. (b) The Completion Statement: (1) must be prepared in the form set out in schedule 3; and (2) will be the same as the Completion Accounts except that the Agreed Adjustments will be made to the Completion Accounts in order to derive the Completion Statement (also having regard to clause 5.2(c)). (c) To the extent that the Completion Accounts reflect any write down in the value of any current assets, which write down exceeds the value of a provision (if any) for that category of current asset contained in the Accounts (Relevant Provision), the amount of the General Provision will be reduced, for the purposes of preparing the Completion Statement, by: (1) the amount of that write down; or (2) if there is a Relevant Provision, the excess of that write down over the Relevant Provision. (d) The Principal Buyer must give PDL all reasonable assistance that PDL requires including, without limitation, by making the employee and business records of the: (1) Buyer Group Companies; (2) Pacific Brands Foreign Entities; and (3) Pacific Brands Foreign Entities Subsidiaries, (to the extent relevant to the Pacific Brands Business), available to PDL and the Seller's Accountants during normal business hours to assist in the preparation of the Completion Accounts and the draft Completion Statement provided that neither PDL nor any Buyer Group Company shall be required to do anything that is likely to cause unreasonable disruption to the conduct of its business and its employees. (e) The Completion Statement must set out, as at the Effective Time, the net amount payable by the Buyer Group Companies to the Seller Group Companies or by the Seller Group Companies to the Buyer Group Companies to be calculated in accordance with Part B of schedule 3, having regard to the Purchase Price, the Receivables and the amounts already paid by the Buyer Group Companies under clause 3.3. (f) The allocation of Purchase Price to be contained in the Apportionment Statement will be based on the following: (1) in respect of each entity being sold under the Shares Agreements (not including the Shares Agreement Australia and the Novare page 18 Co-ordination agreement Shares Agreement), the value attributed or ascribed to that entity for the purposes of the preparation of the Completion Accounts; (2) in respect of the businesses being transferred under the Assets Agreements, the value attributed or ascribed to those businesses for the purposes of the preparation of the Completion Accounts and having regard to the principles set out in schedule 5; in each case, having regard to the Agreed Adjustments and standard consolidation eliminations where not already taken into account; (3) in respect of the entity being sold under the Shares Agreement Australia, $175,000,000; and (4) after the allocation of the Purchase Price referred to in paragraphs (1), (2) and (3) above: (A) to the extent any of the Purchase Price remains unallocated (including any Earn Out Amount), that amount of the Purchase Price will be allocated to the goodwill transferred under the Assets Agreement Australia; (B) to the extent that the amount allocated is greater than the Purchase Price, the excess will be deducted from the allocation to the assets transferred under the Assets Agreement Australia. (g) The Principal Buyer on behalf of the Buyer Group Companies and PDL on behalf of the Seller Group Companies must confer and use all reasonable endeavours to agree on the Completion Statement, the Apportionment Statement and the EBIT Statement within 20 Business Days after a draft is provided to the Buyer Group Companies (Target Date). PDL will procure that the Principal Buyer and its representatives are allowed reasonable access to all personnel involved in and records relating to (including, without limitation, audit work papers) the preparation of the Completion Accounts, draft Completion Statement, the draft Apportionment Statement and the draft EBIT Statement. (h) If the contents of the draft Completion Statement, the draft Apportionment Statement and the draft EBIT Statement are agreed between the Principal Buyer and PDL, those drafts will constitute the Completion Statement, the Apportionment Statement and the EBIT Statement and will be final and binding on the parties. (i) Subject to clause 5.2(j) if the Principal Buyer disputes that the draft Completion Statement, the draft Apportionment Statement or the draft EBIT Statement has been prepared in accordance with this agreement and does not resolve the matters in dispute with PDL by the Target Date, the Principal Buyer may at any time before the date which is 10 Business Days after the Target Date (Dispute Date) elect to refer the matters in dispute to the Valuer for determination in accordance with clause 5.3 by giving written notice to that effect to PDL including full details of the matters in dispute (Matters In Dispute). page 19 Co-ordination agreement (j) The Principal Buyer acknowledges (including on behalf of the Buyer Group Companies) that: (1) the Residual Provision contained in the draft Completion Statement (in accordance with clause 5.2(c)), must be taken into account to address any matters which the Principal Buyer would otherwise dispute in relation to the draft Completion Statement; (2) it will take the matters referred to in clause 5.2(j)(1) into account when seeking to agree the draft Completion Statement with PDL under clause 5.2(g); (3) the Principal Buyer and PDL, when instructing the Valuer under clause 5.3(a), will include in their instructions that any determination made by the Valuer must: (i) take into account the assumption that the Residual Provision will be utilised by the Buyer Group Companies to the extent possible; and (ii) deduct a corresponding amount from any claim made by the Principal Buyer as part of the Matters in Dispute. (k) If the Principal Buyer and PDL do not agree on: (1) the Completion Statement by the Target Date and no election to make a referral is made under clause 5.2(i) by the Dispute Date, the values determined by PDL in the draft Completion Statement will be final and binding on the parties; (2) the Apportionment Statement by the Dispute Date and no election to make a referral is made under clause 5.2(i) by the Target Date, the Apportionment Statement will be final and binding on the parties, except to the extent the Completion Statement remains subject to dispute; (3) the EBIT Statement by the Dispute Date and no election to make a referral is made under clause 5.2(i) by the Target Date, the EBIT Statement will be final and binding on the parties. 5.3 VALUER (a) The Principal Buyer and PDL must jointly instruct the Valuer within 10 Business Days after a referral under clause 5.2(h) and on the basis that the Valuer agrees to make a determination in relation to the Matters In Dispute and any consequential adjustments to the Completion Statement (Valuer's Adjustments) no later than 50 Business Days after the Referral Date as defined in clause 5.3(b)(1). (b) The procedures to be used by the Valuer in determining the Valuer's Adjustments shall be as follows: (1) PDL and the Principal Buyer will together provide to the Valuer copies of this agreement, the Completion Accounts, the draft Completion Statement, the draft Apportionment Statement, the page 20 Co-ordination agreement draft EBIT Statement and the notice of Matters In Dispute as provided to PDL under clause 5.2(i). The date upon which the Valuer receives such documents is referred to in this clause as the Referral Date. (2) Each of the Principal Buyer and PDL may make a single submission to the Valuer in relation to the Matters In Dispute which submission will not exceed 25 A4 pages in length, within 15 Business Days after the Referral Date. (3) The Principal Buyer and PDL will be permitted to deliver to the Valuer a response to the submission of the other party described in sub-clause 5.3(b)(2) above, which shall not exceed 5 A4 pages in length. The responses contemplated by this clause 5.3(b)(3) will be delivered, if at all, within 15 Business Days after receipt of the other party's submission described in clause 5.3(b)(2) above. (4) The Valuer must review the documents submitted by the parties and have the opportunity to ask specific written questions of or request specific historical documents from either party to clarify its understanding of the submissions. In relation to questions asked of one party, the other party may submit to the Valuer written dissent to any response submitted by the first party to the Valuer. (5) Copies of any submission, response or document submitted to or by the Valuer by or to a party as contemplated in this clause will be submitted by the Valuer to the other party simultaneously or as soon as received, as the case may be. (6) The Valuer will deliver its determination of the Matters In Dispute and the Valuer's Adjustments within 50 Business Days following the Referral Date. The Valuer's determination is final and binding on the parties. (7) The fees and expenses of the Valuer will be shared equally by PDL and the Principal Buyer. (8) In making its determination the Valuer acts as an expert and not as an arbitrator and the Valuer's decision will be final and binding. 5.4 EFFECT OF MATTERS IN DISPUTE (a) If the Completion Statement has not been finalised by the Dispute Date due to Matters In Dispute having not been resolved, then: (1) for the purpose of clause 3.4(a), the Payment Date is the day which is 5 Business Days after the Dispute Date (Revised Payment Date); (2) on the Revised Payment Date, the Buyer Group Companies or the Seller Group Companies, as appropriate, must pay to the other the estimated net amount described in clause 5.2(e) less the amount the subject of the unresolved Matters In Dispute in Immediately Available Funds, plus interest on the amount to be paid at the page 21 Co-ordination agreement Interest Rate from and including the Completion Date up to and including the date the amount is paid (subject always to clause 5.4(b)); (3) clause 3.4(a) will apply following determination of the unresolved Matters In Dispute in accordance with clause 5.3, having regard, for the purpose of clause 5.2(e), to the amount paid by the Buyer Group Companies or the Seller Group Companies under clause 5.4(a)(2). (b) If the amount of the subject of the unresolved Matters In Dispute is more than the estimated net amount described in clause 5.2(e), then despite the operation of clause 5.4(a)(2), no party will be required to make any payment on the Revised Payment Date. (c) For the avoidance of doubt, if the Apportionment Statement or the EBIT Statement has not been finalised by the Target Date due to the Matters in Dispute having not been resolved, this will not result in any change to the obligation to make any payment due on the Payment Date. 6 WARRANTIES AND INDEMNITIES 6.1 ACCOUNTS (a) Subject to clauses 6.6 and 6.7, the Seller Group Companies give the warranties set out in clauses 6.1(b) and 6.2 in favour of the Buyer Group Companies as at the date of this agreement and as at Completion. (b) The Accounts: (1) have been prepared in accordance with the Accounting Standards and with due care and attention; (2) show a true and fair view of the financial position of the Pacific Brands Business at the Accounts Date and of the profit and loss of the operations of the Pacific Brands Business for the year ended on the Accounts Date. 6.2 MANAGEMENT ACCOUNTS The Management Accounts, in all material respects: (a) have been be prepared with due care and attention and on a basis consistent with the management accounts from which the Accounts were derived and past practices; (b) accurately disclose the financial position and material assets and liabilities of the Pacific Brands Business and the income, expenses and results of the operations of the Pacific Brands Business for the relevant financial period. 6.3 APPLICATION OF THE SELLER'S WARRANTIES Each of the Seller's Warranties: (a) remains in full force and effect after Completion; and page 22 Co-ordination agreement (b) is separate and independent and is not limited by reference to any other of the Seller's Warranty or any other provision of this agreement. 6.4 [NOT USED] 6.5 TIME OF WARRANTIES Subject to clauses 6.6 and 6.7: (a) the Buyer Group Companies give the Buyer's Warranties in favour of the Seller Group Companies; and (b) the Seller Group Companies give the Seller's Warranties in favour of the Buyer Group Companies, as at the date of this agreement and as at Completion. 6.6 DISCLOSURE The Warranties are given subject to those matters fairly disclosed in, and a party must not claim that any fact renders any of the Warranties untrue or misleading or causes them to be breached if that fact has been fairly disclosed in: (a) a Linked Transaction Agreement; or (b) in the case of the Seller's Warranties, the Disclosure Schedule or the Data Room. 6.7 MATTERS OF PUBLIC RECORD A party must not claim that any fact renders any of the Warranties untrue or misleading or causes them to be breached if that fact would have been revealed at the date of this agreement by searches of: (a) in the case of the Buyer's Warranties, any public register kept by the Australian Securities and Investments Commission under the Corporations Act in relation to the Buyer Group Companies; or (b) in the case of the Seller's Warranties, any public register kept by the Australian Securities and Investments Commission (or similar register in the jurisdictions in which any of the Seller Group Companies, Pacific Brands Foreign Entities or Pacific Brands Foreign Entities Subsidiaries are incorporated), any trade mark registry, land registry or court in relation to the Seller Group Companies, the Pacific Brands Foreign Entities or the Pacific Brands Foreign Entities Subsidiaries or the assets and shares sold pursuant to the Linked Transaction Agreements. 6.8 ENVIRONMENTAL INDEMNITY (a) Subject to clause 6.8(c) and providing the condition of the Environment which is the cause of the Environmental Liability or Loss existed up to and including the Completion Date, PDL agrees to indemnify the Buyer on demand against any Environmental Liability or Loss for a period of 4 years from the Completion Date, all such Environmental Liability or Loss being referred to in this clause as 'Environmental Costs'. page 23 Co-ordination agreement (b) Notwithstanding any clause to the contrary in this agreement, it is further agreed that the environmental indemnity in clause 6.8(a) shall be limited as follows: (1) the Buyer must bear the first $2,000,000 of Environmental Costs; (2) the Buyer and PDL shall share equally the next $13,000,000 of Environmental Costs; and (3) PDL shall bear any Environmental Costs in excess of $15,000,000; (c) PDL's liability to the Buyer under clause 6.8(a) shall be reduced to the extent if any that the Environmental Costs arise or are increased as a result of a failure by the Buyer to comply with the following obligations: (1) The Buyer must take no action that is likely to have the effect of encouraging or provoking a relevant Government Agency to issue a demand, notice or order under any Environmental Law in respect of a Property except where: (i) necessary to obtain or as a condition of the grant of an Authorisation necessary for the continued conduct of the Business or any renewal or variation of any such Authorisation in the ordinary course of the Business; or (ii) necessary to be in a position to properly defend or respond to an action or proceeding against the Buyer by a third party; or (iii) it is reasonable to conclude that: (aa) there is a real risk to the health of persons or damage to property; or (bb) there is an obligation to investigate or remediate under an Environmental Law. (2) The Buyer must keep PDL informed of any matter which it believes may give rise to a claim under clause 6.8(a) and, if there is a dispute as to: (i) whether the matter concerned falls within the provisions of clause 6.8(a): or (ii) as to the nature or extent of works to be undertaken or Environmental Costs to be incurred by the Buyer, either party may request in writing to the other that the matter be referred to a firm of environmental engineers acceptable to both parties ('Expert') on the basis of a joint appointment by the Buyer and PDL within 5 Business Days. The parties shall direct the Expert to take independent legal advice in relation to legal issues arising in relation to the dispute. The decision of the Expert as to the matters in dispute shall be final and binding on the parties and his costs shall be borne equally by PDL and Buyer. page 24 Co-ordination agreement (3) The Buyer must make no statement or admission to a third party Claim for which PDL may be in part responsible under this clause 6.8 without the prior consent of PDL which must not be unreasonably withheld or delayed. (4) The Buyer agrees to comply with clause 7.9 in relation to any Claim to which this clause 6.8 may apply. (d) The Buyer agrees that: (1) its sole remedy against PDL in respect of any Environmental Costs is under this clause 6.8; (2) PDL's Warranties do not apply to the matters referred to in this clause 6.8; and (3) the indemnity in clause 6.8(a) will not apply in relation to a particular Property to the extent that any Environmental Liability or Loss affecting that Property is crystallised or increased as a result of that particular Property no longer being used for a commercial or industrial purpose similar to that for which it is used at Completion. (e) References in this clause 6.8 to 'the Buyer' include each Buyer Group Company, Pacific Brands Foreign Entity and Pacific Brands Foreign Entity Subsidiary on the basis that: (1) the aggregate liability of PDL to all such entities in as set out in clause 6.8(b); (2) each Buyer Group Company agrees with PDL to ensure compliance with this clause by each Pacific Brands Foreign Entity and each Pacific Brands Foreign Entity Subsidiary; and (3) where a Buyer Group Company directly or indirectly owns, immediately after Completion, less than 100% of any such other entity, PDL shall only be liable for the percentage of the Environmental Costs corresponding to that percentage ownership interest. (f) Notwithstanding any clause to the contrary in this agreement or any of the Linked Transaction Agreements, it is agreed that the environmental indemnity in clause 6.8(a) shall only be limited by clauses 6.8(b)-(e). 6.9 LITIGATION INDEMNITY (a) Subject to clause 6.9(b) PDL agrees and undertakes to indemnify and hold harmless the Buyer Group Companies from and against 50% of any and all direct or indirect losses incurred by Restonic (M) Sdn Bhd and/or its subsidiaries or for which they may become liable in connection with the claim made by Perabot Ekomoni against Dreamland Corporation (M) Sdn Bhd in respect of the termination of Perabot Ekomoni's appointment as Dreamland Corporation (M) Sdn Bhd's sole agent in the district of Kluang (Ekomoni Claim). (b) The Buyer Group Companies: page 25 Co-ordination agreement (1) will use their best endeavours to mitigate any loss which PDL may suffer as a result of giving the indemnity set out in clause 6.9(a); and (2) acknowledge the indemnity does not apply in relation to the first of $300,000 of the Ekomoni Claim. 7 LIMITATIONS ON LIABILITY 7.1 LIMITATION TO CLAIMS UNDER THIS AGREEMENT The Buyer Group Companies acknowledge that they have not relied on, and that the Seller Group Companies are not liable to the Buyer Group Companies for, any Claim arising from or relating to any statement, representation, warranty, promise, undertaking or agreement in connection with the sale of the Pacific Brands Business or the shares under the Novare Shares Agreement: (a) made by any person; or (b) resulting from or implied by conduct made in the course of communications or negotiations in connection with the sale of the Pacific Brands Business including, without limitation, the sale of the assets and shares pursuant to the Linked Transaction Agreements, except for the Seller's Warranties and other obligations of the Seller Group Companies arising under the Linked Transaction Documents (Excluded Representations). The Buyer Group Companies now waive and release the Seller Group Companies, their Related Corporations, the Pacific Brands Foreign Entities, the Pacific Brands Foreign Entities Subsidiaries and any person acting or purporting to act on behalf of the Seller Group Companies or a Related Corporation of the Seller Group Companies, the Pacific Brands Foreign Entities or the Pacific Brands Foreign Entities Subsidiaries from any and all liability in respect of any Excluded Representation to the fullest extent permitted by law. 7.2 AWARENESS Where the Seller's Warranties or any provisions of this agreement are qualified by reference to the awareness or knowledge of the relevant Seller Group Company, the Buyer Group Companies acknowledge that the awareness or knowledge of the relevant Seller Group Company is limited to matters now within the actual knowledge of the senior management staff specified in Part B of the Disclosure Schedule after due and careful enquiry of the senior management staff specified in the relevant Disclosure Schedule. 7.3 LIMITATION FOR INSURANCE The Seller Group Companies are not liable to the Buyer Group Companies for any Warranty Claim for Loss which is recovered (net of any tax payable) by a Buyer Group Company, LSM, a Pacific Brands Foreign Entity or a Pacific Brands Foreign Entity Subsidiary or any of them under a policy of insurance. page 26 Co-ordination agreement 7.4 LIMITATION FOR PROVISIONS (a) The Seller Group Companies are not liable to the Buyer Group Companies for any Warranty Claim: (1) in respect of the stock of the Pacific Brands Business, except (subject to this clause 7) to the extent that the amount finally adjudicated or agreed as being payable in respect of all such Warranty Claims exceeds the provision for slow moving, obsolete and damaged stock taken into account in the Completion Statement; or (2) in respect of any matter, except (subject to this clause 7) to the extent that the amount finally adjudicated or agreed as being payable in respect of the Warranty Claim exceeds any understatement of the value of any asset and any unutilised provisions for liabilities taken into account in the Completion Statement. (b) The Seller Group Companies are not liable to the Buyer Group Companies for any Warranty Claim in respect of the shares being sold under the Shares Agreements except (subject to this clause 7) to the extent that the amount finally adjudicated or agreed as being payable in respect of the Warranty Claim exceeds any understatement of the value of any asset and any unutilised provisions for liabilities taken into account in the Completion Statement. 7.5 LIMITATION FOR FUTURE EVENTS The Seller Group Companies are not liable to the Buyer Group Companies for any Warranty Claim to the extent that the cause of action is attributable to: (a) anything done or not done after Completion by or on behalf of the Buyer Group Companies or a Related Corporation, LSM or a Pacific Brands Foreign Entity; or (b) the enactment of any legislation after the date of this agreement including, but not limited to, legislation which has a retrospective effect. 7.6 TIME LIMITS The Seller Group Companies are not liable to the Buyer Group Companies for any Warranty Claim unless: (a) in the case of a Warranty Claim under the Assets Agreement Australia or the Assets Agreement New Zealand, the Buyer Group Companies give notice to the Seller Group Companies setting out specific details of the Warranty Claim within 2 years after the Completion Date; (b) in the case of a Warranty Claim under Seller's Warranty 22 (Tax) of the Shares Agreements, the Buyer Group Companies give notice to the Seller Group Companies setting out specific details of the Warranty Claim within 7 years after the Completion Date; page 27 Co-ordination agreement (c) in the case of a Warranty Claim under the Shares Agreements to which clause 7.6(b) does not apply, the Buyer Group Companies give notice to the Seller Group Companies setting out specific details of the Warranty Claim within 2 years after the Completion Date; and (d) the Warranty Claim is agreed, compromised or settled or the Buyer Group Companies issue and serve legal proceedings against the Seller Group Companies in respect of the Warranty Claim within 6 months after giving notice in respect of the Warranty Claim under clause 7.6(a) to 7.6(c). 7.7 MONETARY LIMITS The Seller Group Companies are not liable to the Buyer Group Companies for any Warranty Claim unless: (a) the amount finally adjudicated or agreed as being payable in respect of the Warranty Claim exceeds $100,000 (one hundred thousand dollars); and (b) then only if the aggregate amount finally adjudicated or agreed as being payable in respect of all Warranty Claims which may be recovered under clause 7.7(a) exceeds 1 percent of the aggregate of the Purchase Price and the amount payable in respect of the Receivables pursuant to the Assets Agreement Australia. For the avoidance of doubt, under this clause 7.7(b), the Seller Group Companies' liability is not limited to the amount by which the above threshold is exceeded. 7.8 MAXIMUM AMOUNT OF WARRANTY CLAIMS The maximum aggregate amount which the Buyer Group Companies may recover from the Seller Group Companies in respect of all Warranty Claims is the aggregate of the Purchase Price and the amount payable in respect of the Receivables pursuant to the Assets Agreement Australia. 7.9 BUYER GROUP COMPANIES' OBLIGATIONS (a) Within 30 Business Days after becoming aware of any matter, claim or demand which may reasonably be expected to lead to the Seller Group Companies being liable under any Warranty Claim, the Buyer Group Companies must give notice to the Seller Group Companies setting out full details of the matter, claim or demand. (b) The Buyer Group Companies must not deal and must procure that LSM the Pacific Brands Foreign Entities and the Pacific Brands Foreign Entities Subsidiaries do not deal with, compromise or accept any matter, claim or demand which may lead to the Seller Group Companies being liable under any Warranty Claim without the Seller Group Companies' prior written approval. (c) On receiving from the Seller Group Companies an indemnity against all Loss which may result, the Buyer Group Companies must take and must procure that the Pacific Brands Foreign Entities and the Pacific Brands Foreign Entities Subsidiaries take any action and provide any assistance the Seller Group Companies reasonably require to deal with, contest or page 28 Co-ordination agreement compromise any matter, claim or demand which may lead to the Seller Group Companies being liable under any Warranty Claim, provided that none of the Seller Group Companies, the Pacific Brands Foreign Entities or the Pacific Brands Foreign Entities Subsidiaries shall be required to do anything that is likely to cause a material disruption to the conduct of its business or its employees or is likely to harm the goodwill or reputation of its business. (d) The Seller Group Companies are not liable to the Buyer Group Companies for any claim arising from a matter, claim or demand to the extent to which the Seller Group Companies' liability arises as a result of or is increased by a failure by the Buyer Group Companies to comply with this clause 7.9. 7.10 RIGHT TO REIMBURSEMENT The Buyer Group Companies must reimburse to the Seller Group Companies an amount equal to any sum paid by the Seller Group Companies in respect of any Warranty Claim which is subsequently recovered by or paid to the Buyer Group Companies (net of any tax payable) or recovered by or paid to LSM, the Pacific Brands Foreign Entities or the Pacific Brands Foreign Entities Subsidiaries (net of any tax payable) by any third party (including, but not limited to, any insurer). 7.11 ALL WARRANTY CLAIMS The limitations on the liability of the Seller Group Companies specified in this clause 7 apply to all Warranty Claims made by a Buyer Group Company pursuant to this agreement or a Linked Transaction Agreement. 8 FOREIGN EXCHANGE CONTRACTS 8.1 FINANCIAL ADJUSTMENTS Following Completion: (a) in relation to the Foreign Exchange Contracts: (1) on the Business Day before the due date for a payment to be made by PDL under a Foreign Exchange Contract, the Principal Buyer will pay that amount in accordance with the directions of PDL (which may include directions as to the recipient of the funds, the currency in which the payment is to be made and the method of payment); (2) subject to clause 8.1(b), on the day of settlement of a Foreign Exchange Contract by or on behalf of PDL, PDL will pay to the Principal Buyer or as directed by the Principal Buyer, any amount received by PDL under that Foreign Exchange Contract, in the currency and in the form in which that payment was received; (b) PDL will not be required to make any payment in relation to a particular Foreign Exchange Contract under clause 8.1(a)(2), and that payment will not become due, until such time as the Principal Buyer has satisfied its page 29 Co-ordination agreement obligations under clause 8.1(a)(1) in relation to that Foreign Exchange Contract. 8.2 INTEREST If the Principal Buyer or PDL does not make a payment as required by clause 8.1(a)(1) or 8.1(a)(2), as applicable, by the due date for payment, that party will be required to pay to the other party interest on the amount owing at a rate equal to the Interest Rate plus 2%, calculated and payable on a daily basis until such time as the principal amount is paid in full. 8.3 INDEMNITY The Principal Buyer indemnifies PDL in relation to any Loss suffered by the Seller Group Companies, as a result of a breach by the Principal Buyer of its obligations under this clause 8 and PDL indemnifies the Principal Buyer in relation to any Loss suffered by the Principal Buyer as a result of a breach by PDL of its obligations under this clause 8. 8.4 PRIOR TO COMPLETION PDL agrees that it will not, between the date of this Agreement and the Completion Date, without the prior written consent (such consent not to be unreasonably withheld) of the Principal Buyer, enter into or agree to enter into any new foreign exchange contract with a value of more than $100,000 which relates to the Pacific Brands Business or extend the maturity date of any existing foreign exchange contract which relates to the Pacific Brands Business. 9 STRATEGIC INVESTMENT PROGRAMME 9.1 ENTITLEMENTS The parties acknowledge (as between them), subject to Completion occurring, in relation to any amounts which are received by the holder of any SIP Registration under the SIP Scheme: (a) for a SIP Registration for the year ended 30 June 2001: (1) the Principal Buyer is entitled to the first $5,000,000 received; (2) PDL is entitled to any amount received in excess of $5,000,000; (b) for a SIP Registration for the year ended 30 June 2002, the Principal Buyer is entitled to any amount received. 9.2 PAYMENT To the extent an amount is received by the holder of a SIP Registration as described in clause 9.1: (a) before Completion, PDL will procure that any portion of that amount to which the Principal Buyer is entitled under clause 9.1, is paid to the Principal Buyer on the Payment Date in Immediately Available Funds; page 30 Co-ordination agreement (b) after Completion, the Principal Buyer will procure that any portion of that amount to which PDL is entitled under clause 9.1, is paid to PDL within 5 Business Days of receipt in Immediately Available Funds. 9.3 INTEREST If the Principal Buyer does not make a payment as required by clause 9.2(b) by the due date for payment, the Principal Buyer will be required to pay to PDL interest on the amount owing at a rate equal to the Interest Rate plus 5%, calculated and payable on a daily basis until such time as the principal amount is paid in full. 9.4 ACKNOWLEDGMENT Until such time as PDL has received all amounts to which it may become entitled as described in clause 9.1 (PDL Entitlements), the Principal Buyer agrees to procure that PDL is: (a) kept informed as to the progress of claims relating to the PDL Entitlements; (b) given reasonable access to employees or contractors engaged by the Buyer Group Companies to progress claims relating to the PDL Entitlements; and (c) given access to any records or documentation reasonably requested by PDL to allow it to monitor the progress of claims relating to the PDL Entitlements. 9.5 INDEMNITY The Principal Buyer indemnifies PDL in relation to any Loss suffered by the Seller Group Companies as a result of a breach by the Principal Buyer of its obligations under this clause 9. 10 ACKNOWLEDGEMENTS 10.1 JOYCE CONTRACT For the avoidance of doubt, the parties acknowledge that the Bid Accounts and the Completion Statement will both contain a matching asset and liability in relation to the Joyce Contract and that the Buyer Group Companies will become entitled to an asset as a result of the transfer of the Joyce Contract under the Assets Agreement Australia. 10.2 INTER GROUP DEBTS For the avoidance of doubt, the parties acknowledge that: (a) all Inter Group Debts are intended to be eliminated from the Completion Accounts in order to derive the Completion Statement and are not intended to be transferred to the Buyer Group Companies; and (b) to the extent that any Inter Group Debt is inadvertently transferred to or remains with the Buyer Group Companies as a result of the operation of page 31 Co-ordination agreement the Shares Agreements or Assets Agreements and has not been eliminated to derive the Completion Statement as referred to in clause 10.2(a), the parties will negotiate in good faith an appropriate method for dealing with that Inter Group Debt, such that neither party receives a windfall gain or suffers a loss as a result of such transfer. 10.3 RESTRUCTURING PROVISION The Buyer Group Companies acknowledge that the Restructuring Provision as at Completion will be included in the Completion Statement, net of any associated future income tax benefit at the rate of 30%. 10.4 GENERAL PROVISION The Buyer Group Companies acknowledge that the General Provision included in the Completion Statement (as adjusted under clause 5.2(c)) will be included net of any associated future income tax benefit at the rate of 30%. 10.5 RESTRUCTURING (a) The Buyer Group Companies and the Seller Group Companies acknowledge and agree that: (1) certain restructuring has occurred within the PDL Group involving the companies being sold under the Share Sale Agreements and their subsidiaries (Companies) post 30 June 2001, which has been disclosed to the Buyer Group Companies (Restructuring); (2) no provision for Tax will be booked in relation to the Restructuring in the Completion Accounts (except to the extent stamp duty has been provided for) and the Seller's Accountant will be so instructed; (3) none of the Buyer Group Companies or their subsidiaries (post Completion), including but not limited to the Companies, will self assess in relation to matters arising from the Restructuring, but any Tax assessment made against any of these entities in relation to those Restructuring matters will be capable of claim under the Tax Indemnity Deed. (b) The Seller Group Companies acknowledge that they do not believe that any Tax liability will arise as a result of the Restructuring, except to the extent stamp duty has been paid or provided for in the Completion Accounts. (c) For the purposes of this clause 10.5, "Tax" has the same meaning as in the Tax Indemnity Deed. page 32 Co-ordination agreement 11 ANNOUNCEMENTS AND CONFIDENTIALITY 11.1 LEGAL REQUIREMENTS A party may disclose anything in respect of this agreement or the terms of the sale transaction the subject of this agreement as required by: (a) applicable law; or (b) any recognised stock exchange on which its shares are listed, but to the extent possible, it must consult with and obtain the prior written consent of PDL and the Principal Buyer before making the disclosure and use its best endeavours to agree on the form and content of the disclosure. 11.2 DISCLOSURE TO OFFICERS, EMPLOYEES AND PROFESSIONAL ADVISERS A party may disclose anything in respect of this agreement or the terms of the sale transaction the subject of this agreement to its Officers, employees, professional advisers, its Related Corporations, its bankers and their employees and professional advisers, to any potential purchaser of any of the assets or shares which are to be sold to the Buyer Group Companies under the Linked Transaction Agreements (to the extent relevant to the sale transaction proposed to be entered) or any receiver or administrator which is appointed in respect of any Buyer Group Company but it must use its best endeavours to ensure all matters disclosed are kept confidential. 11.3 FURTHER PUBLICITY Subject to clause 11.1, no party may disclose the provisions of this agreement or the terms of the sale transaction the subject of this agreement without the written consent of PDL and the Principal Buyer. 11.4 CONFIDENTIALITY Subject to clause 11.1, the Buyer Group Companies must not before Completion disclose any information or documents which have been disclosed or provided to them or any person acting on their behalf in accordance with this agreement or in the course of communications or negotiations in connection with the sale transaction the subject of this agreement. 11.5 RETURN OF INFORMATION AND DOCUMENTS If this agreement is rescinded or terminated, the Buyer Group Companies must: (a) cease using the information and documents referred to in clause 11.4 for their own purposes; and (b) return to the Seller Group Companies all documents (and return or destroy all copies of the documents) referred to in clause 11.4. page 33 Co-ordination agreement 12 DUTIES, COSTS AND EXPENSES 12.1 DUTIES The Buyer Group Companies must pay any stamp duty (including any interest, penalty or like charge) in respect of the execution, delivery and performance of: (a) this agreement; and (b) any agreement or document entered into or signed under this agreement (including but not limited to the Linked Transaction Agreements). 12.2 COSTS AND EXPENSES Subject to clause 12.1, each party must pay its own costs and expenses in respect of the negotiation, preparation, execution, delivery, stamping and registration of this agreement and any other agreement or document described in clause 12.1. 12.3 COSTS OF PERFORMANCE Any action to be taken by the Buyer Group Companies or the Seller Group Companies in performing their obligations under this agreement must be taken at its own cost and expense unless otherwise provided in this agreement. 13 GENERAL 13.1 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: (1) must be in legible writing and in English addressed as shown below: (A) if to the Seller Group Companies: Address: c/o Pacific Dunlop Limited Level 3, 678 Victoria Street, Richmond Vic 3121 Attention: Company Secretary Facsimile: (03) 9270 7300; and (B) if to the Buyer Group Companies: Address: c/- Pacific Brands Holdings Pty Ltd Attention: Philip Kapp Facsimile: (02) 9921 4224 or as specified to the sender by any party by notice; (2) where the sender is a company, must be signed by an Officer or under the common seal of the sender; page 34 Co-ordination agreement (3) is to be regarded as having been given by the sender and received by the addressee: (A) if by delivery in person, when delivered to the addressee; (B) if by post, 3 Business Days from and including the date of postage; or (C) if by facsimile transmission when a legible transmission is received (or regarded as received) by 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 having been received at 9.00 am on the following Business Day; and (4) can be relied on 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 to be regarded as legible unless the addressee telephones the sender within 2 hours after the transmission is received or regarded as received under clause 13.1(a)(3) and informs the sender that it is not legible. (c) In this clause 13.1, a reference to an addressee includes a reference to an addressee's Officers, agents or employees. (d) A notice or other communication referred to in clause 13.1(a) will be deemed to be sent by and to all Seller Group Companies if sent by or to PDL and will be deemed to be sent by and to all Buyer Group Companies if sent by or to the Principal Buyer. 13.2 GOVERNING LAW AND JURISDICTION (a) This agreement is governed by the laws of Victoria. (b) Each party irrevocably submits to the non-exclusive jurisdiction of the courts of Victoria. (c) The Buyer Group Companies which are not registered in Australia appoint the Principal Buyer in relation to proceedings in Australia as their agent to receive service of any legal process on their behalf. 13.3 PROHIBITION AND ENFORCEABILITY (a) Any provision of, or the application of any provision of, this agreement which is void, illegal, unenforceable or prohibited 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. (b) The application of this clause 13.3 is not limited by any other provision of this agreement in relation to severability, prohibition or enforceability. page 35 Co-ordination agreement 13.4 WAIVERS (a) Waiver of any right, power, authority, discretion or remedy arising on a breach of or default under this agreement must be in writing and signed by the party granting the waiver. (b) A party is not entitled to rely on the conduct of another party or on a delay in the exercise or non-exercise of a right, power, authority, discretion or remedy arising from a breach of this agreement or default under this agreement as constituting a waiver of that right, power, authority, discretion or remedy. 13.5 VARIATION A variation of any term of this agreement must be in writing and signed by the parties. 13.6 ASSIGNMENT None of the parties may assign or transfer, or purport to assign or transfer, any of its rights or obligations under this agreement, except that: (a) the Principal Buyer may assign or transfer its rights or obligations under this agreement to a financial institution (or an agent or trustee thereof) providing financing or other facilities to the Principal Buyer (Security Trustee); and (b) the Security Trustee and any agent, receiver, receiver and manager or administrator or other Controller (as defined in the Corporations Act 2001) appointed on its behalf may assign or transfer the rights and obligations of the Principal Buyer under this agreement to a third party on the enforcement of any security over the Principal Buyer in favour of the Security Trustee. Such agreement or transfer must be without prejudice to any of PDL's rights including the right to oppose a Claim and PDL's liability must not exceed that which would have been applicable had the assignment or transfer not taken place. For the avoidance of doubt, PDL consents to the Principal Buyer granting security to the Security Trustee over the Principal Buyer's rights under this agreement. 13.7 SURVIVAL OF CERTAIN PROVISIONS If this agreement or performance of this agreement is rescinded or terminated and Completion does not occur, no party is liable to the other parties under this agreement or the Linked Transaction Agreements except under clauses 11, 12 and 13 of this agreement, which survive the rescission or termination. 13.8 DEFAULT INTEREST If a party fails to pay any amount payable under this agreement on the due date for payment, that party must pay interest on the amount unpaid at 2% per annum above the Interest Rate, compounding weekly. page 36 Co-ordination agreement 13.9 FURTHER ASSURANCES Each party must do all things necessary to give full effect to this agreement and the transactions contemplated by this agreement. 13.10 ENTIRE AGREEMENT This agreement supersedes all previous agreements in respect of its subject matter and embodies the entire agreement between the parties. 13.11 NON-MERGER No provision of this agreement merges on Completion. 13.12 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. 13.13 ATTORNEYS Each of the attorneys executing this agreement states that the attorney has no notice of the revocation of the power of attorney appointing that attorney. 14 INCORPORATION BY REFERENCE 14.1 LINKED TRANSACTION AGREEMENTS Subject to clause 14.2, the provisions of clause 11, 12 and 13 of this agreement are incorporated by reference into and form part of each Linked Transaction Agreement as if those provisions were fully repeated in each such agreement. 14.2 REFERENCES TO GROUP COMPANIES The provisions of this clause 14.2 apply so that a reference in clause 11, 12 or 13 of this agreement to the Buyer Group Companies or to the Seller Group Companies is, when incorporated by reference pursuant to clause 14.1, to be read and construed in the relevant Linked Transaction Agreement as set out below: page 37 Co-ordination agreement
AGREEMENT BUYER GROUP COMPANY SELLER GROUP COMPANY ------------------------------------------------------------------------------------------------------ Assets Agreement Pacific Brands Holdings Pty Ltd Pacific Dunlop Limited Australia Pacific Brands Footwear Pty Ltd Textile Industrial Design and Engineering Pty Ltd Pacific Brands Sport & Leisure Union Knitting Mills Pty Ltd Pty Ltd Pacific Brands Clothing Pty Ltd Boydex International Pty Limited Pacific Brands Household Products Foamlite (Australia) Pty Ltd Pty Ltd PB Holdings NV Vita Pacific Pty Ltd PD Licensing Pty Ltd Niblick Pty Ltd Cliburn Investments Pty Ltd Shares Agreement Pacific Brands Holdings Pty Ltd Pacific Dunlop Limited Australia PB Holdings NV Assets Agreement Pacific Brands Holdings (NZ)Ltd Pacific Dunlop Holdings (NZ) Limited New Zealand PB Holdings NV Shares Agreement PB Holdings NV Pacific Dunlop Holdings (Europe) Ltd UK Shares Agreement PB Holdings NV Pacific Dunlop Holdings (USA) Inc USA Shares Agreement PB Holdings NV Pacific Dunlop Holdings (Singapore) Indonesia Pte Ltd Shares Agreement PB Holdings NV PD International Pty Ltd Fiji Shares Agreement PB Holdings NV PD International Pty Ltd Hong Kong Shares Agreement PB Holdings NV PD Holdings (Malaysia) Sdn Bhd Malaysia Novare Shares Agreement Pacific Brands Holdings Pty Ltd PD Shared Services Holdings Pty Ltd PB Holdings NV
page 38 Co-ordination agreement 15 GUARANTEE AND INDEMNITY - SELLER 15.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer Group Companies the due and punctual performance of the Seller Group Companies' obligations under this agreement. 15.2 INDEMNITY The Guarantor indemnifies and holds the Buyer Group Companies harmless from and against all Loss incurred or suffered by the Buyer Group Companies and all actions, proceedings, claims or demands made against the Buyer Group Companies as a result of default by the Seller Group Companies in the performance of any such obligation. 15.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 15 applies: (1) to the present and future obligations of the Seller Group Companies under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 15 extend to any change in the obligations of the Seller Group Companies as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 15 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 15 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer Group Companies and the Seller Group Companies are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 15.4 CONTINUING GUARANTEE AND INDEMNITY This clause 15 is a continuing obligation of the Guarantor, despite any settlement of account and remains in full force and effect until the obligations of the each Seller Group Company under this agreement have been performed. page 39 Co-ordination agreement 15.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer Group Companies that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 15.6 RIGHTS The Guarantor waives any right it has under contact, tort or statute of first requiring any of the Buyer Group Companies to commence proceedings or enforcing any other right against PDL or any of the Seller Group Companies or any other person before claiming under this clause 15. 15.7 ANSELL The Guarantor covenants with the Buyer that should the Guarantor, within a period of 4 years after Completion, directly or indirectly dispose of, or permit the disposal of, all or substantially all of its interest in or all or substantially all of the assets of Ansell: (a) for other than cash or other valuable consideration received by the Guarantor or a Related Body Corporate of the Guarantor; or (b) for cash or other valuable consideration which is then distributed to parties other than the Guarantor or a Related Body Corporate of the Guarantor, it will first provide the Buyer with security reasonably acceptable to the Buyer for any claims which the Buyer may have against the Seller or Guarantor under this agreement. 16 GUARANTEE AND INDEMNITY - BUYER 16.1 GUARANTEE The Buyer Guarantor unconditionally and irrevocably guarantees to the Seller Group Companies the due and punctual performance of the Buyer Group Companies' obligations under this agreement. page 40 Co-ordination agreement 16.2 INDEMNITY The Buyer Guarantor indemnifies and holds the Seller Group Companies harmless from and against all Loss incurred or suffered by the Seller Group Companies and all actions, proceedings, claims or demands made against the Seller Group Companies as a result of default by the Buyer Group Companies in the performance of any such obligation. 16.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 16 applies: (1) to the present and future obligations of the Buyer Group Companies under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Buyer Guarantor under this clause 16 extend to any change in the obligations of the Buyer Group Companies as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 16 is not affected, nor are the obligations of the Buyer Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 16 applies: (1) regardless of whether the Buyer Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Seller Group Companies and the Buyer Group Companies are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 16.4 CONTINUING GUARANTEE AND INDEMNITY This clause 16 is a continuing obligation of the Buyer Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Buyer Group Companies under this agreement have been performed. 16.5 WARRANTIES OF THE GUARANTOR The Buyer Guarantor represents and warrants to the Seller Group Companies that: (e) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (f) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Buyer Guarantor; or page 41 Co-ordination agreement (3) any security agreement, deed, contract, undertaking or other instrument to which the Buyer Guarantor is a party or which is binding on it. 16.6 RIGHTS The Buyer Guarantor waives any right it has of first requiring the Seller Group Companies to commence proceedings or enforce any other right against the Buyer Group Companies or any other person before claiming under this clause 16. 17 SPEEDS RECEIVABLE In consideration of the Seller Group Companies retaining the Current Speeds Receivable, it is agreed that: (a) subject to clause 17(d), any moneys received from Speeds by any Seller Group Company or Buyer Group Company or their Related Corporations must be promptly paid to PDL and set in reduction of the balance of the Current Speeds Receivable; (b) for the avoidance of doubt, once no amount of the Current Speeds Receivable remains outstanding, clause 17(a) will no longer apply and any Seller Group Company or Buyer Group Company which receives moneys from Speeds after that time in respect of amounts owing to it, will be entitled to retain that amount; (c) the Pacific Brands Business will continue to trade with Speeds for so long as in its dealings with the Buyer Group Companies and Related Corporations, Speeds trades within 60 day credit terms; and (d) if any person takes any action to enforce recovery of amounts owing from Speeds while any of the Current Speeds Receivable remains outstanding, the Seller Group Companies will and the Buyer Group Companies and their Related Corporations will each exercise whatever retention of title or similar rights they may have on the basis that any amounts recovered will be divided between the Buyer Group Companies and their Related Corporations and PDL in the proportion A:B where: (1) A is the amount then owing by Speeds to the Buyer Group Companies and their Related Corporations in relation to trading after Completion; and (2) B is the amount of Current Speeds Receivable then outstanding. page 42 Co-ordination agreement SCHEDULE 1 - PARTIES PART 1 - SELLER GROUP COMPANIES 1 Pacific Dunlop Limited ABN 89 004 085 330 of level 3, 678 Victoria Street, Richmond, Victoria 2 Textile Industrial Design and Engineering Pty Ltd ABN 79 000 283 198 of level 3, 678 Victoria Street, Richmond, Victoria 3 Union Knitting Mills Pty Ltd ABN 38 006 752 021 of level 3, 678 Victoria Street, Richmond, Victoria 4 Boydex International Pty Ltd ABN 81 004 441 758 of level 3, 678 Victoria Street, Richmond, Victoria 5 Foamlite (Australia) Pty Ltd ABN 89 001 595 017 of level 3, 678 Victoria Street, Richmond, Victoria 6 Vita Pacific Pty Ltd ABN 65 004 919 171 of level 3, 678 Victoria Street, Richmond, Victoria 7 Pacific Dunlop Holdings (NZ) Limited WN 54807 of Blenheim Street, Upperhutt, New Zealand 8 Pacific Dunlop Holdings (Europe) Ltd of 119 Ewell Road, Surbiton, Surrey KT6 6AL, United Kingdom 9 Pacific Dunlop Holdings (USA) Inc of 612/1 Lakeside Drive, Suite 200, Reno, Nevada 89511, United States of America 10 PD International Pty Limited of Level 3, 678 Victoria Street, Richmond, Victoria 11 Pacific Dunlop Holdings (Singapore) Pte Ltd of 6 Loy Yang Way 1, 02-02, Kim Chew Building, Singapore, 508704 12 PD Holdings (Malaysia) Sdn Bhd of Suite 103, 1st Floor, Wisma MBF 37C, Jalan Meldrum, 80000 Johor, Bahru, Johor, Malaysia 13 PD Licensing Pty Ltd ABN 67 006 599 131 of level 3, 678 Victoria Street, Richmond, Victoria 14 Niblick Pty Ltd ABN 80 006 049 172 of level 3, 678 Victoria Street, Richmond, Victoria page 43 Co-ordination agreement 15 Cliburn Investments Pty Ltd] ABN 69 006 298 246 of level 3, 678 Victoria Street, Richmond, Victoria 16 PD Shared Services Holdings Pty Ltd ABN 75 092 811 080 of level 3, 678 Victoria Street, Richmond, Victoria PART 2 - BUYER GROUP COMPANIES 1 PB Holdings NV 1170 Brussels, Terhulpsesteenweg 166, Belgium 2 Pacific Brands Holdings Pty Ltd ACN 098 704 646 C/- Minter Ellison, 88 Phillip Street, Sydney, New South Wales 3 Pacific Brands Household Products Pty Ltd ACN 098 742 584 C/- Minter Ellison, 88 Phillip Street, Sydney, New South Wales 4 Pacific Brands Footwear Pty Ltd ACN 098 742 628 C/- Minter Ellison, 88 Phillip Street, Sydney, New South Wales 5 Pacific Brands Sport & Leisure Pty Ltd ACN 098 742 708 C/- Minter Ellison, 88 Phillip Street, Sydney, New South Wales 6 Pacific Brands Clothing Pty Ltd ACN 098 742 655 C/- Minter Ellison, 88 Phillip Street, Sydney, New South Wales 7 Pacific Brands Holdings (NZ) Ltd WN 1174050 C/- Minter Ellison Rudd Watts, Level 17, 125 The Terrace, Wellington, New Zealand page 44 Co-ordination agreement SCHEDULE 2 - CONSENTS PART A - KEY CONSENTS 1. Foreign Investment Review Board approval: (1) a notice in writing must be issued by or on behalf of the Treasurer of the Commonwealth of Australia stating that the Commonwealth Government does not object to the Principal Buyer and the Seller Group Companies entering into and completing the Assets Agreement Australia and the Shares Agreement Australia, either unconditionally or on terms reasonably acceptable to the Principal Buyer and the Seller Group Companies; or (2) the Treasurer of the Commonwealth of Australia must become precluded from making an order in respect of the acquisition of the assets to be transferred under the Assets Agreement Australia under the Foreign Acquisitions and Takeovers Act 1975(Cth). 2. A notice in writing consenting to the transactions contemplated by this agreement on terms reasonably acceptable to the Principal Buyer being given under the New Zealand Overseas Investment Regulations 1995. 3. The Principal Buyer entering into a binding agreement with the relevant banks or other financiers under which such banks or financiers agree to provide on Completion (subject only to such conditions as are acceptable to the Principal Buyer) any funds necessary for the Principal Buyer to purchase the Pacific Brands Business and receipt of such funds by the Principal Buyer under any such agreement. 4. The Principal Buyer entering into satisfactory service contracts with the Senior Management and the Senior Management agreeing to take an equity stake in the Principal Buyer. 5. The Principal Buyer being satisfied that at least 80% of the employees currently employed in the Pacific Brands Business (not including the employees employed in Australia whose employment is governed by an award) are prepared to continue to be employed on the same terms in the Pacific Brands Business after Completion. 6. The Principal Buyer being satisfied that the contractual arrangements with Robert Ng/PD Enterprises Limited in respect of those manufacturing and other services being performed by Robert Ng/PD Enterprises Limited for the Seller Group Companies will be assigned to the relevant Buyer Group Companies on Completion. 7. The completion deliverables specified in paragraphs (m), (n) and (o) of clause 4.2 of the Assets Agreement Australia being capable of delivery. page 45 Co-ordination agreement PART B - SECONDARY CONSENTS Australia Nil New Zealand Nil United Kingdom Nil United States of America Nil Indonesia (relating to sale of shares under the Shares Agreement Indonesia) BKPM approval Fiji (relating to sale of shares under the Shares Agreement Fiji) Reserve Bank approval Fiji Trade and Investment Bureau approval Hong Kong Nil Malaysia (relating to sale of shares under the Shares Agreement Malaysia) One of the following occurring in relation to the pre-emptive rights held by FACB Industries Incorporated Bernard (FACB) under the Joint Venture and Shareholders' Agreement Malaysia dated 6 April 1993 between FACB, PDL and PD Holdings Malaysia Sdn Bhd (JVA) in relation to the shares proposed to be sold under the Shares Agreement Malaysia: (a) FACB waiving its pre-emptive rights; or (b) the period of the "Second Option" (as referred to in the JVA) expiring without FACB having exercised its rights to purchase the shares proposed to be sold under the Shares Agreement Malaysia. Foreign Investment Committee (FIC) approval. Ministry of Trade Industry (MTI) approval. Bank Negara approval page 46 Co-ordination agreement SCHEDULE 3 - COMPLETION STATEMENT PART A See attached page 47 Co-ordination agreement PART B - PURCHASE PRICE AND NET AMOUNT PAYABLE 1 PURCHASE PRICE (CLAUSE 3.1) Fixed portion of price $ 200,700,000 plus Net Assets* $ less Receivables** (A) $ ------------- Purchase Price (B)*** $ ------------- *As shown in Completion Statement. **An amount equal to the Receivables as defined in the Assets Agreement Australia. ***Not including the Earn Out Amount, which is to be calculated and paid in accordance with schedule 9. 2 NET AMOUNT PAYABLE (CLAUSE 3.4) Purchase Price (B) $ Receivables (A) $ ------------- less Amount paid by Buyer on Completion under clauses 3.3(a) and (b) $ 729,600,000 ------------- Net amount payable on Payment $ Date by [Buyer/Seller] ------------- Plus interest on the amount to be paid calculated $ under clause 3.4(a) ------------- Net amount payable on Payment $ Date by [Buyer/Seller], including interest* ------------- ------------- *Not including the Earn Out Amount, which is to be paid in accordance with schedule 9. page 48 Co-ordination agreement SCHEDULE 4 - NOTES FOR PREPARATION OF COMPLETION STATEMENT AGREED ADJUSTMENTS The Agreed Adjustments are as follows: ELIMINATIONS 1 BRANDS AND INTANGIBLES To be eliminated on the same basis as used to derive the Bid Accounts. 2 GROSBY CHINA To be reclassified on the same basis as used to derive the Bid Accounts. 3 DEFERRED COSTS To be eliminated on the same basis as used to derive the Bid Accounts. 4 SPEEDS NET DEBTORS All Speeds debtors as at the Effective Time and any provisions against them, to be eliminated. 5 GUILFORD PROPERTY If necessary, eliminated to the extent that any amount is attributable to that property in the Completion Accounts. 6 CASH, BANK DEBTS All cash and bank debts to be excluded on the same basis as used to derive the Bid Accounts except: (a) any amount of Cash in Hand as defined in the Shares Agreements as at the Effective Time; (b) any amount of Included Cash as defined in the Assets Agreements; (c) any overdraft balances existing at Completion in any companies transferred under the Shares Agreements and their subsidiaries. 7 RESTONIC OEI A 50% equity interest to be eliminated on the same basis as used to derive the Bid Accounts, subject always to paragraph 6(a) above, if applicable. 8 BERLEI INVESTMENTS Fixed amount of $89,554 to be eliminated. ADDITIONS 9 PHILIPPINES INVESTMENTS To be included at $2,905,000 adjusted for the PDL Group's share of profit or loss since the Accounts Date. page 49 Co-ordination agreement 10 PBA STAMP DUTY To be adjusted on the same basis as used to derive the Bid Accounts, except that these eliminations/additions are to be adjusted to reflect any change to the estimated stamp duty (as included in plant and equipment) and any amount of stamp duty paid. 11 BONDS SPINNING To be included on the same basis as used to derive the Bid Accounts. 12 GENERAL PROVISION The General Provision will be included as an adjustment in the same manner as in the Bid Accounts, except as provided under clause 5.2(c) of the Co-ordination Agreement, in which case, the Residual Provision will be included as an adjustment in that manner. 13 SUPER ACCRUAL To be included on the same basis as used to derive the Bid Accounts. INTERCOMPANY 14 TRADING BALANCES To be eliminated on the same basis as used to derive the Bid Accounts. 15 DIVIDENDS To be eliminated on the same basis as used to derive the Bid Accounts. TAXATION BALANCES 16 TAX ACCOUNTS To be eliminated on the same basis as used to derive the Bid Accounts. 17 SHARE SALE BALANCES To be included on the same basis as used to derive the Bid Accounts. 18 BUSINESS ASSETS FITB To be included on the same basis as used to derive the Bid Accounts. ADDITIONAL ADJUSTMENTS 19 SIP EXCESS To be adjusted to eliminate any SIP Excess as defined in the Coordination Agreement. 20 OTHER ADJUSTMENTS Any other adjustment agreed between the parties, including but not limited to the following: (a) the Accepted Liabilities described in paragraph (a)(2) of that definition in the Assets Agreements and the Receivables described in paragraph (b) of that definition in the Assets Agreements which are not already included in the Completion Accounts, to be added. (b) FITB relating to employees of the Pacific Brands Business employed in New Zealand to be eliminated; page 50 Co-ordination agreement SCHEDULE 5 - NOTES FOR PREPARATION OF THE APPORTIONMENT STATEMENT PART A 1 ASSETS - AUSTRALIA AND NEW ZEALAND The apportionment of the Purchase Price in respect of the assets to be transferred under the Assets Agreement Australia and the Assets Agreement New Zealand, will be made in accordance with clause 5.2(f), except as otherwise specified below: ASSETS AUSTRALIA NEW ZEALAND ---------------------------------------------------------------- Assets Leases $ 1 $ 1 Business Records $ 1 $ 1 Contracts $ 1 $ 1 Freehold Properties See note 1 See note 1 Goodwill See note 1 See note 1 Included Cash See note 1 See note 1 Intellectual Property Rights $ 1 $ 1 Plant and Equipment See note 1 See note 1 Property Leases $ 1 $ 1 SIP Receivable $ 5,000,000 N/A Statutory Licences $ 1 $ 1 Stock See note 1 See note 1 Note 1 - Freehold Properties, Goodwill, Included Cash, Plant and Equipment and Stock All of these assets will have values allocated to them in the manner described in clause 5.2(f). 2 RECEIVABLES - ASSETS AGREEMENT AUSTRALIA The current and non current receivables which are attributed to the Australian business under clause 5.2(f): (a) will include the amount payable for the SIP Receivable under the Assets Agreement Australia; (b) excluding the SIP Receivable, represent the Receivables (as defined in the Assets Agreement Australia), which are not part of the assets transferred under the Assets Agreement Australia. The Receivables are to be dealt with in accordance with clause 7.3 of the Assets Agreement Australia, the relevant adjustments to be calculated in accordance with Part B of these notes to the Completion Statement. page 51 Co-ordination agreement 3 OTHER ITEMS - ASSETS AGREEMENTS (a) PAYMENTS IN ADVANCE AND OUTGOINGS (CLAUSE 5.1 ASSETS AGREEMENTS) The prepayments and payables which are attributed to the Australian and New Zealand businesses respectively under clause 5.2(f), include the amounts payable by the Buyer and the Seller under clause 5.1 of the Assets Agreements. (b) EMPLOYEE LEAVE BENEFITS (CLAUSE 9.6 ASSETS AGREEMENTS) The allowance to which the Buyer is entitled in respect of Employee Leave Benefits under clause 9.6 of the Assets Agreements is included in the current and non-current provisions and the FITB which is attributed to the Australian business under clause 5.2(f). (c) GENERAL PROVISION The General Provision (as adjusted in accordance with clauses 5.2(c) and 10.4 of the Co-ordination Agreement) will be attributed to the Australian business to be transferred under the Assets Agreement Australia and will be included in the non-current provisions and FITB. PART B - MISCELLANEOUS NOTES RELATING TO THE PREPARATION OF THE COMPLETION STATEMENT 1 PACIFIC DUNLOP (HOLDINGS) HONG KONG LIMITED This entity will not be included in the Completion Accounts as it has not previously been accounted for as part of the Pacific Brands Business. It will be brought into the Apportionment Statement with nil additional value (the value of its assets, being its subsidiaries and investments, was included in the Bid Accounts). page 52 Co-ordination agreement SCHEDULE 6 - ACCOUNTS page 53 Co-ordination agreement SCHEDULE 7 - BID ACCOUNTS page 54 Co-ordination agreement SCHEDULE 8 - SENIOR MANAGEMENT Paul Moore Stephen Tierney Rick Rostolis Mary Keely Bryan Pearson Sue Morphet Neil Padoa Graham Boyd Steve Audsley David Jackson Malcolm Ford Tom Dalianis page 55 Co-ordination agreement SCHEDULE 9 - EARN OUT PART 1 DEFINITIONS In this schedule, the following expressions have the following meanings: Auditors means the auditors from time to time of the Buyer, being a major international accounting firm. Budget means the Seller's budget for the Business for the period to 30 June 2002. Business means the Pacific Brands Business as carried on by the Buyer Group Companies and their Related Corporations after the Effective Time. Buyer means the Buyer Group Companies and any of their Related Corporations carrying on any part of the Business after Completion under this agreement. Earn Out Period means the period from the Effective Time to 30 June 2002. EBIT means, subject to paragraph 2.1, for the Earn Out Period the audited consolidated profit of the Buyer before interest and tax in relation to the Business determined in accordance with the Accounting Standards as applied in the preparation of the Completion Accounts, except that the following shall apply: (a) no Excluded Costs shall be brought to account; (b) "interest" shall include, without limitation, all interest and charges on finance leases as defined in AASB 1008 and on all types of financial accommodation; (c) other than in the ordinary course of business, the effect of any acceleration of expenditure or deferral of income as compared to practice in the Business in the period from 1 July 2001 to Completion and which would otherwise have the effect of reducing EBIT shall be reversed; (d) one off items of income and expenditure (as defined in the Accounting Standards) will be excluded and specifically any restructuring costs not reflected in the Budget (other than appropriate costs or amortisation of costs incurred to address under performance relative to Budget) to the extent that such costs are not recouped in the Earn Out Period and any advisers fees, expenses or Loss in relation to any matter arising under this agreement will be excluded; (e) there will be no amortisation of intangible assets or deferred costs; (f) Included Revenue will be brought to account; (g) any amounts recoverable under any loss of profits insurances in respect of events occurring during the Earn Out Period will be brought to account; Excluded Costs means those costs, liabilities or expenses to be excluded from EBIT under paragraph 1.2. page 56 Co-ordination agreement First Period EBIT means the audited consolidated profit of the Seller before interest and tax in relation to the Business for the period from 1 July 2001 to the Effective Time, as set out in the EBIT Statement and determined in accordance with the Agreed Accounting Principles, except that, for the avoidance of doubt: (a) The principles set out in paragraphs (b) and (e) in the definition of EBIT will apply; (b) Fees, expenses and costs (other than management time) associated with the sale of the Pacific Brands Business will be excluded; and (c) Profits or losses referable to PDL's indirect ownership interest in Restonic (M) Sdn Bhd and Dunlop Slazenger (Philippines ) Inc will be included. Related Party Transaction has the meaning given in paragraph 1.2(b). 1 DURING EARN OUT PERIOD 1.1 SELLER NOMINEE AND INFORMATION (a) The Seller shall, during the Earn Out Period have the following specific rights the right to attend by its nominee (Seller Nominee) at a briefing meeting to be held in March 2002 between the Seller Nominee on the one hand and a nominee of the Buyer being the Chief Executive Officer or Chief Financial Officer of the Business on the other hand. The purpose of this meeting shall be to keep the Seller Nominee fully apprised of the current operations of the Buyer (including its performance against Budget and a review of management accounts to date) and its future plans. (b) The Seller undertakes that it will keep any information provided to it under paragraph 1.1 confidential and use it only for the purposes of this agreement and will not otherwise use or disclose nor permit to be used or disclosed any such information. 1.2 EXCLUDED COSTS Unless the Seller Nominee has given specific prior written approval of the matter concerned, all costs, liabilities and expenses suffered or incurred by the Buyer in carrying on the Business in relation to the following matters shall be excluded from the calculation of EBIT: (a) any management or similar fees (other than employee or normal director remuneration) payable to any shareholder related director of the Buyer or any Related Corporation; (b) transactions with a shareholder of the Buyer or a Related Corporation of the Buyer (Related Party Transaction), and other parties if and then to the extent that the cost, liability or expense to the Buyer based on a reasonable and customary basis of allocation of such cost, liability or expense is more than would be reasonable to expect between unrelated parties dealing on normal commercial terms; page 57 Co-ordination agreement (c) any marketing and selling expenses, administration expenses, and other expenses (not including freight and distribution) (Relevant Expense Categories) to the extent that the aggregate amount of expenditure for the Relevant Expense Category in the Earn Out Period exceeds the amount budgeted in the Budget for that period except an appropriate amortisation of any expenditure in excess of what was budgeted which was incurred to address material under performance relative to Budget; (d) all costs, liabilities and expenses not incurred by the Buyer in the carrying on of the Business in the ordinary course of business. 1.3 INCLUDED REVENUE (a) Where a Related Party Transaction has occurred and where the income or benefit to the Buyer is less than would be reasonable to expect between unrelated parties dealing on normal commercial terms, the shortfall shall be brought to account for the purpose of determining EBIT. (b) If any part of the Business is disposed of in the Earn Out Period, there shall be included in EBIT from the date of disposal the amount of EBIT budgeted for that period for that disposed part of the Business in the Budget. 1.4 DETERMINATION Any dispute between the parties as to the amount of any benefit, income, expense, cost or liability which is to be treated as Included Revenue or Excluded Cost under this paragraph 1 shall be determined on a reference by either the Buyer or the Seller by the Valuer and the provisions of paragraph 3.3 shall apply to such determination. 1.5 COVENANTS BY BUYER Unless the Seller has given specific prior written approval of the matter concerned, the Buyer must ensure that throughout the Earn Out Period: (a) funds managed by CVC Asia Pacific Limited and Catalyst Investment Managers Pty Limited and executive management of the Pacific Brands Business between them remain beneficially entitled directly or indirectly to at least 60 per cent of the issued share capital of the Buyer; (b) the Buyer maintains insurance on terms usual in relation to a business of the nature of the Business over its assets and undertaking. In the event of a breach of paragraph 1.5(b), there shall be taken into account for the purposes of determining EBIT any reduction in revenue or increase in costs resulting from such breach. page 58 Co-ordination agreement 2 EARLY TERMINATION OF EARN OUT PERIOD 2.1 EARLY TERMINATION If there is a breach of paragraph 1.5(a), EBIT will be calculated as though the Earn Out Period ended at the first month end after the breach, grossed up by the earnings before interest and tax that would be derived if the Business performed to Budget from that month end to 30 June 2002. 2.2 EARLY PAYMENT The Buyer may at any time during the Earn Out Period fully discharge all its obligations under this schedule by paying the Seller $10,000,000 by bank cheque. 3 EARN OUT CALCULATION 3.1 REVIEW BY SELLER'S ACCOUNTANT (a) The Buyer must procure that the Seller's Accountant is given full access to the employees of the Buyer, to the Auditors and to all books and records of the Buyer reasonably required to enable the Seller's Accountant to review: (1) the consolidated audited accounts produced for the Buyer for the Earn Out Period; and (2) the EBIT Certificate (as defined in paragraph 4.2) for each that period. (b) The Buyer must use all reasonable endeavours to ensure that the Seller's Accountant is given access, for the purpose described in paragraph 3.1(a), to the Auditors' relevant working papers. 3.2 ATTEMPT TO RESOLVE (a) If the Seller disputes the content of the EBIT Certificate then it may within 30 Business Days of receiving a copy of the EBIT Certificate from the Buyer refer the matter to the Valuer for determination under paragraph 3.3. (b) If no referral is made by the Seller under paragraph 3.2(a) within the period referred to in paragraph 3.2(a) the value determined by the Auditors shall be final and binding on the parties. 3.3 VALUER The provisions of paragraph 4.2 of this agreement shall apply, with the necessary changes, to disputes in relation to the EBIT Certificate. page 59 Co-ordination agreement 4 EARN OUT 4.1 EARN OUT AMOUNTS (a) The Buyer and Seller agree that part of the Purchase Price is to be determined by reference to the consolidated performance of the Business during the Earn Out Period. (b) An additional amount of Purchase Price will be payable if paragraph 2 applies and also in the circumstances set out in clauses 4.1(c). (c) An additional amount of Purchase Price will be payable (Earn Out Amount) as follows: (1) if the aggregate of the First Period EBIT and the EBIT over the Earn Out Period is less than or equal to $115,000,000 the Earn Out Amount will be nil; (2) if the aggregate of the First Period EBIT and the EBIT over the Earn Out Period is between $115,000,000 and $120,000,000, the Earn Out Amount will be $2 for each $1 of aggregate of First Period EBIT and EBIT above $115,000,000; or (3) if the aggregate of the First Period EBIT and the EBIT over the Earn Out Period is $120,000,000 or more, the Earn Out Amount will be $10,000,000. 4.2 DETERMINATION OF EARN OUT AMOUNT (a) The Buyer must procure that the Auditors provide to the Seller and the Seller's Accountant within three months after the end of the Earn Out Period: (1) a consolidated audited profit and loss account for the Buyer and a consolidated audited balance sheet of the Buyer as at the last day of Earn Out Period; and (2) a certificate of EBIT for the Earn Out Period (EBIT Certificate). (b) In preparing the EBIT Certificate the Auditor must apply all relevant provisions of this agreement. 4.3 PAYMENT OF EARN OUT AMOUNT (a) The Buyer must pay the Earn Out Amount to the Seller by bank cheque on the later of 30 November 2002 and the day which is 5 Business Days after final determination of the Earn Out Amount pursuant to paragraph 3. (b) If the Buyer exercises or purports to exercise any right of set off or counterclaim on any account whatsoever against the amount of the Earn Out Amount otherwise payable and the set off or counterclaim is not ultimately determined wholly or in part in the Buyer's favour then, to the extent it is not determined in the Buyer's favour, interest on that amount shall be payable at the Interest Rate plus 2 percent from the due date for page 60 Co-ordination agreement payment to the date of actual payment (both dates inclusive) calculated on daily rests. page 61 Co-ordination agreement EXECUTED AS AN AGREEMENT: Signed for Pacific Dunlop Limited by its attorney in the presence of: /s/ Paul Devereux /s/ Carly Mansell - ------------------------------ -------------------------------- Witness Attorney Paul Devereux Carly Mansell - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Bonds Industries Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Textile Industrial Design and Engineering Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) page 62 Co-ordination agreement Signed for Union Knitting Mills Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Boydex International Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Foamlite (Australia) Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Vita Pacific Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) page 63 Co-ordination agreement Signed for Pacific Dunlop Holdings (NZ) Limited by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Pacific Dunlop Holdings (Europe) Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Pacific Dunlop Holdings (USA) Inc by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for PD International Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) page 64 Co-ordination agreement Signed for Pacific Dunlop Holdings (Singapore) Pte Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for PD Holdings (Malaysia) Sdn Bhd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for PD Licensing Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for Niblick Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) page 65 Co-ordination agreement Signed for Cliburn Investments Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for PD Shared Services Holdings Pty Ltd by its attorney in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed for and on behalf of PB Holdings NV by its duly authorised Attorneys under Power in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Witness Attorney - ------------------------------ -------------------------------- Name (please print) Name (please print) /s/ -------------------------------- Attorney -------------------------------- Name (please print) page 66 Co-ordination agreement Signed sealed and delivered by Pacific Brands Clothing Pty Ltd in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Director Director - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Household Products Pty Ltd in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Director Director - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Footwear Pty Ltd in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Director Director - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Sport & Leisure Pty Ltd in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Director Director - ------------------------------ -------------------------------- Name (please print) Name (please print) page 67 Co-ordination agreement Signed sealed and delivered by Pacific Brands Clothing Pty Ltd in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Director Director - ------------------------------ -------------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Holdings (NZ) Pty Ltd in the presence of: /s/ /s/ - ------------------------------ -------------------------------- Director Director - ------------------------------ -------------------------------- Name (please print) Name (please print) page 68 Co-ordination agreement ANNEXURE A - ITO SERVICES AGREEMENT page 69 Co-ordination agreement ANNEXURE B - TAX INDEMNITY DEED page 70 Co-ordination agreement ANNEXURE C - DATA ROOM page 71 EX-4.2 5 dex42.txt SALE OF BUSINESS AGREEMENT, PACIFIC BRANDS EXHIBIT 4.2 SALE OF BUSINESS AGREEMENT PACIFIC BRANDS - AUSTRALIA Pacific Dunlop Limited Textile Industrial Design and Engineering Pty Ltd Union Knitting Mills Pty Ltd Boydex International Pty Ltd Foamlite (Australia) Pty Ltd Vita Pacific Pty Ltd PD Licensing Pty Ltd Niblick Pty Ltd Cliburn Investments Pty Ltd and Pacific Brands Holdings Pty Ltd Pacific Brands Footwear Pty Ltd Pacific Brands Sport & Leisure Pty Ltd Pacific Brands Clothing Pty Ltd Pacific Brands Household Products Pty Ltd PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference NJW:BAE
TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 2 1.1 Definitions 2 1.2 Interpretation 9 1.3 Business Day 10 1.4 The Seller 10 1.5 The Buyer 11 1.6 Conflict 12 2 Sale and purchase 12 2.1 Sale of Business Assets 12 2.2 Excluded Assets 12 3 Purchase Price 12 3.1 Purchase Price 12 3.2 Apportionment 13 3.3 Payments at Completion 13 3.4 Final payment 13 4 Completion 13 4.1 Date for Completion 13 4.2 Delivery of documents executed by Seller 13 4.3 Delivery of documents executed by third parties 15 4.4 Delivery of Business Records and documents of title 15 4.5 Buyer's obligations at Completion 15 4.6 Title 15 4.7 Effective Time 15 4.8 Interdependency 16 4.9 Seller obligations post Completion - Intellectual Property Rights 16 5 Payments in advance and outgoings 17 5.1 Advance payments 17 5.2 Outgoings 17 5.3 Quantification 17 6 Liabilities 17 6.1 Seller's responsibility - Liabilities 17 6.2 Quotations, tenders and orders 17 6.3 Buyer's responsibility - Accepted Liabilities 18 6.4 Reimbursement to Seller 18 6.5 Indemnity 18 6.6 Management of Accepted Claims 18
page 1 Australia Asset Agreement 7 Receivables 19 7.1 Collection by Buyer 19 7.2 Accounting for Receivables 19 7.3 Payment on account 19 7.4 Buyer to provide information 20 7.5 Other debts owed to Seller 20 8 Contracts, Assets Leases, Property Leases 20 8.1 Transfer of Contracts, Assets Leases and Property Leases 20 8.2 Obligations pending transfer 20 8.3 Use or occupation pending transfer 21 8.4 Failure to transfer 21 8.5 Letters of Credit 22 9 Employees 22 9.1 Offer of employment by Buyer 22 9.2 Employment terms and conditions 22 9.3 Best endeavours 22 9.4 Termination by Seller 22 9.5 Payment and indemnity by Buyer for Employment Benefits 23 9.6 Allowance for Employee Leave Benefits 23 9.7 Restriction 23 9.8 Indemnity by Seller 23 10 Superannuation 24 10.1 Definitions 24 10.2 Buyer as Associated Employer 25 10.3 Membership of Buyer's Fund - Existing Members 26 10.4 Payment of Accrued Benefit Values 27 10.5 Calculation of Accrued Benefit Values 27 10.6 Successor Fund Agreement 28 10.7 Calculation of Superannuation Amount 29 10.8 Acknowledgments 29 10.9 External Funds 29 10.10 Contributions by Associated Employer 30 10.11 Undertakings by Buyer and Seller 30 10.12 Indemnity 31 11 Release of guarantees 31 12 Period before Completion 31 12.1 Carrying on Business 31 12.2 Access 32 13 After Completion 32 13.1 Supply of after-sales service 32 13.2 Reconciliation for returned goods 33 13.3 Supplier's Warranties 33
page 2 Australia Asset Agreement 13.4 Access by Seller 33 13.5 Access to Excluded Records by Buyer 33 13.6 Tax returns 33 14 Strategic Investment Programme 33 15 Competition 34 15.1 Undertaking 34 15.2 Acquisition of interests in competing businesses 34 15.3 Exclusion from restraint 34 15.4 Related Corporations 35 15.5 Severability 35 16 Warranties 35 17 Limitation of liability 35 17.1 Co-ordination Agreement 35 17.2 Specific exclusions - Freehold Properties 35 17.3 Disclosure statements 37 17.4 Property Covenants 37 17.5 Transfer of Sunnybank Hills Property 37 17.6 Obligations pending transfer - Sunnybank Hills Property 38 17.7 Use or occupation pending transfer/failure to transfer 38 18 GST 39 18.1 Supply of a going concern 39 18.2 GST pass-on 39 19 Guarantee and indemnity - Seller 40 19.1 Guarantee 40 19.2 Indemnity 40 19.3 Extent of guarantee and indemnity 40 19.4 Continuing guarantee and indemnity 40 19.5 Warranties of the Guarantor 40 19.6 Rights 41 20 Guarantee and indemnity - Buyer 41 20.1 Guarantee 41 20.2 Indemnity 41 20.3 Extent of guarantee and indemnity 41 20.4 Continuing guarantee and indemnity 42 20.5 Warranties of the Guarantor 42 20.6 Rights 42 Schedule 1 - Warranties 43 Schedule 2 - Disclosure Schedule 57 Schedule 3 - Employees 58
page 3 Australia Asset Agreement Schedule 4 - Intellectual Property Rights 59 Schedule 5 - Contracts and Assets Leases 63 Schedule 6 - Statutory Licences 67 Schedule 7 - Leased Properties 68 Schedule 8 - Plant and Equipment 69 Schedule 9 - Letters of Credit 72 Schedule 10 - Freehold Properties 73 Schedule 11 - Accepted Liabilities 74 Schedule 12 - Guarantees 75 Schedule 13 - External Funds 76 Annexure A - Assignment of Trademarks Annexure B - Assignment of Contracts and Asset Leases Annexure C - Assignment of Property Leases Annexure D - [Not used] Annexure E - Trade Mark Relationship Agreement Annexure F - Successor Fund Agreement
page 4 Australia Asset Agreement THIS BUSINESS SALE AGREEMENT is made on 2001 between the following parties: 1. Pacific Dunlop Limited ABN 89 004 085 330 (Guarantor) 2. Textile Industrial Design and Engineering Pty Ltd ABN 79 000 283 198 3. Union Knitting Mills Pty Ltd ABN 38 006 752 021 4. Boydex International Pty Ltd ABN 81 004 441 758 5. Foamlite (Australia) Pty Ltd ABN 89 001 595 017 6. Vita Pacific Pty Ltd ABN 65 004 919 171 7. PD Licensing Pty Ltd ABN 67 006 599 131 8. Niblick Pty Ltd ABN 80 006 049 172 9. Cliburn Investments Pty Ltd ABN 69 006 298 246 all of Level 3, 678 Victoria Street, Richmond, Victoria, 3121 (parties 1 to 9 collectively, Seller) 10. Pacific Brands Holdings Pty Ltd ACN 098 704 646 11. Pacific Brands Footwear Pty Ltd ACN 098 742 628 12. Pacific Brands Sport & Leisure Pty Ltd ACN 098 742 708 13. Pacific Brands Clothing Pty Ltd ACN 098 742 655 14. Pacific Brands Household Products Pty Ltd ACN 098 742 584 all c/- Minter Ellision, 88 Phillip Street, Sydney, New South Wales 2000 (parties 10 to 14 collectively, Buyer) 15. PB Holdings NV of 1170 Brussels, Terhulpsesteenweg 166 RECITALS A. The Seller is the owner of the Business Assets. page 1 Australia Asset Agreement B. The Seller has agreed to sell and the Buyer has agreed to buy the Business Assets. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. D. The Buyer Guarantor agrees to guarantee the performance by the Buyer of its obligations pursuant to this agreement. The parties agree in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accepted Claims has the meaning given in clause 6.3; Accepted Liabilities means: (a) those trade and other Liabilities arising in relation to the ownership of the Business Assets or operation of the Business before the Effective Time: (1) and which are provided for in the Completion Statement, including but not limited to any Intra Group Liability; (2) which constitute the amount of any payment to a trade creditor of the Seller the subject of an unpresented cheque of the Seller as at the Effective Time (not including any Inter Group Liability), provided that the relevant cheque account is assumed by the Buyer; and (b) the Liabilities as described in schedule 11, but excluding the Liability assumed by the Buyer pursuant to clause 9.6 and any Inter Group Liability; Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Adjustment Note includes any document or record treated by the Commissioner of Taxation as an adjustment note or as enabling the claiming of an input tax credit for which an entitlement otherwise arises; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Seller is party in relation to assets used in the Business including, but not limited to, those listed in part 2 of schedule 5 and any leases, agreements or arrangements entered into by the Seller between the date of this agreement and the Effective Time, but excludes the Property Leases; page 2 Australia Asset Agreement Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Bid Accounts has the meaning given to that term in the Co-ordination Agreement; Business means the business carried on by the Seller in Australia (excluding the business carried on by Bonds Industries Pty Ltd) comprising the manufacture, marketing, sale and distribution of: (a) clothing and related apparel including socks, underwear and intimate and outerwear garments; (b) foam, polyester fibre, mattresses and bedding accessories and products; (c) footwear; and (d) sporting and leisure equipment and related apparel and footwear and workwear; Business Assets means the following assets: (a) the Assets Leases; (b) the Business Records; (c) the Contracts; (d) the Freehold Properties; (e) the Goodwill; (f) the Included Cash; (g) the Intellectual Property Rights; (h) the Plant and Equipment; (i) the Property Leases; (j) the SIP Receivable; (k) the Statutory Licences; and (l) the Stock, and any asset, right or future economic benefit used in or relating to exclusively, the Business, but excludes the Excluded Assets; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday, Sunday or a public holiday; Business Records means, to the extent relating to the Business, the Seller's customer lists and supplier lists, records of the Intellectual Property Rights, Assets Leases, Contracts, Statutory Licences and Property Leases, records of Accepted Liabilities and records of Transferring Employees and of their Employment Benefits; Buyer Guarantor means Pacific Brands Holdings Pty Ltd and PB Holdings NV; page 3 Australia Asset Agreement Claim means any claim or cause of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement, the Business or any of the Business Assets; Clothing Business means that part of the Business relating to clothing and related apparel including socks, underwear and intimate and outerwear garments (excluding clothing and related apparel which relates to the Sport & Leisure Business); Completion means completion of the sale and purchase of the Business Assets under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement means the statement to be prepared in relation to the Business as at the Effective Time pursuant to the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements (including for the avoidance of doubt Intellectual Property Licences) to which the Seller is a party to the extent they relate to the Business and which are, wholly or partly, executory as at the Effective Time, including, but not limited to, those listed in part 1 of schedule 5, but excludes: (a) the Assets Leases; (b) the Property Leases; and (c) any agreements to the extent they relate to Excluded Assets or Liabilities which are not Accepted Liabilities or which are not otherwise assumed by the Buyer under this agreement; Co-ordination Agreement means the co-ordination agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Disclosure Schedule means schedule 2 to this agreement which contains disclosures in relation to the Seller's Warranties; Dollars, A$ and $ means Australian dollars, unless otherwise specified; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Seller listed in schedule 3 who is still employed in the Business as at the Completion Date and any person who becomes an employee of the Seller in relation to the Business between the date of this agreement and Completion; Employee Leave Benefits means annual leave, leave loading, sick leave and long service leave; page 4 Australia Asset Agreement Employment Benefits means Employee Leave Benefits and all wages, salary, remuneration, compensation and other benefits payable to the Employees by the Seller; Encumbrance means any mortgage, charge, lien, pledge (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Environmental Law has the meaning given to that term in the Co-ordination Agreement; Environmental Liability has the meaning given to that term in the Co-ordination Agreement; Excluded Assets means the following assets of the Seller used in or arising out of the Business: (a) all cash including cash at hand or at bank, except for the Included Cash; (b) the Receivables; (c) any amounts other than Receivables receivable by the Seller at any time in relation to ownership of the Business Assets before Completion including, but not limited to, in respect of any insurance claim; (d) the amount of any payment received or receivable under the SIP Scheme relating to any period up to 30 June 2001 to the extent that the amount of the payment exceeds an amount equal to the SIP Receivable; (e) the Speeds Receivable; (f) the Inter Group Receivables; (g) the Excluded Records; (h) rights to the Licensed Trade Marks as defined in the Trade Mark Relationship Agreement and rights to the name Pacific Dunlop and any names likely to be confused with that name; (i) the benefit of any insurances held by the Seller or any Related Corporation of the Seller; (j) any shares or other securities in any body corporate; (k) the Foreign Exchange Contracts; and (l) goods and service sourcing contracts which apply, as well as to the Business, to other divisions and subsidiaries of Pacific Dunlop Limited; Excluded Records means those Business Records which the Seller is required by law to retain; Footwear Business means that part of the Business relating to footwear (excluding footwear which relates to the Sport & Leisure Business); Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the Seller which relate exclusively to the Business which remain current as at Completion, details of which will be provided to the Buyer at Completion; page 5 Australia Asset Agreement Freehold Properties means the land more particularly described in schedule 10 and the Sunnybank Hills Property; Goodwill means the Seller's goodwill relating exclusively to the Business; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; GST includes any replacement or subsequent similar tax; GST Act means A New Tax System (Goods and Services Tax) Act 1999 (Cth); Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to those listed in schedule 12; Guarantor means Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121; Household Products Business means that part of the Business relating to foam, polyester fibre, mattresses and bedding accessories and products; Immediately Available Funds means cash or bank cheque; Included Cash means any cash of the Seller at the Effective Time, which is located at the Properties or in bank accounts assumed by the Buyer, which is identified in the Completion Statement; Intellectual Property Licences means all agreements under which the Seller has the right to use, but not ownership of, intellectual property used in connection with the Business details of which are set out in part 2 of schedule 4; Intellectual Property Rights means the rights and interests of the Seller to the extent they relate to the Business in all patents, utility models, copyrights, registered or unregistered trade marks or service marks, trade names, know-how, brand names, registered designs and any applications for any of the above, including but not limited to the Intellectual Property Licences and the other rights listed in schedule 4; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Inter Group Debts means any amount owing (including, but not limited to, trade accounts payable and receivable): (a) by a Seller in its capacity as an entity carrying on part of the Business to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) (Inter Group Liability); (b) by a member of the PDL Group (except in its capacity as an entity carrying on any part of the Pacific Brands Business) to a Seller in its capacity as an entity carrying on part of the Business (Inter Group Receivable); page 6 Australia Asset Agreement Inter Group Liability has the meaning given in paragraph (a) of the definition of Inter Group Debts; Inter Group Receivable has the meaning given in paragraph (b) of the definition of Inter Group Debts; Intra Group Debts means any amount owing (including, but not limited to, trade accounts payable and receivable): (a) by a Seller in its capacity as an entity carrying on part of the Business to a member of the PDL Group in its capacity as an entity carrying on any part of the Pacific Brands Business) (Intra Group Liability); (b) by a member of the PDL Group in its capacity as an entity carrying on any part of the Pacific Brands Business to a Seller in its capacity as an entity carrying on part of the Business (Intra Group Receivable); Intra Group Liability has the meaning given in paragraph (a) of the definition of Intra Group Debts; Intra Group Receivable has the meaning given in paragraph (b) of the definition of Intra Group Debts; Leased Properties means the property the subject of the Property Leases, as described in schedule 7; Letters of Credit means such letters of credit procured by the Seller in respect of the purchase of stock-in-trade or plant and equipment in the Business and which are outstanding as at the Effective Time, as are listed in schedule 9; Liabilities means all accrued liabilities of the Seller in respect of the Business as at the Effective Time; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Novated Leases means the leases of motor vehicles used by Employees listed in part 2 of schedule 8; Officer means, in relation to a body corporate, a director or secretary of that body corporate; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group means Pacific Dunlop Limited ABN 89 004 085 330 and its Related Corporations immediately before Completion; Plant and Equipment means the plant (including plant under construction), equipment, machinery, tools, furniture, fittings, spare parts, leasehold improvements and motor vehicles owned by the Seller as at the Effective Time and used exclusively in the Business including, without limitation, those listed in part 1 of schedule 8; page 7 Australia Asset Agreement Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; Properties means the Leased Properties and the Freehold Properties; Property Leases means the leases of real property listed in schedule 7; Purchase Price means Purchase Price payable for the Business Assets calculated under clause 3; Receivables means the trade debts and any other debts or amounts owing acquired in carrying on the Business owed to the Seller at the Effective Time including, but not limited to: (a) any Intra Group Receivable; and (b) the amount of any trade or other debt for which a payment has been received by the Seller but not credited to the Seller's bank accounts at the Effective Time, provided that the relevant cheque account is assumed by the Buyer, but not including the Speeds Receivable, any Inter Group Receivable or any amount relating to the SIP Scheme; Related Corporation means a "related body corporate" as that expression is defined in the Corporations Act; Residual Provision has the meaning given to that term in the Co-ordination Agreement; Restructuring Provision has the meaning given to that term in the Co-ordination Agreement; SIP Receivable means the portion of $5,000,000 receivable relating to the SIP Scheme as described in clause 9.1 (a)(1) of the Co-ordination Agreement, which relates to the Business; SIP Registrations means each of the registrations of Pacific Dunlop Limited and Union Knitting Mills Pty Ltd for the financial years ended 2001 and 2002 and of Boydex International Pty Ltd for the financial year ended 2001, under the SIP Scheme; SIP Scheme means the Textile, Clothing and Footwear Strategic Investment Program Scheme 1999 made under section 8 of the Textile, Clothing and Footwear Strategic Investment Program Act 1999 (Cwth); Speeds Receivable means all the Seller's rights in relation to the Current Speeds Receivable and Non Current Speeds Receivable as defined in the Co-ordination Agreement; Sport & Leisure Business means that part of the Business relating to sporting and leisure equipment and related apparel and footwear and workwear; Statutory Licences means all licences, consents, rights, permits and certificates owned by the Seller relating to any aspect of the Business issued by any governmental or regulatory authority or otherwise necessary for the operation of any of the Business Assets including but not limited to these items described in schedule 6; page 8 Australia Asset Agreement Stock means the stock of the Business owned by the Seller as at the Effective Time and includes, but is not limited to, any stock in transit, raw materials, components, work-in-progress, finished goods, packaging materials, promotional materials and consumables; Sunnybank Hills Property means the property registered in the name of Foamlite (Australia) Pty Ltd at 195 Jackson Road, Sunnybank Hills, Queensland; Tangible Assets means the assets leased or hired under the Assets Leases, the Plant and Equipment and the Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Invoice includes any document or record treated by the Commissioner of Taxation as a tax invoice or as enabling the claiming of an input tax credit for which an entitlement otherwise arises; Tax Law means any law of an Australian parliament relating to Tax; Trade Mark Relationship Agreement means the agreement annexed as Annexure E; Transferring Employee means an Employee who accepts the Buyer's offer of employment under clause 9.1; Transfers means the transfers of land to be delivered by the Seller pursuant to clause 4.2; Valuer has the meaning given to that term in the Co-ordination Agreement; and Warranties means in relation to the Buyer the representations and warranties in part A of schedule 1 and in relation to the Seller the representations and warranties in part B of schedule 1. 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 requires otherwise: (a) terms defined in the GST Act and not otherwise defined in this agreement have the same meaning in this agreement unless provided otherwise; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other parts of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; page 9 Australia Asset Agreement (f) a reference to a clause, party or schedule is a reference to a clause of, and a party and schedule to, this agreement and a reference to this agreement includes any 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) no provision of this agreement will be construed adversely to a party solely on the ground that the party was responsible for the preparation of this agreement or that provision; (k) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; (l) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally; and (m) a reference to 'best endeavours' is an obligation imposed on a party but does not require that party to pay any money or enter into any unreasonably onerous undertaking or obligation. 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 next Business Day. 1.4 THE SELLER (a) In this agreement, a reference to the Seller is a separate reference to each of Pacific Dunlop Limited ABN 89 004 085 330, Textile Industrial Design and Engineering Pty Ltd ABN 79 000 283 198, Union Knitting Mills Pty Ltd ABN 38 006 752 021, Boydex International Pty Ltd ABN 81 004 441 758, Foamlite (Australia) Pty Ltd ABN 89 001 595 017, Vita Pacific Pty Ltd ABN 65 004 919 171, PD Licensing Pty Ltd ABN 67 006 599 131, Niblick Pty Ltd ABN 80 006 049 172 and Cliburn Investments Pty Ltd ABN 69 006 298 246 to the extent that, in the context of the reference, an entity so named holds rights or obligations in relation to the Business generally or owns a Business Asset. (b) In circumstances where a member of the PDL Group owns a Business Asset but that member is not expressly named as a Seller, the Guarantor must procure that any such member complies with any obligation under this agreement relating to that Business Asset. page 10 Australia Asset Agreement 1.5 THE BUYER (a) In this agreement, a reference to the Buyer is a separate reference to: (1) Pacific Brands Holdings Pty Ltd ACN 098 704 646, in the context of a reference to offers of employment to Employees and all related matters (including but not limited to superannuation obligations); (2) Pacific Brands Footwear Pty Ltd ACN 098 742 628, in the context of a reference to matters relating to the sale of the Business Assets, the assumption of the Accepted Liabilities and the collection of the Receivables, which Business Assets, Accepted Liabilities or Receivables relate to the Footwear Business; (3) Pacific Brands Sport & Leisure Pty Ltd ACN 098 742 708, in the context of a reference to matters relating to the sale of the Business Assets, the assumption of the Accepted Liabilities and the collection of the Receivables, which Business Assets, Accepted Liabilities and Receivables relate to the Sport and Leisure Business; (4) Pacific Brands Clothing Pty Ltd ACN 098 742 655, in the context of a reference to matters relating to the sale of the Business Assets, the assumption of the Accepted Liabilities and the collection of the Receivables, which Business Assets, Accepted Liabilities or Receivables relate to the Clothing Business; and (5) Pacific Brands Household Products Pty Ltd ACN 098 742 584, in the context of a reference to matters relating to the sale of the Business Assets, the assumption of the Accepted Liabilities and the collection of the Receivables, which Business Assets, Accepted Liabilities or Receivables relate to the Household Products Business. (b) Each of Pacific Brands Holdings Pty Ltd, Pacific Brands Footwear Pty Ltd, Pacific Brands Sport & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd and Pacific Brands Household Products Pty Ltd acknowledge: (1) for the avoidance of doubt, that the Business Assets, Accepted Liabilities and Receivables relating to each of the Footwear Business, Sport & Leisure Business, Clothing Business and Household Products Business constitute all of the Business Assets, Accepted Liabilities and Receivables; (2) that in the event of any doubt as to which Business Assets, Accepted Liabilities or Receivables relate to each of the 4 businesses making up the Business (ie the Footwear Business, the Sport & Leisure Business, the Clothing Business and the Household Products Business), the Buyer is responsible for any consequence; and (3) that the Seller is not liable for any Loss resulting from the way in which the Business Assets, Accepted Liabilities or Receivables are allocated between each of Pacific Brands Footwear Pty Ltd, Pacific Brands Sport & Leisure Pty Ltd, Pacific Brands Clothing Pty Ltd page 11 Australia Asset Agreement and Pacific Brands Household Products Pty Ltd as contemplated by clause 1.5(a). 1.6 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. 2 SALE AND PURCHASE 2.1 SALE OF BUSINESS ASSETS Subject to the satisfaction or waiver of the Conditions in accordance with the Co-ordination Agreement, on Completion the Seller will sell and the Buyer will buy the Business Assets free of Encumbrances for the Purchase Price and the Buyer will assume the Accepted Liabilities. 2.2 EXCLUDED ASSETS (a) The Excluded Assets are excluded from the sale of the Business. (b) To the extent that any cash which is an Excluded Asset passes to the possession of the Buyer at Completion (which for the avoidance of doubt is not Included Cash), the Buyer will refund that cash to the Seller immediately it becomes aware of such cash or on demand by the Seller. 3 PURCHASE PRICE 3.1 PURCHASE PRICE (a) The Purchase Price is the total value of the Business Assets: (1) less the total value of the Accepted Liabilities (which for the avoidance of doubt, does not include the value of the items described in clauses 3.1(a)(4) and (5)); (2) less the allowance referred to in clause 9.6 (Employee Leave Benefits); (3) plus or minus any adjustments under clause 5.1 in respect of advance payments and outgoings; (4) less that portion of the Restructuring Provision applicable to Australia net of future income tax benefit calculated at the rate of 30%; and (5) less the Residual Provision net of future income tax benefit calculated at the rate of 30%, reflected in the Apportionment Statement derived from the Completion Statement. page 12 Australia Asset Agreement (b) The Purchase Price is payable in accordance with clauses 3.3 and 3.4. 3.2 APPORTIONMENT (a) The Purchase Price will be allocated and apportioned between the Business Assets in the manner described in the Co-ordination Agreement. (b) The Accepted Liabilities are valued as per the valuation pursuant to the Completion Statement. 3.3 PAYMENTS AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.4 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS EXECUTED BY SELLER At Completion the Seller must give the Buyer the following documents executed by the Seller or its Related Corporations or registered owner or lessee (as the case requires): (a) the Trade Mark Relationship Agreement; (b) assignments or novations of those Assets Leases, Contracts and Property Leases which have been transferred to the Buyer before Completion in accordance with clause 8.1; (c) as many transfer of ownership and registration forms for motor vehicles leased or hired under the Assets Leases or included in the Plant and Equipment as have been assembled as at Completion it being agreed by the parties that any costs associated with transferring such motor vehicles after Completion including, without limitation, costs associated with obtaining roadworthy certificates, will be solely to the account of the Buyer; (d) evidence of the transfer of as many Statutory Licences as have been transferred to the Buyer as at Completion and of such necessary consents to such transfers as have been obtained or of the lodgement of appropriate transfer documentation with the relevant authority; page 13 Australia Asset Agreement (e) certificates for those registered trade marks, granted patents and registered designs included in the Intellectual Property Rights which are in the Seller's possession as at Completion; (f) assignments of the trade marks included in the Intellectual Property Rights which are registered in Australia, China, Malaysia, Vietnam, United Kingdom, Papua New Guinea, Singapore, Hong Kong and Indonesia, in the form annexed as Annexure A; (g) subject to any lease and the provisions of this agreement, vacant possession of the Freehold Properties; (h) properly executed transfers of the Freehold Properties in favour of the Buyer which, subject to clause 17.5, is capable of registration (after stamping); (i) a Goods Statutory Declaration required by the Duties Act 2000 (Vic) to be furnished to procure the stamping of a transfer referred to in clause 4.2(h); (j) a declaration required by the Stamps Act 1894 (Qld) to be furnished to procure the stamping of a transfer referred to in clause 4.2(h); (k) any instrument of title for the Freehold Properties required to register a transfer referred to in clause 4.2(h); (l) any document required to transfer the SIP Registrations in accordance with clause 14(a) which the Seller is able to provide at Completion; (m) the assignment or novation to the relevant Buyer Group Companies specified by the Principal Buyer of the Property Leases in respect of the following sites and receipt of all relevant consents to such assignments and/or novations: (1) 28-30 Scrivener Street, Warwick Farm, New South Wales; (2) 1 Dunlop Drive, Dandenong, Victoria; (3) 72-96 Station Street, Nunawading, Victoria; (4) 100 Henderson Road, Rowville, Victoria; and (5) 47-67 Westgate Drive, Altona North, Victoria. (n) the assignment or novation to the relevant Buyer Group Company of the technical aid agreement between PDL, Dunlop Slazenger Group Limited and Dunlop Slazenger International Limited, on the terms set out in the copy of the agreement that was in the Data Room; and (o) the assignment or novation of the relevant licence agreements in respect of the following brands: (1) 'Jockey'; (2) 'Simmons'; (3) 'Playtex'; (4) 'Everlast'; (5) 'Clarks'; and (6) 'Hush Puppies', page 14 Australia Asset Agreement on the terms set out in the copy of the agreement that was in the Data Room. 4.3 DELIVERY OF DOCUMENTS EXECUTED BY THIRD PARTIES At Completion the Seller must give the Buyer: (a) the consents to the transfer of the Contracts, Assets Leases and Property Leases which have been obtained at or before Completion; (b) a release of each Encumbrance affecting any of the Business Assets executed by the holder of that Encumbrance; and (c) as many certificates of roadworthiness for motor vehicles or forklifts (if required by law) leased or hired under the Assets Leases or included in the Plant and Equipment as have been assembled as at Completion. 4.4 DELIVERY OF BUSINESS RECORDS AND DOCUMENTS OF TITLE (a) At Completion the Seller and its Related Corporations (as the case requires) must transfer to the Buyer at the Properties: (1) all originals in the Seller's possession of the Contracts, Assets Leases and Property Leases; (2) all registration certificates and other documents of title for the Intellectual Property Rights in the Seller's possession; (3) all registration papers for all motor vehicles leased or hired under the Assets Leases or included in the Plant and Equipment in the Seller's possession; (4) the Business Records (other than Excluded Records); and (5) the Tangible Assets, to the extent located at the Properties. (b) If any document referred to in clause 4.4(a) is not available because it is lost or destroyed, the Seller must deliver such evidence of its title to the Business Assets concerned as is acceptable to the Buyer, acting reasonably. 4.5 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must give the Seller counterparts, executed by the Buyer, of those documents listed in clauses 4.2 and 4.3 that are to be executed by the Buyer and the Buyer must comply with its obligations pursuant to clause 3.3. 4.6 TITLE Title to the Business Assets passes to the Buyer on Completion (subject to clause 17.5 relating to the Sunnybank Hills Property). 4.7 EFFECTIVE TIME Subject to Completion occurring: (a) risk in the Business Assets; page 15 Australia Asset Agreement (b) the benefit of all income and benefits derived from the Business Assets; and (c) the burden of and all liabilities and obligations arising from the Business Assets, pass to the Buyer with effect from the Effective Time. 4.8 INTERDEPENDENCY (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) Subject to clause 4 of the Co-ordination Agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A material breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.9 SELLER OBLIGATIONS POST COMPLETION - INTELLECTUAL PROPERTY RIGHTS After Completion, the Seller will give the Buyer the following documents executed (to the extent necessary) by the Seller or its Related Corporations or registered owner (as the case may be): (a) an assignment of the patent applications and registrations listed in schedule 4; (b) an assignment of the design applications and registrations listed in schedule 4; (c) an assignment of the .com domain names listed in schedule 4; (d) a notification of cancellation of the .com.au domain names listed in schedule 4; (e) assignments of the trade mark applications and registrations listed in schedule 4, to the extent that such documents have not been provided to the Buyer at Completion; and (f) documents in the possession of the Seller evidencing the chain of title of trade mark applications and registrations listed in schedule 4 from the registered owner to the actual owner, where such documents are necessary for the Buyer to record the assignment of such trade mark applications from the actual owner to the Buyer. page 16 Australia Asset Agreement 5 PAYMENTS IN ADVANCE AND OUTGOINGS 5.1 ADVANCE PAYMENTS On the Payment Date: (a) the Buyer must account to the Seller for: (1) any payments in advance made by the Seller for goods or services supplied or to be supplied to the Business after the Effective Time; (2) any other payments in advance made by the Seller in respect of the Business, the benefit of which is received or is to be received by the Business after the Effective Time; and (3) any amount of Employment Benefits paid by the Seller to Transferring Employees in relation to any period after the Effective Time; and (b) the Seller must account to the Buyer for any payments in advance received by the Seller for goods or services supplied or to be supplied by the Business after the Effective Time. 5.2 OUTGOINGS Except as otherwise expressly provided in this agreement, at the Payment Date the Seller will deliver to the Buyer a written statement setting out all outgoings of a periodical or recurring nature in respect of any of the Business Assets and otherwise in the conduct of the Business which will be apportioned as between the Buyer and the Seller on the basis that they will be borne by the Seller in respect of the period before the Effective Time and afterwards by the Buyer. 5.3 QUANTIFICATION For the purpose of clauses 5.1 and 5.2, the quantum of any payment, amount or outgoing referred to in clauses 5.1 and 5.2 will be as determined in the Completion Statement. The Buyer acknowledges that any such adjustments will form part of the Purchase Price and will be reflected in the Completion Statement. 6 LIABILITIES 6.1 SELLER'S RESPONSIBILITY - LIABILITIES The Seller must pay or otherwise discharge all Liabilities which are not expressly assumed by the Buyer under this agreement. 6.2 QUOTATIONS, TENDERS AND ORDERS (a) Subject to clause 6.2(b), the Buyer must discharge any obligations which have arisen or may arise in respect of all quotations given, tenders made or orders taken by the Seller in the ordinary course of the Business before Completion. page 17 Australia Asset Agreement (b) The Seller has disclosed in writing to the Buyer any tender, quotation or order in the Business which involves the supply of goods and services with a value in excess of $1 million. 6.3 BUYER'S RESPONSIBILITY - ACCEPTED LIABILITIES The Buyer must: (a) pay all Accepted Liabilities on or before the due date; (b) pay and discharge all other liabilities and obligations of the Seller not paid or discharged before the Effective Time relating to goods or services to be supplied to the Business after the Effective Time or relating to a benefit received or to be received by the Business after the Effective Time; (c) in the case of Accepted Liabilities which are claims relating to the Business as described in part 1 of schedule 11 (Accepted Claims), manage those claims in accordance with clause 6.6. 6.4 REIMBURSEMENT TO SELLER If the Seller, or any person on behalf of the Seller, pays an Accepted Liability, the Buyer must reimburse the Seller within 10 Business Days after the Buyer receives evidence of payment. 6.5 INDEMNITY The Buyer must indemnify the Seller against any Loss suffered, paid or incurred by the Seller after Completion as a result of any failure by the Buyer to comply with its obligations under this clause 6 and the Seller must indemnify the Buyer against any Loss suffered, paid or incurred by the Buyer after Completion as a result of any failure by the Seller to comply with its obligations under this clause 6. 6.6 MANAGEMENT OF ACCEPTED CLAIMS The Buyer will: (a) manage the Accepted Claims after Completion at its own cost and expense; (b) on request of the Guarantor, provide an update of the status of any Accepted Claim; and (c) use its reasonable endeavours to protect the name and reputation of the Guarantor and its Related Corporations in the management of the Accepted Claims, provided that the Seller will allow the Buyer access to any records reasonably required to assist the Buyer in performing its obligations as described above. page 18 Australia Asset Agreement 7 RECEIVABLES 7.1 COLLECTION BY BUYER (a) The Seller is entitled to the Receivables. Title to the Receivables will at all times remain with the Seller. (b) The Buyer must use its reasonable endeavours to expedite collection of the Receivables on behalf of the Seller. Collection of the Receivables will occur in the name of the Seller. (c) The Buyer must not release, agree to delayed payment of or otherwise compromise the Seller's rights in relation to a Receivable without the Seller's specific written approval. 7.2 ACCOUNTING FOR RECEIVABLES For the purpose of clause 7.3(b)(1), the Buyer must account to the Seller for collection of the Receivables as follows: (a) any amount received by the Buyer which is stated to be in payment of, or which is readily reconcilable with, specific Receivables or debts must be treated as a payment of those Receivables or debts (as applicable); and (b) in any other case, the amount received must be applied: (1) first, in payment of the Receivables owed by the debtor, with those which have been outstanding the longest to be paid before the others; and (2) second, in payment of the debts owed by the debtor to the Buyer, with those which have been outstanding the longest to be paid before the others. 7.3 PAYMENT ON ACCOUNT (a) On account of the Buyer's obligations under clauses 7.1 and 7.2: (1) on Completion the Buyer must pay to the Seller the estimated net value of the Receivables in accordance with the Co-ordination Agreement; (2) on the Payment Date the Buyer must pay the Seller the amount, if any, by which the total of the Receivables set out in the Completion Statement exceeds the amount paid under clause 7.3(a)(1); and (3) on the Payment Date the Seller must reimburse to the Buyer the amount, if any, by which the total of the Receivables set out in the Completion Statement is less than the amount paid under clause 7.3(a)(1). (b) At the end of the period 6 months after the Completion Date (Collection Period): (1) the Buyer must give the Seller a detailed account of the Receivables collected by it in the Collection Period; and page 19 Australia Asset Agreement (2) the Seller if requested in writing by the Buyer must assign to the Buyer all its right, title and interest to such Receivables as remain uncollected as at the end of the Collection Period. 7.4 BUYER TO PROVIDE INFORMATION The Buyer must give the Seller any information in relation to the collection of the Receivables that the Seller reasonably requests. 7.5 OTHER DEBTS OWED TO SELLER If the Buyer receives a payment in respect of a debt owed to the Seller (other than a Receivable), it must pay the amount received to the Seller within 2 Business Days after receiving it. 8 CONTRACTS, ASSETS LEASES, PROPERTY LEASES 8.1 TRANSFER OF CONTRACTS, ASSETS LEASES AND PROPERTY LEASES (a) Subject to clause 4.2, the Seller and Buyer must use their best endeavours to transfer the Contracts, Assets Leases and Property Leases to the Buyer on or as soon as possible after Completion. (b) A transfer under clause 8.1(a) may be made by assignment in the form of the deed of assignment annexed, in the case of Contracts and Assets Leases, as Annexure B or, in the case of Property Leases, as Annexure C or in other terms agreed by the Buyer and Seller which include indemnities in the terms of clause 8.2(a)(2) and 8.2(b)(3). (c) If the consent of a third party is required for a transfer under clause 8.1(a), then the Buyer and the Seller must use their best endeavours to obtain that consent, including, in the case of the Buyer, giving such security for its obligations as may be reasonably required by the third party. 8.2 OBLIGATIONS PENDING TRANSFER If an Assets Lease, Contract or Property Lease has not been transferred to the Buyer by Completion, then after Completion: (a) the Buyer must: (1) to the extent it lawfully can, perform all the Seller's obligations under the relevant Assets Lease, Contract or Property Lease; and (2) indemnify the Seller against any Loss suffered, paid or incurred by the Seller after the Effective Time under the relevant Assets Lease, Contract or Property Lease other than one which is attributable to default of the Seller in discharging the Seller's obligations under the relevant Assets Lease, Contract or Property Lease before the Effective Time provided always that this exclusion from the Buyer's indemnity obligation does not apply to a default or obligation relating to the physical condition of the Leased page 20 Australia Asset Agreement Properties unless it is the subject of notice from the relevant lessor received by the Seller before the date of this agreement; and (b) the Seller must: (1) if the Buyer cannot lawfully perform an obligation or exercise a right of the Seller under the Assets Lease, Contract or Property Lease, at the request and expense of and with the full assistance of the Buyer, use its best endeavours to perform that obligation or exercise that right; (2) within 2 Business Days after receipt pay to the Buyer any amount, or account to the Buyer for the value of any other benefit, it receives after the Effective Time in respect of the relevant Assets Lease, Contract or Property Lease; and (3) indemnify the Buyer against any Loss suffered, paid or incurred by the Buyer after the Effective Time arising under an Assets Lease, Contract or Property Lease from a default by the Seller in discharging its obligations under the relevant Assets Lease, Contract or Property Lease before the Effective Time provided always that this indemnity does not apply to a default or obligation relating to the physical condition of the Leased Properties unless it is the subject of a notice from the relevant lessor received by the Seller before the date of this agreement. 8.3 USE OR OCCUPATION PENDING TRANSFER (a) If an Assets Lease or a Property Lease has not been transferred to the Buyer by Completion the Seller must, to the extent it lawfully can, allow the Buyer to use or occupy the property the subject of that Assets Lease or Property Lease as licensee from Completion until the transfer is completed. (b) If, notwithstanding that the Seller and the Buyer have complied with clause 8.1, the Seller is not able to allow the Buyer to use or occupy any property the subject of an Asset Lease as licensee pursuant to clause 8.3(a), the Buyer must pay to the relevant lessor all moneys necessary to pay out the Assets Lease and the Seller will then direct that title to the assets concerned be transferred to the Buyer provided that it is permitted under the terms of the relevant Asset Lease. 8.4 FAILURE TO TRANSFER The Seller will fully co-operate with the Buyer in any reasonable arrangements designed to provide for the Buyer the benefit and burden or the relevant Contract, Asset Lease or Property Lease including enforcement of any and all rights of the Seller against the party to the relevant Contract, Asset Lease or Property Lease but otherwise the Seller has no liability to the Buyer in relation to the failure to transfer any Contract, Assets Lease or Property Lease if the Seller has met its obligations under this clause 8. page 21 Australia Asset Agreement 8.5 LETTERS OF CREDIT (a) The Seller will use its best endeavours to procure a transfer of the benefit of all Letters of Credit to the Buyer on Completion on terms which release the Seller and any Related Corporation of the Seller from any liability to the issuer of the Letter of Credit in respect of the Letter of Credit and pending such release the Buyer must pay to the Seller on demand any amount drawn-down against such Letter of Credit. (b) If the transfer and release to the Buyer as referred to in clause 8.5(a) has not been effected within 30 Business Days after Completion the Seller will, to the extent possible, cancel all outstanding Letters of Credit and the Buyer must make its own alternative arrangements to meet the payment obligations concerned. (c) The Buyer indemnifies the Seller in respect of any amounts payable to the Seller by it under this clause 8.5. 9 EMPLOYEES 9.1 OFFER OF EMPLOYMENT BY BUYER As early as possible before Completion, the Buyer must send each Employee a letter in a form agreed with the Seller offering, subject to Completion occurring, to employ the Employee with effect from Completion. 9.2 EMPLOYMENT TERMS AND CONDITIONS Each offer must be for employment on terms and conditions which in the aggregate are no less favourable to the Employee than those under which the Employee is employed by the Seller immediately before Completion: (a) including, but not limited to, those relating to retrenchment and redundancy (in each case taking into account length of service with the Seller); and (b) without loss of continuity of employment for the purpose of all employee entitlements excluding, for purposes of this clause 9.2, terms and conditions relating to superannuation (which is provided for in clause 10). 9.3 BEST ENDEAVOURS The Buyer and Seller must each use its best endeavours to encourage all of the Employees to accept the offers so made. 9.4 TERMINATION BY SELLER On or as soon as practicable after Completion the Seller must: (a) release the Transferring Employees from employment with the Seller, that release to take effect at [the Effective Time]; page 22 Australia Asset Agreement (b) pay the Transferring Employees all Employment Benefits (other than Employee Leave Benefits) accrued by them at the Effective Time; (c) pay the Transferring Employees any Employee Leave Benefits which they are entitled to be paid and in fact demand payment of on termination; and (d) indemnify the Buyer (to the extent not provided for in the Completion Statement), against any liability for Employment Benefits other than Employee Leave Benefits and other entitlements due to or accrued by a Transferring Employee at the Effective Time and against all Losses arising out of a breach by a Seller of its contractual or other legal obligations to a Transferring Employee prior to the Effective Time. 9.5 PAYMENT AND INDEMNITY BY BUYER FOR EMPLOYMENT BENEFITS After Completion the Buyer must: (a) pay the Transferring Employees all Employment Benefits and other entitlements due to them after the Effective Time as and when they fall due; and (b) indemnify the Seller against any liability for Employment Benefits and other entitlements due to or accrued by a Transferring Employee after the Effective Time and against all Loss in any way connected with the Buyer's employment of a Transferring Employee or termination of that employment. 9.6 ALLOWANCE FOR EMPLOYEE LEAVE BENEFITS In consideration of the obligations undertaken by the Buyer under clause 9.5, the Buyer is entitled to an allowance equal to 70% of the monetary value of the Transferring Employees' accrued annual leave, leave loading and long service leave as set out in the Completion Accounts. The Buyer acknowledges that this allowance will be reflected in the Completion Statement. 9.7 RESTRICTION The Buyer covenants with the Seller that it will not for a period of twelve months after Completion directly or indirectly procure the services, as employee, consultant, contractor or otherwise of any Employee who does not accept the Buyer's offer of employment under clause 9.1. 9.8 INDEMNITY BY SELLER Provided that the Buyer has met its obligations under clauses 9.2 and 9.3, the Seller must indemnify the Buyer against any Claim brought by an Employee who is not a Transferring Employee arising out of the termination of employment of that Employee by the Seller. page 23 Australia Asset Agreement 10 SUPERANNUATION 10.1 DEFINITIONS In this clause 10 and paragraph 13 of the Seller's Warranties: Accrued Benefit Value means, in relation to a Transferring Member, the total amount accumulated or accrued in respect of the member under the governing rules of the Seller's Fund as at the Completion Date calculated in accordance with clause 10.5; Associated Employer has the same meaning as in the governing rules of the Seller's Fund, as amended from time to time; Buyer's Actuary means a qualified actuary nominated by the Buyer; Buyer's Fund means the fund to be established by the Buyer in order to comply with its obligations under clause 10.3; Existing Member means a Transferring Employee who is a member of the Seller's Fund on the date immediately before the Completion Date but is not a Transferring Ex-Clarks Member; External Funds means the funds listed in schedule 13 to which the Seller is obliged to contribute in respect of certain Employees pursuant to an industrial award or agreement; Expert means a person agreed in writing by the Seller's Actuary and the Buyer's Actuary or, in default of agreement within 2 Business Days, an independent person appointed by the President of the Institute of Actuaries of Australia or his nominee; Factor means: (a) if the Successor Fund Transfer Date occurs no later than six months after the Completion Date, 0.66/0.85; or (b) if the Successor Fund Transfer Date occurs more than six months after the Completion Date, such fraction as the Seller and the Buyer may agree, or in default of agreement, as the Expert may determine. Principal Employer means Pacific Dunlop Limited as the current "principal employer" of the Seller's Fund; Ring-fenced Amount means the amount determined as the Ring-fenced Amount as at the Successor Fund Transfer Date in accordance with a successor fund agreement dated 7 September 2000 between Clarks Shoes Australia Superannuation Pty Ltd and the trustee of the Seller's Fund; Seller's Actuary means a qualified actuary nominated by the Seller; Seller's Fund means the Pacific Dunlop Superannuation Fund (established by a trust deed dated 7 April 1986, as subsequently amended); Successor Fund has the same meaning as in the Superannuation Industry (Supervision) Act 1993; page 24 Australia Asset Agreement Successor Fund Agreement means the deed of agreement to be entered into between the trustee of the Seller's Fund and the trustee of the Buyer's Fund substantially in the form of Annexure F; Successor Fund Transfer means a transfer of the amount specified in clause 10.6(b) from the Seller's Fund to the Buyer's Fund on the basis that the Buyer's Fund is a Successor Fund; Successor Fund Transfer Date means: (a) the date six months after the Completion Date; or (b) such earlier or later date as the Buyer and the Seller may agree, but in any event not before any claims in respect of the Ring-fenced Amount have been resolved to the Buyer's satisfaction; Superannuation Amount means: (a) the value of the Ring-fenced Amount calculated as at the Successor Fund Transfer Date, less (b) the value of the Transferring Ex-Clarks Members' accrued benefits (calculated in the same manner as is provided in clause 10.5) as at the Successor Fund Transfer Date, multiplied by the Factor; Superannuation Date means the date which is 20 Business Days after the Successor Fund Transfer Date or such later date as the Buyer and the Seller may agree; Termination Benefit means, in relation to an Employee, the benefit due to the Employee under the governing rules of the Seller's Fund upon the termination of the Employee's employment with the Seller; Transfer Date means: (a) the date three months after the Completion Date; or (b) such earlier or later date as the Buyer and Seller may agree; Transferring Ex-Clarks Member means a Transferring Employee who is a member of the Seller's Fund on the date immediately before the Completion Date and who was a member of the Clarks Shoes Australia Limited Staff Superannuation Fund immediately prior to becoming a member of the Seller's Fund; and Transferring Member means an Existing Member who gives the authorisation referred to in clause 10.3(b)(2) to transfer his or her Accrued Benefit Value to the Buyer's Fund. 10.2 BUYER AS ASSOCIATED EMPLOYER (a) The Buyer will continue to participate as an Associated Employer in the Seller's Fund in respect of the Transferring Ex-Clarks Members until the Successor Fund Transfer Date. (b) Whilst the Buyer is an Associated Employer in the Seller's Fund: page 25 Australia Asset Agreement (1) the Principal Employer undertakes not to exercise any of its powers in a manner materially adverse to the Buyer's financial interests or contrary to the intent of this clause 10; and (2) the Buyer undertakes not to exercise any of its powers in a manner contrary to the intent of this clause 10. 10.3 MEMBERSHIP OF BUYER'S FUND - EXISTING MEMBERS (a) Before the Transfer Date, the Buyer will ensure that each Existing Member becomes a member of the Buyer's Fund with effect from the Completion Date on terms and conditions which provide: (1) in respect of each Existing Member (other than a Transferring Member), benefits in respect of the period after the Completion Date which in the aggregate are of amounts and payable on conditions no less favourable than those that would have been provided in respect of the Existing Member under the governing rules of the Seller's Fund as at the Completion Date; and (2) in the case of a Transferring Member but subject to payment of the Transferring Member's Accrued Benefit Value under clause 10.4, benefits which in the aggregate are of amounts and payable on conditions no less favourable than those provided in respect of the Transferring Member under the governing rules of the Seller's Fund as at the Completion Date, with the Transferring Member's Accrued Benefit Value to be taken into account in the Buyer's Fund: (A) by providing a fully vested benefit equal to the Accrued Benefit Value and adjusted to take account of the earnings and expenses of the Buyer's Fund after the date that the Accrued Benefit Value is transferred to the Buyer's Fund; or (B) in such other manner as may be agreed with the Transferring Member. (b) As part of the process of becoming a member of the Buyer's Fund pursuant to clauses 10.3(a)(1) and (2), the Seller will use all reasonable endeavours to ensure that a form that is reasonably acceptable to the trustee of the Seller's Fund and the trustee of the Buyer's Fund will be given to each relevant Existing Member before the Transfer Date under which the Existing Member may elect either: (1) that the trustee of the Seller's Fund provides the Termination Benefit to the Existing Member; or (2) in lieu of receiving a Termination Benefit, that the trustee of the Seller's Fund cause the Existing Member's Accrued Benefit Value to be transferred to the Buyer's Fund. page 26 Australia Asset Agreement 10.4 PAYMENT OF ACCRUED BENEFIT VALUES (a) The Seller will use all reasonable endeavours to ensure that on or before the day which is 10 Business Days after the later of: (1) the Transfer Date; and (2) the date on which the Accrued Benefit Values of the Transferring Members have been calculated, the trustee of the Seller's Fund pays the Accrued Benefit Values of the Transferring Members to the trustee of the Buyer's Fund, adjusted for interest in respect of the period between the Completion Date and the date the amount is paid to the Buyer's Fund at the rate which applies as at the date in clause 10.4(a)(2) under the governing rules of the Seller's Fund for the purpose of determining relevant benefits which are payable from the Seller's Fund. (b) The interest payable under clause 10.4(a) accrues from day to day. (c) The Seller and the Buyer agree that the Accrued Benefit Values and any interest payable under clause 10.4(a) will be paid in immediately available funds, except to the extent that the trustee of the Buyer's Fund agrees to accept other assets in whole or partial satisfaction of those amounts and the Buyer and the Seller agree that, to the extent that the trustee of the Buyer's Fund agrees to accept other assets, the calculation of the relevant amounts under this clause 10.4 shall be based on the value of those assets as agreed between the trustees of the Seller's Fund and the Buyer's Fund. 10.5 CALCULATION OF ACCRUED BENEFIT VALUES (a) The Seller will use all reasonable endeavours to procure that the Accrued Benefit Values of the Transferring Members will be calculated by the Seller's Actuary as at the Completion Date in accordance with this clause 10.5 and the calculations of the Seller's Actuary shall be conclusive and binding on the parties. (b) Where the whole of the normal retirement benefit to be provided from the Seller's Fund in respect of a Transferring Member under the governing rules of the Seller's Fund is calculated on the basis of the accumulation of amounts paid or credited in respect of the Member with interest or other earnings, the Transferring Member's Accrued Benefit Value shall be the total amount accumulated in respect of the Transferring Member for that purpose under those governing rules as at the Completion Date. (c) Where clause 10.5(b) does not apply to a Transferring Member, the Transferring Member's Accrued Benefit Value as at the Completion Date shall be calculated in accordance with the following formula (subject to a minimum of the benefit which would have become payable to the Transferring Member from the Seller's Fund had the Transferring Member voluntarily ceased to be an Employee while in good health on the Completion Date): [ABM X FAS X DF] + AC Where: page 27 Australia Asset Agreement "ABM" is the benefit multiple accrued in respect of the Transferring Member as at the Completion Date in relation to the period before that Date for the purpose of calculating the normal retirement benefit to be provided from the Seller's Fund if the Member ceased to be an employee on attaining the normal retirement date in terms of the governing rules of the Seller's Fund, calculated using the defined benefit accrual rate or rates applicable in respect of that period under those governing rules and including any initial retirement benefit multiple granted in respect of the Transferring Member upon the Transferring Member transferring into the Seller's Fund from another fund or benefit arrangement. "FAS" is the Transferring Member's Final Average Salary (as defined in the governing rules of the Seller's Fund) as at the Completion Date. "DF" is [1 / 1.03] /55-age/, where age denotes the Transferring Member's age at the Completion Date (and where "DF" is 1 at age 55 or older). "AC" is, to the extent that the retirement benefit of the Transferring Member under the Seller's Fund is not calculated on a defined benefit basis but on the basis of the accumulation of amounts paid or credited in respect of the Member with interest or other earnings, the total amount accumulated in respect of the Member for that purpose under the governing rules of the Seller's Fund as at the Completion Date. 10.6 SUCCESSOR FUND AGREEMENT The Seller and the Buyer will use their best endeavours to procure that: (a) on or before the Successor Fund Transfer Date the trustee of the Seller's Fund and the trustee of the Buyer's Fund execute the Successor Fund Agreement in respect of the Transferring Ex-Clarks Members; and (b) on the Superannuation Date the trustee of the Seller's Fund and the trustee of the Buyer's Fund give effect to the Successor Fund Agreement by transferring from the Seller's Fund to the Buyer's Fund the Transferring Ex-Clarks Members and the greater of : (1) the Ring-fenced Amount; and (2) the aggregate value of the accrued benefits of all Transferring Ex-Clarks Members (calculated in the same manner as is provided in clause 10.5) as at the Successor Fund Transfer Date, with interest from the Successor Fund Transfer Date to the Superannuation Date at the rate which applies as at the Successor Fund Transfer Date under the governing rules of the Seller's Fund for the purpose of determining relevant benefits which are payable from the Seller's Fund. page 28 Australia Asset Agreement 10.7 CALCULATION OF SUPERANNUATION AMOUNT (a) Within 10 Business Days after the Successor Fund Transfer Date, the Seller's Actuary must calculate the Ring-fenced Amount and the Superannuation Amount and notify the Buyer's Actuary of the Superannuation Amount and provide all information reasonably required to review the calculation of the Superannuation Amount. (b) The Buyer is taken to have accepted the Superannuation Amount unless the Buyer's Actuary notifies the Seller's Actuary that it does not accept the Superannuation Amount within 10 Business Days after the Seller's Actuary provides to the Buyer's Actuary the information referred to in clause 10.7(a). (c) The Buyer must pay the Superannuation Amount to the Guarantor on the Superannuation Date, with interest from the Superannuation Date to the date of payment at the rate which applies as at the Superannuation Date under the governing rules of the Seller's Fund for the purpose of determining relevant benefits which are payable from the Seller's Fund. (d) If the Buyer's Actuary disputes the Superannuation Amount, the parties agree as follows: (1) the parties must endeavour in good faith to resolve promptly between themselves the dispute; (2) if the parties are not able to resolve between themselves the dispute within 10 Business Days of the date the Buyer's Actuary serves the Seller's Actuary with written notice under clause 10.7(b) the matter must be referred to the Expert for determination; and (3) the parties must bear the cost of the determination in such manner as the Expert directs. (e) Following completion of the Expert's calculation of the Superannuation Amount (Expert's SA Value): (1) if the Expert's SA Value exceeds the Superannuation Amount, then within 5 Business Days after the Expert's determination is made the Buyer must pay to the Seller the amount of the excess; or (2) if the Expert's SA Value is less than the Superannuation Amount, then within 5 Business Days after the Expert's determination is made the Seller must pay to the Buyer the amount of the deficiency. 10.8 ACKNOWLEDGMENTS The Seller and the Buyer each acknowledge that the transactions contemplated by this agreement, and in particular the transactions contemplated by this clause 10, are not intended to cause a Termination Benefit to become payable from the Seller's Fund to any Transferring Ex-Clarks Member. 10.9 EXTERNAL FUNDS Within one month (or any longer period agreed between the Buyer and the Seller) after the Completion Date, but in any event before the Transfer Date, the Buyer page 29 Australia Asset Agreement must become a participating employer in the External Funds with respect to the Transferring Employees who are members of the External Funds and must make contributions to the External Funds at a rate which is at least equal to the minimum rate prescribed by the Superannuation Guarantee (Administration) Act 1992. 10.10 CONTRIBUTIONS BY ASSOCIATED EMPLOYER The Buyer must continue to contribute to the Seller's Fund in respect of the Transferring Ex-Clarks Members in accordance with its deed of admission as an Associated Employer until the Successor Fund Transfer Date. 10.11 UNDERTAKINGS BY BUYER AND SELLER (a) The Seller will provide, and will use all reasonable endeavours to ensure that the trustee of the Seller's Fund provides, to the Buyer and to the trustee of the Buyer's Fund any information reasonably required by them to give effect to this clause 10. (b) As from the date of this agreement, the Seller will use all reasonable endeavours to ensure that no action is taken, discretion exercised or omission occurs which would: (1) alter the level of benefits or contributions in respect of an Existing Member or a Transferring Ex-Clarks Member under the governing rules of the Seller's Fund from the level applicable immediately before the date of this agreement; or (2) alter any Accrued Benefit Value, except: (3) to the extent reasonably necessary to secure or better secure a concession or relief in respect of any duty or Tax or to avoid a penalty, detriment or disadvantage under a law affecting the Seller's Fund; or (4) with the consent of the Buyer. (c) The Buyer will provide, and will use all reasonable endeavours to ensure that the trustee of the Buyer's Fund provides, to the Seller and to the trustee of the Seller's Fund any information reasonably required by them to give effect to this clause 10. (d) The Buyer will use all reasonable endeavours to ensure that the governing rules of the Buyer's Fund contain provisions to the extent necessary to give effect to this clause 10. (e) The Buyer will secure in respect of each Existing Member a benefit on his or her death or total and permanent disablement while employed by the Buyer between the Completion Date and the date he or she becomes a member of the Buyer's Fund pursuant to clause 10.3 of an amount at least equal to: (1) the value of the benefit which would have been payable from the Seller's Fund if the Existing Member had died or become totally and permanently disabled immediately before the Completion Date, page 30 Australia Asset Agreement less: (2) the amount paid or payable to or in respect of the Existing Member from the Seller's Fund (whether as a result of the Existing Member's transfer to the Buyer's Fund or the Existing Member's death or total and permanent disablement). (f) The Buyer will use all reasonable endeavours to ensure that the Buyer's Fund is and remains a "complying superannuation fund" in terms of Part IX of the Income Tax Assessment Act 1936 (as amended or replaced from time to time). 10.12 INDEMNITY The Guarantor indemnifies the Buyer against: (a) any claim (including legal costs incurred ) in respect of the Ring-fenced Amount (other than in respect of the Transferring Ex-Clarks Members' accrued benefits); (b) any claim (including legal costs incurred) in respect of the Buyer's participation as an Associated Employer (other than in respect of the usual obligations of an Associated Employer); and (c) any loss or liability incurred as a result of a breach of paragraph 13.5 of the Seller's Warranties. 11 RELEASE OF GUARANTEES (a) The Buyer must use its reasonable endeavours to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 11(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 11(a) which relates to any act or omission of the Buyer after Completion. 12 PERIOD BEFORE COMPLETION 12.1 CARRYING ON BUSINESS The Seller must use all reasonable endeavours to ensure that between the date of this agreement and Completion the Business is conducted in the ordinary course of business and: (a) the Seller in carrying on the Business does not acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; page 31 Australia Asset Agreement (b) the Seller does not in its conduct of the Business make any material change to its policy and practice as to the payment of creditors and collection of trade receivables; (c) the Seller does not engage any new employee to fill a new role in relation to the Business with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminate the employment of any of the Employees or change in any material respect the terms of employment (including remuneration of any of the Employees); (d) the Seller does not sell or agree to sell any fixed asset relating to the Business with a value of more than $250,000 or buy or commit to buy any fixed asset for use in the Business with a value of more than $250,000; (e) neither the Seller nor its Related Corporations create any Encumbrance over any asset of the Business; (f) neither the Seller nor its Related Corporations incur any indebtedness or liability in the nature of borrowings in relation to the Business other than in the ordinary course of business; and (g) the Seller does not enter into any contract or arrangement for the Business outside the ordinary course of trading or otherwise than on arm's length terms, without in each case the prior consent of the Buyer, which must not be unreasonably withheld or delayed. 12.2 ACCESS Before Completion the Seller must, after reasonable notice from the Buyer, allow the Buyer and any person authorised by the Buyer, reasonable access during normal business hours to Employees (only with the consent of the Seller, such consent not to be unreasonably withheld) the Business Assets and the Properties as is necessary to facilitate the smooth transfer of the Business at Completion. 13 AFTER COMPLETION 13.1 SUPPLY OF AFTER-SALES SERVICE After Completion the Buyer must: (a) remedy any defect in the goods or services supplied by the Seller in the Business before Completion; (b) supply after-sales service which the Seller undertook to perform in respect of goods or services supplied by the Seller in the Business before Completion; and (c) perform the Seller's obligations under any guarantee or warranty or otherwise in respect of goods or services supplied by the Seller in the Business before Completion. page 32 Australia Asset Agreement 13.2 RECONCILIATION FOR RETURNED GOODS If any goods sold in the Business by the Seller before the Completion Date are returned to the Buyer or repudiated for any reason by a customer of the Business after the Completion Date, then the Buyer is entitled to those goods and must meet any claim for credit or otherwise made by the customer in relation to them. 13.3 SUPPLIER'S WARRANTIES To assist the Buyer in meeting its obligations pursuant to clauses 13.1 and 13.2, the Seller undertakes to use all reasonable endeavours to make available to the Buyer the benefit of any supplier or manufacturer warranty available to the Seller in connection with the transactions contemplated by clauses 13.1 and 13.2. 13.4 ACCESS BY SELLER After Completion the Buyer must, after reasonable notice from the Seller, allow the Seller and its representatives: (a) access during normal business hours to Transferring Employees; and (b) to inspect and take copies of the Business Records (to the extent that they relate to any period before Completion), to assist the Seller in relation to any Liability or other obligations or rights arising in relation to the conduct or ownership of the Business before Completion, provided that any access under this clause 13.4 is conducted in a manner so as to avoid unreasonable disruption to the conduct of the Business as operated by the Buyer and the Transferring Employees. 13.5 ACCESS TO EXCLUDED RECORDS BY BUYER After Completion the Seller must, after reasonable notice from the Buyer, allow the Buyer and its representatives access during normal business hours to inspect and take copies of the Excluded Records (to the extent they relate to any period before Completion) as necessary to assist the Buyer in operating the Business. 13.6 TAX RETURNS After Completion, the Buyer must at the reasonable cost and expense of the Seller prepare draft income tax returns, fringe benefits tax returns and any other tax returns required by any Governmental Agency that imposes Tax in relation to the Business as carried on by the Seller in respect of the financial year ending on 30 June 2002 and ensure that its employees fully co-operate with the Seller in relation to completing and finalising such returns to a form fit for lodgement by the Seller. The Buyer must provide a first draft of such returns to the Seller on or before 30 October 2002. 14 STRATEGIC INVESTMENT PROGRAMME (a) The parties agree that at or as soon as practicable after Completion, they will do everything necessary to procure that each SIP Registration is transferred to the Buyer. page 33 Australia Asset Agreement (b) The parties acknowledge that their respective entitlements to receive the benefit of any amounts received under the SIP Scheme in respect of the SIP Registrations, are set out in the Co-ordination Agreement, except in relation to the SIP Receivable which is a Business Asset transferred under this agreement. 15 COMPETITION 15.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for 5 years, 4 years, 3 years, 2 years or one year after the Completion Date in Australia: (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date employed in the Business to cease to be employed in the Business; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Business with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the Buyer and its clients, customers, employees or suppliers. 15.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 15.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 15.3 EXCLUSION FROM RESTRAINT This clause 15 does not restrict the Seller or any of its Related Corporations from: (a) continuing to carry on any business (other than the Business as sold under this agreement) carried on at the date of this agreement; or page 34 Australia Asset Agreement (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. 15.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 15 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 15.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 15.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 15.1. (b) If any of the prohibitions or restrictions contained in this clause 15 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Seller, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 16 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. 17 LIMITATION OF LIABILITY 17.1 CO-ORDINATION AGREEMENT The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 17.2 SPECIFIC EXCLUSIONS - FREEHOLD PROPERTIES (a) The Buyer acknowledges that apart from the Seller's Warranties the terms and warranties implied by the operation of section 52A of the Conveyancing Act 1919 (NSW) and Regulations 6 and 7 of the Conveyancing (Sale of Land) Regulations (2000), and provided that nothing in this clause 17.2(a) shall operate in any way to limit the liability of the Guarantor under clause 6.8 of the Co-ordination Agreement, in respect of the Freehold Properties known as: (1) 159 Kingsgrove Road, Kingsgrove, New South Wales; and (2) 16 Bellambi Road, Bellambi, New South Wales, page 35 Australia Asset Agreement it has relied on its own investigations and assessment of and has relied on no representation or warranty but acknowledges the disclosure referred to in clause 17.2(b) and will bring no Claim against the Seller or its Related Corporations, officers, employees, agents or advisers in relation to any breach of Environmental Law or any Environmental Liability which may affect the Buyer or any other person in relation to ownership of those Freehold Properties. (b) The Buyer acknowledges that it has been given the opportunity to make physical inspections of the Freehold Properties and buildings, plant, equipment and other assets located at the Freehold Properties and accepts that apart from the Seller's Warranties and the terms and warranties implied by the operation of section 52A of the Conveyancing Act 1919 NSW and Regulations 6 and 7 of the Conveyancing (Sale of Land) Regulations (2000) , in respect of the Freehold Properties known as: (1) 159 Kingsgrove Road, Kingsgrove, New South Wales; and (2) 16 Bellambi Road, Bellambi, New South Wales, it has relied on its own investigations and assessment of and it has relied on no representation or warranty and will bring no Claim against the Seller or its Related Corporations, officers, employees, agents or advisers in relation to the dimensions, description, condition, fitness for use, safety or legal compliance status of those Freehold Properties or any buildings, plant, equipment or other assets located at the Freehold Properties. (c) The Buyer acknowledges that in respect of the property known as 9 Sodium Street, Narangba, Queensland (Narangba Property): (1) the Narangba Property is included in the Environmental Management Register; (2) the Buyer has received from the Seller and read before the date of this agreement, a notice pursuant to section 421(2) of the Environmental Protection Act 1994 (Qld) in respect of the Narangba Property. (d) The Buyer acknowledges that the warranties implied by section 3 of the Conveyancing and Law of Property Act 1884 (Tasmania) and section 56 of the Land Titles Act 1980 (Tasmania) do not apply to this agreement. (e) The Buyer purchases the Freehold Properties subject to: (1) the easements and covenants noted on the title to the Freehold Properties concerned; (2) in the case of the Freehold Property located at Bellambi (described in paragraph 3(b) above), the registered lease number 727645; (3) the reservations, exceptions and conditions (if any) contained in the crown grant; (4) in the case of the Sunnybank Hills Property, the provisions of the Land Act 1994 (Qld) and the reservations, exceptions and conditions (if any) contained in the terms of the grant of the Sunnybank Hills Property; page 36 Australia Asset Agreement (5) all easements or rights vested in any Governmental Agency and not registered on the title to the Freehold Properties except for matters not disclosed to the Buyer which constitute breaches of the Seller's Warranties; and (6) subject to all town planning or other restrictions on the use and development of the Freehold Properties. 17.3 DISCLOSURE STATEMENTS (a) The Buyer acknowledges that prior to the execution of this agreement, the Buyer received from the Seller: (1) a Vendor's Statement under section 32 of the Sale of Land Act 1962 (Vic) (Vendor's Statement) in relation to all Freehold Properties located in Victoria; (2) the prescribed documents under section 52A(2) of the Conveyancing Act 1919 (NSW) (Section 52A Statement) in relation to all Freehold Properties located in New South Wales; and (3) a notice pursuant to section 421(2) of the Environmental Protection Act 1994 (Qld) (Environmental) Management Register Notice in respect of the Narangba Property. (b) The Vendor's Statement, section 52A Statement and Environmental Management Register Notice are scheduled to the Disclosure Schedule. 17.4 PROPERTY COVENANTS The Seller covenants to the Buyer at the date of this agreement and on Completion: (a) that it consents to the lodgement of caveats by the Buyer on Completion in respect of the Freehold Properties; (b) that it will not take any action or procure any person to do anything that may cause a lapsing notice to be lodged at a Land Titles Office; (c) that there are no unsatisfied or outstanding judgements or notices against the Freehold Properties; (d) to answer all requisitions that may be made by a Land Titles Office in relation to registration of the Transfers. 17.5 TRANSFER OF SUNNYBANK HILLS PROPERTY (a) Despite anything to the contrary in this agreement, the Buyer acknowledges that on Completion the Buyer may not obtain a transfer of the Sunnybank Hills Property capable of immediate registration. (b) As soon as practicable following the date of this agreement, the Seller and the Buyer must use their best endeavours to transfer the Sunnybank Hills Property to the Buyer by attending to the matters referred to in clause 17.5(c). (c) The Seller and the Buyer must: page 37 Australia Asset Agreement (1) at the Seller's cost, make the necessary application pursuant to the Land Act 1994 for consent to the transfer of the Sunnybank Hills Property to the Buyer; and (2) the Seller must deliver the consent to the Buyer within 2 Business Days of receipt of the same or on Completion whichever is the latter. (d) For the purposes of this clause 17.5, the Buyer must do all things necessary to enable the Seller to obtain the consent referred to in clause 17.5(c)(1). 17.6 OBLIGATIONS PENDING TRANSFER - SUNNYBANK HILLS PROPERTY If the Sunnybank Hills Property has not been transferred to the Buyer by Completion, then after Completion: (a) the Buyer must: (1) to the extent it lawfully can, perform all the Seller's obligations in respect of the Sunnybank Hills Property; and (2) indemnify the Seller against any Loss suffered, paid or incurred by the Seller after the Effective Time in respect of the Sunnybank Hills Property other than one which is attributable to default of the Seller in discharging the Seller's obligations in respect of the Sunnybank Hills Property before the Effective Time provided always that this exclusion from the Buyer's indemnity obligation does not apply to a default or obligation relating to the physical condition of the Sunnybank Hills Property unless it is the subject of a notice from the relevant lessor received by the Seller before the date of this agreement; and (3) pay all rental for the Sunnybank Hills Property from the Effective Time, as and when it falls due; and (b) the Seller must: (1) if the Buyer cannot lawfully perform an obligation or exercise a right of the Seller in respect of the Sunnybank Hills Property, at the request and expense of and with the full assistance of the Buyer use all reasonable endeavours to perform that obligation or exercise that right; and (2) within 2 Business Days after receipt pay to the Buyer any amount, or account to the Buyer for the value of any other benefit, it receives after the Effective Time in respect of the Sunnybank Hills Property. 17.7 USE OR OCCUPATION PENDING TRANSFER/FAILURE TO TRANSFER (a) If the Sunnybank Hills Property has not been transferred to the Buyer by Completion the Seller must, to the extent it lawfully can, allow the Buyer to use or occupy the Sunnybank Hills Property as licensee from Completion until the transfer is completed. page 38 Australia Asset Agreement (b) If the Sunnybank Hills Property has not been transferred to the Buyer by the date [6 months] after Completion or another later date agreed by the parties, the Seller will immediately repay the amount of the Purchase Price apportioned to the Sunnybank Hills Property under the Co-ordination Agreement to the Buyer and the Sunnybank Hills Property will remain the Seller's. 18 GST 18.1 SUPPLY OF A GOING CONCERN (a) The parties agree that the transfer of the Business Assets from the Seller to the Buyer under this agreement is the supply of a going concern for the purposes of section 38-325 of the GST Act. (b) Under this agreement, the Seller supplies to the Buyer all of the things necessary for the continued operation of the Business. (c) The Buyer warrants that it is registered or required to be registered for GST purposes. 18.2 GST PASS-ON (a) If it is subsequently determined by the Commissioner of Taxation that a liability exists in respect of a supply made by a party (Supplier) under or in connection with this agreement, the Supplier may, to the extent that the consideration otherwise provided for that supply under this agreement is not stated to already include an amount in respect of GST on the supply: (1) increase the consideration otherwise provided for that supply under this agreement by the amount of that GST; or (2) otherwise recover from the recipient of the supply (Recipient) the amount of that GST together with any penalty or interest amount levied on that GST. (b) The recovery of any amount in respect of GST by the Supplier under this agreement on a supply is subject to the issuing of the relevant Tax Invoice or Adjustment Note to the Recipient. (c) If there is an adjustment event in relation to a supply which results in the amount of GST on a supply being different from the amount in respect of GST recovered by the Supplier, as appropriate, the Supplier: (1) may recover from the Recipient the amount by which the amount of GST on the supply exceeds the amount recovered; and (2) must refund to the Recipient the amount by which the amount recovered exceeds the amount of GST on the supply. page 39 Australia Asset Agreement 19 GUARANTEE AND INDEMNITY - SELLER 19.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 19.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 19.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 19 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 19 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 19 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 19 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 19.4 CONTINUING GUARANTEE AND INDEMNITY This clause 19 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. 19.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: page 40 Australia Asset Agreement (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 19.6 RIGHTS The Guarantor waives any right it has of first requiring the Buyer to commence proceedings or enforce any other right against the Seller or any other person before claiming under this clause 19. 20 GUARANTEE AND INDEMNITY - BUYER 20.1 GUARANTEE The Buyer Guarantor unconditionally and irrevocably guarantees to the Seller the due and punctual performance of the Buyer's obligations under this agreement. 20.2 INDEMNITY The Buyer Guarantor indemnifies and holds the Seller harmless from and against all Loss incurred or suffered by the Seller and all actions, proceedings, claims or demands made against the Seller as a result of default by the Buyer in the performance of any such obligation. 20.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 20 applies: (1) to the present and future obligations of the Buyer under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Buyer Guarantor under this clause 20 extend to any change in the obligations of the Buyer as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 20 is not affected, nor are the obligations of the Buyer Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 20 applies: (1) regardless of whether the Buyer Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Seller and the Buyer are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. page 41 Australia Asset Agreement 20.4 CONTINUING GUARANTEE AND INDEMNITY This clause 20 is a continuing obligation of the Buyer Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Buyer under this agreement have been performed. 20.5 WARRANTIES OF THE GUARANTOR The Buyer Guarantor represents and warrants to the Seller that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Buyer Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Buyer Guarantor is a party or which is binding on it. 20.6 RIGHTS The Buyer Guarantor waives any right it has of first requiring the Seller to commence proceedings or enforce any other right against the Buyer or any other person before claiming under this clause 20. page 42 Australia Asset Agreement SCHEDULE 1 - WARRANTIES CLAUSE 1.1 (DEFINITIONS) A. BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution nor received a notice under sections 601AA or 601AB of the Corporations Act. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 43 Australia Asset Agreement 7 NO RECEIVER OR ADMINISTRATOR No receiver, receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 BUYER'S KNOWLEDGE Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that constitutes at Completion a breach of the Seller's Warranties. page 44 Australia Asset Agreement B. SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person (except for consents required under the Contracts, Assets Leases and Property Leases) and free of any pre-emptive rights or rights of first refusal. 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller or any of the Business Assets. 1.4 CORPORATE POWER The Seller has full corporate power to own, lease and operate the Business Assets and the Business. 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Seller has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the Business Assets or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Seller holds all necessary material Authorisations required to conduct the Business, use the Business Assets and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. page 45 Australia Asset Agreement 3 POSITION SINCE 30 JUNE 2001 3.1 POST ACCOUNTS DATE Since 30 June 2001: (a) the Seller in carrying on the Business has not acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (b) the Seller has not in its conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (c) the Seller has not engaged any new employee to fill a new role in relation to the Business with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of the Employees or changed, in any material respect, the terms of employment (including remuneration of any of the Employees); (d) the Seller has not sold or agreed to sell any fixed asset relating to the Business with a value of more than $250,000 or bought or committed to buy any fixed asset for use in the Business with a value of more than $250,000; (e) neither the Seller nor its Related Corporations has created any Encumbrance over any asset of the Business; (f) neither the Seller nor its Related Corporations has incurred any indebtedness or liability in the nature of borrowings in relation to the Business other than in the ordinary course of business; (g) the Seller has not entered into any contract or arrangement for the Business outside the ordinary course of trading or otherwise than on arm's length terms; (h) there has been no material adverse change in the Business Assets and liabilities of the Business; (i) there has been no change in the accounting policies, practices and principles used by the Seller in respect of the Business. 3.2 SUPPLIERS/CUSTOMERS Since 30 June 2001: (a) none of the following suppliers of the Business: Kuehne & Nahgel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to the Business other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Business after Completion; or (3) materially altered the terms on which it trades with the Business. (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: page 46 Australia Asset Agreement (1) reduced the level of its custom from the Business other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Business after Completion; or (3) materially altered the terms on which it trades with the Business . 4 TANGIBLE ASSETS 4.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Seller; (b) the absolute property of the Seller free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 4.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Seller in the Business but are not owned by the Seller are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 4.3 PLANT AND EQUIPMENT All Plant and Equipment listed in part 1 of schedule 8 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; (c) in reasonable condition having regard to its age and fair wear and tear. 5 ENCUMBRANCES 5.1 OWNERSHIP OF BUSINESS ASSETS As at Completion the Seller will be the legal and beneficial owner of the Business Assets free of Encumbrances. 5.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Business Assets other than any which will be discharged on or before Completion. page 47 Australia Asset Agreement 5.3 BUSINESS ASSETS USED IN BUSINESS The Business Assets comprise all the assets used by the Seller in the Business and are the only assets required for the operation of the Business in the manner in which it is currently operated. 6 INTELLECTUAL PROPERTY RIGHTS 6.1 SCOPE So far as the Seller is aware, it or its Related Corporations own or have an enforceable right to use all the Intellectual Property Rights needed to carry on the Business in the places and in the manner currently carried on and all the Intellectual Property Rights will be transferred or licensed to the Buyer at Completion. 6.2 OWNERSHIP AND USE (a) The Seller or its Related Corporations is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Seller or its Related Corporations have, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Seller in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 6.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Seller or its Related Corporations or a licensee from the Seller or its Related Corporations disclosed in part 3 of schedule 4 has any right to any intellectual property right listed in part 1 of schedule 4. 6.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Seller or any Related Corporation of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Seller or any Related Corporation has infringed or is infringing the intellectual property rights of any third party. 6.5 DISPUTES Neither the Seller nor its Related Corporations is currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 6.6 ASSIGNMENTS The execution of assignments of Intellectual Property Rights by the Seller or its Related Corporations and the performance by the Seller or any Related Corporations of its obligations under those assignments will not cause the Seller or its Related Corporations to be in breach of any contract with a third party. page 48 Australia Asset Agreement 6.7 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Seller in connection with the use of any Intellectual Property Rights. 7 ASSETS LEASES 7.1 NATURE The Assets Leases to which the Seller is a party were entered into within the ordinary course of business. 7.2 NO DEFAULT The Seller is not and, so far as the Seller is aware, no other party to any Assets Lease is in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Seller in carrying on the Business and the Seller has received no notice of any default of any Asset Lease. 7.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Business Assets. 7.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business. 8 CONTRACTS 8.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 5 and parts 2 and 3 of schedule 4 contain details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Seller's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by the Seller of more than $1 million; page 49 Australia Asset Agreement (f) are distribution or agency agreements; or (g) entitle the other party to terminate the Contract or impose less favourable terms by reason of a sale of some or all of the Business Assets. 8.2 NO DEFAULT The Seller is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on and there no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 8.3 FOREIGN CURRENCY Part 3 of Schedule 5 contains a listing, which is accurate in all material respects, of outstanding commitments of the Seller in the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 8.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9 PROPERTIES 9.1 INTERESTS The Seller has no interest in real property which it uses in the Business except for its interest in the Properties. 9.2 OCCUPATION AND USE The Seller has exclusive occupation and quiet enjoyment of the Properties. The Seller's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, developments, approvals, permits and requirements (including zoning requirements) of any Governmental Agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, are subject to any sub-lease, tenancy or right of occupation by any other party. 9.3 NO BREACH The Seller has not received a notice of default in respect of any Leased Property which remains outstanding and asserts material non-compliance with the lease of that property. 9.4 NO NOTICES The Seller has not received any notice from any third party in respect of any of the Properties: page 50 Australia Asset Agreement (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of any of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 9.5 PROPERTY DETAILS The particulars of the Properties set out in schedules 7 and 10 are true and correct in all material respects. 9.6 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are used or occupied by the Seller are contained in the Data Room and there are no other documents, correspondence or other material which has not been provided to the Buyer which would have a material adverse affect on the interests of the Seller in the Properties. 9.7 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the relevant Property. 9.8 FREEHOLD PROPERTY - SPECIFIC WARRANTIES (a) So far as the Seller is aware, it is not in breach of or in default under any covenant, easement or right affecting the Freehold Properties which breach or default would have a materially adverse effect on the use of the Freehold Properties in the Business as currently used. (b) Except for any matters indicated in documents of title provided to the Buyer, the Freehold Properties are not, so far as the Seller is aware: (1) affected by any rights of adverse possession, easements, rights vested in any Governmental Agency, restrictive covenants, rights of way, proposed roads or resumptions or proposed drains, sewers or stormwater channels; (2) affected by any leases, licences or Encumbrances; or (3) the subject of any claim notified to the Seller that any third party asserts an ownership interest in any of the Freehold Properties, which, in any of the above cases, would be likely to have a material and adverse effect on the current use of the Freehold Properties in the Business. 9.9 PROPERTY LEASE DISCLOSURE The Property Leases, particulars of which are set out in schedule 7: page 51 Australia Asset Agreement (a) so far as the Seller is aware, are, in all material respects, a complete recording of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 9.10 TERMINATION NOTICE The lessor under the Property Leases has not served any notice to terminate the relevant Property Lease. 9.11 ASSIGNMENT The Seller: (a) has not agreed to any assignment, subletting, parting with possession or surrender of any of the Property Leases or any part of them; and (b) has not given any materially false or misleading information to any authority having jurisdiction over the property the subject of the Property Leases. 10 OFFERS OUTSTANDING Any offer, tender or quotation made by the Seller in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 11 MEMBERSHIPS The Seller is not a member of any joint venture, partnership or unincorporated association (other than a recognised trade association) in respect of the Business. 12 EMPLOYEES 12.1 LIST OF EMPLOYEES COMPLETE Schedule 3 contains a complete list of the Employees as at the date indicated in the schedule and the Buyer has been given all material details of their Employment Benefits. 12.2 INCENTIVE SCHEMES The Seller has not agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 12.3 SERVICE AGREEMENTS The Seller is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. page 52 Australia Asset Agreement 12.4 MANAGEMENT AGREEMENTS The Seller is not a party to any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 12.5 DISPUTES The Seller is not involved in any material dispute with any of the Employees as at the date of this agreement and is not aware of any circumstances likely to give rise to any dispute. 12.6 COMPLIANCE The Seller is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 12.7 DISCLOSURE The Seller is not a party to any agreement, arrangements or understanding with a union or industrial organisation in respect of the Employees which is not set out in the Data Room. 13 SUPERANNUATION 13.1 LIST OF SUPERANNUATION SCHEMES COMPLETE The Seller's Fund and the External Funds are the only superannuation schemes or pension arrangements to which the Seller pays contributions in respect of the Employees. 13.2 GOVERNING RULES OF SELLER'S FUND The copy of the governing rules of the Seller's Fund supplied to the Buyer on or before the date of this agreement is a true and complete copy. 13.3 FUNDING The Seller has paid all contributions due by the Seller to the Seller's Fund and the External Funds in respect of the Employees. 13.4 ACCRUED BENEFIT VALUES There are sufficient assets in the Seller's Fund to support the payment of: (a) each Existing Member's Termination Benefit or Accrued Benefit Value (as applicable); and (b) the amount specified in clause 10.6(b) in respect of the Transferring Ex-Clarks Members. page 53 Australia Asset Agreement 13.5 POWER TO PAY AMOUNT IN RESPECT OF TRANSFERRING EX-CLARKS MEMBERS The Trustee of the Seller's Fund has power and may properly pay the amount specified in clause 10.6(b) to the Buyer's Fund under the Successor Fund Agreement. 14 LITIGATION 14.1 NOT A PARTY TO ANY LITIGATION The Seller is not: (a) a party to any material prosecution, litigation or arbitration proceedings affecting all or part of the Business or any of the Business Assets; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation in respect of all or part of the Business or any of the Business Assets, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 14.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 14.1. 15 [NOT USED] 16 SOLVENCY 16.1 NO LIQUIDATION OR WINDING-UP The Seller has not gone into liquidation nor passed a winding-up resolution nor received a notice under sections 601AA or 601AB of the Corporations Act. 16.2 NO PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 16.3 NO WRIT OF EXECUTION No writ of execution has issued against the Seller or any of the Business Assets. 16.4 NO RECEIVER OR ADMINISTRATOR No receiver, receiver and manager, liquidator, provisional liquidator or administrator of any part of the undertaking or assets of the Seller has been appointed. page 54 Australia Asset Agreement 16.5 PAYMENT OF DEBTS The Seller: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of section 95A of the Corporations Act; and (c) is not subject to voluntary administration under Part 5.3A of the Corporations Act. 17 INSURANCE 17.1 POLICIES Those Business Assets which are of an insurable nature are insured against fire and other usual risks on a basis which the Seller considers commercially prudent. 17.2 NOTICE The Seller has not received any notice from an insurer adversely affecting its insurances for the Business or the Business Assets. 18 INFORMATION 18.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Business: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller that data was, so far as the Seller is aware and for the purpose for which it was prepared, true and correct in all material respects. 18.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 3 to 13 to this agreement is complete and accurate in all material respects and not misleading. 19 BUSINESS RECORDS The Business Records are in the Seller's possession or control and will be maintained by the Seller in accordance with its usual practice pending Completion. page 55 Australia Asset Agreement 20 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 21 DUTIES All Duties or Taxes or documents which are necessary to establish the title of the Seller to the Business Assets have been duly assessed and paid. 22 TRADE PRACTICES So far as the Seller is aware, the Seller has not in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the Trade Practices Act 1979 (Cth), the Fair Trading Act (NSW) or like legislation in any other state or territory of Australia. 23 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS Neither the Seller nor any Related Corporation is a party to any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest which contain any obligations or liabilities (actual or contingent) which may affect the Business and/or any Buyer Group Company. page 56 Australia Asset Agreement SCHEDULE 2 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller Warranties, they constitute disclosure against any other Seller Warranty to which they may apply. Seller Warranty Number Matter Disclosed page 57 Australia Asset Agreement SCHEDULE 3 - EMPLOYEES As annexed page 58 Australia Asset Agreement SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS Part 1 - Owned by the Seller Part 2 - Licensed to the Seller Part 3 - Owned by the Seller and licensed to third parties page 59 Australia Asset Agreement PART 1 As annexed page 60 Australia Asset Agreement PART 2 As annexed page 61 Australia Asset Agreement PART 3 As annexed page 62 Australia Asset Agreement SCHEDULE 5 - CONTRACTS AND ASSETS LEASES PART 1 CONTRACTS As annexed PART 2 ASSETS LEASES As annexed t PART 3 FOREIGN EXCHANGE CONTRACTS As annexed page 63 Australia Asset Agreement PART 1 As annexed page 64 Australia Asset Agreement PART 2 As annexed page 65 Australia Asset Agreement PART 3 As annexed page 66 Australia Asset Agreement SCHEDULE 6 - STATUTORY LICENCES page 67 Australia Asset Agreement SCHEDULE 7 - LEASED PROPERTIES As annexed page 68 Australia Asset Agreement SCHEDULE 8 - PLANT AND EQUIPMENT PART 1 PLANT AND EQUIPMENT As annexed PART 2 NOVATED LEASES As annexed page 69 Australia Asset Agreement PART 1 As annexed page 70 Australia Asset Agreement PART 2 As annexed page 71 Australia Asset Agreement SCHEDULE 9 - LETTERS OF CREDIT As annexed page 72 Australia Asset Agreement SCHEDULE 10 - FREEHOLD PROPERTIES page 73 Australia Asset Agreement SCHEDULE 11 - ACCEPTED LIABILITIES page 74 Australia Asset Agreement SCHEDULE 12 - GUARANTEES u page 75 Australia Asset Agreement SCHEDULE 13 - EXTERNAL FUNDS page 76 Australia Asset Agreement EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - ------------------------- ------------------------- Witness Attorney Paul Devereux Carly Mansell - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of Textile Industrial Design and Engineering Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of Union Knitting Mills Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) page 77 Australia Asset Agreement Signed for and on behalf of Boydex International Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of Foamlite (Australia) Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of Vita Pacific Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of PD Licensing Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) page 78 Australia Asset Agreement Signed for and on behalf of Niblick Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of Cliburn Investments Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Holdings Pty Ltd in the presence of: /s/ Andrew Cummins /s/ Justin Ryan - ------------------------- ------------------------- Director Director Andrew Cummins Justin Ryan - ------------------------- ------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Footwear Pty Ltd in the presence of: /s/ /s/ - ------------------------- ------------------------- Director Director - ------------------------- ------------------------- Name (please print) Name (please print) page 79 Australia Asset Agreement Signed sealed and delivered by Pacific Brands Sport & Leisure Pty Ltd in the presence of: /s/ /s/ - ------------------------- ------------------------- Director Director - ------------------------- ------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Clothing Pty Ltd in the presence of: /s/ /s/ - ------------------------- ------------------------- Director Director - ------------------------- ------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Household Products Pty Ltd in the presence of: /s/ - ------------------------- ------------------------- Director Director /s/ - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of PB Holdings NV by its duly authorised Attorneys under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) /s/ ------------------------- Attorney ------------------------- Name (please print) page 80 Australia Asset Agreement page 81 Australia Asset Agreement ANNEXURE A - ASSIGNMENT OF TRADEMARKS As annexed Australia Asset Agreement ANNEXURE B - ASSIGNMENT OF CONTRACTS AND ASSET LEASES As annexed Australia Asset Agreement ANNEXURE C - ASSIGNMENT OF PROPERTY LEASES As annexed Australia Asset Agreement ANNEXURE D - [NOT USED] Australia Asset Agreement ANNEXURE E - TRADE MARK RELATIONSHIP AGREEMENT As annexed Australia Asset Agreement ANNEXURE F - SUCCESSOR FUND AGREEMENT As annexed EX-4.3 6 dex43.txt SALE OF BUSINESS AGREEMENT DATED 11/30/2001 EXHIBIT 4.3 SALE OF BUSINESS AGREEMENT Pacific Dunlop Limited Pacific Dunlop Holdings (NZ) Limited PD Licensing Pty Ltd Pacific Brands Holdings (NZ) Ltd and PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference NJW:BAE TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 9 1.3 Business Day 9 1.4 The Seller 10 1.5 Conflict 10 2 Sale and purchase 10 1.1 Sale of Business Assets 10 2.2 Excluded Assets 10 3 Purchase Price 10 3.1 Purchase Price 10 3.2 Apportionment 11 3.3 Payments at Completion 11 3.4 Final payment 11 4 Completion 11 4.1 Date for Completion 11 4.2 Delivery of documents executed by Seller 11 4.3 Delivery of documents executed by third parties 13 4.4 Delivery of Business Records and documents of title 13 4.5 Buyer's obligations at Completion 14 4.6 Title 14 4.7 Effective Time 14 4.8 Interdependency 14 4.9 Seller obligations post Completion - Intellectual Property Rights 14 5 Payments in advance and outgoings 15 1.1 Advance payments 15 5.2 Outgoings 15 5.3 Quantification 15 6 Liabilities 16 1.1 Seller's responsibility - Liabilities 16 6.2 Quotations, tenders and orders 16 6.3 Buyer's responsibility - Accepted Liabilities 16 6.4 Reimbursement to Seller 16 6.5 Indemnity 16 6.6 Management of Accepted Claims 16 7 Receivables 17 7.1 Assignment 17 page 1 Sale of Business Agmt 7.2 Accounting for Receivables 17 7.3 Other debts owed to Seller 17 8 Contracts, Assets Leases, Property Leases 17 1.1 Transfer of Contracts, Assets Leases and Property Leases 17 8.2 Obligations pending transfer 18 8.3 Indemnities 18 8.4 Use or occupation pending transfer 18 8.5 Failure to transfer 19 8.6 Letters of Credit 19 9 Employees 19 9.1 Offer of employment by Buyer 19 9.2 Employment terms and conditions 19 9.3 Best endeavours 20 9.4 Termination by Seller 20 9.5 Payment and indemnity by Buyer for Employment Benefits 20 9.6 Allowance for Employee Leave Benefits 20 9.7 Restriction 21 9.8 Indemnity by Seller 21 9.9 Accident insurance arrangements 21 10 Superannuation 21 10.1 Buyer arrangements 21 10.2 Buyer's Fund from Transfer Date 22 10.3 Documentation of election 22 10.4 Parties to use reasonable endeavours 22 10.5 Information 23 10.6 Accrued Benefit Values 23 10.7 Acknowledgment 24 10.8 Timing 25 10.9 Indemnity 25 10.10 Statement of intention 26 11 Release of guarantees 26 12 Period before Completion 26 12.1 Carrying on Business 26 12.2 Access 27 12.3 Certain Freehold Property 27 13 After Completion 28 13.1 Supply of after-sales service 28 13.2 Reconciliation for returned goods 28 13.3 Supplier's Warranties 28 13.4 Access by Seller 28 13.5 Access to Excluded Records by Buyer 29 13.6 Tax returns 29 page 2 Sale of Business Agmt 13.7 Land - Servitor Productions Limited 29 14 Competition 29 14.1 Undertaking 29 14.2 Acquisition of interests in competing businesses 30 14.3 Exclusion from restraint 30 14.4 Related Corporations 30 14.5 Severability 30 15 Warranties 31 16 Limitation of liability 31 16.1 Co-ordination Agreement 31 16.2 Specific exclusions - Freehold Properties 31 16.3 Property Covenants 32 17 GST 32 17.1 Supply of a going concern 32 17.2 Taxable Supply 32 18 Guarantee and indemnity - Seller 33 18.1 Guarantee 33 18.2 Indemnity 33 18.3 Extent of guarantee and indemnity 33 18.4 Continuing guarantee and indemnity 33 18.5 Warranties of the Guarantor 33 18.6 Rights 34 19 Guarantee and indemnity - Buyer 34 19.1 Guarantee 34 19.2 Indemnity 34 19.3 Extent of guarantee and indemnity 34 19.4 Continuing guarantee and indemnity 35 19.5 Warranties of the Guarantor 35 19.6 Rights 35 Schedule 1 - Warranties 36 page 3 Sale of Business Agmt 1 Buyer authorised 36 2 Power to buy 36 3 No legal impediment 36 4 No liquidation or winding-up 36 5 No petition 36 6 No writ of execution 36 7 No receiver or administrator 37 8 Buyer's knowledge 37 9 GST Registered 37 1 Authorities 38 1.1 Seller authorised 38 1.2 Power to sell 38 1.3 No legal impediment 38 1.4 Corporate power 38 2 Compliance with law 38 2.1 Compliance with law 38 2.2 Authorisations 38 3 Position since 30 June 2001 39 3.1 Post Accounts Date 39 3.2 Suppliers / Customers 39 4 Tangible Assets 40 4.1 Title to assets 40 4.2 Assets not owned 40 4.3 Plant and Equipment 40 5 Encumbrances 40 5.1 Ownership of Business Assets 40 5.2 Discharges by Completion 40 5.3 Business Assets used in Business 41 6 Intellectual Property Rights 41 6.1 Scope 41 6.2 Ownership and use 41 page 4 Sale of Business Agmt 6.3 No third party rights 41 6.4 No infringement 41 6.5 Disputes 41 6.6 Assignments 41 6.7 Royalties/fees 42 7 Assets Leases 42 7.1 Nature 42 7.2 No default 42 7.3 Validity 42 7.4 Assets Leases used in the Business 42 8 Contracts 42 8.1 Nature of Contracts 42 8.2 No default 43 8.3 Foreign Currency 43 8.4 Copies of Contracts 43 9 Properties and Freehold Properties 43 9.1 Interests 43 9.2 Occupation and Use 43 9.3 No Breach 43 9.4 No Notices 44 9.5 Property details 44 9.6 Property disclosure 44 9.7 Disputes 44 9.8 Freehold Property - specific warranties 44 9.9 Property Lease disclosure 45 9.10 Termination notice 45 9.11 Assignment 45 10 Offers outstanding 45 11 Memberships 45 12 Employees 45 12.1 List of Employees complete 45 12.2 Incentive schemes 45 12.3 Service agreements 46 12.4 Management agreements 46 12.5 Disputes 46 12.6 Compliance 46 12.7 Disclosure 46 13 Superannuation 46 13.1 List of superannuation schemes complete 46 13.2 Governing Rules of Seller's Fund 46 13.3 Funding 46 page 5 Sale of Business Agmt 13.4 Accrued Benefit Values 46 13.5 Compliance of Fund 47 13.6 Compliance of Seller 47 13.7 Conditions 47 13.8 Records 47 13.9 Claims 47 14 Litigation 47 14.1 Not a party to any litigation 47 14.2 No circumstances 47 15 [Not used] 47 16 Solvency 48 16.1 No liquidation or winding-up 48 16.2 No petition 48 16.3 No writ of execution 48 16.4 No receiver or administrator 48 16.5 Payment of debts 48 17 Insurance 48 17.1 Policies 48 17.2 Notice 48 18 Information 48 18.1 Written Information 48 18.2 Accuracy 49 19 Business Records 49 20 Seller's knowledge 49 21 Duties 49 22 Trade Practices 49 23 Liability under asset and other sale agreements 49 Schedule 2 - Disclosure Schedule 50 Schedule 3 - Employees 51 Schedule 4 - Intellectual Property Rights 52 Schedule 5 - Contracts and Assets Leases 56 Schedule 6 - Statutory Licences 60 Schedule 7 - Leased Properties 61 Schedule 8 - Plant and Equipment 62 page 6 Sale of Business Agmt Schedule 9 - Letters of Credit 65 Schedule 10 - Freehold Properties 66 Schedule 11 - Accepted Liabilities 67 Schedule 12 - Guarantees 68 Schedule 13 - Seller's Fund 69 Annexure A - Assignment of Trademarks Annexure B - Assignment of Contracts and Asset Leases 2 Annexure C - Assignment of Property Leases Annexure D - Deed of Adherence page 7 Sale of Business Agmt THIS BUSINESS SALE AGREEMENT is made on 2001 between the following parties: 1. Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria, Australia (Guarantor) 2. Pacific Dunlop Holdings (NZ) Limited WN 54807 of Blenheim Street, Upper Hutt, New Zealand 3. PD Licensing Pty Ltd ABN 67 006 599 131 of Level 3, 678 Victoria Street, Richmond, Victoria, Australia 4. Pacific Brands Holdings (NZ) Ltd WN 1174050 of c/- Minter Ellison Rudd Watts, Level 17, 125 The Terrace, Wellington, New Zealand (Buyer) 5. PB Holdings NV of 1170 Brussells, Terhulpsesteenweg 166 (Buyer Guarantor) RECITALS A. The Seller is the owner of the Business Assets. B. The Seller has agreed to sell and the Buyer has agreed to buy the Business Assets. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. D. The Buyer Guarantor agrees to guarantee the performance by the Buyer of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accepted Claims has the meaning given in clause 6.3; Accepted Liabilities means: page 1 Sale of Business Agmt (a) those trade and other Liabilities arising in relation to the ownership of the Business Assets or operation of the Business before the Effective Time: (1) and which are provided for in the Completion Statement, including but not limited to any Intra Group Liability; (2) which constitute the amount of any payment to a trade creditor of the Seller the subject of an unpresented cheque of the Seller as at the Effective Time (not including any Inter Group Liability), provided that the relevant cheque account is assumed by the Buyer; and (b) the Liabilities as described in schedule 11, but excluding the Liability assumed by the Buyer pursuant to clause 9.6 and any Inter Group Liability; Accrued Benefit Value means, in relation to an Existing Member, the amount determined by the trustees of the Seller's Fund to be the aggregate of the amounts standing to the credit of the Existing Member's Member Number 1 and Member Number 2 Accounts in the Seller's Fund as at the Completion Date adjusted with interest or earnings in accordance with the Governing Rules of the Seller's Fund and further adjusted if permitted in terms of the trust deed of the Seller's Fund to take account of the Existing Member's share of earnings and gains and amounts payable to the Seller's Fund and losses and liabilities of and amounts payable from the Seller's Fund in respect of the period from the Completion Date to the date the Accrued Benefit Value is paid to the Buyer's Fund or in the case of a Member who does not transfer to the Buyer's Fund such Termination Benefit as the trustees of the Seller's Fund determine to be the Member's benefit entitlement as at the date the Member ceases to be employed by the Seller; Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Seller is party in relation to assets used in the Business including, but not limited to, those listed in part 2 of schedule 5 and any leases, agreements or arrangements entered into by the Seller between the date of this agreement and the Effective Time, but excludes the Property Leases; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Bid Accounts has the meaning given to that term in the Co-ordination Agreement; Business means the business carried on by the Seller in New Zealand comprising the manufacture, marketing, sale and distribution of: (a) clothing and related apparel including socks, underwear and intimate and outerwear garments; page 2 Sale of Business Agmt (b) foam, polyester fibre, mattresses and bedding accessories and products; (c) footwear; and (d) sporting and leisure equipment and related apparel and footwear and workwear; Business Assets means the following assets: (a) the Assets Leases; (b) the Business Records; (c) the Contracts; (d) the Freehold Properties; (e) the Goodwill; (f) the Included Cash; (g) the Intellectual Property Rights; (h) the Plant and Equipment; (i) the Property Leases; (j) the Receivables; (k) the Statutory Licences; and (l) the Stock, and any asset right or future economic benefit used in or relating to, exclusively, the Business, but excludes the Excluded Assets; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday, Sunday or a public holiday; Business Records means, to the extent relating to the Business, the Seller's customer lists and supplier lists, records of the Intellectual Property Rights, Assets Leases, Contracts, Receivables, Statutory Licences and Property Leases, records of Accepted Liabilities and records of Transferring Employees and of their Employment Benefits; Buyer's Fund means the Buyer's superannuation fund established or nominated by the Buyer for the purpose of clause 10; Claim means any claim or cause of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement, the Business or any of the Business Assets; Completion means completion of the sale and purchase of the Business Assets under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement means the statement to be prepared in relation to the Business as at the Effective Time pursuant to the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; page 3 Sale of Business Agmt Contracts means the agreements (including for the avoidance of doubt Intellectual Property Licences) to which the Seller is a party to the extent they relate to the Business and which are, wholly or partly, executory as at the Effective Time, including, but not limited to, those listed in part 1 of schedule 5, but excludes: (a) the Assets Leases; (b) the Property Leases; and (c) any agreements to the extent they relate to Excluded Assets or Liabilities which are not Accepted Liabilities or which are not otherwise assumed by the Buyer under this agreement; Co-ordination Agreement means the co-ordination agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Disclosure Schedule means schedule 2 to this agreement which contains disclosures in relation to the Seller's Warranties; Dollars, A$ and $ means Australian dollars, unless otherwise specified; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Seller listed in schedule 3 who is still employed in the Business as at the Completion Date and any person who becomes an employee of the Seller in relation to the Business between the date of this agreement and Completion; Employee Leave Benefits means annual leave, leave loading, sick leave and long service leave; Employment Benefits means Employee Leave Benefits and all wages, salary, remuneration, compensation and other benefits payable to the Employees by the Seller; Encumbrance means any mortgage, charge, lien, pledge (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Environmental Law has the meaning given to that term in the Co-ordination Agreement; Environmental Liability has the meaning given to that term in the Co-ordination Agreement; Excluded Assets means the following assets of the Seller used in or arising out of the Business: (a) all cash including cash at hand or at bank, except for the Included Cash; page 4 Sale of Business Agmt (b) any amounts other than Receivables receivable by the Seller at any time in relation to ownership of the Business Assets before Completion including, but not limited to, in respect of any insurance claim; (c) the Inter Group Receivables; (d) the Excluded Records; (e) rights to the Licensed Trade Marks as defined in the Trade Mark Relationship Agreement and rights to the names Pacific Dunlop, Dunlop and Olympic and any names likely to be confused with those names; (f) the benefit of any insurances held by the Seller or any Related Corporation of the Seller; (g) any shares or other securities in any body corporate; (h) the Foreign Exchange Contracts; and (i) goods and service sourcing contracts which apply, as well as to the Business, to other divisions and subsidiaries of Pacific Dunlop Limited; Excluded Records means those Business Records which the Seller is required by law to retain; Existing Member means a Transferring Employee who is a member of the Seller's Fund on the date immediately before the Completion Date; Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the Seller which relate exclusively to the Business which remain current as at Completion, details of which will be provided to the Buyer at Completion; Freehold Properties means the land more particularly described in schedule 10; Goodwill means the Seller's goodwill relating exclusively to the Business; Governing Rules means, in relation to a superannuation fund, the trust deed, rules and other documents governing that fund; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; GST includes any replacement or subsequent similar tax; GST Act means the Goods and Services Tax Act 1985; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to those listed in schedule 12; Guarantor means Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121; Immediately Available Funds means cash or bank cheque; Included Cash means any cash of the Seller at the Effective Time, which is located at the Properties or in bank accounts assumed by the Buyer which is identified in the Completion Statement; page 5 Sale of Business Agmt Intellectual Property Licences means all agreements under which the Seller has the right to use, but not ownership of, intellectual property used in connection with the Business details of which are set out in part 2 of schedule 4; Intellectual Property Rights means the rights and interests of the Seller to the extent they relate to the Business in all patents, utility models, copyrights, registered or unregistered trademarks or service marks, trade names, know-how, brand names, registered designs and any applications for any of the above, including but not limited to the Intellectual Property Licences and the other rights listed in schedule 4; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Inter Group Debts means any amount owing (including, but not limited to, trade accounts payable and receivable): (a) by a Seller in its capacity as an entity carrying on part of the Business to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) (Inter Group Liability); (b) by a member of the PDL Group (except in its capacity as an entity carrying on any part of the Pacific Brands Business) to a Seller in its capacity as an entity carrying on part of the Business (Inter Group Receivable); Inter Group Liability has the meaning given in paragraph (a) of the definition of Inter Group Debts; Inter Group Receivable has the meaning given in paragraph (b) of the definition of Inter Group Debts; Intra Group Debts means any amount owing (including, but not limited to, trade accounts payable and receivable): (a) by a Seller in its capacity as an entity carrying on part of the Business to a member of the PDL Group in its capacity as an entity carrying on any part of the Pacific Brands Business) (Intra Group Liability); (b) by a member of the PDL Group in its capacity as an entity carrying on any part of the Pacific Brands Business to a Seller in its capacity as an entity carrying on part of the Business (Intra Group Receivable); Intra Group Liability has the meaning given in paragraph (a) of the definition of Intra Group Debts; Intra Group Receivable has the meaning given in paragraph (b) of the definition of Intra Group Debts; Leased Properties means the property the subject of the Property Leases, as described in schedule 7; Letters of Credit means such letters of credit procured by the Seller in respect of the purchase of stock-in-trade or plant and equipment in the Business and which are outstanding as at the Effective Time, as are listed in schedule 9; page 6 Sale of Business Agmt Liabilities means all accrued liabilities of the Seller in respect of the Business as at the Effective Time; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Novated Leases means the leases of motor vehicles used by Employees listed in part 2 of schedule 8; Officer means, in relation to a body corporate, a director or secretary of that body corporate; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group means Pacific Dunlop Limited ABN 89 004 085 330 and its Related Corporations immediately before Completion; Plant and Equipment means the plant (including plant under construction), equipment, machinery, tools, furniture, fittings, spare parts, leasehold improvements and motor vehicles owned by the Seller as at the Effective Time and used exclusively in the Business including, without limitation, those listed in part 1 of schedule 8; Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; Properties means the Leased Properties and the Freehold Properties; Property Leases means the leases of real property listed in schedule 7; Purchase Price means Purchase Price payable for the Business Assets calculated under clause 3; Receivables means the trade debts and any other debts or amounts owing acquired in carrying on the Business owed to the Seller at the Effective Time, including, but not limited to: (a) any Intra Group Receivable; and (b) the amount of any trade or other debt for which a payment has been received by the Seller but not credited to the Seller's bank accounts at the Effective Time, provided that the relevant cheque account is assumed by the Buyer, but not including any Inter Group Receivable; Related Corporation means a "related company" as that expression is defined in the Companies Act of New Zealand 1993; Restructuring Provision has the meaning given to that term in the Co-ordination Agreement; Seller's Fund means the Seller's superannuation fund, details of which are set out in schedule 13; page 7 Sale of Business Agmt Statutory Licences means all licences, consents, rights, permits and certificates owned by the Seller relating to any aspect of the Business issued by any governmental or regulatory authority or otherwise necessary for the operation of any of the Business Assets including but not limited to these items described in schedule 6; Stock means the stock of the Business owned by the Seller as at the Effective Time and includes, but is not limited to, any stock in transit, raw materials, components, work-in-progress, finished goods, packaging materials, promotional materials and consumables; Tangible Assets means the assets leased or hired under the Assets Leases, the Plant and Equipment and the Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Invoice includes any document or record treated by the Commissioner of Inland Revenue as a tax invoice or as enabling the claiming of an input tax credit for which an entitlement otherwise arises; Tax Law means any law of a New Zealand parliament relating to Tax; Termination Benefit means, in relation to an Employee, the benefit due to the Employee under the Governing Rules of the Seller's Fund upon the termination of the Employee's employment with the Seller; Trade Mark Relationship Agreement means the agreement annexed as Annexure E to the Business Sale Agreement made between, among others, Pacific Dunlop Limited and Pacific Brands Holdings Pty Ltd on the same day as this agreement in relation to the Pacific Brands business carried on in Australia; Transfer Date means the date which is 120 days after Completion or any other date agreed by the Buyer and the Seller; Transferring Employee means an Employee who accepts the Buyer's offer of employment under clause 9.1; Transferring Member means a Transferring Employee who accepts the Buyer's offer, made in accordance with clause 10, to transfer their Accrued Benefit Value to the Buyer's Fund; Transfers means the transfers of land to be delivered by the Seller pursuant to clause 4.2; Transitional Arrangement has the meaning ascribed to that term in clause 10.4(b); Valuer has the meaning given to that term in the Co-ordination Agreement; and Warranties means in relation to the Buyer the representations and warranties in part A of schedule 1 and in relation to the Seller the representations and warranties in part B of schedule 1. page 8 Sale of Business Agmt 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 requires otherwise: (a) terms defined in the GST Act and not otherwise defined in this agreement have the same meaning in this agreement unless provided otherwise; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other parts of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a clause, party or schedule is a reference to a clause of, and a party and schedule to, this agreement and a reference to this agreement includes any 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) no provision of this agreement will be construed adversely to a party solely on the ground that the party was responsible for the preparation of this agreement or that provision; (k) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; (l) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally; and (m) a reference to 'best endeavours' is an obligation imposed on a party but does not require that party to pay any money or enter into any unreasonably onerous undertaking or obligation. 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 next Business Day. page 9 Sale of Business Agmt 1.4 THE SELLER (a) In this agreement, a reference to the Seller is a separate reference to each of Pacific Dunlop Limited ABN 89 004 085 330, Pacific Dunlop Holdings (NZ) Limited WN 54087 and PD Licensing Pty Ltd ABN 67 006 599 131, to the extent that, in the context of the reference, an entity so named holds rights or obligations in relation to the Business generally or owns a Business Asset. (b) In circumstances where a member of the PDL Group owns a Business Asset but that member is not expressly named as a Seller, the Guarantor must procure that any such member complies with any obligation under this agreement relating to that Business Asset. 1.5 Conflict If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. 2 SALE AND PURCHASE 2.1 SALE OF BUSINESS ASSETS Subject to the satisfaction or waiver of the Conditions in accordance with the Co-ordination Agreement, on Completion the Seller will sell and the Buyer will buy the Business Assets free of Encumbrances for the Purchase Price and the Buyer will assume the Accepted Liabilities. 2.2 EXCLUDED ASSETS (a) The Excluded Assets are excluded from the sale of the Business. (b) To the extent that any cash which is an Excluded Asset passes to the possession of the Buyer at Completion (which for the avoidance of doubt is not Included Cash), the Buyer will refund that cash to the Seller immediately it becomes aware of such cash or on demand by the Seller. 3 PURCHASE PRICE 3.1 PURCHASE PRICE (a) The Purchase Price is the total value of the Business Assets: (1) less the total value of the Accepted Liabilities (which, for the avoidance of doubt, does not include the value of the item described in clause 3.1(a)(4)); (2) less the allowance referred to in clause 9.6 (Employee Leave Benefits); page 10 Sale of Business Agmt (3) plus or minus any adjustments under clause 5.1 in respect of advance payments and outgoings; and (4) less that portion of the Restructuring Provision applicable to New Zealand net of future income tax benefit calculated at the rate of 30%, reflected in the Apportionment Statement derived from the Completion Statement. (b) The Purchase Price is payable in accordance with clauses 3.3 and 3.4. 3.2 APPORTIONMENT (a) The Purchase Price will be allocated and apportioned between the Business Assets in the manner described in the Co-ordination Agreement. (b) The Accepted Liabilities are valued as per the valuation pursuant to the Completion Statement. 3.3 PAYMENTS AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.4 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS EXECUTED BY SELLER At Completion the Seller must give the Buyer the following documents executed by the Seller or its Related Corporations or registered owner or lessee (as the case requires): (a) assignments or novations of those Assets Leases, Contracts and Property Leases which have been transferred to the Buyer before Completion in accordance with clause 8.1; (b) as many transfer of ownership and registration forms for motor vehicles leased or hired under the Assets Leases or included in the Plant and Equipment as have been assembled as at Completion it being agreed by the parties that any costs associated with transferring such motor vehicles after page 11 Sale of Business Agmt Completion including, without limitation, costs associated with obtaining certificates of fitness, will be solely to the account of the Buyer; (c) evidence of the transfer of as many Statutory Licences as have been transferred to the Buyer as at Completion and of such necessary consents to such transfers as have been obtained or of the lodgement of appropriate transfer documentation with the relevant authority; (d) certificates for those registered trade marks, granted patents and registered designs included in the Intellectual Property Rights which are in the Seller's possession as at Completion; (e) assignments of the trademarks included in the Intellectual Property Rights which are registered in New Zealand, in the form annexed as Annexure A; (f) subject to any lease and the provisions of this agreement, vacant possession of the Freehold Properties; (g) properly executed transfers of the freehold property situated at: (1) 666 Tremaine Avenue, Palmerston North, Wellington (Wellington Property); (2) 83-87 Harris Road, East Tamaki, Auckland (Harris Road Property); and (3) 5-7 and 9-11 Greenmount Drive, East Tamaki, Auckland (Greenmount Drive Property)(the transfers for the Greenmount Drive Property will be executed by Pacific Dunlop Holdings (NZ) Limited), together with: (A) the dealing number (Wellington Dealing) of the combined Declaration of Correction of Company Name/Declaration of Loss/Application for Correction of Name and New Certificate of Title in a form agreed with the Buyer and lodged by the Seller at the Wellington District Land Registry prior to Completion in relation to the Wellington Property; (B) an irrevocable authority or power of attorney in a form agreed with the Buyer executed by the Seller authorising the Buyer to progress the Wellington Dealing after Completion; (C) the dealing number (Harris Road Dealing) of the combined Declaration of Change of Company Name/Declaration of Loss/Application for Change of Company Name and New Certificate of Title in a form agreed with the Buyer and lodged by the Seller at the North Auckland District Land Registry prior to Completion in relation to the Harris Road Property; and (D) an irrevocable authority or power of attorney in a form agreed with the Buyer executed by the Seller authorising the Buyer to progress the Harris Road Dealing after Completion; page 12 Sale of Business Agmt (h) confirmation from the Seller's solicitor of the status of the application to the High Court of New Zealand (to be filed on or before 7 December 2001) for the restoration of Servitor Productions Limited to the Register of Companies and/or the application to the Crown for the transfer of the Greenmount Drive Property to the Seller, together with confirmation that the Seller's solicitor has all information they believe will be required to progress any such applications to a successful conclusion; (i) an irrevocable authority or power of attorney in a form agreed with the Buyer executed by the Seller, authorising the Buyer to progress any such application to the High Court or the Crown after Completion at the Seller's cost (provided that any costs incurred by the Buyer are reasonable) with such authority exercisable at the sole discretion of the Buyer; and (j) the assignment or novation of the relevant licence agreements in respect of the following brands: (1) 'Jockey'; and (2) 'Playtex', on the terms set out in the copy of the agreement that was in the Data Room. 4.3 DELIVERY OF DOCUMENTS EXECUTED BY THIRD PARTIES At Completion the Seller must give the Buyer: (a) the consents to the transfer of the Contracts, Assets Leases and Property Leases which have been obtained at or before Completion; (b) a release of each Encumbrance affecting any of the Business Assets executed by the holder of that Encumbrance; and (c) as many certificates of fitness for motor vehicles or forklifts (if required by law) leased or hired under the Assets Leases or included in the Plant and Equipment as have been assembled as at Completion. 4.4 DELIVERY OF BUSINESS RECORDS AND DOCUMENTS OF TITLE (a) At Completion the Seller and its Related Corporations (as the case requires) must transfer to the Buyer at the Properties: (1) all originals in the Seller's possession of the Contracts, Assets Leases and Property Leases; (2) all registration certificates and other documents of title for the Intellectual Property Rights in the Seller's possession; (3) all registration papers for all motor vehicles leased or hired under the Assets Leases or included in the Plant and Equipment in the Seller's possession; (4) the Business Records (other than Excluded Records); and (5) the Tangible Assets, to the extent located at the Properties. (b) If any document referred to in clause 4.4(a) is not available because it is lost or destroyed, the Seller must deliver such evidence of its title to the page 13 Sale of Business Agmt Business Assets concerned as is acceptable to the Buyer, acting reasonably. 4.5 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must give the Seller counterparts, executed by the Buyer, of those documents listed in clauses 4.2 and 4.3 that are to be executed by the Buyer and the Buyer must comply with its obligations pursuant to clause 3.3. 4.6 TITLE Title to the Business Assets passes to the Buyer on Completion. 4.7 EFFECTIVE TIME Subject to Completion occurring: (a) risk in the Business Assets; (b) the benefit of all income and benefits derived from the Business Assets; and (c) the burden of and all liabilities and obligations arising from the Business Assets, pass to the Buyer with effect from the Effective Time. 4.8 INTERDEPENDENCY (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) Subject to clause 4 of the Co-ordination Agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A material breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.9 SELLER OBLIGATIONS POST COMPLETION - INTELLECTUAL PROPERTY RIGHTS After Completion, the Seller will give the Buyer the following documents executed (to the extent necessary) by the Seller or its Related Corporations or registered owner (as the case may be): (a) an assignment of the patent applications and registrations listed in schedule 4; (b) an assignment of the design applications and registrations listed in schedule 4; page 14 Sale of Business Agmt (c) an assignment of the .com domain names listed in schedule 4; (d) a notification of cancellation of the .com.au domain names listed in schedule 4; (e) assignments of the trade mark applications and registrations listed in schedule 4, to the extent that such documents have not been provided to the Buyer at Completion; and (f) documents in the possession of the Seller evidencing the chain of title of trade mark applications and registrations listed in schedule 4 from the registered owner to the actual owner, where such documents are necessary for the Buyer to record the assignment of such trade mark applications or registrations from the actual owner to the Buyer. 5 PAYMENTS IN ADVANCE AND OUTGOINGS 5.1 ADVANCE PAYMENTS On the Payment Date: (a) the Buyer must account to the Seller for: (1) any payments in advance made by the Seller for goods or services supplied or to be supplied to the Business after the Effective Time; (2) any other payments in advance made by the Seller in respect of the Business, the benefit of which is received or is to be received by the Business after the Effective Time; and (3) any amount of Employment Benefits paid by the Seller to Transferring Employees in relation to any period after the Effective Time; and (b) the Seller must account to the Buyer for any payments in advance received by the Seller for goods or services supplied or to be supplied by the Business after the Effective Time. 5.2 OUTGOINGS Except as otherwise expressly provided in this agreement, at the Payment Date the Seller will deliver to the Buyer a written statement setting out all outgoings of a periodical or recurring nature in respect of any of the Business Assets and otherwise in the conduct of the Business which will be apportioned as between the Buyer and the Seller on the basis that they will be borne by the Seller in respect of the period before the Effective Time and afterwards by the Buyer. 5.3 QUANTIFICATION For the purpose of clauses 5.1 and 5.2, the quantum of any payment, amount or outgoing referred to in clauses 5.1 and 5.2 will be as determined in the Completion Statement. The Buyer acknowledges that any such adjustments will form part of the Purchase Price and will be reflected in the Completion Statement. page 15 Sale of Business Agmt 6 LIABILITIES 6.1 SELLER'S RESPONSIBILITY - LIABILITIES The Seller must pay or otherwise discharge all Liabilities which are not expressly assumed by the Buyer under this agreement. 6.2 QUOTATIONS, TENDERS AND ORDERS (a) Subject to clause 6.2(b), the Buyer must discharge any obligations which have arisen or may arise in respect of all quotations given, tenders made or orders taken by the Seller in the ordinary course of the Business before Completion. (b) The Seller has disclosed in writing to the Buyer any tender, quotation or order in the Business which involves the supply of goods and services with a value in excess of $1 million. 6.3 BUYER'S RESPONSIBILITY - ACCEPTED LIABILITIES The Buyer must: (a) pay all Accepted Liabilities on or before the due date; (b) pay and discharge all other liabilities and obligations of the Seller not paid or discharged before the Effective Time relating to goods or services to be supplied to the Business after the Effective Time or relating to a benefit received or to be received by the Business after the Effective Time; (c) in the case of Accepted Liabilities which are claims relating to the Business as described in part 1 of schedule 11 (Accepted Claims), manage those claims in accordance with clause 6.6. 6.4 REIMBURSEMENT TO SELLER If the Seller, or any person on behalf of the Seller, pays an Accepted Liability, the Buyer must reimburse the Seller within 10 Business Days after the Buyer receives evidence of payment. 6.5 INDEMNITY The Buyer must indemnify the Seller against any Loss suffered, paid or incurred by the Seller after Completion as a result of any failure by the Buyer to comply with its obligations under this clause 6 and the Seller must indemnify the Buyer against any Loss suffered, paid or incurred by the Buyer after Completion as a result of any failure by the Seller to comply with its obligations under this clause 6. 6.6 MANAGEMENT OF ACCEPTED CLAIMS The Buyer will: (a) manage the Accepted Claims after Completion at its own cost and expense; page 16 Sale of Business Agmt (b) on request of the Guarantor, provide an update of the status of any Accepted Claim; and (c) use its reasonable endeavours to protect the name and reputation of the Guarantor and its Related Corporations in the management of the Accepted Claims, provided that the Seller will allow the Buyer access to any records reasonably required to assist the Buyer in performing its obligations as described above. 7 RECEIVABLES 7.1 ASSIGNMENT (a) With effect from the Effective Time, the Seller absolutely assigns and transfers all of its right, title and interest in and to the Receivables to the Buyer free from Encumbrances. (b) The Seller must, if requested to do so by the Buyer, notify a debtor who owes a Receivable of the assignment effected pursuant to clause 8.1(a). 7.2 ACCOUNTING FOR RECEIVABLES If the Seller receives a payment in respect of any Receivable, it must pay the amount received to the Buyer within 2 Business Days after receiving it. 7.3 OTHER DEBTS OWED TO SELLER If the Buyer receives a payment in respect of a debt owed to the Seller (other than a Receivable), it must pay the amount received to the Seller within 2 Business Days after receiving it. 8 CONTRACTS, ASSETS LEASES, PROPERTY LEASES 8.1 TRANSFER OF CONTRACTS, ASSETS LEASES AND PROPERTY LEASES (a) Subject to clause 4.2, the Seller and Buyer must use their best endeavours to transfer the Contracts, Assets Leases and Property Leases to the Buyer on or as soon as possible after Completion. (b) A transfer under clause 8.1(a) may be made by assignment in the form of the deed of assignment annexed, in the case of Contracts and Assets Leases, as Annexure B or, in the case of Property Leases, as Annexure C. (c) If the consent of a third party is required for a transfer under clause 8.1(a), then the Buyer and the Seller must use their best endeavours to obtain that consent, including, in the case of the Buyer, giving such security for its obligations as may be reasonably required by the third party. page 17 Sale of Business Agmt 8.2 OBLIGATIONS PENDING TRANSFER If an Assets Lease, Contract or Property Lease has not been transferred to the Buyer by Completion, then after Completion: (a) the Buyer must, to the extent it lawfully can, perform all the Seller's obligations under the relevant Assets Lease, Contract or Property Lease; and (b) the Seller must: (1) if the Buyer cannot lawfully perform an obligation or exercise a right of the Seller under the Assets Lease, Contract or Property Lease, at the request and expense of and with the full assistance of the Buyer, use its best endeavours to perform that obligation or exercise that right; and (2) within 2 Business Days after receipt pay to the Buyer any amount, or account to the Buyer for the value of any other benefit, it receives after the Effective Time in respect of the relevant Assets Lease, Contract or Property Lease. 8.3 INDEMNITIES (a) The Buyer must indemnify the Seller against any Loss suffered, paid or incurred by the Seller after the Effective Time under an Assets Lease, Contract or Property Lease other than one which is attributable to default of the Seller in discharging the Seller's obligations under the Assets Lease, Contract or Property Lease before the Effective Time provided always that this exclusion from the Buyer's indemnity obligation does not apply to a default or obligation relating to the physical condition of the Leased Properties unless it is the subject of notice from the relevant lessor received by the Seller before the date of this agreement. (b) The Seller must indemnify the Buyer against any Loss suffered, paid or incurred by the Buyer after the Effective Time arising under an Assets Lease, Contract or Property Lease from a default by the Seller in discharging its obligations under the Assets Lease, Contract or Property Lease before the Effective Time (including any failure by the Seller to pay stamp duty due from it in respect of any Asset Lease, Contract or Property Lease) provided always that this indemnity does not apply to a default or obligation relating to the physical condition of the Leased Properties unless it is the subject of a notice from the relevant lessor received by the Seller before the date of this agreement. 8.4 USE OR OCCUPATION PENDING TRANSFER (a) If an Assets Lease or a Property Lease has not been transferred to the Buyer by Completion the Seller must, to the extent it lawfully can, allow the Buyer to use or occupy the property the subject of that Assets Lease or Property Lease as licensee from Completion until the transfer is completed. (b) If, notwithstanding that the Seller and the Buyer have complied with clause 8.1, the Seller is not able to allow the Buyer to use or occupy any page 18 Sale of Business Agmt property the subject of an Asset Lease as licensee pursuant to clause 8.3(a), the Buyer must pay to the relevant lessor all moneys necessary to pay out the Assets Lease and the Seller will then direct that title to the assets concerned be transferred to the Buyer provided that it is permitted under the terms of the relevant Asset Lease. 8.5 FAILURE TO TRANSFER The Seller will fully co-operate with the Buyer in any reasonable arrangements designed to provide for the Buyer the benefit and burden or the relevant Contract, Asset Lease or Property Lease including enforcement of any and all rights of the Seller against the party to the relevant Contract, Asset Lease or Property Lease but otherwise the Seller has no liability to the Buyer in relation to the failure to transfer any Contract, Assets Lease or Property Lease if the Seller has met its obligations under this clause 8. 8.6 LETTERS OF CREDIT (a) The Seller will use its best endeavours to procure a transfer of the benefit of all Letters of Credit to the Buyer on Completion on terms which release the Seller and any Related Corporation of the Seller from any liability to the issuer of the Letter of Credit in respect of the Letter of Credit and pending such release the Buyer must pay to the Seller on demand any amount drawn-down against such Letter of Credit. (b) If the transfer and release to the Buyer as referred to in clause 8.6(a) has not been effected within 30 Business Days after Completion the Seller will, to the extent possible, cancel all outstanding Letters of Credit and the Buyer must make its own alternative arrangements to meet the payment obligations concerned. (c) The Buyer indemnifies the Seller in respect of any amounts payable to the Seller by it under this clause 8.6. 9 EMPLOYEES 9.1 OFFER OF EMPLOYMENT BY BUYER As early as possible before Completion, the Buyer must send each Employee a letter in a form agreed with the Seller offering, subject to Completion occurring, to employ the Employee with effect from Completion. 9.2 EMPLOYMENT TERMS AND CONDITIONS Each offer must be for employment on terms and conditions which in the aggregate are no less favourable to the Employee than those under which the Employee is employed by the Seller immediately before Completion: (a) including, but not limited to, those relating to retrenchment and redundancy (in each case taking into account length of service with the Seller); and page 19 Sale of Business Agmt (b) without loss of continuity of employment for the purpose of all employee entitlements, excluding, for purposes of this clause 9.2, terms and conditions relating to superannuation (which is provided for in clause 10). 9.3 BEST ENDEAVOURS The Buyer and Seller must each use its best endeavours to encourage all of the Employees to accept the offers so made. 9.4 TERMINATION BY SELLER On or as soon as practicable after Completion the Seller must: (a) release the Transferring Employees from employment with the Seller, that release to take effect at the Effective Time; (b) pay the Transferring Employees all Employment Benefits (other than Employee Leave Benefits) accrued by them at the Effective Time; (c) pay the Transferring Employees any Employee Leave Benefits which they are entitled to be paid and in fact demand payment of on termination; and (d) indemnify the Buyer (to the extent not provided for in the Completion Statement), against any liability for Employment Benefits other than Employee Leave Benefits and other entitlements due to or accrued by a Transferring Employee at the Effective Time and against all Losses arising out of a breach by a Seller of its contractual or other legal obligations to a Transferring Employee prior to the Effective Time. 9.5 PAYMENT AND INDEMNITY BY BUYER FOR EMPLOYMENT BENEFITS After Completion the Buyer must: (a) pay the Transferring Employees all Employment Benefits and other entitlements due to them after the Effective Time as and when they fall due; and (b) indemnify the Seller against any liability for Employment Benefits and other entitlements due to or accrued by a Transferring Employee after the Effective Time and against all Loss in any way connected with the Buyer's employment of a Transferring Employee or termination of that employment. 9.6 ALLOWANCE FOR EMPLOYEE LEAVE BENEFITS In consideration of the obligations undertaken by the Buyer under clause 9.5, the Buyer is entitled to an allowance equal to the monetary value of the Transferring Employees' accrued annual leave, leave loading and long service leave as set out in the Completion Accounts. The Buyer acknowledges that this allowance will be reflected in the Completion Statement. page 20 Sale of Business Agmt 9.7 RESTRICTION The Buyer covenants with the Seller that it will not for a period of twelve months after Completion directly or indirectly procure the services, as employee, consultant, contractor or otherwise of any Employee who does not accept the Buyer's offer of employment under clause 9.1. 9.8 INDEMNITY BY SELLER Provided that the Buyer has met its obligations under clauses 9.2 and 9.3, the Seller must indemnify the Buyer against any Claim brought by an Employee who is not a Transferring Employee arising out of the termination of employment of that Employee by the Seller. 9.9 ACCIDENT INSURANCE ARRANGEMENTS After Completion, the Buyer must in relation to any Transferring Employee who suffers a work related personal injury for which the Seller is required to provide entitlements (or a contribution towards entitlements) under its Accredited Employer Programme Accreditation Agreement with the Accident Compensation Corporation: (a) use all reasonable endeavours to: (1) ensure that the Transferring Employee co-operates in rehabilitation and maintains employment; and (2) assist with the rehabilitation; and (3) avoid placing the Transferring Employee in a position which may aggravate or prolong the Transferring Employee's disability; and (b) consult the Seller as early as is reasonably practicable prior to making any decision to medically retire the Transferring Employee; and (c) facilitate the rehabilitation of any Transferring Employee by permitting the Seller's case management providers access to the Transferring Employee at the Transferring Employee's place of employment or any other place controlled by the Buyer in order to undertake any rehabilitation deemed necessary by the Seller's case management providers. 10 SUPERANNUATION 10.1 BUYER ARRANGEMENTS Subject to clause 10.2, prior to Completion, the Buyer must make all arrangements necessary to provide superannuation benefits for each Existing Member with effect from Completion on terms and conditions which provide in respect of each Existing Member who accepts an offer to join the Buyer's Fund in respect of the period after Completion, terms and benefits no less favourable than those which would have been provided for the Existing Member in respect of that period under the Seller's Fund. page 21 Sale of Business Agmt 10.2 BUYER'S FUND FROM TRANSFER DATE If the Buyer or the Seller determines that because of the need for the trustees of the Buyer's Fund to comply with s9B(2) Superannuation Scheme Act 1989 or the Buyer determines for any other reason, the Transferring Members will not be transferred into the Buyer's Fund at Completion then the Buyer may determine that the Transitional Arrangement shall apply and clause 10.1 shall apply only in so far as the Buyer's Fund shall be available from the Transfer Date. 10.3 DOCUMENTATION OF ELECTION The offer referred to in clause 10.1 must include or attach a form or forms acceptable to the trustees of Seller's Fund to be completed and signed by the Existing Member under which the Existing Member may elect either: (a) that the trustees of Seller's Fund (as their only obligation in respect of the Existing Member after Completion other than any obligation connected with or arising from the Existing Member's membership of the Seller's Fund) provide the benefit payable to the Existing Member under the relevant provision of Seller's Fund as at the date the member ceases to be an employee of the Seller; or (b) to have the trustees of Seller's Fund (as their only obligation in respect of the Existing Member after Completion other than any obligation connected with or arising from the Existing Member's membership of the Seller's Fund) cause his or her Accrued Benefit Value to be transferred to the Buyer's Fund together with any amount that the Trustees of the Seller's Fund determine to pay under clause 10A.2 of the Governing Rules of the Seller's Fund or if the Seller or Buyer determines that the Transitional Arrangement will apply, to have the trustees of the Seller's Fund (as their only obligation of the Existing Member after the Transfer Date other than any obligation connected with or arising from the Existing Member's membership of the Seller's Fund) cause his or her Accrued Benefit Value to be transferred to the Buyer's Fund on the Transfer Date together with any amount that the Trustees of the Seller's Fund determine to pay under clause 10A.2 in accordance with the Governing Rules of the Seller's Fund (other than in a circumstance where a benefit becomes payable to the Existing Member between the Completion Date and the Transfer Date when the obligation shall be to pay the appropriate benefit under the Governing Rules of the Seller's Fund). and under which (except as provided in clauses 10.3(a) and 10.3(b) above) the trustees of Seller's Fund are discharged from all liability in respect of the Existing Member from the Completion Date other than in respect of any liability connected with or arising from the Existing Member's membership of the Seller's Fund. 10.4 PARTIES TO USE REASONABLE ENDEAVOURS (a) The Seller shall use its best endeavours to provide any consents required under clause 10A.1 of the trust deed of the Seller's Fund so that in respect of a Transferring Member the amount transferred to the Buyer's Fund is at least equivalent to the Transferring Member's No. 1 Account balance and Member's No. 2 Account balance adjusted for interest or earnings in page 22 Sale of Business Agmt accordance with the Governing Rules of the Seller's Fund. In particular the Seller shall, prior to the date on which Transferring Members' cease to be employed by the Seller give notice to the trustees of the Seller's Fund that Transferring Members are eligible to join the Buyer's Fund and that the Buyer's Fund is approved by the Seller for the purposes of clause 10A.1 of the Trust Deed of the Seller's Fund; and (b) If it becomes necessary for the purposes of complying with section 9B(2)of the Superannuation Schemes Act 1989 or the Buyer determines under clause 10.2, for the Buyer to become an "Employer" (as defined in the Trust Deed of the Seller's Fund under the Trust Deed of the Seller's Fund the Buyer shall, on Completion, execute and hand to the Vendor a Deed of Adherence in the form annexed as Annexure D and the Seller and the Buyer shall use their best endeavours to ensure that each Existing Member who accepts an offer of employment under clause 10.1 agrees in writing on or before the Completion Date with the trustees of the Seller's Fund pursuant to clause 10(a) of the Trust Deed of the Seller's Fund to be bound by the Deed of Adherence relating to the Buyer in the Seller's Fund until the Transfer Date, such participation by the Buyer in the Seller's Fund to be known as the "Transitional Arrangement". 10.5 INFORMATION (a) The Seller must use all reasonable endeavours to ensure that the trustees of Seller's Fund provide to the Buyer and to the trustee of the Buyer's Fund any information in respect of the Existing Members reasonably required by them to give effect to this clause 10 including such information as the trustees of the Buyer's Fund may require to ascertain their obligations under Section 9B(2) of the Superannuation Schemes Act 1989. (b) The Buyer must use all reasonable endeavours to ensure that the trustees of the Buyer's Fund provide to the trustees of the Seller's Fund any information in respect of the Buyer's Fund reasonably required to ascertain their obligations under Section 9B(2) of the Superannuation Schemes Act 1989. (c) Until Existing Members are transferred to the Buyer's Fund all communications from the Buyer or the trustees of the Buyer's Fund relating to superannuation shall be subject to the prior written approval of the Seller and no communication relating to superannuation or benefits shall be provided to Existing Members or Transferring Members until approved by the Seller, such approval not to be unreasonably withheld. 10.6 ACCRUED BENEFIT VALUES The Seller shall ensure that the amount equivalent to the aggregate amount of Accrued Benefit Values which Existing Members have elected to have transferred to the Buyer's Fund as provided in clause 10.3(b)shall be paid to the trustee of the Buyer's Fund in cash (or at the option of the trustees of the Seller's Fund by the transfer of assets of equivalent value and so long as the Buyer and the Seller agree) as soon as reasonably practicable after Completion. page 23 Sale of Business Agmt 10.7 ACKNOWLEDGMENT (a) The Seller and Buyer acknowledge that the provisions of this clause 10 are subject to the Governing Rules of the Seller's Fund and the Superannuation Schemes Act 1989 and the provisions of this clause 10 shall take effect only to the extent permitted by the Governing Rules of the Seller's Fund and that Act. Each party shall act in good faith to give effect to the provisions of this clause to the maximum extent possible, including if required the Buyer becoming a participating employer under the Seller's Fund. (b) If, to give effect to the Transitional Arrangements it becomes necessary for the Buyer to become an "Employer" (as defined in the Trust Deed of the Seller's Fund under the Seller's Fund: (1) The Seller and the Buyer shall use their best endeavours to procure that the Buyer becomes a participating employer in the Seller's Fund on Completion until the Transfer Date and the Buyer and the Seller shall execute and use their reasonable endeavours and procure that the trustees of the Seller's Fund execute such documents as shall be required to provide for the participation of the Buyer in the Seller's Fund from the Completion Date until the Transfer Date. (2) The Buyer shall on Completion execute a "Deed of Adherence" (as that term is described in clause 2 of the Trust Deed of the Seller's Fund) in the form annexed as Annexure D. The benefits and conditions for employees of the Buyer to whom the Deed of Adherence relates shall be the same benefits as apply to the Existing Members to the intent that each Existing Member who remains a Member of the Seller's Fund after the Completion Date shall be entitled to the same benefits from the Seller's Fund after the Completion Date as he or she would have been entitled to prior to the Completion Date in the event of a benefit becoming payable between the Completion Date and the Transfer Date. (3) Each party shall meet their own costs associated with the preparation and execution of the Deed of Adherence and any filing or other costs incurred by the Seller or the Trustees of the Seller's Fund as a result of any need to comply with the provisions of the Superannuation Schemes Act 1989, the Securities Act 1978, the Securities Regulations 1983 or the Multiple Participants Superannuation Schemes Securities Act Exemption Notice. In particular the Buyer acknowledges that subject to the Buyer handing to the Seller on the Completion Date the Deed of Adherence referred to in clause 10.7(b)(2) the Seller is responsible for ensuring that a copy of the Deed of Adherence is delivered to the Government Actuary in New Zealand and to the Registrar of Companies within 14 days of the Deed of Adherence being signed in order to comply with the provisions of clause 8(2) of the Multiple Participants Superannuation Schemes Exemption Notice. page 24 Sale of Business Agmt (4) The Buyer agrees that other than offers made to Existing Members under clause 10(a) of the Trust Deed of the Seller's Fund that it will not invite any other employee or person in its service to become a member of the Seller's Fund and that it will cease to be an Employer under the Seller's Fund immediately following the Transfer Date. (5) The Buyer agrees that it will be responsible for all employer contributions and other moneys payable in respect of Existing Members remaining in the Seller's Fund until the Transfer Date from the Completion Date until the Transfer Date and shall assume all the obligations of the Employer arising under the Trust Deed of the Seller's Fund in respect of such Existing Members on or after the Completion Date. (6) The Seller and the Buyer agree that they will not, and the Seller agrees that it will use its best endeavours to ensure the trustees of the Seller's Fund do not agree to any amendment of the trust deed of the Seller's Fund which in any way has the effect of amending the benefits of the Existing Members before the Transfer Date. Without limiting the generality of the foregoing the Seller will not give its consent under the Governing Rules of the Seller's Fund to such amendment. In addition the Seller will not wind up the Seller's Fund before the Transfer Date. 10.8 TIMING The rights of Existing Members to become members of the Buyer's Fund shall be subject to the provisions of the Superannuation Schemes Act 1989 and to the provisions of the Governing Rules of the Seller's Fund to the intent that where any Existing Member electing to transfer to the Buyer's Fund is prevented by that Act or the Governing Rules of the Seller's Fund from being a member of the Buyer's Fund from Completion, membership shall be offered from such other date as is allowed under the Act and/or the Governing Rules of the Seller's Fund. In the event that a benefit becomes payable to an Existing Member electing to transfer to the Buyer's Fund prior to the date of receipt of any transfer value in respect of such Existing Member the Seller shall use its best endeavours to procure if permitted by the Seller's Fund the payment of an amount equivalent to the transfer value to the Existing Member or his or her personal representative. 10.9 INDEMNITY The Buyer hereby indemnifies the Seller and the trustees for the time being of the Seller's Fund against any claim or action against, and all liabilities, losses or damages incurred by the Seller or the trustees for the time being of the Seller's Fund relating to:- (a) any breach of the Superannuation Schemes Act 1989 by the trustees of the Buyer's Fund. (b) all ongoing obligations (including the provision of any benefit arising on or after the Completion Date other than as provided in clause 10.2 or 10.3 and including all ongoing employer contributions and payments relating to page 25 Sale of Business Agmt Existing Members superannuation entitlements under the Seller's Fund with effect from Completion) relating to Existing Members superannuation entitlements or benefits with effect from Completion other than those which arise prior to Completion. For the purposes of this clause "benefit" includes (but not by way of limitation) any death benefit or benefit payable on incapacity and any insured benefit the Existing Member would have been entitled to under the Seller's Fund on or after the Completion Date to the intent that the trustees of the Seller's Fund shall from the Completion Date only be liable to pay the amounts specified in clause 10.3a and 10.2of this Agreement as applicable to the extent permitted by the Governing Rules of the Seller's Fund and the Superannuation Schemes Act 1989. 10.10 STATEMENT OF INTENTION To the extent permitted by the Governing Rules of the Seller's Fund the parties shall use their reasonable endeavours to procure that in respect of an Existing Member who elects to transfer to the Buyer's Fund that the amount transferred is at least equivalent to the value of the Member's Member No. 1 Account balance and Member No. 2 Account balance in the Seller's Fund as at the date of transfer adjusted for interest or earnings in accordance with the Governing Rules of the Seller's Fund. 11 RELEASE OF GUARANTEES (a) The Buyer must use its reasonable endeavours to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 11(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 11(a) which relates to any act or omission of the Buyer after Completion. 12 PERIOD BEFORE COMPLETION 12.1 CARRYING ON BUSINESS The Seller must use all reasonable endeavours to ensure that between the date of this agreement and Completion the Business is conducted in the ordinary course of business and: (a) the Seller in carrying on the Business does not acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (b) the Seller does not in its conduct of the Business make any material change to its policy and practice as to the payment of creditors and collection of trade receivables; page 26 Sale of Business Agmt (c) the Seller does not engage any new employee to fill a new role in relation to the Business with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminate the employment of any of the Employees or change in any material respect the terms of employment (including remuneration of any of the Employees); (d) the Seller does not sell or agree to sell any fixed asset relating to the Business with a value of more than $250,000 or buy or commit to buy any fixed asset for use in the Business with a value of more than $250,000; (e) neither the Seller nor its Related Corporations create any Encumbrance over any asset of the Business; (f) neither the Seller nor its Related Corporations incur any indebtedness or liability in the nature of borrowings in relation to the Business other than in the ordinary course of business; (g) the Seller does not enter into any contract or arrangement for the Business outside the ordinary course of trading or otherwise than on arm's length terms; (h) using reasonable endeavours, neither the Seller nor its Related Corporations will do anything which may be reasonably likely to harm the Goodwill, without in each case the prior consent of the Buyer, which must not be unreasonably withheld or delayed. 12.2 ACCESS Before Completion the Seller must, after reasonable notice from the Buyer, allow the Buyer and any person authorised by the Buyer, reasonable access during normal business hours to Employees (only with the consent of the Seller, such consent not to be unreasonably withheld) the Business Assets and the Properties as is necessary to facilitate the smooth transfer of the Business at Completion. 12.3 CERTAIN FREEHOLD PROPERTY (a) Prior to Completion, the Seller will lodge the declarations and application described in clause 4.2(g)(3)(A) at the Wellington District Land Registry and promptly respond to and comply with any requisitions the Wellington District Land Registry may raise prior to Completion. (b) Prior to Completion, the Seller will lodge the declarations and application described in clause 4.2(g)(3)(C) at the North Auckland District Land Registry and promptly respond to and comply with any requisitions the North Auckland District Land Registry may raise prior to Completion. (c) On or before 7 December 2001, the Seller will make application to the High Court of New Zealand for the restoration of Servitor Productions Limited and for the transfer of the Greenmount Drive Property to the Seller. The Seller will continue to keep the Buyer fully informed of the progress of any such application and the Seller will do all things within its reasonable power to prosecute such application both before and after Completion for so long as such application has not been finally page 27 Sale of Business Agmt determined. In the event that the application to the High Court is unsuccessful the Buyer reserves the right to require the Seller to make an application to the Crown for the transfer of the Greenmount Drive Property to the Seller. 13 AFTER COMPLETION 13.1 SUPPLY OF AFTER-SALES SERVICE After Completion the Buyer must: (a) remedy any defect in the goods or services supplied by the Seller in the Business before Completion; (b) supply after-sales service which the Seller undertook to perform in respect of goods or services supplied by the Seller in the Business before Completion; and (c) perform the Seller's obligations under any guarantee or warranty or otherwise in respect of goods or services supplied by the Seller in the Business before Completion. 13.2 RECONCILIATION FOR RETURNED GOODS If any goods sold in the Business by the Seller before the Completion Date are returned to the Buyer or repudiated for any reason by a customer of the Business after the Completion Date, then the Buyer is entitled to those goods and must meet any claim for credit or otherwise made by the customer in relation to them. 13.3 SUPPLIER'S WARRANTIES To assist the Buyer in meeting its obligations pursuant to clauses 13.1 and 13.2, the Seller undertakes to use all reasonable endeavours to make available to the Buyer the benefit of any supplier or manufacturer warranty available to the Seller in connection with the transactions contemplated by clauses 13.1 and 13.2. 13.4 ACCESS BY SELLER After Completion the Buyer must, after reasonable notice from the Seller, allow the Seller and its representatives: (a) access during normal business hours to Transferring Employees; and (b) to inspect and take copies of the Business Records (to the extent that they relate to any period before Completion), to assist the Seller in relation to any Liability or other obligations or rights arising in relation to the conduct or ownership of the Business before Completion, provided that any access under this clause 13.4 is conducted in a manner so as to avoid unreasonable disruption to the conduct of the Business as operated by the Buyer and the Transferring Employees. page 28 Sale of Business Agmt 13.5 ACCESS TO EXCLUDED RECORDS BY BUYER After Completion the Seller must, after reasonable notice from the Buyer, allow the Buyer and its representatives access during normal business hours to inspect and take copies of the Excluded Records (to the extent they relate to any period before Completion) as necessary to assist the Buyer in operating the Business. 13.6 TAX RETURNS After Completion, the Buyer must at the reasonable cost and expense of the Seller prepare a draft income tax returns, fringe benefits tax returns and any other tax returns required by any Governmental Agency that imposes Tax in relation to the Business as carried on by the Seller in respect of the financial year ending on 30 June 2002 and ensure that its employees fully co-operate with the Seller in relation to completing and finalising such returns to a form fit for lodgement by the Seller. The Buyer must provide a first draft of such returns to the Seller on or before 30 October 2002. 13.7 LAND - SERVITOR PRODUCTIONS LIMITED Within 5 Business Days after Servitor Productions Limited is restored arising out of the application to the High Court or to the Crown referred to in clause 12.3(c), the Seller must deliver the following documents to the Buyer: (a) instruments of title for the Greenmount Drive Property (other than withdrawal of caveats lodged pursuant to clause 16.3(a)); and (b) confirmation that the transfer of the Greenmount Drive Property, delivered to the Buyer on Completion pursuant to clause 4.2(g), is now capable of registration. 14 COMPETITION 14.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for 5 years, 4 years, 3 years, 2 years or one year after the Completion Date in New Zealand: (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date employed in the Business to cease to be employed in the Business; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Business with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or page 29 Sale of Business Agmt (d) interfere with the relationship between the Buyer and its clients, customers, employees or suppliers. 14.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 14.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 14.3 EXCLUSION FROM RESTRAINT This clause 14 does not restrict the Seller or any of its Related Corporations from: (a) continuing to carry on any business (other than the Business as sold under this agreement) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. 14.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 14 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 14.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 14.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 14.1. (b) If any of the prohibitions or restrictions contained in this clause 14 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Seller, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. page 30 Sale of Business Agmt 15 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. 16 LIMITATION OF LIABILITY 16.1 CO-ORDINATION AGREEMENT The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 16.2 SPECIFIC EXCLUSIONS - FREEHOLD PROPERTIES (a) The Buyer acknowledges that apart from the Seller's Warranties and provided that nothing in this clause 16.2(a) shall operate in any way to limit the liability of the Guarantor under clause 6.8 of the Co-ordination Agreement, it has relied on its own investigations and assessment of and has relied on no representation or warranty but acknowledges the disclosure referred to in clause 16.2(b) and will bring no Claim against the Seller or its Related Corporations, officers, employees, agents or advisers in relation to any breach of Environmental Law or any Environmental Liability which may affect the Buyer or any other person in relation to ownership of those Freehold Properties; (b) The Buyer acknowledges that it has been given the opportunity to make physical inspections of the Freehold Properties and buildings, plant, equipment and other assets located at the Freehold Properties and accepts that apart from the Seller's Warranties it has relied on its own investigations and assessment of and it has relied on no representation or warranty and will bring no Claim against the Seller or its Related Corporations, officers, employees, agents or advisers in relation to the dimensions, description, condition, fitness for use, safety or legal compliance status of those Freehold Properties or any buildings, plant, equipment or other assets located at the Freehold Properties. (c) The Buyer purchases the Freehold Properties subject to: (1) the encumbrances, easements and covenants noted on the title to the Freehold Properties concerned; (2) the reservations, exceptions and conditions (if any) contained in the crown grant; (3) all easements or rights vested in any Governmental Agency and not registered on the title to the Freehold Properties except for matters not disclosed to the Buyer which constitute breaches of the Seller's Warranties; and page 31 Sale of Business Agmt (4) all town planning or other restrictions on the use and development of the Freehold Properties. 16.3 PROPERTY COVENANTS The Seller covenants to the Buyer at the date of this agreement and on Completion: (a) that it consents to the lodgement of caveats by the Buyer on Completion in respect of the Freehold Properties; (b) that it will not take any action or procure any person to do anything that may cause a lapsing notice to be lodged at a Land Titles Office; (c) that there are no unsatisfied or outstanding judgements or notices against the Freehold Properties; (d) to answer all requisitions that may be made by a Land Titles Office or by Land Information New Zealand in relation to registration of the Transfers. 17 GST 17.1 SUPPLY OF A GOING CONCERN (a) The parties agree that the transfer of the Business Assets from the Seller to the Buyer under this agreement is the supply of a taxable activity as a going concern within Section 11(1)(c) of the GST Act on which GST is chargeable at the rate of zero percent. (b) The Seller agrees, if requested by the Buyer, to assist the Buyer in defending the sale of the Business as a sale as a going concern for the purposes of the GST Act. 17.2 TAXABLE SUPPLY In the event that it is determined that the sale of the Business Assets is not a supply of a taxable activity as a going concern and GST is payable in respect to the transactions evidenced by this agreement then: (a) Buyer shall pay to the Seller the amount of the GST and any Default GST which is so payable in one sum within five (5) Business Days of written demand being made by Seller; (b) where such amount is not so paid to Seller, Buyer shall in addition pay to the Seller interest at the rate of twelve (12) percent per annum on the amount of GST unpaid from 5 days after demand until payment; (c) it shall not be a defence to a claim against Buyer for payment to the Seller of any Default GST that Seller has failed to mitigate Seller's damage by paying an amount of GST when it fell due under the GST Act; and (d) Seller will deliver a tax invoice for the purposes of the GST Act to the Buyer as soon as practicable subsequent to recognition that GST is payable. page 32 Sale of Business Agmt Default GST in this clause means any interest, penalty or other sum levied against Seller under the GST Act by reason of non-payment of the GST payable in respect of the supply made under this agreement, but does not include any such sum levied against Seller by reason of a default by Seller after payment of the amounts payable pursuant to this clause to Seller by Buyer. 18 GUARANTEE AND INDEMNITY - SELLER 18.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 18.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 18.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 18 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 18 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 18 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 18 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 18.4 CONTINUING GUARANTEE AND INDEMNITY This clause 18 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Principal under this agreement have been performed. 18.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: page 33 Sale of Business Agmt (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 18.6 RIGHTS The Guarantor waives any right it has of first requiring the Buyer to commence proceedings or enforce any other right against the Seller or any other person before claiming under this clause 18. 19 GUARANTEE AND INDEMNITY - BUYER 19.1 GUARANTEE The Buyer Guarantor unconditionally and irrevocably guarantees to the Seller the due and punctual performance of the Buyer's obligations under this agreement. 19.2 INDEMNITY The Buyer Guarantor indemnifies and holds the Seller harmless from and against all Loss incurred or suffered by the Seller and all actions, proceedings, claims or demands made against the Seller as a result of default by the Buyer in the performance of any such obligation. 19.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 19 applies: (1) to the present and future obligations of the Buyer under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Buyer Guarantor under this clause 19 extend to any change in the obligations of the Buyer as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 19 is not affected, nor are the obligations of the Buyer Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 19 applies: page 34 Sale of Business Agmt (1) regardless of whether the Buyer Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Seller and the Buyer are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 19.4 CONTINUING GUARANTEE AND INDEMNITY This clause 19 is a continuing obligation of the Buyer Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Buyer under this agreement have been performed. 19.5 WARRANTIES OF THE GUARANTOR The Buyer Guarantor represents and warrants to the Seller that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Buyer Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Buyer Guarantor is a party or which is binding on it. 19.6 RIGHTS The Buyer Guarantor waives any right it has of first requiring the Seller to commence proceedings or enforce any other right against the Buyer or any other person before claiming under this clause 19. page 35 Sale of Business Agmt SCHEDULE 1 - WARRANTIES CLAUSE 1.1 (DEFINITIONS) A. BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution nor received a notice under part XVI of the Companies Act 1993. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 36 Sale of Business Agmt 7 NO RECEIVER OR ADMINISTRATOR No receiver, receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 BUYER'S KNOWLEDGE Neither the Buyer nor any holding company (director indirect) of the Buyer is aware of any matter or thing that constitutes at Completion a breach of the Seller's Warranties. 9 GST REGISTERED The Buyer is registered for GST under the GST Act and evidence of such registration has been provided to the Seller. page 37 Sale of Business Agmt B. SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person (except for consents required under the Contracts, Assets Leases and Property Leases) and free of any pre-emptive rights or rights of first refusal. 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller or any of the Business Assets. 1.4 CORPORATE POWER The Seller has full corporate power to own, lease and operate the Business Assets and the Business. 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Seller has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the Business Assets or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Seller holds all necessary material Authorisations required to conduct the Business, use the Business Assets and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such page 38 Sale of Business Agmt breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 POSITION SINCE 30 JUNE 2001 3.1 POST ACCOUNTS DATE Since 30 June 2001: (a) the Seller in carrying on the Business has not acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (b) the Seller has not in its conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (c) the Seller has not engaged any new employee to fill a new role in relation to the Business with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of the Employees or changed, in any material respect, the terms of employment (including remuneration of any of the Employees); (d) the Seller has not sold or agreed to sell any fixed asset relating to the Business with a value of more than $250,000 or bought or committed to buy any fixed asset for use in the Business with a value of more than $250,000; (e) neither the Seller nor its Related Corporations has created any Encumbrance over any asset of the Business; (f) neither the Seller nor its Related Corporations has incurred any indebtedness or liability in the nature of borrowings in relation to the Business other than in the ordinary course of business; (g) the Seller has not entered into any contract or arrangement for the Business outside the ordinary course of trading or otherwise than on arm's length terms; (h) there has been no material adverse change in the Business Assets and liabilities of the Business; (i) there has been no change in the accounting policies, practices and principles used by the Seller in respect of the Business. 3.2 SUPPLIERS / CUSTOMERS Since 30 June 2001: (a) none of the following suppliers of the Business: Kuehne & Nahgel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to the Business other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Business after Completion; or (3) materially altered the terms on which it trades with the Business. page 39 Sale of Business Agmt (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: (1) reduced the level of its custom from the Business other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Business after Completion; or (3) materially altered the terms on which it trades with the Business. 4 TANGIBLE ASSETS 4.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Seller; (b) the absolute property of the Seller free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 4.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Seller in the Business but are not owned by the Seller are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 4.3 PLANT AND EQUIPMENT All Plant and Equipment listed in part 1 of schedule 8 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; (c) in reasonable condition having regard to its age and fair wear and tear. 5 ENCUMBRANCES 5.1 OWNERSHIP OF BUSINESS ASSETS As at Completion the Seller will be the legal and beneficial owner of the Business Assets free of Encumbrances. 5.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Business Assets other than any which will be discharged on or before Completion. page 40 Sale of Business Agmt 5.3 BUSINESS ASSETS USED IN BUSINESS The Business Assets comprise all the assets used by the Seller in the Business and are the only assets required for the operation of the Business in the manner in which it is currently operated. 6 INTELLECTUAL PROPERTY RIGHTS 6.1 SCOPE So far as the Seller is aware, it or its Related Corporations own or have an enforceable right to use all the Intellectual Property Rights needed to carry on the Business in the places and in the manner currently carried on and all the Intellectual Property Rights will be transferred or licensed to the Buyer at Completion. 6.2 OWNERSHIP AND USE (a) The Seller or its Related Corporations is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Seller or its Related Corporations have, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Seller in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 6.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Seller or its Related Corporations or a licensee from the Seller or its Related Corporations disclosed in part 3 of schedule 4 has any right to any intellectual property right listed in part 1 of schedule 4. 6.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Seller or any Related Corporation of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Seller or any Related Corporation has infringed or is infringing the intellectual property rights of any third party. 6.5 DISPUTES Neither the Seller nor its Related Corporations is currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 6.6 ASSIGNMENTS The execution of assignments of Intellectual Property Rights by the Seller or its Related Corporations and the performance by the Seller or any Related Corporations of its obligations under those assignments will not cause the Seller or its Related Corporations to be in breach of any contract with a third party. page 41 Sale of Business Agmt 6.7 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Seller in connection with the use of any Intellectual Property Rights. 7 ASSETS LEASES 7.1 NATURE The Assets Leases to which the Seller is a party were entered into within the ordinary course of business. 7.2 NO DEFAULT The Seller is not and, so far as the Seller is aware, no other party to any Assets Lease is in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Seller in carrying on the Business and the Seller has received no notice of any default of any Asset Lease. 7.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Business Assets. 7.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business. 8 CONTRACTS 8.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 5 and parts 2 and 3 of schedule 4 contain details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Seller's freedom to carry on the Business in the places and the manner in which it is currently carried on; page 42 Sale of Business Agmt (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by the Seller of more than $1 million; (f) are distribution or agency agreements; or (g) entitle the other party to terminate the Contract or impose less favourable terms by reason of a sale of some or all of the Business Assets. 8.2 NO DEFAULT The Seller is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on and there no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 8.3 FOREIGN CURRENCY Part 3 of Schedule 5 contains a listing, which is accurate in all material respects, of outstanding commitments of the Seller in the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 8.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9 PROPERTIES AND FREEHOLD PROPERTIES 9.1 INTERESTS The Seller has no interest in real property which it uses in the Business except for its interest in the Properties. 9.2 OCCUPATION AND USE The Seller has exclusive occupation and quiet enjoyment of the Properties. The Seller's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, developments, approvals, permits and requirements (including zoning requirements) of any Governmental Agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, are subject to any sub-lease, tenancy or right of occupation by any other party. 9.3 NO BREACH The Seller has not received a notice of default in respect of any Leased Property which remains outstanding and asserts material non-compliance with the lease of that property. page 43 Sale of Business Agmt 9.4 NO NOTICES The Seller has not received any notice from any third party in respect of any of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of any of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 9.5 PROPERTY DETAILS The particulars of the Properties set out in schedules 7 and 10 are true and correct in all material respects. 9.6 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are used or occupied by the Seller are contained in the Data Room and there are no other documents, correspondence or other material which has not been provided to the Buyer which would have a material adverse affect on the interests of the Seller in the Properties. 9.7 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the relevant Property; 9.8 FREEHOLD PROPERTY - SPECIFIC WARRANTIES (a) So far as the Seller is aware, it is not in breach of or in default under any covenant, easement or right affecting the Freehold Properties which breach or default would have a materially adverse effect on the use of the Freehold Properties in the Business as currently used. (b) Except for any matters indicated in documents of title provided to the Buyer, the Freehold Properties are not, so far as the Seller is aware: (1) affected by any rights of adverse possession, easements, rights vested in any Governmental Agency, restrictive covenants, rights of way, proposed roads or resumptions or proposed drains, sewers or stormwater channels; (2) affected by any leases, licences or Encumbrances; or (3) the subject of any claim notified to the Seller that any third party asserts an ownership interest in any of the Freehold Properties, which, in any of the above cases, would be likely to have a material and adverse effect on the current use of the Freehold Properties in the Business. page 44 Sale of Business Agmt 9.9 PROPERTY LEASE DISCLOSURE The Property Leases, particulars of which are set out in schedule 7: (a) so far as the Seller is aware, are, in all material respects, a complete recording of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 9.10 TERMINATION NOTICE The lessor under the Property Leases has not served any notice to terminate the relevant Property Lease. 9.11 ASSIGNMENT The Seller: (a) has not agreed to any assignment, subletting, parting with possession or surrender of any of the Property Leases or any part of them; and (b) has not given any materially false or misleading information to any authority having jurisdiction over the property the subject of the Property Leases. 10 OFFERS OUTSTANDING Any offer, tender or quotation made by the Seller in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 11 MEMBERSHIPS The Seller is not a member of any joint venture, partnership or unincorporated association (other than a recognised trade association) in respect of the Business. 12 EMPLOYEES 12.1 LIST OF EMPLOYEES COMPLETE Schedule 3 contains a complete list of the Employees as at the date indicated in the schedule and the Buyer has been given all material details of their Employment Benefits. 12.2 INCENTIVE SCHEMES The Seller has not agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. page 45 Sale of Business Agmt 12.3 SERVICE AGREEMENTS The Seller is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 12.4 MANAGEMENT AGREEMENTS The Seller is not a party to any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 12.5 DISPUTES The Seller is not involved in any material dispute with any of the Employees as at the date of this agreement and is not aware of any circumstances likely to give rise to any dispute. 12.6 COMPLIANCE The Seller is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 12.7 DISCLOSURE The Seller is not a party to any agreement, arrangements or understanding with a union or industrial organisation in respect of the Employees which is not set out in the Data Room. 13 SUPERANNUATION 13.1 LIST OF SUPERANNUATION SCHEMES COMPLETE The Seller's Fund is the only superannuation scheme or pension arrangement to which the Seller pays contributions in respect of the Employees. 13.2 GOVERNING RULES OF SELLER'S FUND The copy of the Governing Rules of the Seller's Fund in respect of the Employees are the Trust Deed dated 30 November 1994 as amended by deeds dated 13 August 1996 and 16 November 1999 and in respect of each Employee the Deed of Adherence and any amendment thereto applicable to that Employee. 13.3 FUNDING The Seller has paid all contributions due by the Seller to the Seller's Fund in respect of the Employees. 13.4 ACCRUED BENEFIT VALUES There are sufficient assets at Completion in the Seller's Fund to support, in respect of the Transferring Employees who are Existing Members, the transfer or payment of the total Termination Benefits of those members. page 46 Sale of Business Agmt 13.5 COMPLIANCE OF FUND So far as the Seller is aware from its establishment the Seller's Fund has complied with all applicable laws. 13.6 COMPLIANCE OF SELLER The Seller has complied with all laws applicable to it in respect of the Seller's Fund. 13.7 CONDITIONS The Seller has complied and will comply to Completion with all of its obligations under the Governing Rules of the Seller's Fund including but not limited to the making of all contributions to the Seller's Fund under the Governing Rules of the Seller's Fund. 13.8 RECORDS So far as the Seller is aware full and proper records and accounts of the Seller's Fund have been kept, are up to date and disclose a full and fair view of the Seller's Fund. 13.9 CLAIMS So far as the Seller is aware neither the Seller nor the trustees of the Seller's Fund have received notice of any claim or dispute in relation to the Seller's Fund. 14 LITIGATION 14.1 NOT A PARTY TO ANY LITIGATION The Seller is not: (a) a party to any material prosecution, litigation or arbitration proceedings affecting all or part of the Business or any of the Business Assets; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation in respect of all or part of the Business or any of the Business Assets, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 14.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 14.1. 15 [NOT USED] page 47 Sale of Business Agmt 16 SOLVENCY 16.1 NO LIQUIDATION OR WINDING-UP The Seller has not gone into liquidation nor passed a winding-up resolution nor received a notice part XVI of the Companies Act 1993. 16.2 NO PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 16.3 NO WRIT OF EXECUTION No writ of execution has issued against the Seller or any of the Business Assets. 16.4 NO RECEIVER OR ADMINISTRATOR No receiver, receiver and manager, liquidator, provisional liquidator or administrator of any part of the undertaking or assets of the Seller has been appointed. 16.5 PAYMENT OF DEBTS The Seller: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of the Companies Act 1993; and (c) is not subject to voluntary administration under the Companies Act 1993. 17 INSURANCE 17.1 POLICIES Those Business Assets which are of an insurable nature are insured against fire and other usual risks on a basis which the Seller considers commercially prudent. 17.2 NOTICE The Seller has not received any notice from an insurer adversely affecting its insurances for the Business or the Business Assets. 18 INFORMATION 18.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Business: page 48 Sale of Business Agmt (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller that data was, so far as the Seller is aware and for the purpose for which it was prepared, true and correct in all material respects. 18.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 3 to 13 to this agreement is complete and accurate in all material respects and not misleading. 19 BUSINESS RECORDS The Business Records are in the Seller's possession or control and will be maintained by the Seller in accordance with its usual practice pending Completion. 20 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 21 DUTIES All Duties or Taxes or documents which are necessary to establish the title of the Seller to the Business Assets have been duly assessed and paid. 22 TRADE PRACTICES So far as the Seller is aware, the Seller has not in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the Commerce Act 1986, the Fair Trading Act 1986, Consumer Guarantees Act 1993 or like legislation in New Zealand. 23 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS Neither the Seller nor any Related Corporation is a party to any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest which contain any obligations or liabilities (actual or contingent) which may affect the Business and/or any Buyer Group Company. page 49 Sale of Business Agmt SCHEDULE 2 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller Warranties, they constitute disclosure against any other Seller Warranty to which they may apply. Seller Warranty Number Matter Disclosed page 50 Sale of Business Agmt SCHEDULE 3 - EMPLOYEES As annexed page 51 Sale of Business Agmt SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS Part 1 - Owned by the Seller Part 2 - Licensed to the Seller Part 3 - Owned by the Seller and licensed to third parties page 52 Sale of Business Agmt PART 1 As annexed page 53 Sale of Business Agmt PART 2 As annexed page 54 Sale of Business Agmt PART 3 As annexed page 55 Sale of Business Agmt SCHEDULE 5 - CONTRACTS AND ASSETS LEASES PART 1 CONTRACTS As annexed PART 2 ASSETS LEASES As annexed PART 3 FOREIGN EXCHANGE CONTRACTS As annexed page 56 Sale of Business Agmt PART 1 As annexed page 57 Sale of Business Agmt PART 2 As annexed page 58 Sale of Business Agmt PART 3 As annexed page 59 Sale of Business Agmt SCHEDULE 6 - STATUTORY LICENCES page 60 Sale of Business Agmt SCHEDULE 7 - LEASED PROPERTIES As annexed page 61 Sale of Business Agmt SCHEDULE 8 - PLANT AND EQUIPMENT PART 1 PLANT AND EQUIPMENT As annexed PART 2 NOVATED LEASES As annexed page 62 Sale of Business Agmt PART 1 As annexed page 63 Sale of Business Agmt PART 2 As annexed page 64 Sale of Business Agmt SCHEDULE 9 - LETTERS OF CREDIT As annexed page 65 Sale of Business Agmt SCHEDULE 10 - FREEHOLD PROPERTIES page 66 Sale of Business Agmt SCHEDULE 11 - ACCEPTED LIABILITIES page 67 Sale of Business Agmt SCHEDULE 12 - GUARANTEES page 68 Sale of Business Agmt SCHEDULE 13 - SELLER'S FUND A The PACIFIC DUNLOP (NZ) SUPERANNUATION SCHEME (called "the Scheme") was constituted by a Trust Deed ("the Original Trust Deed") dated the 1st day of November 1989 (the "Date of Establishment") to provide retirement and other benefits for Employees invited to become members of the Scheme. B Since the Date of Establishment the Original Trust Deed has been amended and the Scheme is presently governed by the consolidating deed dated 30 November 1994 and the amending Deeds dated 13 August 1996 and 16 November 1999 (together called "the Trust Deed") and in respect of a member to whom a Deed of Adherence applies by the Deed of Adherence applicable to the Member. C The Scheme is a registered superannuation scheme under the Superannuation Schemes Act 1989. D [ ] was admitted as an Employer in respect of Employees employed by it, by way of a Deed of Adherence executed on [ ]. E The Scheme as it relates to employees of [ ] is governed by the Trust Deed as modified in respect of such employees by the existing [ ] Deed of Adherence. page 69 Sale of Business Agmt EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - ------------------------- ------------------------- Witness Attorney Paul Devereux Carly Mansell - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of Pacific Dunlop Holdings (NZ) Limited by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed for and on behalf of PD Licensing Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Holdings (NZ) Ltd in the presence of: /s/ /s/ - ------------------------- ------------------------- Director Director - ------------------------- ------------------------- Name (please print) Name (please print) page 70 Sale of Business Agmt Signed for and on behalf of PB Holdings NV by its duly authorised Attorneys under Power in the presence of: /s/ /s/ - ------------------------- ------------------------- Witness Attorney - ------------------------- ------------------------- Name (please print) Name (please print) /s/ ------------------------- Attorney ------------------------- Name (please print) page 71 Sale of Business Agmt ANNEXURE A - ASSIGNMENT OF TRADEMARKS As annexed page 1 Sale of Business Agmt ANNEXURE B - ASSIGNMENT OF CONTRACTS AND ASSET LEASES As annexed page 2 Sale of Business Agmt ANNEXURE C - ASSIGNMENT OF PROPERTY LEASES As annexed page 1 Sale of Business Agmt ANNEXURE D - DEED OF ADHERENCE As annexed page 1 Sale of Business Agmt [ ] PACIFIC DUNLOP HOLDINGS (NZ) LIMITED Vaughan Martyn Renner, Maureen Dale Jacobson, Michael Neill Phelan, John Anthony Gilchrist and Jeffrey Ward Taylor PACIFIC DUNLOP (NZ) SUPERANNUATION SCHEME KPMG Legal Solicitors Wellington & Auckland page 2 Sale of Business Agmt Deed dated 2001 PARTIES 1 ("The Employer") 2 Pacific Dunlop Holdings (NZ) Limited ("the Principal Employer") 3 Vaughan Martyn Renner, Maureen Dale Jacobson, Michael Neill Phelan, John Anthony Gilchrist and Jeffrey Ward Taylor ("the Trustees") BACKGROUND A By a Trust Deed dated the 1st day of November 1989 (hereinafter called "the Trust Deed") there was established a superannuation scheme (known as the Pacific Dunlop (NZ) Superannuation Scheme) (hereinafter called "the Scheme"). The Scheme is currently governed by a consolidating trust deed dated 30 November 1994 as subsequently amended and in respect of employees of Employers by various Deeds of Adherence. B The Trustees are the current Trustees of the Scheme. C The Scheme was established for the benefit of Employees of the Principal Employer and of such Employers as may be Deed of Adherence participate in the Scheme. D The Employer wishes to participate in the Scheme. E The Principal Employer and the Trustees accept the Employer as a participant of the Scheme. COVENANTS 1. The Employer agrees to be bound by the Trust Deed as amended by this Deed of Adherence in all matters relating to the Scheme and this Deed of Adherence shall form part of and be read in conjunction with the Trust Deed. 2. This Deed of Adherence shall apply to Employees of the Employer. 3. The provisions of the Trust Deed shall apply to all Employees of the Employer who become Members of the Scheme save that where a Member becomes bound by this Deed of Adherence by virtue of the application of clause 10(a) of the Trust Deed and immediately prior to becoming bound by this Deed of Adherence was covered by another Deed of Adherence ("the previous deed of adherence") then in respect of such member page 1 Sale of Business Agmt the benefits and conditions applying in respect of such Member shall continue to be determined in accordance with the Trust Deed and the previous deed of adherence as it relates to such Member so that such Member remains entitled to the same benefits as he or she would have been entitled to had he or she not become bound by this Deed of Adherence and in respect of any Employees of the Employer, the Trust Deed is amended accordingly. EXECUTION Signed for and on behalf of by two of its directors in the presence of: - ------------------------------------- ---------------------------------------- Director Director - ------------------------------------- ---------------------------------------- Witness Signature Witness Signature - ------------------------------------- ---------------------------------------- Witness Name Witness Name - ------------------------------------- ---------------------------------------- Witness Occupation Witness Occupation - ------------------------------------- ---------------------------------------- Witness Address Witness Address page 2 Sale of Business Agmt Signed for and on behalf of Pacific Dunlop Holdings (NZ) Limited by two of its directors in the presence of: - ------------------------------------- ---------------------------------------- Director Director - ------------------------------------- ---------------------------------------- Witness Signature Witness Signature - ------------------------------------- ---------------------------------------- Witness Name Witness Name - ------------------------------------- ---------------------------------------- Witness Occupation Witness Occupation - ------------------------------------- ---------------------------------------- Witness Address Witness Address Signed for and on behalf of the Trustees of the PACIFIC DUNLOP (NZ) SUPERANNUATION SCHEME by MICHAEL NEILL PHELAN and JEFFREY WARD TAYLOR acting under the authority of the Trustees pursuant to clause 2(c) and clause 13(k) of the Trust Deed - ------------------------------------- ---------------------------------------- Michael Neill Phelan Jeffrey Ward Taylor - ------------------------------------- ---------------------------------------- Witness Signature Witness Signature - ------------------------------------- ---------------------------------------- Witness Name Witness Name page 3 Sale of Business Agmt - ------------------------------------- ---------------------------------------- Witness Occupation Witness Occupation - ------------------------------------- ---------------------------------------- Witness Address Witness Address page 4 EX-4.4 7 dex44.txt LETTER AGREEMENT DATED 11/30/2001 EXHIBIT 4.4 30 November 2001 PB Holdings NV 1170 Brussels Terhulpsesteenweg 166 Dear Sirs Proposed sale of shares in Restonic (M) Sdn Bhd This letter sets out the arrangements between PB Holdings NV (Buyer) and PD Holdings (Malaysia) Sdn Bhd (Seller) (a wholly owned subsidiary of Pacific Dunlop Limited (PDL)), in relation to the proposed sale by the Seller of its shares in Restonic (M) Sdn Bhd (Company). The Seller owns 5,249,999 "ordinary B" shares and 7,000,000 preference shares in the Company (Sale Shares), constituting approximately 50% of the shares on issue in the Company. 1. CONDITIONS The parties acknowledge that the proposed sale of the Sale Shares is subject to one of the following occurring in relation to the pre-emptive rights held by FACB Industries Incorporated Berhad (FACB) under the Joint Venture and Shareholder's Agreement Malaysia dated 6 April 1993 between FACB, PDL and the Seller (JVA) in relation to the Sale Shares: (a) FACB waiving its pre-emptive rights; or (b) the period of the "Second Option" (as referred to in the JVA) expiring without FACB having exercised its rights to purchase the Sale Shares, (Pre-emptive Rights Condition). The sale of Sale Shares is also subject to obtaining Foreign Investment Committee approval, Ministry of Trade Industry approval and Bank Negara approval (collectively Other Conditions). 2. OFFER 2.1 PRE-EMPTIVE RIGHTS CONDITION SATISFIED BY 4 DECEMBER 2001 If the Pre-emptive Rights Condition is satisfied by 5pm on Tuesday, 4 December 2001, the Buyer agrees that it will do the following: (a) continue to be bound by the terms of the Co-ordination Agreement signed by it on [30 November 2001] (Co-ordination Agreement) as it relates to the Company and Sale Shares; and (b) execute an agreement for the sale of the Sale Shares, being an agreement in the form of the draft agreement attached as Annexure A (Malaysia Share Sale Agreement). In such circumstances, the Buyer, the Seller and PDL agree that they will execute the Malaysia Share Sale Agreement by 5pm on Wednesday, 5 December 2001. 2.2 IRREVOCABLE OFFER If the Pre-emptive Rights Condition has not been satisfied by 5pm on 4 December 2001, the Buyer agrees that by 5pm on Wednesday, 5 December 2001, it will make an irrevocable offer to the Seller to purchase all of the Sale Shares on the terms and conditions described below (Irrevocable Offer). (a) terms substantially similar to those contained in the draft agreement attached as Annexure A will apply, except that: (1) the purchase price will be a fixed price of AUD$5,189,500, payable in full on completion; (2) the completion date will be the business day immediately following the date on which all of the Pre-emptive Rights Condition and the Other Conditions have been satisfied; and (b) terms substantially similar to the following which are currently contained in the Co-ordination Agreement will apply: (1) clause 4.3 (Secondary Consents) (but only to the extent it relates to the Sale Shares) and that part of schedule 2, part B which relates to the Company and the Sale Shares; (2) clause 4.5 (Tax Indemnity Deed); (3) clause 6 (Warranties and Indemnities); (4) clause 7 (Limitations on Liability); (5) clause 8 (Foreign Exchange Contracts); (6) clause 11 (Announcements and Confidentiality); (7) clause 12 (Duties, Costs and Expenses); and (8) clause 13 (General), amended to the extent necessary to apply to the Company, the Sale Shares, the Seller and the Buyer. The above arrangement would be documented by amending the draft agreement attached as Annexure A as follows: (1) in the manner described in paragraph (a) above; (2) by removing all references to the Co-ordination Agreement and replacing any provisions incorporated by reference from the Co-ordination Agreement, with the relevant provisions from the Co-ordination Agreement, amended to the extent necessary to apply to the Company, the Sale Shares, the Seller and the Buyer and to ensure that the agreement is 'stand alone'; and (3) by adding the provisions described in paragraph (b) above. The intended result of the amendments would be a stand-alone document for the sale of the Sale Shares (Stand-alone Malaysia Share Sale Agreement). The Buyer agrees that if it is required to make the Irrevocable Offer in accordance with this paragraph 2.2, it will do so by signing an offer letter in the form of the draft letter attached as Annexure B, which incorporates the terms contained in the Stand-alone Malaysia Share Sale Agreement. For the avoidance of doubt, that part of the Escrow Amount relating to the Sale Shares held in the Escrow Account pursuant to the Co-ordination Agreement, will continue to be held on the terms of the Co-ordination Agreement until such time as the Irrevocable Offer is accepted, from which time the terms of the Irrevocable Offer will apply to that amount. The terms "Escrow Amount" and "Escrow Amount" used in this paragraph have the meanings set out in the Co-ordination Agreement. This paragraph 2.2 is subject to paragraph 3 below. 3. TERMS OF SATISFACTION OF PRE-EMPTIVE RIGHTS CONDITION In circumstances where: (a) paragraph 2.2 rather than paragraph 2.1 applies to the Buyer (ie - the Irrevocable Offer has been made); and (b) the Pre-emptive Rights Condition has been satisfied by 15 January 2002, on terms which allow for the Buyer, the Seller and PDL to proceed on sale terms other than those set out in the Irrevocable Offer, then PDL, the Buyer and the Seller agree that the terms on which the Sale Shares are to be sold will revert to the documentary arrangements described in paragraph 2.1. In such circumstances, as soon as practicable after the Pre-emptive Rights Condition has been satisfied, the Buyer, the Seller and PDL will execute the Malaysia Share Sale Agreement and the Seller will formally notify the Buyer that it does not accept the Irrevocable Offer. In circumstances where: (c) paragraph 2.2 rather than paragraph 2.1 applies to the Buyer (ie - the Irrevocable Offer has been made); and (d) the Pre-emptive Rights Condition has been satisfied after 15 January 2002 or on terms which do not allow for the Buyer, the Seller and PDL to proceed on sale terms other than those set out in the Irrevocable Offer, then PDL, the Buyer and the Seller acknowledge and agree that: (1) after the earlier of the date on which the Pre-emptive Rights Condition has been satisfied and 15 January 2002, the Buyer may serve a notice on the Seller requiring it to accept the Irrevocable Offer and in such circumstances, the draft agreement attached to the Irrevocable Offer will be executed by PDL, the Buyer and the Seller immediately thereafter; (2) as soon as practicable after the earlier of the date on which the Pre-emptive Rights Condition has been satisfied and 15 January 2002, PDL and the Buyer will procure that the Co-ordination Agreement is amended in accordance with the following principles: (A) references to the Sale Shares, the Malaysia Share Sale Agreement and the completion of the Malaysia Share Sale Agreement will be removed; (B) the Malaysia Share Sale Agreement will cease to be a Linked Transaction Agreement; (C) the fixed price payable under the Stand-alone Malaysia Share Sale Agreement (Fixed Price) will be included as an Agreed Adjustment, such that it will be deducted from the Completion Accounts to derive the Completion Statement, subject to paragraph 4 (for the avoidance of doubt, this new Agreed Adjustment is additional to the Agreed Adjustment relating to the Company specified in paragraph 7 of schedule 4 of the Co-ordination Agreement); and (D) if the Buyer does not eventually buy the Sale Shares because the Pre-emptive Rights Condition or the Other Conditions are not satisfied, and the Fixed Price is less than 50% of the net assets of the Company in the Completion Accounts, PDL will refund the Buyer the difference. 4 ACKNOWLEDGMENT OF TERMS OF THIS LETTER By signing the attached copy of this letter, the Buyer agrees to be bound by the terms of this letter and to procure its related corporations to do everything necessary to give effect to its terms. PDL agrees to procure its related corporations do everything necessary to give effect to the terms set out in this letter. Yours sincerely Paul Devereux Pacific Dunlop Limited Signed for and on behalf of PB Holdings NV by its attornies: /s/ /s/ - ------------------------------- ------------------------------- Witness Attorney ------------------------------- Name (please print) /s/ /s/ - ------------------------------- ------------------------------- Witness Attorney ------------------------------- Name (please print) ANNEXURE A DRAFT SHARE SALE AGREEMENT ANNEXURE B FORM OF IRREVOCABLE OFFER LETTER See attached [PB HOLDINGS NV LETTERHEAD] [date] Mr Paul Devereux Pacific Dunlop Limited Level 3 678 Victoria Street Richmond Vic 3121 Dear Sir Irrevocable offer for purchase of shares in Restonic (M) Sdn Bhd PB Holdings NV irrevocably offers to PD Holdings (Malaysia) Sdn Bhd (Seller) (a wholly owned subsidiary of Pacific Dunlop Limited) to purchase the Sale Shares from the Seller for AUD$5,189,500 and on the terms and conditions contained in the draft agreement annexed as Annexure A. This offer will lapse and will have no further force and effect after 1 December 2002. For the purposes of this offer: Company means Restonic (M) Sdn Bhd; Sale Shares means all of the shares owned by the Seller in the Company, being 5,249,999 "ordinary B" shares and 7,000,000 preference shares. Signed for and on behalf of PB Holdings NV by its attornies: - --------------------------- ------------------------------- Witness Attorney ------------------------------- Name (please print) - ---------------------------- ------------------------------- Witness Attorney ------------------------------- Name (please print) ANNEXURE A DRAFT SHARE SALE AGREEMENT - IRREVOCABLE OFFER ANNEXURE A SHARE SALE AGREEMENT RESTONIC (M) SDN BHD Pacific Dunlop Limited PD Holdings (Malaysia) Sdn Bhd and PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference NJW:BAE Malaysia Share Sale Agreement TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 4 1.3 Business Day 5 1.4 Conflict 5 2 Sale and purchase 5 2.1 Sale of shares 5 2.2 Associated rights 6 3 Purchase Price 6 3.1 Amount 6 3.2 Payment at Completion 6 3.3 Final payment 6 4 Completion 6 4.1 Date for Completion 6 4.2 Delivery of documents 6 4.3 Board meetings - to be considered 7 4.4 Buyer's obligations at completion 7 4.5 Interdependence 7 4.6 Conduct until Shares are registered 8 [Not used] 8 6 After Completion 8 6.1 Obligations relating to Taxes or Duties 8 6.2 Consultation 8 [Not used] 8 7 Warranties 8 8 Limitation of liability 9 9 Competition 9 9.1 Undertaking - jurisdictions to be confirmed 9 9.2 Acquisition of interests in competing Businesses 9 9.3 Exclusion from restraint 10 9.4 Related Corporations 10 9.5 Severability 10 10 Release of guarantees 10 11 Guarantee and indemnity 10 11.1 Guarantee 10 11.2 Indemnity 11 11.3 Extent of guarantee and indemnity 11 11.4 Continuing guarantee and indemnity 11 11.5 Warranties of the Guarantor 11 11.6 Rights 12 12 [Not used] 12 page 1 Malaysia Share Sale Agreement 13 [Not used] 12 Schedule 1 - Share Details 13 Schedule 2 - Warranties 15 Schedule 3 - Disclosure Schedule 32 Schedule 4 - Intellectual Property Rights 33 Schedule 5 - Superannuation funds 34 Schedule 6 - Contracts 35 Schedule 7 - Guarantees 36 Schedule 8 - Employees 38 Schedule 9 - Plant and Equipment 39 Schedule 10 - Assets Leases 40 Schedule 11 - Properties 41 Schedule 12 - [Not used] 42 page 2 Malaysia Share Sale Agreement THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Accounts has the meaning given to that term in the Co-ordination Agreement; Accounts Date means 30 June 2001; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which a member of the Company Group is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Properties; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company Group as more particularly described in part 8 of schedule 1; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means the Company Group's customer lists and supplier lists, records of Intellectual Property Rights, Assets Leases, Contracts and Properties; Buyer means the company specified in part 2 of schedule 1; page 1 Malaysia Share Sale Agreement Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Company Group means the Company and the Company Subsidiaries; Company Subsidiaries means the companies specified in part 5 of schedule 1; Company Subsidiary Shares means the shares in the capital of the Company Subsidiaries described in the columns headed "Shares legally owned by the Company" in part 7 of schedule 1; Completion means completion of the sale and purchase of the Shares under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which a member of the Company Group is a party and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the same meaning given to that term in the Co-ordination Agreement; Dollars, A$ and $ means Australian dollars unless otherwise specified in this agreement; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Company Group listed in schedule 8 who is still employed in the Business as at the Completion Date; Environmental Law has the same meaning given to that term in the Co-ordination Agreement; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; page 2 Malaysia Share Sale Agreement Encumbrance means any mortgage, charge, lien, pledge, other security interest or encumbrance (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the Seller which relate exclusively to the Business which remain current as at Completion, details of which will be provided to the Buyer at the date of this agreement and at Completion; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company Group in the internet domain names, trademarks, patents, copyrights and designs including, but not limited to, those listed in schedule 4; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group means Pacific Dunlop Limited ABN 89 004 085 330 and its Related Corporations, immediately before Completion; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by a member of the Company Group as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; Power means any right, power, authority, discretion or remedy conferred on the clause by this agreement or any applicable law; Properties means the properties leased under the Property Leases; Property Leases means the leases of real property listed in schedule 11; Purchase Price means the price payable for the Shares under clause 3.1; page 3 Malaysia Share Sale Agreement Records means all original and copy records, documents, books, files, reports, accounts, plans, correspondence, letters and papers of every description and other material regardless of their form or medium and whether coming into existence before, on or after the date of this agreement, belonging or relating to or used by a member of the Company Group including (without limitation) certificates of registration, minute books, statutory books and registers, books of account, Tax returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Related Corporation means a "related body corporate" as defined in the Corporations Act; Secondary Consents has the meaning given to that term in the Co-ordination Agreement; Shares means the shares in the capital of the Company described in the column headed "Shares legally owned by the Seller" in part 6 of schedule 1; Seller means the company specified in part 1 of schedule 1; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Seller's Warranties means the warranties set out in part 2 of schedule 2; Stock means the stock of the Business owned by a member of the Company Group as at Completion and includes, but is not limited to, raw materials, components, work in progress, finished goods, packaging materials, promotional materials, spare parts and other consumables; Superannuation Funds means the superannuation funds to which a member of the Company Group makes contributions in respect of the Employees as listed in schedule 5; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Law means any law relating to Tax; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; page 4 Malaysia Share Sale Agreement (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; (k) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (l) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 1.4 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions and any relevant Secondary Consents having been fulfilled or waived in accordance with the Co-ordination Agreement, the Seller page 5 Malaysia Share Sale Agreement will sell and the Buyer will buy the Shares for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price is the value ascribed to the Company Group in the Apportionment Statement in accordance with the terms of the Co-ordination Agreement. 3.2 PAYMENT AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.3 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the provisions of the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares; (b) duly completed transfers of the Shares to the Buyer in registrable form, executed by the Seller; (c) duly executed releases of all guarantees that have been obtained in accordance with clause 10; page 6 Malaysia Share Sale Agreement (d) the written resignations of all directors and secretaries of each member of the Company Group which were directors or secretaries appointed by the PDL Group (including a written acknowledgment that he or she has no Claim against the Company for loss of office, breach of contract, redundancy, compensation, payment or repayment of loans or otherwise, except for payments properly payable as an employee for accrued salary, holiday pay and long service leave up to the Completion Date) except David Pond and David Jackson, to be effective on the appointment of the directors to be appointed at the Board meetings to be convened under clause 4.3; (e) evidence that any Secondary Consent relevant to the sale of the Shares has been obtained, to the extent in the possession of the Seller; (f) any power of attorney or other authority under which the transfers of the Shares are executed; and (g) evidence that all rights of pre-emption which any person has in respect of any of the Shares have been satisfied or waived. 4.3 BOARD MEETINGS - TO BE CONSIDERED At Completion, the Seller must request that a meeting of the directors of the Company is convened and conducts the following business: (a) approval of the registration of the Buyer as the holder of the Shares in the books of the Company; and (b) appointment of the nominees of the Buyer as directors of the members of the Company Group. 4.4 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must: (a) pay the Seller an estimate of the Purchase Price in accordance with clause 3.2; (b) execute the transfers of Shares delivered by the Seller pursuant to clause 4.2(b); (c) deliver to the Seller a copy of each of the consents which have been lodged with the Malaysian Registry of Companies from the persons nominated by the Buyer as the directors and secretary of each member of the Company Group; and (d) deliver to the Seller any evidence required by it that any Secondary Consent relevant to the sale of the Shares has been obtained. 4.5 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. page 7 Malaysia Share Sale Agreement (b) All actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.6 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the Company as the Buyer directs. 5 [NOT USED] 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that each member of the Company Group provides the Seller with access to such employees and records of the member of the Company Group as the Seller reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of a member of the Company Group relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. 6.3 [NOT USED] 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. page 8 Malaysia Share Sale Agreement (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 9 COMPETITION 9.1 UNDERTAKING - JURISDICTIONS TO BE CONFIRMED In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in Malaysia or Singapore. (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a director, employee or agent of a member of the Company Group to leave the employment or agency of the Company Group; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of a member of the Company Group with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between a member of the Company Group and its clients, customers, employees or suppliers. 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. page 9 Malaysia Share Sale Agreement 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Related Corporations from: (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. 9.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 9 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company Group, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavours to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company Group after Completion. 11 GUARANTEE AND INDEMNITY 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. page 10 Malaysia Share Sale Agreement 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 11 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. page 11 Malaysia Share Sale Agreement 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. 12 [NOT USED] 13 [NOT USED] page 12 Malaysia Share Sale Agreement SCHEDULE 1 - SHARE DETAILS PART 1 - SELLER PD Holdings (Malaysia) Sdn Bhd PART 2 - BUYER PB Holdings NV of 1170 Brussels, Terhulpsesteenweg 166 PART 3 - GUARANTOR Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 4 - COMPANY Restonic (M) Sdn Bhd PART 5 - COMPANY SUBSIDIARIES Dreamland Corporation (M) Sdn Bhd Dream Crafts Sdn Bhd Dream Products Sdn Bhd Sleepmaker Sdn Bhd Dreamland Spring Manufacturing Sdn Bhd Eurocoir Products Sdn Bhd Dreamland (Singapore) Pte Ltd PART 6 - SHARES
PLACE OF NOMINAL SHARE SHARES OWNED BY COMPANY INCORPORATION CAPITAL ISSUED CAPITAL THE SELLER ---------------------------------------------------------------------------------------------------------------- Restonic (M) Malaysia RM35,000,000 divided 12,250,000 . PD Holdings Sdn Bhd into: Ordinary "A" (Malaysia) Sdn Bhd - Ordinary 17,500,000 Ordinary 5,249,999 B - 5,249,999 "A" @ RM1.00 Ordinary "B" 7,500,000 Ordinary 7,000,000 . PD Holdings "B" @ RM1.00 Preference (Malaysia) Sdn Bhd - 10,000,000 Preference Preference @ RM1.00 shares - 7,000,000
PART 7 - COMPANY SUBSIDIARY SHARES
COMPANY PLACE OF SHARES OWNED BY SUBSIDIARY INCORPORATION AUTHORISED CAPITAL ISSUED CAPITAL THE COMPANY ---------------------------------------------------------------------------------------------------------------- Dreamland Malaysia RM5,000,000 4,000,000 4,000,000 held by Corporation (M) (5,000,000 @ RM1 per Restonic (M) Sdn Sdn Bhd share) Bhd Dream Crafts Malaysia RM100,000 (100,000 @ 100,000 100,000 held by Sdn Bhd RM1 per share) Restonic (M) Sdn Bhd Dream Products Malaysia RM1,000,000 243,100 243,100 held by Sdn (1,000,000 @ RM1 per Restonic (M) Sdn ----------------------------------------------------------------------------------------------------------------
page 13 Malaysia Share Sale Agreement
COMPANY PLACE OF SHARES OWNED BY SUBSIDIARY INCORPORATION AUTHORISED CAPITAL ISSUED CAPITAL THE COMPANY ---------------------------------------------------------------------------------------------------------------- Bhd share) Bhd Sleepmaker Sdn Malaysia RM100,000 (100,000 @ 20 20 held by Bhd RM1 per share) Restonic (M) Sdn Bhd Dreamland Malaysia RM5,000,000 3,300,000 3,300,000 held by Spring (5,000,000 @ RM$1 per Restonic (M) Sdn Manufacturing share) Bhd Sdn Bhd Eurocoir Malaysia RM5,000,000 2,000,000 2,000,000 held by Products Sdn Bhd (5,000,000 @ RM1 per Restonic (M) Sdn share) Bhd Dreamland Singapore S$1,000,000 200,000 200,000 held by (Singapore) Pte (1,000,000 @ S$1 per Restonic (M) Sdn Ltd share) Bhd
PART 8 - BUSINESS The business carried on by the Company Group comprising of the manufacturing and selling of foam, furniture and bedding. page 14 Malaysia Share Sale Agreement SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution nor received or published a notice under sections 601AA or 601AB of the Corporations Act or any similar insolvency law in Belgium. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 15 Malaysia Share Sale Agreement 7 NO RECEIVER OR ADMINISTRATOR No receiver or receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 KNOWLEDGE OF BUYER Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 16 Malaysia Share Sale Agreement PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and its validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer (except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER (a) Each member of the Company Group: (1) is validly existing and in good standing; (2) is accurately described in part 4 of schedule 1; and (3) has full corporate power to own its properties, assets and businesses and to carry on the Business. (b) The Company Group has good and marketable title to all the assets included in the Accounts. 1.5 CONSTITUTION The copy of the constitution of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company Group does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 17 Malaysia Share Sale Agreement 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW So far as the Seller is aware, the Company Group has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Company Group holds all necessary material Authorisations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE (a) The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. (b) The Company is the legal and beneficial owner of the Company Subsidiary Shares free of all Encumbrances and other third party interests or rights. 3.2 ISSUED CAPITAL (a) The shares described in the column headed "Issued Capital" in part 6 of schedule 1 are all the issued shares in the capital of the Company and were validly issued by the Company. (b) The shares described in the column headed "Issued Capital" in part 7 of schedule 1 are all the issued shares in the capital of each of the Company Subsidiaries and those shares were validly issued by the applicable Company Subsidiary. 3.3 FULLY PAID The Shares and Company Subsidiary Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES No member of the Company Group is under an obligation to issue or allot, and has not granted any person the right to call for the issue or allotment of or exercise any option over, any shares or other securities of the Company Group which is still current and subsisting. page 18 Malaysia Share Sale Agreement 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date no member of the Company Group has: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in a member of the Company Group; (k) altered its constitution; (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) changed its accounting policies, practices or principles, except in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 SUPPLIERS/CUSTOMERS Since the Accounts Date: (a) so far as the Seller is aware, none of the following suppliers of the Business: Kuehne and Nahgel, Bugley Hobba and Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to a member of the Company Group other than in the ordinary course of business; page 19 Malaysia Share Sale Agreement (2) indicated an intention to cease or reduce the volume of its trading with a member of the Company Group after Completion; or (3) materially altered the terms on which it trades with a member of the Company Group; or (b) none of the following customers of the Business: Kmart, BigW, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones: (1) reduced the level of its custom from a member of the Company Group other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with a member of the Company Group after Completion; or (3) materially altered the terms on which it trades with a member of the Company Group. 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the relevant member of the Company Group; (b) the absolute property of the relevant member of the Company Group free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the members of the Company Group but are not owned by those companies are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT So far as the Seller is aware, all Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. page 20 Malaysia Share Sale Agreement 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company Group other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, each member of the Company Group owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. 7.2 OWNERSHIP AND USE (a) The Company Group is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Company Group has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Company Group in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a Company Subsidiary, or a licensee of the Company or a Company Subsidiary disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the members of the Company Group of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that a member of the Company Group has infringed or is infringing the intellectual property rights of a third party. 7.5 DISPUTES No member of the Company Group is currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by members of the Company Group in connection with the use of any Intellectual Property Rights. page 21 Malaysia Share Sale Agreement 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT No member of the Company Group and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to a member of the Company Group in carrying on the Business and no member of the Company Group has received notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the members of the Company Group. 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict a Company Group member's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by a member of the Company Group of more than $1,000,000; (f) are distribution or agency agreements; and (g) entitle the other party to terminate the contract or impose terms less favourable to a member of the Company Group due to the sale of the Shares. page 22 Malaysia Share Sale Agreement 9.2 NO DEFAULT No member of the Company Group and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to a member of the Company Group in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the members of the Company Group relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies or written summaries of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which a Company Group member is a party, or that a member of the Company Group has an interest in enforcing have been paid or are provided for in the Accounts. 10 PROPERTIES 10.1 COMPANY GROUP'S INTEREST No member of the Company Group has an interest in real property which it uses in the Business except for its interest in the Properties. 10.2 OCCUPATION AND USE The Company Group has exclusive occupation and quiet enjoyment of the Properties and the Company Group's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, are subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH No member of the Company Group has received a notice of default in respect of any Leased Property which remains outstanding and asserts non-compliance with the lease of that property. page 23 Malaysia Share Sale Agreement 10.4 NO NOTICES No member of the Company has received any notice from any third party in respect of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 [NOT USED] 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the members of the Company Group have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the members of the Company Group in the Properties. 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. 10.9 [NOT USED] 10.10 PROPOSED DISPOSAL No member of the Company Group is a party to any outstanding agreement to acquire or dispose of land or Properties or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. page 24 Malaysia Share Sale Agreement 10.13 ASSIGNMENT Neither the Company, the Company Subsidiaries nor the Seller: (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by a member of the Company Group in respect of the Business which is outstanding and capable of acceptance by a third party, was, so far as the Seller is aware, made in the ordinary course of the Business. 12 SHAREHOLDINGS No member of the Company Group is the holder or beneficial owner of any shares or other securities in any company (except for shares held by the Company in the Company Subsidiaries, as described in part 7 of schedule 1). 13 MEMBERSHIPS No member of the Company Group is a member of any joint venture, partnership or unincorporated association (other than a recognised trade association). 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the employees employed by the Company Group in the Business as at the date indicated in the schedule and the Buyer has been given all material details of the employment benefits of these employees. 14.2 INCENTIVE SCHEMES No member of the Company Group has agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS No member of the Company is a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. page 25 Malaysia Share Sale Agreement 14.4 MANAGEMENT AGREEMENTS No member of the Company Group has any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 14.5 DISPUTES No member of the Company Group is involved in any material dispute with any employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE No member of the Company Group is in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE Each member of the Company Group has complied with and continues to comply with all obligations arising under law, equity, statute (including occupational health and safety, annual leave, long service leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company Group. 15 SUPERANNUATION 15.1 LIST OF SUPERANNUATION FUNDS The Superannuation Funds are the only superannuation schemes or pension arrangements to which members of the Company Group make contributions in respect of the Employees. 15.2 FUNDING Each member of the Company Group has paid all contributions due by it to the Superannuation Funds in respect of the Employees. 16 LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION No member of the Company Group is: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, page 26 Malaysia Share Sale Agreement and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP No member of the Company Group has gone into liquidation under the Companies Act 1965 nor been removed from the Registrar of Companies under the Companies Act 1965. 18.2 NO PETITION No petition or other process for winding-up has been presented or threatened against any member of the Company Group and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against any member of the Company Group. 18.4 NO RECEIVER OR ADMINISTRATOR No receiver or manager of any part of the Company's or a Company Subsidiary's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS No member of the Company Group: (a) has stopped paying its debts as and when they fall due; (b) is insolvent within the meaning of the Companies Act 1965, Malaysia; and (c) is subject to voluntary administration under the Companies Act 1965, Malaysia. 18.6 LIQUIDATION The Seller has not gone into liquidation under the Companies Act 1965 nor been removed from the Registrar of Companies under the Companies Act 1965. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. page 27 Malaysia Share Sale Agreement 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. 19 INSURANCE 19.1 POLICIES Those assets of the Company Group which are of an insurable nature are insured by the relevant Company Group members against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller or members of the Company Group, that data was, so far as the Seller is aware, true and correct in all material respects. 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule and the schedules numbered 4 to 11 to this agreement are complete and accurate in all material respects and not misleading. 21 BUSINESS RECORDS The Business Records are in the possession or control of the relevant Company Group member and will be maintained by that Company Group member in accordance with its usual practice pending Completion. page 28 Malaysia Share Sale Agreement 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of any of the members of the Company Group which has become due for payment has been paid. 22.2 SINCE ACCOUNTS DATE So far as the Seller is aware, the conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. 22.3 PROVISION IN ACCOUNTS Adequate provision has been made in the Accounts for any Tax on a member of the Company Group which is payable or may become payable in respect of any transaction or income occurring or arising before the Accounts Date but which was unpaid as at the Accounts Date. 22.4 WITHHOLDING TAX So far as the Seller is aware, any obligation of a member of the Company Group under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS Each member of the Company Group has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. 22.6 RETURNS SUBMITTED So far as the Seller is aware, each member of the Company Group has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to that Company Group member. 22.7 RETURNS ACCURATE So far as the Seller is aware, any information, notice, computation, return, declaration or election which has been submitted by a member of the Company Group to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by a member of the Company Group in respect of any Tax or page 29 Malaysia Share Sale Agreement Duty which has been supplied to the Buyer by the Seller are true copies of the originals. 22.9 NO DISPUTES No member of the Company Group is currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of any member of the Company Group ceasing or being entitled to substantially reduce its level of business with that Company Group member. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which a member of the Company Group is a party; or (b) relieve any person from any obligation to a member of the Company Group; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on a member of the Company Group, its assets or undertaking; or (d) result in any indebtedness of a member of the Company Group becoming due and payable. page 30 Malaysia Share Sale Agreement 25 TRADE PRACTICES So far as the Seller is aware, no member of the Company Group nor any of the officers or employees of the members of the Company Group has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the Contracts Act 1950 in Malaysia. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS No member of the Company Group will have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. page 31 Malaysia Share Sale Agreement SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. Seller Warranty Number Matter Disclosed page 32 Malaysia Share Sale Agreement SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS PART 1 - INTELLECTUAL PROPERTY RIGHTS OWNED BY THE COMPANY GROUP TRADE MARKS:
REGISTERED OWNER COUNTRY TRADEMARK REGISTRATION NUMBER ------------------------------------------------------------------------------------------------------- Dreamland Corporation (M) Sdn Bhd Malaysia DREAMLAND 85/04381 Dreamland Spring Manufacturing Sdn Bhd Malaysia ARISTOCRAT M/94443 Dreamland Corporation (M) Sdn Bhd Sarawak DREAMLAND 24325 Dreamland Corporation (M) Sdn Bhd Sarawak DREAMLAND 24326 Dreamland Corporation (M) Sdn Bhd Sarawak DREAMLAND 24328 Dreamland Corporation (M) Sdn Bhd Sarawak DREAMLAND 24329 Dreamland Corporation (M) Sdn Bhd Singapore ARISTOCRAT B376/84 Dreamland Corporation (M) Sdn Bhd Brunei DREAMLAND 11,450 Dreamland Corporation (M) Sdn Bhd Brunei DREAMLAND 11,449 Dreamland Corporation (M) Sdn Bhd Brunei DREAMLAND 11,448 Dreamland Corporation (M) Sdn Bhd Brunei DREAMLAND 11,447 Dreamland Corporation (M) Sdn Bhd Brunei DREAMLAND 11,446
PART 2 - LICENSES TO MEMBERS OF THE COMPANY GROUP TO USE INTELLECTUAL PROPERTY RIGHTS
PROPERTY TERRITORY/ LICENCE TITLE PARTIES (EG TRADE MARK ETC) EXCLUSIVITY EXPIRY DATE -------------------------------------------------------------------------------------------------------------- Technology Licensor - Pacific SLEEPMAKER trade mark Malaysia 3 years from the sell Agreement Dunlop Limited (registration no down by Pacific Dunlop 84/04298) Limited of its Licensee - Restonic interests in Restonic (M) Bhd Sdn SLEEPMAKER trade mark Singapore (M) Sdn Bhd as under (registration no the Technology B3826/86) Agreement or 3 years from the date upon SLEEPMAKER trade mark Brunai which the Joint Venture (registration no 22421) and Shareholders Agreement terminates. Licence Licensor - Leggett Licensor's technical Federation of Business unit has Agreement & Platt and non-technical Malaysia, advised that agreement written information to Singapore & still current. Licensee - enable the Licensee to Brunei. Dreamland Spring produce and market the Manufacturing Sdn Products. Exclusive for Bhd initial term. Includes licence of (to be confirmed) "Mira Coil" trade mark or application in Malaysia and Singapore.
PART 3 - LICENSES GIVEN BY MEMBERS OF THE COMPANY GROUP TO USE ITS INTELLECTUAL PROPERTY RIGHTS page 33 Malaysia Share Sale Agreement SCHEDULE 5 - SUPERANNUATION FUNDS Employee Provident Fund page 34 Malaysia Share Sale Agreement SCHEDULE 6 - CONTRACTS PART 1 - CONTRACTS COMPANY AND COMPANY SUBSIDIARY CONTRACTS
BUSINESS UNIT PARTIES CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- BEDDING MALAYSIA IKEA Handel Sdn Bhd Purchase Agreement Dreamland Corporation (Malaysia) Sdn Bhd & Amway Distribution Agreement (Malaysia) Sdn Bhd Dreamland Corporation (Malaysia) Sdn Bhd & Supply Contract Magnificent Diagraph Sdn Bhd Dreamland & Duport Marketing Pty Ltd Unwritten Distributor Agreement Sleepmaker & MLC Marketing Pty Ltd Unwritten Distributor Agreement Kanzen Berhad, PD Holdings (Malaysia), Sdn Bhd, Escrow Agreement Restonic (M) Sdn Bhd & Malayan Banking Berhad Pacific Dunlop & Restonic (M) Sdn Bhd Technology Agreement Kanzen Berhad & Restonic (M) Sdn Bhd Share Sale Agreement Kanzen Berhad, PD Holdings (Malaysia) Sdn Bhd & Joint Venture and Shareholders' Agreement Pacific Dunlop Eurocoir Products & Yorya Industrial Co Ltd Sale of Goods Deed Hotline Furniture Trading (M) Sdn Bhd and Dreamland Settlement Agreement Corporation (Malaysia) Sdn Bhd. Kanzen Berhad, PD Holdings (Malaysia) Sdn Bhd and Adherence Agreement Lembaga Tabung Angakatan Tentera
PART 2 - FOREIGN EXCHANGE CONTRACTS page 35 Malaysia Share Sale Agreement SCHEDULE 7 - GUARANTEES
Amount (Ringgit Company Guarantor Beneficiary Malaysia - RM) Due Date - ---------------------------------------------------------------------------------------------------------------------- Restonic (M) Sdn Bhd Citibank Berhad Tenaga Nasional 20,000 03/07/01 - 02/07/02 Dreamland Corporation Citibank Berhad Sunway City Berhad 2,727 19/10/01 - 18/10/02 (M) Sdn Bhd Dreamland Spring Citibank Berhad Tenaga Nasional 12,000 13/11/00 - 12/11/01 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 10,500 30/05/01 - 29/05/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 6,000 26/06/01 - 25/06/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 6,000 10/07/01 - 09/07/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 31,000 19/07/01 - 18/07/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 6,700 01/08/01 - 30/07/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 6,300 15/08/01 - 14/08/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 2,700 22/08/01 - 21/08/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 2,500 24/08/01 - 23/08/02 Manufacturing Sdn Bhd Dreamland Spring Citibank Berhad Ketua Pengarah Kastam 300,000 17/07/01 - 16/07/02 Manufacturing Sdn Bhd Dream Products Sdn Bhd Citibank Berhad Tenaga Nasional 6,000 01/07/01 - 30/06/02 Dream Products Sdn Bhd Citibank Berhad Ketua Pengarah Kastam 2,500 25/07/01 - 24/07/02 Dream Products Sdn Bhd Citibank Berhad Ketua Pengarah Kastam 100,000 10/09/01 - 09/09/01 Eurocoir Products Sdn Citibank Berhad Tenaga Nasional 46,000 13/05/01 - 12/05/02 Bhd
page 36 Malaysia Share Sale Agreement
Amount (Ringgit Company Guarantor Beneficiary Malaysia - RM) Due Date - ---------------------------------------------------------------------------------------------------------------------- Eurocoir Products Sdn Citibank Berhad Ketua Pengarah Kastam 20,000 14/06/01 - 13/06/01 Bhd
page 37 Malaysia Share Sale Agreement SCHEDULE 8 - EMPLOYEES page 38 Malaysia Share Sale Agreement SCHEDULE 9 - PLANT AND EQUIPMENT
DESCRIPTION OF BUSINESS UNIT ASSET LOCATION WDV $,000 --------------------------------------------------------------------------------------------- Dream Products Sdn Leasehold buildings Tanjung Agas Industrial 796 Bhd Estate, Malaysia Dreamland Spring Leasehold buildings Tanjung Agas Industrial 825 Manufacturing Sdn Bhd Estate, Malaysia Dreamland Spring Gribetz G14300E & Tanjung Agas Industrial 310 Manufacturing Sdn Bhd quilting machine Estate, Malaysia Dreamland Spring Miracoil machine Tanjung Agas Industrial 610 Manufacturing Sdn Bhd Estate, Malaysia Eurocoir Products Leasehold Tanjung Agas Industrial 309 Sdn Bhd buildings (Palm Estate, Malaysia line) Eurocoir Products Leasehold Tanjung Agas Industrial 1,011 Sdn Bhd buildings (Poly Estate, Malaysia line) Eurocoir Products Polyester machine Tanjung Agas Industrial 445 Sdn Bhd Estate, Malaysia Eurocoir Products Non-woven low Tanjung Agas Industrial 1,452 Sdn Bhd melting fibre plant Estate, Malaysia
page 39 Malaysia Share Sale Agreement SCHEDULE 10 - ASSETS LEASES page 40 Malaysia Share Sale Agreement SCHEDULE 11 - PROPERTIES Unwritten Tenancy Agreement between Dreamland Corporation (M) Sdn Bhd and Khoo Guat Beng in relation to 45 and 47 Jalan Kapal, off Jalan Chain Ferry, 12100 Butterworth, Penang, Malaysia. Tenancy Agreement dated 18 August 2000 between Haut Heng (Lim Low & Sons) Sdn Bhd and Dreamland Corporation (M) Sdn Bhd in relation to Lot 56, Komplecks Selayang, Batu 8 1/2, Jalan Ipoh, 68100 Batu Caves, Selangor Darul Ehsan. Tenancy Agreement dated 1 September 2000 between Subang Furnishing Centre and Dreamcrafts (M) Sdn Bhd, in relation to Lot F35, Subang Parade Shopping Complex. Tenancy Agreement dated 9 March 2000 between Limstead Holdings Sdn Bdh and Dream Crafts Sdn Bhd in relation to Ground and First Floor at No 15, Jalan ss 2/67, 47300 Petaling Jaya, Selangor. Tenancy Agreement dated 1 January 2001 between Rangkaian Hotel Seri Malaysia Sdn Bhd and Dream Crafts Sdn Bhd in relation to No 6, Jalan 27/70A, Desa Sri Hartamas 50480, Kuala Lumpur. Leasehold factory at Tanjung Agas Industrial Estate Muar, comprising four separate lots: . HS (D) 5333, Daerah Muar, Negeri Johore, No P.T. K35, Mukim Kesang in the name of Eurocoir Products Sdn Bhd . HS (D) 11185, Daerah Muar, Negeri Johore, No. P.T. K33, Mukim Kesang in the name of Flexible Foam Sdn Bhd (now called Dream Products Sdn Bhd) . HS (D) 4934, Daerah Muar, Negeri Johore, No P.T. K25, Mukim Kesang in the name of Dreamland Spring Manufacturing Sdn Bhd . HS (D) 5334, Daerah Muar, Negeri Johore, No P.T. K35, Mukim Kesang in the name of Eurocoir Products Sdn Bhd. page 41 Malaysia Share Sale Agreement SCHEDULE 12 - [NOT USED] page 42 Malaysia Share Sale Agreement EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: - -------------------------------- ------------------------------- Witness Attorney - -------------------------------- ------------------------------- Name (please print) Name (please print) Signed for and on behalf of PD Holdings (Malaysia) Sdn Bhd by its duly authorised Attorney under Power in the presence of: - -------------------------------- ------------------------------- Witness Attorney - -------------------------------- ------------------------------- Name (please print) Name (please print) Signed for and on behalf of: PB Holdings NV by its duly authorised Attorney under Power in the presence of: - -------------------------------- ------------------------------- Witness Attorney - -------------------------------- ------------------------------- Name (please print) Name (please print) - -------------------------------- ------------------------------- Witness Attorney - -------------------------------- ------------------------------- Name (please print) Name (please print) page 43 EX-4.5 8 dex45.txt SHARE SALE AGREEMENT EXHIBIT 4.5 SHARE SALE AGREEMENT PD SHARED SERVICES LSM PTY LTD PD Shared Services Holdings Pty Ltd Pacific Dunlop Limited and Pacific Brands Holdings Pty Ltd [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference SJL:AS LSM share sale agreement TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 4 1.3 Business Day 5 2 Sale and purchase 5 2.1 Sale of shares 5 2.2 Associated rights 5 3 Purchase Price 6 3.1 Amount 6 3.2 Payment at Completion 6 4 Completion 6 4.1 Date for Completion 6 4.2 Delivery of documents 6 4.3 Board meetings 7 4.4 Buyer's obligations at completion 7 4.5 Interdependence 7 4.6 Conduct until Shares are registered 7 5 Before Completion 8 5.1 Carrying on Business 8 5.2 Treatment of Cash in Hand 8 5.3 Inter Company Debt 9 5.4 31 August Accounts 9 6 After Completion 9 6.1 Obligations relating to Taxes or Duties 9 6.2 Consultation 9 7 Warranties 9 8 Limitation of liability 10 9 Competition 10 9.1 Undertaking 10 9.2 Acquisition of interests in competing Businesses 10 9.3 Exclusion from restraint 11 9.4 Related Corporations 11 9.5 Severability 11 page 1 LSM share sale agreement 10 Release of guarantees 11 11 Guarantee and indemnity 12 11.1 Guarantee 12 11.2 Indemnity 12 11.3 Extent of guarantee and indemnity 12 11.4 Continuing guarantee and indemnity 12 11.5 Warranties of the Guarantor 12 11.6 Rights 13 12 Employees 13 12.1 Seconded Employees 13 12.2 No limitation 14 13 Head office services 14 14 Restrictions on the Company and Business 14 Schedule 1 - Share Details 15 Schedule 2 - Warranties 16 Part 1 - Buyer's warranties 16 1 Buyer Authorised 16 2 Power to buy 16 3 No legal impediment 16 4 No liquidation or winding-up 16 5 No petition 16 6 No writ of execution 16 7 No receiver or administrator 16 8 Knowledge of Buyer 17 Part 2 - Seller's warranties 18 1 Authorities 18 1.1 Seller authorised 18 1.2 Power to sell 18 1.3 No legal impediment 18 1.4 Corporate power 18 page 2 LSM share sale agreement 1.5 Constitution 18 1.6 Corporate name 18 2 Compliance with law 19 2.1 Compliance with law 19 2.2 Authorisations 19 3 Shares and capital 19 3.1 Title 19 3.2 Issued capital 19 3.3 Fully paid 19 3.4 Issue of other securities 19 4 Position since the Accounts Date 19 4.1 Post Accounts Date 19 4.2 [Not used] 20 5 Tangible Assets 20 5.1 Title to assets 20 5.2 Assets not owned 21 5.3 Plant and Equipment 21 6 Encumbrances 21 6.1 Ownership of Shares 21 6.2 Discharges by Completion 21 7 Intellectual Property Rights 21 7.1 Scope 21 7.2 Ownership and use 21 7.3 No third party rights 22 7.4 No infringement 22 7.5 Disputes 22 7.6 Royalties/fees 22 8 Assets Leases 22 8.1 Nature 22 8.2 No default 22 8.3 Validity 22 8.4 Assets Leases used in the Business 22 9 Contracts 23 9.1 Nature of Contracts 23 9.2 No default 23 9.3 Foreign currency 23 9.4 Copies of Contracts 23 9.5 Taxes 23 page 3 LSM share sale agreement 10 Properties 24 10.1 Company's Interest 24 10.2 Occupation and Use 24 10.3 No breach 24 10.4 No notices 24 10.5 [Not used] 24 10.6 Property details 24 10.7 Property disclosure 24 10.8 Disputes 25 10.9 [Not used] 25 10.10 Proposed disposal 25 10.11 Property Lease disclosure 25 10.12 Termination notice 25 10.13 Assignment 25 11 Offers outstanding 25 12 Shareholdings 25 13 Memberships 26 14 Employees 26 14.1 List of Employees complete 26 14.2 Incentive schemes 26 14.3 Service agreements 26 14.4 Management agreements 26 14.5 Disputes 26 14.6 Compliance 26 14.7 Compliance 26 14.8 Disclosure 27 15 Superannuation 27 15.1 List of Superannuation Funds 27 15.2 Funding 27 16 Litigation 27 16.1 Not a party to any litigation 27 16.2 No circumstances 27 17 [Not used] 27 18 Solvency 28 18.1 No liquidation or winding-up 28 18.2 No petition 28 18.3 No writ of execution 28 18.4 No receiver or administrator 28 18.5 Payment of debts 28 page 4 LSM share sale agreement 18.6 Liquidation 28 18.7 Petition 28 18.8 Writ of execution 28 18.9 Receiver manager 28 19 Insurance 29 19.1 Policies 29 20 Information 29 20.1 Written information 29 20.2 Accuracy 29 21 Business Records 29 22 Taxes and duties 29 22.1 Tax paid 29 22.2 Since Accounts Date 29 22.3 [Not used] 30 22.4 Withholding tax 30 22.5 Records 30 22.6 Returns submitted 30 22.7 Returns accurate 30 22.8 Copies accurate 30 22.9 No disputes 30 23 Seller's knowledge 30 24 Effect of Sale of Shares 31 24.1 Customers/supplier relationships 31 24.2 Effect of sale 31 25 Trade Practices 31 26 Liability under asset and other sale agreements 31 27 Financial position 31 28 Business 32 Schedule 3 - Disclosure Schedule 33 Schedule 4 - Intellectual Property Rights 34 Schedule 5 - Superannuation funds 35 Schedule 6 - Contracts 36 Schedule 7 - Guarantees 37 Schedule 8 - Employees 38 page 5 LSM share sale agreement Schedule 9 - Plant and Equipment 43 Schedule 10 - Assets Leases 44 Schedule 11 - Properties 45 Schedule 12 - Inter Company Debts 46 page 6 THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: 31 August Accounts has the meaning given in clause 5.4; Accenture Group means Accenture Australia Pty Ltd ACN 096 776 895 (Accenture) and its Related Corporations and Accenture's ultimate parent company Accenture Ltd (a company registered in Bermuda under Number EC 30090) and that company's subsidiaries as at 20 September 2001; Accounts Date means 30 June 2001; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Company is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Properties; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company as more particularly described in part 6 of schedule 1; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means, to the extent relating to the Business, the Company's customer lists and supplier lists, records of Intellectual Property Rights, Assets Leases, Contracts and Properties; Buyer means the company specified in part 2 of schedule 1; page 1 LSM share sale agreement Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Cash in Hand means the amount of cash at bank on deposit or at hand in the Company; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Completion means completion of the sale and purchase of the Shares under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which the Company is a party and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Dollars, A$ and $ means Australian dollars; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Company listed in schedule 8 who is still employed by the Company as at the Completion Date; Encumbrance means any mortgage, charge, lien, pledge, other security interest or encumbrance (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Environmental Law has the meaning given to that term in the Co-ordination Agreement; Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the Seller which relate exclusively to the Business which remain current as at Completion, including but not limited to those contracts listed in part 2 of schedule 6; page 2 LSM share sale agreement Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company in the internet domain names, trademarks, patents, copyrights and designs listed in schedule 4; Inter Company Debt means any amount owing (including trade accounts payable and receivable): (a) by the Company to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to the Company; immediately before Completion; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Pacific Brands Employees means the Employees who are employed in the conduct of the Pacific Brands Business, as listed in part 1 of schedule 8; Partnership means the partnership between PD Shared Services Pty Ltd ACN 092 830 227 and PD Shared Services Holdings Pty Ltd ACN 092 811 080, known as the "Novare partnership"; PDL Group means Pacific Dunlop Limited ABN 89 004 085 330 and its Related Corporations, immediately before Completion; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by the Company as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; page 3 LSM share sale agreement Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; Property Leases means the leases of real property listed in schedule 11; Properties means the properties leased under the Property Leases; Purchase Price means the price payable for the Shares under clause 3.1; Related Corporation means a "related body corporate" as defined in the Corporations Act; Seconded Employees means those Employees who are not employed in the conduct of the Pacific Brands Business, as listed in part 2 of schedule 8; Shares means all the issued shares in the capital of the Company, as specified in part 5 of schedule 1; Seller means the company specified in part 1 of schedule 1; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Seller's Warranties means the warranties set out in part 2 of schedule 2; Superannuation Funds means the superannuation funds to which the Company makes contributions in respect of the Employees as listed in schedule 5; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Indemnity Deed has the meaning given to that term in the Co-ordination Agreement; Tax Law means any law relating to Tax; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; page 4 LSM share sale agreement (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) 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 following Business Day; (k) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; (l) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (m) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions having been fulfilled or waived in accordance with the Coordination Agreement, the Seller will sell and the Buyer will buy the Shares for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. page 5 LSM share sale agreement 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price payable for the Shares is $1.00, plus any amount payable under clause 5.2(b). 3.2 PAYMENT AT COMPLETION The Buyer must pay the Purchase Price to the Seller at Completion. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares; (b) duly completed transfers of the Shares to the Buyer in registrable form, executed by the Seller; (c) duly executed releases of all guarantees that have been obtained in accordance with clause 10; (d) the original certificate of incorporation or registration of the Company; (e) all original documents of title in relation to the Intellectual Property Rights; (f) the written resignations of all directors and the secretary of the Company (including a written acknowledgment that he or she has no Claim against the Company for loss of office, breach of contract, redundancy, compensation, payment or repayment of loans or otherwise, except for payments properly payable as an employee for accrued salary, holiday pay and long service leave up to the Completion Date), to be effective on the appointment of the directors to be appointed at the Board meetings to be convened under clause 4.3; (g) any power of attorney or other authority under which the transfers of the Shares are executed; (h) duly executed instruments irrevocably waiving in favour of the Buyer all rights of pre-emption which any person has in respect of any of the Shares; and (i) all Records, which must be complete and up to date, (by constructive delivery at the Company's premises). page 6 LSM share sale agreement 4.3 BOARD MEETINGS At Completion, the Seller must ensure that a meeting of the directors of the Company is convened and conducts the following business: (a) approval of the registration of the Buyer as the holder of the Shares in the books of the Company; (b) appointment of the nominees of the Buyer as directors of the Company; (c) alteration of the registered office of the Company to a registered office nominated by the Buyer; and (d) revocation of all existing mandates for the operation of bank accounts of the Company and approval of new mandates in favour of the officers of the Company nominated by the Buyer. 4.4 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must: (a) execute the transfers of Shares delivered by the Seller pursuant to clause 4.2(b); and (b) deliver to the Seller written consents to act from the persons nominated by the Buyer as the directors and secretary of the Company. 4.5 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) Subject to clause 4 of the Co-ordination Agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.6 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the Company as the Buyer directs. page 7 LSM share sale agreement 5 BEFORE COMPLETION 5.1 CARRYING ON BUSINESS The Seller will procure that the Company uses all reasonable endeavours to ensure that between the date of this agreement and Completion, subject to clauses 5.2 and 5.3, the Business is conducted in the ordinary course of business and that the Company does not: (a) enter into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (c) make any material change to its policy and practice as to payment of creditors and collection of trade receivables; (d) engage any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminates the employment of any of its employees or changes in any material respect the terms of employment (including remuneration); (e) sell or agree to sell any fixed asset with a value of more than $250,000 or buy or commit to buy any fixed asset with a value of more than $250,000; (f) create any Encumbrance over any of its assets; (g) incur any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (h) distribute or return any capital to its members; (i) pay any dividend to its members or pays any management fee or similar amount; (j) issue any shares, options or securities which are convertible into shares in the Company; and (k) alter its constitution, unless the Buyer first consents in writing, which must not be unreasonably withheld or delayed. 5.2 TREATMENT OF CASH IN HAND (a) At any time before Completion, the Seller may arrange for any Cash in Hand held by the Company to be removed in any manner selected by the Seller. (b) An amount equal to any Cash in Hand held by the Company as at the Effective Time, will be added to the Purchase Price, except to the extent that all or part of the Cash in Hand is an amount required to ensure that the Seller complies with the warranty contained in paragraph 27 of the Seller's Warranties. page 8 LSM share sale agreement 5.3 INTER COMPANY DEBT The Buyer acknowledges that prior to Completion, the Seller will procure that any Inter Company Debt owing to or by the Company is satisfied or otherwise extinguished, including but not limited to those Inter Company Debts listed in schedule 12. The Seller will provide evidence to the Buyer of any such satisfaction of debt on or prior to Completion. 5.4 31 AUGUST ACCOUNTS As soon as possible after they are made available to the Seller, the Seller will deliver to the Buyer a copy of the statutory accounts of the Company, such statutory accounts comprising the profit and loss account for the Company for the year ended 31 August 2001 and the balance sheet of the Company as at the same date, each audited by the auditors of the Guarantor (31 August Accounts). 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that the Company provides the Seller with access to such employees and records of the Company as the Seller reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of the Company relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. (c) Subject to clauses 7(d) and 7(e), the Seller agrees and undertakes to indemnify on demand and hold harmless the Buyer from and against any and all direct Losses (including in respect of any Employee) incurred by the Buyer or its Related Corporations or the Company or for which any of them may become liable solely as a result of any act or omission by (or on behalf of) or claim against the Company before Completion or the conduct of the Business at any time prior to Completion. page 9 LSM share sale agreement (d) The Seller will only be liable to the Buyer under clause 7(c) to the extent that the Losses claimed cause or increase the extent of a breach of the warranty given in paragraph 27 of the Seller's Warranties, had those Losses been taken into account in the preparation of accounts for the Company at Completion as contemplated by paragraph 27 of the Seller's Warranties. (e) The Seller is not liable to the Buyer under clause 7(c) if the Buyer is entitled to make a claim under the Tax Indemnity Deed in respect of the Losses sought to be recovered, in which case the Buyer may only claim in respect of those Losses under the Tax Indemnity Deed. 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 9 COMPETITION 9.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in Australia: (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a director, employee or agent of the Company to leave the employment or agency of the Company; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Company with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the Company and its clients, customers, employees or suppliers. 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: page 10 LSM share sale agreement (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 25% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Related Corporations from: (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 10% of the issued share capital of a company listed on a recognised Stock Exchange. 9.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 9 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or unenforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavours to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for page 11 LSM share sale agreement in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company after Completion. (c) [Not used] 11 GUARANTEE AND INDEMNITY 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 11 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: page 12 LSM share sale agreement (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. 12 EMPLOYEES 12.1 SECONDED EMPLOYEES (a) The Buyer will procure the secondment of the Seconded Employees to the Partnership (Secondments) for the period commencing on Completion and ending up to 3 months after Completion (Secondment Period). (b) At any time on or before the end of the Secondment Period the PDL Group or any third party customer of the Partnership may offer employment to a Seconded Employee. If a Seconded Employee accepts employment with the PDL Group or such third party, then the Buyer will procure the release of that Seconded Employee from employment with the Company. (c) Unless the Buyer elects to retain the employment of a Seconded Employee by the Company after the end of the Secondment Period, then the Buyer must, unless the parties otherwise agree, procure the termination of the employment of that Seconded Employee with effect on and from the end of the Secondment Period. The Buyer shall procure that the Company terminates the employment of the Seconded Employees upon the terms and conditions advised by the Seller and shall make such payments to the Seconded Employees on termination as the Seller directs. (d) The Seller is responsible for, and indemnifies and holds the Buyer harmless from and against, all costs and expenses (net of tax) associated with the employment of the Seconded Employees accruing after Completion, including without limitation: (1) all costs of the Company in remunerating the Seconded Employees; page 13 LSM share sale agreement (2) all other employee entitlements accruing to the Seconded Employees during the Secondment Period, including but not limited to superannuation contributions and all long service, sick leave and annual leave entitlements; (3) all costs of the Company as a result of terminating the employment of Seconded Employees in accordance with clause 12.1(c), except to the extent that such costs relate to the period before Completion. (e) For the avoidance of doubt, if a Seconded Employee is retained in employment by the Company after the Secondment Period, the Seller has no further responsibility for the costs associated with the employment of, or termination of, that Employee. 12.2 NO LIMITATION The limitations on claims applying to the Buyer under clause 7 of the Co-ordination Agreement do not apply to any Claim made by the Buyer under the indemnities given by the Seller under this clause 13 or clause 7(c). 13 HEAD OFFICE SERVICES (a) The Buyer acknowledges that, at Completion, certain Pacific Brands Employees are engaged in providing services to the PDL Group (Head Office Services). (b) The Buyer must ensure that for 3 months following Completion, the Head Office Services are provided to the Guarantor at the pricing, to the standard of service and with the level of resources as existed immediately prior to Completion. 14 RESTRICTIONS ON THE COMPANY AND BUSINESS The Buyer will not and will procure that the Company does not, after Completion: (a) use: (1) the services of the Employees; or (2) any tangible or intangible assets owned by the Company or previously used by the Partnership for the Pacific Brands Business, for the purposes of providing outsourced services in competition with any member of the Accenture Group; (b) sell the Company or the Business to any third party competitor of any member of the Accenture Group. page 14 LSM share sale agreement SCHEDULE 1 - SHARE DETAILS PART 1 - SELLER PD Shared Services Holdings Pty Ltd ABN 75 092 811 080 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 2 - BUYER Pacific Brands Holdings Pty Ltd ACN 098 704 646, c/- Minter Ellison, 88 Phillip Street, Sydney New South Wales 2000 PART 3 - GUARANTOR Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 4 - COMPANY PD Shared Services LSM Pty Ltd ABN 77 093 040 745 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 5 - SHARES 100 ordinary shares PART 6 - BUSINESS The provision of personnel to the Partnership to perform various functions for PDL Group and customers of the PDL Group. page 15 LSM share sale agreement SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (1) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (2) the constitution or other constituent documents of the Buyer; and (3) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution nor received or published a notice under sections 601AA or 601AB of the Corporations Act. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. 7 NO RECEIVER OR ADMINISTRATOR No receiver or receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. page 16 LSM share sale agreement 8 KNOWLEDGE OF BUYER Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 17 PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and it is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer(except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER The Company: (a) is validly existing and in good standing; (b) is accurately described in part 4 of schedule 1; (c) has full corporate power to own its properties, assets and businesses and to carry on the Business; and (d) has good and marketable title to all the assets included in the Accounts. 1.5 CONSTITUTION The copy of the constitution of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 18 LSM share sale agreement 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Company has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Company holds all necessary material Authorisations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. 3.2 ISSUED CAPITAL The Shares are all the issued shares in the capital of the Company and were validly issued by the Company. 3.3 FULLY PAID The Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES The Company is not under any obligation to issue or allot, and has not granted any person the right to call for the issue or allotment of or exercise any option over, any shares or other securities of the Company which is still current and subsisting. 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date the Company has not: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; page 19 LSM share sale agreement (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in the Company; (k) altered its constitution, (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) there has been no change in the accounting policies, practices and principles of the Company, except, in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 [NOT USED] 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Company ; (b) the absolute property of the Company free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. page 20 LSM share sale agreement 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Company but are not owned by the Company are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT All Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, the Company owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. 7.2 OWNERSHIP AND USE (a) The Company is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Company has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Company in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. page 21 LSM share sale agreement 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a licensee of the Company disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Company of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Company has infringed or is infringing the intellectual property rights of a third party. 7.5 DISPUTES The Company is not currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Company in connection with the use of any Intellectual Property Rights. 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business and the Company has received no notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the Company. page 22 LSM share sale agreement 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Company's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts which are expected to result in expenditure by the Company of more than $1,000,000; (f) are distribution or agency agreements: (g) entitle the other party to terminate the contract or impose terms less favourable to the Company due to the sale of the Shares. 9.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the Company relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which the Company is a party, or that the Company has an interest in enforcing have been paid or are provided for in the Accounts. page 23 LSM share sale agreement 10 PROPERTIES 10.1 COMPANY'S INTEREST The Company has no interest in real property which it uses in the Business except for its interest in the Properties. 10.2 OCCUPATION AND USE The Company has exclusive occupation and quiet enjoyment of the Properties and the Company's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, is subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH The Company has not received a notice of default in respect of any Leased Property which remains outstanding and asserts non-compliance with the lease of that property. 10.4 NO NOTICES The Company has not received any notice from any third party in respect of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 [NOT USED] 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the Company have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the Company in the Properties. page 24 LSM share sale agreement 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. 10.9 [NOT USED] 10.10 PROPOSED DISPOSAL The Company is not a party to any outstanding agreement to acquire or dispose of land or Properties or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. 10.13 ASSIGNMENT Neither the Company nor the Seller: (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by the Company in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 12 SHAREHOLDINGS The Company is not the holder or beneficial owner of any shares or other securities in any company. page 25 LSM share sale agreement 13 MEMBERSHIPS The Company is not a member of any joint venture, partnership or unincorporated association (other than a recognised trade association). 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the Company's employees employed in the Business as at the date indicated in the schedule and the Buyer has been given all material details of their employment benefits. 14.2 INCENTIVE SCHEMES The Company has not agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS The Company is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 14.4 MANAGEMENT AGREEMENTS The Company does not have any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 14.5 DISPUTES The Company is not involved in any material dispute with any employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE The Company is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE The 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 leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. page 26 LSM share sale agreement 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company. 15 SUPERANNUATION 15.1 LIST OF SUPERANNUATION FUNDS The Superannuation Funds are the only superannuation schemes or pension arrangements to which the Company makes contributions in respect of the Employees. 15.2 FUNDING The Company has paid all contributions due by it to the Superannuation Funds in respect of the Employees. 16 LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION The Company is not: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] page 27 LSM share sale agreement 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP The Company has not gone into liquidation under Corporations Act nor been removed from the companies register. 18.2 NO PETITION No petition or other process for winding-up has been presented or threatened against the Company and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against the Company. 18.4 NO RECEIVER OR ADMINISTRATOR No receiver or statutory manager of any part of the Company's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS The Company: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of the Corporations Act; and (c) is not subject to voluntary administration under the Corporations Act. 18.6 LIQUIDATION The Seller has not gone into liquidation under the Corporations Act nor been removed from the companies register. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. page 28 LSM share sale agreement 19 INSURANCE 19.1 POLICIES Those assets of the Company which are of an insurable nature are insured by the Company against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller or the Company, that data was, so far as the Seller is aware, true and correct in all material respects. 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 4 to 12 to this agreement are complete and accurate in all material respects and not misleading. 21 BUSINESS RECORDS The Business Records are in the Company's possession or control and will be maintained by the Company in accordance with its usual practice pending Completion. 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of the Company which has become due for payment has been paid. 22.2 SINCE ACCOUNTS DATE The conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. page 29 LSM share sale agreement 22.3 [NOT USED] 22.4 WITHHOLDING TAX Any obligation of the Company under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS The Company has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. 22.6 RETURNS SUBMITTED The Company has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to the Company. 22.7 RETURNS ACCURATE Any information, notice, computation, return, declaration or election which has been submitted by the Company to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by the Company in respect of any Tax or Duty which have been supplied to the Buyer by the Seller are true copies of the originals. 22.9 NO DISPUTES The Company is not currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. page 30 LSM share sale agreement 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of the Company ceasing or being entitled to substantially reduce its level of business with the Company. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which the Company is a party; or (b) relieve any person from any obligation to the Company; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on the Company, its assets or undertaking; or (d) result in any indebtedness of the Company becoming due and payable. 25 TRADE PRACTICES So far as the Seller is aware, neither the Company nor any of its officers or employees has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the Trade Practices Act in Australia. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS The Company will not have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. 27 FINANCIAL POSITION If a balance sheet of the Company, prepared on a consistent basis with the principles used to prepare the 31 August Accounts, was produced at Completion, the net asset position (excluding any Cash In Hand included as part of the Purchase Price under clause 5.2(b)) of the Company would be positive. page 31 LSM share sale agreement 28 BUSINESS Since incorporation, the Company has not carried on any business other than the Business. For the avoidance of doubt, the Company has not incurred any liabilities or obligations other than in the ordinary course of business of the Business. page 32 LSM share sale agreement SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. Seller Warranty Number Matter Disclosed page 33 LSM share sale agreement SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS Part 1 - Intellectual Property Rights owned by the Company Part 2 - Licenses to the Company to use Intellectual Property Rights Part 3 - Licenses given by the Company to use its Intellectual Property Rights page 34 LSM share sale agreement SCHEDULE 5 - SUPERANNUATION FUNDS Accenture Employees Superannuation Fund page 35 LSM share sale agreement SCHEDULE 6 - CONTRACTS PART 1 - CONTRACTS Time and materials service agreement between the Company and Dialog Pty Ltd dated 17 October 2001. PART 2 - FOREIGN EXCHANGE CONTRACTS page 36 LSM share sale agreement SCHEDULE 7 - GUARANTEES page 37 LSM share sale agreement SCHEDULE 8 - EMPLOYEES PART 1 - PACIFIC BRANDS EMPLOYEES 1 Burke, Anne 2 Clarke, Heather 3 Craggs, Penelope 4 Daley, Linda 5 Davies, Lisa 6 Del Rosario, Luis 7 Ellul, Gail 8 Ely, Lois 9 Gabler, Otto 10 Jackson, Claudette 11 Kusnadi, Surja 12 Labbett, Pauline 13 Lalor, Robin 14 Lill, Christine 15 Lim, Eng 16 Loos, Denis 17 Lorkovic, Lily 18 Lucich, Thomas 19 Luton, Elizabeth 20 Morris, Linda 21 Nacua, Nida 22 Parsons, Patricia 23 Pavin, Anna 24 Perry, Angela 25 Poveda, Bernarda 26 Robinson, Belinda 27 Sharma, Praveen 28 Stamboulis, Marjorie 29 Sumcad, Josephine 30 Taylor, Marilyn 31 Weeks, Belinda 32 Weldrake, Paulette page 38 LSM share sale agreement 33 Whatson, Julie 34 Zakarian, Azatue 35 Alfaiate, Sonia 36 Ambalavanar, Kiruba 37 Andrews, Rhonda 38 Austen, Russell 39 Ball, Sheena 40 Bennetts, Victor 41 Berlouis, Harry 42 Bitzikopoulos, Emma 43 Boulat, Janna 44 Brown, Timothy 45 Buckland, Simon 46 Camilleri, Andrew 47 Carmody, Annette 48 Carter, Flora 49 Catalano, Fiona 50 Chia, Clifford 51 Clissold, Karen 52 Coker, Paul 53 Comber, Gregory 54 Cronin, Caroline 55 Csakvari, Naomi 56 Curry, Peter 57 Daniele, Peter 58 Darmody, Carolyn 59 Davies, Sean 60 Dean, Maureen 61 Driessen, Judith 62 Dwyer, Andrew 63 Elford, Debbie 64 Fletcher, Ian 65 Fox, Kylie 66 Galgey, Patricia page 39 LSM share sale agreement 67 Geary, Alicia 68 Graham, Stephen 69 Greco, Mara 70 Guy, Carmel 71 Halvadakis, Sylvana 72 Hanley, Wayne 73 Hawthorne, Jarrod 74 Huang, Josephine 75 Hudson, Diane 76 Huynh, Diem 77 Jansen, Sharon 78 Jilich, Maurus 79 Johnston, Elizabeth 80 Kaiser, Margaret 81 Kerger, Mark 82 Kickert, Vanessa 83 Kontra, Andrew 84 Koresis, Chrisostonos 85 Lee, Richard 86 Lillycrapp, Ruth 87 Logiudice, Julie 88 Macleod, Sheena 89 Macnab, Ron 90 Mahon, Jennifer 91 Mandaliti, Antonio 92 Marks, Glenn 93 Marston, Mark 94 Martin, Sandy 95 McDonald, Alice 96 McKay, Peter 97 McKinnon, Andrew 98 McNeill, Murray 99 Meco, Emidia 100 Millar, Melinda page 40 LSM share sale agreement 101 Monk, Sharon 102 Murray, Louise 103 O'Malley, Louise 104 O'Reardon, David 105 Oh-Williams, Anny 106 Oliver, Beverley 107 Papatheodorou, Harry 108 Papworth, Serena 109 Parisi, Lorraine 110 Parker, Marilyn 111 Paten, Gregory 112 Pengelly, Stephen 113 Pennington, John 114 Perna, Irene 115 Perrusio, Marianna 116 Pickering, Raymond 117 Pickett, Catherine 118 Polini, Penny 119 Poon, Bill 120 Rapke, Damon 121 Rathgen, Scott 122 Ream, Mina 123 Reynolds, Matthew 124 Roberts, Michaela 125 Schouteten, Jason 126 Shepherd, Sheridan 127 Stamatakis, Marianne 128 Starkowski, John 129 Stenzel, Renata 130 Stewart, Malcolm 131 Stirling, Sylvia 132 Stone, Karen 133 Swift, Kathleen 134 Tadross, Marianne page 41 LSM share sale agreement 135 Tainton-Smith, Lisa 136 Tan, Tjai 137 Taylor, Gregory 138 Thackray, David 139 Thompson, Vanessa 140 Thorp, Karen 141 Veselinovski, Stojan 142 Vong, Karen 143 Walters, Andree 144 Ward, Kerry 145 Williams, Eva 146 Willits, Barbara 147 Wong, Linda 148 Zheng, Jianxue PART 2 - SECONDED EMPLOYEES 1 Brunner, Shane 2 Capstick, Timothy 3 Flynn, Lisa 4 Francis, Peter 5 Harvey, Andrew 6 Height, Roslyn 7 Henderson, Maree 8 Hill, Christopher 9 Jungwirth, Stanley 10 Lingwood-Smith,Grant 11 Naish, Phil 12 Norman, Peter 13 Sullivan, Jamie page 42 LSM share sale agreement SCHEDULE 9 - PLANT AND EQUIPMENT 1 Office fit-out and partitions located at Richmond, Victoria office (Level 1, Building 10, 658 Church Street, Richmond, Victoria) 2 Office fit-out and partitions located at Wentworthville, New South Wales office (190 Dunmore Street, Wentworthville, New South Wales) page 43 LSM share sale agreement SCHEDULE 10 - ASSETS LEASES page 44 LSM share sale agreement SCHEDULE 11 - PROPERTIES Part Level 1, Building 10, 658 Church Street, Richmond, Victoria 3121, leased by the Company under the Sub-Lease between Australand Wholesale Investments Limited, Pacific Dunlop Limited and the Company. Arrangement between the Company and Bonds Industries Pty Ltd in respect of the premises leased by the Company at 190 Dunmore Street, Wentworthville, New South Wales 2145. page 45 LSM share sale agreement SCHEDULE 12 - INTER COMPANY DEBTS page 46 LSM share sale agreement EXECUTED AS AN AGREEMENT: Signed for and on behalf of PD Shared Services LSM Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - --------------------------------------- ------------------------------------- Witness Attorney Paul Devereux Carly Mansell - --------------------------------------- ------------------------------------- Name (please print) Name (please print) Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - --------------------------------------- ------------------------------------- Witness Attorney Paul Devereux Carly Mansell - --------------------------------------- ------------------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Holdings Pty Ltd in the presence of: /s/ Andrew Cummins /s/ Justin Ryan - --------------------------------------- ------------------------------------- Director Director Andrew Cummins Justin Ryan - --------------------------------------- ------------------------------------- Name (please print) Name (please print) page 47 EX-4.6 9 dex46.txt SHARE SALE AGREEMENT, PACIFIC BRANDS (FIJI) EXHIBIT 4.6 SHARE SALE AGREEMENT PACIFIC BRANDS (FIJI) LIMITED P.D. International Pty Ltd Pacific Dunlop Limited and PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference NJW:BAE TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 4 1.3 Business Day 5 1.4 Conflict 5 2 Sale and purchase 6 2.1 Sale of shares 6 2.2 Associated rights 6 3 Purchase Price 6 3.1 Amount 6 3.2 Payment at Completion 6 3.3 Final payment 6 4 Completion 6 4.1 Date for Completion 6 4.2 Delivery of documents 6 4.3 Board meetings 7 4.4 Buyer's obligations at completion 7 4.5 Interdependence 7 4.6 Conduct until Shares are registered 8 5 Before Completion 8 5.1 Carrying on Business 8 5.2 Treatment of Cash in Hand 9 5.3 Inter Company Debt 9 6 After Completion 9 6.1 Obligations relating to Taxes or Duties 9 6.2 Consultation 9 7 Warranties 9 8 Limitation of liability 10 9 Competition 10 9.1 Undertaking 10 9.2 Acquisition of interests in competing Businesses 10 9.3 Exclusion from restraint 10 9.4 Related Corporations 11 9.5 Severability 11 10 Release of guarantees 11 11 Guarantee and indemnity 11 11.1 Guarantee 11 11.2 Indemnity 12 11.3 Extent of guarantee and indemnity 12 11.4 Continuing guarantee and indemnity 12 11.5 Warranties of the Guarantor 12 page 1 11.6 Rights 13 Schedule 1 - Share Details 14 Schedule 2 - Warranties 15 Schedule 3 - Disclosure Schedule 31 Schedule 4 - Intellectual Property Rights 32 Schedule 5 - Superannuation funds 33 Schedule 6 - Contracts 34 Schedule 7 - Guarantees 35 Schedule 8 - Employees 36 Schedule 9 - Plant and Equipment 37 Schedule 10 - Assets Leases 38 Schedule 11 - Properties 39 Schedule 12 - Inter Company Debt 40 page 2 THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Accounts has the meaning given to that term in the Co-ordination Agreement; Accounts Date means 30 June 2001; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Company is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Properties; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company as more particularly described in part 6 of schedule 1; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means, the Company's customer lists and supplier lists, records of Intellectual Property Rights, Assets Leases, Contracts and Properties; Buyer means the company specified in part 2 of schedule 1; page 1 Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Cash in Hand means the amount of cash at bank on deposit or at hand in the Company; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Completion means completion of the sale and purchase of the Shares under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which the Company is a party and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Dollars, A$ and $ means Australian dollars unless otherwise specified in this agreement; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Company listed in schedule 8 who is still employed in the Business as at the Completion Date; Encumbrance means any mortgage, charge, lien, pledge, other security interest or encumbrance (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Environmental Law has the meaning given to that term in the Co-ordination Agreement; Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the PDL Group which relate exclusively to the Business which remain page 2 current as at Completion, details of which will be provided to the Buyer at the date of this agreement and at Completion; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company in the internet domain names, trademarks, patents, copyrights and designs listed in schedule 4; Inter Company Debt means any amount owing (including trade accounts payable and receivable): (a) by the Company to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to the Company, immediately before Completion; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group has the meaning given to that term in the Co-ordination Agreement; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by the Company as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; page 3 Properties means the properties leased under the Property Leases; Property Leases means the leases of real property listed in schedule 11; Purchase Price means the price payable for the Shares under clause 3.1; Records means all original and copy records, documents, books, files, reports, accounts, plans, correspondence, letters and papers of every description and other material regardless of their form or medium and whether coming into existence before, on or after the date of this agreement, belonging or relating to or used by the Company including (without limitation) certificates of registration, minute books, statutory books and registers, books of account, Tax returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Related Corporation means a "related body corporate" as defined in the Corporations Act; Secondary Consents has the meaning given to that term in the Co-ordination Agreement; Shares means all the issued shares in the capital of the Company, as specified in part 3 of schedule 1; Seller means the company specified in part 1 of schedule 1; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Seller's Warranties means the warranties set out in part 2 of schedule 2; Stock means the stock of the Business owned by the Company as at Completion and includes, but is not limited to, raw materials, components, work in progress, finished goods, packaging materials, promotional materials, spare parts and other consumables; Superannuation Funds means the superannuation funds to which the Company makes contributions in respect of the Employees as listed in schedule 5; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Law means any law relating to Tax; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; page 4 (c) words importing a gender include any gender; (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) 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 following Business Day; (k) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; (l) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (m) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 1.4 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. page 5 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions and any Secondary Consents relevant to the sale of the Shares having been fulfilled or waived in accordance with the Co-ordination Agreement, the Seller will sell and the Buyer (or a nominee of the Buyer) will buy the Shares for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price is the value ascribed to the Company in the Apportionment Statement in accordance with the terms of the Co-ordination Agreement. 3.2 PAYMENT AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.3 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the provisions of the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares; page 6 (b) duly completed transfers of the Shares to the Buyer (and the Buyer's nominee) in registrable form, executed by the Seller (and the Seller's nominee); (c) duly executed releases of all guarantees that have been obtained in accordance with clause 10; (d) the original certificate of incorporation or registration of the Company; (e) all original documents of title (if any) in relation to the Intellectual Property Rights; (f) evidence that any Secondary Consents relevant to the sale of the Shares have been obtained, to the extent in the possession of the Seller; (g) any power of attorney or other authority under which the transfers of the Shares are executed; (h) duly executed instruments irrevocably waiving in favour of the Buyer all rights of pre-emption which any person has in respect of any of the Shares; and (i) all Records, which must be complete and up to date (by constructive delivery at the Company's premises). 4.3 BOARD MEETINGS At Completion, the Seller must ensure that a meeting of the directors of the Company is convened and conducts the following business: (a) approval of the registration of the Buyer (and the Buyer's nominee) as the holder of the Shares in the books of the Company; and (b) revocation of all existing mandates for the operation of bank accounts of the Company and approval of new mandates in favour of the officers of the Company nominated by the Buyer. 4.4 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must: (a) pay the Seller an estimate of the Purchase Price in accordance with clause 3.2; (b) execute, and procure that the Buyer's nominee execute, the transfers of Shares delivered by the Seller pursuant to clause 4.2(b); (c) deliver to the Seller any evidence required by it that any Secondary Consents relevant to the sale of the Shares has been obtained. 4.5 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. page 7 (b) Subject to clause 4 of the Co-ordination Agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.6 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the Company as the Buyer directs. 5 BEFORE COMPLETION 5.1 CARRYING ON BUSINESS The Seller will procure that the Company uses all reasonable endeavours to ensure that between the date of this agreement and Completion, subject to clauses 5.2 and 5.3, the Business is conducted in the ordinary course of business and that the Company does not: (a) enter into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (c) make any material change to its policy and practice as to payment of creditors and collection of trade receivables; (d) engage any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminates the employment of any of its employees or changes in any material respect the terms of employment (including remuneration); (e) sell or agree to sell any fixed asset with a value of more than $250,000 or buy or commit to buy any fixed asset with a value of more than $250,000; (f) create any Encumbrance over any of its assets; (g) incur any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (h) distribute or return any capital to its members; (i) pay any dividend to its members or pay any management fee or similar amount; page 8 (j) issue any shares, options or securities which are convertible into shares in the Company Group; and (k) alter its constitution, unless the Buyer first consents in writing, which must not be unreasonably withheld or delayed. 5.2 TREATMENT OF CASH IN HAND (a) At any time before Completion, the Seller may arrange for any Cash in Hand held by the Company to be removed in any manner selected by the Seller. (b) Any Cash in Hand held by the Company as at the Effective Time, will be included in the Completion Statement. 5.3 INTER COMPANY DEBT The parties agree that as soon as practicable after Completion, they will take such steps as necessary to procure that any Inter Company Debt owing to or by the Company is extinguished including but not limited to those Inter Company Debts listed in schedule 12. Each party will on request provide to the other evidence of such extinguishment. 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that the Company provides the Seller with access to such employees and records of the Company as the Seller reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of the Company relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. page 9 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 9 COMPETITION 9.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in Fiji: (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a director, employee or agent of the Company to leave the employment or agency of the Company; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Company with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the Company and its clients, customers, employees or suppliers. 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Related Corporations from: page 10 (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. 9.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 9 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavours to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company after Completion. 11 GUARANTEE AND INDEMNITY 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. page 11 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 11 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. page 12 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. page 13 SCHEDULE 1 - SHARE DETAILS PART 1 - SELLER P.D. International Pty Ltd PART 2 - BUYER PB Holdings NV of 1170 Brussels, Terhulpsesteenweg 166 PART 3 - GUARANTOR Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 4 - COMPANY Pacific Brands (Fiji) Limited PART 5 - SHARES
PLACE OF AUTHORISED ISSUED SHARES LEGALLY SHARES HELD ON COMPANY INCORPORATION CAPITAL CAPITAL OWNED BY SELLER BEHALF OF THE SELLER ----------------------------------------------------------------------------------------------------- Pacific Fiji F$50,000 50,000 49,999 held by 1 held by Brands (Fiji) (50,000 @ Seller David Graham as Limited F$1 per trustee for Seller share)
PART 6 - BUSINESS Sourcing of clothing. page 14 SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution nor received or published a notice under sections 601AA or 601AB of the Corporations Act 2001 (Australia) or any similar insolvency law in Belgium. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 15 7 NO RECEIVER OR ADMINISTRATOR No receiver or receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 KNOWLEDGE OF BUYER Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 16 PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer (except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER The Company: (a) is validly existing and in good standing; (b) is accurately described in part 4 of schedule 1; (c) has full corporate power to own its properties, assets and businesses and to carry on the Business; and (d) has good and marketable title to all the assets included in the Accounts. 1.5 CONSTITUTION The copy of the constitution of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 17 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Company has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Company holds all necessary material Authorisations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. 3.2 ISSUED CAPITAL The Shares are all the issued shares in the capital of the Company and were validly issued by the Company. 3.3 FULLY PAID The Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES The Company is not under any obligation to issue or allot, and has not granted any person the right to call for the issue or allotment of or exercise any option over, any shares or other securities of the Company which is still current and subsisting. 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date the Company has not: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; page 18 (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in the Company; (k) altered its constitution, (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) there has been no change in the accounting policies, practices and principles of the Company, except, in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 SUPPLIERS/CUSTOMERS Since the Accounts Date: (a) none of the following suppliers of the Business: Kuehne & Nahgel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or (3) materially altered the terms on which it trades with the Company; or (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: (1) reduced the level of its custom from the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or page 19 (3) materially altered the terms on which it trades with the Company. 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Company; and (b) the absolute property of the Company free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Company but are not owned by the Company are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT All Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, the Company owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. page 20 7.2 OWNERSHIP AND USE (a) The Company is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Company has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Company in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a licensee of the Company disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Company of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Company has infringed or is infringing the intellectual property rights of a third party. 7.5 DISPUTES The Company is not currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Company in connection with the use of any Intellectual Property Rights. 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business and the Company has received no notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. page 21 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the Company. 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Company's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by the Company of more than $1,000,000; (f) are distribution or agency agreements; and (g) entitle the other party to terminate the contract or impose terms less favourable to the Company due to the sale of the Shares. 9.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the Company relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which the Company is a party, or that the Company has an interest in enforcing have been paid or are provided for in the Accounts. page 22 10 PROPERTIES 10.1 COMPANY'S INTEREST The Company has no interest in real property which it uses in the Business except for its interest in the Properties. 10.2 OCCUPATION AND USE The Company has exclusive occupation and quiet enjoyment of the Properties and the Company's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, is subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH The Company has not received a notice of default in respect of any Property which remains outstanding and asserts non-compliance with the lease of that property. 10.4 NO NOTICES The Company has not received any notice from any third party in respect of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 [NOT USED] 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the Company have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the Company in the Properties. 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. page 23 10.9 [NOT USED] 10.10 PROPOSED DISPOSAL The Company is not a party to any outstanding agreement to acquire or dispose of land or Properties or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. 10.13 ASSIGNMENT Neither the Company nor the Seller: (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by the Company in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 12 SHAREHOLDINGS The Company is not the holder or beneficial owner of any shares or other securities in any company. 13 MEMBERSHIPS The Company is not a member of any joint venture, partnership or unincorporated association (other than a recognised trade association). page 24 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the Company's employees employed in the Business as at the date indicated in the schedule and the Buyer has been given all material details of their employment benefits. 14.2 INCENTIVE SCHEMES The Company has not agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS The Company is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 14.4 MANAGEMENT AGREEMENTS The Company does not have any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 14.5 DISPUTES The Company is not involved in any material dispute with any employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE The Company is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE The 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 leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company. page 25 15 SUPERANNUATION 15.1 LIST OF SUPERANNUATION FUNDS The Superannuation Funds are the only superannuation schemes or pension arrangements to which the Company makes contributions in respect of the Employees. 15.2 FUNDING The Company has paid all contributions due by it to the Superannuation Funds in respect of the Employees. 16 LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION The Company is not: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP The Company has not gone into liquidation under the Companies Act of Fiji nor been removed from the register kept by the registrar of companies in Suva. 18.2 NO PETITION No petition or other process for winding-up has been presented or threatened against the Company and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against the Company. page 26 18.4 NO RECEIVER OR ADMINISTRATOR No receiver or statutory manager of any part of the Company's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS The Company: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of the Companies Act of Fiji; and (c) is not subject to voluntary administration under the Companies Act of Fiji. 18.6 LIQUIDATION The Seller has not gone into liquidation under the Companies Act of Fiji nor been removed from the register kept by the registrar of companies in Suva. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. 19 INSURANCE 19.1 POLICIES Those assets of the Company which are of an insurable nature are insured by the Company against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller or the Company, that data was, so far as the Seller is aware, true and correct in all material respects. page 27 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 4 to 12 to this agreement are complete and accurate in all material respects and not misleading. 21 BUSINESS RECORDS The Business Records are in the Company's possession or control and will be maintained by the Company in accordance with its usual practice pending Completion. 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of the Company which has become due for payment has been paid. 22.2 SINCE ACCOUNTS DATE The conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. 22.3 PROVISION IN ACCOUNTS Adequate provision has been made in the Accounts for any Tax on the Company which is payable or may become payable in respect of any transaction or income occurring or arising before the Accounts Date but which was unpaid as at the Accounts Date. 22.4 WITHHOLDING TAX Any obligation of the Company under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS The Company has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. 22.6 RETURNS SUBMITTED The Company has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to the Company. page 28 22.7 RETURNS ACCURATE Any information, notice, computation, return, declaration or election which has been submitted by the Company to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by the Company in respect of any Tax or Duty which have been supplied to the Buyer by the Seller are true copies of the originals. 22.9 NO DISPUTES The Company is not currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of the Company ceasing or being entitled to substantially reduce its level of business with the Company. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which the Company is a party; or (b) relieve any person from any obligation to the Company; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on the Company, its assets or undertaking; or (d) result in any indebtedness of the Company becoming due and payable. page 29 25 TRADE PRACTICES So far as the Seller is aware, neither the Company nor any of its officers or employees has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the Fair Trading Decree 1992 in Fiji. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS The Company will not have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. page 30 SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. Seller Warranty Number Matter Disclosed page 31 SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS Part 1 - Intellectual Property Rights owned by the Company Part 2 - Licenses to the Company to use Intellectual Property Rights Part 3 - Licenses given by the Company to use its Intellectual Property Rights page 32 SCHEDULE 5 - SUPERANNUATION FUNDS Fiji National Provident Fund - FNPF page 33 SCHEDULE 6 - CONTRACTS PART 1 - CONTRACTS
BUSINESS UNIT PARTIES CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- Pacific Brands (Fiji) Pacific Green Industries (Fiji) Limited, Pacific Asset Sale Agreement, dated 30 July 2001 Dunlop Limited and Pacific Brands (Fiji) Limited
PART 2 - FOREIGN EXCHANGE CONTRACTS page 34 SCHEDULE 7 - GUARANTEES page 35 SCHEDULE 8 - EMPLOYEES Fareen Jalal Aliti Bennion Anup Kumar Sanjay Naidu Pravinesh Lala Renal Chandra Azad Ali Ken Rao page 36 SCHEDULE 9 - PLANT AND EQUIPMENT page 37 SCHEDULE 10 - ASSETS LEASES page 38 SCHEDULE 11 - PROPERTIES Factory 3, Section F, Kalabo Tas Free Zone, Valelevu, Fiji. page 39 SCHEDULE 12 - INTER COMPANY DEBT page 40 EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - -------------------------------------- -------------------------------- Witness Attorney Paul Devereux Carly Mansell - -------------------------------------- -------------------------------- Name (please print) Name (please print) Signed for and on behalf of P.D. International Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - -------------------------------------- -------------------------------- Witness Attorney - -------------------------------------- -------------------------------- Name (please print) Name (please print) Signed for and on behalf of: PB Holdings NV by its duly authorised Attorney under Power in the presence of: /s/ /s/ - -------------------------------------- -------------------------------- Witness Attorney - -------------------------------------- -------------------------------- Name (please print) Name (please print) /s/ /s/ - -------------------------------------- -------------------------------- Witness Attorney - -------------------------------------- -------------------------------- Name (please print) Name (please print) page 41 EX-4.7 10 dex47.txt SHARE SALE AGREEMENT, PACIFIC DUNLOP HOLDINGS EXHIBIT 4.7 SHARE SALE AGREEMENT PACIFIC DUNLOP HOLDINGS (HONG KONG) LIMITED Pacific Dunlop Limited P.D. International Pty Ltd and PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference NJW:BAE TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 5 1.3 Business Day 6 1.4 Conflict 6 2 Sale and purchase 6 2.1 Sale of shares 6 2.2 Associated rights 6 3 Purchase Price 6 3.1 Amount 6 3.2 Payment at Completion 6 3.3 Final payment 7 4 Completion 7 4.1 Date for Completion 7 4.2 Delivery of documents 7 4.3 Board meetings 8 4.4 Buyer's obligations at completion 8 4.5 Interdependence 9 4.6 Conduct until Shares are registered 9 5 Before Completion 9 5.1 Carrying on Business 9 5.2 Treatment of Cash in Hand 10 5.3 Inter Company Debt 10 6 After Completion 10 6.1 Obligations relating to Taxes or Duties 10 6.2 Consultation 10 6.3 Indemnities 11 7 Warranties 11 8 Limitation of liability 11 9 Competition 12 9.1 Undertaking 12 9.2 Acquisition of interests in competing Businesses 12 9.3 Exclusion from restraint 12 9.4 Related Corporations 13 9.5 Severability 13 10 Release of guarantees 13 11 Guarantee and indemnity 13 11.1 Guarantee 13 11.2 Indemnity 13 11.3 Extent of guarantee and indemnity 14 11.4 Continuing guarantee and indemnity 14 page 1 11.5 Warranties of the Guarantor 14 11.6 Rights 14 12 Change of company names 15 Schedule 1 - Share Details 16 Schedule 2 - Warranties 18 Schedule 3 - Disclosure Schedule 36 Schedule 4 - Intellectual Property Rights 37 Schedule 5 - Superannuation funds 38 Schedule 6 - Contracts 39 Schedule 7 - Guarantees 41 Schedule 8 - Employees 42 Schedule 9 - Plant and Equipment 44 Schedule 10 - Assets Leases 45 Schedule 11 - Properties 46 Schedule 12 - Inter Company Debts 47 page 2 THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Accounts has the meaning given to that term in the Co-ordination Agreement; Accounts Date means 30 June 2001; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which a member of the Company Group is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Properties; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company Group as more particularly described in part 8 of schedule 1; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means the Company Group's customer lists and supplier lists, and records of Intellectual Property Rights, Assets Leases, Contracts and Properties; page 1 Buyer means the company specified in part 2 of schedule 1; Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Cash in Hand means the amount of cash at bank on deposit or at hand in any member of the Company Group; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Company Group means the Company and the Company Subsidiaries; Company Subsidiaries means the companies specified in part 5 of schedule 1; Company Subsidiary Shares means the shares in the capital of the Company Subsidiaries as described in the columns headed "Shares legally owned by a member of the Company Group" and "Shares held on behalf of a member of the Company Group" in part 7 of schedule 1; Completion means completion of the sale and purchase of the Shares under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which a member of the Company Group is a party and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Dollars, A$ and $ means Australian dollars unless otherwise specified in this agreement; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; page 2 Employees means an employee of the Company Group listed in schedule 8 who is still employed in the Business as at the Completion Date; Environmental Law has the same meaning given to that term in the Co-ordination Agreement; Encumbrance means any mortgage, charge, lien, pledge, other security interest or encumbrance (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the PDL Group which relate exclusively to the Business which remain current as at Completion, details of which will be provided to the Buyer at the date of this agreement and at Completion; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company Group in the internet domain names, trademarks, patents, copyrights and designs listed in schedule 4; Inter Company Debt means any amount owing (including trade accounts payable and receivable): (a) by a member of the Company Group to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to a member of the Company Group, immediately before Completion; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Investment Company means Dunlop Slazenger (Philippines) Inc; Investment Company Shares means the shares in the Investment Company described in the columns headed "Legally owned by the Company" and "Shares held on behalf of the Company" in part 9 of schedule 1; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; page 3 Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Nominee Holders means the persons who hold Shares, Company Subsidiary Shares and Investment Company Shares as nominees, as specifically described in the columns headed "Shares held on behalf of the Seller" or "Shares held on behalf of a member of the Company Group" (as the case may be) in parts 6, 7 and 9 of schedule 1; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group has the meaning given to that term in the Co-ordination Agreement; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by a member of the Company Group as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; Power means any right, power, authority, discretion or remedy conferred on the clause by this agreement or any applicable law; Properties means the properties leased under the Property Leases; Property Leases means the leases of real property listed in schedule 11; Purchase Price means the price payable for the Shares under clause 3.1; Records means all original and copy records, documents, books, files, reports, accounts, plans, correspondence, letters and papers of every description and other material regardless of their form or medium and whether coming into existence before, on or after the date of this agreement, belonging or relating to or used by a member of the Company Group including (without limitation) certificates of registration, minute books, statutory books and registers, books of account, Tax returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Related Corporation means a "related body corporate" as defined in the Corporations Act; Shares means all the issued shares in the capital of the Company, as specified in the column headed "Issued Capital" in part 6 of schedule 1; Seller means the company specified in part 1 of schedule 1; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Seller's Warranties means the warranties set out in part 2 of schedule 2; Stock means the stock of the Business owned by a member of the Company Group as at Completion and includes, but is not limited to, raw materials, components, work in progress, finished goods, packaging materials, promotional materials, spare parts and other consumables; page 4 Superannuation Funds means the superannuation funds to which a member of the Company Group makes contributions in respect of the Employees as listed in schedule 5; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Law means any law relating to Tax; Uncertificated Shares means 1 share held by Ross Taylor and 24,119 shares owned by the Company in the Investment Company, in respect of which there are no current share certificates; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; page 5 (k) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (l) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 1.4 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions having been fulfilled or waived in accordance with the Co-ordination Agreement, the Seller will sell and the Buyer (or a nominee of the Buyer) will buy the Shares for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price is the value ascribed to the Company Group in the Apportionment Statement in accordance with the terms of the Co-ordination Agreement. 3.2 PAYMENT AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. page 6 3.3 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the provisions of the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares, Company Subsidiary Shares and Investment Company Shares (excluding the Uncertificated Shares); (b) duly completed instruments of transfer and sold notes in respect of the Shares to the Buyer (and the Buyer's nominee) executed by the Seller (and the Seller's nominee); (c) in respect of the Company Subsidiary Shares which are registered in the names of Nominee Holders, duly completed instruments of transfer and sold notes; (d) duly executed releases of all guarantees that have been obtained in accordance with clause 10; (e) the original certificates of incorporation or registration of each member of the Company Group; (f) all original documents of title in relation to the Intellectual Property Rights; (g) the written resignations of all directors and the secretary of each member of the Company Group (including a written acknowledgment that he or she has no Claim against the Company for loss of office, breach of contract, redundancy, compensation, payment or repayment of loans or otherwise, except for payments properly payable as an employee for accrued salary, holiday pay and long service leave up to the Completion Date) except Graham Robert Nurse, Stephen Yean Ing Yong, Anita Man Ping Chan, Stephen James Tierney and Secreco Limited, to be effective on the appointment of the directors to be appointed at the Board meetings to be convened under clause 4.3; (h) any power of attorney or other authority under which the transfers of the Shares are executed; (i) a duly executed deed of consent between Alwero Holdings (HK) Ltd, Pacific Brands Marketing (Hong Kong) Limited and Pacific Dunlop page 7 Brands (Asia) Limited (in a form agreed between those parties) in respect of the shares in Pacific Brands Marketing (Hong Kong) Limited; (j) all Records, which must be complete and up to date (by constructive delivery at the premises of each member of the Company Group); and (k) duly executed instruments of change of name for the Company and Pacific Dunlop Brands (Asia) Limited. 4.3 BOARD MEETINGS At Completion, the Seller must ensure that a meeting of the directors of the Company and (where applicable) the Company Subsidiaries is convened and conducts the following business: (a) subject to stamping and due completion of the documents in clause 4.2(b), approval of the instruments of transfer and bought and sold notes in respect of the Shares and approval of the registration of the Buyer (and the Buyer's nominee) as the holder of the Shares in the books of the Company; (b) subject to stamping and due completion of the documents in clause 4.2(c) in respect of the Company Subsidiaries, approval by the Company Subsidiaries of the instruments of transfer and bought and sold notes in respect of the Company Subsidiary Shares as are registered in the names of Nominee Holders and approval of the registration of the Buyer (or its nominee) as the holder of those shares in the books of the relevant Company Subsidiary; (c) acceptance of the resignations provided by the Seller in clause 4.2(g) of directors and secretary for each member of the Company Group and appointment of the nominees of the Buyer as directors and secretary for each member of the Company Group; (d) revocation of all existing mandates for the operation of bank accounts of the Company and approval of new mandates in favour of the officers of the Company nominated by the Buyer; and (e) approval by the Company and Pacific Dunlop Brands (Asia) Limited to change the name of those companies to names nominated by the Buyer, in accordance with clause 12. 4.4 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must: (a) pay the Seller an estimate of the Purchase Price in accordance with clause 3.2; (b) execute or procure that the Buyer's nominee execute the instruments of transfer of Shares and Company Subsidiary Shares delivered by the Seller pursuant to clauses 4.2(b) and 4.2(c); (c) deliver to the Seller written consents to act from the persons nominated by the Buyer as the directors and secretary of each member of the Company Group. page 8 4.5 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) Subject to clause 4 of the Co-ordination Agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.6 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the members of the Company Group as the Buyer directs. 5 BEFORE COMPLETION 5.1 CARRYING ON BUSINESS The Seller will procure that each member of the Company Group uses all reasonable endeavours to ensure that between the date of this agreement and Completion, subject to clauses 5.2 and 5.3, the Business is conducted in the ordinary course of business and that a member of the Company Group does not: (a) enter into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (c) make any material change to its policy and practice as to payment of creditors and collection of trade receivables; (d) engage any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminates the employment of any of its employees or changes in any material respect the terms of employment (including remuneration); (e) sell or agree to sell any fixed asset with a value of more than $250,000 or buy or commit to buy any fixed asset with a value of more than $250,000; (f) create any Encumbrance over any of its assets; page 9 (g) incur any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (h) distribute or return any capital to its members; (i) pay any dividend to its members or pay any management fee or similar amount; (j) issue any shares, options or securities which are convertible into shares in the member of the Company Group; and (k) alter its constitution, unless the Buyer first consents in writing, which must not be unreasonably withheld or delayed. 5.2 TREATMENT OF CASH IN HAND (a) At any time before Completion, the Seller may arrange for any Cash in Hand held by a member of the Company Group to be removed in any manner selected by the Seller. (b) Any Cash in Hand held by a member of the Company Group as at the Effective Time, will be included in the Completion Statement. 5.3 INTER COMPANY DEBT The parties agree that as soon as practicable after Completion, they will take such steps as are necessary to procure that any Inter Company Debt owing to or by a member of the Company Group is extinguished, including but not limited to those Inter Company Debts listed in schedule 12. Each party will on request provide to the other evidence of any such extinguishment. 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that each member of the Company Group provides the Seller with access to such employees and records of the member of the Company Group as the Seller reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of a member of the Company Group relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. page 10 6.3 INDEMNITIES (a) The Seller indemnifies and holds the Buyer (and from Completion, the Company) harmless from and against all Loss associated with all current and future obligations of the Company in respect to the Acquisition Contract between Hangzhou Futong Group Company, Golden Glory Development Ltd, Pacific Dunlop (Asia) Ltd (now known as ADP Limited) and the Company. (b) In relation to the Uncertificated Shares: (1) the Seller and Buyer acknowledge that at Completion the Company will have beneficial but not legal title to the Uncertificated Shares; (2) from Completion, the Seller is responsible for, and must take all steps necessary at its cost to, perfect the Company's legal title to the Uncertificated Shares; (3) the Buyer must provide the Seller with the assistance it reasonably requires in order to meet its obligation in clause 6.3(b)(2), including but not limited to, providing information and records to the Seller and procuring that the Company execute all necessary documents; (4) the Seller undertakes that neither the Company nor Ross Taylor has effected or purported to effect any transfer, charge, loan, deposit or other dealing of or with the Uncertificated Shares; and (5) the Seller indemnifies and keeps indemnified the Buyer and the Company from and against all and any actions, claims, demands, costs, charges and expenses whatsoever which may be brought against or incurred by the Buyer or the Company in consequence of any subsequent acceptance and registration of a transfer of any of the Uncertificated Shares without the production of the original certificates for those shares, other than any subsequent transfer effected by the Buyer or the Company. 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. page 11 9 COMPETITION 9.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in the Peoples Republic of China (including Hong Kong): (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a director, employee or agent of the Company Group to leave the employment or agency of the Company Group; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Company Group with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the members of the Company Group and its clients, customers, employees or suppliers. 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Related Corporations from: (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. page 12 9.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 9 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company Group, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavours to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company after Completion. 11 GUARANTEE AND INDEMNITY 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. page 13 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 11 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. page 14 12 CHANGE OF COMPANY NAMES On, or immediately prior to, Completion the Seller will procure that the names of the Company and Pacific Dunlop Brands (Asia) Limited are changed to names which do not include the words "Pacific Dunlop", as follows: (a) Pacific Dunlop Holdings (Hong Kong) Limited to Pacific Brands Holdings (Hong Kong) Limited; (b) Pacific Dunlop Brands (Asia) Limited to Pacific Brands (Asia) Limited. page 15 SCHEDULE 1 - SHARE DETAILS PART 1 - SELLER P.D. International Pty Ltd PART 2 - BUYER PB Holdings NV of 1170 Brussels, Terhulpsesteenweg 166. PART 3 - GUARANTOR Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 4 - COMPANY Pacific Dunlop Holdings (Hong Kong) Limited PART 5 - COMPANY SUBSIDIARIES . Pacific Dunlop Brands (Asia) Limited . Grosby (China) Limited . Pacific Brands Marketing (Hong Kong) Limited PART 6 - SHARES
SHARES HELD ON PLACE OF ISSUED SHARES LEGALLY BEHALF OF THE COMPANY INCORPORATION AUTHORISED CAPITAL CAPITAL OWNED BY SELLER SELLER ------------------------------------------------------------------------------------------------------- Pacific Hong Kong HK$1,000,000,000 10,129,602 10,129,601 held by 1 (held by Dunlop (100,000,000 @ HK$10 P.D. International S.T.P. (Hong Holdings per share) Pty Ltd Kong) Limited) (Hong Kong) (as nominee) Limited
PART 7 - COMPANY SUBSIDIARY SHARES
SHARES LEGALLY SHARES HELD ON OWNED BY A MEMBER BEHALF OF A MEMBER COMPANY PLACE OF ISSUED OF THE COMPANY OF THE COMPANY SUBSIDIARY INCORPORATION AUTHORISED CAPITAL CAPITAL GROUP GROUP ------------------------------------------------------------------------------------------------------------- Pacific Hong Kong $HK500,000 (500,000 500,000 499,999 held by 1 held by S.T.P. Dunlop Brands @ $HK1 per share) Pacific Dunlop (Hong Kong) (Asia) Limited Holdings (Hong Limited (as Kong) Limited nominee) Grosby Hong Kong $HK22,760,000 2,276,000 2,275,999 held by 1 held by S.T.P. (China) (2,276,000 @ $HK10 Pacific Dunlop (Hong Kong) Limited per share) Holdings (Hong Limited (as Kong) Limited nominee) Pacific Hong Kong $HK1,000,000 2 1 held by Pacific Nil Brands (100,000 @ $HK10 per Dunlop Brands Marketing share) (Asia) Limited
page 16
SHARES LEGALLY SHARES HELD ON OWNED BY A MEMBER BEHALF OF A MEMBER COMPANY PLACE OF ISSUED OF THE COMPANY OF THE COMPANY SUBSIDIARY INCORPORATION AUTHORISED CAPITAL CAPITAL GROUP GROUP ------------------------------------------------------------------------------------------------------------- (Hong Kong) = 50% ownership Limited
PART 8 - BUSINESS The business carried on by the Company Group comprising the sourcing of clothing and footwear, the manufacture of footwear and the marketing of clothing goods, but does not include the business carried on by the Investment Company. PART 9 - INVESTMENT COMPANY SHARES
SHARES HELD ON BEHALF OF NAME OF PLACE OF ISSUED LEGALLY OWNED BY A MEMBER OF THE COMPANY COMPANY INCORPORATION AUTHORISED CAPITAL CAPITAL THE COMPANY GROUP ------------------------------------------------------------------------------------------------------------------ Dunlop Philippines PhP125,000,000 8,960,290 298,450 held by 1 held by Ross Taylor Slazenger (1,250,000 @ Pacific Dunlop (as nominee) (Philippines) PhP100 per share) Holdings (Hong Inc Kong) Limited 1 held by Maurice Wulfsohn (as nominee) 24, 119 held by Pacific Dunlop (Asia) Limited (now ADP Limited)
page 17 SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution nor received or published a notice under sections 601AA or 601AB of the Corporations Act or any similar insolvency law in Belgium. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 18 7 NO RECEIVER OR ADMINISTRATOR No receiver or receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 KNOWLEDGE OF BUYER Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 19 PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer (except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER (a) Each member of the Company Group: (1) is validly existing and in good standing; (2) is accurately described in part 4 of schedule 1; and (3) has full corporate power to own its properties, assets and businesses and to carry on the Business. (b) The Company Group has good and marketable title to all the assets included in the Accounts. 1.5 CONSTITUTION The copy of the constitution of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company Group does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 20 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Company Group has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Company Group holds all necessary material Authorisations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE (a) The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. (b) The Company is the legal and beneficial owner of the Company Subsidiary Shares free of all Encumbrances and other third party interests or rights. (c) The Company is the beneficial owner of the Investment Company Shares. 3.2 ISSUED CAPITAL (a) The Shares are all the issued shares in the capital of the Company and were validly issued by the Company. (b) The shares described in the column headed "Issued Capital" in part 7 of schedule 1 are all the issued shares in the capital of the Company Subsidiaries and those shares were all validly issued by the applicable Company Subsidiary. 3.3 FULLY PAID The Shares, Company Subsidiary Shares and Investment Company Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES No member of the Company Group is under an obligation to issue or allot, and has not granted any person the right to call for the issue or allotment of or exercise any option over, any shares or other securities of the Company Group which is still current and subsisting. page 21 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date no member of the Company Group has: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in a member of the Company Group; (k) altered its constitution; (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) changed its accounting policies, practices or principles, except in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 SUPPLIERS/CUSTOMERS Since the Accounts Date: (a) none of the following suppliers of the Business: Kuehne & Nahgel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to a member of the Company Group other than in the ordinary course of business; page 22 (2) indicated an intention to cease or reduce the volume of its trading with a member of the Company Group after Completion; or (3) materially altered the terms on which it trades with a member of the Company Group; or (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: (1) reduced the level of its custom from a member of the Company Group other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with a member of the Company Group after Completion; or (3) materially altered the terms on which it trades with a member of the Company Group. 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the relevant member of the Company Group; (b) the absolute property of the relevant member of the Company Group free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the members of the Company Group but are not owned by those companies are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT All Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. page 23 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company Group other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, each member of the Company Group owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. 7.2 OWNERSHIP AND USE (a) Each member of the Company Group is the legal and beneficial owner of the Intellectual Property Rights listed as applicable to that member of the Company Group in parts 1 and 3 of schedule 4. (b) Each member of the Company Group has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by that Company Group member in the Business all the Intellectual Property Rights listed as applicable to that member of the Company Group in part 2 of schedule 4. 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a Company Subsidiary, or a licensee of the Company or a Company Subsidiary disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the members of the Company Group of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that a member of the Company Group has infringed or is infringing the intellectual property rights of a third party. page 24 7.5 DISPUTES No member of the Company Group is currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by members of the Company Group in connection with the use of any Intellectual Property Rights. 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT No member of the Company Group and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to a member of the Company Group in carrying on the Business and no member of the Company Group has received notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the members of the Company Group. 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; page 25 (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict a Company Group member's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by a member of the Company Group of more than $1,000,000; (f) are distribution or agency agreements; and (g) entitle the other party to terminate the contract or impose terms less favourable to a member of the Company Group due to the sale of the Shares. 9.2 NO DEFAULT No member of the Company Group and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to a member of the Company Group in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the members of the Company Group relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies or written summaries of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which a Company Group member is a party, or that a Company Group member has an interest in enforcing have been paid or are provided for in the Accounts. 10 PROPERTIES 10.1 COMPANY GROUP'S INTEREST No member of the Company Group has an interest in real property which it uses in the Business except for its interest in the Properties. page 26 10.2 OCCUPATION AND USE The Company and Grosby (China) Limited have exclusive occupation and quiet enjoyment of the Properties and the use by the Company and Grosby (China) Limited of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, is subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH Neither the Company nor Grosby (China) Limited have received a notice of default in respect of any Leased Property which remains outstanding and asserts non-compliance with the lease of that property. 10.4 NO NOTICES Neither the Company nor Grosby (China) Limited have received any notice from any third party in respect of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 [NOT USED] 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the members of the Company Group have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the members of the Company Group in the Properties. 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. page 27 10.9 [NOT USED] 10.10 PROPOSED DISPOSAL No member of the Company Group is party to any outstanding agreement to acquire or dispose of land or Properties or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. 10.13 ASSIGNMENT Neither the Company, the Company Subsidiaries nor the Seller: (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by a member of the Company Group in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 12 SHAREHOLDINGS No member of the Company Group is the holder or beneficial owner of any shares or other securities in any company (except for shares in the Company Subsidiaries and Investment Company as described in parts 7 and 9 of schedule 1). 13 MEMBERSHIPS No member of the Company Group is a member of any joint venture, partnership or unincorporated association (other than a recognised trade association). page 28 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the employees employed by each of the Company Group members in the Business as at the date indicated in the schedule and the Buyer has been given all material details of the employment benefits of these employees. 14.2 INCENTIVE SCHEMES No member of the Company Group has agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS No member of the Company Group is a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 14.4 MANAGEMENT AGREEMENTS No member of the Company Group has any material agreements with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 14.5 DISPUTES No member of the Company Group is involved in any material dispute with any employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE No member of the Company Group is in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE Each member of the Company Group has complied with and continues to comply with all obligations arising under law, equity, statute (including occupational health and safety, annual leave, long service leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. page 29 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company Group. 15 SUPERANNUATION 15.1 LIST OF SUPERANNUATION FUNDS The Superannuation Funds are the only superannuation schemes or pension arrangements to which members of the Company Group make contributions in respect of the Employees. 15.2 FUNDING Each member of the Company Group has paid all contributions due by it to the Superannuation Funds in respect of the Employees. 16 LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION No member of the Company Group is: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] page 30 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP No member of the Company Group has gone into liquidation under the Companies Ordinance of Hong Kong (Cap.32) nor been removed from the register of Hong Kong Companies Registry. 18.2 NO PETITION No petition or other process for winding-up has been presented or threatened against any member of the Company Group and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against any member of the Company Group. 18.4 NO RECEIVER OR ADMINISTRATOR No receiver or manager of any part of the Company's or a Company Subsidiary's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS No member of the Company Group: (a) has stopped paying its debts as and when they fall due; (b) is insolvent within the meaning of the Companies Ordinance Hong Kong; and (c) is subject to voluntary administration under the Companies Ordinance Hong Kong. 18.6 LIQUIDATION The Seller has not gone into liquidation under the Australian Corporations Act nor been removed from the register of the Australian Securities and Investments Commission. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. page 31 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. 19 INSURANCE 19.1 POLICIES Those assets of the Company Group which are of an insurable nature are insured by the relevant Company Group members against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller or members of the Company Group, that data was, so far as the Seller is aware, true and correct in all material respects. 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, and the schedules numbered 4 to 12 to this agreement are complete and accurate in all material respects and not misleading. 21 BUSINESS RECORDS The Business Records are in the possession or control of the relevant Company Group member and will be maintained by that Company Group member in accordance with its usual practice pending Completion. 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of any of the members of the Company Group which has become due for payment has been paid. page 32 22.2 SINCE ACCOUNTS DATE The conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. 22.3 PROVISION IN ACCOUNTS Adequate provision has been made in the Accounts for any Tax on a member of the Company Group which is payable or may become payable in respect of any transaction or income occurring or arising before the Accounts Date but which was unpaid as at the Accounts Date. 22.4 WITHHOLDING TAX Any obligation of a member of the Company Group under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS Each member of the Company Group has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. 22.6 RETURNS SUBMITTED Each member of the Company Group has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to that Company Group member. 22.7 RETURNS ACCURATE Any information, notice, computation, return, declaration or election which has been submitted by a member of the Company Group to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by a member of the Company Group in respect of any Tax or Duty which has been supplied to the Buyer by the Seller are true copies of the originals. page 33 22.9 NO DISPUTES No member of the Company Group is currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of any member of the Company Group ceasing or being entitled to substantially reduce its level of business with that Company Group member. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which a member of the Company Group is a party; or (b) relieve any person from any obligation to a member of the Company Group; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on a member of the Company Group, its assets or undertaking; or (d) result in any indebtedness of a member of the Company Group becoming due and payable. page 34 25 TRADE PRACTICES So far as the Seller is aware, no member of the Company Group nor any of the officers or employees of each member of the Company Group has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the legislation applicable in Hong Kong which regulates trade practices matters. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS No member of the Company Group will have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. page 35 SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. SELLER WARRANTY NUMBER MATTER DISCLOSED page 36 SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS PART 1 - INTELLECTUAL PROPERTY RIGHTS OWNED BY THE COMPANY GROUP PART 2 - LICENSES TO THE COMPANY GROUP TO USE INTELLECTUAL PROPERTY RIGHTS PART 3 - LICENSES GIVEN BY THE COMPANY GROUP TO USE ITS INTELLECTUAL PROPERTY RIGHTS page 37 SCHEDULE 5 - SUPERANNUATION FUNDS 1 COMPANY Nil 2 COMPANY SUBSIDIARIES (a) PACIFIC DUNLOP BRANDS (ASIA) LIMITED . Pacific Dunlop Holdings (Hong Kong) Limited Provident Fund; . Pacific Dunlop Brands (Asia) Limited HSBC Mandatory Provident Fund - Supertrust; and . Pacific Dunlop Superannuation Fund. (b) GROSBY (CHINA) LIMITED Statutory Fund. (c) PACIFIC BRANDS MARKETING (HONG KONG) LIMITED Nil page 38 SCHEDULE 6 - CONTRACTS PART 1 - CONTRACTS 1 COMPANY
BUSINESS UNIT PARTIES CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- Head Office Pacific Dunlop Holdings (Hong Kong) Limited, Grosby Grosby China Option Agreement (China) Limited, Alwero Holdings Limited [agreement to be signed] Hangzhou Futong Group Company, Golden Glory Acquisition Contract Development Ltd, Pacific Dunlop (Asia) Limited and Pacific Dunlop Holdings (Hong Kong) Limited Pacific Dunlop Brands (Asia) Limited, PD Clothing & Rescission Deed for Grosby Share Sale Textiles Ltd and Grosby (China) Limited [agreement Agreement to be signed] Pacific Dunlop Holdings (Hong Kong) Limited, PD Grosby China Sale Agreement Garments Ltd and Grosby (China) Limited [agreement to be signed]
2 COMPANY SUBSIDIARIES (a) PACIFIC DUNLOP BRANDS (ASIA) LIMITED
BUSINESS UNIT PARTIES CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- Head Office Pacific Dunlop Brands (Asia) Limited & Others Novation Agreement for Non-Competition Deed Pacific Dunlop Brands (Asia) Limited & Others Non-Competition Deed Grosby Australia Grosby Australia & Pacific Dunlop Brands (Asia) Unwritten Buying/Selling and agency Agreement (Shoe Talk HK division) Shoe Talk HK (PDBAL) Grosby (China) Limited, Shoe Talk Limited, Grosby Distribution Agreement Australia division, Pacific Brands (UK) Limited, Pacific Brands Canada & TT Group Limited PD Asia Clothing Pacific Dunlop Brands (Asia) Limited (c/- Shoe Talk Agency Agreement HK) and RMS (HK) Ltd (South Africa) Pacific Dunlop Brands (Asia) Limited (c/- PD Asia Agency Agreement Clothing) and Pacific Dunlop Holdings NZ Ltd Pacific Dunlop Brands (Asia) Limited and Berlei Agency Agreement Pacific Dunlop Brands (Asia) Limited and Holeproof Agency Agreement Pacific Dunlop Brands (Asia) Limited and Union Agency Agreement Knitting Mills Pty Ltd Pacific Dunlop Brands (Asia) Limited and Tontine Agency Agreement Pacific Brands Marketing (HK) Ltd, Pacific Dunlop Hong Kong Joint Venture Shareholders Agreement (Asia) Limited, Alwero Holdings (HK) Limited Pacific Dunlop (Asia) Ltd, Pacific Dunlop Brands Hong Kong Marketing JV Novation Agreement (Asia) Limited, Pacific Brands Marketing (Hong Kong) Ltd and Alwero Holdings (HK) Ltd Pacific Dunlop Brands (Asia) Limited, Alwero Call Option Agreement Novation and Amendment Holdings (HK) Ltd and Others [agreement to be Deed signed] Pacific Dunlop (Asia) Limited, Alwero Holdings (HK) Call Option Agreement Ltd and Others Pacific Dunlop Brands (Asia) Limited, PD Clothing & Rescission Deed for Grosby Share Sale Textiles Ltd and Grosby (China) Limited [agreement Agreement to
page 39 be signed] Alwero Holdings (HK) Ltd, Pacific Brands Marketing Deed of Consent (Hong Kong) Limited and Pacific Dunlop Brands (Asia) Ltd [agreement to be signed]
(b) GROSBY (CHINA) LIMITED
BUSINESS UNIT PARTIES CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- Grosby China Grosby Australia & Grosby (China) Ltd Unwritten Supply of Footwear Contract Grosby (China) Limited, Shoe Talk Limited, Grosby Distribution Agreement Australia division, Pacific Brands (UK) Limited, Pacific Brands Canada & TT Group Limited Legamex State Company & Grosby (China) Limited Unwritten contract for the supply of footwear Shenzhen Bo (foreign trade company) & Hong Kong Contract Processing for the Manufacture of Silver Roof (Grosby) Ltd Footwear Legamex State Company, (Vietnam), Grosby (China) Unwritten supply agreement and equipment and Limited and Shoe Talk HK management arrangement RK Factory, Fujian, Grosby (China) Limited and Shoe Unwritten supply agreement and equipment and Talk HK management arrangement Pacific Dunlop Holdings (Hong Kong) Limited, Grosby Grosby China Option Agreement (China) Limited, Alwero Holdings Limited [agreement to be signed] Grosby (China) Limited and Fani King Properties Land Use Agreement Grosby (China) Limited and P D Enterprises Limited Management Agreement [agreement to be signed] Pacific Dunlop Brands (Asia) Limited, PD Clothing & Rescission Deed for Grosby Share Sale Textiles Ltd and Grosby (China) Limited [agreement Agreement to be signed] Grosby (China) Limited and PD Enterprise Ltd Rescission Deed for Management Agreement [agreement to be signed] Pacific Dunlop Holdings (Hong Kong) Limited, PD Grosby China Sale Agreement Garments Ltd and Grosby (China) Limited [agreement to be signed]
(c) PACIFIC BRANDS MARKETING (HONG KONG) LIMITED
BUSINESS UNIT PARTIES CONTRACT NAME - ------------------------------------------------------------------------------------------------------------------------------- Pacific Brands Marketing (HK) Ltd, Pacific Dunlop Hong Kong Joint Venture Shareholders (Asia) Limited, Alwero Holdings (HK) Limited Agreement Pacific Dunlop (Asia) Ltd, Pacific Dunlop Brands Hong Kong Marketing JV Novation Agreement (Asia) Limited, Pacific Brands Marketing (Hong Kong) Ltd and Alwero Holdings (HK) Ltd Alwero Holdings (HK) Ltd, Pacific Brands Marketing Deed of Consent (Hong Kong) Limited and Pacific Dunlop Brands (Asia) Ltd [agreement to be signed]
PART 2 - FOREIGN EXCHANGE CONTRACTS page 40 SCHEDULE 7 - GUARANTEES page 41 SCHEDULE 8 - EMPLOYEES 1 COMPANY Nil. 2 COMPANY SUBSIDIARIES (a) PACIFIC DUNLOP BRANDS (ASIA) LIMITED C&T GROUP Lee Foon Chan Man Ping, Anita Ho Pik Yiu, Peggy Lai Mei Yee, Vivian Lee Siu Mei, May Young Lai Shan, Liza Tsui Siu Hing Siu Chui Ping, Rowena Cheung Yuk Lan, Biddy Lo Ka Ling, Nowel Lai Wan Sze, Ada Lee Yuk Kam, Rebecca Lee Wai Ling, Elsa Cheng Ngar Shan, Pian Ho Wai Ching, Winnie Law Kit Yi, Kitty Lai Wai Man, Aaron Wong Yim Chun, Sidney SHOE TALK DIVISION (1) HONG KONG Ku Kwai Lin, Audrey Sum Siu King, Ivy Leung Kwok Ping, Pauline Lo Koon Kiu, Lovem Cheung Tak Wah, Susanna Ng Lai Ching, Albrey Graham Robert Nurse Lee Chi Keung, Simon page 42 Leung Kam Ying, Rin John David Johnston Lai Wing Chi, Emily (2) FUJIAN (RK/KR) Enrico Binalber Eduardo Roxas Nestor Jimenez (3) VIETNAM Rodolfo D Jr Marquez (b) GROSBY (CHINA) LIMITED Ng Chung Yu, Norman Lee Chi Hung, Triango Wong Koon Ming Yong Yean Ing, Stephen Antonio Espiritu Celedonio Espiritu Pang Kwok Fai, Trico Antonio Acosta See also attached schedule of Grosby (China) Limited employees. (c) PACIFIC BRANDS MARKETING (HONG KONG) LIMITED Nil. page 43 SCHEDULE 9 - PLANT AND EQUIPMENT 1 COMPANY 2 COMPANY SUBSIDIARIES (a) PACIFIC DUNLOP BRANDS (ASIA) LIMITED (b) GROSBY CHINA
DESCRIPTION OF ASSET LOCATION WDV $,000 ---------------------------------------------------------------------- Leasehold buildings Hanggeng, China 5,676
(c) PACIFIC BRANDS MARKETING (HK) LIMITED page 44 SCHEDULE 10 - ASSETS LEASES 1 COMPANY 2 COMPANY SUBSIDIARIES (a) PACIFIC DUNLOP BRANDS (ASIA) LIMITED Lease of Canon NP-4050 Copier (renewed until 31/12/01) with Jardine One Solution (Lessor) (b) GROSBY CHINA (c) PACIFIC BRANDS MARKETING (HK) LIMITED page 45 SCHEDULE 11 - PROPERTIES 1 COMPANY Suite 1607-1611, Tower 2, The Gateway, Harbour City, 25-27 Canton Road, Kowloon, Hong Kong 2 COMPANY SUBSIDIARIES (a) GROSBY (CHINA) LIMITED 189 Industrial District, Henggang, Longbang, Shenzhen, China page 46 SCHEDULE 12 - INTER COMPANY DEBTS page 47 EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - --------------------------------------- -------------------------------- Witness Attorney Paul Devereux Carly Mansell - --------------------------------------- -------------------------------- Name (please print) Name (please print) Signed for and on behalf of P.D. International Limited by its duly authorised Attorney under Power in the presence of: /s/ /s/ - --------------------------------------- -------------------------------- Witness Attorney - --------------------------------------- -------------------------------- Name (please print) Name (please print) Signed for and on behalf of: PB Holdings NV by its duly authorised Attorney under Power in the presence of: /s/ /s/ - --------------------------------------- -------------------------------- Witness Attorney - --------------------------------------- -------------------------------- Name (please print) Name (please print) /s/ /s/ - --------------------------------------- -------------------------------- Witness Attorney - --------------------------------------- -------------------------------- Name (please print) Name (please print) page 48 EX-4.8 11 dex48.txt SHARE SALE AGREEMENT, PT BARLEI INDONESIA EXHIBIT 4.8 SHARE SALE AGREEMENT PT BERLEI INDONESIA PD International Pty Ltd Pacific Dunlop Holdings (Singapore) Pte Ltd and PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 5 1.3 Business Day 6 1.4 Conflict 6 2 Sale and purchase 6 2.1 Sale of shares 6 2.2 Associated rights 6 3 Purchase Price 6 3.1 Amount 6 3.2 Payment at Completion 7 3.3 Final payment 7 4 Completion 7 4.1 Date for Completion 7 4.2 Delivery of documents 7 4.3 Shareholders' meetings 7 4.4 [Not used] 8 4.5 Buyer's obligations at completion 8 4.6 Interdependence 8 4.7 Conduct until Shares are registered 8 5 Before Completion 8 5.1 Carrying on Business 8 5.2 Treatment of Cash in Hand 9 5.3 Inter Company Debt 9 6 After Completion 9 6.1 Obligations relating to Taxes or Duties 9 6.2 Consultation 10 7 Warranties 10 8 Limitation of liability 10 9 Competition 10 9.1 Undertaking 10 9.2 Acquisition of interests in competing Businesses 11 9.3 Exclusion from restraint 11 page 1 9.4 Company Affiliates 11 9.5 Severability 11 10 Release of guarantees 11 11 Guarantee and indemnity 12 11.1 Guarantee 12 11.2 Indemnity 12 11.3 Extent of guarantee and indemnity 12 11.4 Continuing guarantee and indemnity 12 11.5 Warranties of the Guarantor 13 11.6 Rights 13 Schedule 1 - Share Details 14 Schedule 2 - Warranties 15 Schedule 3 - Disclosure Schedule 31 Schedule 4 - Intellectual Property Rights 32 Schedule 5 - Superannuation funds 33 Schedule 6 - Contracts 34 Schedule 7 - Guarantees 35 Schedule 8 - Employees 36 Schedule 9 - Plant and Equipment 37 Schedule 10 - Assets Leases 38 Schedule 11 - Properties 39 Schedule 12 - Inter Company Debts 40 page 2 THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Accounts has the meaning given to that term in the Co-ordination Agreement; Accounts Date means 30 June 2001; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Company is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Properties; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company as more particularly described in part 6 of schedule 1; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means, the Company's customer lists and supplier lists, records of Intellectual Property Rights, Assets Leases, Contracts and Properties; Buyer means the company specified in part 2 of schedule 1; page 1 Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Cash in Hand means the amount of cash at bank on deposit or at hand in the Company; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Company Affiliate means: (a) a company which controls directly or indirectly a party to this agreement; (b) a company which is controlled directly or indirectly by a party to this agreement; or (c) a company which is controlled directly or indirectly by a third party which also controls directly or indirectly a party to this agreement, where control of a company means ownership of more than 20% of the issued voting capital of that company or the ability to appoint a majority of the members of the direski or dewan komisaris of that company; Company Law means Law No. 1 of 1995 on Limited Liability Companies of the Republic of Indonesia; Company Register means the register of companies as stipulated under Law No. 3 of 1982 on Companies Compulsory Registration; Completion means completion of the sale and purchase of the Shares under clause 5; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which the Company is a party and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Dollars, A$ and $ means Australian dollars, unless otherwise specified in this agreement; page 2 Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Company listed in schedule 8 who is still employed in the Business as at the Completion Date; Encumbrance means an interest or power: (a) reserved in or over an interest in any asset including, but not limited to, any retention or title; or (b) created or otherwise arising in or over any interest in any asset under a bill of sale, mortgage, charge, lien, pledge, trust or power, by way of security for the payment of a debt or any other monetary obligation or the performance of any other obligation and includes, but is not limited to, any agreement to grant or create any of the above; Environmental Law has the meaning given to that term in the Co-ordination Agreement; Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the PDL Group which relate exclusively to the Business which remain current as at Completion, details of which will be provided to the Buyer at the date of this agreement and at Completion; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Company Affiliates in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company in the internet domain names, trademarks, patents, copyrights and designs listed in schedule 4; Inter Company Debt means any amount owing (including trade accounts payable and receivable): (a) by the Company to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to the Company, immediately before Completion; page 3 Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group has the meaning given to that term in the Co-ordination Agreement; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by the Company as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; Properties means the properties leased under the Property Leases; Property Leases means the leases of real property listed in schedule 11; Purchase Price means the price payable for the Shares under clause 3.1; Records means all original and copy records, documents, books, files, reports, accounts, plans, correspondence, letters and papers of every description and other material regardless of their form or medium and whether coming into existence before, on or after the date of this agreement, belonging or relating to or used by the Company including (without limitation) certificates of registration, minute books, statutory books and registers, books of account, Tax returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Secondary Consents has the meaning given to that term in the Co-ordination Agreement; Shares means all the issued shares in the capital of the Company, as specified in part 5 of schedule 1; Seller means the companies specified in part 1 of schedule 1; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Seller's Warranties means the warranties set out in part 2 of schedule 2; Stock means the stock of the Business owned by the Company as at Completion and includes, but is not limited to, raw materials, components, work in progress, page 4 finished goods, packaging materials, promotional materials, spare parts and other consumables; Pension Funds means the employees social security fund to which the Company makes contributions in respect of the Employees as listed in schedule 5; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Law means any law relating to Tax including, but not limited to, Law No. 16 of 2000 regarding General Requirements and Procedures on Tax, Law No. 17 of 2000 regarding Income Tax, and Law No. 18 of 2000 regarding Value Added Tax on Goods and Services and Sale Tax on Luxury Goods; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) 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 following Business Day; page 5 (k) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; (l) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (m) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 1.4 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions and the Secondary Consent relevant to the sale of the Shares having been fulfilled or waived in accordance with the Co-ordination Agreement, the Seller will sell and the Buyer (or a nominee of the Buyer) will buy the Shares for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price is the value ascribed to the Company in the Apportionment Statement in accordance with the terms of the Co-ordination Agreement. page 6 3.2 PAYMENT AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.3 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the provisions of the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares; (b) duly completed transfers of the Shares to the Buyer (and the Buyer's nominee) in registrable form executed by the Seller; (c) duly executed releases of all guarantees that have been obtained in accordance with clause 10; (d) a copy of the Deed of Establishment; (e) all original documents of title (if any) held by the Company in relation to the Intellectual Property Rights; (f) any power of attorney or other authority under which the transfers of the Shares are executed; (g) duly executed instruments irrevocably waiving all rights of pre-emption which any person has in respect of any of the Shares; and (h) all Records, which must be complete and up to date (by constructive delivery at the Company's premises). 4.3 SHAREHOLDERS' MEETINGS At Completion, the Seller must ensure that a general meeting of the shareholders of the Company is conducted to conduct the following business: (a) approval of the transfer of the Shares to the Buyer and the Buyer's nominee; and (b) to confirm the issued capital of the Company following the transfer of the Shares. page 7 4.4 [NOT USED] 4.5 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must: (a) pay the Seller an estimate of the Purchase Price in accordance with clause 3.2; (b) execute, and procure that the Buyer's nominee execute, the transfers of Shares delivered by the Seller pursuant to clause 4.2(b); and (c) deliver to the Seller any evidence required by it that the Secondary Consent relevant to the sale of the Shares has been obtained. 4.6 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) Subject to clause 4 of the Co-ordination Agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.7 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the Company as the Buyer directs. 5 BEFORE COMPLETION 5.1 CARRYING ON BUSINESS The Seller will procure that the Company uses all reasonable endeavours to ensure that between the date of this agreement and Completion, subject to clauses 5.2 and 5.3, the Business is conducted in the ordinary course of business and that the Company does not: (a) enter into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; page 8 (b) acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (c) make any material change to its policy and practice as to payment of creditors and collection of trade receivables; (d) engage any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminates the employment of any of its employees or changes in any material respect the terms of employment (including remuneration); (e) sell or agree to sell any fixed asset with a value of more than $250,000 or buy or commit to buy any fixed asset with a value of more than $250,000; (f) create any Encumbrance over any of its assets; (g) incur any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (h) distribute or return any capital to its members; (i) pay any dividend to its members or pay any management fee or similar amount; (j) issue any shares, options or securities which are convertible into shares in the Company; and (k) alter its constitution, unless the Buyer first consents in writing, which must not be unreasonably withheld or delayed. 5.2 TREATMENT OF CASH IN HAND (a) At any time before Completion, the Seller may arrange for any Cash in Hand held by the Company to be removed in any manner selected by the Seller. (b) Any Cash in Hand held by the Company as at the Effective Time, will be included in the Completion Statement. 5.3 INTER COMPANY DEBT The parties agree that as soon as practicable after Completion, they will take such steps as necessary to procure that any Inter Company Debt owing to or by the Company is extinguished, including but not limited to those Inter Company Debts listed in schedule 12. Each party will on request provide to the other evidence of such extinguishment. 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that the Company provides the Seller with access to such employees and records of the Company as the Seller page 9 reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of the Company relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 9 COMPETITION 9.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in the territory of the Republic of Indonesia: (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a direski, employee or agent of the Company to leave the employment or agency of the Company; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Company with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the Company and its clients, customers, employees or suppliers. page 10 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Company Affiliates from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Company Affiliate uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Company Affiliates from: (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. 9.4 COMPANY AFFILIATES The Buyer agrees that the provisions of this clause 9 only apply to the Company Affiliates of the Seller for so long as those entities remain Company Affiliates of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavours to secure the release of the Seller or any Company Affiliate of the Seller from any Guarantee or page 11 Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Company Affiliate of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company after Completion. 11 GUARANTEE AND INDEMNITY 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 12 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. page 12 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; and (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. page 13 SCHEDULE 1 - SHARE DETAILS PART 1 - SELLER P D International Pty Ltd Pacific Dunlop Holdings (Singapore) Pte Ltd PART 2 - BUYER PB Holdings NV of 1170 Brussels, Terhulpsesteenweg 166 PART 3 - GUARANTOR Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 4 - COMPANY PT Berlei Indonesia PART 5 - SHARES
SHARES SHARES HELD PLACE OF ISSUED LEGALLY OWNED ON BEHALF OF COMPANY INCORPORATION AUTHORISED CAPITAL CAPITAL BY SELLER THE SELLER ------------------------------------------------------------------------------------------------------- PT Berlei Indonesia RP12,756,000,000, 500 5 held by P D Nil Indonesia (1,500 shares @ RP International 8,504,000 per share) Pty Ltd 495 held by Pacific Dunlop Holdings (Singapore) Pte Ltd
PART 6 - BUSINESS Manufacturer of intimate apparel page 14 SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution under the Company Law or the Corporations Act (Australia) nor received or published a notice under sections 601AA or 601AB of the Corporations Act (Australia) or any similar insolvency law of Belgium. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 15 7 NO RECEIVER OR ADMINISTRATOR No receiver or receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 KNOWLEDGE OF BUYER Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 16 PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer (except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER The Company: (a) is validly existing and in good standing; (b) is accurately described in part 4 of schedule 1; (c) has full corporate power to own its properties, assets and businesses and to carry on the Business; and (d) has good and marketable title to all the assets included in the Accounts. 1.5 CONSTITUTION The copy of the constitution of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 17 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Company has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Company holds all necessary material Authorisations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. 3.2 ISSUED CAPITAL The Shares are all the issued shares in the capital of the Company and were validly issued by the Company. 3.3 FULLY PAID The Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES The Company is not under any obligation to issue or allot, and has not granted any person the right to call for the issue or allotment of or exercise any option over, any shares or other securities of the Company which is still current and subsisting. 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date the Company has not: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; page 18 (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in the Company; (k) altered its constitution, (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) there has been no change in the accounting policies, practices and principles of the Company, except, in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 SUPPLIERS/CUSTOMERS Since the Accounts Date: (a) none of the following suppliers of the Business: Kuehne & Nahgel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or (3) materially altered the terms on which it trades with the Company; or (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: (1) reduced the level of its custom from the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or page 19 (3) materially altered the terms on which it trades with the Company. 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Company; and (b) the absolute property of the Company free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Company but are not owned by the Company are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT All Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, the Company owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. page 20 7.2 OWNERSHIP AND USE (a) The Company is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Company has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Company in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a licensee of the Company disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Company of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Company has infringed or is infringing the intellectual property rights of a third party. 7.5 DISPUTES The Company is not currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Company in connection with the use of any Intellectual Property Rights. 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business and the Company has received no notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. page 21 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the Company. 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Company's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by the Company of more than $1,000,000; (f) are distribution or agency agreements; and (g) entitle the other party to terminate the contract or impose terms less favourable to the Company due to the sale of the Shares. 9.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the Company relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which the Company is a party, or that the Company has an interest in enforcing have been paid or are provided for in the Accounts. page 22 10 PROPERTIES 10.1 COMPANY'S INTEREST The Company has no interest in real property which it uses in the Business except for its interest in the Properties. 10.2 OCCUPATION AND USE The Company has exclusive occupation and quiet enjoyment of the Properties and the Company's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, is subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH The Company has not received a notice of default in respect of any Leased Property which remains outstanding and asserts non-compliance with the lease of that property. 10.4 NO NOTICES The Company has not received any notice from any third party in respect of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 [NOT USED] 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the Company have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the Company in the Properties. 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. page 23 10.9 [NOT USED] 10.10 PROPOSED DISPOSAL The Company is not a party to any outstanding agreement to acquire or dispose of land or Properties or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in of schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. 10.13 ASSIGNMENT Neither the Company nor the Seller: (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by the Company in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 12 SHAREHOLDINGS The Company is not the holder or beneficial owner of any shares or other securities in any company. 13 MEMBERSHIPS The Company is not a member of any joint venture, partnership or unincorporated association (other than a recognised trade association). page 24 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the Company's employees employed in the Business as at the date indicated in the schedule and the Buyer has been given all material details of their employment benefits. 14.2 INCENTIVE SCHEMES The Company has not agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS The Company is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 14.4 MANAGEMENT AGREEMENTS The Company does not have any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 14.5 DISPUTES The Company is not involved in any material dispute with any employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE The Company is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE The 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 leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company. page 25 15 SUPERANNUATION 15.1 LIST OF PENSION FUNDS The Pension Funds are the only superannuation schemes or pension arrangements to which the Company makes contributions in respect of the Employees. 15.2 FUNDING The Company has paid all contributions due by it to the Pension Funds in respect of the Employees. 16 LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION The Company is not: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP The Company has not gone into liquidation under the Company Law, particularly as described in Articles 114 to 124, nor been removed from the Company Register. 18.2 NO PETITION No petition or other process for winding-up has been presented or threatened against the Company and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against the Company. page 26 18.4 NO RECEIVER OR ADMINISTRATOR No receiver or statutory manager of any part of the Company's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS The Company: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of Company Law; and (c) is not subject to voluntary administration under Company Law. 18.6 LIQUIDATION The Seller has not gone into liquidation under Company Law nor been removed from the Company Register. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. 19 INSURANCE 19.1 POLICIES Those assets of the Company which are of an insurable nature are insured by the Company against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller or the Company, that data was, so far as the Seller is aware, true and correct in all material respects. page 27 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 4 to 12 to this agreement are complete and accurate in all material respects and not misleading. 21 BUSINESS RECORDS The Business Records are in the Company's possession or control and will be maintained by the Company in accordance with its usual practice pending Completion. 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of the Company which has become due for payment has been paid. 22.2 SINCE ACCOUNTS DATE The conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. 22.3 PROVISION IN ACCOUNTS Adequate provision has been made in the Accounts for any Tax on the Company which is payable or may become payable in respect of any transaction or income occurring or arising before the Accounts Date but which was unpaid as at the Accounts Date. 22.4 WITHHOLDING TAX Any obligation of the Company under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS The Company has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. 22.6 RETURNS SUBMITTED The Company has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to the Company. page 28 22.7 RETURNS ACCURATE Any information, notice, computation, return, declaration or election which has been submitted by the Company to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by the Company in respect of any Tax or Duty which have been supplied to the Buyer by the Seller are true copies of the originals. 22.9 NO DISPUTES The Company is not currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of the Company ceasing or being entitled to substantially reduce its level of business with the Company. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which the Company is a party; or (b) relieve any person from any obligation to the Company; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on the Company, its assets or undertaking; or (d) result in any indebtedness of the Company becoming due and payable. page 29 25 TRADE PRACTICES So far as the Seller is aware, neither the Company nor any of its officers or employees has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the legislation in Indonesia regulating trade practices matters. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS The Company will not have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. page 30 SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. SELLER WARRANTY NUMBER MATTER DISCLOSED page 31 SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS Part 1 - Intellectual Property Rights owned by the Company Part 2 - Licenses to the Company to use Intellectual Property Rights Part 3 - Licenses given by the Company to use its Intellectual Property Rights page 32 SCHEDULE 5 - SUPERANNUATION FUNDS The workers' social security (Jaminan Sosial Tenaga Kerja or Jamsostek) operated by the Government of the Republic of Indonesia through PT Jaminan Sosial Tenaga Kerja (Persero) ("PT Jamsostek") page 33 SCHEDULE 6 - CONTRACTS Part 1 - Contracts Part 2 - Foreign Exchange Contracts page 34 SCHEDULE 7 - GUARANTEES page 35 SCHEDULE 8 - EMPLOYEES Carl David Taylor See also attached schedule of Employees page 36 SCHEDULE 9 - PLANT AND EQUIPMENT BUSINESS UNIT DESCRIPTION OF ASSET LOCATION WDV $,000 - ---------------------------------------------------------------------------- PT Berlei Indonesia Machtex lamination machine Indonesia 100 page 37 SCHEDULE 10 - ASSETS LEASES Sewing machine lease dated 10 February 2001 between Hendru Utomo Dibjopramono and Jiani S, PT Berlei Indonesia. Sewing Machine Rental Agreement between PD Usman Jaya and PT Berlei Indonesia dated 23 October 2000 in respect of machine nos. 9812337 and G457857. Sewing Machine Rental Agreement between PD Usman Jaya and PT Berlei Indonesia dated 14 May 2001 in respect of machine no. 602308. Amendment of Car Rental Agreement dated 3 April 2001 between Toyota Rent a Car PT Sevasi Autoraya and PT Berlei Indonesia (No. 140024401/03.04.2001). Amendment of Car Rental Agreement dated 3 April 2001 between Toyota Rent a Car PT Sevasi Autoraya and PT Berlei Indonesia (No. 1040024400/03.04.2001). Amendment of Car Rental Agreement dated 15 May 2001 between Toyota Rent a Car PT Sevasi Autoraya and PT Berlei Indonesia (No. 1040025235/15.05.2001). Amendment of Car Rental Agreement dated 15 May 2001 between Toyota Rent a Car PT Sevasi Autoraya and PT Berlei Indonesia (No. 1040025234/15/05/2001). page 38 SCHEDULE 11 - PROPERTIES . Apartment Tower: Allamand AV705, Jalan Casablanca Kav.7, Jakarta, 12870 Indonesia . Hak Guna Bangunan, No 47/Karang Baru, Indonesia (locally known as Kaveling number W39 Jalan Jababeka 12) page 39 SCHEDULE 12 - INTER COMPANY DEBTS page 40 EXECUTED AS AN AGREEMENT: Signed for and on behalf of P.D International Pty Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- ----------------------------------- Name (please print) Name (please print) Signed for and on behalf of Pacific Dunlop Holdings (Singapore) Pte Ltd by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- ----------------------------------- Name (please print) Name (please print) Signed for and on behalf of: PB Holdings NV by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- ----------------------------------- Name (please print) Name (please print) /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- ----------------------------------- Name (please print) Name (please print) page 41 EX-4.9 12 dex49.txt SHARE SALE AGREEMENT, PACIFIC BRANDS (UK) EXHIBIT 4.9 SHARE SALE AGREEMENT PACIFIC BRANDS (UK) LTD Pacific Dunlop Holdings (Europe) Limited Pacific Dunlop Limited and PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 4 1.3 Business Day 5 1.4 Conflict 5 2 Sale and purchase 6 2.1 Sale of shares 6 2.2 Associated rights 6 3 Purchase Price 6 3.1 Amount 6 3.2 Payment at Completion 6 3.3 Final payment 6 4 Completion 6 4.1 Date for Completion 6 4.2 Delivery of documents 6 4.3 Board meetings 7 4.4 Buyer's obligations at completion 7 4.5 Interdependence 7 4.6 Conduct until Shares are registered 8 5 Before Completion 8 5.1 Carrying on Business 8 5.2 Treatment of Cash in Hand 8 5.3 Inter Company Debt 9 6 After Completion 9 6.1 Obligations relating to Taxes or Duties 9 6.2 Consultation 9 7 Warranties 9 8 Limitation of liability 9 9 Competition 10 9.1 Undertaking 10 9.2 Acquisition of interests in competing Businesses 10 9.3 Exclusion from restraint 10 9.4 Associates 11 9.5 Severability 11 10 Release of guarantees 11 11 Guarantee and indemnity 11 11.1 Guarantee 11 11.2 Indemnity 11 11.3 Extent of guarantee and indemnity 11 11.4 Continuing guarantee and indemnity 12 11.5 Warranties of the Guarantor 12 page 1 11.6 Rights 12 Schedule 1 - Share Details 13 Schedule 2 - Warranties 14 Schedule 3 - Disclosure Schedule 30 Schedule 4 - Intellectual Property Rights 31 Schedule 5 - Superannuation funds 32 Schedule 6 - Contracts 33 Schedule 7 - Guarantees 34 Schedule 8 - Employees 35 Schedule 9 - Plant and Equipment 36 Schedule 10 - Assets Leases 37 Schedule 11 - Properties 38 Schedule 12 - Inter Company Debt 39 page 2 THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Accounts has the meaning given to that term in the Co-ordination Agreement; Accounts Date means 30 June 2001; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Company is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Properties; Associate means any person who is a connected person (as defined in section 839 of the Income and Corporations Taxes Act 1988 (United Kingdom)) of a seller; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company as more particularly described in part 6 of schedule 1; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means, the Company's customer lists and supplier lists, records of Intellectual Property Rights, Assets Leases, Contracts and Properties; page 1 Buyer means the company specified in part 2 of schedule 1; Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Cash in Hand means the amount of cash at bank on deposit or at hand in the Company; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Completion means completion of the sale and purchase of the Shares under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which the Company is a party and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Dollars, A$ and $ means Australian dollars unless otherwise specified in this agreement; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Company listed in schedule 8 who is still employed in the Business as at the Completion Date; Encumbrance means any mortgage, charge, lien, pledge, other security interest or encumbrance (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Environmental Law has the meaning given to that term in the Co-ordination Agreement; page 2 Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the PDL Group which relate exclusively to the Business which remain current as at Completion, details of which will be provided to the Buyer at the date of this agreement and at Completion; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Associates in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company in the internet domain names, trademarks, patents, copyrights and designs listed in schedule 4; Inter Company Debt means any amount owing (including trade accounts payable and receivable): (a) by the Company to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to the Company, immediately before Completion; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group has the meaning given to that term in the Co-ordination Agreement; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by the Company as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; page 3 Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; Properties means the properties leased under the Property Leases; Property Leases means the leases of real property listed in schedule 11; Purchase Price means the price payable for the Shares under clause 3.1; Records means all original and copy records, documents, books, files, reports, accounts, plans, correspondence, letters and papers of every description and other material regardless of their form or medium and whether coming into existence before, on or after the date of this agreement, belonging or relating to or used by the Company including (without limitation) certificates of registration, minute books, statutory books and registers, books of account, Tax returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Secondary Consents has the meaning given to that term in the Co-ordination Agreement; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Shares means all the shares in the capital of the Company, as described in the column headed "Shares legally owned by the Seller" in part 5 of schedule 1; Seller means the company specified in part 1 of schedule 1; Seller's Warranties means the warranties set out in part 2 of schedule 2; Stephen Tierney Share means the 1 share held by Stephen Tierney on trust for the Seller as described in part 5 of schedule 1; Stock means the stock of the Business owned by the Company as at Completion and includes, but is not limited to, raw materials, components, work in progress, finished goods, packaging materials, promotional materials, spare parts and other consumables; Superannuation Funds means the superannuation funds to which the Company makes contributions in respect of the Employees as listed in schedule 5; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Law means any law relating to Tax; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: page 4 (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) 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 following Business Day; (k) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; (l) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (m) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 1.4 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. page 5 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions having been fulfilled or waived in accordance with the Co-ordination Agreement, the Seller will sell and the Buyer will buy the Shares and all rights, interest and powers in the Stephen Tierney Share for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price is the value ascribed to the Company in the Apportionment Statement in accordance with the terms of the Co-ordination Agreement. 3.2 PAYMENT AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.3 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the provisions of the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares; page 6 (b) duly completed transfers of the Shares to the Buyer in registrable form, executed by the Seller; (c) duly executed releases of all guarantees that have been obtained in accordance with clause 10; (d) the original certificate of incorporation or registration of the Company; (e) all original documents of title in relation to the Intellectual Property Rights; (f) any power of attorney or other authority under which the transfers of the Shares are executed; (g) duly executed instruments irrevocably waiving in favour of the Buyer all rights of pre-emption which any person has in respect of any of the Shares; and (h) all Records, which must be complete and up to date (by constructive delivery at the Company's premises). 4.3 BOARD MEETINGS At Completion, the Seller must ensure that a meeting of the directors of the Company is convened and conducts the following business: (a) approval of the registration of the Buyer as the holder of the Shares in the register of members of the Company; and (b) revocation of all existing mandates for the operation of bank accounts of the Company and approval of new mandates in favour of the officers of the Company nominated by the Buyer. 4.4 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must pay the Seller an estimate of the Purchase Price in accordance with clause 3.2. 4.5 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) All actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. page 7 4.6 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the Company as the Buyer directs. 5 BEFORE COMPLETION 5.1 CARRYING ON BUSINESS The Seller will procure that the Company uses all reasonable endeavours to ensure that between the date of this agreement and Completion, subject to clauses 5.2 and 5.3, the Business is conducted in the ordinary course of business and that the Company does not: (a) enter into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (c) make any material change to its policy and practice as to payment of creditors and collection of trade receivables; (d) engage any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminates the employment of any of its employees or changes in any material respect the terms of employment (including remuneration); (e) sell or agree to sell any fixed asset with a value of more than $250,000 or buy or commit to buy any fixed asset with a value of more than $250,000; (f) create any Encumbrance over any of its assets; (g) incur any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (h) distribute or return any capital to its members; (i) pay any dividend to its members or pay any management fee or similar amount; (j) issue any shares, options or securities which are convertible into shares in the Company; and (k) alter its constitution, unless the Buyer first consents in writing, which must not be unreasonably withheld or delayed. 5.2 TREATMENT OF CASH IN HAND (a) At any time before Completion, the Seller may arrange for any Cash in Hand held by the Company to be removed in any manner selected by the Seller. page 8 (b) Any Cash in Hand held by the Company as at the Effective Time, will be included in the Completion Statement. 5.3 INTER COMPANY DEBT The parties agree that as soon as practicable after Completion, they will take such steps as necessary to procure that any Inter Company Debt owing to or by the Company is extinguished, including but not limited to those Inter Company Debts listed in schedule 12. Each party will on request provide to the other evidence of such extinguishment. 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that the Company provides the Seller with access to such employees and records of the Company as the Seller reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of the Company relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. page 9 9 COMPETITION 9.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in the United Kingdom: (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a director, employee or agent of the Company to leave the employment or agency of the Company; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Company with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the Company and its clients, customers, employees or suppliers. 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Associates from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Associate uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Associates from: (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. page 10 9.4 ASSOCIATES The Buyer agrees that the provisions of this clause 9 only apply to the Associates of the Seller for so long as those entities remain Associates of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavours to secure the release of the Seller or any Associate of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Associate of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company after Completion. 11 GUARANTEE AND INDEMNITY 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: page 11 (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 11 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. page 12 SCHEDULE 1 - SHARE DETAILS PART 1 - SELLER Pacific Dunlop Holdings (Europe) Limited PART 2 - BUYER PB Holdings NV of 1170 Brussels, Terhulpsesteenweg 166 PART 3 - GUARANTOR Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 4 - COMPANY Pacific Brands (UK) Ltd PART 5 - SHARES
SHARES HELD ON PLACE OF AUTHORISED ISSUED SHARES LEGALLY BEHALF OF THE COMPANY INCORPORATION CAPITAL CAPITAL OWNED BY SELLER SELLER -------------------------------------------------------------------------------------------------------- Pacific United Kingdom (pound)10,000,000 2,000,000 1,999,999 held 1 held by Stephen Brands (10,000,000, by Seller Tierney as trustee (UK) Ltd @ (pound)1 per share)
PART 6 - BUSINESS Footwear wholesaler page 13 SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 SOLVENCY (a) The Buyer has not: (1) gone into liquidation nor passed a winding up resolution nor received or published a notice under sections 601AA or 601AB of the Corporations Act or any similar insolvency law of Belgium; (2) gone into liquidation under the Insolvency Act 1986 (United Kingdom) nor been removed from the United Kingdom companies register. (b) No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. (c) No writ of execution has issued against the Buyer. (d) No receiver or statutory manager of any part of the Buyer's undertaking or assets has been appointed. page 14 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. 7 NO RECEIVER OR ADMINISTRATOR No receiver or receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 KNOWLEDGE OF BUYER Neither the Buyer nor a holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 15 PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer (except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the memorandum or articles of association of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER The Company: (a) is validly existing and in good standing; (b) is accurately described in part 4 of schedule 1; (c) has full corporate power to own its properties, assets and businesses and to carry on the Business; and (d) has good and marketable title to all the assets included in the Accounts. 1.5 CONSTITUTION The copy of the constitution of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 16 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Company has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Company holds all necessary material Authorisations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. 3.2 ISSUED CAPITAL The Shares and the 1 share held by Stephen Tierney (as described in part 5 of schedule 1) are all the issued shares in the capital of the Company and were validly issued by the Company. 3.3 FULLY PAID The Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES The Company is not under any obligation to issue or allot, and has not granted any person the right to call for the issue or allotment of or exercise any option over, any shares or other securities of the Company which is still current and subsisting. 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date the Company has not: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; page 17 (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in the Company; (k) altered its memorandum or articles of association; (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) there has been no change in the accounting policies, practices and principles of the Company, except, in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 SUPPLIERS/CUSTOMERS Since the Accounts Date: (a) none of the following suppliers of the Business: Kuehne & Nahgel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or (3) materially altered the terms on which it trades with the Company; or (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: (1) reduced the level of its custom from the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or page 18 (3) materially altered the terms on which it trades with the Company. 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Company; and (b) the absolute property of the Company free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Company but are not owned by the Company are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT All Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, the Company owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. page 19 7.2 OWNERSHIP AND USE (a) The Company is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Company has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Company in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a licensee of the Company disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Company of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Company has infringed or is infringing the intellectual property rights of a third party. 7.5 DISPUTES The Company is not currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Company in connection with the use of any Intellectual Property Rights. 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business and the Company has received no notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. page 20 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the Company. 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Company's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by the Company of more than $1,000,000; (f) are distribution or agency agreements; and (g) entitle the other party to terminate the contract or impose terms less favourable to the Company due to the sale of the Shares. 9.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the Company relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which the Company is a party, or that the Company has an interest in enforcing have been paid or are provided for in the Accounts. page 21 10 PROPERTIES 10.1 COMPANY'S INTEREST The Company has no interest in real property which it uses in the Business except for its interest in the Properties. 10.2 OCCUPATION AND USE The Company has exclusive occupation and quiet enjoyment of the Properties and the Company's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, is subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH The Company has not received a notice of default in respect of any Property which remains outstanding and asserts non-compliance with the lease of that property. 10.4 NO NOTICES The Company has not received any notice from any third party in respect of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 [NOT USED] 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the Company have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the Company in the Properties. 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. page 22 10.9 [NOT USED] 10.10 PROPOSED DISPOSAL The Company is not a party to any outstanding agreement to acquire or dispose of land or Properties (including the Properties) or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. 10.13 ASSIGNMENT Neither the Company nor the Seller: (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by the Company in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 12 SHAREHOLDINGS The Company is not the holder or beneficial owner of any shares or other securities in any company. 13 MEMBERSHIPS The Company is not a member of any joint venture, partnership or unincorporated association (other than a recognised trade association). page 23 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the Company's employees employed in the Business as at the date indicated in the schedule and the Buyer has been given all material details of their employment benefits. 14.2 INCENTIVE SCHEMES The Company has not agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS The Company is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 14.4 MANAGEMENT AGREEMENTS The Company does not have any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 14.5 DISPUTES The Company is not involved in any material dispute with any Employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE The Company is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE The 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 leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company. page 24 15 SUPERANNUATION 15.1 LIST OF SUPERANNUATION FUNDS The Superannuation Funds are the only superannuation schemes or pension arrangements to which the Company makes contributions in respect of the Employees. 15.2 FUNDING The Company has paid all contributions due by it to the Superannuation Funds in respect of the Employees. 16 LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION The Company is not: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP The Company has not gone into liquidation under the Insolvency Act 1986 (United Kingdom) nor been removed from the United Kingdom companies register. 18.2 NO PETITION No petition or other process for winding-up has been presented or threatened against the Company and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against the Company. page 25 18.4 NO RECEIVER OR ADMINISTRATOR No receiver or statutory manager of any part of the Company's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS The Company: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of the Insolvency Act 1986; and (c) is not subject to voluntary administration under the Insolvency Act 1986 (United Kingdom). 18.6 LIQUIDATION The Seller has not gone into liquidation under the Insolvency Act 1986 (United Kingdom) nor been removed from the United Kingdom companies register. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. 19 INSURANCE 19.1 POLICIES Those assets of the Company which are of an insurable nature are insured by the Company against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; page 26 (b) if that information comprised historical data about the Business prepared by the Seller or the Company, that data was, so far as the Seller is aware, true and correct in all material respects. 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 4 to 12 to this agreement are complete and accurate in all material respects and not misleading. 21 BUSINESS RECORDS The Business Records are in the Company's possession or control and will be maintained by the Company in accordance with its usual practice pending Completion. 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of the Company which has become due for payment has been paid. 22.2 SINCE ACCOUNTS DATE The conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. 22.3 PROVISION IN ACCOUNTS Adequate provision has been made in the Accounts for any Tax on the Company which is payable or may become payable in respect of any transaction or income occurring or arising before the Accounts Date but which was unpaid as at the Accounts Date. 22.4 WITHHOLDING TAX Any obligation of the Company under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS The Company has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. page 27 22.6 RETURNS SUBMITTED The Company has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to the Company. 22.7 RETURNS ACCURATE Any information, notice, computation, return, declaration or election which has been submitted by the Company to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by the Company in respect of any Tax or Duty which have been supplied to the Buyer by the Seller are true copies of the originals. 22.9 NO DISPUTES The Company is not currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of the Company ceasing or being entitled to substantially reduce its level of business with the Company. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which the Company is a party; or (b) relieve any person from any obligation to the Company; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on the Company, its assets or undertaking; or (d) result in any indebtedness of the Company becoming due and payable. page 28 25 TRADE PRACTICES So far as the Seller is aware, neither the Company nor any of its officers or employees has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the Competition Act 1998 in the United Kingdom. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS The Company will not have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. page 29 SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. Seller Warranty Number Matter Disclosed page 30 SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS PART 1 - INTELLECTUAL PROPERTY RIGHTS OWNED BY THE COMPANY Refer to attached schedule of owned IP. PART 2 - LICENSES TO THE COMPANY TO USE INTELLECTUAL PROPERTY RIGHTS
PROPERTY PARTIES (eg TRADE MARK Etc) TERRITORY/ EXCLUSIVITY EXPIRY DATE - ---------------------------------------------------------------------------------------------------------------- Licensor - JC Bamford JCB brand and any United Kingdom, Channel 31 May 2002 Excavator Limited associated imagery owned Islands Republic of or controlled by the Ireland, France, Italy, The Representative Licensor Spain, Germany, Portugal, Benelux, South Africa, - -The Licensing Company Limited Australia and Canada Licensee - Pacific Brands Non-exclusive for fashion (UK) Limited and performance outdoor footwear Exclusivity for safety industrial footwear Licensor - Stride Rite "Sperry, " "Sperry UK 30 November 2004 International Corporation Top-Sider" and associated Trade Marks for the Licensee: Pacific Brands UK purpose of the Distributor's performance under the agreement.
PART 3 - LICENSES GIVEN BY THE COMPANY TO USE ITS INTELLECTUAL PROPERTY RIGHTS. page 31 SCHEDULE 5 - SUPERANNUATION FUNDS 1. Royal & Sun alliance, Group Personal Pension Plan (25 employees). 2. Sun Life Flexible Executive Pension Plan for Paul Simpson. 3. Sun Life Flexible Executive Pension Plan for Jillian Helm. 4. Sun Life Flexible Executive Pension Plan for Robert Williams. page 32 SCHEDULE 6 - CONTRACTS PART 1 - CONTRACTS
BUSINESS UNIT PARTIES CONTRACT NAME - ---------------------------------------------------------------------------------------------------------------------- Pacific Brands UK Pacific Brands (UK) & Famous Army Stores Ltd Supply Agreement (5 October 1998) Stride Rite International Corporation (USA) Ltd & Distributorship Agreement (July 1, 2000) Pacific Brands (UK)
PART 2 - FOREIGN EXCHANGE CONTRACTS See attached page 33 SCHEDULE 7 - GUARANTEES page 34 SCHEDULE 8 - EMPLOYEES page 35 SCHEDULE 9 - PLANT AND EQUIPMENT page 36 SCHEDULE 10 - ASSETS LEASES page 37 SCHEDULE 11 - PROPERTIES Unit 1, Stretton Green Distribution Park, Appleton, Warrington, UK. page 38 SCHEDULE 12 - INTER COMPANY DEBT page 39 EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Holdings (Europe) Limited by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ----------------------------------------- ----------------------------------- Witness Attorney - ----------------------------------------- ----------------------------------- Name (please print) Name (please print) Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - ----------------------------------------- ----------------------------------- Witness Attorney Paul Devereux Carly Mansell - ----------------------------------------- ----------------------------------- Name (please print) Name (please print) Signed for and on behalf of: PB Holdings NV by its duly authorised Attorneys under Power in the presence of: /s/ /s/ - ----------------------------------------- ----------------------------------- Witness Attorney - ----------------------------------------- ----------------------------------- Name (please print) Name (please print) /s/ /s/ - ----------------------------------------- ----------------------------------- Witness Attorney - ----------------------------------------- ----------------------------------- Name (please print) Name (please print) page 40 EX-4.10 13 dex410.txt STOCK PURCHASE AGREEMENT, PACBRANDS USA INC EXHIBIT 4.10 STOCK PURCHASE AGREEMENT PACBRANDS USA INC Pacific Dunlop Holdings (USA) Inc Pacific Dunlop Limited and PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference NJW:BAE TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 4 1.3 Business Day 5 1.4 Conflict 5 2 Sale and purchase 5 2.1 Sale of shares 5 2.2 Associated rights 6 3 Purchase Price 6 3.1 Amount 6 3.2 Payment at Completion 6 3.3 Final payment 6 4 Completion 6 4.1 Date for Completion 6 4.2 Delivery of documents 6 4.3 Board meetings 7 4.4 Buyer's obligations at completion 7 4.5 Interdependence 7 4.6 Conduct until Shares are registered 8 5 Before Completion 8 5.1 Carrying on Business 8 5.2 Treatment of Cash in Hand 9 5.3 Inter Company Debt 9 6 After Completion 9 6.1 Obligations relating to Taxes or Duties 9 6.2 Consultation 9 7 Warranties 9 8 Limitation of liability 9 9 Competition 10 9.1 Undertaking 10 9.2 Acquisition of interests in competing Businesses 10 9.3 Exclusion from restraint 10 9.4 Related Corporations 11 9.5 Severability 11 10 Release of guarantees 11 11 Guarantee and indemnity 11 11.1 Guarantee 11 11.2 Indemnity 11 11.3 Extent of guarantee and indemnity 12 11.4 Continuing guarantee and indemnity 12 11.5 Warranties of the Guarantor 12 page 1 11.6 Rights 13 Schedule 1 - Share Details 14 Schedule 2 - Warranties 15 Schedule 3 - Disclosure Schedule 31 Schedule 4 - Intellectual Property Rights 32 Schedule 5 - [Not used] 33 Schedule 6 - Contracts 34 Schedule 7 - Guarantees 35 Schedule 8 - Employees 36 Schedule 9 - Plant and Equipment 37 Schedule 10 - Assets Leases 38 Schedule 11 - Properties 39 Schedule 12 - Inter Company Debt 40 page 2 THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 Definitions In this agreement: Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Accounts has the meaning given to that term in the Co-ordination Agreement; Accounts Date means 30 June 2001; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Company is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Properties; Authorization means any consent, registration, agreement, certificate, license, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company as more particularly described in part 6 of schedule 1; Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means, the Company's customer lists and supplier lists, records of Intellectual Property Rights, Assets Leases, Contracts and Properties; Buyer means the company specified in part 2 of schedule 1; page 1 Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Cash in Hand means the amount of cash at bank on deposit or at hand in the Company; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Completion means completion of the sale and purchase of the Shares under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which the Company is a party and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Data Room has the meaning given to that term in the Co-ordination Agreement; Dollars, A$ and $ means Australian dollars unless otherwise defined; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; Employees means an employee of the Company listed in schedule 8 who is still employed in the Business as at the Completion Date; Environmental Law has the meaning given to that term in the Co-ordination Agreement; Encumbrance means any mortgage, charge, lien, pledge, other security interest or encumbrance (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the PDL Group which relate exclusively to the Business which remain page 2 current as at Completion, details of which will be provided to the Buyer at the date of this agreement and at Completion; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company in the internet domain names, trademarks, patents, copyrights and designs listed in schedule 4; Inter Company Debt means any amount owing (including trade accounts payable and receivable): (a) by the Company to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to the Company, immediately before Completion; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group has the meaning given to that term in the Co-ordination Agreement; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by the Company as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; page 3 Properties means the properties leased under the Property Leases; Property Leases means the leases of real property listed in schedule 11; Purchase Price means the price payable for the Shares under clause 3.1; Records means all original and copy records, documents, books, files, reports, accounts, plans, correspondence, letters and papers of every description and other material regardless of their form or medium and whether coming into existence before, on or after the date of this agreement, belonging or relating to or used by the Company including (without limitation) certificates of registration, minute books, statutory books and registers, books of account, Tax returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Related Corporation means an "Affiliate" as defined in Rule 12b-2 promulgated under the U.S. Securities Exchange Act of 1934; Seller means the company specified in part 1 of schedule 1; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Seller's Warranties means the warranties set out in part 2 of schedule 2; Shares means all the issued shares in the capital of the Company, as specified in part 5 of schedule 1; Stock means the stock of the Business owned by the Company as at Completion and includes, but is not limited to, raw materials, components, work in progress, finished goods, packaging materials, promotional materials, spare parts and other consumables; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Law means any law relating to Tax; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; page 4 (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, 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 all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) 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 following Business Day; (k) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; (l) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (m) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 1.4 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions having been fulfilled or waived in accordance with the Co-ordination Agreement, the Seller will sell and the Buyer will buy the Shares page 5 for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price is the value ascribed to the Company in the Apportionment Statement in accordance with the terms of the Co-ordination Agreement. 3.2 PAYMENT AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.3 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the provisions of the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares; (b) stock powers relating to the Shares in forms acceptable to the Buyer duly executed by the Seller; (c) duly executed releases of all guarantees that have been obtained in accordance with clause 10; (d) the original certificate of incorporation or registration of the Company; page 6 (e) all original documents of title in relation to the Intellectual Property Rights; (f) the written resignations of all directors and the secretary of the Company (including a written acknowledgment that he or she has no Claim against the Company for loss of office, breach of contract, redundancy, compensation, payment or repayment of loans or otherwise, except for payments properly payable as an employee for accrued salary, holiday pay and long service leave up to the Completion Date) except Bradley Milnes and Allan Mackay, to be effective on the Completion Date; (g) any power of attorney or other authority under which the transfers of the Shares are executed; (h) duly executed instruments irrevocably waiving in favour of the Buyer all rights of pre-emption which any person has in respect of any of the Shares; (i) all Records, which must be complete and up to date (by constructive delivery at the Company's premises); and (j) the consent to the change of control of the Company from Jockey International Inc in respect of the Licence Agreement dated 12 March 1999. 4.3 BOARD MEETINGS At Completion, the Seller must ensure that a meeting of the directors of the Seller is convened and conducts the following business: (a) approval and ratification of the power of attorney of the Company; (b) approval of the execution and delivery of this agreement by the attorneys on Completion; and (c) approval of the execution and delivery by the attorneys of all instruments and documents required under this agreement. 4.4 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must pay the Seller an estimate of the Purchase Price in accordance with clause 3.2 4.5 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) Subject to clause 4 of the Co-ordination agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to page 7 be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.6 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the Company as the Buyer directs. 5 BEFORE COMPLETION 5.1 CARRYING ON BUSINESS The Seller will procure that the Company uses all reasonable endeavours to ensure that between the date of this agreement and Completion, subject to clauses 5.2 and 5.3, the Business is conducted in the ordinary course of business and that the Company does not: (a) enter into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (c) make any material change to its policy and practice as to payment of creditors and collection of trade receivables; (d) engage any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminates the employment of any of its employees or changes in any material respect the terms of employment (including remuneration); (e) sell or agree to sell any fixed asset with a value of more than $250,000 or buy or commit to buy any fixed asset with a value of more than $250,000; (f) create any Encumbrance over any of its assets; (g) incur any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (h) distribute or return any capital to its members; (i) pay any dividend to its members or pay any management fee or similar amount; (j) issue any shares, options or securities which are convertible into shares in the Company; and (k) alter its certificate of incorporation or by laws, page 8 unless the Buyer first consents in writing, which must not be unreasonably withheld or delayed. 5.2 TREATMENT OF CASH IN HAND (a) At any time before Completion, the Seller may arrange for any Cash in Hand held by the Company to be removed in any manner selected by the Seller. (b) Any Cash in Hand held by the Company as at the Effective Time, will be included in the Completion Statement. 5.3 INTER COMPANY DEBT The Buyer acknowledges that prior to Completion, the Seller will procure that any Inter Company Debt owing to or by the Company is satisfied or otherwise extinguished, including but not limited to those Inter Company Debts listed in schedule 12. The Seller will provide evidence to the Buyer of any such satisfaction of debt on or prior to Completion. 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that the Company provides the Seller with access to such employees and records of the Company as the Seller reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of the Company relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favor of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favor of the Buyer on and subject to the terms set out in the Co-ordination Agreement. page 9 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favor of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 9 COMPETITION 9.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in the United States of America: (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a director, employee or agent of the Company to leave the employment or agency of the Company; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Company with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the Company and its clients, customers, employees or suppliers. 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavors to dispose of the competing business or its interest in the business within 12 months after its acquisition. 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Related Corporations from: page 10 (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognized Stock Exchange. 9.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 9 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavors to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company after Completion. 11 GUARANTEE AND INDEMNITY 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or page 11 demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 11 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Principal under this agreement have been performed. 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. page 12 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. page 13 SCHEDULE 1 - SHARE DETAILS PART 1 - SELLER Pacific Dunlop Holdings (USA) Inc. PART 2 - BUYER PB Holdings NV of 1170 Brussels, Terhulpsesteenweg 166 PART 3 - GUARANTOR Pacific Dunlop Limited ABN 89 004 085 330 of Level 3, 678 Victoria Street, Richmond, Victoria 3121 PART 4 - COMPANY PacBrands USA Inc PART 5 - SHARES
SHARES LEGALLY SHARES HELD ON PLACE OF AUTHORISED ISSUED OWNED BY BEHALF OF THE COMPANY INCORPORATION CAPITAL CAPITAL SELLER SELLER ------------------------------------------------------------------------------------------------- PacBrands USA Inc State of US$1000 (1000 100 100 held by Nil Delaware, @ US$1 per Seller United States share) of America
PART 6 - BUSINESS Distribution and sale of thermal underwear page 14 SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORIZED The Buyer has taken all necessary action to authorize the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorization, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up or dissolution resolution. 5 NO PETITION No voluntary or involuntary petition in bankruptcy or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 15 7 NO RECEIVER OR ADMINISTRATOR No receiver of any part of the undertaking or assets of the Buyer has been appointed. 8 KNOWLEDGE OF BUYER Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 16 PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORIZED The Seller has taken all necessary action to authorize the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer (except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorization, ruling, judgment, order or decree of any Governmental Agency; (b) the Certificate of Incorporation and By-laws of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER The Company: (a) is validly existing and in good standing; (b) is accurately described in part 4 of schedule 1; (c) has full corporate power to own its properties, assets and businesses and to carry on the Business; and (d) has good and marketable title to all the assets included in the Accounts. 1.5 CERTIFICATE OF INCORPORATION The copy of the Certificate of Incorporation and By-laws of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 17 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Company has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORIZATIONS The Company holds all necessary material Authorizations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. 3.2 ISSUED CAPITAL The Shares are all the issued shares in the capital of the Company and were validly issued by the Company. 3.3 FULLY PAID The Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES The Company is not under any obligation to issue or allot, and has not granted any person any option, warrant, purchase right, or other contract or commitment to issue any shares or other securities of the Company which is still current and subsisting. 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date the Company has not: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; page 18 (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in the Company; (k) altered its Certificate of Incorporation or By-laws; (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) there has been no change in the accounting policies, practices and principles of the Company, except, in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 SUPPLIERS/CUSTOMERS Since the Accounts Date: (a) none of the following suppliers of the Business: Kuehne & Nahgel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or (3) materially altered the terms on which it trades with the Company; or (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: (1) reduced the level of its custom from the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or page 19 (3) materially altered the terms on which it trades with the Company. 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Company; and (b) the absolute property of the Company free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Company but are not owned by the Company are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT All Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, the Company owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. page 20 7.2 OWNERSHIP AND USE (a) The Company is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Company has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Company in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a licensee of the Company disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Company of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Company has infringed or is infringing the intellectual property rights of a third party. 7.5 DISPUTES The Company is not currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Company in connection with the use of any Intellectual Property Rights. 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business and the Company has received no notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. page 21 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the Company. 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Company's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by the Company of more than $1,000,000; (f) are distribution or agency agreements; and (g) entitle the other party to terminate the contract or impose terms less favourable to the Company due to the sale of the Shares. 9.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the Company relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which the Company is a party, or that the Company has an interest in enforcing have been paid or are provided for in the Accounts. page 22 10 PROPERTIES 10.1 COMPANY'S INTEREST The Company has no interest in real property which it uses in the Business except for its interest in the Properties. 10.2 OCCUPATION AND USE The Company has exclusive occupation and quiet enjoyment of the Properties and the Company's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, is subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH The Company has not received a notice of default in respect of any Property which remains outstanding and asserts non-compliance with the lease of that property. 10.4 NO NOTICES The Company has not received any notice from any third party in respect of the Properties: (a) in respect of the condemnation, compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme or zoning ordinance; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 [NOT USED] 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the Company have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the Company in the Properties. 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. page 23 10.9 [NOT USED] 10.10 PROPOSED DISPOSAL The Company is not a party to any outstanding agreement to acquire or dispose of land or Properties or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. 10.13 ASSIGNMENT Neither the Company nor the Seller: (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by the Company in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 12 SHAREHOLDINGS The Company is not the holder or beneficial owner of any shares or other securities in any company. 13 MEMBERSHIPS The Company is not a member of any joint venture, partnership or unincorporated association (other than a recognized trade association). page 24 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the Company's employees employed in the Business as at the date indicated in the schedule and the Buyer has been given all material details of their employment benefits. 14.2 INCENTIVE PLANS The Company has not agreed to any share incentive plan, share option plan, bonus plan, profit-sharing plan or other employee incentive plan in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS The Company is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 14.4 MANAGEMENT AGREEMENTS The Company does not have any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. 14.5 DISPUTES The Company is not involved in any material dispute with any employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE The Company is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE The 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 leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company. page 25 15 [NOT USED] 16 LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION The Company is not: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP The Company has not undergone voluntary or involuntary liquidation or dissolution under the General Corporation Law of Delaware. 18.2 NO PETITION No voluntary or involuntary petition in bankruptcy or other process for winding-up has been presented or threatened against the Company and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against the Company. 18.4 NO RECEIVER OR ADMINISTRATOR No receiver of any part of the Company's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS The Company: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of the General Corporation Law of Delaware; and page 26 18.6 LIQUIDATION The Seller has not gone into liquidation under the General Corporation Law of Delaware nor been removed from the register of companies in the United States of America. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. 19 INSURANCE 19.1 POLICIES Those assets of the Company which are of an insurable nature are insured by the Company against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller or the Company, that data was, so far as the Seller is aware, true and correct in all material respects. 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 4 to 12 to this agreement are complete and accurate in all material respects and not misleading. page 27 21 BUSINESS RECORDS The Business Records are in the Company's possession or control and will be maintained by the Company in accordance with its usual practice pending Completion. 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of the Company which has become due for payment has been paid. 22.2 SINCE ACCOUNTS DATE The conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. 22.3 PROVISION IN ACCOUNTS Adequate provision has been made in the Accounts for any Tax on the Company which is payable or may become payable in respect of any transaction or income occurring or arising before the Accounts Date but which was unpaid as at the Accounts Date. 22.4 WITHHOLDING TAX Any obligation of the Company under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS The Company has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. 22.6 RETURNS SUBMITTED The Company has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to the Company. 22.7 RETURNS ACCURATE Any information, notice, computation, return, declaration or election which has been submitted by the Company to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. page 28 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by the Company in respect of any Tax or Duty which have been supplied to the Buyer by the Seller are true copies of the originals. 22.9 NO DISPUTES The Company is not currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of the Company ceasing or being entitled to substantially reduce its level of business with the Company. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which the Company is a party; (b) relieve any person from any obligation to the Company; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on the Company, its assets or undertaking; or (d) result in any indebtedness of the Company becoming due and payable. page 29 25 TRADE PRACTICES So far as the Seller is aware, neither the Company nor any of its officers or employees has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the legislation applicable in the United States of America which regulates trade practices matters. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS The Company will not have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. page 30 SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. SELLER WARRANTY NUMBER MATTER DISCLOSED page 31 SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS PART 1 - INTELLECTUAL PROPERTY RIGHTS OWNED BY THE COMPANY PART 2 - LICENSES TO THE COMPANY TO USE INTELLECTUAL PROPERTY RIGHTS License Agreement between Jockey International Inc and Pac Brands USA Inc dated 12 March 1999. PART 3 - LICENSES GIVEN BY THE COMPANY TO USE ITS INTELLECTUAL PROPERTY RIGHTS page 32 SCHEDULE 5 - [NOT USED] page 33 SCHEDULE 6 - CONTRACTS PART 1 - CONTRACTS Oral Agency Agreements between PacBrands USA Inc and the following agents: . Mel Kramer; . Gene Beileer; . Carole Mayashida; . Rich Levy; and . Dennis Murphy, to use the trade marks Jockey, Hot Bods and Housebrands. PART 2 - FOREIGN EXCHANGE CONTRACTS page 34 SCHEDULE 7 - GUARANTEES page 35 SCHEDULE 8 - EMPLOYEES Allan Mackey Robyn Simon Junoir Zamora page 36 SCHEDULE 9 - PLANT AND EQUIPMENT page 37 SCHEDULE 10 - ASSETS LEASES page 38 SCHEDULE 11 - PROPERTIES Suite B, 2990 Redhill Avenue, Costa Mesa, California, USA. page 39 SCHEDULE 12 - INTER COMPANY DEBT page 40 EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Holdings (USA) Inc by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ----------------------------------- --------------------------------- Witness Attorney - ----------------------------------- --------------------------------- Name (please print) Name (please print) Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - ----------------------------------- --------------------------------- Witness Attorney Paul Devereux Carly Mansell - ----------------------------------- --------------------------------- Name (please print) Name (please print) Signed for and on behalf of: PB Holdings NV by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ----------------------------------- --------------------------------- Witness Attorney - ----------------------------------- --------------------------------- Name (please print) Name (please print) /s/ /s/ - ----------------------------------- --------------------------------- Witness Attorney - ----------------------------------- --------------------------------- Name (please print) Name (please print) page 41 EX-4.11 14 dex411.txt SHARE SALE AGREEMENT, BONDS INDUSTRIES LIMITED EXHIBIT 4.11 SHARE SALE AGREEMENT BONDS INDUSTRIES LIMITED Pacific Dunlop Limited and Pacific Brands Holdings Pty Ltd PB Holdings NV [LOGO OF FREEHILLS] 101 Collins Street Melbourne Victoria 3000 Australia Telephone 61 3 9288 1234 Facsimile 61 3 9288 1567 www.freehills.com.au DX240 Melbourne SYDNEY MELBOURNE PERTH CANBERRA BRISBANE HANOI HO CHI MINH CITY SINGAPORE Correspondent Offices JAKARTA KUALA LUMPUR Liability limited by the Solicitors' Limitation of Liability Scheme, approved under the Professional Standards Act 1994 (NSW) Reference NJW:BAE TABLE OF CONTENTS Clause Page 1 Definitions and interpretation 1 1.1 Definitions 1 1.2 Interpretation 5 1.3 Business Day 6 1.4 Conflict 6 2 Sale and purchase 6 2.1 Sale of shares 6 2.2 Associated rights 6 3 Purchase Price 7 3.1 Amount 7 3.2 Payment at Completion 7 3.3 Final payment 7 4 Completion 7 4.1 Date for Completion 7 4.2 Delivery of documents 7 4.3 Board meetings 8 4.4 Buyer's obligations at completion 8 4.5 Interdependence 8 4.6 Conduct until Shares are registered 9 5 Before Completion 9 5.1 Carrying on Business 9 5.2 Treatment of Cash in Hand 10 5.3 Inter Company Debt 10 5.4 Strategic Investment Programme 10 6 After Completion 10 6.1 Obligations relating to Taxes or Duties 10 6.2 Consultation 10 6.3 Indemnity 10 7 Warranties 11 8 Limitation of liability 11 9 Competition 11 9.1 Undertaking 11 9.2 Acquisition of interests in competing Businesses 11 9.3 Exclusion from restraint 12 9.4 Related Corporations 12 9.5 Severability 12 10 Release of guarantees 12 11 Guarantee and indemnity - Seller 13 11.1 Guarantee 13 11.2 Indemnity 13 11.3 Extent of guarantee and indemnity 13 page 1 11.4 Continuing guarantee and indemnity 13 11.5 Warranties of the Guarantor 14 11.6 Rights 14 12 Guarantee and Indemnity - Buyer 14 12.1 Guarantee 14 12.2 Indemnity 14 12.3 Extent of guarantee and indemnity 14 12.4 Continuing guarantee and indemnity 15 12.5 Warranties of the Buyer Guarantor 15 12.6 Rights 15 13 Superannuation 15 13.1 Membership of Buyer's Fund 15 13.2 Transfer 16 13.3 Calculation of Accrued Benefit Values 16 13.4 Payment of Accrued Benefit Values 17 13.5 Undertakings by Buyer and Seller 18 Schedule 1 - Share Details 20 Schedule 2 - Warranties 21 1 Buyer Authorised 21 Schedule 3 - Disclosure Schedule 37 Schedule 4 - Intellectual Property Rights 38 Schedule 5 - Superannuation Funds 39 Schedule 6 - Contracts 40 Schedule 7 - Guarantees 41 Schedule 8 - Employees 42 Schedule 9 - Plant and Equipment 43 Schedule 10 - Assets Leases 44 Schedule 11 - Properties 45 Schedule 12 - Inter Company Debts 46 page 2 THIS SHARE SALE AGREEMENT is made on 2001 between the parties specified in parts 1, 2 and 3 of schedule 1. RECITALS A. The Seller is the owner of the Shares. B. The Seller agrees to sell and the Buyer agrees to buy the Shares on the terms and conditions set out in this agreement. C. The Guarantor agrees to guarantee the performance by the Seller of its obligations pursuant to this agreement. D. The Buyer Guarantor agrees to guarantee the performance by the Buyer of its obligations pursuant to this agreement. THE PARTIES AGREE in consideration of, among other things, the mutual promises contained in this agreement: 1 DEFINITIONS AND INTERPRETATION 1.1 DEFINITIONS In this agreement: Accounting Standards has the meaning given to that term in the Co-ordination Agreement; Accounts has the meaning given to that term in the Co-ordination Agreement; Accounts Date means 30 June 2001; Accrued Benefit Value means the total amount accumulated or accrued in respect of a Member under the governing rules of the Seller's Fund as at the Completion Date, calculated in accordance with clause 13.3; Apportionment Statement has the meaning given to that term in the Co-ordination Agreement; Assets Leases means all leases, hire purchase agreements, conditional purchase agreements and other hiring arrangements to which the Company is party including, but not limited to, those listed in schedule 10, but excludes leases in relation to the Leased Properties; Authorisation means any consent, registration, agreement, certificate, licence, approval, permit, authority or exemption from, by or with a Governmental Agency; Business means the business carried on by the Company as more particularly described in part 6 of schedule 1; page 1 Business Day means a day on which banks are open for business in Melbourne, Sydney and Auckland excluding a Saturday or a Sunday or a public holiday; Business Records means, the Company's customer lists and supplier lists, records of Intellectual Property Rights, Assets Leases, Contracts and Properties; Buyer means the company specified in part 2 of schedule 1; Buyer Group Companies has the meaning given to that term in the Co-ordination Agreement; Buyer Guarantor means the company specified in part 8 of schedule 1; Buyer's Fund means the Buyer's superannuation fund established or nominated by the Buyer for the purpose of clause 13; Buyer's Warranties means the warranties set out in part 1 of schedule 2; Cash in Hand means the amount of cash at bank on deposit or at hand in the Company; Claim means any claim or any course of action (including, but not limited to, in contract, in tort or under statute) in respect of this agreement; Company means the company specified in part 4 of schedule 1; Completion means completion of the sale and purchase of the Shares under clause 4; Completion Date has the meaning given to that term in the Co-ordination Agreement; Completion Statement has the meaning given to that term in the Co-ordination Agreement; Conditions has the meaning given to that term in the Co-ordination Agreement; Contracts means the agreements to which the Company is a party to the extent they relate to the Business and which are, wholly or partly, executory as at the Completion Date, including, but not limited to, those listed in part 1 of schedule 6, but excludes: (a) the Assets Leases; and (b) leases in relation to the Leased Properties; Co-ordination Agreement means the Co-ordination Agreement executed on the same day as this agreement by, among others, the Seller and the Buyer; Dollars, A$ and $ means Australian dollars; Duty means any stamp, transaction or registration duty or similar charge imposed by any Governmental Agency and includes, but is not limited to, any interest, fine, penalty, charge or other amount imposed in respect of the above, but excludes any Tax; Effective Time has the meaning given to that term in the Co-ordination Agreement; page 2 Employees means an employee of the Company listed in schedule 8 who is still employed in the Business as at the Completion Date; Encumbrance means any mortgage, charge, lien, pledge, other security interest or encumbrance (other than liens arising in the ordinary course of business by operation of law and title retention in respect of stock-in-trade); Environmental Law has the meaning given to that term in the Co-ordination Agreement; External Funds means the superannuation schemes listed in part 2 of schedule 5; Foreign Exchange Contracts means all foreign exchange hedging contracts entered by the Seller which relate exclusively to the Business which remain current as at Completion, details of which will be provided to the Buyer at the date of this agreement and at Completion; Freehold Properties means the freehold land owned by the Company and more particularly described in part 1 of schedule 11; Governmental Agency means any government or any governmental, semi-governmental, administrative, fiscal or judicial body, department, commission, authority, tribunal, agency or entity in any part of the world; Guarantees means the guarantees and other letters of comfort and commitments of financial support given by the Seller and its Related Corporations in relation to the Business which remain in force at the date of this agreement, including but not limited to, as listed in schedule 7; Guarantor means the company specified in part 3 of schedule 1; Intellectual Property Rights means the rights and interests of the Company in the internet domain names, trademarks, patents, copyrights and designs listed in schedule 4; Inter Company Debt means any amount owing (including trade accounts payable and receivable): (a) by the Company to a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business); or (b) by a member of the PDL Group (except in that member's capacity as an entity carrying on any part of the Pacific Brands Business) to the Company, immediately before Completion; Interest Rate means the average rate displayed on the Reuters Page BBSW for 90 day bank bills at 10:10 am Melbourne time applicable to each Business Day on which amounts are outstanding as confirmed by Westpac Banking Corporation and on the basis that for a day other than a Business Day the rate applicable to the last preceding Business Day will apply; Leased Properties means the properties leased under the Property Leases; Linked Transaction Agreements has the meaning given to that term in the Co-ordination Agreement; page 3 Loss includes any damage, loss, claim, action, liability, cost, expense, outgoing or payment; Member means an Employee who is a member of the Seller's Fund immediately before the Completion Date; Pacific Brands Business has the meaning given to that term in the Co-ordination Agreement; Payment Date has the meaning given to that term in the Co-ordination Agreement; PDL Group means Pacific Dunlop Limited ABN 89 004 085 330 and its Related Corporations, immediately before Completion; Plant and Equipment means the plant, equipment, machinery, tools, furniture, fittings, lease hold improvements and motor vehicles owned by the Company as at Completion and used exclusively in the Business including, without limitation, those listed in schedule 9; Power means any right, power, authority, discretion or remedy conferred on the parties by this agreement or any applicable law; Properties means the Leased Properties and the Freehold Properties; Property Leases means the leases of real property listed in part 2 of schedule 11; Purchase Price means the price payable for the Shares under clause 3.1; Records means all original and copy records, documents, books, files, reports, accounts, plans, correspondence, letters and papers of every description and other material regardless of their form or medium and whether coming into existence before, on or after the date of this agreement, belonging or relating to or used by the Company including (without limitation) certificates of registration, minute books, statutory books and registers, books of account, Tax returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Related Corporation means a "related body corporate" as defined in the Corporations Act; Seller means the company specified in part 1 of schedule 1; Seller Group Companies has the meaning given to that term in the Co-ordination Agreement; Seller's Actuary means a qualified actuary nominated by the Seller for the purposes of clause 13.3; Seller's Fund means the superannuation fund listed in part 1 of schedule 5; Seller's Warranties means the warranties set out in part 2 of schedule 2; Shares means all the issued shares in the capital of the Company, as specified in part 5 of schedule 1; SIP Registrations means the registrations of the Company for the financial years ended 2001 and 2002 under the SIP Scheme; page 4 SIP Scheme means the Textile, Clothing and Footwear Strategic Investment Program Scheme 1999 made under section 8 of the Textile, Clothing and Footwear Strategic Investment Program Act 1999 (Cwth); Stock means the stock of the Business owned by the Company as at Completion and includes, but is not limited to, raw materials, components, work in progress, finished goods, packaging materials, promotional materials, spare parts and other consumables; Tangible Assets means Plant and Equipment and Stock; Tax means any tax, levy, charge, impost, duty, fee, deduction, compulsory loan or withholding, which is assessed, levied, imposed or collected by any Governmental Agency and includes, but is not limited to any interest, fine, penalty, charge, fee or any other amount imposed on, or in respect of, any of the above but excludes Duty; Tax Law means any law relating to Tax; Transfer Date means: (a) the date agreed by the Seller and the Buyer for this purpose, not being earlier than the Completion Date; or (b) if the Buyer and Seller do not agree a date for the purposes of paragraph (a) of this definition within one month of the Completion Date, the date which is three months after the Completion Date; and Warranties means the Buyer's Warranties and the Seller's Warranties. 1.2 INTERPRETATION In this agreement, unless the context otherwise requires: (a) headings and underlinings are for convenience only and do not affect the interpretation of this agreement; (b) words importing the singular include the plural and vice versa; (c) words importing a gender include any gender; (d) other clauses of speech and grammatical forms of a word or phrase defined in this agreement have a corresponding meaning; (e) an expression importing a natural person includes any company, partnership, joint venture, association, corporation or other body corporate and any Governmental Agency; (f) a reference to a part, clause, party, annexure or schedule is a reference to a clause and part of, and a party, annexure and schedule to this agreement and a reference to this agreement includes any annexure 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, and a reference to a statute page 5 includes all regulations, proclamations, ordinances and by-laws issued under that statute; (h) a reference to a document includes all amendments or supplements to, or replacements or novations of, that document; (i) a reference to a party to a document includes that party's successors and permitted assigns; (j) 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 following Business Day; (k) no rule of construction applies to the disadvantage of a party because that party was responsible for the preparation of this agreement or any part of it; (l) if a covenant, undertaking, representation, warranty, indemnity or agreement is made or given by two or more parties, that covenant, undertaking, representation, warranty, indemnity or agreement is made or given and binds those parties jointly and severally; and (m) if a party comprises two or more persons, a covenant, undertaking, representation, warranty, indemnity or agreement made or given by that party binds those persons jointly and severally. 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 next Business Day. 1.4 CONFLICT If there is any conflict or inconsistency between anything contained in this agreement and anything contained in the Co-ordination Agreement, then the Co-ordination Agreement will prevail. 2 SALE AND PURCHASE 2.1 SALE OF SHARES Subject to the Conditions having been fulfilled or waived in accordance with the Co-ordination Agreement, the Seller will sell and the Buyer will buy the Shares for the Purchase Price free of Encumbrances and other third party rights on Completion. 2.2 ASSOCIATED RIGHTS The Shares will be transferred under this agreement with all rights attached or accruing to them on and from the Effective Time. The Buyer is not entitled to the rights attached to the Shares as at the date of this agreement or to any rights which accrue between the date of this agreement and the Effective Time, including dividend rights. page 6 3 PURCHASE PRICE 3.1 AMOUNT The Purchase Price is the value ascribed to the Company in the Apportionment Statement in accordance with the terms of the Co-ordination Agreement. 3.2 PAYMENT AT COMPLETION It is acknowledged that under the Co-ordination Agreement, an amount must be paid at Completion by the Buyer to Pacific Dunlop Limited (or as otherwise directed by it) on behalf of the Seller. 3.3 FINAL PAYMENT On the Payment Date, the Buyer or the Seller, as appropriate, must pay to the other any net amount plus interest on the amount which may be payable in accordance with the provisions of the Co-ordination Agreement. 4 COMPLETION 4.1 DATE FOR COMPLETION Completion must take place on the Completion Date, subject to and as provided for in the Co-ordination Agreement. 4.2 DELIVERY OF DOCUMENTS At Completion, the Seller must deliver to the Buyer: (a) original share certificates for the Shares; (b) duly completed transfers of the Shares to the Buyer in registrable form, executed by the Seller; (c) duly executed releases of all guarantees that have been obtained in accordance with clause 10; (d) the original certificate of incorporation or registration of the Company; (e) all original documents of title in relation to the Freehold Properties and Intellectual Property Rights; (f) the written resignations of all directors and the secretary of the Company (including a written acknowledgment that he or she has no Claim against the Company for loss of office, breach of contract, redundancy, compensation, payment or repayment of loans or otherwise, except for payments properly payable as an employee for accrued salary, holiday pay and long service leave up to the Completion Date) except Rick Rostolis and Stephen James Tierney, to be effective on the appointment of the directors to be appointed at the Board meetings to be convened under clause 4.3; page 7 (g) evidence that the Company has transferred its shares in Mt Waverley Estates Pty Ltd ACN 004 552 694 to a member of the PDL Group which is not being sold as part of the sale of the Pacific Brands Business; (h) any power of attorney or other authority under which the transfers of the Shares are executed; (i) duly executed instruments irrevocably waiving in favour of the Buyer all rights of pre-emption which any person has in respect of any of the Shares; and (j) all Records, which must be complete and up to date (by constructive delivery at the Company's premises). 4.3 BOARD MEETINGS At Completion, the Seller must ensure that a meeting of the directors of the Company is convened and conducts the following business: (a) approval of the registration of the Buyer as the holder of the Shares in the books of the Company; (b) appointment of the nominees of the Buyer as directors of the Company; (c) alteration of the registered office of the Company to a registered office nominated by the Buyer; and (d) revocation of all existing mandates for the operation of bank accounts of the Company and approval of new mandates in favour of the officers of the Company nominated by the Buyer. 4.4 BUYER'S OBLIGATIONS AT COMPLETION At Completion the Buyer must: (a) pay the Seller an estimate of the Purchase Price in accordance with clause 3.2; (b) execute the transfers of Shares delivered by the Seller pursuant to clause 4.2(b); (c) deliver to the Seller written consents to act from the persons nominated by the Buyer as the directors and secretary of the Company; and (d) deliver to the Seller evidence obtained by it that it has replaced the Guarantee as required under clause 10(c). 4.5 INTERDEPENDENCE (a) Notwithstanding any provision of a Linked Transaction Agreement but subject to clause 4 of the Co-ordination Agreement, the obligations of the parties to the Linked Transaction Agreements in respect of completion (as defined in each Linked Transaction Agreement) are interdependent. (b) Subject to clause 4 of the Co-ordination Agreement, all actions at Completion under this agreement and completion under each other Linked Transaction Agreement will be deemed to take place simultaneously and page 8 no delivery or payment will be deemed to have been made until all deliveries and payments under the Linked Transaction Agreements due to be made at or immediately after completion (as defined in each Linked Transaction Agreement) have been made. (c) A breach of this agreement by any party to this agreement is deemed to constitute a breach by the defaulting party of each Linked Transaction Agreement to which the defaulting party is a party. 4.6 CONDUCT UNTIL SHARES ARE REGISTERED After Completion and until the Shares are registered in the name of the Buyer or its nominee, the Seller must take all action lawfully required by the Buyer by written notice to the Seller to vote on any resolutions of the Company as the Buyer directs. 5 BEFORE COMPLETION 5.1 CARRYING ON BUSINESS The Seller will procure that the Company uses all reasonable endeavours to ensure that between the date of this agreement and Completion, subject to clauses 5.2 and 5.3, the Business is conducted in the ordinary course of business and that the Company does not: (a) enter into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquire or dispose of any assets other than on arm's length terms in the ordinary course of business; (c) make any material change to its policy and practice as to payment of creditors and collection of trade receivables; (d) engage any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminates the employment of any of its employees or changes in any material respect the terms of employment (including remuneration); (e) sell or agree to sell any fixed asset with a value of more than $250,000 or buy or commit to buy any fixed asset with a value of more than $250,000; (f) create any Encumbrance over any of its assets; (g) incur any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (h) distribute or return any capital to its members; (i) pay any dividend to its members or pay any management fee or similar amount; (j) issue any shares, options or securities which are convertible into shares in the Company; and page 9 (k) alter its constitution, unless the Buyer first consents in writing, which must not be unreasonably withheld or delayed. 5.2 TREATMENT OF CASH IN HAND (a) At any time before Completion, the Seller may arrange for any Cash in Hand held by the Company to be removed in any manner selected by the Seller. (b) Any Cash in Hand held by the Company as at the Effective Time, will be included in the Completion Statement. 5.3 INTER COMPANY DEBT The Buyer acknowledges that prior to Completion, the Seller will procure that any Inter Company Debt owing to or by the Company is satisfied or otherwise extinguished, including but not limited to those Inter Company Debts listed in schedule 12. The Seller will provide evidence to the Buyer of any such satisfaction of debt on or prior to Completion. 5.4 STRATEGIC INVESTMENT PROGRAMME The parties acknowledge that their respective entitlements to receive the benefit of any amounts received under the SIP Scheme in respect of the SIP Registrations, are set out in the Co-ordination Agreement. 6 AFTER COMPLETION 6.1 OBLIGATIONS RELATING TO TAXES OR DUTIES After Completion, the Buyer must procure that the Company provides the Seller with access to such employees and records of the Company as the Seller reasonably requires to meet its obligations under any law relating to Tax or Duty provided such access is exercised and conducted in a manner to avoid unreasonable disruption to the conduct of the Business and the activities and operations of the Company and its employees. 6.2 CONSULTATION If any Governmental Agency conducts an audit in relation to the affairs of the Company relating to any period prior to the Completion Date then the Buyer must procure that the Seller is promptly notified of this and that the Seller is then regularly consulted with in relation to the audit process until resolved. 6.3 INDEMNITY The Seller indemnifies and holds the Buyer harmless from and against all reasonable costs and expenses associated with the claim against the Company described as the Footwear Import Group/Loscam Pallet claim, details of which are page 10 contained in the Data Room (Footwear Import Group Folder, section 4.1, document 100426). 7 WARRANTIES (a) The Buyer gives the Buyer's Warranties in favour of the Seller on and subject to the terms set out in the Co-ordination Agreement. (b) The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the terms set out in the Co-ordination Agreement. 8 LIMITATION OF LIABILITY The Seller gives the Seller's Warranties in favour of the Buyer on and subject to the limitations on liability set out in the Co-ordination Agreement. 9 COMPETITION 9.1 UNDERTAKING In consideration for the respective promises of the Seller and the Buyer to each other in this agreement, the Seller undertakes to the Buyer that it will not for a period of 5 years, 4 years, 3 years, 2 years or 1 year after the Completion Date in Australia. (a) engage in any business or activity which is the same as or substantially similar to or competitive with, the Business or any material part of it; (b) solicit, canvass, induce or encourage any person who was at any time during the 6 months period ending on the Completion Date a director, employee or agent of the Company to leave the employment or agency of the Company; (c) solicit, canvass, approach or accept any approach from any person who was at any time during the 6 months period ending on the Completion Date, a client or customer of the Company with a view to obtaining the custom of that person in a business which is the same as or substantially similar to or competitive with, the Business; or (d) interfere with the relationship between the Company and its clients, customers, employees or suppliers. 9.2 ACQUISITION OF INTERESTS IN COMPETING BUSINESSES Clause 9.1 does not prevent the Seller or any of its Related Corporations from acquiring an interest, directly or indirectly, in a business in competition with the Business in the area referred to in that clause if: page 11 (a) the acquisition of the interest in the competing business occurs as a result of or in conjunction with an acquisition of an interest, directly or indirectly, in other assets; (b) the value of the competing business is not more than 15% of the value of the acquisition taken as a whole; and (c) the Seller or the relevant Related Corporation uses its best endeavours to dispose of the competing business or its interest in the business within 12 months after its acquisition. 9.3 EXCLUSION FROM RESTRAINT This clause 9 does not restrict the Seller or any of its Related Corporations from: (a) continuing to carry on any business (other than the Business) carried on at the date of this agreement; or (b) holding less than 5% of the issued share capital of a company listed on a recognised Stock Exchange. 9.4 RELATED CORPORATIONS The Buyer agrees that the provisions of this clause 9 only apply to the Related Corporations of the Seller for so long as those entities remain Related Corporations of the Seller. 9.5 SEVERABILITY (a) If any of the several separate and independent covenants and restraints in clause 9.1 are or become invalid or unenforceable for any reason, then that invalidity or unenforceability will not affect the validity or enforceability of any of the other separate and independent covenants and restraints in clause 9.1. (b) If any of the prohibitions or restrictions contained in this clause 9 is judged to go beyond what is reasonable in the circumstances and necessary to protect the goodwill of the Company, but would be judged reasonable and necessary if any activity were deleted or the period or area were reduced, then the prohibitions or restrictions apply with that activity deleted or that period or area reduced by the minimum amount necessary. 10 RELEASE OF GUARANTEES (a) The Buyer must use its best endeavours to secure the release of the Seller or any Related Corporation of the Seller from any Guarantee or Encumbrance provided in relation to the Business, effective from Completion. (b) If the Buyer is unable to secure the release under clause 10(a), then the Buyer must pay the Seller an amount equal to any Loss which the Seller or any Related Corporation of the Seller pays, suffers, incurs, or is liable for page 12 in relation to any Guarantee or Encumbrance referred to in clause 10(a) which relates to any act or omission of the Company after Completion. (c) In the case of the Guarantee provided in favour of the WorkCover Authority of New South Wales (Authority), the Buyer agrees to procure the replacement of that Guarantee by a Related Corporation acceptable to the Authority and in accordance with the requirements of the Authority, at or as soon as practicable after Completion. 11 GUARANTEE AND INDEMNITY - SELLER 11.1 GUARANTEE The Guarantor unconditionally and irrevocably guarantees to the Buyer the due and punctual performance of the Seller's obligations under this agreement. 11.2 INDEMNITY The Guarantor indemnifies and holds the Buyer harmless from and against all Loss incurred or suffered by the Buyer and all actions, proceedings, claims or demands made against the Buyer as a result of default by the Seller in the performance of any such obligation. 11.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 11 applies: (1) to the present and future obligations of the Seller under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Guarantor under this clause 11 extend to any change in the obligations of the Seller as a result of any amendment, supplement, renewal or replacement of this agreement. (c) This clause 11 is not affected, nor are the obligations of the Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 11 applies: (1) regardless of whether the Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Buyer and the Seller are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 11.4 CONTINUING GUARANTEE AND INDEMNITY This clause 11 is a continuing obligation of the Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Seller under this agreement have been performed. page 13 11.5 WARRANTIES OF THE GUARANTOR The Guarantor represents and warrants to the Buyer that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Guarantor is a party or which is binding on it. 11.6 RIGHTS The Guarantor waives any right it has of first requiring any of the Buyer Group Companies to commence proceedings or enforce any other right against the Seller or any of the Seller Group Companies or any other person before claiming under this clause 11. 12 GUARANTEE AND INDEMNITY - BUYER 12.1 GUARANTEE The Buyer Guarantor unconditionally and irrevocably guarantees to the Seller the due and punctual performance of the Buyer's obligations under this agreement. 12.2 INDEMNITY The Buyer Guarantor indemnifies and holds the Seller harmless from and against all Loss incurred or suffered by the Seller and all actions, proceedings, claims or demands made against the Seller as a result of default by the Buyer in the performance of any such obligation. 12.3 EXTENT OF GUARANTEE AND INDEMNITY (a) This clause 12 applies: (1) to the present and future obligations of the Buyer under this agreement; and (2) to this agreement, as amended, supplemented, renewed or replaced. (b) The obligations of the Buyer Guarantor under this clause 12 extend to any change in the obligations of the Buyer as a result of any amendment, supplement, renewal or replacement of this agreement. page 14 (c) This clause 12 is not affected, nor are the obligations of the Buyer Guarantor under this agreement released or discharged or otherwise affected, by anything which, but for this provision, might have that effect. (d) This clause 12 applies: (1) regardless of whether the Buyer Guarantor is aware of, or has consented to, or is given notice of, any amendment, supplement, renewal or replacement of any agreement to which the Seller and the Buyer are a party or the occurrence of any other thing; and (2) irrespective of any rule of law or equity to the contrary. 12.4 CONTINUING GUARANTEE AND INDEMNITY This clause 12 is a continuing obligation of the Buyer Guarantor despite any settlement of account and remains in full force and effect until the obligations of the Buyer under this agreement have been performed. 12.5 WARRANTIES OF THE BUYER GUARANTOR The Buyer Guarantor represents and warrants to the Seller that: (a) it has the corporate power to enter into this guarantee and indemnity and has taken all necessary action to authorise the execution, delivery and performance of this agreement; (b) the execution, delivery and performance of this guarantee and indemnity will not violate any provision of: (1) any law or regulation or any order or decree of any Governmental Agency of the Commonwealth of Australia or any state or territory; (2) the constitution of the Buyer Guarantor; or (3) any security agreement, deed, contract, undertaking or other instrument to which the Buyer Guarantor is a party or which is binding on it. 12.6 RIGHTS The Buyer Guarantor waives any right it has of first requiring any of the Seller Group Companies to commence proceedings or enforce any other right against the Buyer or any of the Buyer Group Companies or any other person before claiming under this clause 12. 13 SUPERANNUATION 13.1 MEMBERSHIP OF BUYER'S FUND Within three months (or any longer period agreed between the Buyer and the Seller) after the Completion Date, the Buyer will ensure that each Member becomes a member of the Buyer's Fund in accordance with clause 13.2 with effect from the Completion Date on terms and conditions which provide: page 15 (a) in respect of the period after the Completion Date, benefits in respect of each Member which in the aggregate are of amounts and payable on conditions no less favourable than those that would have been provided in respect of the Member under the governing rules of the Seller's Fund in force on the Completion Date; and (b) that the Accrued Benefit Value of each Member transferred to the Buyer's Fund in accordance with clause 13.2 will be: (1) a fully vested benefit equal to the Member's Accrued Benefit Value and adjusted to take account of the earnings and expenses of the Buyer's Fund after the date that the Accrued Benefit Value is transferred to the Buyer's Fund; (2) taken account of in another manner that complies with the "successor fund" requirements of the Superannuation Industry (Supervision) Act 1993 (where the transfer under clause 13.2 occurs by way of successor fund transfer), in which case the requirements of clause 12.1(a) are deemed to be satisfied; or (3) taken account of in the Buyer's Fund in a manner agreed to by the Member. 13.2 TRANSFER The Seller must use its best endeavours to ensure that the trustee of the Seller's Fund transfers each Member's Accrued Benefit Value from the Seller's Fund to the Buyer's Fund (either on the basis of obtaining the consent of each Member or on a "successor fund" basis in accordance with the Superannuation Industry (Supervision) Act 1993). 13.3 CALCULATION OF ACCRUED BENEFIT VALUES (a) CALCULATED BY SELLER'S ACTUARY The Seller will use all reasonable endeavours to procure that the Accrued Benefit Values of Members will be calculated by the Seller's Actuary as at the Completion Date in accordance with this clause 13.3 and the calculations of the Seller's Actuary will be conclusive and binding on the parties. (b) CALCULATION FOR ACCUMULATION BENEFITS Where the whole of the normal retirement benefit to be provided from the Seller's Fund in respect of a Member under the governing rules of the Seller's Fund is calculated on the basis of the accumulation of amounts paid or credited in respect of the Member with interest or other earnings, the Member's Accrued Benefit Value will be the total amount accumulated in respect of the Member for that purpose under those governing rules as at the Completion Date. (c) CALCULATION FOR DEFINED BENEFITS Where clause 13.3(b) does not apply to a Member, the Member's Accrued Benefit Value as at the Completion Date will be calculated in accordance page 16 with the following formula (subject to a minimum of the benefit which would have become payable to the Member from the Seller's Fund had the Member voluntarily ceased to be an Employee while in good health on the Completion Date): [ABM X FAS X DF] + AC Where: ABM is the benefit multiple accrued in respect of the Member as at the Completion Date in relation to the period before that date for the purpose of calculating the normal retirement benefit to be provided from the Seller's Fund if the Member ceased to be an employee on attaining the normal retirement date in terms of the governing rules of the Seller's Fund, calculated using the defined benefit accrual rate or rates applicable in respect of that period under those governing rules and including any initial retirement benefit multiple granted in respect of the Member upon the Member transferring into the Seller's Fund from another fund or benefit arrangement. FAS is the Member's Final Average Salary (as defined in the governing rules of the Seller's Fund) as at the Completion Date. DF is (1/1.03)/55-age/, where age denotes the Member's age at the Completion Date (and where DF is 1 at age 55 or older). AC is, to the extent that the retirement benefit of the Member under the Seller's Fund is not calculated on a defined benefit basis but on the basis of the accumulation of amounts paid or credited in respect of the Member with interest or other earnings, the total amount accumulated in respect of the Member for that purpose under the governing rules of the Seller's Fund as at the Completion Date. 13.4 PAYMENT OF ACCRUED BENEFIT VALUES (a) The Seller will use all reasonable endeavours to ensure that on or before the day which is 10 Business Days after the later of: (1) the Transfer Date; and (2) the date on which the Accrued Benefit Values of Members have been calculated, the trustee of the Seller's Fund pays the Accrued Benefit Values of Members to the trustee of the Buyer's Fund, adjusted for interest in respect of the period between the Completion Date and the date the amount is paid at the rate which applies under the governing rules of the Seller's Fund as at the date in clause 13.4(a)(2) for the purpose of determining relevant benefits which are payable from the Seller's Fund. page 17 (b) The interest payable under clause 13.4(a) accrues from day to day. (c) The Accrued Benefit Values and any interest payable under clause 13.4(a) will be paid in immediately available funds except to the extent that the trustee of the Buyer's Fund agrees to accept other assets in whole or partial satisfaction of those amounts and, to the extent that the trustee of the Buyer's Fund agrees to accept other assets, the calculation of the relevant amounts under this clause 13.4 will be based on the value of those assets as agreed between the trustee of the Seller's Fund and the Buyer's Fund. 13.5 UNDERTAKINGS BY BUYER AND SELLER (a) SELLER TO PROVIDE INFORMATION The Seller will provide, and will use all reasonable endeavours to ensure that the trustee of the Seller's Fund provides, to the Buyer and to the trustee of the Buyer's Fund any information reasonably required by them to give effect to this clause 13. (b) NO ALTERATION TO BENEFITS As from the date of this agreement the Buyer and the Seller will use all reasonable endeavours to ensure that no action is taken, discretion exercised or omission occurs which would: (1) alter the level of benefits or contributions in respect of a Member under the governing rules of the Seller's Fund from the level applicable immediately before the date of this agreement; (2) alter the rights or liabilities of the Company under the governing rules of the Seller's Fund from those which existed immediately before the date of this agreement; or (3) alter any Accrued Benefit Value, except: (4) to the extent reasonably necessary to secure or better secure a concession or relief in respect of any duty or Tax or to avoid a penalty, detriment or disadvantage under a law affecting the Seller's Fund; or (5) with the consent of the Buyer. (c) LIMITATIONS CONCERNING THE COMPANY'S EMPLOYEES The Buyer and the Seller will use all reasonable endeavours to ensure that: (1) no employee of the Company is admitted as a member of the Seller's Fund after the Completion Date; (2) the Seller and the Company comply with the governing rules of the Seller's Fund at all material times after the date of this agreement; and (3) the Company permanently ceases to contribute to the Seller's Fund in respect of each Employee on the Completion Date. page 18 (d) COMPANY TO PROVIDE INFORMATION The Buyer will provide and will ensure that, after the Completion Date, the Company provides, and will use all reasonable endeavours to ensure that the trustee of the Buyer's Fund provides, to the Seller and to the trustee of the Seller's Fund any information reasonably required by them to give effect to clause 13. (e) BUYER'S FUND GOVERNING RULES The Buyer will use all reasonable endeavours to ensure that the governing rules of the Buyer's Fund contain provisions to the extent necessary to give effect to clause 13. (f) DEATH AND DISABILITY BENEFIT PROTECTIONS (1) The Buyer will secure in respect of each Member a benefit on his or her death or total and permanent disablement while employed by the Buyer or the Company (as applicable) between the Completion Date and the date he or she becomes a member of the Buyer's Fund pursuant to clause 13.1. (2) The amount of the benefit to be provided under clause 13.5(f)(1) must be at least equal to: (A) the value of the benefit which would have been payable from the Seller's Fund if the Member had died or become totally and permanently disabled immediately before the Completion Date, less: (B) amounts paid or payable to or in respect of the Member from the Seller's Fund, as applicable, (whether as a result of the Member's transfer to the Buyer's Fund or the Member's death or total and permanent disablement). (g) BUYER'S FUND TO BE A COMPLYING SUPERANNUATION FUND The Buyer will use all reasonable endeavours to ensure that the Buyer's Fund is a "complying superannuation fund" in terms of Part IX of the Income Tax Assessment Act 1936 (as amended or replaced from time to time). page 19 SCHEDULE 1 - SHARE DETAILS [Schedules 1 and 3-12 to be provided separately] page 20 SCHEDULE 2 - WARRANTIES PART 1 - BUYER'S WARRANTIES 1 BUYER AUTHORISED The Buyer has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms. 2 POWER TO BUY The Buyer has full power to enter into and perform its obligations under this agreement and can do so without the consent of any other person. 3 NO LEGAL IMPEDIMENT So far as the Buyer is aware, the execution, delivery and performance by the Buyer of this agreement comply with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Buyer; and (c) any Encumbrance or document which is binding on the Buyer. 4 NO LIQUIDATION OR WINDING-UP The Buyer has not gone into liquidation nor passed a winding-up resolution nor received or published a notice under sections 601AA or 601AB of the Corporations Act. 5 NO PETITION No petition or other process for winding-up has been presented or threatened against the Buyer and there are no circumstances justifying such a petition or other process. 6 NO WRIT OF EXECUTION No writ of execution has issued against the Buyer. page 21 7 NO RECEIVER OR ADMINISTRATOR No receiver or receiver and manager or administrator of any part of the undertaking or assets of the Buyer has been appointed. 8 KNOWLEDGE OF BUYER Neither the Buyer nor any holding company (direct or indirect) of the Buyer is aware of any matter or thing that at Completion constitutes a breach of the Seller's Warranties. page 22 PART 2 - SELLER'S WARRANTIES 1 AUTHORITIES 1.1 SELLER AUTHORISED The Seller has taken all necessary action to authorise the execution, delivery and performance of this agreement in accordance with its terms and is validly existing and in good standing. 1.2 POWER TO SELL The Seller has full power to enter into and perform its obligations under this agreement and is able to sell and transfer the Shares being sold by it under this agreement without the consent of any other person and free of any pre-emptive rights, or rights of first refusal or any other such rights which may restrict the transfer of the Shares to the Buyer (except as disclosed in writing by the Seller). 1.3 NO LEGAL IMPEDIMENT The execution, delivery and performance by the Seller of this agreement complies with: (a) each law, regulation, Authorisation, ruling, judgment, order or decree of any Governmental Agency; (b) the constitution or other constituent documents of the Seller; and (c) any Encumbrance or document which is binding on the Seller. 1.4 CORPORATE POWER The Company: (a) is validly existing and in good standing; (b) is accurately described in part 4 of schedule 1; (c) has full corporate power to own its properties, assets and businesses and to carry on the Business; and (d) has good and marketable title to all the assets included in the Accounts. 1.5 CONSTITUTION The copy of the constitution of the Company given to the Buyer is a complete and accurate copy in all material respects. 1.6 CORPORATE NAME The Company does not trade under a name other than its corporate name (excluding trademarks or business names registered in a name other than its corporate name). page 23 2 COMPLIANCE WITH LAW 2.1 COMPLIANCE WITH LAW The Company has complied in all material respects with all applicable laws (whether applicable to the conduct of the Business, the assets of the Business or the Properties) and no material contravention or allegation of any material contravention of any applicable law is known to the Seller. 2.2 AUTHORISATIONS The Company holds all necessary material Authorisations required to conduct the Business, use the assets of the Business and occupy the Properties and has paid all fees due in relation to them and is not in breach of any conditions under them where such breach would be likely to have a material and adverse effect on the Business as currently carried on. 3 SHARES AND CAPITAL 3.1 TITLE The Seller is the legal and beneficial owner of the Shares being sold by it under this agreement which are free of all Encumbrances and other third party interests or rights. 3.2 ISSUED CAPITAL The Shares are all the issued shares in the capital of the Company and were validly issued by the Company. 3.3 FULLY PAID The Shares are fully paid and no money is owing in respect of them. 3.4 ISSUE OF OTHER SECURITIES The Company is not under any obligation to issue or allot, and has not granted any person the right to call for the issue or allotment of or exercise any option over, any shares or other securities of the Company which is still current and subsisting. 4 POSITION SINCE THE ACCOUNTS DATE 4.1 POST ACCOUNTS DATE Since the Accounts Date the Company has not: (a) entered into any material contract or arrangement outside the ordinary course of trading or otherwise than on arm's length terms; (b) acquired or disposed of any assets other than on arm's length terms in the ordinary course of business; (c) created an Encumbrance over any of its assets; page 24 (d) incurred any indebtedness or liability in the nature of borrowings other than in the ordinary course of business; (e) in the conduct of the Business made any material change to its policy or practice as to the payment of creditors or collection of trade receivables; (f) engaged any new employee to fill a new role with an annual remuneration package in excess of $120,000 or, except in the ordinary course of the Business, terminated the employment of any of its employees or changed in any material respect the terms of employment (including remuneration); (g) sold or agreed to sell any fixed asset with a value of more than $250,000 or bought or committed to buy any fixed asset with a value of more than $250,000; (h) distributed or returned any capital to its members; (i) paid any dividend to its members or paid any management fee or similar amount; (j) issued any shares, options or securities which are convertible into shares in the Company; (k) altered its constitution, (l) incurred or undertaken any actual or contingent liabilities or obligations (including Tax) except in the ordinary course of business; or (m) there has been no change in the accounting policies, practices and principles of the Company, except, in respect of the period between the date of this agreement and Completion, if the Buyer has first consented in writing. 4.2 SUPPLIERS/CUSTOMERS Since the Accounts Date: (a) none of the following suppliers of the Business: Kuehne & Nagel, Begley Hobba & Manton, Robert Ng, Zenith Media, Dow Chemical, Helm AG, Ulee, Hewlett Packard, PT Goldindo Menawian and BASF has: (1) reduced the level of its supplies to the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or (3) materially altered the terms on which it trades with the Company; or (b) none of the following customers of the Business: Kmart, Big W, Myer/Grace Bros, Target, Best & Less, Lowes Manhattan, Woolworths, Payless Shoes, Harvey Norman and David Jones has: (1) reduced the level of its custom from the Company other than in the ordinary course of business; (2) indicated an intention to cease or reduce the volume of its trading with the Company after Completion; or page 25 (3) materially altered the terms on which it trades with the Company. 5 TANGIBLE ASSETS 5.1 TITLE TO ASSETS All material Tangible Assets are: (a) (other than items under repair and stock-in-transit) in the possession or under the control of the Company; (b) the absolute property of the Company free of all Encumbrances, other than the Tangible Assets subject to the Assets Leases. 5.2 ASSETS NOT OWNED All material Tangible Assets which are used by the Company but are not owned by the Company are used pursuant to the Assets Leases or other arrangements entered into on arm's length terms in the ordinary course of the Business. 5.3 PLANT AND EQUIPMENT All Plant and Equipment listed in schedule 9 and currently in use in the Business is: (a) in good working order; (b) capable of doing the job for which it is now being used; and (c) in reasonable condition having regard to its age and fair wear and tear. 6 ENCUMBRANCES 6.1 OWNERSHIP OF SHARES As at Completion the Seller will be the legal and beneficial owner of the Shares being sold by it under this agreement free of Encumbrances. 6.2 DISCHARGES BY COMPLETION The Seller has not granted or created, or agreed to grant or create, any Encumbrance in respect of the Shares being sold by it under this agreement or the assets of the Company other than any which will be discharged on or before Completion. 7 INTELLECTUAL PROPERTY RIGHTS 7.1 SCOPE So far as the Seller is aware, the Company owns or has an enforceable right to use all intellectual property rights needed to carry on the Business in the places and in the manner currently carried on. page 26 7.2 OWNERSHIP AND USE (a) The Company is the legal and beneficial owner of all the Intellectual Property Rights listed in parts 1 and 3 of schedule 4. (b) The Company has, by way of a valid, binding and enforceable licence from a third party, a lawful right to use in the places and manner in which they are currently used by the Company in the Business all the Intellectual Property Rights listed in part 2 of schedule 4. 7.3 NO THIRD PARTY RIGHTS So far as the Seller is aware, no person, other than the Company or a licensee of the Company disclosed in part 3 of schedule 4 has any right to any Intellectual Property Right listed in part 1 of schedule 4. 7.4 NO INFRINGEMENT So far as the Seller is aware, the use by the Company of the Intellectual Property Rights listed in schedule 4 does not breach or infringe any Intellectual Property Right of any other person nor, so far as the Seller is aware, are there any allegations that the Company has infringed or is infringing the intellectual property rights of a third party. 7.5 DISPUTES The Company is not currently involved in any material dispute with any third party in relation to the Intellectual Property Rights listed in schedule 4. 7.6 ROYALTIES/FEES Other than in respect of the Intellectual Property Rights set out in part 2 of schedule 4, there are no material royalties, licence fees or other similar fees payable by the Company in connection with the use of any Intellectual Property Rights. 8 ASSETS LEASES 8.1 NATURE The Assets Leases were entered into within the ordinary course of business. 8.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Assets Lease is, in default under an Assets Lease where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business and the Company has received no notice of any default of any Asset Lease. 8.3 VALIDITY So far as the Seller is aware, each Asset Lease: (a) is valid and subsisting; (b) has not been amended or modified; and (c) is not terminable by virtue of the sale of the Shares. page 27 8.4 ASSETS LEASES USED IN THE BUSINESS The Asset Leases constitute all the lease and hire purchase agreements used in the Business by the Company. 9 CONTRACTS 9.1 NATURE OF CONTRACTS So far as the Seller is aware, part 1 of schedule 6 and parts 2 and 3 of schedule 4 contains details of all Contracts which: (a) are not within the ordinary course of ordinary business of the Business; (b) are not on arm's length terms; (c) are not capable of complete performance or termination without payment of damages, within 12 months from the date of this agreement; (d) restrict the Company's freedom to carry on the Business in the places and the manner in which it is currently carried on; (e) are contracts (not being contracts for the purchase or sale of Stock) which are expected to result in expenditure by the Company of more than $1,000,000; (f) are distribution or agency agreements; (g) entitle the other party to terminate the contract or impose terms less favourable to the Company due to the sale of the Shares. 9.2 NO DEFAULT The Company is not and, so far as the Seller is aware, no other party to any Contract is in default under such Contract where such breach or default would be materially and adversely prejudicial to the Company in carrying on the Business as currently carried on and there are no grounds for rescission, avoidance or repudiation of any such Contract where such rescission, avoidance or repudiation would be materially and adversely prejudicial to the Seller in carrying on the Business as currently carried on. 9.3 FOREIGN CURRENCY Part 2 of schedule 6 contains a listing, which is accurate in all material respects, of outstanding commitments of the Company relevant to the Business as at the date stated in that schedule in relation to foreign currency hedging contracts. 9.4 COPIES OF CONTRACTS So far as the Seller is aware, the Data Room contained copies of all Contracts which are material to the operation of the Business. 9.5 TAXES All Taxes (including stamp duty or any similar tax) payable on all transactions to which the Company is a party, or that the Company has an interest in enforcing have been paid or are provided for in the Accounts. page 28 10 PROPERTIES 10.1 COMPANY'S INTEREST The Company has no interest in real property which it uses in the Business except for its interest in the Properties. 10.2 OCCUPATION AND USE The Company has exclusive occupation and quiet enjoyment of the Properties and the Company's use of the Properties, so far as the Seller is aware, complies in all material respects with all acts, regulations, planning schemes, developments, approvals, permits and requirements (including zoning requirements) of any governmental agency (not including in relation to Environmental Law, which this warranty does not apply to). None of the Properties, so far as the Seller is aware, is subject to any sub-lease, tenancy or right of occupation by any other party. 10.3 NO BREACH The Company has not received a notice of default in respect of any Leased Property which remains outstanding and asserts non-compliance with the lease of that property. 10.4 NO NOTICES The Company has not received any notice from any third party in respect of the Properties: (a) in respect of the compulsory acquisition or resumption of any part of any of the Properties; or (b) asserting that the current use of the Properties breaches the requirements of any relevant planning scheme; or (c) which would be likely to have a materially adverse effect on the use of the Properties in the Business as currently used. 10.5 ADVERSE RIGHTS (a) So far as the Seller is aware, the Company is not in breach of or in default under any covenant, easement or right affecting the Freehold Properties which breach or default would have a materially adverse effect on the use of the Freehold Properties in the Business as currently used. (b) Except for any matters indicated in documents of title provided to the Buyer, none of the Freehold Properties are: (1) affected by any rights of adverse possession, easements, rights vested in any Governmental Agency, restrictive covenants, rights of way, proposed roads or resumptions or proposed drains, sewers or stormwater channels; (2) affected by any leases, licenses or Encumbrances; or (3) the subject of any claim notified to the Company that any third party asserts an ownership interest in any of the Freehold Properties, which, in any of the above cases, would be likely to page 29 have a material and adverse effect on the current use of the Freehold Properties in the Business. 10.6 PROPERTY DETAILS The particulars of the Properties set out in schedule 11 are true and correct in all material aspects. 10.7 PROPERTY DISCLOSURE Details of all material documentation pursuant to which the Properties are owned, used or occupied by the Company have been provided to the Buyer and there are no other documents, correspondence or other material which have not been provided to the Buyer which would have a material adverse affect on the interests of the Company in the Properties. 10.8 DISPUTES There are no material disputes claims or actions relating to any of the Properties or their use including, but not limited to, disputes with any adjoining or neighbouring owner with respect to boundary walls or fences or with respect to any easement, right or means of access to the Properties. 10.9 FREEHOLD PROPERTIES In relation to the Freehold Properties: (a) the Company is the registered holder and beneficial owner of the Freehold Property; (b) all rates, Taxes and levies (including land tax) applicable to the Freehold Property have been paid; and (c) the Company has not sold, agreed to sell, granted any option to sell, lease or sublease or agreed to lease or sublease any of the Freehold Property. 10.10 PROPOSED DISPOSAL The Company is not a party to any outstanding agreement to acquire or dispose of land or Properties or any interest in land or Properties. 10.11 PROPERTY LEASE DISCLOSURE In relation to the Property Leases, particulars of which are set out in part 2 of schedule 11: (a) written copies of which have been provided to the Buyer, and are so far as the Seller is aware, complete in all material aspects recordings of their terms and there are no other agreements, documents or understandings in relation to the Property Leases; and (b) so far as the Seller is aware, are current and enforceable. 10.12 TERMINATION NOTICE No lessor under a Property Lease has served any notice to terminate the Property Lease. 10.13 ASSIGNMENT Neither the Company nor the Seller: page 30 (a) has agreed to any assignment, subletting, parting with possession or surrender of a Property Lease or any part of the property leased; or (b) has given any materially false or misleading information to an authority having jurisdiction over property the subject of a Property Lease. 11 OFFERS OUTSTANDING Any offer, tender or quotation made by the Company in respect of the Business which is outstanding and capable of acceptance by a third party, was made in the ordinary course of the Business. 12 SHAREHOLDINGS The Company is not the holder or beneficial owner of any shares or other securities in any company. 13 MEMBERSHIPS The Company is not a member of any joint venture, partnership or unincorporated association (other than a recognised trade association). 14 EMPLOYEES 14.1 LIST OF EMPLOYEES COMPLETE Schedule 8 contains a complete list of the Company's employees employed in the Business as at the date indicated in the schedule and the Buyer has been given all material details of their employment benefits. 14.2 INCENTIVE SCHEMES The Company has not agreed to any share incentive scheme, share option scheme, bonus scheme, profit-sharing scheme or other employee incentive scheme in respect of the Business or with any Employee which has not been fairly disclosed to the Buyer. 14.3 SERVICE AGREEMENTS The Company is not a party to any written employment or service agreement with any Employee requiring the giving of more than three months notice to the employee which has not been fairly disclosed to the Buyer. 14.4 MANAGEMENT AGREEMENTS The Company does not have any material agreement with any person for the provision of consulting or management services in respect of the Business which has not been fairly disclosed to the Buyer. page 31 14.5 DISPUTES The Company is not involved in any material dispute with any employees (past or present) and is not aware of any circumstances likely to give rise to any dispute. 14.6 COMPLIANCE The Company is not in breach in any material respect of any employment contract with any Employee as at the date of this agreement. 14.7 COMPLIANCE The 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 leave, equal opportunity, anti-discrimination, Taxation, superannuation, workers compensation and industrial laws), award, enterprise agreement or other instrument made or approved under any law with respect to its past and present employees and contractors. 14.8 DISCLOSURE Except as set out in the Data Room there are no awards, enterprise agreements or other instruments made or approved under law which apply to employees of the Company. 15 SUPERANNUATION 15.1 LIST OF SUPERANNUATION SCHEMES COMPLETE The Seller's Fund and the External Funds are the only superannuation schemes or pension arrangements to which the Company makes contributions in respect of the Employees. 15.2 GOVERNING RULES OF THE SELLER'S FUND Any copy of the governing rules of the Seller's Fund supplied to the Buyer on or before the date of this agreement is a true and complete copy. 15.3 FUNDING The Company has paid all contributions due by it to the Seller's Fund and each External Fund in respect of the Employees. 15.4 ACCRUED BENEFIT VALUES 16 THERE ARE SUFFICIENT ASSETS IN THE SELLER'S FUND TO SUPPORT THE TRANSFER OF EACH EMPLOYEE'S ACCRUED BENEFIT VALUE.LITIGATION 16.1 NOT A PARTY TO ANY LITIGATION The Company is not: (a) a party to any material prosecution, litigation or arbitration proceedings; or (b) so far as the Seller is aware, subject to any material administrative or governmental investigation, page 32 and the Seller is not aware that any such proceeding or investigation is threatened or pending. 16.2 NO CIRCUMSTANCES There are no circumstances of which the Seller is aware which may give rise to any proceeding or investigation referred to in warranty 16.1. 17 [NOT USED] 18 SOLVENCY 18.1 NO LIQUIDATION OR WINDING-UP The Company has not gone into liquidation under the Corporations Act nor been removed from the companies register. 18.2 NO PETITION No petition or other process for winding-up has been presented or threatened against the Company and there are no circumstances justifying such a petition or other process. 18.3 NO WRIT OF EXECUTION No writ of execution has issued against the Company. 18.4 NO RECEIVER OR ADMINISTRATOR No receiver or statutory manager of any part of the Company's undertaking or assets has been appointed. 18.5 PAYMENT OF DEBTS The Company: (a) has not stopped paying its debts as and when they fall due; (b) is not insolvent within the meaning of the Corporations Act; and (c) is not subject to voluntary administration the Corporations Act. 18.6 LIQUIDATION The Seller has not gone into liquidation under the Corporations Act nor been removed from the companies register. 18.7 PETITION No petition or other process for winding-up has been presented or threatened against the Seller and there are no circumstances justifying such a petition or other process. page 33 18.8 WRIT OF EXECUTION No writ of execution has issued against the Seller. 18.9 RECEIVER MANAGER No receiver or statutory manager of any part of the Seller's undertaking or assets has been appointed. 19 INSURANCE 19.1 POLICIES Those assets of the Company which are of an insurable nature are insured by the Company against fire and other usual risks on a basis which the Seller considers commercially prudent. 20 INFORMATION 20.1 WRITTEN INFORMATION In relation to written information provided by the Seller to the Buyer in relation to the sale of the Shares sold by it under this agreement: (a) if that information comprised copies of documents, correspondence or other materials the copies provided were, so far as the Seller is aware, true and complete; (b) if that information comprised historical data about the Business prepared by the Seller or the Company, that data was, so far as the Seller is aware, true and correct in all material respects. 20.2 ACCURACY Each of the statements and all information set out, or referred to, in the Disclosure Schedule, the schedules numbered 4 to 12 to this to this agreement is complete and accurate in all material respects and not misleading. 21 BUSINESS RECORDS The Business Records are in the Company's possession or control and will be maintained by the Company in accordance with its usual practice pending Completion. 22 TAXES AND DUTIES 22.1 TAX PAID Any Tax arising under any Tax Law payable in respect of any transaction, income or asset of the Company which has become due for payment has been paid. page 34 22.2 SINCE ACCOUNTS DATE The conduct of the Business since the Accounts Date will only give rise to liability to Tax in the ordinary course of business. 22.3 PROVISION IN ACCOUNTS Adequate provision has been made in the Accounts for any Tax on the Company which is payable or may become payable in respect of any transaction or income occurring or arising before the Accounts Date but which was unpaid as at the Accounts Date. 22.4 WITHHOLDING TAX Any obligation of the Company under any Tax Law to withhold amounts at source, including, but not limited to, withholding tax, has been complied with. 22.5 RECORDS The Company has maintained proper and adequate records to enable it to comply with its obligations to: (a) prepare and submit any information, notices, computations, returns, declarations, elections and payments required in respect of any Tax Law; (b) prepare any accounts necessary for the compliance of any Tax Law; and (c) retain necessary records as required by any Tax Law. 22.6 RETURNS SUBMITTED The Company has submitted any necessary information, notices, computations, returns, declarations and elections to the relevant Governmental Agency in respect of any Tax or any Duty relating to the Company. 22.7 RETURNS ACCURATE Any information, notice, computation, return, declaration or election which has been submitted by the Company to a Governmental Agency in respect of any Tax or Duty: (a) discloses all material facts that should be disclosed under any Tax Law; and (b) has been submitted on time. 22.8 COPIES ACCURATE All copies of any information, notices, computations, returns, declarations or elections submitted by the Company in respect of any Tax or Duty which have been supplied to the Buyer by the Seller are true copies of the originals. 22.9 NO DISPUTES The Company is not currently engaged in any dispute with any Governmental Agency in respect of any Tax or Duty and is not aware of any circumstances that may give rise to such a dispute. page 35 23 SELLER'S KNOWLEDGE The Seller is not aware of any matter or thing that is or may be inconsistent with the Buyer's Warranties. 24 EFFECT OF SALE OF SHARES 24.1 CUSTOMERS/SUPPLIER RELATIONSHIPS As far as the Seller is aware, the transfer of the Shares to the Buyer under this agreement will not result in any supplier or customer of the Company ceasing or being entitled to substantially reduce its level of business with the Company. 24.2 EFFECT OF SALE The entry into and performance of this agreement does not and will not: (a) result in the breach of any of the terms, conditions or provisions of any agreement or arrangement to which the Company is a party; or (b) relieve any person from any obligation to the Company; (c) result in the creation, imposition, crystallisation or enforcement of any Encumbrance or other third party right or interest on the Company, its assets or undertaking; or (d) result in any indebtedness of the Company becoming due and payable. 25 TRADE PRACTICES So far as the Seller is aware, neither the Company nor any of its officers or employees has, in the two years before Completion, committed or omitted to do any act or thing the commission or omission of which is a material contravention of the Trade Practices Actin Australia. 26 LIABILITY UNDER ASSET AND OTHER SALE AGREEMENTS The Company will not have any obligations or liabilities (actual or contingent) after Completion to: (a) do any act, matter or thing; or (b) pay any moneys under any indemnity, under any agreement entered into prior to Completion for the sale or purchase of any business interest, shares or partnership interest. page 36 SCHEDULE 3 - DISCLOSURE SCHEDULE The matters set out in this disclosure schedule constitute formal disclosure to the Buyer of facts or circumstances which are, or may be, inconsistent with the Seller's Warranties. The Seller gives no representation as to the completeness or accuracy of the disclosures in this schedule. While some disclosures have, for convenience, been set against specific Seller's Warranties, they constitute disclosure against any other Seller's Warranty to which they may apply. Seller Warranty Number Matter Disclosed page 37 SCHEDULE 4 - INTELLECTUAL PROPERTY RIGHTS PART 1 - INTELLECTUAL PROPERTY RIGHTS OWNED BY THE COMPANY PART 2 - LICENSES TO THE COMPANY TO USE INTELLECTUAL PROPERTY RIGHTS PART 3 - LICENSES GIVEN BY THE COMPANY TO USE ITS INTELLECTUAL PROPERTY RIGHTS page 38 SCHEDULE 5 - SUPERANNUATION FUNDS page 39 SCHEDULE 6 - CONTRACTS PART 1 - CONTRACTS PART 2 - FOREIGN EXCHANGE CONTRACTS page 40 SCHEDULE 7 - GUARANTEES page 41 SCHEDULE 8 - EMPLOYEES page 42 SCHEDULE 9 - PLANT AND EQUIPMENT page 43 SCHEDULE 10 - ASSETS LEASES page 44 SCHEDULE 11 - PROPERTIES PART 1 - FREEHOLD PROPERTIES PART 2 - LEASED PROPERTIES page 45 SCHEDULE 12 - INTER COMPANY DEBTS page 46 EXECUTED AS AN AGREEMENT: Signed for and on behalf of Pacific Dunlop Limited by its duly authorised Attorney under Power in the presence of: /s/ Paul Devereux /s/ Carly Mansell - ----------------------------------- ----------------------------------- Witness Attorney Paul Devereux Carly Mansell - ----------------------------------- ----------------------------------- Name (please print) Name (please print) Signed sealed and delivered by Pacific Brands Holdings Pty Ltd in the presence of: /s/ /s/ - ----------------------------------- ----------------------------------- Director Director - ----------------------------------- ----------------------------------- Name (please print) Name (please print) Signed for and on behalf of PB Holdings NV by its duly authorised Attorney under Power in the presence of: /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- ----------------------------------- Name (please print) Name (please print) /s/ ----------------------------------- Attorney ----------------------------------- Name (please print) page 47 EX-4.12 15 dex412.txt LETTER AGREEMENT DATED 11/30/2001 EXHIBIT 4.12 30 November 2001 PB Holdings NV 1170 Brussels Terhulpsesteenweg 166 Dear Sirs This letter is intended to evidence the agreement of the parties to the Co-ordination Agreement between Pacific Dunlop Limited (PDL), PB Holdings NV and various of their respective subsidiaries dated on or about 30 November 2001 (Co-ordination Agreement), to amend clause 5.3 of the following Shares Agreements (as that term and the following terms are defined in the Co-ordination Agreement): .. Shares Agreement Australia; .. Shares Agreement USA; and .. Novare Shares Agreement. Clause 5.3 of the Shares Agreements specified above is deleted and replaced by the following clause: "The parties agree that as soon as practicable after Completion, they will take such steps as necessary to procure that any Inter Company Debt owing to or by the Company is extinguished including but not limited to those Inter Company Debts listed in schedule 12. Each party will on request provide to the other evidence of such extinguishment. For the avoidance of doubt, nothing in this clause 5.3 will require: (a) any party or its Related Corporations to pay any money; or (b) require any adjustment to the Purchase Price." By signing the attached copy of this letter, PDL and PB Holdings NV agree to be bound by the terms of this letter and to procure its related corporations to do everything necessary to give effect to its terms. Yours sincerely /s/ Paul Devereux Paul Devereux Pacific Dunlop Limited Signed for and on behalf of Pacific Dunlop Limited by its attorney: /s/ Paul Devereux /s/ Carly Mansell - ----------------------------------- ----------------------------------- Witness Attorney Paul Devereux - ----------------------------------- Name (please print) Signed for and on behalf of PB Holdings NV by its attornies: /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- Name (please print) /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- Name (please print) EX-4.13 16 dex413.txt LETTER AGREEMENT 11/30/2001 EXHIBIT 4.13 30 November 2001 PB Holdings NV 1170 Brussels Terhulpsesteenweg 166 Dear Sirs This letter is intended to evidence the agreement of the parties to the Co-ordination Agreement between Pacific Dunlop Limited (PDL), PB Holdings NV and various of their respective subsidiaries dated on or about 30 November 2001 (Co-ordination Agreement), to amend clause 5.3 of the following Shares Agreements (as that term and the following terms are defined in the Co-ordination Agreement): .. Shares Agreement Indonesia; .. Shares Agreement Fiji; .. Shares Agreement Hong Kong; and .. Shares Agreement UK. Clause 5.3 of the Shares Agreements specified above is amended by the addition of the following sentence at the end of that clause: "For the avoidance of doubt, nothing in this clause 5.3 will require: (a) any party or its Related Corporations to pay any money; or (b) require any adjustment to the Purchase Price." By signing the attached copy of this letter, PDL and PB Holdings NV agree to be bound by the terms of this letter and to procure its related corporations to do everything necessary to give effect to its terms. Yours sincerely /s/ Paul Devereux Paul Devereux Pacific Dunlop Limited Signed for and on behalf of Pacific Dunlop Limited by its attorney: /s/ Paul Devereux /s/ Carly Mansell - ----------------------------------- ----------------------------------- Witness Attorney Paul Devereux - ----------------------------------- Name (please print) Signed for and on behalf of PB Holdings NV by its attornies: /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- Name (please print) /s/ /s/ - ----------------------------------- ----------------------------------- Witness Attorney - ----------------------------------- Name (please print) EX-7.1 17 dex71.txt COMPUTATION OF THE RATIO OF EARNINGS PART III ITEM 19 : EXHIBITS - -------------------------------------------------------------------------------- EXHIBIT 7.1 COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
JUNE 30 JUNE 30 JUNE 30 A$ MILLIONS 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ AUSTRALIAN GAAP (A) Operating profit before tax from continuing operations (including non-recurring items) (32.8) (91.1) (35.3) ------------------------------ Net Interest Expense 54.7 99.4 102.5 50% of SPT Total Interest/(1)/ 5.8 9.1 8.6 ------------------------------ (B) Total Fixed Charges 60.5 108.5 111.1 (C) Total (A) plus (B) 27.7 17.4 75.8 ------------------------------ Ratio of (C) to (B) 0.46 0.16 0.68 ------------------------------ US GAAP US GAAP Profit after tax from continuing operations (75.1) (223.0) (31.0) Operating profit tax expense 26.9 147.2 2.6 Minority Interest 2.8 3.6 4.1 ------------------------------ US GAAP Profit before Tax (45.4) (72.2) (24.3) (B) Add: Total fixed charges as above 60.5 108.5 111.1 (D) Total 15.1 36.3 86.8 ------------------------------ Ratio of (D) to (B) 0.25 0.33 0.78 ------------------------------
/(1)/ 50% owned entities SPT represents the South Pacific Tyres joint venture -----END PRIVACY-ENHANCED MESSAGE-----