Frigrite and PPK have entered into the Underwriting Agreement pursuant to which PPK has agreed to underwrite $2 million of the Rights Issue on the terms and conditions in that agreement. Subject to the terms and conditions of the
Underwriting Agreement, PPK is required to subscribe for New Shares in respect of which a valid application is not received up to the first $2 million. The
underwritten amount is inclusive of any entitlements PPK takes up under the Rights Issue.
Fees
The amount payable to PPK under the Underwriting Agreement is $660,000 (plus GST), which comprises:
(a) $600,000 payable out of the proceeds from the issue of the Convertible Notes and Options as a fee for arranging commitments in respect of the Convertible Notes and Options; and
(b) $60,000 payable out of the proceeds of the Rights Issue as an underwriting fee for the Rights Issue.
If the issue of the shares under the Rights Issue and the issue of Convertible Notes and Options does not occur in circumstances where the Underwriting Agreement and/or the Placement Agreement are terminated due to any of:
(a) the Company withdrawing the Rights Issue;
(b) any warranty or representation by the Company ceasing to be true; and (c) the Company breaching the Underwriting Agreement or the Placement
Agreement,
then the Company must still pay PPK the full amount of $660,000 as described above. No amount was paid by Frigrite in respect of the withdrawal of the Rights Issue and Convertible Note placement on 26 May 2009.
The Company has agreed to indemnify PPK in certain circumstances connected with the underwriting, other than to the extent that any loss, claim, damage, liability or expense is found in a final judgment by a court to have resulted in whole or in part from PPK's wilful misconduct, breach of contract, negligence or fraud.
Conditions precedent
Completion under the Underwriting Agreement of the issue of at least $2,000,000 of shares under the Rights Issue is subject to certain conditions (which can be waived by PPK), including:
(a) the Company obtaining the shareholder approval under Listing Rule 7.1 for the issue of the Convertible Notes and Options;
(b) the Company not being in material breach of its obligations under the Placement Agreement;
(c) applications are received to raise a minimum by the Company under the Rights Issue and the issue of Convertible Notes (with attaching Options) of
$10,000,000 (before costs associated with the issue); and
(d) the Company providing such evidence in writing as PPK reasonably requires which establishes that:
(i) all requirements and conditions imposed by ANZ for the provision by ANZ of the Ongoing ANZ Facilities have been met and fulfilled by the Company to ANZ's satisfaction; and
(ii) the Ongoing ANZ Facilities will be provided by ANZ's following Completion and there are no facts, matter or circumstances which have arisen which could result in the Ongoing ANZ Facilities being withdrawn by ANZ and the Company is not aware of any such facts, matters or circumstances which are likely to arise following
Completion,
and the ANZ consenting to the Company granting the charges and mortgage to the Trustee in accordance with the terms of the Note Deed and entering into a Priority Agreement with the Trustee on terms
reasonably acceptable to the Trustee and pursuant to which ANZ Bank has first ranking priority for the principal amount owing to ANZ plus interest and costs and the Trustee then having priority for all moneys owing to the Trustee and the holders of Notes under the Note Deed.
Termination
PPK can terminate the Underwriting Agreement if prior to Completion:
(a) the terms of the Shares or any other securities of the Company or the constitution of the Company are modified or repealed or the Company proposes any such modification or repeal;
(b) any:
(i) information in the Offer Documents which is untrue, incorrect or misleading in a material way; or
(ii) material omission from the Offer Documents,
which in the reasonable opinion of PPK has or is likely to have a Material Adverse Effect;
(c) the Company materially breaches this agreement and fails to remedy the breach to the reasonable satisfaction of PPK or any warranty or
representation by the Company under the Underwriting Agreement is or becomes materially untrue;
(d) a change occurs after the date of this document effecting or relating to:
(i) the Company or a subsidiary; or
(ii) the industry in which the Company or a Subsidiary operates;
which in the reasonable opinion of PPK has or is likely to either:
(iii) have a Material Adverse Effect; or
(iv) materially change, or result in a material change to, the operations of the Company;
(e) the Company materially contravenes:
(i) any law, regulation, authorisation, ruling, consent, judgment, order or decree of any Governmental Agency;
(ii) its constitution or another constituent document;
(iii) the Listing Rules; or
(iv) an Encumbrance or document which is binding on:
(A) the Company or a Subsidiary; or
(B) an asset of the Company or a Subsidiary;
which in the reasonable opinion of PPK Investment has or is likely to have a Material Adverse Effect;
(f) ASX Approval has not been given by the second Business Day after the Closing Date or ASX refuses or withdraws ASX Approval;
(g) an insolvency event occurs in relation to the Company or a subsidiary;
(h) a Prescribed Event occurs in relation to the Company or a subsidiary;
(i) at any time after the date of this document but before the Closing Date, the All Ordinaries Index is, for three consecutive Business Days, 10% or more below its level as at the close of trading immediately preceding the date of this document;
(j) an outbreak of new hostilities or a state of war, whether declared or not, arises after the date of this agreement, or an escalation of hostilities already in existence occurs, involving, or a terrorist act is threatened or
carried out after the date of this agreement in or against any diplomatic, military, commercial or political institution, establishment, body or
personnel of Australia, Japan, any member country of the European Union or the United States of America, which in the reasonable opinion of PPK has or is likely to have a Material Adverse Effect;
(k) any Australian government adopts or announces any change in law or policy which in the reasonable opinion of PPK has or is likely to have a Material Adverse Effect;
(l) except as disclosed to PPK before the date of this document, after the date of this document an officer or senior manager of the Company or a
subsidiary resigns or is removed from office, is charged with or convicted of a criminal offence or becomes a bankrupt, or steps are taken to achieve such an outcome;
(m) any event specified in the timetable for the Rights Issue in the Underwriting Agreement does not occur within 14 days after the date specified for that event;
(n) any meeting of the Company required by any Governmental Agency or law or the rules of the ASX to approve this agreement, the Rights Issue or anything related to the Rights Issue is not held or does not produce the required approval;
(o) any securities that have been issued by the Company which at the date of this document are quoted on the ASX:
(i) are suspended from quotation whether temporarily or otherwise; or (ii) are the subject of an ASX statement to the effect that the securities
will be suspended or cease to be quoted;
(p) the ASX makes a statement to any person that official quotation of the underwritten shares will not be granted;
(q) at any time after the date of this agreement, the indicator rate for bonds issued by the Commonwealth of Australia, which have a tenor of either three or ten years, rises 1.0% or more above the level of the indicator rate as at the close of business on the date immediately prior to the date of this agreement (as published in the Australian Financial Review on the date of this agreement);
(r) any of the making of the Rights Issue, the issue of the Offer Documents or the distribution of the Offer Documents constitutes misleading or deceptive conduct;
(s) any circumstance arises after the Offer Documents are issued that results in the Company doing any of the following: repaying, or offering to repay, any Application Monies the Company receives from Shareholders; or
offering one or more Shareholders an opportunity to withdraw their Entitlement and Acceptance Forms; or
(t) at any time after the date of this document, the Company withdraws the Rights Issue or any Offer Document; or
(u) PPK becomes entitled to and does terminate the Placement Agreement.
For the purpose of the above termination events, "Material Adverse Effect" means an event that has a material adverse effect on any of the following: the Shares, including without limitation, their price, value of liquidity; the market for Shares; the Rights Issue, including the outcome of the Rights Issue; or a decision of a person whether or not to invest in Shares at the Issue Price; or a decision of a sub underwriter whether or not to sub underwrite the Shares at the Issue Price; or the Company, including without limitation the assets, liabilities, financial position, earnings, performance, profits or results of operations of the Company.
8.2. Placement Agreement
Frigrite, PPK and certain other subscribers have entered into the Placement Agreement for the issue of the Convertible Notes (with attaching Options). On the date of the Placement Agreement, PPK and the subscribers will deliver to the Company applications for the Convertible Notes, pursuant to which they irrevocably agreed to subscribe for $8 million worth of Convertible Notes (with attaching Options).
Completion of the issue of the Convertible Notes (with attaching Options) is subject to conditions similar to those applying for the Underwriting Agreement described above, as well as the successful closing of the Rights Issue.
Termination
PPK may terminate the Placement Agreement by notice in writing to the
Company, without cost or liability to PPK or the Subscribers, immediately if prior to Completion:
(a) the Company materially breaches the Placement Agreement and fails to remedy the breach to the reasonable satisfaction of PPK or any warranty or representation by the Company under the Placement Agreement is or becomes materially untrue; or
(b) PPK becomes entitled to and does terminate the Underwriting Agreement.
8.3. ANZ Commercial Funding Facility
Frigrite has accepted a Letter of Offer dated 12 May 2009 with ANZ of up to
$21.5 million in facilities, to among other things, refinance Frigrite’s previous facilities with ANZ. Of this $21.5 million, $8 million in principal is required to be repaid following the receipt of proceeds from the Convertible Notes and Options
and $1.0 million of the facility expired on 30 June 2009. Following completion of the Offer, Frigrite will have facilities totalling $12.5 million which will include:
(a) $9.2 million Variable Rate Fully Drawn Advance Facility; and
(b) other facilities including an online facility, bank guarantee, overdraft, asset finance facility and encashment facility.
All facilities are provided on a revolving basis, subject to annual review, the first review being 21 December 2009. The facilities are secured by, among other things, a fixed and floating charge over the assets and undertakings of Frigrite (and its subsidiaries). The Letter of Offer contains customary undertakings, events of default and other provisions of debt facility agreements.
8.4. Lead Distributor and Arranger
Aequs has been appointed lead distributor and arranger in relation to the Rights Issue. Aequs will also be appointed as Nominee to arrange for the sale of Non-Eligible Shareholder Rights.
Fees
Under the appointment letter, Aequs may be paid the following amounts:
(a) an upfront one-off management fee of $15,000; and
(b) a placement fee of 1.0% on all or part thereof of the shortfall (post underwriting) which is distributed and / or placed by Aequs during the term.
8.5. Effects of rounding and warning against share splitting
All Entitlements will be rounded up to the nearest whole number of New Shares.
If Frigrite reasonably believes that a Shareholder has been a party to the splitting or division of a shareholding in an attempt to obtain an advantage from the rounding up of Entitlements, then the Company reserves the right to round the Entitlement of such holdings so as to provide only the number of New Shares that would have been received but for the splitting or division.
8.6. Privacy
The Entitlement & Acceptance Form requires you to provide information that may be person information for the purpose of the Privacy Act 1988 (Cth). Frigrite (and the Share Registry on its behalf) collects, holds and uses personal information in order to assess applications for New Shares, service the needs of Shareholders, provide facilities and services and to administer Frigrite.
Access to information may also be provided to the Frigrite's related bodies corporate, agents and service providers, regulatory bodies, mail houses and the Share Registry.
If you do not provide the information requested of you in the Entitlement &
Acceptance Form, the Share Registry will not be able to process your application for New Shares or administer your holding of Shares appropriately.
9. GLOSSARY OF TERMS