FEDERAL COURT OF AUSTRALIA ITX Group Pty Limited, in the matter of ITX Group Pty Limited (No 2) [2010] FCA 1501 Citation: ITX Group Pty Limited, in the matter of ITX Group Pty Limited (No 2) [2010] FCA 1501 Parties: ITX GROUP PTY LIMITED ACN 107 656 833 File number(s): NSD 1345 of 2010 Judge: EMMETT J Date of judgment: 2 December 2010 Date of hearing: 2 December 2010 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 5 Counsel for the Plaintiff: M. Oakes SC Solicitor for the Plaintiff: Norton Rose IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1345 of 2010 IN THE MATTER OF ITX GROUP PTY LIMITED ACN 107 656 833 ITX GROUP PTY LIMITED ACN 107 656 833 JUDGE: EMMETT J DATE OF ORDER: 2 DECEMBER 2010 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Pursuant to s 411(4)(b) of the Corporations Act 2001 (Cth) (the Act), the scheme of arrangement between itX Group Limited (itX) and its members, a copy of which is annexed hereto and marked "A" (the Scheme), be approved. 2. Pursuant to s 411(12) of the Act, itX be exempted from compliance with s 411(11) of the Act in respect to the Scheme. 3. These orders be entered forthwith. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. Annexure "A" Scheme THIS SCHEME OF ARRANGEMENT is made under section 411 of the Corporations Act 2001 (Cth). PARTIES: (1) itX Group Limited (ACN 107 656 833) of Level 3, 67 Epping Road, North Ryde NSW 2113 (Target). (2) The holders of fully paid ordinary shares in the capital of Target as at the Scheme Record Date (Scheme Shareholders). IT IS AGREED: 1. DEFINITIONS AND INTERPRETATIONS 1.1 In this agreement: Agreed Dividend means a dividend (other than the Final Dividend) of Target of up to $0.20 per Target Share declared on the Effective Date in accordance with clause 4.3 of the Scheme Implementation Agreement. ASIC means the Australian Securities and Investments Commission. ASX means ASX Limited or the Australian Securities Exchange, as the context requires. Authority means: (a) any government or governmental, semi-governmental or local authority and any department, office, minister, commission, board, delegate or agency of any such government or authority; (b) any judicial or administrative entity or authority; and (c) any other authority, commission, board, agency or other entity established or having power under statute or the listing rules of any recognised securities exchange. Bidder means Avnet Technology Solutions (Australia) Pty Ltd (ACN 145 620 293) of Level 5, 126 Phillip Street, Sydney NSW 2000. Court means the Federal Court of Australia or any other court of competent jurisdiction under the Corporations Act, as agreed by Target and Bidder. Deed Poll means the deed poll entered into by Bidder in favour of the Scheme Shareholders dated 20 October 2010. Dividend Payment Date means the date which is 8 Business Days after the Effective Date. Dividend Record Date means 7.00 pm on the date which is 7 Business Days after the Effective Date. Effective means, when used in relation to the Scheme, the coming into effect pursuant to section 411(10) of the Corporations Act of the order of the Court made under section 411(4)(b) in relation to the Scheme. Effective Date means the date the Scheme becomes Effective. Excluded Shares means any Target Share held by any person on behalf of or for the benefit of the Bidder Group. Final Dividend means the dividend of Target for the full year ended 30 June 2010 of $0.0425 per Target Share announced to the ASX on 28 July 2010 and payable on 26 August 2010. Implementation Date means the date which is the later of: (a) 1 Business Day after the Scheme Record Date; and (b) 3 January 2011, or such other date as Target and Bidder may agree. Long Stop Date means 31 January 2011, or such later date as may be agreed by Target and Bidder. Register means the register of Target Shares maintained by Registries Limited on behalf of Target. Scheme means this scheme of arrangement subject to any alterations or conditions made or required by the Court under section 411(6) of the Corporations Act and approved in writing by Target and Bidder. Scheme Consideration means A$1.55 cash (less the amount of the Agreed Dividend, if any) in respect of each Target Share held by a Scheme Shareholder. Scheme Implementation Agreement means the scheme implementation agreement entered into by Bidder and Target dated 13 August 2010. Scheme Meeting means the meeting of Target Shareholders ordered by the Court to be convened pursuant to section 411(1) of the Corporations Act in respect of the Scheme. Scheme Shareholder means a person who is a Target Shareholder as at the Scheme Record Date other than a holder of Excluded Shares (if any). Scheme Record Date means 7.00 pm on the date which is 9 Business Day after the Effective Date, or such earlier date (after the Effective Date) as Target and Bidder may agree in writing. Second Court Date means the first day on which the application made to the Court for an order pursuant to section 411(4)(b) of the Corporations Act approving the Scheme is heard or, if the application is adjourned for any reason, the first day on which the adjourned application is heard. Target Share means a fully paid ordinary share issued in the capital of Target. Target Shareholder means a person who is registered in the Register as the holder of one or more Target Shares from time to time. 1.2 Related entities For the purposes of this agreement, an entity is a related entity of another entity if the first entity and the second entity would be related bodies corporate for the purposes of section 50 of the Corporations Act if the Corporations Act were read so that: (a) references to bodies corporate included references to other entities; (b) a subsidiary of an entity included an entity that is controlled by the first entity for the purposes of section 50AA of the Corporations Act; (c) a trust is a subsidiary of another entity if it would have been a subsidiary had the trust been a body corporate and had units in the trust been shares; and (d) an entity is a subsidiary of a trust if it would have been a subsidiary had the trust been a body corporate. 1.3 Interpretation In this agreement any reference, express or implied, to an enactment (which includes any legislation in any jurisdiction) includes references to: (a) that enactment as re-enacted, amended, extended or applied by or under any other enactment (before, on or after the date of this agreement); (b) any enactment which that enactment re-enacts (with or without modification); and (c) any subordinate legislation made (before, on or after the date of this agreement) under that enactment, as re-enacted, amended, extended or applied as described in paragraph 1.3(a) or under any enactment referred to in paragraph 1.3(b). 1.4 In this scheme: (a) a word importing the singular includes the plural and vice versa; (b) a reference to a person includes an individual, an association, a corporation or other body corporate, a joint venture, a partnership, a trust and any Authority; (c) a reference to an agreement or document (including this agreement) is to that agreement or document as varied, novated, ratified or replaced from time to time; (d) 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 to it; (e) a reference to property or an asset includes any real or personal, present or future, tangible or intangible property or asset and any right, interest, revenue or benefit in, under or derived from the property or asset; (f) the word includes in any form of that word is not a word of limitation; (g) a reference to $ or dollar is to Australian currency; (h) a reference to any time is a reference to that time in Sydney, Australia; (i) where a word or phrase is given a defined meaning, any other part of speech or grammatical form of that word or phrase has a corresponding meaning; and (j) references to a party to this agreement include references to the successors or permitted assigns (immediate or otherwise) of that party. 1.5 Clauses 1.1 to 1.4 apply unless the contrary intention appears. 1.6 The headings in this agreement do not affect its interpretation. 1.7 If there is any conflict or inconsistency between a term in the main part of this agreement and a term in the schedules or other documents referred to or otherwise incorporated into this agreement, the term in the main part of this agreement shall take precedence, unless the schedule or other document which is incorporated into this agreement is expressly stated to take precedence over the main part of this agreement. 1.8 Except where otherwise expressly provided, where under this agreement the day on which any act, matter or thing is to be done is a day other than a Business Day, such act, matter or thing must be done on or by the next Business Day. 2. PRELIMINARY MATTERS (a) Target is a public company registered in Victoria and is a company limited by shares. (b) As at 13 August 2010, 50,000,000 Target Shares were on issue. (c) Bidder is a company incorporated in Victoria, Australia. (d) If the Scheme becomes Effective: (i) Bidder will provide or procure the provision of the Scheme Consideration to Scheme Shareholders in accordance with the Scheme; and (ii) all the Scheme Shares, and all the rights and entitlements attaching to them as at the Implementation Date, will be transferred to Bidder and Target will enter the name of Bidder in the Register in respect of the Scheme Shares. (e) Target and Bidder have agreed, by executing the Scheme Implementation Agreement, to implement the Scheme. (f) Bidder has agreed, by executing the Deed Poll, to perform its obligations under this Scheme, including the obligation to provide or procure the provision of the Scheme Consideration to the Scheme Shareholders. 3. CONDITIONS TO THE SCHEME (a) The Scheme is conditional on: (i) all the conditions in clause 3.1 of the Scheme Implementation Agreement required to be satisfied or waived by the Long Stop Date having been satisfied or (other than the conditions precedent which cannot be waived by either party to the Scheme Implementation Agreement) waived in accordance with the terms of the Scheme Implementation Agreement by 8.00am on the Second Court Date; (ii) approval of this Scheme by the Court pursuant to section 411(4)(b) of the Corporations Act; (iii) the Scheme Implementation Agreement not having been terminated by either party to that agreement before 8.00am on the Second Court Date. (b) Satisfaction of the conditions in clause 3(a) is a condition precedent to the operation of clause 4. (c) The Scheme will lapse and be of no further force or effect if the Effective Date does not occur on or before the Long Stop Date, or any later date that Bidder and Target agree. 4. IMPLEMENTATION OF THE SCHEME 1.1 Lodgement of Court Orders Target will lodge with ASIC office copies of the Court orders under section 411(4)(b) of the Corporations Act approving the Scheme by 5.00pm on the first Business Day after the day on which the Court approves the Scheme. 1.2 Agreed Dividend (a) If Target has made an announcement to the ASX pursuant to clause 4.3 of the Scheme Implementation Agreement of its intention to declare an Agreed Dividend then Target must declare a dividend in the amount of the Agreed Dividend on the Effective Date in accordance with clause 4.3 of the Scheme Implementation Agreement. (b) On the Dividend Payment Date Target must pay the Agreed Dividend (if any) to all Target Shareholders on the register at the Dividend Record Date. 1.3 Transfer of Scheme Shares On the Implementation Date: (a) subject to the provision of the Scheme Consideration in the manner contemplated by clause 4.5, all of the Scheme Shares together with all rights and entitlements attaching to them as at the Implementation Date, will be transferred to Bidder, without the need for any further act by any Scheme Shareholder (other than acts performed by Target as attorney and agent for Scheme Shareholders under clause7.5) by: (i) Target delivering to Bidder duly completed and executed share transfer forms (or master share transfer form) to transfer all the Scheme Shares to Bidder; and (ii) Bidder duly executing the share transfer forms (or master share transfer form), attending to the stamping of the share forms (or master share transfer form) (if required) and delivering the share transfer forms (or master share transfer form) to Target for registration; and (b) immediately after receipt of the share transfer forms (or master share transfer form) in accordance with clause 4.2(a), Target must enter, or procure the entry of, the name of Bidder in the Register in respect of all the Scheme Shares; and (c) the transfer of Scheme Shares will be deemed to be effective on the Implementation Date. 1.4 Agreement by Scheme Shareholders Each Scheme Shareholder agrees to the transfer of their Scheme Shares to Bidder in accordance with the terms of this Scheme. 1.5 Provision of Scheme Consideration (a) The obligation of Bidder to provide or procure the provision of the Scheme Consideration to Scheme Shareholders will be satisfied by Bidder depositing an amount in cleared funds equal to the aggregate Scheme Consideration payable to all Scheme Shareholders into an account established by or on behalf of Target before 10.00am on the Implementation Date. Such amount is to be held on trust for Scheme Shareholders and for the purpose of paying the aggregate Scheme Consideration to the Scheme Shareholders in accordance with the Scheme. Any interest earned on the amount deposited by Bidder will be for the account of Bidder. (b) On the Implementation Date, subject to Bidder having complied with clause 4.5(a), Target must pay from the account referred to in clause 4.5(a) to each Scheme Shareholder such amount of cash as is due to that Scheme Shareholder as Scheme Consideration in respect of all Scheme Shares held by that Scheme Shareholder. (c) The amount referred to in clause 4.5(b) may be paid by Target sending or procuring the despatch to each Scheme Shareholder by prepaid post to the address of the Scheme Shareholder recorded in the Register as at the Scheme Record Date a pre printed cheque for the amount of Scheme Consideration due to that Scheme Shareholder as determined in accordance with the Scheme. (d) In the case of any Scheme Shares held in joint names, the Scheme Consideration will be paid by sending or procuring the despatch of a pre printed cheque payable to the joint holders to the address of the holder whose name first appears in the Register as at the Record Date. 5. DEALINGS IN TARGET SHARES (a) To establish the identity of the Scheme Shareholders, dealings in Target Shares will only be recognised if: (i) in the case of dealings of the type to be effected using CHESS, the transferee is registered in the Register as the holder of the relevant Target Shares on or before the Scheme Record Date; and (ii) in all other cases, registrable transmission applications or transfers in respect of those dealings are received on or before the Scheme Record Date at the place where the Register is kept. (b) Target must register registrable transmission applications or transfers of Target Shares of the kind referred to in clause 5(a)(ii) by the Scheme Record Date. (c) If the Scheme becomes Effective, a holder of Scheme Shares (and any person claiming through that holder) must not dispose of or purport or agree to dispose of any Scheme Shares or any interest in them after the Scheme Record Date. (d) Target will not accept for registration or recognise for any purpose any transmission application or transfer in respect of Target Shares received after the Scheme Record Date, other than a transfer of Target Shares to Bidder pursuant to the Scheme or any subsequent transfer by Bidder to its successors in title. (e) For the purpose of determining entitlements to the Scheme Consideration, Target must maintain the Register in accordance with the provisions of this clause 5 until the Scheme Consideration has been paid to all Scheme Shareholders. The Register in this form will solely determine entitlements to the Scheme Consideration. (f) All statements of holding for Target Shares will cease to have effect from the Scheme Record Date as documents of title in respect of those shares and, as from that date, each entry current at that date on the Register will cease to have effect except as evidence of entitlement to the Scheme Consideration in respect of the Target Shares relating to that entry. (g) As soon as possible on or after the Scheme Record Date, and in any event within one Business Day after the Record Date, Target will ensure that details of the names, registered addresses and holdings of Target Shares for each Scheme Shareholder as shown in the Register on the Scheme Record Date are available to Bidder in the form Bidder reasonably requires. 6. QUOTATION OF TARGET SHARES (a) Target will apply to ASX to suspend trading on the ASX in Target Shares from the close of trading on the day Target notifies ASX that the Court has approved the Scheme under section 411(4)(b) of the Corporations Act. (b) On a date after the Implementation Date to be determined by Bidder, Target will apply: (i) for termination of the official quotation of Target Shares on the ASX; and (ii) to have itself removed from the official list of the ASX. 7. GENERAL SCHEME PROVISIONS 1.1 Consent to Scheme amendments If the Court proposes to approve the Scheme subject to any alterations or conditions, Target may by its counsel consent on behalf of all persons concerned to those alterations or conditions to which Bidder has consented. 1.2 Scheme Shareholders' agreements and warranties (a) Each Scheme Shareholder agrees to the transfer of their Target Shares to Bidder in accordance with this Scheme and acknowledges that the Scheme binds all Scheme Shareholders. (b) Each Scheme Shareholder is taken to have warranted to Target and Bidder that all their Scheme Shares (including any rights and entitlements attaching to those shares other than the entitlement to the Agreed Dividend) which are transferred to Bidder under the Scheme will, at the date of transfer, be fully paid and free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise, and restrictions on transfer of any kind, and that they have full power and capacity to sell and transfer their Target Shares to Bidder together with any rights and entitlements attaching to those shares under the Scheme, other than the entitlement to the Agreed Dividend. Target undertakes that it will provide such warranty to Bidder as agent and attorney of each Scheme Shareholder. 1.3 Title to and rights in Scheme Shares (a) To the extent permitted by law, the Target Shares transferred under the Scheme will be transferred free from all mortgages, charges, liens, encumbrances and interests of third parties of any kind, whether legal or otherwise. (b) On and from the Implementation Date, Bidder will be beneficially entitled to the Target Shares transferred to it under the Scheme pending registration by Target of Bidder in the Register as the holder of the Target Shares. 1.4 Appointment of Sole Proxy From the time that the Scheme Consideration is paid to Scheme Shareholders until Target registers Bidder as the holder of all Scheme Shares in the Register, each Scheme Shareholder: (a) is deemed to have irrevocably appointed Bidder as attorney and agent (and directed Bidder in each such capacity) to appoint any director, officer, secretary or agent nominated by Bidder as its sole proxy and, where applicable or appropriate, corporate representative to attend shareholders' meetings, exercise the votes attaching to the Scheme Shares registered in their name and sign every shareholders' resolution, and no Scheme Shareholder may itself attend or vote at any of those meetings or sign any resolutions, whether in person, by proxy or by corporate representative (other than pursuant to this clause 7.4(a)); (b) undertakes not to otherwise attend shareholders' meetings, exercise the votes attaching to the Scheme Shares registered in their name and sign any shareholders' resolutions, whether in person, by proxy or corporate representative; (c) must take all other actions in the capacity of a registered holder of Scheme Shares as Bidder reasonably directs; and (d) acknowledges and agrees that in exercising the powers referred to in clause 7.4(a), Bidder or any officer or agent nominated by Bidder may act in the best interests of Bidder as the intended registered holder of the Scheme Shares. 1.5 Power of attorney (a) Scheme Shareholders will be deemed to have authorised Target, and all of its directors, officers and secretaries, to do and execute all acts, matters, things and documents on the part of each Scheme Shareholder necessary to implement the Scheme including (without limitation) executing, as agent and attorney of each Scheme Shareholder, a share transfer form (or master share transfer form) in relation to Scheme Shares as contemplated by clause 4.3(a). (b) Each Scheme Shareholder, without the need for any further act, irrevocably appoints Target and all of its directors, officers and secretaries (jointly and severally) as its attorney and agent for the purpose of executing any document necessary to give effect to the Scheme including without limitation, a proper instrument of transfer of its Scheme Shares for the purposes of section 1071B of the Corporations Act which may be a master transfer of all the Scheme Shares. 1.6 Enforcement of Deed Poll Target undertakes in favour of each Scheme Shareholder to enforce the Deed Poll against Bidder on behalf of and as agent and attorney for the Scheme Shareholders. 1.7 Effect of Scheme The Scheme binds Target and all Scheme Shareholders from time to time and, to the extent of any inconsistency and to the extent permitted by law, overrides the constitution of Target. 8. GENERAL 1.1 Stamp duty Bidder will pay all stamp duties payable in respect of the transfer of the Scheme Shares to Bidder. 1.2 Consent (a) The Scheme Shareholders consent to Target doing all things necessary or incidental to the implementation of the Scheme. (b) Each Scheme Shareholder acknowledges that this Scheme binds Target and all Scheme Shareholders (including those who do not attend the Scheme Meeting, do not vote at the Scheme Meeting or vote against the Scheme at the Scheme Meeting). 1.3 Notices If a notice, transfer, transmission, application, direction or other communication referred to in the Scheme is sent by post to Target, it will not be taken to be received in the ordinary course of post or on a date and time other than the date and time (if any) on which it is actually received at Target's registered office or at the office of the Registrar. 1.4 Governing Law (a) This Scheme is governed by the law applying in New South Wales. (b) Each party irrevocably submits to the non-exclusive jurisdiction of courts exercising jurisdiction in New South Wales and courts of appeal from them in respect of any proceedings arising out of or in connection with this Scheme. Each party irrevocably waives any objection to the venue of any legal process in these courts on the basis that the process has been brought in an inconvenient forum. 8.5 Further action Target must, at its own expense, do all things and execute all documents necessary to give full effect to the Scheme and the transactions contemplated by it. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1345 of 2010 IN THE MATTER OF ITX GROUP PTY LIMITED ACN 107 656 833 ITX GROUP PTY LIMITED ACN 107 656 833 JUDGE: EMMETT J DATE: 2 DECEMBER 2010 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 20 October 2010, for reasons that I published on 21 October 2010, I ordered that the plaintiff, itX Group Limited (the Company), convene a meeting of its ordinary shareholders for the purpose of considering and, if it thought fit, approving a scheme of arrangement proposed between the Company and its shareholders. The meeting was convened for 29 November 2010, to be held at the conclusion or adjournment at the annual general meeting of itX to be held on that day. The Company has now applied to the Court for approval of the scheme on the basis that it has been agreed to by the requisite majority of its shareholders. 2 One aspect of the scheme was a proposal for the declaration of a special dividend subject to the passing of a special resolution at the annual general meeting approving the payment of that dividend, on the basis that it constituted financial assistance in connection with the proposed acquisition of the shares in the Company under the scheme. I am satisfied from the evidence that has been filed that the meeting was convened in accordance with the order of the Court and the Rules. 3 At the annual general meeting, the special resolution approving the dividend was passed. At the meeting of members convened by the Court, the resolution agreeing to the scheme was passed, with 99.86 percent of the votes cast in favour of the resolution. The votes cast altogether on the resolution represented some 41.05 per cent of shareholders, in excess of 92 per cent of the issued share capital as at that day. 4 The scheme was conditional upon a number of events, including the issue of a class ruling by the Commissioner of Taxation as to the effect of the scheme on shareholders. Such a class ruling was issued on 1 December 2010 by the Commissioner. My attention has been drawn to paragraph 34 of the class ruling, which erroneously refers to 17 December 2010 as the scheme record date. That erroneous reference appears to have no significance. Accordingly, the relevant condition has been satisfied. I have also seen certificates signed on behalf of itX and Avnet to the effect that all other conditions have been satisfied. 5 I have also seen a letter of 1 December 2010 from the Australian Securities and Investments Commission (the Commission) to the Company's solicitors indicating under s 411(17)(b) of the Corporations Act 2001 (Cth) (the Act) that the Commission has no objection to the scheme of arrangement. In all of the circumstances, I consider that it is appropriate to approve the scheme pursuant to s 411(4)(b) of the Act. It is also appropriate that the Company be exempted from complying with s 411(11) of the Act. I certify that the preceding five (5) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett. Associate: Dated: 25 January 2011