ISS Group Limited, in the matter of ISS Group Limited [2013] FCA 630

Federal Court of Australia|2013-06-20|Before: Barker J

Pursuant to s 411 of the Corporations Act 2001 (Cth) (Corporations Act), the plaintiff convene a meeting of holders of fully paid ordinary shares in the capital of the plaintiff (shareholders) to be held in Perth, Western Australia on 24 July 2013 at 11:00am (Perth time) or on such other date and such other time as the Court may approve (scheme meeting) for the purpose of considering and if thought fit, approving with or without modifications, the scheme of arrangement proposed between the plaintiff and its shareholders (scheme), being the document behind Tab 3 to exhibit RP-1 to the affidavit of Richard Pang sworn on 5 June 2013. 2. The scheme booklet which contains an explanatory statement required by s 412(1)(a) of the Corporations Act and being the document behind Tab 5 to exhibit RP-1 to the affidavit of Richard Pang sworn on 5 June 2013 and including the notice of scheme meeting being the document annexed as Annexure "PCW-5" to the affidavit of Peter Wall sworn on 20 June 2013, be and is approved, subject to: (a) correction of any minor typographical or grammatical errors and the date of the second hearing as provided for in order 9 below; (b) any minor amendments required or approved by the Australian Securities and Investments Commission (ASIC) for registration under s 412(6) of the Corporations Act; and (c) adopting the marked-up amendments contained in Annexure "PCW-9" to the affidavit of Peter Wall sworn on 20 June 2013. 3. Subject to registration of the scheme booklet pursuant to s 412(6) of the Corporations Act, the plaintiff is to dispatch, on or before 24 June 2013 or such other date as directed by the Court, a document substantially in the form of the scheme booklet (as amended in order 2 above) to the shareholders who appear on the register of members as at 5:00pm (Perth time) on 20 June 2013 by ordinary post (or by airmail to overseas holders) or by fax or e-mail (provided a fax number or e-mail address has been nominated by the holder). 4. Subject to these orders, the scheme meeting is to be (so far as practicable): (a) convened, held and conducted in accordance with the provisions of Part 2G.2 of the Corporations Act that apply to members of a company and the provisions of the plaintiff's constitution that are not inconsistent therewith and that apply to meetings of members; (b) convened, held and conducted pursuant to s 1319 of the Corporations Act, on the basis that regulations 5.6.11 to 5.6.12 and 5.6.13A to 5.6.36A of the Corporations Regulations 2001 (Cth) do not apply to the scheme meeting; and (c) convened using the notice of meeting substantially in the form of the notice annexed as Annexure "PCW-5" to the affidavit of Peter Wall sworn on 20 June 2013 and filed herein. 5. Evan Cross or, failing him, Richard Pang is to be appointed to act as chairperson of the scheme meeting and report the result of the scheme meeting to this Court. 6. The chairperson can adjourn the scheme meeting in his discretion. 7. Two shareholders present in person or by proxy, corporate representative or attorney under power and entitled to vote shall constitute a quorum for the scheme meeting. 8. Voting on the resolution to approve the scheme at the scheme meeting is to be conducted by way of poll. 9. The matter may be relisted on 26 July 2013 at 2:15pm for such application as appropriate following the scheme meeting. 10. If the matter is relisted, then the plaintiff is to give notice of the hearing of the application pursuant to s 411(4) of the Corporations Act and that notice: (a) is to be published once in each of "The Australian" and "The West Australian" newspapers; and (b) is to be by an advertisement substantially in the form of "Annexure A" to these orders, such advertisement to be published at least 5 days before the date fixed for the hearing. 11. The scheme and scheme booklet be confidential to the plaintiff on the Court file until the explanatory statement in the scheme booklet has been registered with the ASIC in accordance with s 412(6) of the Corporations Act. 12. The plaintiff, the ASIC and any interested party has liberty to apply to relist the matter on 24 hours' written notice. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. Annexure A ISS Group Limited (ABN 27 109 443 852) Notice of hearing to approve compromise or arrangement TO all the creditors and members of ISS Group Limited ABN 27 109 443 852 (ISS). TAKE NOTICE that at 2:15pm (Perth time) on 26 July 2013 the Federal Court of Australia at [insert court room] (situated at the Commonwealth Law Courts Building, 1 Victoria Avenue, Perth) will hear an application by ISS seeking the approval of an arrangement between ISS and its members, if agreed to by resolution to be considered by the members of ISS at a meeting of such members to be held on 24 July 2013 at Suite 1, 40 Hasler Road, Osborne Park, Western Australia 6017 at 11.00am (Perth time). If you wish to oppose the approval of the arrangement, you must file and serve on ISS a notice of appearance, in the prescribed form, together with any affidavit on which you wish to rely at the hearing. The notice of appearance and affidavit must be served on ISS at its address for service at least 1 day before the date fixed for the hearing of the application. The address for service on ISS is, c/o Steinepreis Paganin, Level 4, The Read Buildings, 16 Milligan Street, Perth, Western Australia 6000 (Reference: David Naoum/Peter Wall). Richard Pang Managing Director ISS Group Limited

IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 171 of 2013

IN THE MATTER OF ISS GROUP LIMITED ABN 27 109 443 852 ISS GROUP LIMITED ABN 27 109 443 852

JUDGE: BARKER J DATE: 20 JUNE 2013 PLACE: PERTH

overview 1 On 20 June 2013, the Court made an order under s 411(1) of the Corporations Act 2001 (Cth) (Act) convening a meeting of the holders of issued, full paid ordinary shares in the capital of the plaintiff (ISS) (shareholders) for the purpose of considering a proposed scheme of arrangement between ISS and the shareholders in relation to the acquisition of all of the ordinary shares in ISS by P2ES Holdings, Inc. (P2ES), as well as ancillary orders. 2 These are short reasons for the making of the orders.

background 3 By affidavit, Richard Pang, managing director and chief executive officer of ISS, provides a background to the proposed scheme. 4 ISS was registered as a public company limited by shares in Western Australia on 8 June 2004. It provides operational management software for use in the energy, resources and manufacturing industries. 5 ISS is admitted to the official list of the Australian Securities Exchange (ASX) and its ordinary shares are quoted and traded on the ASX. As at 5 June 2013, the issued capital of ISS comprised 136,150,863 ordinary shares. 6 The board of directors of ISS comprises four directors: Evan Cross (non-executive chairman), Shane Attwell (non-executive director), Colin Yamey (non-executive director) and Mr Pang. 7 P2ES is an unlisted United States public company with a registered office in Denver, Colorado. It provides software, geospatial data, land management tools and outsourcing services to the energy industry.

proposed scheme 8 The scheme of arrangement now proposed results from ISS entering into a merger implementation agreement with P2ES on 4 June 2013. 9 The scheme, if implemented, will result in all of the ordinary shares in ISS being transferred to P2ES and ISS being delisted from the ASX. In exchange, each ISS shareholder will receive $0.33 for each share held (scheme consideration). The scheme consideration represents a 50% premium on the closing price of ISS shares on 31 May 2013, the last trading day before the announcement of the proposed scheme. 10 Clause 11.2 of the merger implementation agreement sets out certain circumstances where ISS may be liable to pay P2ES a fee of $449,297.85 (break fee). Clause 12.2 of the merger implementation agreement sets out certain circumstances where P2ES may be liable to pay ISS a fee of $449,297.85 (reverse break fee). 11 Clauses 10.2 to 10.6 of the merger implementation agreement provide, inter alia, that during a defined "exclusivity period" (of a maximum of four months from the date of the agreement), ISS and its representatives must not, except with the prior written consent of P2ES: directly or indirectly solicit, invite, encourage or initiate any competing proposal or enquiries, negotiations or discussions with any third party in relation to a competing proposal (the "no shop obligation"); or negotiate or enter into or participate in negotiations or discussions with any other person in relation to a competing proposal (the "no talk obligation") (exclusivity provisions). 12 Mr Pang deposes that the break fee and the exclusivity provisions were agreed between ISS and P2ES following arm's length commercial negotiations, in which both parties were separately advised and represented by external legal advisers. Both ISS and P2ES required provisions of this nature to be included in the merger implementation agreement and ISS was satisfied that the final form was acceptable to it. Mr Pang considers that neither the break fee nor the exclusivity provisions operate against the interests of shareholders. 13 Mr Pang provides reasons why he considers the break fee is reasonable and appropriate: The break fee is only payable in particular circumstances. Neither the break fee nor the reverse break fee will be payable if the proposed scheme becomes effective. The break fee is not payable if the ISS board of directors withdraws its support or recommendation of the proposed scheme as a result of an independent expert opinioning that the proposed scheme is not in the best interests of the shareholders, or as a result of any matter or thing giving ISS the right to terminate the merger implementation agreement. The amount of the break fee represents a fair and reasonable pre-estimate of the minimum transaction and opportunity costs P2ES would likely incur should the proposed scheme not proceed. The amount of the break fee does not represent greater than 1% of either the total equity value of ISS or the value of the scheme consideration. 14 Mr Pang also provides reasons why he considers the exclusivity provisions are reasonable and appropriate: The exclusivity provisions take into account part of the significant transaction costs of both ISS and P2ES which will be incurred in proposing the merger and putting the proposal before shareholders. There are fiduciary carve-outs from the "no talk" obligation.

consideration 15 The Court is satisfied that the proposed scheme is one that may be approved under s 411 of the Act. 16 The level of disclosure to be provided by the draft scheme booklet is satisfactory. 17 An independent expert has provided a report, to be included with the draft scheme booklet to be given to shareholders, that states that the scheme is fair and reasonable and in the best interests of shareholders in the absence of a superior proposal. 18 There is no demonstrated performance risk in relation to the proposed scheme that should prevent it from going forward to the meeting of shareholders. Further, it is not for the Court as this point to exercise commercial judgment in respect of the proposed scheme, but to leave the shareholders to exercise that judgment. 19 All necessary procedural matters required under the Act concerning the calling and conduct of the meeting of shareholders have been met. The meeting will be chaired by Mr Cross or, failing him, Mr Pang. Mr Cross and Mr Pang have disclosed the extent of their commitments and obligations to ISS, none of which disqualifies either of them as an appropriate chairperson at the meeting. 20 There is nothing in the break fee or exclusivity provisions that, in my opinion, should cause the Court to think that shareholders at the meeting may not fairly consider supporting or rejecting the proposed scheme. I accept the statements made by Mr Pang as to the reasonableness and appropriateness of the provisions in the circumstances. I also accept that the break fee, if it were required to be paid, is not an unreasonable, commercial provision in the circumstances of the proposed scheme. 21 Finally, pursuant to s 411(2) of the Act, the Australian Securities and Investments Commission has been given the required notice of the hearing of the application and a copy of the draft scheme booklet, and has provided a letter indicating that it does not, at this point, propose making any submission in relation to the proposed scheme.

CONCLUSION AND orders 22 In all of these circumstances, appropriate disclosure of any relevant matters having been made on behalf of ISS, the Court is satisfied that the orders proposed should be made. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.

Corporations Act 2001(Cth)s 411(1), s

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