R & M Marshall Investments Pty Ltd Trading as Burmar Cleveland ACN:

Transcription

1 Report to creditors of: Burmar Industries Pty Ltd Trading as Burmar Sumner Park ACN: R & M Marshall Investments Pty Ltd Trading as Burmar Cleveland ACN: RAMB Enterprises Pty Ltd Formerly trading as Burmar Plumbing Plus Nerang ACN: RA & RM Enterprises Pty Ltd Formerly trading as Burmar Plumbing Plus Camp Hill ACN: (All Administrators Appointed) Friday, 21 January 2011

2 Index Appendices 1 Introduction Administrators Executive Summary Trading during the Administration Period and Sale of Business Proposed Deed of Company Arrangement Antecedent Transactions Estimated Outcome Statement and Recommendation Administrators Statement Remuneration Meeting of Creditors A B C D E F G H I Deed of Company Arrangement Proposal and copy of the draft Deed Estimated Return to Creditors Analysis Summary of Receipts and Payments IPA Creditor Information Sheet Remuneration Report Burmar Industries Remuneration Report R & M Marshall Remuneration Report RAMB Enterprises Remuneration Report RM &RA Enterprises Meeting of Creditors Documentation 2010 Grant Thornton

3 1 Introduction Michael Gerard McCann and Graham Robert Killer were appointed Joint & Several Administrators of the Burmar Group of Companies on Thursday, 28 October The second meetings of creditors were held on Friday, 3 December Quorums were present for each of these meetings and creditors resolved to adjourn the meetings for a period of up to 45 business days. The reconvened second meetings of creditors will be held on Tuesday, 1 February 2011, at 3pm at the offices of Grant Thornton Grant Thornton 21 January

4 Introduction Michael Gerard McCann and Graham Robert Killer were appointed Joint & Several Administrators of the Burmar Group of Companies pursuant to Section 436A of the Corporations Act 2001 ( the Act ) after a resolution was passed by the Directors on Thursday, 28 October On 24 November 2010, we issued our report ( our previous Report ) pursuant to Section 439A of the Act following our investigations into the affairs of the Burmar Group, pursuant to Section 438A of the Act. This report is an update to our previous Report and should be read in conjunction with that report. Second meetings of creditors The second meetings of creditors of the Group were held on Friday, 3 December 2010, at 11am at the offices of Grant Thornton. The purpose of the second meetings was to consider the Administrators report on the Burmar Group s business, property, affairs and financial circumstances and to consider the Administrators statement of opinion in respect of each of the options available to creditors. At the meetings, creditors resolved that the meetings be adjourned for a period of up to 45 business days. The purpose of the adjournments was to allow the Directors additional time to propose a Deed of Company Arrangement for one or more of the Companies. We have now received a DOCA proposal in respect to Burmar Industries Pty Ltd T/A Burmar Sumner Park ( Sumner Park ). Please refer to Section 4 for a detailed discussion on the proposal. Reconvened second meetings of creditors The reconvened second meetings of creditors of the Group will be held on Tuesday, 1 February 2011, at 3pm at the offices of Grant Thornton. The purpose of the reconvened second meetings are to consider the Administrators further report on the Burmar Group s business, property, affairs and financial circumstances and to consider the Administrators statement of opinion in respect of each of the options available to creditors. At the meetings, creditors will be required to determine the future of the Burmar Group and to resolve one of the following: That the Companies execute a Deed of Company Arrangement ( DOCA ); or That the Administrations end; or That the Companies be wound up. For reasons stated in this report it is our opinion the Creditors resolve to accept a Deed of Company Arrangement for Burmar Industries Pty Ltd and that each of the remainder of the Burmar Group companies be placed into Liquidation Grant Thornton 21 January

5 Creditors should note that in preparing this report we have relied on information that has been provided by the Directors of the Companies and the books and records of the Companies. In the event that any of the companies of the Burmar Group proceeds into Liquidation, further investigations will be conducted. Provided that funding is available, the investigations will be more extensive than those undertaken to date (which has been limited by the time constraints of the voluntary administration process). Further investigation may be supported by public examinations of the Directors, officers and others who may be able to provide information about the Companies examinable affairs (as that expression is defined in the Act). It is our view that the previous Report and this report provides sufficient information to creditors to allow them to make an informed decision about the Burmar Group s future and allows the Administrators to make a reasoned and fair recommendation based upon our opinions and the options available to creditors. Compliance with best practice We confirm that this report complies with the statements of best practice issued by the IPA with regard to content of Administrators reports and the Code of Professional Practice (effective 1 January 2011) with regard to remuneration. Abbreviations used in this report ABN Australian Business Number ACN Australian Company Number Act Corporations Act 2001 ASIC Australian Securities & Investment Commission ATO - Australian Taxation Office Bob Marshall Robert Ronald Marshall Burmar Group or Companies Burmar Industries Pty Ltd trading as Burmar Sumner Park, R & M Marshall Investments Pty Ltd trading as Burmar Cleveland, RAMB Enterprises Pty Ltd formerly trading as Burmar Nerang, and RA & RM Enterprises Pty Ltd formerly trading as Burmar Plumbing Plus Camp Hill. Camp Hill - RA & RM Enterprises Pty Ltd formerly trading as Burmar Plumbing Plus Camp Hill. COGS Cost of Goods Sold Cleveland - R & M Marshall Investments Pty Ltd trading as Burmar Cleveland DOCA Deed of Company Arrangement the Directors Robert Ronald Marshall, Robert James Marshall, and Merna Janice Marshall GEERS General Employee Entitlements Redundancy Scheme IPA Insolvency Practitioners Association of Australia NAB National Australia Bank Ltd Nerang - RAMB Enterprises Pty Ltd formerly trading as Burmar Nerang previous Report Administrators report dated 24 November Grant Thornton 21 January

6 relation back date the commencement of the winding up date, or the date the Administrators were appointed being Thursday, 28 October Robert Marshall Robert James Marshall ROT Retention of Title SGC Superannuation Guarantee Charge SOCP Statement of Current Position Sumner Park - Burmar Industries Pty Ltd trading as Burmar Sumner Park Westpac Westpac Banking Corporation 2010 Grant Thornton 21 January

7 2 Administrators Executive Summary The Administrators have continued to trade the Sumner Park and Cleveland businesses. The Nerang business has ceased operations. The Directors have proposed a DOCA for Sumner Park. They have not submitted proposals on any other Company Grant Thornton 21 January

8 Independence We confirm that we have had no previous dealings with the Burmar Group or its Directors. Neither the Burmar Group nor its Directors have been clients of this firm and we have not provided any professional advice to the Group or its Directors except in relation to the appointment of an administrator. We confirm that there have been no changes to the Declaration of Independence, Relevant Relationships and Indemnities issued to creditors with the initial Notice to Creditors. Background On 24 November 2010, we issued our report pursuant to 439A of the Act. Subsequent to issuing that Report, concurrent meetings of creditors for the Burmar Group were held at the offices of Grant Thornton on 3 December The meetings on 3 December 2010 were adjourned to allow the Directors time to prepare a proposal for a Deed of Company Arrangement ( DOCA ). Since that time, the Directors have consulted with their legal and accounting advisors to formulate a Proposal for a DOCA for some or all of the companies. After serious consideration regarding the Group, the Directors have submitted a DOCA proposal for Burmar Industries Pty Ltd ( Sumner Park ) only. There are no DOCA proposals for the other Burmar Group Companies. Trading during the administration period Set out on the following page is a summary of the trading performance by each location. Sumner Park has traded profitably over the 2 month period, with sales being at or better than forecast levels. Whilst additional costs have been incurred, particularly for IT support, cost savings have been initiated during the Administration, enhancing the future profitability of this location. Cleveland and Nerang have made losses during the Administration period. On Friday, 17 December 2010, the decision was made to close Nerang with immediate effect. This decision was based on the following key factors: Poor trading performance; and The finalisation of a contract with a major customer. We will provide a further update on the trading performance of the businesses at the reconvened meetings of creditors to be held on 1 February Grant Thornton 21 January

9 Sales Sumner Park Cleveland Nerang 28-Oct Oct Oct Dec Dec Dec-10 * ($) ($) ($) Sales 721, , ,301 COGS (530,017) (137,451) (341,705) Gross Profit 191,095 48,294 46, % 26.0% 12.0% Expenses Bank Charges** (13,351) (905) (10,061) IT Support (10,151) - (1,295) Lease Payments (2,639) - - Motor Vehicle / Fuel (1,861) (861) (3,200) Other Overheads (8,709) (1,965) (2,940) Rent (21,374) (22,849) (14,543) Stationery / Printing (1,485) - (45) Superannuation (8,301) (2,509) (2,180) Telephone (7,284) (2,174) (1,571) Utilities (1,423) (1,500) (1,500) Wages & Salaries (99,970) (30,999) (28,047) Insurance (4,106) (1,192) (1,299) Total Expenses (180,654) (64,954) (66,681) Net Operating Profit/ (Loss) 10,441 (16,660) (20,085) Other Income 5, ,345 Net Profit/(Loss) 16,179 (16,149) (12,741) * Nerang was closed effective 17 December 2010 * * Includes Merchant Fees Sale of businesses The Sumner Park and Cleveland businesses have been advertised for sale. The expressions of interest for the above close on 4 February 2011 and we will provide an update on that sale campaign at the reconvened meetings of creditors. Investigations by the Administrators As set out in our previous Report, investigations to date have focused on the trading history during the 12 months leading up to our appointment and the reasons for the Burmar Group being placed into Voluntary Administration. These investigations also focused on issues such as insolvent trading, preference payments and uncommercial transactions. In considering the proposed DOCA, we have further investigated the likelihood of any return to creditors from pursuing claims arising from antecedent transactions. The following table summarises payments made to creditors that our review suggests may be considered preferential and recoverable by a Liquidator: Burmar Industries RA & RM Enterprises RAMB Enterprises R & M Marshall Investments Supplier No# Amount($) No# Amount($) No# Amount($) No# Amount($) Trade creditors 6 90, , , ,000 Statutory Creditors 1 92, , , ,734 Total 7 182, , , , Grant Thornton 21 January

10 DOCA Proposal The Directors of Burmar Industries Pty Ltd have proposed a DOCA be entered into with creditors. The DOCA can be summarised as follows: The business and associated assets of Burmar Industries Pty Ltd together with the stock of RAMB Pty Ltd and RA & RM Enterprises Pty Ltd will be sold to a New Company for a total consideration of $1,246,100 paid over 48 months. From the sale proceeds, the NAB is to be paid $102,785 for the plant and equipment pursuant to its fixed charge immediately upon signing of the DOCA and Sale Agreement. Employee entitlements for employees currently employed by Sumner Park will be transferred to the new entity. Employees that ceased employment will receive 100% of their outstanding entitlements. Unsecured creditors receive an estimated 22 cents in the dollar on their debts (based upon the information known to date). The current Directors will not claim in the DOCA. The DOCA provides a better return to creditors than they would receive under a Liquidation scenario. Return to creditors Based upon our investigations and the information available, we believe that, in the event of a DOCA: Priority creditors will receive 100 cents in the dollar on their claims. Under the proposed DOCA, unsecured creditors should receive 22 cents in the dollar. Based upon our investigations and the information available, we believe that, in the event of Liquidation: On an optimistic basis, it is possible that the claims of priority creditors will be paid in full across all Companies. However on a pessimistic scenario the return to priority creditors will be limited to that available under GEERS. Under an optimistic liquidation scenario, it is possible that unsecured creditors of Burmar Industries Pty Ltd may receive a nominal distribution. However this is subject to the extent of cross collateralisation of the NAB liabilities. Unsecured creditors will not receive a return under a pessimistic Liquidation scenario. It is therefore our view that a greater return to creditors of Burmar Industries Pty Ltd is more likely if the DOCA proceeds. Future of the Companies At the forthcoming meetings, creditors will be required to resolve one of the following options for each of the companies in the Burmar Group: That the Company execute a DOCA (Burmar Industries Pty Ltd only); or That the Company be wound up; or That the Administration end (and the Company be returned to the Directors control) Grant Thornton 21 January

11 A summary of each scenario and our recommendation is provided below. That Burmar Industries execute a DOCA The Directors of Burmar Industries Pty Ltd have proposed a DOCA, a summary of which is set out in Section 4 of this report. It is our opinion that it is in the interests of unsecured creditors of Burmar Industries Pty Ltd that the company execute a DOCA. Our opinion is based on: The return to unsecured creditors is significant and provides a materially better return than the return under Liquidation; The DOCA enables the business to continue and provides continued employment for current employees; Provides potential for suppliers to continue to trade with the business; and There is a realistic basis to expect the business may be traded on a viable basis in the future and complete the DOCA successfully. That R & M Marshall Investments Pty Ltd, RAMB Enterprises Pty Ltd, and RA & RM Enterprises Pty Ltd be wound up Should creditors resolve to wind up the Group, the Group will be placed into Liquidation that day. A Liquidator is required to realise the Group s property and distribute the proceeds to creditors in accordance with the priorities detailed in the Act. A Liquidator is also required to undertake further investigation into the Group s prior activities and the conduct of its Directors. It is our opinion that it IS in the interests of unsecured creditors that R & M Marshall Investments Pty Ltd, RAMB Enterprises Pty Ltd, and RA & RM Enterprises Pty Ltd be wound up as the entities are insolvent and no DOCA proposal has been received. However, it is our opinion that it is NOT in the interests of unsecured creditors for Burmar Industries Pty Ltd to be wound up as there would be little or no return to creditors under a business sale or due to the business ceasing to trade and the assets not being able to be effectively realised for a greater value. End the administration Should creditors resolve to end the Administration, the Group will be placed in a similar position to that which existed prior to our appointment (ie, as if the Administration did not occur). Creditors would then have the option of pursuing their usual recovery actions against the Group such as court actions to obtain judgements, warrants of execution or even winding up the Group. We do not believe that it will be in the best interests of creditors for the Administrations to end. As stated in the previous Report, the Group has substantial outstanding debts and the Group is insolvent. Accordingly, the return of control of the Group to the Directors without the protection of a DOCA is not satisfactory for unsecured creditors and is therefore not considered an option Grant Thornton 21 January

12 3 Trading during the Administration Period and Sale of Business We have continued to trade the Cleveland and Sumner Park businesses. The operations at Nerang have ceased. We are currently seeking to sell the businesses Grant Thornton 21 January

13 Trading results during the Administration period Since the meeting of creditors on 3 December 2010, the Administrators continued to trade Cleveland, Nerang and Sumner Park businesses. This enabled us to assess the viability of the businesses, facilitate the better collection of receivables, explore the opportunity to sell the businesses (to maximise asset realisation) and also allow the Directors the opportunity to propose a DOCA (refer to Section 4 for further commentary). Set out in the table opposite is a summary of the trading results for the period ended 31 December 2010 (approximately 8 weeks). Sumner Park has traded profitably, with sales levels being consistent with forecast. Concerns are identified regarding the gross margins being achieved. However these are heavily affected by the competitiveness within the industry. As identified in our previous Report, the Groups accounting systems were not configured at the time of my appointment to capture costs of goods sold ( COGS ) on a transactional basis. This was rectified during December As a result, the COGS previously reported by the Group represented the cost of purchases only, not taking into account the stock already on hand, and may have materially under-report the actual cost of stock sold. The largest expense of the business aside from stock purchases is salary and wages. This expense has been marginally higher during the Administration due to the requirement of staff to work overtime as a result of staff shortages caused by resignations. The largest non trading expense incurred was IT support. This cost has been incurred to enable the accurate recording of the Sales Sumner Park Cleveland Nerang 28-Oct Oct Oct Dec Dec Dec-10 * ($) ($) ($) Sales 721, , ,301 COGS (530,017) (137,451) (341,705) Gross Profit 191,095 48,294 46, % 26.0% 12.0% Expenses Bank Charges** (13,351) (905) (10,061) IT Support (10,151) - (1,295) Lease Payments (2,639) - - Motor Vehicle / Fuel (1,861) (861) (3,200) Other Overheads (8,709) (1,965) (2,940) Rent (21,374) (22,849) (14,543) Stationery / Printing (1,485) - (45) Superannuation (8,301) (2,509) (2,180) Telephone (7,284) (2,174) (1,571) Utilities (1,423) (1,500) (1,500) Wages & Salaries (99,970) (30,999) (28,047) Insurance (4,106) (1,192) (1,299) Total Expenses (180,654) (64,954) (66,681) Net Operating Profit/ (Loss) 10,441 (16,660) (20,085) Other Income 5, ,345 Net Profit/(Loss) 16,179 (16,149) (12,741) * Nerang was closed effective 17 December 2010 * * Includes Merchant Fees trading results of the business so as to provide information to assist our decisions regarding the trading performance of the businesses and assess the viability of the DOCA proposal Grant Thornton 21 January

14 Other Income includes rebates and discounts received from various suppliers through the period. It is expected that further rebates will be receivable in the coming weeks. Cleveland has made losses during this period predominately due to the inability of the business to operate on a cost structure low enough to generate a net profit from the low gross margin being achieved. The loss resulting at Cleveland, of $16,149 has been funded by the sale of stock held at the time of appointment of the Administrators. Nerang made losses during the Administration period until it was closed on 17 December The losses resulted primarily from the unsustainably low gross margins being achieved on sales at this location. Since my last report, several additional cost saving initiatives have been undertaken to improve the viability of the operations. These include: A further review of the workforce, award coverage, and the roster to reduce wages and employee expenses (the single largest expense); Continued review of the costing and pricing systems (ongoing); Reduced purchasing to lower the stock holding and associated costs of same; and Reduced unnecessary telephone and vehicle expenses, including the disposing of excess vehicles. We will provide a further update on the trading performance of the businesses at the creditors meeting to be held on 1 February Rationale for closure of Nerang During our appointment as Administrators we have undertaken a review of each of the businesses including an assessment of their ongoing viability. On 17 December 2010, the decision was made to close Nerang with immediate effect. Due to poor trading performance and the immanent finalisation of a contract with a major customer, further reducing sales significantly, no justification could be identified to continue to incur the trading losses. Sale of businesses We have advertised the Sumner Park and Cleveland businesses for sale. The expressions of interest for the above close on 4 February 2011 and we will provide an update on the progress of that sale campaign at the reconvened meetings of creditors. As set out in Section 4 of this report, the Directors have proposed a DOCA for Burmar Industries Pty Ltd which involves the purchase of the Sumner Park business. Should creditors not resolve that Burmar Industries Pty Ltd execute a DOCA, or the Directors not secure the funds required under the DOCA proposal, efforts will continue to sell the Sumner Park business whilst in Liquidation Grant Thornton 21 January

15 Whilst no DOCA has been proposed for R & M Marshall Pty Ltd (Cleveland), we believe that the Cleveland operates a viable small business. In addition, we do not consider that a forced sale of the assets would realise a substantial return for creditors. Accordingly, we have sought expressions of interest for this business Grant Thornton 21 January

16 4 Proposed Deed of Company Arrangement The Directors of Burmar Industries Pty Ltd have proposed a Deed of Company Arrangement ( DOCA ) where a greater return is provided to creditors No other DOCA proposals have been received 2010 Grant Thornton 21 January

17 The Proposed DOCA The Directors of Burmar Industries Pty Ltd have proposed a DOCA be entered into with creditors. The details of this proposed DOCA and a copy of the proposed draft Deed are attached for your reference (Annexure A). The DOCA can be summarised as follows: The business and associated assets of Burmar Industries Pty Ltd together with the stock of RAMB Pty Ltd and RA & RM Enterprises Pty Ltd will be sold to a New Company for a total consideration of $1,246,100. The business and its associated assets includes all assets of the business excluding cash at bank, stock subject to ROT claims and the trade debtor accounts outstanding at the date of the DOCA. The New Company will assume control of the business upon signing of the DOCA and the accompanying sale of business agreement. The consideration is to be paid as a $200,000 lump sum upon signing the DOCA and Sale Agreement with the remainder paid over 48 months. From the sale proceeds, the NAB is to be paid $102,785 for the plant and equipment secured to it pursuant to its fixed charge. Employee entitlements for employees currently employed by Sumner Park (excluding outstanding superannuation) will be transferred to the new entity. Employees that ceased employment will receive 100% of their outstanding entitlements. The NAB agrees to limit its priority claim in the DOCA to $100,000 with the remainder of any shortfall, including amounts guaranteed by the Group for the directors personal property borrowings, ranking as an unsecured claim. The current Directors will not claim in the DOCA. Unsecured creditors receive an estimated 22 cents in the dollar on their debts (based upon the information known to date). Additional requirements by Administrators The Administrators require the following securities be established to support the payment obligations of the New Company: Require security by way of a fixed and floating charge registered over the New Company. This may be required to rank behind any debtor finance provider to the New Company, should it be required. Require personal guarantees and indemnities from the new Directors with respect to the payments due under the DOCA. Reporting by the New Company Under the terms of the DOCA there are to be certain reporting obligations imposed on the New Company. Set out below is a summary of those obligations: Monthly trading reports (including bank reconciliations); Biannual forecasts including profit and loss, cash flow and balance sheets be provided on 31 August and 28 February of each year. Annual business plans to be prepared by 30 June of each year and be supplied to confirm the strategic direction of the business annually Grant Thornton 21 January

18 Biannual reports to be supplied to creditors to update them on DOCA compliance. Effect on Creditors The effects of the proposed DOCA on different classes of creditor are as follows: Secured Creditors The NAB holds cross collateralised security across the Group and the Directors personal assets. The return to NAB is largely dependant on actual debtors collected and the amounts realised under the other securities (personal properties). Amounts outstanding after the collection of the debtors (and the sale of the personal assets) are required to be paid in priority to unsecured creditors (employee entitlements excluded). Under the proposed DOCA, the company is seeking the NAB s consent to limit its priority claim to $100,000 from the Deed fund with the remainder of the claim ranking equally with ordinary unsecured creditors. The NAB is also to receive $102,785 representing the sale value of the Company s plant and equipment. Employees Claims by continuing employees for unpaid annual leave, long service leave and other employee entitlements are to be carried over to the continuing business. The New Company should meet these obligations in full as they arise in the future. Previously terminated employees, employees who do not choose to transfer to the New Company or former employees with outstanding claims as at Thursday, 28 October 2010 will be paid subject to the terms of the DOCA, in priority to other unsecured creditors. Further details on the impact of the DOCA on employees is as follows: Accrued Leave Entitlements: In a winding up, employees have a priority for all accrued leave entitlements owing at the date of appointment (Thursday, 28 October 2010). In the case of an "excluded employee" (directors and relatives) there is a $1,500 limit to that priority. The DOCA proposal retains the priority for employees who have terminated or who will terminate their employment with the company on or before the date on which the Administrators cease operating the business. Continuing employees (those whose employment has not terminated) entitlements are to be transferred to the New Company and paid in the ordinary course of business as annual leave is taken (ie continuing employees will take annual leave as normal and be paid for such leave). The Directors forego any accrued leave entitlements. Therefore, the position of terminated employees is unaffected by the DOCA proposal as they will receive their annual leave payouts. Continuing employees will not receive a payout of their annual leave entitlements from the Deed funds. However, we consider that they are in the same or possibly a better position than they 2010 Grant Thornton 21 January

19 would be under the terms of the DOCA than Liquidation as: (1) any of those continuing employees could choose to become terminated employees before execution of the DOCA (by resigning from their employment) and thereby obtain the priority for a leave payout; (2) the continuing employees retain employment and that their accrued leave entitlements will be paid in the ordinary course when leave is taken; and (3) in the event of an immediate winding up, the continuing employees are likely to be terminated and payments to employees would be limited to funding available under GEERS. Superannuation Contributions The proposed DOCA will contain provisions dealing with unpaid superannuation contributions and the superannuation guarantee charge. Provision is made in the Act to ensure that claims cannot be admissible for dividend twice. Where there are unpaid superannuation contributions there will be only one claim admissible for dividend. If the Australian Taxation Office lodges a claim for SGC then that claim will subsist to the exclusion of a claim by the employee. dividend where the ATO has lodged a proof for SGC or the SGC has already been paid for that debt. Employee s rights are not prejudiced by these provisions as any funds recovered by the ATO for SGC are past onto the employee and the employee can still have a claim for the amount of the unpaid superannuation contributions not recovered by way of SGC. Employees may receive a speedier return under a liquidation through GEERS. However, the arrangements GEERS do not fund outstanding superannuation and as such, the superannuation outstanding to continuing and previously terminated employees is likely to remain unpaid under a liquidation scenario. Ordinary Unsecured (Trade) Creditors All other non-related unsecured creditors are to release their debts against the company upon completion of the terms of the DOCA. Creditors are entitled to make a claim against the DOCA for the full value of their debt. Unsecured creditors will be entitled to receive a dividend from the DOCA. Non-Participating Creditors Various creditors are said to be non-participating creditors. These include the related parties (ie directors, their relatives and entities associated with the directors). In accordance with section 444DB of the Act, the DOCA will provide the Deed Administrators with the power to determine that the whole of a superannuation contribution debt by an employee (continuing and previously terminated) is not admissible for 2010 Grant Thornton 21 January

20 Successful Implementation of the DOCA Upon review of the DOCA proposal, we consider the following elements key for the Deed to be successful: Supplier support. We have been advised by the Director that numerous key suppliers have agreed to support the sale and the New Company. Our discussions with selected suppliers appear to reflect the Directors representations. Customer support. We have been advised by the Director that the majority of the current customers have agreed to support the business. Working capital funding. The Directors have advised they wish to pursue a debtor factoring facility to assist in providing working capital. We have sighted a letter of offer from one financial supplier and are aware of discussions with another. Business viability and performance. The Directors have been unable to prepare a budget and cash flow projection for the business. Accordingly, we have developed an integrated 3- way (Profit and Loss, Cash Flow Statement and Balance Sheet) forecast for the 18 month period from February 2011 to June The forecast has been developed based on the following assumptions: - Sales revenue is based on the average daily sales for FY2010 adjusted for the seasonality of the business; - The gross margin achieved during the Administrators trading period; - Expenses based on historical averages; - Debtors subject to a debtor finance arrangement with a forecast with bad debts as 1% of sales. Based on the integrated forecast, the business may be able to generate $200,000 in free cash after payment of the DOCA payments by June This may be sufficient working capital for the business for the remainder of the DOCA period. We consider there is a likelihood of successful trading at a level sufficient to support the DOCA payments and continue trading into the future as : - The forecast has been prepared on a conservative basis; - Operational improvements and cost saving initiatives have been introduced into the business during the Administration; and - An upturn in the building industry is predicted following the recent flood damage in South East Queensland. Competent financial management. During the Administration, we have implemented: - Changes to the management structure of the Sumner Park store by redeploying a manager to supervise operations. - The retirement of most pre-existing administration staff. - Various control measures, system improvements and provided advice to staff regarding systems and day-to-day operations. - Whilst it would be preferred, the business is not in a position to employ a full time financial controller at this stage. Accordingly, we have engaged a book keeper to assist in improving the preparation of reports and to train the staff regarding the financial operations of the business. - We have identified and recommended an external financial advisor to assist management in the future Grant Thornton 21 January

21 The above adjustments should assist the New Company to meet forecasts and perform its obligations under the DOCA. NAB Support. Support of the NAB for the DOCA through agreement to limit its priority claim to $100,000. Specific Items Impacting on the Return to Unsecured Creditors The outcomes for creditors under the DOCA are not able to be accurately quantified as the position will be dependant on a number of key variables including: The actual recovery of outstanding debtors and the return to NAB from all securities, including the return from securities that are Director related, but outside the Burmar Group; The amount of employees that choose not to be employees of the New Company and have their entitlements transferred; The financial performance of the Ne Company; and The Final quantum of creditor claims. The above variables are difficult to estimate and may have a considerable range. Taxation Implications Creditors should note there may be taxation consequences of receiving a distribution from a DOCA or Liquidation. Creditors are urged to obtain their own independent taxation advice regarding their individual taxation circumstances. Key Events The key events of the Administration are as follows (although these could be subject to change): Event 1. Reconvening of the adjourned 2 nd meeting Anticipated Date 1 February Execution of the DOCA Within 15 business days from the date of creditors meeting approving DOCA (being no later than 22 February 2011) 3. Payment of $200,000 into Deed fund 4. Payment of monthly deed contribution Immediately upon signing of the DOCA 15 th of each month commencing 1 st month after DOCA executed 5. Distribution to Creditors Upon recovery of the specified assets and discharge of priority creditors and secured creditors 6. Termination of the DOCA Within 21 days of the final distribution to creditors (subject to presentation of distribution payments) 2010 Grant Thornton 21 January

22 Summary The Directors DOCA will provide an estimated return of 22 cents in the dollar over the next 4 years. The DOCA has the potential to be successfully implemented. The DOCA provides a better return to creditors than they would receive under a Liquidation scenario. Creditors should seek taxation advice regarding implications the DOCA may have on their individual circumstances Grant Thornton 21 January

23 5 Antecedent Transactions We believe that the Companies may have been insolvent from at least 30 June Transactions involving 14 trade creditors would be required to be further investigated should the Companies be placed into Liquidation Grant Thornton 21 January

24 Further investigations Subsequent to our previous Report, we have further investigated the possible recovery actions available to a Liquidator should one be appointed. We ask creditors to read this in conjunction with our previous report. Uncommercial transactions As set out in our previous Report, numerous transactions were identified between the entities as possible uncommercial transactions. These transactions created intercompany loan accounts in the book of each entity. Unfair preferences As set out in our previous report, preliminary investigations revealed that potential unfair preferences could be recoverable by a Liquidator. Since issuing the previous Report, we have conducted further investigations into the payments and possible defences available to creditors receiving such payments and set out the results of our investigations in the table below: Summary of possible preferences Burmar Industries RA & RM Enterprises RAMB Enterprises R & M Marshall Investments Supplier No# Amount($) No# Amount($) No# Amount($) No# Amount($) Trade creditors 6 90, , , ,000 Statutory Creditors 1 92, , , ,734 Total 7 182, , , ,734 Should a Liquidator be appointed additional investigations would be undertaken. Upon beginning this process, the Liquidation may identify further defences available to creditors. Creditors should note that any funds recovered, would be diluted by the fact that the individual creditor who may be forced to disgorge the amounts would be able to prove for those amounts in the Liquidation. Our review of the Companies records has identified the following intercompany loan balances: Inter Company Loan Summary as at 28 October 2010 Debt / (Liability) In the accounts of: Nerang Sumner Park Camp Hill Cleveland Total Nerang - 189,866 62,208 7, ,643 Sumner park (135,015) - 33,965 41,015 (60,035) Camp Hill 3, ,194-46, ,602 Cleveland 8,922 16,681 47,060-72,663 Total (122,522) 405, ,233 95, ,874 Note: The accounts of Burmar Industries Pty Ltd Sumner Park) are as at 30 September The table demonstrates that the loan balances do not reconcile between entities (eg. Sumner Park accounts suggest it is owed $189,866 from Nerang. Whereas Nerang s accounts, suggest that it owes Sumner Park $135,015). The Directors have advised that the majority of loan account transactions relate to the transfer of stock, the payment of utility suppliers and cash between entities. We understand that stock transfers were valued at historical cost. Due to inadequate records maintained by the Companies, we have been unable to completely reconcile these accounts as at the date of the appointment of the Administrators Grant Thornton 21 January

25 Investigations suggest that Burmar Industries Pty Ltd was the net provider of funding to other Burmar Group entities. Accordingly, we do not believe that the other Burmar Group companies will have any claim against Burmar Industries Pty Ltd. Insolvent trading We have tabled below the dates we believe the Companies may have become insolvent and the basis for our presumption: Possible dates of insolvency Company Burmar Industries Pty Ltd (Administrators Appointed) RA & RM Enterprises Pty Ltd (Administrators Appointed) RAMB Enterprises Pty Ltd (Administrators Appointed) R & M Marshall Investments Pty Ltd (Administrators Appointed) Earliest estimated date of insolvency Indicators of insolvency 30-Jun-09 Working capital Ratio of <1 Increase in creditors not proportionate to increased sales Marginal trading profits Slowing cash collections 30-Jun-09 Working capital ratio of <1 Net assets deficiencies Substantial losses 30-Jun-09 Working capital ratio of <1 Net assets deficiencies 30-Jun-10 Sustained and ongoing losses Ongoing losses Increasing in creditors aging Slowing cash collections To establish any claim against the Directors, the Liquidators would be required to determine if and when the Director s knew, or a reasonable person in his/ her position ought to have known that the Companies were insolvent. Quantum of potential Insolvent Trading Claim(s) We estimate that the following claims for continuing to trade whilst insolvent may exist: Company Estimated IT claim ($) Burmar Industries Pty Ltd (Administrators Appointed) 812,448 RA & RM Enterprises Pty Ltd (Administrators Appointed) 204,902 RAMB Enterprises Pty Ltd (Administrators Appointed) 376,742 R & M Marshall Investments Pty Ltd (Administrators Appointed) 279,562 Total possible claim 1,673,654 Although a claim for insolvent trading may exist, the ability of the Director s to meet any successful claim will need to be assessed prior to any action being commenced. Due to the extent of personal guarantees issued by the Directors, it appears highly unlikely that the Directors will have any assets available to meet such a claim. Personal Financial Position of Directors As set out in our previous Report, our investigations have revealed that the Directors of the Companies have limited assets in their personal estates and further, have provided guarantees to secured creditors of the Companies. These guarantees are secured by way of mortgages over personal properties and it is our understanding, that there is limited equity in these properties. In addition to the above mortgages, numerous trade credit terms provide for the ability of caveats to be lodged over personal property. Accordingly any surplus (which appears to be nil in 2010 Grant Thornton 21 January

26 this instance) would flow through these caveat holders before any funds could be recovered by a Liquidator. Therefore, even if an action against the Directors for insolvent trading was successful, it appears highly unlikely that the Directors will have sufficient assets available to meet such a claim. Summary We believe approximately $752,131 in possible preferences may be recoverable by a Liquidator. We believe that the Companies may have become insolvent from as early as 30 June 2009 and at least by 30 June A potential claim of approximately may $1.6m exist against the Directors. An insolvent trading action against the Directors may be possible, however, on a cost-benefit analysis, creditors should be aware that the costs of litigation and the extensive time taken in reaching a successful outcome might not be in the best interests of creditors. We believe the Directors will have insufficient assets available to meet any claim arsing from an action against them for insolvent trading Grant Thornton 21 January

27 6 Estimated Outcome Statement and Recommendation The proposed DOCA for Burmar Industries Pty Ltd is expected to provide a better return than that available under Liquidation. Unsecured creditors are expected to receive minimal, if any; return under Liquidation Grant Thornton 21 January

28 We have prepared an analysis (attached as Annexure B), which details the estimated range of return to creditors in a Liquidation scenario and, in the case of Burmar Industries, this is compared with the DOCA proposal. For the purposes of this report, we have assumed for Sumner Park and Cleveland a sale of the business and a closure and asset sale as the optimistic and pessimistic liquidation scenarios, respectively. R & M Marshall (Cleveland) Creditor Class Optimistic liquidation Pessimistic liquidation Priority (Employees) 100c Limited to GEERS Secured (NAB) Withheld Limited to fixed charge realisations only Unsecured Nil Nil The estimated return to NAB has been withheld as to not interfere with the sale program currently underway. RAMB Enterprises (Nerang) Creditor Class Optimistic liquidation Pessimistic liquidation Priority (Employees) 100c Limited to GEERS Secured (NAB) 13 Nil Unsecured 13 Nil RA & RM Enterprise (Camp Hill) Creditor Class Optimistic liquidation Pessimistic liquidation Priority (Employees) Limited to GEERS Limited to GEERS Secured (NAB) 7 Nil Unsecured 7 Nil Burmar Industries (Sumner Park) DOCA Liquidation optimistic Liquidation pessimistic Estimated DOCA Contributions / sale proceeds 1,246,100 1,030, ,915 Less associated costs of sale (720,260) (604,853) (624,102) Funds available for priority creditors 525, ,474 Nil Less payments to priority creditors Employee entitlements (62,317) (62,317) (129,639) NAB - Cross collateralised (100,000) (394,819) (469,699) Total priority creditors (162,317) (457,136) (599,338) Estimated GEERS funding N/A N/A 106,401 Estimated recovery of antecedental transactions N/A 180,000 Unknown Estimated return to priority creditors (162,317) (425,474) (106,401) Estimated return to priority creditors (C/$) Funds available for unsecured creditors 363, ,000 Nil Total unsecured creditor claims (1,682,216) (1,316,274) (1,785,973) Estimated return to unsecured creditors (363,523) (180,000) Nil Estimated return to creditors (C/$) Funds available for shareholders Nil Nil Nil The outcomes for unsecured creditors under the optimistic scenarios are difficult to quantify as the position will be dependant on a number of key variables including: Return to NAB from all securities; Ability to realise significant funds from stock and other assets under a sale of business scenarios; Amounts recovered from antecedent transactions recovery actions that may be taken by a Liquidator; and Final quantum of creditor claims Grant Thornton 21 January

29 The above variables are difficult to estimate and may have a considerable range. Unsecured creditors will not receive a return under a pessimistic Liquidation scenario for any of the Companies. At the time of drafting this report, the Administrators have received proof of debts from unsecured creditors as totalled below: Company Unsecured Creditors POD's Received ($) Administrators Estimate ($) Priority Creditors POD's Received ($) R & M Marshall Investments Pty Ltd 163, ,206 63,782 RA & RM Enterprises Pty Ltd 415, ,421 2,623 Burmar Industries Pty Ltd 741,492 1,662, ,347 RAMB Enterprises Pty Ltd 553, ,689 10,151 Summary of Receipts and Payments Please find attached as Annexure C to this report, a Summary of the Receipts and Payments of the Administration for the period Thursday, 28 October 2010 to 17 January Conclusion The DOCA will provide a better return to Creditors of Burmar Industries Pty Ltd than under a Liquidation scenario. On a Liquidation optimistic basis, it is possible that the claims of priority creditors will be paid in full across all Companies. However on a pessimistic scenario, the return to priority creditors will be limited to that available under GEERS. Under an optimistic Liquidation scenario, it is possible that unsecured creditors of Burmar Industries Pty Ltd may receive a distribution. For the other Companies any return is mainly dependant on antecedent recoveries by the Liquidator Grant Thornton 21 January

30 7 Administrators Statement It is our opinion that it is in the interests of unsecured creditors of Burmar Industries Pty Ltd that the company execute a DOCA. It is our opinion that it is in the interests of unsecured creditors of R & M Marshall Investments Pty Ltd, RAMB Enterprises Pty Ltd, and RA & RM Enterprises Pty Ltd that these companies be wound up Grant Thornton 21 January

31 Pursuant to Section 439A(4)(d) of the Act, the Administrators are required to express an opinion whether it would be in the best interests of creditors of the Group: That Burmar Industries execute a DOCA The Directors of Burmar Industries Pty Ltd have proposed a DOCA, a summary of which is set out in Section 4 of this report. It is our opinion that it is in the interests of unsecured creditors of Burmar Industries Pty Ltd that the company execute a DOCA. Our opinion is based on: The likely return to unsecured creditors is significant and provides a materially better return than the return under Liquidation; The DOCA enables the business to continue and provides continued employment for current employees; Continued trading provides potential for ongoing business for suppliers; and That R & M Marshall Investments Pty Ltd, RAMB Enterprises Pty Ltd, and RA & RM Enterprises Pty Ltd be wound up Should creditors resolve to wind up the Group, the Group will be placed into Liquidation that day. A Liquidator is required to realise the Group s property and distribute the proceeds to creditors in accordance with the priorities detailed in the Act. A Liquidator is also required to undertake further investigation into the Group s prior activities and the conduct of its Directors. It is our opinion that it IS in the interests of unsecured creditors that R & M Marshall Investments Pty Ltd, RAMB Enterprises Pty Ltd, and RA & RM Enterprises Pty Ltd be wound up as the entities are insolvent and no DOCA proposal has been received. However, it is our opinion that it is NOT in the interests of unsecured creditors for Burmar Industries Pty Ltd to be wound up as there would be little or no return to creditors under a business sale or due to the business ceasing to trade and the assets not being able to be effectively realised for a greater value. With the adjustments to management, there is a realistic basis to expect the New Company to trade on a viable business in the future and complete the DOCA successfully Grant Thornton 21 January

32 End the administration Should creditors resolve to end the Administration, the Group will be placed in a similar position to that which existed prior to our appointment (ie as if the Administration did not occur). Creditors would then have the option of pursuing their usual recovery actions against the Group such as court actions to obtain judgements, warrants of execution or even winding up the Group. We do not believe that it will be in the best interests of creditors for the Administrations to end. As stated in the previous Report, the Group has substantial outstanding debts and the Group is insolvent. Accordingly, the return of control of the Group to the Directors without the protection of a DOCA is not satisfactory for unsecured creditors and is therefore not considered an option. Conclusion The Directors of the Company have proposed a DOCA for Burmar Industries Pty Ltd. We believe it is in the interest of unsecured creditors that Burmar Industries Pty Ltd executed a DOCA. It is our opinion that it is in the interests of unsecured creditors of R & M Marshall Investments Pty Ltd, RAMB Enterprises Pty Ltd, and RA & RM Enterprises Pty Ltd to be wound up as the entities are insolvent and no DOCA proposal has been received. We do not believe there would be any benefit to creditors in ending the administrations Grant Thornton 21 January

33 8 Remuneration At the upcoming meeting creditors will be asked to consider: - The Administrators remuneration for the period 1 December 2010 to 15 January The Administrators remuneration for the period 16 January 2011 to 1 February The Administrators remuneration for the period 2 February to the execution of the DOCA - Should Burmar Industries execute a DOCA, the Deed Administrators remuneration - Should the Companies be placed into Liquidation, the Liquidators remuneration Grant Thornton 21 January

34 Administrators remuneration In order for the Administrators to receive remuneration, such remuneration is to be approved by creditors. Costs Approved to Date As at the date of this report, the following remuneration was approved by creditors at the meeting of creditors on 3 December Oct 10 to Company 1 Dec 10 Total ($) Burmar Industries Pty Ltd 144,653 R&M Marshall Investments Pty Ltd 65,443 RA & RM Enterprises Pty Ltd 17,312 RAMB Enterprises Pty Ltd 64,225 Total 291,633 In accordance with the Code of Practice issued by the IPA, please find enclosed an IPA Creditor Information Sheet (as Annexure D) providing information on approval of remuneration. Remuneration to be Approved At the reconvened meetings of creditors on Tuesday, 1 February 2011, creditors will be requested to approve the following additional remuneration. Remuneration to be Approved Work to Date At the reconvened meetings, creditors will be requested to approve remuneration for work undertaken from Thursday, 1 December 2010 to 15 January A summary of time incurred and expected to be incurred is summarised below: 1 Dec Jan 11 To To Total 1 Feb 11 ($) 15 Jan 11 Company (Estimated) Burmar Industries Pty Ltd 76,414 18,000 94,414 R&M Marshall Investments Pty Ltd 20,555 4,500 25,055 RA & RM Enterprises Pty Ltd 5,226 2,000 7,226 RAMB Enterprises Pty Ltd 21,354 3,500 24,854 Total 123, , ,549 Detailed information on the calculation of remuneration for each Company is provided in the attached in the following Annexure: Burmar Industries Pty Ltd Annexure D R&M Marshall Investments Pty Ltd - Annexure E RA & RM Enterprises Pty Ltd Annexure F RAMB Enterprises Pty Ltd Annexure G A breakdown of the work undertaken from 1 December to date is provided in the Remuneration Report - Description of Work Completed (VA). Remuneration to be Approved Future Work of the Voluntary Administrators Should creditors resolve that Burmar Industries Pty Ltd enter into a DOCA, the Company and its Directors will have 15 Business days to execute the DOCA. It will be necessary for creditors to approve the drawing of remuneration for that period. The remuneration to be approved will be calculated on a time basis by 2010 Grant Thornton 21 January

35 applying the hours worked on the Administration by the applicable charge out rate for the person involved. The following is an estimate for this period (details of which are contained in the aforementioned annexure): 2 Feb 11 to Company 21-Feb-11 Burmar Industries Pty Ltd 20,000 Remuneration to be Approved Future Work of the Deed Administrators Should creditors resolve that Burmar Industries Pty Ltd execute a DOCA, creditors would need to approve the drawing of the Deed Administrators remuneration instead of the future work of the Liquidator. A summary of the estimated remuneration is summarised below: Signing DOCA Company Finalisation Burmar Industries Pty Ltd 120,000 Remuneration will be drawn on a periodic basis from the funds available to the Deed Administrators from the Group s assets. Detailed information on the calculation of remuneration including a breakdown of the work to be undertaken during this period is provided in the attached Remuneration Report - Description of Work To Be Completed (DOCA) at Annexure E. to There is no indemnity provided by any third party for remuneration or liabilities. Remuneration to be Approved Future Work of the Liquidators Should creditors resolve to wind up the Companies, creditors can place the Companies into Liquidation. Should this occur, creditors would need to approve the drawing of the Liquidators remuneration instead of the future work of the Voluntary Administrators and Deed Administrators. A summary of the estimated remuneration for each Company under Liquidation is summarised below: 31 Jan 11 Company Finalisation Burmar Industries Pty Ltd 150,000 R&M Marshall Investments Pty Ltd 65,000 RA & RM Enterprises Pty Ltd 25,000 RAMB Enterprises Pty Ltd 45,000 Total 285,000 Remuneration will be drawn on a periodic basis from the funds available to the Administrators/Liquidators from each of the respective Company s assets. There is no indemnity provided by any third party for remuneration or liabilities. Detailed information on the calculation of remuneration including a breakdown of the expected work to be undertaken during the Liquidation is provided in the attached Remuneration Report - Description of Work to Be Completed (Liquidation) at Annexures E to H. to 2010 Grant Thornton 21 January

36 Creditor s resolutions At the forthcoming meetings, creditors will be asked to consider the following resolutions: Remuneration to be Approved Work to date and Future Work of the Administrators Burmar Industries Pty Ltd That the remuneration of the Administrators, their partners and staff incurred in relation to the administration of Burmar Industries Pty Ltd for the period 1 December 2010 to 1 February 2011, be hereby calculated on a time basis and by reference to the hourly rates of Grant Thornton - Recovery & Reorganisation Services. Such remuneration is to be $94,414.00, excluding GST and disbursements, and should be drawn to the extent of available funds. Burmar Industries Pty Ltd That the remuneration of the Administrators, their partners and staff incurred in relation to the administration of Burmar Industries Pty Ltd for the period 2 February 2011 to the execution of the Deed, be hereby calculated on a time basis and by reference to the hourly rates of Grant Thornton - Recovery & Reorganisation Services. Such remuneration is to be $20,000, excluding GST and disbursements, and should be drawn to the extent of available funds. R&M Marshall Investments Pty Ltd That the remuneration of the Administrators, their partners and staff incurred in relation to the administration of R&M Marshall Investments Pty Ltd for the period 1 December 2010 to 1 February 2011, be hereby calculated on a time basis and by reference to the hourly rates of Grant Thornton - Recovery & Reorganisation Services. Such remuneration is to be $25,055.50, excluding GST and disbursements, and should be drawn to the extent of available funds. RA & RM Marshall Investments Pty Ltd That the remuneration of the Administrators, their partners and staff incurred in relation to the administration of RA & RM Marshall Investments Pty Ltd for the period 1 December 2010 to 1 February 2011, be hereby calculated on a time basis and by reference to the hourly rates of Grant Thornton - Recovery & Reorganisation Services. Such remuneration is to be $7,226.00, excluding GST and disbursements, and should be drawn to the extent of available funds. RAMB Enterprises Pty Ltd That the remuneration of the Administrators, their partners and staff incurred in relation to the administration of RAMB Enterprises Pty Ltd for the period 1 December 2010 to 1 February 2011, be hereby calculated on a time basis and by reference to the hourly rates of Grant Thornton - Recovery & Reorganisation Services. Such remuneration is to be $24,854.50, excluding GST and disbursements, and should be drawn to the extent of available funds. Remuneration to be Approved Future Work of the Deed Administrators Burmar Industries Pty Ltd That the remuneration of the Deed Administrators, their partners and staff for work carried out in relation to Burmar Industries Pty Ltd (Administrators 2010 Grant Thornton 21 January

37 Appointed) be hereby calculated by reference to the current and future hourly rates of Grant Thornton-Recovery and Reorganisation Services. Such remuneration is to be capped at $120,000 excluding GST and disbursements, and should be drawn to the extent of available funds. In respect to remuneration calculated by reference to future hourly rates, any annual increase to hourly rates charged will not exceed 10% of the current or prior year s hourly rates of Grant Thornton-Recovery and Reorganisation Services Remuneration to be Approved Future Work of the Liquidators Burmar Industries Pty Ltd That the remuneration of the Liquidators, their partners and staff for work carried out in relation to Burmar Industries Pty Ltd (Administrators Appointed) be hereby calculated by reference to the current and future hourly rates of Grant Thornton-Recovery and Reorganisation Services. Such remuneration is to be capped at $150,000 excluding GST and disbursements, and should be drawn to the extent of available funds. In respect to remuneration calculated by reference to future hourly rates, any annual increase to hourly rates charged will not exceed 10% of the current or prior year s hourly rates of Grant Thornton-Recovery and Reorganisation Services R & M Marshall Investments Pty Ltd That the remuneration of the Liquidators, their partners and staff for work carried out in relation to R&M Marshall Investments Pty Ltd be hereby calculated by reference to the current and future hourly rates of Grant Thornton-Recovery and Reorganisation Services. Such remuneration is to be capped at $65,000 excluding GST and disbursements, and should be drawn to the extent of available funds. In respect to remuneration calculated by reference to future hourly rates, any annual increase to hourly rates charged will not exceed 10% of the current or prior year s hourly rates of Grant Thornton- Recovery and Reorganisation Services RA & RM Marshall Investments Pty Ltd That the remuneration of the Liquidators, their partners and staff for work carried out in relation to RA & RM Marshall Investments Pty Ltd be hereby calculated by reference to the current and future hourly rates of Grant Thornton-Recovery and Reorganisation Services. Such remuneration is to be capped at $25,000 excluding GST and disbursements, and should be drawn to the extent of available funds. In respect to remuneration calculated by reference to future hourly rates, any annual increase to hourly rates charged will not exceed 10% of the current or prior year s hourly rates of Grant Thornton- Recovery and Reorganisation Services RAMB Enterprises Pty Ltd That the remuneration of the Liquidators, their partners and staff for work carried out in relation to RAMB Enterprises Pty Ltd) be hereby calculated by reference to the current and future hourly rates of Grant Thornton-Recovery and Reorganisation Services. Such remuneration is to be capped at $45,000 excluding GST and disbursements, and should be drawn to the extent of available funds. In respect to remuneration calculated by reference to future hourly rates, any annual increase to hourly rates charged will not exceed 10% of the current or prior year s hourly rates of Grant Thornton-Recovery and Reorganisation Services Staffing of Administration The Administrators staff team is structured such that tasks are completed by staff with the appropriate level of experience Grant Thornton 21 January

38 9 Meeting of Creditors The reconvened meetings of creditors will be held at the offices of Grant Thornton, Ground Floor, Grant Thornton House, 102 Adelaide Street, Brisbane Qld 4000 on Tuesday, 1 February 2011 at 3:00pm. Creditors who have not submitted a proof of debt form are required to submit this form if they are to vote at the upcoming meeting and must complete the form for the Company of which they are a creditor. New proxy forms are not required for this meeting if you attended the previous meeting on 3 December Grant Thornton 21 January

39 For people who attended the meeting on 3 December 2010 Proxies lodged for the meeting on 3 December 2010 are valid for this meeting and therefore, fresh proxies and informal proofs of debt do not need to be lodged to enable creditors to vote at the reconvened meeting. For people who did not attend the meeting on 3 December 2010 and wish to attend the meeting on 1 February 2011 Proxies lodged for the previous meetings are not valid for this meeting and therefore, fresh proxies and informal proofs of debt need to be lodged to enable creditors to vote at the reconvened second meeting of creditors. Please ensure that the proxies are signed under seal, where appropriate (if you are a company) and if the proxy is executed by a power of attorney, that a copy of the power of attorney is enclosed with the proxy form. If proxies are lodged by facsimile or , the law requires that the original proxy must be lodged with the Administrators within 72 hours of lodging the faxed or ed copy. If you are attending the meeting, it would be appreciated if you could arrive at the meeting venue at least 15 minutes before the scheduled commencement time to allow for the registration of attendees. Should you wish to discuss this report further, please contact Ms Caitlin Bennett of this office on Yours faithfully Burmar Industries Pty Ltd R & M Marshall Investments Pty Ltd RAMB Enterprises Pty Ltd RA & RM Enterprises Pty Ltd (All Administrators Appointed) Proxies are required for each company that you are creditors of and wish to vote at the respective meetings. Proxies for the meetings can be lodged in the following ways: by post to arrive prior to the meeting; by facsimile to (07) at least 3 hour prior to the meeting; by person with a person attending the meeting; or by to info.qld@au.gt.com at least 3 hours prior to the meeting. M G McCann Joint & Several Administrator 2010 Grant Thornton 21 January

40 Annexure A Deed of Company Arrangement Proposal 2010 Grant Thornton 21 January

41 Burmar Industries Pty Ltd (Administrators Appointed) DOCA Proposal Outline A new company ( the New Company ) (Director Leigh Esposito) wishes to acquire the business of Burmar Industries Pty Ltd, through a Deed of Company Arrangement ( DOCA ) proposal. Details of the purchase and DOCA proposals follow: New Company acquires the business and associated assets of Burmar Industries Pty Ltd together with the stock of RAMB Pty Ltd and RA &RM Enterprises, for total consideration of $1,246,100. The business and its associated assets includes all assets of the business excluding cash at bank, stock subject to ROT claims and the trade debtor accounts outstanding at the date of the DOCA. The New Company will assume control of the business upon signing of the DOCA and the accompanying sale of business agreement. The Deed Administrator will establish a Deed Fund to receive the sale consideration. The consideration for the purchase by the New Company of $1,246,100 will be made through the following payments to the Deed Fund: No. Payment Date Payment Amount Payment To 1 Immediately upon $200, Deed Fund execution of DOCA and sale agreement 2 Monthly, 15th of each month commencing the 1 st month after the execution of the DOCA 48 payments of $21, per month on average. Deed Fund 3 EXCEPTIONS JANUARY, FEBRUARY & DECEMBER For the months of January, February and December it would be appropriate to reduce the monthly commitment if required and then increase it during the other months of the year. $10, for these 3 months and then $25, for the other 9 months of the year. Deed Fund 1

42 The new entity will take over the employee entitlements of those staff that continue with the business ( the continuing employees ), following the execution of the DOCA, including annual leave, sick leave and long service leave. No adjustment to consideration. The New Company will assume responsibility, seek to take assignment of, and continue to service current equipment and premises leases of Burmar Industries Pty Ltd. With the assistance of the New Company, the Deed Administrator will collect the trade debtor accounts outstanding at the date of the DOCA and apply same as follows: 2 1. All debts as at the appointment of the appointment of the voluntary administrators subject to the security of National Australia Bank will be paid to NAB; 2. Voluntary Administration trade expenses, the costs and expenses of the Voluntary Administrator; 3. The costs and expenses of the Deed Administrator; 4. Any surplus funds will be made available to the Deed Fund in reduction the payments to be made under item 3 in the table on the page following, being payments to ordinary unsecured creditors. Upon final payment into the Deed Fund, or as funds accumulate in the Deed Fund and the fund allows, the following payments may be made: 1. The Bank in respect to its fixed charge assets (Plant and Equipment) in the value of $102, The Administrators / Deed administrations costs and expenses. Any expenses not covered by the collection of the debtors outstanding at the signing of the DOCA. 3. RAMB Pty Ltd and RA & RM Enterprises Pty Ltd for the purchase of stock not subject to ROT claims. 4. The remaining employee entitlements not taken over during the DOCA, which would generally receive a priority under section 556 (e) (g) and (h) of the Corporations Act 2001, will be will be paid from contributions made to the Deed Fund in accordance with such priority. 5. The Bank subject to its floating charge capped at $100,000. This requires the bank to limit its claim under the floating charge at $100,000 with the remainder of its claim to rank as an unsecured. 6. Unsecured creditors will receive the balance of funds available in the Deed Administrator s Deed Fund. The intended purpose if this DOCA is that Unsecured Creditors will receive a return of 30 cents in the dollar of their current claim. The current directors Robert Ronald Marshall and Robert James Marshall, agree not to claim as a creditor in the DOCA. In consideration of same, Burmar Industries Pty Ltd will forgive all claims against the current directors. The following reports are to be provided to the Deed Administrator so as to enable him to monitor the performance of the company:

43 - Monthly financial statements, including a profit and loss, and balance sheet report; - Monthly bank reconciliation report and supporting bank statement; - Biannual financial forecasts including a forecast profit and loss, cashflow and balance sheet, to be provided on 31 st August and 28 th February; - Annual business plan to be provided by 30 June Date: Signed: Leigh Esposito Robert Marshall Robert (Bob) Marshall 3

44 Deed of Company Arrangement Burmar Industries Pty Ltd (Administrators Appointed) ACN Merna Janice Marshall, Robert Ronald Marshall and Robert James Marshall Michael Gerard McCann and Graham Robert Killer [Insert Name of New Company] GADENS LAWYERS 240 Queen Street BRISBANE QLD 4000 Telephone Facsimile Ref AJG: BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

45 Contents 1. Definitions and interpretation Commencement Moratorium Sale and Purchase of the Business The Administration Fund Management of the Company Secured creditors, owners and lessors Admitted list of claims Payment of admitted claims Administrator Administrator's indemnity Committee of creditors Meeting of admitted creditors Termination No lodging of accounts General...21 BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

46 DATED: The date specified in Item 1. Parties 1. The Company. 2. The Administrator. 3. The Director. 4. The Deferring Parties. 5. The Purchaser. Background A. On the Resolution Date, it was resolved by the Director that the Company was insolvent and that the Administrator be appointed as administrator of the Company. B. The Company appointed the Administrator as administrator of the Company on the Fixed Date. C. At the Meeting held on the Meeting Date, it was resolved that the Company should enter into a Deed of Company Arrangement substantially in the form of this Deed. D. The Administrator has consented to act as administrator of this Deed. E. Except as expressly provided, this Deed binds each of the Company, the Administrator, the Director, the Deferring Parties and the Purchaser in accordance with the Corporations Law and this Deed. Operative provisions 1. Definitions and interpretation 1.1 In this Deed, unless the context otherwise requires, the defined terms shall have the following meanings: Administrator and Administrator of this Deed: Administration Fund: Admitted Claim: the person or persons named in Item 3 and, if they resign or otherwise cease to be Administrators of this Deed, the person or persons who replaces them in that office in accordance with Clause 10.8; the account set up by the Administrator in accordance with Part 5; a Claim admitted by the Administrator in accordance with the procedure set out in Part 8; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

47 2 Admitted Creditor: Admitted List: Arrangement Period: Asserted Claim: Assets: Available Property Board: Business: Business Day: Business Sale Agreement: Claim: any person who has an Admitted Claim; a list of all Admitted Claims; the period commencing on the Commencing Date and ending on the Termination Date; a debt or claim asserted by any person to be a Claim and notified to the Administrator in accordance with Part 8; all property and assets of the Company used in the Business or held ready for use in the Business, with the exception of the Excluded Items; the Company's property described in Item 10 available for realisation by the Administrator under Part 6; the board of directors of the Company, as constituted from time to time; the plumbing business conducted by the Company and the Purchaser, before and after the date in Item 1 respectively, under the trading name [Client to Advise] a day that is not a Saturday, a Sunday or public holiday or bank holiday in the State; the Business Sale Agreement between the Company and the Purchaser executed simultaneously with this Deed for the sale and purchase of the Business and the Assets for the Purchase Price; a debt payable by, or a claim against the Company (present or future, certain or contingent, ascertained or sounding only in damages, liquidated or unliquidated) being a debt or claim the circumstances giving rise to which occurred before the Fixed Date; Commencing Date: the date in Item 1; Commission: Committee: the Australian Securities and Investments Commission or such other entity as may be constituted to fulfil the same functions; a committee of creditors appointed to which Part 12 applies; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

48 3 Company: the company described in Item 2; Corporations Law: Court: Creditor: Debtors: Deed: Corporations Act 2001 (Cth) any court having jurisdiction to hear and determine matters under the Corporations Law; any person who has a Claim; all debts owed to the Company as at the Commencing Date with the exception of the DFA Debtor; this Deed of Company Arrangement, as amended from time to time; Deferring Parties: the party or parties described in Item 5; DFA Debtors: all debts owed to the Company, which were sold to the National Australia Bank prior to the Fixed Date pursuant to the Debtor Finance Agreement between the Company and the National Australia Bank Director: the party or parties described in Item 4; Director's Claim: Employee Entitlements: Enforcement Process: Entitlement: Excluded Items: Fixed Date: any Claim of a Director; any claim by any employee of the Company for wages, annual leave or other entitlement arising out of his/her employment which the Administrator, in his absolute discretion, accepts as an employee entitlement; has the same meaning as in the Corporations Law; in relation to an Admitted Claim, the quantum of the Admitted Claim; any stock subject to a retention of title claim, any cash at bank, the Books Debts and any trade debtors of the Business as at the date in Item 1 the date of appointment of the Administrator, as specified in Item 7; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

49 4 Former Director: any person who has been a director of the Company; Insolvency Event: The happening of any of the following events to the Purchaser: an application is made to a court for an order or an order is made appointing a liquidator, provisional liquidator (or proceedings are commenced or a resolution passed or proposed in a notice of meeting for any of those things); proceedings are initiated with a view to obtaining an order for the winding up or similar process, or an order is made or any effective resolution is passed for the winding up; except to reconstruct or amalgamate while solvent on terms approved by the Administrator, enters into, or resolves to enter into, a scheme of arrangement, deed of company arrangement or composition with, or assignment for the benefit of, all or any class of its creditors, or it proposes a reorganisation, moratorium or other administration involving any class of its creditors; a controller is appointed to or over or takes possession of all or a substantial part of the assets or undertakings of the Purchaser; the Purchaser is or is deemed or presumed by law or a court to be insolvent or bankrupt; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

50 5 the Purchaser takes any step to obtain protection or is granted protection from its creditors, under any applicable legislation or an administrator is appointed to the Purchaser; and anything analogous or having a substantially similar effect to any of the events specified above happens under the law of any applicable jurisdiction; Lessor: Meeting: any person who is the legal or beneficial owner of property in the possession of the Company at the Commencing Date that is leased or hired by the Company; the meeting of Creditors of the Company convened pursuant to Section 439A of the Corporations Law held on the Meeting Date; Meeting Date: the date specified in Item 8; Owner: Purchaser: Purchase Price: Records: Regulations: any person who is the legal or beneficial owner of property in the possession of the Company at the Commencing Date; a company incorporated by Leigh Esposito and Ross Eekhoff to acquire the Business and the Assets in accordance with the Business Sale Agreement; the amount specified in Item 11 to be paid by the Purchaser to the Administrator under Part 4 and in accordance with the Business Sale Agreement; all original and copies of the 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 document, belonging or relating to or used by the Business including books of account, taxation returns, title deeds and other documents of title, customer lists, price lists, computer programs and software, and trading and financial records; Corporations Regulations 2001 (Cth) BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

51 6 Report: Resolution: the Report(s) to Creditors by the Administrator for the purpose of the Meeting; a resolution passed at a meeting of Admitted Creditors convened in accordance with Part 14 and "Resolve" has a corresponding meaning; Resolution Date: the date specified in Item 9; Section 439C Resolution: Secured Creditor: Security Interest: State: Termination Date: the resolution of the Company's creditors passed at the Meeting that the Company execute a Deed of Company Arrangement substantially in the form of this Deed; any Admitted Creditor with the benefit of a Security Interest at the Commencing Date over all or any property of the Company securing all or any part of its Claim; any mortgage, charge, lien or pledge as security for the payment or repayment of a monetary obligation or the observance of any other obligation; the State in which the Administration principally carries on business at the Commencing Date; the date of termination of this Deed as provided for in Part 15; Time Limit: the period of time specified in Item 12 from the Commencing Date. 1.2 In this Deed, unless the context otherwise requires: (a) (b) (c) (d) (e) (f) (g) reference to a person includes any other entity recognised by law and vice versa; the singular includes the plural and vice versa; one gender includes every gender; reference to a party includes their executors, administrator or permitted assigns or, being a company, its successors or permitted assigns; an agreement, representation or warranty on the part of two or more persons binds each and all of them; an agreement, representation or warranty in favour of two or more persons is for the benefit of each and all of them; clause headings are for reference purposes only; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

52 7 (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) (r) references to writing include any means of representing or reproducing words (in English), figures, drawings or symbols, in a visible, tangible form; references to signature and signing include due execution by a corporation or other relevant entity; a reference to any agreement or document is a reference to the agreement or document as amended, novated, supplemented, varied or replaced from time to time, in accordance with this Deed or that other agreement or document; a reference to conduct includes, without limitation, any omission, statement or undertaking whether or not in writing; reference to a Clause, Part, Exhibit, Annexure or Schedule is a reference to the corresponding Clause, Part, Exhibit, Annexure or Schedule to this Deed; reference to a statute, ordinance, code or other law includes regulations and other instruments under it and consolidations, amendments, re-enactments or replacements of it; references to sections of a statute or terms defined in statutes refer to corresponding sections or defined terms in amended, consolidated or replacement statutes; headings and the table of contents are used for convenience only and do not affect interpretation; where any word or phrase is given a defined meaning, any other grammatical form of that word or phrase has a corresponding meaning; no rule of construction of documents shall apply to the disadvantage of a party, on the basis that the party put forward this document or any relevant part of it; when a day on or by which anything to be done is not a Business Day, that thing may be done on the next Business Day. 1.3 Exclusion of All Prescribed Provisions Each and every one of the prescribed provisions contained in Schedule 8A of the Regulations do not apply to this Deed. 2. Commencement 2.1 Effective Date Subject to clause 2.3, this Deed commences on the Commencing Date. 2.2 Interim Effect To the extent that a person would be bound by this Deed if it had already been executed and had commenced, a person shall not, at any time after the Section 439C Resolution is passed, but before the Commencement Date, do anything inconsistent with the terms of this Deed except with leave of the Court. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

53 8 2.3 Conditions Precedent This Deed is subject to and conditional upon: (a) (b) all of the named parties to this Deed executing the Deed; and the Administrators, the Company and the Purchaser entering into the Business Sale Agreement simultaneously with this Deed. 2.4 Termination for Failure to Comply Where a condition precedent to this Deed has not been met, the Administrator may: (a) (b) (c) immediately terminate this Deed; grant an extension of time for the act to be performed, such extension to be any period up to two months; do anything else the Administrator considers necessary or reasonable in the circumstances. 3. Moratorium 3.1 Binding effect This Deed binds all persons having a Claim to the extent of such Claim. 3.2 Property available to pay Admitted Claims Subject to the rights of any Secured Creditor or any Owner or Lessor referred to in Part 7 and subject to the provisions of Part 3, only the Available Property and the Administration Fund shall be available to pay the Admitted Claims in accordance with Part Restrictions on Persons bound by this Deed Subject to Part 7, during the Arrangement Period a person having a Claim shall not: (a) (b) (c) (d) (e) make an application for an order to wind up the Company; proceed with such an application made before this Deed became binding on the Admitted Creditor; begin or continue any proceeding against the Company (including exercise any right of set off or cross-action to which the person would not have been entitled had the Company been wound up as at the Commencing Date) or in relation to any of its property; begin or continue with any Enforcement Process in relation to the Company's property; or except, in the case of paragraphs (c) and (d) only, with the leave of a Court and in accordance with such terms (if any) as a Court imposes. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

54 9 For the purposes of this Clause 3.3, "property" includes property used or occupied by, or in the possession of, the Company. This Deed may be pleaded by the Administrator, the Company and the Director against any Creditor in bar of any debt or claim that is admissible under this Deed. 3.4 Release of an Admitted Claim The operation of this Deed will release the Company from an Admitted Claim, save for any Entitlement payable under this Deed. 3.5 All Claims Against Company Extinguished Upon distribution of all moneys to be received into the Administration Fund, all debts or claims, present or future, actual or contingent, due or which may become due by the Company as a result of anything done or omitted by or on behalf of the Company before the Commencing Date and each Claim against the Company as a result of anything done or omitted by or on behalf of the Company before the Commencing Date are extinguished. 3.6 Discharge of Debts The Creditors must accept their Entitlements under this Deed in full satisfaction and complete discharge of all debts or Claims which they have or claim to have against the Company as at the Fixed Date and each of them will, if called upon to do so, execute and deliver to the Company such forms of release of any such Claim as the Administrator requires. 3.7 Director and Deferring Parties not entitled to Distribution (a) (b) (c) The Director and the Deferring Parties shall not assert any Claim during the operation of this Deed nor shall they take any step to have any Claim included on the Admitted List other than for voting purposes only. The Director and the Deferring Parties shall not be entitled to any distribution under the terms of this Deed. On the Termination Date, the Claims of the Director and the Deferring Parties will be extinguished. 3.8 Undertaking The Director undertakes: (a) (b) to procure the Company to discharge each of its obligations express and implied hereunder; and to co-operate with the Administrator, to comply with any directions given by the Administrator pursuant to his powers under this Deed and to assist him to carry out his duties and functions pursuant to this Deed and the Corporations Law. 3.9 No Liability of Administrator The Administrator shall have no liability for any act done by the Director in the exercise of the powers referred to in this Part or otherwise. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

55 10 4. Sale and Purchase of the Business 4.1 Sale and Purchase The Administrator and the Company agree to enter into the Business Sale Agreement. 4.2 Purchase price The Purchaser agrees to pay the Purchase Price to the Administrator in accordance with Item Time and place for Completion The Administrator, the Company and the Purchaser agree that the completion of the Business Sale Agreement must take place by 5:00pm on the date in Item Title, Risk and Possession (a) (b) Title to and control of the Business and the Assets will pass to the Purchaser on completion of the Business Sale Agreement; and Possession of the Business and the Assets and risks related to them are given to and taken by the Purchaser on completion of the Business Sale Agreement. 4.5 Security In consideration of the Administrator and the Company allowing the Purchase Price to be paid in instalments, the Purchaser agrees to provide the Administrator and the Company with the following security of its obligations under this Deed and the Business Sale Agreement: (a) (b) Fixed and floating charge over all of the assets and undertaking of the Purchaser; and A Deed of Guarantee from each of the directors of the Purchaser who are appointed as a director at the date in Item The Administration Fund 5.1 Creation of the Administration Fund The Administrator shall open an account in the name of the Company (Subject to Deed of Company Arrangement) into which the Deed Payments shall be paid. 5.2 Purpose The Administration Fund will be established to, amongst other things, pay a dividend to the unsecured creditors of the Company. 5.3 The Deed Payments The Administration Fund will be comprised of payments into the Deed Fund of all funds currently held by the Administrator in the Company administration bank account and the Purchase Price (Deed Payments). These payments shall comprise the Administration Fund. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

56 11 6. Management of the Company 6.1 Recovery of Debtors and Other Assets (a) (b) (c) (d) The Director and the Company agree that the Administrator shall recover all of the DFA Debtors and the Debtors, save for those owed to the Company by any Director or Deferring Party in existence at the date in Item 1. All of the proceeds of the Debtors to be recovered as aforesaid will be contributed to the Administration Fund, subject to clauses 6.1(c) and 6.1(d). Any write offs of the DFA Debtors or the Debtors are to be done with the Administrator's written authority. The Administrator shall also recover the Available Property and the proceeds from the realisation of the Available Property will also be contributed to the Administration Fund. If the Purchaser recovers a payment in respect of a debt owed to the Business or the Company, it must pay the amount received by it to the Administrator within 14 Business Days after receiving it. The Directors, the Company, the Administrators and the Admitted Creditors agree that all of the DFA Debtors recovered by the Administrator, the Company or the Purchaser shall be paid to pay all outstanding debts and other obligations incurred by the Company prior to the Fixed Date, which are subject to the security given in favour of the National Australia Bank; The Directors, the Company, the Administrators and the Admitted Creditors agree that all of the Debtors recovered by the Administrator, the Company or the Purchaser shall be paid as follows: (i) (ii) (iii) firstly, to pay all outstanding debts and other obligations incurred by the Company during the period from the Fixed Date to the Commencing Date including (without limitation) any debts and remuneration to which the statutory indemnity under Section 443D applies; secondly, to pay all outstanding debts and other obligations incurred by the Administrator on behalf of the Company after the Commencing Date including any unpaid remuneration of the Administrator and any amount entitled to the benefit of the indemnity in Part 11; and thirdly, any surplus will be paid to the Administration Fund in reduction of the Purchase Price. 6.2 Access to the Reports and Records (a) (b) (c) The Administrator and the Company may retain, after the date in Item 1, copies of the Records necessary for them to comply with any applicable law, including to prepare Tax or other returns required of the Administrator or the Company by law; The Purchaser shall do all things reasonably requested of it by the Administrator, its employees, agents and representatives, to ensure the Administrator has free and unfettered access to the Records at all reasonable times on reasonable notice for a period of four (4) years following completion of the Business Sale Agreement; and As and from the date in Item 1, the Purchaser shall provide the Administrator with the following reports for the Business: BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

57 12 (i) (ii) (iii) (iv) Monthly financial statements, including a profit and loss, and balance sheet report, by the 30th day of each month; Monthly bank reconciliation reports and supporting bank statements by the 30th day of each month; Biannual financial forecasts, including a forecast profit and loss, cashflow and balance sheet, both of which are to be provided on 31 st August and 28 th February each year; and An annual business plan by the 30th of June each year. 7. Secured creditors, owners and lessors 7.1 Secured Creditors Nothing in this Deed shall in any way restrict the right of a Secured Creditor who did not vote in favour of the Section 439C Resolution from lawfully realising or otherwise dealing with its Security Interest. 7.2 Owners and Lessors Nothing in this Deed shall in any way restrict a right that an Owner or Lessor who did not vote in favour of the Section 439C Resolution has in relation to the relevant property of that Owner or Lessor in the possession of the Company as at the Commencing Date. 8. Admitted list of claims 8.1 Admitted List The Administrator shall make the Admitted List. The Director and the Deferring Parties shall be included on that Admitted List and shall be treated as having an Admitted Claim but only for the purposes of voting at any meeting of creditors. 8.2 Procedure In making the Admitted List, the Administrator shall follow the procedure for proof of claim by liquidators set out in subdivisions A, B, C and E of division 6 of Part 5.6 of the Corporations Law and Regulations to insofar as it is not inconsistent with this Deed, such that the Admitted List shall comprise a list of all Asserted Claims notified to the Administrator and which have been determined and admitted in accordance with the procedure specified herein. The relevant date as that term is defined in the Corporations Law is to be read as the Fixed Date for the purposes of proving under this Deed. 8.3 National Australia Bank The National Australia Bank agrees to limit its Asserted Claim under its fixed and floating charge over the Company to $100,000.00, with the balance of its Asserted Claim to rank as an unsecured debt. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

58 Costs and Expenses Any costs and expenses incurred by a person in preparing an Asserted Claim shall be borne by that person and shall not form part of the person's Asserted Claim. 8.5 Late entry of Claims Notwithstanding that a person has failed to lodge an Asserted Claim with the Administrator in accordance with clause 8.2, the Administrator may, in their absolute discretion, accept a formal proof of debt from that person. If the Administrator admits only part of such an Asserted Claim, the Administrators shall notify the person in accordance with Regulation Time of the Essence Time shall be of the essence in respect of each and every obligation of an Admitted Creditor or a person notifying an Asserted Claim. 9. Payment of admitted claims 9.1 Preconditions to Distributions The Administrator shall not make any distribution to an Admitted Creditor pursuant to this Part unless, immediately before the distribution is made, the Administrator is satisfied that following the distribution the Company shall have sufficient funds to: (a) firstly, pay to the National Australia Bank $102,785.00; (b) (c) (d) (e) (f) (g) secondly, pay all outstanding debts and other obligations incurred by the Company during the period from the Fixed Date to the Commencing Date including (without limitation) any debts and remuneration to which the statutory indemnity under Section 443D applies; thirdly, pay all outstanding debts and other obligations incurred by the Administrator on behalf of the Company after the Commencing Date including any unpaid remuneration of the Administrator and any amount entitled to the benefit of the indemnity in Part 11; fourthly, pay RAMB Enterprises Pty Ltd ACN and RA & RM Enterprises Pty Ltd ACN for the purchase of stock not subject to retention of title claims; fifthly, pay the Employee Entitlements (except for those of the Director and Deferring Parties, if any) whose liability was not assumed by the Purchaser upon completion of the Business Sale Agreement; sixthly, pay the National Australia Bank $100, in exchange for a release, in registrable form, of its fixed and floating charge given registration number ; seventhly, pay such other amounts as the Administrator may determine to have priority under Clause 9.3, and such payments shall have priority over all other Admitted Claims. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

59 Distribution Subject to the provisions of this Deed, and in particular Clauses 9. l, 9.3 and 9.4, the Administrator shall make distributions from the Administration Fund at such intervals during the Arrangement Period as they may determine to each Creditor on the Admitted List and the amount distributed shall be calculated on the basis of the proportion an Admitted Claim represents of the total of the Admitted Claims. 9.3 Administrator's Discretion The Administrator may, in their absolute discretion, pay any Claim in preference and priority to any other Claim if they consider it desirable to do so, having regard to (amongst other things) the interests of the Admitted Creditors. 9.4 Priority Subject to the provisions of this Deed, the Administrator shall apply the moneys in the Administration Fund in the order of priority specified in Section 556 of the Corporations Law. 10. Administrator 10.1 Role of Administrator (a) (b) The Administrator is hereby appointed as administrator of this Deed, and accepts such appointment. This Deed shall be administered by the Administrator who shall have the powers, functions and duties conferred on him by this Deed and the Corporations Law Agent of the Company In exercising the powers conferred by this Deed and carrying out their duties arising under this Deed, the Administrator shall act as agent for and on behalf of the Company Responsibilities During the Arrangement Period, the Administrator shall be responsible for: (a) (b) (c) collecting and receiving all moneys to be deposited to the Administration Fund and attending to the distribution of moneys from the Administration Fund in accordance with the terms of this Deed; verifying and investigating the amount to be collected and received; attending to any other incidental matters arising under this Deed including calling of Creditors' meetings, and shall have all powers necessary to carry out those responsibilities. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

60 Powers of Administrator For the purpose only of administering this Deed, the Administrator has the following powers: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) (q) (r) to enter upon or take possession of the property of the Company and to take possession or inspect the books and records of the Company; to lease or let on hire property of the Company; to grant options over property of the Company on such conditions as the Administrator thinks fit; to insure property of the Company; to repair, renew or enlarge property of the Company; to call in, collect or convert into money the property of the Company; to administer the assets available for the payment of claims of Creditors in accordance with the provisions of this Deed; to purchase, hire, lease or otherwise acquire any property or interest in property from any person or corporation; to borrow or raise money, whether secured upon any or all of the assets of the Company or unsecured, for any period on such terms as the Administrator thinks fit and whether in substitution for any existing security or otherwise; to bring, prosecute and defend in the name and on behalf of the Company or in the name of the Administrator any actions, suits or proceedings including any winding up or bankruptcy proceedings; to refer to arbitration any question affecting the Company; to make payments to any Secured Creditor of the Company and any person who is the owner or lessor of property possessed used or occupied by the Company; to convene and hold meetings of the members or Creditors of the Company for any purpose the Administrator thinks fit; to make interim or other distributions of the proceeds of the realisation of the assets available for the payment of claims of Creditors as provided in this Deed; to appoint agents to do any business or to attend to any matter or affairs of the Company that the Administrator is unable to do, or that it is unreasonable to expect the Administrator to do, in person; to engage or discharge employees on behalf of the Company; to appoint a solicitor, accountant or other professionally qualified person to assist the Administrator; to permit any person authorised by the Administrator to operate any account in the name of the Company; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

61 16 (s) (t) (u) (v) (w) (x) (y) (z) (aa) (bb) (cc) (dd) (ee) (ff) (gg) to sell, call in or convert into money any of the property of the Company, to apply the money in accordance with this Deed and otherwise effectively and properly to carry out his or her duties as Administrator; to do all acts and execute in the name and on behalf of the Company all deeds, receipts and other documents, using the Company's common or official seal when necessary; subject to the Bankruptcy Act 1966, to prove in the bankruptcy of any contributory or Debtor of the Company or under any deed executed under that Act; subject to the Corporations Law, to prove in the winding up of any contributory or Debtor of the Company or under any scheme of arrangement entered into, or deed of company arrangement executed, under the Corporations Law; to draw, accept, make or endorse any bill of exchange or promissory note in the name and on behalf of the Company, to take out letters of administration of the estate of a deceased contributory or Debtor, and do any other act necessary for obtaining payment of any money due from a contributory or Debtor, or the estate of a contributory or Debtor, that cannot be conveniently done in the name of the Company; to bring or defend an application for the winding up of the Company; to carry on the business of the Company on such terms and conditions and for such purposes and times and in such manner as the Administrator thinks fit subject only to the limitations imposed by this Deed; to sell any or all of the property of the Company including the whole of the business or undertaking of the Company at any time the Administrator thinks fit, either by public auction or by private contract and either for a lump sum or for a sum payable by instalments or for a sum on account and to obtain a mortgage charge or encumbrance for the balance or otherwise; to close down the whole or any part of any business of the Company; to enter into and complete any contract for the sale of shares in the Company; to compromise any debts or claims brought by or against the Company on such terms as the Administrator thinks fit and to take security for the discharge of any debt forming part of the property of the Company; to pay any class of Creditors in full, subject to Subdivision D of Division 6 of Part 5.6 of the Corporations Law; to do anything that is incidental to exercising a power set out in this clause; to do anything else that is necessary or convenient for the purpose of administering this Deed. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

62 Administrators to Act Jointly and Severally Where there is more than one Administrator appointed to administer the provisions of this Deed, such appointment shall be joint and several, and anything that can be done by the Administrator can be done by both of them or by either of them acting alone Delegation The powers conferred on the Administrator may be exercised: (a) (b) by the Administrator in person, or by any partner servant or agent of the Administrator duly authorised by the Administrator in that behalf; and at such times and in such manner as the Administrator in his or her sole judgment and discretion considers necessary or desirable for the purposes of administrating this Deed Change of Administrator The position of the Administrator (or either of the Administrators, if more than one) shall become vacant if: (a) (b) (c) that person dies; that person resigns from the office of Administrator; or that person ceases to be eligible to act as an administrator. If there is more than one Administrator and the office of either of them becomes vacant, then the other may, by notice in writing, appoint another person (being a registered liquidator) to fill the vacant position. If there be no Administrator left in office as a consequence of the position of an administration becoming vacant, then a new administrator may be appointed by Resolution of a meeting of creditors called for that purpose by the Committee, or, if there is no Committee in existence, then by the Director. A new administrator appointed under this Clause shall have all the powers, privileges, duties and responsibilities of the Administrator under this Deed and pursuant to the Corporations Law Limitation of the Administrator's Liability Subject to the Corporations Law, the Administrator shall not be personally liable for: (a) (b) (c) any debt, liability or other obligation, which the Administrator incurs reasonably and properly on behalf of the Company pursuant to this Deed; any debt, liability or other obligation, which the Purchaser incurs reasonably or otherwise, now or in the future; any loss or damage caused by any act, default or omission by the Administrator or on behalf of the Administrator in the performance of the Administrator's powers, functions and duties under this Deed; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

63 18 (d) (e) any debt, liability or obligation incurred by the Director personally or on behalf of the Company in the exercise of the powers referred to in Parts 3 and 6 or otherwise; any loss or damage caused by any act, default or omission by the Director in the performance of the Director's powers, functions and duties under Parts 3 and 6 or otherwise Remuneration The Administrator shall be: (a) remunerated out of the Administration Fund and/or by the Company in respect of any work reasonably and properly done by the Administrator, and any partner or employee of the Administrator: (i) (ii) in connection with this Deed and the Business Sale Agreement; and/or in the period from the Fixed Date to the Commencing Date, at the rate from time to time set by the Administrator; (b) (c) (d) reimbursed out of the Administration Fund and/or by the Company in respect of all costs, fees and expenses reasonably and properly incurred in connection with the performance of their duties, obligations and responsibilities under this Deed; entitled to draw reimbursement for expenses immediately, and entitled to draw the Administrator's remuneration from time to time and at such times as the Administrator may see fit; and entitled to charge interest at the rate of twelve (12) per cent per annum on the amount of remuneration and expenses from the date when such remuneration and expenses may be drawn until payment provided that no interest shall accrue in respect of remuneration for a period of six (6) months from the Commencing Date. 11. Administrator's indemnity 11.1 Nature of Indemnity Subject to Clause 11.2, the Administrator is entitled to be indemnified out of the Administration Fund and the Company's property, and the Company gives the Administrator an indemnity, for: (a) (b) (c) their reasonable remuneration, costs, fees and expenses properly incurred being payable pursuant to Clause 10.9; all liabilities reasonably and properly incurred by the Administrator in the course of the Deed, including any moneys borrowed by the Administrator in the course of the Deed and interest thereon and any contracts adopted or otherwise agreed by the Administrator (the Liabilities); and all actions, suits, proceedings, accounts, claims and demands arising out of this Deed which may be reasonably and properly commenced, incurred by or made on the Administrator by any person and against all costs, charges and expenses incurred by the Administrator in respect thereof (the Demands). BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

64 No Indemnity for Misfeasance The Administrator's indemnity shall not extend to any Liabilities or Demands arising out of the wilful default, dishonesty or negligence of the Administrator or any of the Administrator's agents, employees or delegates in the performance or exercise or purported performance or exercise of the Administrator's rights, powers, discretions or authorities or as a result of the Administrator or the Administrator's agents, employees or delegates knowingly or negligently exceeding the scope of the Administrator's rights, powers, discretions and authorities Continuing Indemnity This indemnity shall take effect on and from the Commencing Date and be without limitation as to time and shall enure for the benefit of the Administrator's respective legal personal representatives notwithstanding the removal of the Administrator and the appointment of a new Administrator or the termination of this Deed for any reason whatsoever Indemnity not to be Affected or Prejudiced The indemnity under Clause 11.1 shall not: (a) (b) be affected, limited or prejudiced in any way by any irregularity, defect or invalidity in the appointment of the Administrator and shall extend to all actions, suits, proceedings, accounts, liabilities, claims and demands arising in any way out of any defect in the appointment of the Administrator, the approval and execution of this Deed or otherwise; or affect or prejudice all or any rights that the Administrator may have against the Company or any other persons to be indemnified against the costs, charges, expenses and liabilities incurred by the Administrator of or incidental to the exercise or performance of any of the powers or authorities conferred on the Administrator by this Deed or otherwise. 12. Committee of creditors 12.1 Acknowledgment of Committee It is acknowledged that the creditors are entitled by Resolution to appoint a Committee of Creditors (Committee) for the purpose of advising and assisting the Administrator of this Deed Rules for Committee In the event that a Committee is appointed, the following rules apply: (a) (b) (c) (d) the Committee must consist of at least 3 and not more than 5 members; the Creditors must appoint the members in a general meeting; a Creditor is not entitled to have more than one representative (including the Creditor himself or herself, if a natural person) on the Committee; minutes of all resolutions and proceedings of each meeting of the Committee must be made and duly entered in books to be provided from time to time for that purpose by the Administrator under this Deed; BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

65 20 (e) (f) (g) if the minutes of a meeting purport to be signed by the chairperson of the meeting at which the resolutions were passed or proceedings taken or by the chairperson of the next meeting of the Committee, the minutes are prima facie evidence of the matters contained in them; unless the contrary is proved, the meeting is taken to have been duly had and convened and all resolutions passed and proceedings taken at the meeting are taken to have been duly passed and taken; a corporation (being otherwise qualified for membership of the Committee) is not entitled to be a member of the Committee but may appoint a person to represent it on the Committee; (h) sub-section 548(3) and sections 549, 550 and 551 of the Corporations Law apply, with such modifications as are necessary, to a committee of inspection established under this Deed as if the references to the liquidator were references to the Administrator of this Deed and the references to contributories were deleted. 13. Meeting of admitted creditors 13.1 Convening meetings Meetings of Admitted Creditors may be convened by the Administrator from time to time in accordance with Section 445F of the Corporations Law Corporations regulations Except to the extent (if any) they are excluded or modified by or are inconsistent with the terms of this Deed, Regulations to A apply, with such modifications as are necessary, to meetings of the Admitted Creditors or of the Committee as if the references to "the liquidator", "the liquidator or provisional liquidator", the "liquidator, provisional liquidator or chairman", or "a liquidator, provisional liquidator or trustee for debenture holders", as the case may be, were a reference to the Administrator. 14. Termination 14.1 Termination of this Deed This Deed shall terminate if: (a) a Court so orders in accordance with Section 445D; (b) (c) (d) (e) the Administrator determines that it is no longer practicable or desirable to implement this Deed; subject to any variation of this Deed pursuant to Clause 16.1, the Time Limit expires; the Business Sale Agreement is terminated; an Insolvency Event occurs; or BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

66 21 (f) if neither (a), (b), (c) or (d) occur, the date when the Administrator certifies to the Commission as required in Clause Previous Operation of this Deed Preserved The termination or avoidance, in whole or in part, of this Deed does not affect the previous operation of this Deed, save that no provision of this Deed shall be construed, in the event of a subsequent liquidation of the Company, as a deferral or subordination of any Director's Claim or any Claim by any of the Deferring Parties Notice of Termination Where Arrangement Achieved If the Administrator has applied and distributed all moneys to be received into the Administration Fund, then the Administrator must certify to that effect in writing and must with 28 days lodge with the Commission a notice of termination in the following form: "I [insert name and address] as Administrator of the Deed of Company Arrangement executed on [insert date] CERTIFY that the Deed has been wholly effectuated" and the execution of the notice terminates this Deed. 15. No lodging of accounts 15.1 No Accounts Sections 432 and 434 of the Corporations Law do not apply to the Administrator as if the reference to a controller were a reference to the Administrator of this Deed. (Clause 10 of Schedule 8A of the Corporations Regulations is expressly excluded). 16. General 16.1 Variation of this Deed by Creditors This Deed may be varied by a Resolution passed at a meeting of the Admitted Creditors convened under Section 445F of the Corporations Law but only if the variation is not materially different from a proposed variation set out in the notice of meeting Governing Law This Deed shall be governed by and construed in accordance with the laws in force in the State. Any action or proceeding arising out of or in connection with this Deed shall be instituted or brought in a Court in the State Inconsistency with the Corporations Law If there is any inconsistency between the terms of this Deed and the Corporations Law then the provisions of this Deed shall, only to the extent that such inconsistency may be permitted by the Corporations Law, prevail and this Deed shall be interpreted accordingly Severance Notwithstanding anything contained in any provision of this Deed, if any such provision shall be held or found to be void, invalid or otherwise unenforceable, such provision shall be BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

67 22 deemed to be severed from this Deed to the extent only that it is void, invalid or unenforceable but the remainder of any such provision and this Deed shall remain in full force and effect This Deed prevails over Memorandum, Articles, Contract If there is any inconsistency between the provisions of this Deed and the memorandum of association or articles of association of the Company or any other obligations binding on the Company, then the provision of this Deed shall prevail to the extent of the inconsistency Notices (a) notice, approval, request, demand or other communication (notice) to be given for the purposes of this Deed must be in writing and must be: (i) (ii) (iii) served personally; or sent by ordinary or registered post - person to person mail (airmail if overseas) to the address of the party specified in this Deed (or such other address as that party notifies in writing); or sent by facsimile transmission to the facsimile number of that party specified in this Deed, (or such other facsimile number as that party notifies in writing). (b) A notice given: (i) (ii) (iii) personally will be served on delivery; by post will be served seven days after posting; by facsimile transmission will be served on receipt of a transmission report by the machine from which the facsimile was sent indicating that the facsimile had been sent in its entirety to the facsimile number specified in this Deed or such other number as may have been notified by the receiving party. If the facsimile has not been completely transmitted by 5.00 pm (determined by reference to the time of day at the recipient's address) it will be deemed to have been served on the next day Stamp Duty and Costs (a) (b) The Company must pay all stamp duty on or arising in connection with this Deed and any other related documentation. Each party must bear its own legal and other costs and expenses arising directly or indirectly with respect to the preparation, execution, completion and performance of this Deed or any related documentation. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

68 Waiver The failure or omission of a party at any time to: (a) (b) enforce or require the strict observance of or compliance with any provision of this Deed; or exercise any election or discretion under this Deed, will not operate as a waiver of them or the rights of a party, whether express or implied, arising under this Deed Further Assurance Each party must sign, execute and complete all additional documents which may be necessary to effect, perfect, or complete the provisions of this Deed and the transactions to which it relates Execution by Counterparts This Deed may consist of one or more counterpart copies and all counterparts will, when taken together, constitute the one document. Facsimile or copies are sufficient evidence of execution by counterpart. BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

69 24 Schedule Item 1 Date: Item 2 The Company: Item 3 The Administrator: Item 4 The Director: Item 5 The Deferring Parties: Item 6 The Purchaser: [TBA] Burmar Industries Pty Ltd (Administrators Appointed) ACN of [Insert Address] Michael Gerard McCann and Graham Robert Killer of [Insert Address] Merna Janice Marshall, Robert Ronald Marshall and Robert James Marshall of [Insert Address] Merna Janice Marshall, Robert Ronald Marshall and Robert James Marshall of [Insert Address] A company incorporated by Leigh Esposito and Ross Eekhoff to acquire the Business and Assets of the Company in accordance with the Business Sale Agreement Item 7 Fixed Date: 28 October 2010 Item 8 Meeting Date: 1 February 2011 Item 9 Resolution Date: 28 October 2010 Item 10 Available Property: Item 11 Purchase Price (and manner and time for payment): [TBA] $1,246, to be paid as follows: (a) $200, immediately upon execution of this Deed; and (b) followed by monthly payments of $25, for 48 months on the 15 th day of each month with the exception of December, January and February when payments of only $10, are required each month. Item 12 Time Limit: 48 months from the date of this Deed BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

70 25 EXECUTED as a Deed. EXECUTED by Burmar Industries Pty Ltd (Administrators Appointed) ACN by its duly appointed directors ) ) ) ) ) ) ) ) Signature of first director Signature of second director SIGNED SEALED AND DELIVERED by Merna Janice Marshall in the presence of: Signature of witness Name of Witness - please print Address of witness SIGNED SEALED AND DELIVERED by Robert Ronald Marshall in the presence of: Signature of witness Name of Witness - please print Address of witness BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

71 26 SIGNED SEALED AND DELIVERED by Robert James Marshall in the presence of: Signature of witness Name of Witness - please print Address of witness SIGNED SEALED AND DELIVERED by Michael Gerard McCann in the presence of: Signature of witness Name of Witness - please print Address of witness SIGNED SEALED AND DELIVERED by Graham Robert Killer in the presence of: Signature of witness Name of Witness - please print Address of witness EXECUTED by [Insert Name of New Company] in accordance with section 127 of the Corporations Act 2001 (Cth): ) ) ) ) ) ) ) ) ) Signature Director Signature of Director/Secretary BNEDOCS FINAL DRAFT DOCA - Burmar Industries Pty Ltd - (As sent to Creditors)_ _1 (2).DOC

72 Annexure B Estimated Return to Creditors 2010 Grant Thornton 21 January

73 Estimated return to creditors Burmar Industries (Sumner Park) Notes DOCA Liquidation optimistic Liquidation pessimistic Estimated DOCA Contributions / sale proceeds 1 1,246,100 1,030, ,915 Less associated costs of sale ROT Claims (80,000) (80,000) (139,130) NAB - Fixed Charge realisations 2 (102,785) (102,785) (27,905) Purchase of stock 3 (155,408) - - Legal Fees 4 (10,000) (40,000) (50,000) Administrators' fees (252,068) (232,068) (232,068) Deed administrators' / Liquidators' fees (120,000) (150,000) (175,000) Total costs of sale (720,260) (604,853) (624,102) Funds available for priority creditors 525, ,474 Nil Less payments to priority creditors Employee entitlements 5 (62,317) (62,317) (129,639) NAB - Cross collateralised 6 (100,000) (394,819) (469,699) Total priority creditors (162,317) (457,136) (599,338) Estimated GEERS funding 7 N/A N/A 106,401 Estimated recovery of antecedental transactions 8 N/A 180,000 Unknown Estimated return to priority creditors (162,317) (425,474) (106,401) Estimated return to priority creditors (C/$) Funds available for unsecured creditors 363, ,000 Nil Total unsecured creditor claims 5 (1,682,216) (1,316,274) (1,785,973) Estimated return to unsecured creditors (363,523) (180,000) Nil Estimated return to creditors (C/$) Funds available for shareholders Nil Nil Nil Notes: 1) Please refer to Section 4 of this report for commentary on the proposed DOCA. Under a Liquidation scenario, the stock will be sold to Burmar Industries under a DOCA. Under a pessimistic scenario, the cost of relocation is based upon an auction realisation of the stock and plant and equipment 2) Under the DOCA and optimistic liquidation scenarios, the going concern value of the plan and equipment. The Auction realisable value has been used under a pessimistic scenario. 3) Please refer to Section 4 for further commentary. 4) Legal fees include the estimated fees to prepare the DOCA and or pursue ancidental transactions under Liquidation scenarios. 5) Under a sale of business (DOCA or Optimistic Liquidation), the current employees are to be transferred to the new entity. Under a pessimistic scenario, the business will be closed and all employees will claim in the Liquidation. This figure is subject to change depending upon the resolution of ROT claims in related entities. 6) Under the DOCA, NAB has been asked to limit its claim pursuant to its floating charge. This is not available under Liquidation. Please refer to Section 4 for further commentary. 7) Under their operational arrangements, GEERS does not fund outstanding superannuation. Accordingly, the Superannuation is likely to remain unpaid in a pessimistic Liquidation scenario 8) Please refer to Section 5 of this report Grant Thornton 21 January

74 Estimated return to creditors R & M Marshall (Cleveland) Notes Liquidation optimistic Liquidation pessimistic Estimated sale proceeds 1 Withheld 44,231 Less associated costs of sale ROT Claims (39,457) (16,888) Trading loss (16,149) (16,149) Administrators' fees (90,499) (90,499) Liquidators' fees (50,000) (75,000) Total costs of sale (196,105) (198,536) Funds available for priority creditors Withheld Nil Less payments to priority creditors Employee entitlements (25,086) (65,642) NAB - Cross collateralised (497,604) (497,604) Total priory creditors (522,690) (563,246) Estimated GEERS funding 2 N/A 52,146 Estimated recovery of antecedental transactions 89,734 36,734 Estimated return to priority creditors (25,086) (52,146) Estimated return to creditors (C/$) 5 9 Funds available for unsecured creditors Nil Nil Total unsecured creditor claims 3 (871,810) (871,810) Estimated return to unsecured creditors Nil Nil Estimated return to creditors (C/$) - - Funds available for shareholders Nil Nil Notes: 1) The sale amount has been withheld to not prejudice the current sale campaign 2) Under their operational arrangements, GEERS does not fund outstanding superannuation. Accordingly, the Superannuation is likely to remain unpaid in a low Liquidation scenario 3) Unsecured creditors inclused the estimated NAB priority claim not covered by asset realisations Grant Thornton 21 January

75 Estimated return to creditors RAMB Enterprises (Nerang) Notes Liquidation optimistic Liquidation pessimistic Estimated sale proceeds 1 129,738 19,461 Less associated costs of sale ROT Claims (84,553) (19,461) Trading loss (12,741) (12,741) Administrators' fees (89,080) (89,080) Liquidators' fees (30,000) (45,000) Total costs of sale (216,374) (166,281) Funds available for priority creditors Nil Nil Less payments to priority creditors Employee entitlements (46,921) (46,921) NAB - Cross collateralised (497,604) (497,604) Total priory creditors (544,525) (544,525) Estimated GEERS funding 2 N/A 40,634 Estimated recovery of antecedental transactions 300,000 16,251 Estimated return to priority creditors (46,921) (40,634) Estimated return to creditors (C/$) 9 7 Funds available for unsecured creditors 166,443 Nil Total unsecured creditor claims 3 (1,296,025) (1,296,025) Estimated return to unsecured creditors (166,443) Nil Estimated return to creditors (C/$) 13 - Funds available for shareholders Nil Nil Notes: 1) Under a optimistic scenario, the stock will be sold to Burmar Industries under a DOCA. The pessimistic scenario is based upon an auction realisation of the stock and Plant and Equipment 2) Under their operational arrangements, GEERS does not fund outstanding superannuation. Accordingly, the Superannuation is likely to remain unpaid in a low Liquidation scenario 3) Unsecured creditors inclused the estimated NAB priority claim not covered by asset realisations Grant Thornton 21 January

76 Estimated return to creditors RA & RM Marshall (Camp Hill) Notes Liquidation optimistic Liquidation pessimistic Estimated sale proceeds 1 25,670 Nil Less associated costs of sale ROT Claims (10,000) Nil Administrators' fees (24,539) (24,539) Liquidators' fees (50,000) (75,000) Total costs of sale (84,539) (99,539) Funds available for priority creditors Nil Nil Less payments to priority creditors Employee entitlements (12,623) (12,623) NAB - Cross collateralised (497,604) (497,604) Total priory creditors (510,227) (510,227) Estimated GEERS funding Unknown Unknown Estimated recovery of antecedental transactions 156,004 35,964 Estimated return to priority creditors 2 (12,623) (12,623) Estimated return to creditors (C/$) 2 2 Funds available for unsecured creditors 84,513 Nil Total unsecured creditor claims 3 (1,152,290) (1,152,290) Estimated return to unsecured creditors (84,513) Nil Estimated return to creditors (C/$) 7 - Funds available for shareholders Nil Nil Notes: 1) Under a high scenario, the stock will be sold to Burmar Industries under a DOCA. Under a pessimistic scenario, the cost of relocation is based upon an auction realisation of the stock and plant and equipment 2) The return to priority creditors will be limited to that paid under GEERS. 3) Unsecured creditors inclused the estimated NAB priority claim not covered by asset realisations Grant Thornton 21 January

77 Annexure C Summary of Receipts and Payments 2010 Grant Thornton 21 January

78 BURMAR INDUSTRIES PTY LTD (ADMINISTRATORS APPOINTED) Trading as Burmar Sumner Park Receipts and Payments Schedule for the period 28 October 2010 to 17 January 2011 R & M MARSHALL INVESTMENTS PTY LTD (ADMINISTRATORS APPOINTED) Trading as Burmar Cleveland Receipts and Payments Schedule for the period 28 October 2010 to 17 January 2011 Description Total ($) Receipts Sales 320,537 Sales (refunds) (273) Rebate Income 6,311 Refund 3,065 Accounts Receivable (Pre-Appointment) 283,414 Stock/Inventory on Hand 1,373 Superannuation withheld - Employee Contribution 5,600 Total Receipts 620,027 Payments Fuel & Oil (947) Freight Outwards (88) Cost of Goods Sold (102,603) IT & Computers (9,346) Rent & Rates (21,374) Secured Creditors (100,000) Statutory Advertisng (840) Locksmith (457) Hire & Leasing (1,259) Motor Vehicle Expenses (1,313) Sundry Expenses (36) Superannuation (9,403) Wages & Salaries (112,934) Bank Charges (2,654) Entity Loan (5,000) PAYG Control (Trading): PAYG Withheld 20,555 Superannuation Control (Trading): Superannuation Withheld 9,403 Total Payments (338,296) Cash at Bank on 17 January ,731 Description Total ($) Receipts Sales 107,667 Sales Rebate (234) Rebate Income 592 Accounts Receivable (Pre-Appointment) 134,203 Cash at Bank on appointment 10,110 Cash on Hand on appointment 2,587 Total Receipts 254,925 Payments Bank Charges (996) Cost of Goods Sold (26,285) Fuel & Oil (98) Locksmith (220) Motor Vehicle Expenses (860) PAYG Control (Trading): PAYG Withheld 5,478 Rent & Rates (35,982) Repairs and Maintenance (396) Rubbish Removal (129) Secured Creditors (50,000) Statutory Advertising (420) Superannuation (2,797) Superannuation Control (Trading): Superannuation Withheld 2,797 Telephone & Fax (832) Wages & Salaries (34,391) Total Payments (145,131) Cash at Bank on 17 January , Grant Thornton 21 January

79 RAMB ENTERPRISES PTY LTD (ADMINISTRATORS APPOINTED) Formerly trading as Burmar Nerang Receipts and Payments Schedule for the period 28 October 2010 to 17 January 2011 RA & RM ENTERPRISES PTY LTD (ADMINISTRATORS APPOINTED) Formerly trading as Burmar Plumbing Plus Camp Hill Receipts and Payments Schedule for the period 28 October 2010 to 17 January 2011 Description Total ($) Receipts Sales 10,711 Accounts Receivable (Pre-Appointment) 335,705 Cash on Hand 49 Stock/Inventory Hand 185 Entity Loan 5,000 Total Receipts 351,650 Payments Bank Charges (1,956) Cost of Goods Sold (23,609) Fuel & Oil (2,166) IT Computer Expenses (2,695) Secured Creditors (100,000) Security Expenses (226) Statutory Advertsing (420) Sundry Expenses (120) Wages & Salaries (23,266) Total Payments (154,458) Description Total ($) Receipts Cash on Hand 392 Accounts Receivable (Pre-Appointment) 4,936 Total Receipts 5,328 Payments Bank Charges (25) Sundry Expenses (283) Total Payments (307) Cash at Bank on 17 January ,021 Cash at Bank on 17 January , Grant Thornton 21 January

80 Annexure D IPA Creditor Information Sheet 2010 Grant Thornton 21 January

81 INFORMATION SHEET 85 Approving fees: a guide for creditors If a company is in financial difficulty, it can be put under the control of an independent external administrator. This information sheet gives general information for creditors on the approval of an external administrator s fees in a liquidation of an insolvent company, voluntary administration or deed of company arrangement (other forms of external administration are not discussed in this information sheet). It outlines the rights that creditors have in the approval process. Entitlement to fees and costs A liquidator, voluntary administrator or deed administrator (i.e. an external administrator ) is entitled to be: paid reasonable fees, or remuneration, for the work they perform, once these fees have been approved by a creditors committee, creditors or a court, and reimbursed for out-of-pocket costs incurred in performing their role (these costs do not need creditors committee, creditor or court approval). External administrators are only entitled to an amount of fees that is reasonable for the work that they and their staff properly perform in the external administration. What is reasonable will depend on the type of external administration and the issues that need to be resolved. Some are straightforward, while others are more complex. External administrators must undertake some tasks that may not directly benefit creditors. These include reporting potential breaches of the law and lodging a detailed listing of receipts and payments with ASIC every six months. The external administrator is entitled to be paid for completing these statutory tasks. For more on the tasks involved, see ASIC s information sheets INFO 45 Liquidation: a guide for creditors and INFO 74 Voluntary administration: a guide for creditors. Out-of-pocket costs that are commonly reimbursed include: Important note: This information sheet contains a summary of basic information on the topic. It is not a substitute for legal advice. Some provisions of the law referred to may have important exceptions or qualifications. This document may not contain all of the information about the law or the exceptions and qualifications that are relevant to your circumstances. You will need a qualified professional adviser to take into account your particular circumstances and to tell you how the law applies to you. Australian Securities & Investments Commission, December 2008 Page 1 of 5