"This update is to provide shareholders in Metyor, Inc. BSX: MTYR.BH ("the Company") with details concerning the current status of its claims against Bank of Queensland Limited and one of its subsidiaries (collectively "BOQ") as previously disclosed in Metyor's Listing Document
Background
On or about 31 March 2000, the Company, Saracen Financial Services Limited ("Saracen") (a company now effectively controlled by the Company), BOQ and Compaq Computer Australia Pty Limited ("Compaq") entered into a joint venture agreement for the purpose of proving ATM services through new "web-enabled" ATM's to be rolled out by the joint venture.
The joint venture was to be conducted through a joint venture company ("JVCo") to be owned as to 22.55% by each of the Company and Saracen Financial Services Limited (ie collectively they own 45.1%), 49.9% by BOQ and 5% by Compaq.
It was intended that JVCo initially roll out 300 "web enabled" ATMs, 81 of which were to replace BOQ's current ATMs.
BOQ was obliged to underwrite minimum transaction levels from these 300 machines being 3,500 transactions per machine per month at an average transaction fee of A$0.71 for the five years following the go live date of the project (ie a total underwriting commitment of approximately A$45 million.
The joint venture was subject to 4 conditions subsequent which the parties were obliged to use the best endeavours to satisfy. It is the satisfaction of these conditions and the parties obligations to use best endeavours to satisfy such conditions which is the main issue in the proceedings. The four conditions briefly stated are:
(a) the adoption of a business plan;
(b) adoption of a budget;
(c) JVCo obtaining financing for the project; and
(d) BOQ obtaining necessary regulatory approvals,
which were all to be satisfied before the project commenced.
After a business plan and budget was adopted and phase 0 of the adopted business plan was completed and funding proposals obtained and submitted to BOQ, BOQ notified the other parties that it no longer viewed the project as commercially viable and alleged that the conditions had not been satisfied.
The Company responded by indicating the business plan and budget condition had plainly been satisfied, funding had been obtained in accordance with BOQ written requirements and therefore the condition satisfied (or in the alternative the condition would have been satisfied had BOQ used its best endeavours to satisfy same) and that no regulatory approvals were required.
On 11 April 2001 the Company serve a notice of breach and dispute on BOQ stating:
"Recent letters from BOQL to Talisman [the Company's former name], and recent conduct of BOQL's representatives (including on the board of JV Company) indicate:
(a) that BOQL and BOQ Sub (collectively "BOQ") have decided that (employing the words in BOQ's letter of 9 October 2000) "they no longer wish €¦ to remain part of the joint venture"; and
(b) that they are therefore attempting to position themselves so that they may later argue that the "conditions subsequent" contained in the JV Agreement have not been satisfied, and in particular the Business Plan has not been adopted and funding not obtained.
This attempted positioning is plainly contrary to JV Company board minutes (see minutes/circulating resolution of 23 May 2000, 28 June 2000 and 25 July 2000) and steering committee documentation, as well as correspondence between BOQ representatives and Talisman Technologies, Inc representatives.
In relation to funding, firm funding proposals acceptable to Talisman, Saracen and Compaq have been obtained which are more favourable to BOQ than those contemplated when the JV Agreement was originally entered into, In addition these financing proposals are in accordance with BOQ's more recently announced criteria (see for example, BOQL's letter of 5 September 2000) and have all been submitted to BOQ for approval.
In an effort to resolve matters, it was agreed by letter agreement dated 8 February 2001 to enter into good faith negotiations to determine an alternative to the Joint Venture. In early March 2001 it became apparent to Talisman that BOQ was not acting in good faith and had no desire to proceed with the Joint Venture or any proposal similar to the Joint Venture.
More particularly BOQ and its representatives have failed to take steps on their part necessary to enable the financing condition in clause 2.1(c) of the JV Agreement ("Financing Condition") to be satisfied. This is in breach of:
(a) clauses 2.2(a) and (b), 6.1(a), 8.2(a), (b) and (c) and 31 of the JV Agreement;
(b) BOQ's fiduciary duties and duties of good faith in respect of the other parties to the JV Agreement; and
(c) Mr Dawson's duties as a director of the JV Company (namely, to act in the best interests of the company as a whole, to act in good faith and to exercise due care and diligence),
Such failures, together with BOQ pulling resources from the Joint Venture, have caused substantial delay as well as significant damage to the JV Company and its shareholders.
Accordingly, pursuant to clause 27.1(a)(i) of the JV Agreement, Talisman hereby gives notice to BOQL and BOQ Sub of the breaches of the JV Agreement specified above including that:
(d) BOQ Sub has not and is not using "its best endeavours to ensure that the conditions Subsequent are satisfied";
(e) BOQ Sub has not and is not acting in good faith / in a "just and faithful" manner in relation to the Conditions Subsequent and the Joint Venture generally;
(f) BOQ Sub has and is unreasonably delaying approval of / decisions in connection with of the Conditions Subsequent and the Joint Venture generally; and
(g) BOQL has failed to ensure that BOQ Sub duly and punctually performs its obligations under the JV Agreement,
and requests that such breaches be immediately remedied.
On 23 April 2001, the Company's lawyers advised BOQ that the Company would be commencing proceedings. Later that day BOQ's lawyers advised the Company that BOQ had instituted proceedings to wind up JVCo. The following day, the Company instituted proceedings against BOQ for, amongst other things breach of contract and failure to act in good faith and seeking specific performance of BOQ's obligations and in the alternative damages.
Current Status
Both sets of proceedings had now been consolidated into one set of proceedings with BOQ's winding up application to be incorporated in its counter claim to the Company's claims against it.
In addition, Saracen has now joined as a plaintiff the proceedings raising claims against BOQ identical to the Company's claims.
Importantly, BOQ's former Chief Information Officer has provided the Company with an affidavit which indicates, amongst other things, that BOQ decided to withdraw from the joint venture and pulled resources from the joint venture in early September 2000.
Based on the minimum number of ATMs contemplated (i.e. 300), the Company considers that value of JVCo would have been between A$100 million and A$150 million (the Company and Saracen's interest therefore being A$45.1 million to A$ 67.65 million). These figures are based on forecasts approved by BOQ when it entered into the joint venture agreement.
Based on 1000 ATMS being rolled out, the Company considers that value of JVCo would have been between A$600 million and $A800 million (the Company and Saracen's interest therefore being A$270.6 million to A$360.8 million). These figures are based on forecasts approved by BOQ when it entered into the joint venture agreement but extrapolated out from 300 to 1000 ATMs.
The Company considers its financial models are based on conservative assumptions based on extensive research. These are currently being reviewed by an independent expert for the purpose of providing expert evidence to the Court.
Metyor has provided a bank guarantee in the amount of $360,000AUD as security for BOQ's costs should Metyor's claim not be successful."
M J Milne
Chairman
For further information please contact;
Adam Schofield
Ph. 61-2 8243 4203
Mob. 61 40 2223299
aschofield@metyor.com