BABCOCK & BROWN

8. Additional information
Accordingly, whenever Babcock & Brown issues further
Ordinary Shares and options (for example, under a placement,
dividend reinvestment plan, employee incentive plan, etc)
it will be obliged to subscribe for an equal number of new
A Class Shares in BBIPL. The issue price for those new A Class
Shares will be the amount (net of issue costs) that Babcock &
Brown receives for the issue of its Ordinary Shares.
Further B Class Shares may be issued if there is a rights issue
at the Babcock & Brown level, in which case BBIPL may be
obliged to offer rights to its own shareholders in the same
ratio. B Class Shareholders also have the right to ‘cash out’
their BBIPL rights at the applicable market price of Babcock
& Brown’s rights.
8.6.4 Voting rights and election of directors to the
BBIPL board
Generally, A Class and B Class Shares have equal voting rights
at a general meeting of BBIPL.
There are some cases, however, where the A Class Shares
‘flow through’ the votes taken at a general meeting of Babcock
& Brown. In these cases, a ‘proportional voting requirement’
applies under which Babcock & Brown is obliged to vote and
abstain from voting its A Class Shares in the same proportions
as ‘for’ and ‘against’ votes were cast and shares were not voted
(respectively) by shareholders of Babcock & Brown.
One of the key matters to which the proportional voting
requirement applies is the election of directors at the BBIPL
level. It is intended that the boards of Babcock & Brown and
BBIPL should closely mirror one another, subject to B Class
Shareholders having a vote at the BBIPL level. For instance,
whenever a BBIPL director who is also a Director retires and
stands for re-election at Babcock & Brown level, the director
must also retire and stand for re-election at the BBIPL level.
Even if a BBIPL director is not a Director, the person must
retire and stand for re-election on the same rotational basis as
if he or she was a director of a listed company. The right of
the BBIPL board to appoint a new director as a casual vacancy
is also limited to people who are also Directors.
Further, the BBIPL Constitution provides that after the date on
which BBIPL is entitled to compulsorily redeem B Class Shares
(see above), Babcock & Brown will essentially be able to exercise
complete control over the composition of the BBIPL board.
8.6.5 Election of Directors
B Class Shareholders do not have any voting rights at a general
meeting of Babcock & Brown, including in relation to the
appointment of Directors.
However, Babcock & Brown is obliged to accept a nomination
from the board of BBIPL where an election is to be held to
fill a Board vacancy at Babcock & Brown level. However, such
nominations do not displace the right of the Board to put its
own nominees to a vote of Shareholders.
8.6.6 Sale of substantial assets by BBIPL
Babcock & Brown’s business interests, investments and assets
are held through BBIPL and BBIPL’s subsidiaries.
If Shareholders are to vote on a significant acquisition, disposal
or related party transaction to which chapter 10 or 11 of the
Listing Rules applies and which affects BBIPL (which will
usually be the case), any such decision must also be approved
by BBIPL’s shareholders to the extent that it affects BBIPL’s
assets. Babcock & Brown can vote its A Class Shares on that
resolution, and the proportional voting requirement referred
to above applies to this resolution.
Similarly, the sale by Babcock & Brown of its A Class Shares
in BBIPL (this will be Babcock & Brown’s major directly held
asset) also requires the approval of BBIPL shareholders. Babcock
& Brown can vote its A Class Shares on this resolution, and
the proportional voting requirement referred to above applies.
These special provisions in relation to substantial assets only
apply until the date on which BBIPL becomes entitled to
compulsorily redeem B Class Shares. After that date, acquisitions
or disposals of this kind do not require the approval of BBIPL
shareholders.
8.6.7 Dividends
A Class Shares and B Class Shares have the same per share
dividend rights. While there are B Class Shareholders in
BBIPL, Babcock & Brown may not pay a total dividend
which exceeds the total dividend that it receives from BBIPL
on its A Class Shares.
8.6.8 General minority shareholder protection
The BBIPL Constitution requires Babcock & Brown not to do
anything that would materially prejudice the ability of B Class
members to have their B Class Shares redeemed or converted.
This restriction does not apply where the relevant event is
specifically provided for elsewhere in the BBIPL Constitution,
such as under a scheme of arrangement or takeover bid.
8.7 Summary of Offer Management Agreement
On 9 November 2005, Babcock & Brown and the Lead
Manager & Bookrunner entered into the Offer Management
72 BABCOCK & BROWN SUBORDINATED NOTES