RBS 2008 Annual Report Download - page 283

RBS Group Annual Report and Accounts 2008282
Additional information continued
Standby underwriting commitment letter
On 28 May 2007, the company and Merrill Lynch International entered
into a standby underwriting commitment letter, pursuant to which Merrill
Lynch International undertook to underwrite one or more issues by the
company of securities eligible to be treated as part of its innovative or
non-innovative Tier 1 capital and/or convertible securities convertible
into Ordinary Shares, the proceeds of which would be used to finance
part of the cash portion of consideration payable to ABN AMRO
shareholders upon settlement of the offers for shares in ABN AMRO.
The aggregate amount of Merrill Lynch International’s standby
underwriting commitment was €6.2 billion. Pursuant to the letter, the
company agreed to pay certain fees and expenses to Merrill Lynch
International in consideration for its standby commitment.
Agreement with Bank of America for the sale of LaSalle
On 22 April 2007, ABN AMRO Bank and Bank of America entered into
an agreement for the sale by ABN AMRO Bank to Bank of America of
all of the outstanding shares of common stock of ABN AMRO North
America Holding Company (ABN AMRO North America), a Delaware
corporation whose subsidiaries include LaSalle. The consideration for
the shares was US$21 billion, subject to a potential purchase price
adjustment if ABN AMRO Bank’s estimate of the net income of ABN
AMRO North America for the pre-closing period was less than a
specified income threshold. The agreement also provided for
approximately US$6 billion owed by ABN AMRO North America to other
members of the ABN AMRO group to be converted into common stock
of ABN AMRO North America. ABN AMRO Bank gave certain
representations and warranties to Bank of America, including, inter alia,
as to title to the shares, authority and capacity to enter into the
agreement, financial statements, tax and employee benefits. The
warranties given by ABN AMRO Bank were repeated on closing of the
agreement. ABN AMRO Bank is liable to indemnify and hold harmless
Bank of America for damages arising out of certain specified events,
including breach of any covenant that survives closing.
Underwriting agreement
On 22 April 2008, the company, Goldman Sachs International, Merrill
Lynch International, UBS and the Royal Bank entered into an underwriting
agreement, pursuant to which Merrill Lynch International, Goldman
Sachs International and UBS agreed to procure subscribers for, or failing
which themselves to subscribe for, Ordinary Shares not taken up under
the Rights Issue, in each case at the relevant issue price. Pursuant to the
underwriting agreement, the company agreed to pay certain fees and
expenses to Merrill Lynch International, Goldman Sachs International and
UBS in consideration for their underwriting commitment. The company
gave certain representations and warranties and indemnities to those
persons defined as underwriters in the Underwriting Agreement. The
liabilities of the company were uncapped as to time and amount.
Sale of Angel Trains
On 6 August 2008, the company completed the sale of Angel Trains
Group to a consortium advised by Babcock & Brown for an enterprise
value of £3.6 billion.
Sale of Tesco Personal Finance
On 28 July 2008, the company announced that it had agreed to sell its
50 per cent. shareholding in Tesco Personal Finance to its joint venture
partner Tesco plc for a cash consideration of £950 million, subject to
transaction adjustments. As part of this transaction, the Group will
continue to provide certain commercial services to Tesco Personal
Finance post-completion. The sale completed on 19 December 2008.
First Placing and Open Offer Agreement
Pursuant to a placing and open offer agreement effective as of 13
October 2008 entered into between the company, UBS, Merrill Lynch
International and HM Treasury, (i) the company agreed to invite
qualifying shareholders to apply to acquire new Shares at the issue
price of 65.5 pence by way of the First Open Offer, (ii) UBS and Merrill
Lynch International were appointed as joint sponsors, joint bookrunners
and joint placing agents and agreed to use reasonable endeavours to
procure placees to acquire the new Shares at not less than the issue
price of 65.5 pence on such terms as agreed by HM Treasury on the
basis that the new Shares placed were subject to clawback to the
extent they were taken up under the Open Offer and (iii) HM Treasury
agreed that, to the extent not placed or taken up under the First Open
Offer and subject to the terms and conditions set out in the First Placing
and Open Offer Agreement, HM Treasury would acquire such new
Shares itself at the issue price of 65.5 pence.
In consideration of its services under the First Placing and Open Offer
Agreement, HM Treasury was paid (i) a commission of 0.5 per cent. of
the aggregate value of the new Shares at the issue price of 65.5 pence
per new Share payable on Admission (as defined in the First Placing
and Open Offer Agreement) and the second business day after the day
on which the First Placing and Open Offer Agreement terminated and
(ii) a further commission of 1 per cent. of the aggregate value of the
new Shares acquired by placees (including HM Treasury) at the issue
price of 65.5 pence per new Share payable on Admission (as defined in
the First Placing and Open Offer Agreement). The company paid all
legal and other costs and expenses of HM Treasury, those of UBS and
Merrill Lynch International properly incurred and the costs and
expenses of HM Treasury’s financial advisers incurred in connection
with the First Placing and Open Offer and the Preference Share Issue.
The company also bore all costs and expenses relating to the First
Placing and Open Offer and the Preference Share Issue, including (but
not limited to) the fees and expenses of its professional advisers, the
cost of preparation, advertising, printing and distribution of the First
Placing and Open Offer prospectus and all other documents connected
with the First Placing and Open Offer and the Preference Share Issue,
the listing fees of the FSA, any charges by CREST and the fees of the
London Stock Exchange and Euronext.
The company gave certain undertakings to HM Treasury in relation to
such matters as mortgage lending, lending to SMEs and Board
remuneration. These undertakings were aimed at ensuring that any state
aid involved in the potential acquisition of new Shares and the
company’s potential participation in the guarantee scheme to be
promoted by HM Treasury as part of its support for the UK banking
industry was compatible with the common market under EU law. These
constraints will cease to apply when, broadly, it is determined that the
company is no longer in receipt of state aid.