RBS 2008 Annual Report Download - page 285

RBS Group Annual Report and Accounts 2008284
Additional information continued
Certain of the conditions may be waived by HM Treasury at its
discretion. Prior to Admission, HM Treasury may terminate the Second
Placing and Open Offer Agreement in certain circumstances. On a
termination event arising, neither UBS nor Merrill Lynch International are
entitled to effect the termination of the Second Placing and Open Offer
Agreement but each may terminate its obligations under the Second
Placing and Open Offer Agreement.
On termination of appointment by UBS or Merrill Lynch International, the
Second Placing and Open Offer Agreement will continue to be in force
as between the non-terminating parties.
HM Treasury is entitled to novate its rights under the Second Placing
and Open Offer Agreement to any entity that is owned, directly or
indirectly, by HM Treasury.
The company has given certain representations and warranties and
indemnities to each of HM Treasury, UBS and Merrill Lynch International
under the Second Placing and Open Offer Agreement. The liabilities of
the company are unlimited as to time and amount.
The company also gave HM Treasury the following undertakings:
•to extend the lending commitments made to HM Treasury in the First
Placing and Open Offer Agreement in respect of the UK mortgage
and SME lending markets. These commitments will now also apply to
the company’s lending to larger commercial and industrial companies
in the United Kingdom; and
•a commitment to increase the level at which competitively priced
lending is made available and actively marketed by the Group in the
United Kingdom by £6 billion.
Preference Share Subscription Agreement
Pursuant to a preference share subscription agreement effective as of
13 October 2008 between the company and HM Treasury, HM Treasury
subscribed for, and the company allotted and issued to HM Treasury, the
Preference Shares for a total consideration of £5 billion. The company
and HM Treasury agreed that applications would be made to the UKLA
for the Preference Shares to be admitted to the Official List and to the
London Stock Exchange for the Preference Shares to be admitted to
trading on the London Stock Exchange. Pursuant to the Preference
Share Subscription Agreement, the company agreed to pay the costs and
expenses of both parties in relation to the negotiation of the Preference
Share Subscription Agreement and the subscription for, and allotment and
issue of, the Preference Shares (including, without limitation, any stamp
duty or stamp duty reserve tax). HM Treasury was entitled to novate its
rights under the Preference Share Subscription Agreement to any entity
that is owned, directly or indirectly, by HM Treasury.
The Preference Share Subscription Agreement was conditional on the
First Placing and Open Offer Agreement becoming unconditional in
accordance with its terms.
Subscription and Transfer Agreements
In connection with the First Placing and Open Offer, the company,
Merrill Lynch International, UBS, Computershare and Encuentro Limited
entered into several agreements dated 4 November 2008, in respect of
the subscription and transfer of ordinary shares and redeemable
preference shares in Encuentro Limited. Under the terms of these
agreements:
•the company and UBS and/or Merrill Lynch International agreed to
acquire ordinary shares in Encuentro Limited and enter into put and
call options in respect of the ordinary shares in Encuentro Limited
subscribed for by UBS and/or Merrill Lynch that were exercisable if
the Placing and Open Offer did not proceed;
•Merrill Lynch International or UBS, as applicable, agreed to apply
monies received from Qualifying Shareholders, placees or HM
Treasury under the Placing and Open Offer to subscribe for
redeemable preference shares in Encuentro Limited to an aggregate
value equal to such monies, after deduction of the amount of certain
commissions and expenses; and
•the company agreed to allot and issue the New Shares to those
persons entitled thereto in consideration of Merrill Lynch International
or UBS, as applicable, transferring its holding of redeemable
preference shares and ordinary shares in Encuentro Limited to
the company.
Accordingly, instead of receiving cash as consideration for the issue of
the New Shares, at the conclusion of the First Placing and Open Offer
the company owned the entire issued ordinary and redeemable
preference share capital of Encuentro Limited whose only assets were
its cash reserves, which represented an amount equivalent to the net
proceeds of the First Placing and Open Offer. The company was able to
utilise this amount equivalent to the First Placing and Open Offer net
proceeds by exercising its right of redemption over the redeemable
preference shares it held in Encuentro Limited.
Qualifying Shareholders were not party to these arrangements and so
did not acquire any direct right against Merrill Lynch International, UBS
and Computershare pursuant to these arrangements. The company was
responsible for enforcing the other parties’ obligations thereunder.
FSAListing Rules disclosure
With effect from 1 July 2008, the Group sold to Santander (a related
party for the purposes of the FSA Listing Rules) its interests in the
European Consumer Finance businesses in Germany and Austria for
€306 million.