RBS 2010 Annual Report Download - page 402

Material contracts continued
Second Placing and Open Offer Agreement
Pursuant to a placing and open offer agreement dated 19 January 2009
entered into between the company, UBS, Merrill Lynch International and
HM Treasury, (i) the company agreed to invite qualifying shareholders to
apply to subscribe for new shares at the issue price of 31.75 pence per
new share by way of the Second 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 subscribe for the new shares on such terms as may be agreed
by the company and HM Treasury at not less than the issue price of
31.75 pence per new share on the basis that the new shares placed will
be subject to clawback to the extent they are taken up under the Second
Open Offer and (iii) HM Treasury agreed that, to the extent not placed or
taken up under the Second Open Offer and subject to the terms and
conditions set out in the Second Placing and Open Offer Agreement, HM
Treasury would subscribe for such new shares itself at the issue price of
31.75 pence per new share.
Pursuant to the terms of the Second Placing and Open Offer Agreement,
the aggregate proceeds of the Second Placing and Open Offer (net of
expenses) were used in full to fund the redemption on Admission (as
defined in the Second Placing and Open Offer Agreement) of the
preference shares held by HM Treasury at 101 per cent of their issue
price (£5.05 billion) together with the accrued dividend on the preference
shares (from and including 1 December 2008 to but excluding the Date of
Admission (as defined in the Second Placing and Open Offer Agreement))
and the commissions payable to HM Treasury under the Second Placing
and Open Offer Agreement.
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.
Pre-accession Commitments Letter
On 26 February 2009, the Royal Bank entered into a deed poll in favour
of HM Treasury, pursuant to which the Royal Bank gave a series of
undertakings on behalf of each member of the Group, with immediate
effect unless otherwise agreed, in relation to the provision of information
and the management of the assets, commitments and exposures (the
"Proposed Assets") in the period prior to the Royal Bank's proposed
accession to and participation in the UK Government's Asset Protection
Scheme (APS).
The Royal Bank undertook to HM Treasury, among other things, to:
(i) provide all such assistance and information and data as is
reasonably requested which is pertinent to the implementation of
the APS and the Royal Bank's potential participation in the APS;
(ii) provide, as soon as practicable, an indicative list of the assets,
commitments and exposures that the Royal Bank propose to
include within the APS with a view to agreeing such list by 30
April 2009;
(iii) provide, as promptly as practicable, information and data relating
to the Proposed Assets reasonably requested for due diligence
purposes and to provide certain other information concerning the
Group's business and the financial performance and risk of the
Proposed Assets;
(iv) provide access to the Group's premises, books, records, senior
executives, relevant personnel and professional advisers on
reasonable terms;
(v) consult with HM Treasury regarding the management and
operations of the Proposed Assets and to ensure that the
management of the Proposed Assets is in accordance with usual
business practices and also without regard to the possible
benefits under the APS;
(vi) develop and, subject to market conditions, implement a liability
management plan which is designed to enable the Group to meet
certain Core Tier 1 capital targets for 2009; and
(vii) use best endeavours (giving regard to reasonable operational
requirements) to maintain regular, adequate and effective
monitoring, reporting, risk management and audit controls and
procedures in order, among other things, to ensure that risks
relating to key business processes which affect the Proposed
Assets are identified, assessed and reported and are managed
and mitigated appropriately.
In addition, the Royal Bank agreed in principle that, if and only if the
Royal Bank accedes to the APS, it would not claim, and would disclaim,
certain UK tax losses and allowances arising to members of the Group in
respect of any accounting period ending on or after 31 December 2008,
provided that this undertaking would not apply in respect of any such tax
benefits arising in the earlier of (a) the first accounting period beginning
more than five years after the relevant accession date and (b) the first
accounting period beginning after the relevant accession date in which
the Group becomes profitable.
The company's commitments, described in this section have been
superseded by the Scheme Rules and the Accession Agreement, (for
details of the Accession Agreement, see below), with the exception of a
commitment to inform the Department for Business, Innovation and Skills
prior to making significant reductions in the level of lending being made
available to certain borrowers or counterparties, which will apply until 28
February 2011, in line with the duration of the commitments under the
Lending Commitments Letter described below.
RBS Group 2010400
Additional information continued