[CLIFFORD CHANCE LOGO] LIMITED LIABILITY PARTNERSHIP
EXHIBIT 4.01
CONFORMED COPY
MARCONI CORPORATION PLC
MARCONI PLC
HSBC BANK PLC
AND
BARCLAYS BANK PLC
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ESOP ESCROW AGREEMENT
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CONTENTS
CLAUSE PAGE
1. Interpretation................................................................................. 2
2. Escrow Agent................................................................................... 10
3. Creation Of The Escrow......................................................................... 11
4. Terms Of Escrow................................................................................ 12
5. Escrow Cash Entitlement........................................................................ 13
6. Charged Escrow Cash Entitlement................................................................ 13
7. Release From Escrow............................................................................ 15
8. The Mobile Escrow Agreement.................................................................... 18
9. The Subsequently Sold Opcos Escrow Agreements.................................................. 19
10. Non-Participating ESOP Banks................................................................... 20
11. Duties And Liability Of Escrow Agent........................................................... 20
12. Reimbursement Of Escrow Agent.................................................................. 22
13. Acknowledgement Of Event Of Default And Undertakings........................................... 23
14. Arbitration.................................................................................... 24
15. Costs.......................................................................................... 25
16. Termination.................................................................................... 25
17. Notices........................................................................................ 25
18. Announcements.................................................................................. 26
19. Further Assurance.............................................................................. 27
20. Remedies And Partial Invalidity................................................................ 27
21. Rights Of Third Parties........................................................................ 27
22. Assignment..................................................................................... 27
23. Amendment...................................................................................... 27
24. Counterparts................................................................................... 28
25. Governing Law And Jurisdiction................................................................. 28
SCHEDULE 1 Determination Of Escrow Cash Claim....................................................... 29
SCHEDULE 2 The Esop Swap Transactions............................................................... 32
SCHEDULE 3 Form Of Payment Instruction.............................................................. 33
SCHEDULE 4 Sold Opcos, Mobile Opcos And Subsequently Sold Opcos..................................... 34
SCHEDULE 5 Participating Opcos...................................................................... 39
SCHEDULE 6 Deed Of Adherence........................................................................ 40
SCHEDULE 7 Form Of ESOP Bank Certificate............................................................ 41
THIS AGREEMENT is dated 13 December 2002
BETWEEN:
(1) MARCONI CORPORATION PLC, a company incorporated in England and Wales
(registered number 67307), whose registered office is at New Century
Park, Box 53, Coventry, Warwickshire, CV3 1HJ (the "COMPANY");
(2) MARCONI PLC, a company incorporated in England and Wales (registered
number 3846429), whose registered office is at New Century Park, Box
53, Coventry, Warwickshire, CV3 1HJ ("PLC");
(3) HSBC BANK PLC ("HSBC") in its capacities as (i) agent for the Banks (in
this capacity, the "AGENT"), (ii) trustee under the Security Documents
(in this capacity, the "SECURITY TRUSTEE") and (iii) escrow agent (in
this capacity, the "ESCROW AGENT"); and
(4) BARCLAYS BANK PLC ("BARCLAYS").
RECITALS
(A) The Marconi Employee Trust ("MET") was established by a trust deed
entered into between PLC and BCT in 1999 for the purposes of, inter
alia, operating the ESOP to provide incentive arrangements over PLC
shares to employees of the Opcos. Arrangements have been made whereby
employees of certain Opcos are entitled to call for PLC shares at
specified exercise prices.
(B) Certain financial institutions have entered into the ESOP Swap
Transactions to hedge the exposure of BCT against an increase in the
price of PLC shares in relation to future calls for shares by employees
under the ESOP. PLC has guaranteed the obligations of BCT under the
ESOP Swap Transactions (the "PLC GUARANTEES").
(C) From December 1999, a series of letter agreements were and/or may have
been entered into by PLC and certain of the Opcos (the "FUNDING
LETTERS"). The terms of each Funding Letter provided that the Opco that
was a party to it would bear the costs of its employees' participation
in the ESOP, including without limitation (i) costs incurred through
acquiring PLC shares on the market and holding them pending transfer to
employees entitled to them and (ii) costs associated with a derivative
or similar instrument enabling the MET to acquire PLC shares to satisfy
employees' entitlements, and the relevant Opco agreed to pay to the MET
or otherwise as PLC requested such amounts as requested by PLC from
time to time.
(D) The Company (acting at the request of PLC) advanced by way of limited
recourse loans an aggregate sum of L215 million to BCT as a result of
UBS and Salomon having made cash calls under their ESOP Swap
Transactions.
(E) As a result of the fall in the price of the PLC shares, the aggregate
exposure of BCT to Barclays, Salomon and UBS (net of cash collateral
paid to Salomon and UBS), under the ESOP Swap Transactions was stated
to be approximately L160 million as at 31 March 2002.
(F) In accordance with the ESOP Term Sheet, the Parties have agreed that on
the Trigger Date, an escrow arrangement will be put in place under
which the Escrow Cash will be set aside pending agreement
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between the Interested Parties, or a formal determination by the Court
or otherwise in accordance with this Agreement, of each ESOP Bank's
entitlement (if any) to the Escrow Cash Balance.
(G) Barclays has agreed to support the implementation of the Schemes
pursuant to and on the basis set out in the Restructuring Undertaking
Agreement, however, it is possible that the Company Scheme and/or the
PLC Scheme may not be implemented if, amongst other things, the
required levels of support for those Schemes are not obtained.
(H) This Agreement sets out the terms on which the Escrow Cash will be held
and creates a framework for resolving each ESOP Bank's entitlement (if
any) to the Escrow Cash Balance.
(I) On 13 September 2002, Highrose granted fixed charges to the Security
Trustee for and on behalf of, respectively, the Bank Beneficiaries and
the Bondholders over the Deposits on the terms and subject to the
conditions of the Security Documents.
(J) This Agreement also sets out the terms of escrow relating to any
Charged Escrow Cash paid into escrow in accordance with clauses 5 (ESOP
Banks) or 6 (Order of Application) of the Trust Deed and the mechanism
by which the Charged Escrow Cash Balance may be released from the
escrow arrangements contemplated herein.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 In this Agreement:
"ACT" means the Companies Act 1985 (as amended);
"BCT" means Bedell Cristin Trustees Limited;
"CHARGED ESCROW CASH" means the aggregate of:
(i) the "Escrow Cash Amount" as defined in and determined in
accordance with the provisions of clause 5.1 (ESOP Banks'
Entitlement) of the Trust Deed to be paid by the Security
Trustee to the Escrow Agent in accordance with clause 3.2.1(b)
(Charged Escrow Cash Arrangements); and
(ii) the amount (if any) received by the Escrow Agent prior to the
Trigger Date pursuant to clauses 8.1.2 and 8.1.4 (PLC and the
Company Undertakings - Mobile Opcos);
"CHARGED ESCROW CASH BALANCE" means, following payment of the Charged
Escrow Cash to the Escrow Agent, the balance from time to time standing
to the credit of the Escrow Account, including (i) all interest accrued
and (ii) all income received from any Investments;
"CHARGED ESCROW CASH ENTITLEMENT" has the meaning given in clause 6.4
(Charged Escrow Cash Entitlement - Court Determination);
"CLOSE-OUT AMOUNT" means, in relation to an ESOP Bank, the aggregate
net liabilities owed (or deemed owing, as the case may be) by BCT to
that ESOP Bank under the relevant ESOP Contracts in respect of the
relevant Close-Out Date, and for these purposes:
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(a) all ESOP Swap Transactions between BCT and that ESOP Bank will
terminate (or be deemed to terminate) on the relevant
Close-Out Date;
(b) the liabilities of BCT will (subject to paragraph (c) below)
be calculated in accordance with the calculation provisions
expressly set out in the relevant ESOP Contracts; and
(c) if the relevant ESOP Swap Transactions are terminated
following agreement between BCT and that ESOP Bank or are
deemed to be terminated on the Effective Date, then the
following assumptions will apply:
(i) an Event of Default (as such term is defined in the
relevant ESOP Contracts) has occurred and was
continuing under the relevant ESOP Contracts;
(ii) BCT is the Defaulting Party (as such term is defined
in the relevant ESOP Contracts) for the purposes of
the relevant ESOP Contracts;
(iii) the relevant Close-Out Date is the Early Termination
Date (as such term is defined in the relevant ESOP
Contracts) for the purposes of the relevant ESOP
Contracts; and
(iv) the ESOP Swap Transactions are the Terminated
Transactions (as such term is defined in the relevant
ESOP Contracts) for the purposes of the relevant ESOP
Swap Master;
"CLOSE-OUT DATE" means in relation to the relevant ESOP Swap
Transactions between BCT and an ESOP Bank:
(a) if the ESOP Swap Transactions have been duly terminated in
accordance with their terms, the Early Termination Date (as
defined under the relevant ESOP Swap Master);
(b) if the ESOP Swap Transactions are terminated by agreement
between BCT and that ESOP Bank, the date that such termination
is effective; or
(c) if the ESOP Swap Transactions have not been terminated in the
manner described in paragraphs (a) or (b) above prior to the
Effective Date, the Effective Date;
"COMPANY SCHEME" means a scheme of arrangement under Section 425 of the
Act of certain liabilities of the Company on substantially the basis
set out in the Restructuring Term Sheet;
"COMPANY SECURITIES" means any New Ordinary Shares, Senior Notes,
Junior Notes and US Notes received by an ESOP Bank under the PLC Scheme
in respect of that ESOP Bank's claims under the relevant PLC
Guarantees;
"DETERMINATION" has the meaning given in paragraph 1 of Schedule 1
(Determination of Escrow Cash Claim);
"DETERMINATION DATE" means, as appropriate, the earlier of:
(i) the date a Payment Instruction is executed by all Interested
Parties in accordance with clause 7.1.1 (Escrow Cash Balance -
Payment Instruction or Final Judgment);
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(ii) the occurrence of a Final Judgment following an application to
the Court under clause 5.2 (Escrow Cash Claim- Court
Determination);
(iii) the date a Payment Instruction is executed by all Interested
Parties in accordance with clause 7.4.1 (Charged Escrow Cash
Balance - Payment Instruction or Final Judgment); or
(iv) the occurrence of a Final Judgment following an application to
the Court under clause 6.4 (Charged Escrow Cash Entitlement -
Court Determination);
"EFFECTIVE DATE" means the date when an office copy of the Order of the
High Court sanctioning the Company Scheme is delivered to the Registrar
of Companies for registration as required by Section 425 of the Act;
"ESCROW ACCOUNT" means the interest bearing deposit account no.:
57548467, sort code: 40-05-15 held with HSBC Bank plc ,8 Canada Square,
London E14 5HQ in the name of the Escrow Agent;
"ESCROW CASH" means the aggregate of:
(i) the amount to be paid by the Company to the Escrow Agent as
calculated in accordance with clause 3.1 (Escrow Cash
Arrangements);
(ii) the amount (if any) received by the Escrow Agent in accordance
with clause 9.2.1 (Terms of Subsequently Sold Opco Escrow
Agreements); and
(iii) the amount (if any) received by the Escrow Agent on or after
the Trigger Date pursuant to clauses 8.1.2 and 8.1.4 (PLC and
the Company Undertakings - Mobile Opcos);
"ESCROW CASH BALANCE" means on or after the Trigger Date, the balance
from time to time standing to the credit of the Escrow Account
including (i) all interest accrued in respect of the period commencing
on 1 February 2004 and (ii) all income received from any Investments
generated in respect of the period commencing on 1 February 2004;
"ESCROW CASH CLAIM" has the meaning given in paragraph 1 of Schedule 1
(Determination Of Escrow Cash Claim);
"ESCROW CASH ENTITLEMENT" of an ESOP Bank shall be that amount
calculated in accordance with the formula:
(A - B) + ((A - B) x CD)
where:
A = the Escrow Cash Claim of that ESOP Bank
B = the aggregate value (if any) of the PLC Distribution
received as at the date of the relevant calculation by that
ESOP Bank together with the likely value of future PLC
Distributions (as determined by that ESOP Bank acting
reasonably in consultation with the other Interested Parties)
to be received by that ESOP Bank and which have been declared
pursuant to the provisions of the PLC Scheme as at the date of
the relevant calculation
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C = the Interest Rate
D = the number of days elapsed from the Record Date to the
Determination Date divided by 365
"ESOP" means all employees' share schemes, stock option plans and share
option plans relating to employees of any Opco, including the share
plans described in the PLC listing particulars dated 11 October 1999
and/or the Form 20-F filed in relation to PLC and the Company dated 28
September 2001;
"ESOP BANK" means Barclays and any of Salomon and/or UBS that becomes
an "ESOP Bank" pursuant to clause 10 (Non-Participating ESOP Banks);
"ESOP BANK CERTIFICATE" means a certificate substantially in the form
set out in Schedule 7;
"ESOP CONTRACTS" means, in relation to an ESOP Bank, the ESOP Swap
Master and the related ESOP Swap Transactions between BCT and that ESOP
Bank;
"ESOP LOCK-UP" means an agreement substantially in the form of the
Restructuring Undertaking Agreement;
"ESOP SWAP LIABILITIES" means, in relation to an ESOP Bank, the
Close-Out Amount due from BCT to that ESOP Bank under the relevant ESOP
Contracts PLUS interest at the Interest Rate from the relevant
Close-Out Date to the Record Date MINUS any benefit or recovery
received by that ESOP Bank from BCT in respect of the liabilities owed
to that ESOP Bank under the relevant ESOP Contracts;
"ESOP SWAP MASTER" means the ISDA Master Agreement identified in
Schedule 2 (The ESOP Swap Transactions) between BCT and the relevant
ESOP Bank or Non-Participating ESOP Bank as specified in Schedule 2.
The ESOP Swap Master includes the relevant Schedule and the relevant
Confirmations also identified in Schedule 2 that were exchanged between
the parties confirming the ESOP Swap Transactions;
"ESOP SWAP TRANSACTIONS" means the derivative transactions specified in
Schedule 2 (The ESOP Swap Transactions) and the related credit support
arrangements, including those confirmed in the Credit Support Annex to
the ISDA Master Agreement dated 16 June 2000 between UBS and BCT;
"ESOP TERM SHEET" means the non-legally binding indicative ESOP term
sheet dated 28 August 2002 and initialled by, inter alia, Barclays,
HSBC, JPMorgan Chase Bank, PLC, the Company and Bingham McCutchen LLP;
"FINAL JUDGMENT" means a judgment delivered by the Court and/or, where
the provisions of clause 14 (Arbitration) apply, an award made by the
arbitrator, which determines (or, where there is both a judgment and an
award and/or more than one judgment and/or award, which together
determine) each matter referred to the Court and/or the arbitrator and
which is (or, which each are) final and in relation to which no appeal
or judicial challenge may be made (whether by lapse of time or
otherwise);
"FRACTION" means, if Barclays is the only ESOP Bank, 83.49 divided by
100 or, if either or both of Salomon and/or UBS become an ESOP Bank
pursuant to clause 10 (Non-Participating ESOP Banks)
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(each a "NEW ESOP BANK"), such other fraction as may be agreed by the
Parties and each New ESOP Bank in writing;
"FUNDING LETTERS" has the meaning given in Recital C;
"HIGHROSE" means Highrose Limited, a company incorporated in England
and Wales with registered number 44101334;
"HYPOTHETICAL INSOLVENCY" has the meaning given in paragraph 1 of
Schedule 1 (Determination of Escrow Cash Claim);
"HYPOTHETICAL INSOLVENCY PRACTITIONER" means the administrator,
liquidator or other office holder of (i) PLC and (ii) the Company
assumed to have been appointed in relation to the Hypothetical
Insolvency;
"INTERESTED PARTIES" means:
(a) up to, but not including, the Trigger Date, PLC, the Company,
the Agent and (subject to any waiver given in accordance with
clause 6.1.1 (Claims against Participating Opcos)) each ESOP
Bank; and
(b) from the Trigger Date, the Company and (subject to any waiver
given in accordance with clause 6.1.1 (Claims against
Participating Opcos)) each ESOP Bank;
"INTEREST RATE" means LIBOR plus 225 basis points (expressed as a
percentage);
"INVESTMENTS" means, at any time:
(a) cash in hand or on deposit (but if for a fixed period then
such period shall be no more than three months) with any
acceptable bank; and
(b) certificates of deposit, maturing no more than three months
after the relevant date of calculation, issued by an
acceptable bank,
and an "ACCEPTABLE BANK" for this purpose is a commercial bank or trust
company which has a rating of A or higher by Standard & Poor's or
FitchIBCA or A2 or higher by Moody's or a comparable rating from a
nationally recognised credit rating agency for its long-term debt
obligations;
"JUNIOR NOTES" means the junior secured notes to be issued to certain
creditors under the Company Scheme;
"LIBOR" means the rate for the date of calculation (the "RESET DATE)
for deposits in Sterling for a period of three months or such other
period as the Interested Parties may agree (the "DESIGNATED MATURITY")
which appears on the Telerate Page 3750 as of 11:00 a.m., London time,
on the Reset Date. If such rate does not appear on the Telerate Page
3750, the rate for that date will be calculated on the basis of the
rates at which deposits in Sterling are offered to the relevant ESOP
Bank at approximately 11:00 a.m. on the Reset Date in the London
interbank market for a period of the Designated Maturity commencing on
the Reset Date and in an amount representative of a single transaction
in the market at that time;
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"MARCONI GROUP COMPANY" means each of PLC, the Company and all of their
respective subsidiaries and former subsidiaries and each Opco;
"MET" has the meaning given in Recital A;
"MOBILE ESCROW AGENT" has the meaning given in clause 8.1 (PLC and the
Company Undertakings - Mobile Opcos);
"MOBILE ESCROW AGREEMENT" means the escrow agreement entered into
between the Company, PLC, Marconi Bruton Street Limited, HSBC (on its
own behalf and as a member of the Co-ordination Committee), Barclays,
Salomon, UBS, BCT and Slaughter and May dated 2 August 2002;
"MOBILE OPCOS" means those Opcos listed in Schedule 4.2 under the
heading "Mobile Opcos";
"MODEL" has the meaning given in paragraph 2.3 of Schedule 1
(Determination of Escrow Cash Claim);
"NEW ORDINARY SHARES" means new ordinary shares in the Company;
"NON-PARTICIPATING ESOP BANK" means any of Salomon and/or UBS which is
not an ESOP Bank;
"OPCOS" means subsidiaries or former subsidiaries of PLC (including the
Company and any subsidiary or former subsidiary of PLC that is dormant
or has been dissolved or wound up) and subsidiaries or former
subsidiaries of any partnership (wherever formed) wholly owned,
directly or indirectly, by PLC and/or by a subsidiary or subsidiaries
or former subsidiary or former subsidiaries of PLC;
"ORDER" means any order, decision, injunction, judgment, decree,
ruling, writ, assessment or arbitration award;
"PARTICIPATING OPCOS" means the Opcos, excluding the Mobile Opcos and
the Subsequently Sold Opcos, whose employees participated in the ESOP.
For the purpose of information only and without limiting the generality
of this definition or binding any of the Parties, the Opcos whose
employees participated in the ESOP identified by PLC and the Company as
being "Participating Opcos" as at the date of this Agreement on the
basis described in PLC's letter to Barclays dated 12 December 2002 are
listed in Schedule 5 (Participating Opcos);
"PARTY" means a party to this Agreement and includes its successors,
permitted assigns and permitted transferees;
"PAYMENT INSTRUCTION" means a notice substantially in the form set out
in Schedule 3 (Form of Payment Instruction);
"PLC DISTRIBUTION" means, in relation to an ESOP Bank (in its capacity
as such), the aggregate value of the cash (if any) and the Company
Securities (if any) received by that ESOP Bank under the PLC Scheme in
respect of its claims under the relevant PLC Guarantees and, for this
purpose :
(a) the value of cash shall be the amount of that cash; and
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(b) the value of Company Securities shall be calculated by
reference to (i) the net proceeds received on a sale of all or
part of those Company Securities by that ESOP Bank (as
certified in the ESOP Bank Certificate) and/or (ii) in
relation to any of those Company Securities that are not sold
by that ESOP Bank on or prior to the relevant Determination
Date, the closing price on the Determination Date for New
Ordinary Shares, Junior Notes, Senior Notes or US Notes (as
applicable) (the "RELEVANT SECURITIES") on the relevant
primary stock exchange for the Relevant Securities (or, if no
price is quoted on that Determination Date, the last price
quoted for the Relevant Securities on the relevant primary
stock exchange) (the "LAST LISTING") as quoted in an
appropriate recognised journal published in the relevant
jurisdiction on the next Business Day following the relevant
Determination Date (or the date of the Last Listing, as the
case may be);
"PLC GUARANTEES" has the meaning set out in Recital B;
"PLC SCHEME" means the proposed scheme of arrangement under Section 425
of the Act of certain liabilities of PLC on the basis set out in the
Restructuring Term Sheet;
"POST-DETERMINATION INTEREST" means interest at the Interest Rate on
the Escrow Cash Claim of an ESOP Bank less the value (if any) of its
PLC Distribution (including, if necessary, the likely value of future
PLC Distributions (as determined by that ESOP Bank acting reasonably in
consultation with the other Interested Parties)) for the period from
the Determination Date to the date on which that amount is paid to that
ESOP Bank pursuant to clause 7.2.1;
"PWC MODEL" has the meaning given in paragraph 2.4 of Schedule 1
(Determination of Escrow Cash Claim);
"RECORD DATE" means the date falling 2 Business Days before the
application relating to the Company Scheme is filed at the Court;
"RECOVERY" has the meaning given in clause 6.1.3 (Claims against
Participating Opcos);
"RESTRUCTURING TERM SHEET" means the indicative non-binding heads of
terms for the proposed Schemes dated 28 August 2002 (as amended or
supplemented from time to time);
"RESTRUCTURING UNDERTAKING AGREEMENT" means the agreement dated 13
September 2002 entered into between PLC, the Company and Barclays (as
amended on or about the date of this Agreement );
"SALOMON" means Salomon Brothers International Limited;
"SCHEMES" means both the PLC Scheme and the Company Scheme;
"SENIOR NOTES" means the senior secured bonds to be issued to certain
creditors under the Schemes;
"SOLD OPCOS" means the Opcos sold by a Marconi Group Company prior to
28 August 2002. For the purpose of information only and without
limiting the generality of this definition or binding any of the
Parties, Schedule 4.1 lists those Opcos which are listed in Schedule 5
and/or in respect of which signed Funding Letters have been located and
which the Company has identified as "Sold Opcos" as at the date of this
Agreement;
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"SUBSEQUENTLY SOLD OPCO ESCROW AGREEMENTS" means (i) the agreement (the
"Israel Agreement") dated 21 October 2002 between the Company, PLC,
HSBC (on its own behalf and as a member of the Co-ordination
Committee), Barclays, BCT and Allen & Overy, (ii) the agreement (the
"Singapore Agreement") dated 12 November 2002 between the Company, PLC,
Metapath Software International Limited, HSBC (on its own behalf and on
behalf and as a member of the Co-ordination Committee), Barclays, BCT
and Allen & Overy and (iii) any other escrow agreements entered into
pursuant to clause 9.1 (PLC and the Company Undertakings - Subsequently
Sold Opcos);
"SUBSEQUENTLY SOLD OPCO LIABILITIES" means, in relation to a
Subsequently Sold Opco, an amount equal to all potential claims against
that Subsequently Sold Opco relating to the costs of the participation
of all employees of that Subsequently Sold Opco in the ESOP (including
the claims of the ESOP Banks, BCT and the Company, irrespective of
whether or not (i) such Subsequently Sold Opco has signed a Funding
Letter and (ii) a Funding Letter in respect of that Subsequently Sold
Opco can be located);
"SUBSEQUENTLY SOLD OPCOS" means any Opcos sold by a Marconi Group
Company (other than to another Marconi Group Company) on or after 28
August 2002 but prior to the earlier of (i) the Enforcement Date and
(ii) the Trigger Date (including those Opcos listed in Schedule 4.3
under the heading "Subsequently Sold Opcos");
"TRIGGER DATE" means the Effective Date provided:
(a) the Restructuring Undertaking Agreement has not been validly
terminated by Barclays at such time; and
(b) the documents setting out and/or giving effect to the Company
Scheme include or provide for an ESOP escrow proposal
substantially in accordance with the ESOP Term Sheet;
"TRUST DEED" means the trust deed dated 13 September 2002 entered into
between the Security Trustee, the Company and Highrose in respect of
the Banks' Security over Cash Deed and the Bondholders' Security over
Cash Deed (as amended and restated on or about the date of this
Agreement );
"UBS" means UBS AG; and
"US NOTES" means the secured limited recourse notes to be issued to
certain creditors under the Schemes.
1.2 In this Agreement, a reference to:
1.2.1 a "SUBSIDIARY" is to be construed in accordance with section
736 of the Act but the phrase "body corporate" in section
736(3) of the Act shall be construed in this Agreement as
referring to any company, corporation or body corporate
incorporated in any country;
1.2.2 any "LIABILITY" under, pursuant to or arising out of (or any
analogous expression) any agreement, contract, deed or other
instrument includes a reference to contingent liability under,
pursuant to or arising out of (or any analogous expression)
that agreement, contract, deed or other instrument;
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1.2.3 a "SUCCESSOR" includes a successor in title of any Party and
any person who under the laws of its jurisdiction of
incorporation or domicile has assumed the rights and
obligations of any Party under this Agreement or to which,
under such laws, any rights and obligations have been
transferred;
1.2.4 a statutory provision includes a reference to the statutory
provision as modified or re-enacted or both from time to time
before the date of this Agreement and any subordinate
legislation made under the statutory provision (as so modified
or re-enacted) before the date of this Agreement;
1.2.5 a "PERSON" includes a reference to any individual, firm,
company, corporation or other body corporate, government,
state or agency of a state or any association, trust or
partnership (whether or not having separate legal personality
of two or more of the foregoing);
1.2.6 a clause, paragraph or Schedule, unless the context otherwise
requires, is a reference to a clause or paragraph of, or
schedule to, this Agreement;
1.2.7 any English legal term for any action, remedy, method of
judicial proceeding, legal document, legal status, court,
official or any legal concept or thing shall in respect of any
jurisdiction other than England be deemed to include what most
nearly approximates in that jurisdiction to the English legal
term and to any English statute shall be construed so as to
include equivalent or analogous laws of any other
jurisdiction; and
1.2.8 times of the day is to London time.
1.3 Words and expressions not defined in this Agreement shall, unless
otherwise specified in this Agreement, have the meanings given in the
Trust Deed.
1.4 Words importing the singular in this Agreement shall include the plural
and vice versa.
1.5 Save where they incorporate definitions for application in this
Agreement, the recitals and clause headings are for ease of reference
only, do not affect its interpretation and are not intended to have
binding effect and any factual or legal statements in the recitals are
working assumptions that are not agreed by the Parties and do not
constitute admissions for the purpose of any dispute.
1.6 Where any amount expressed in a currency other than pounds sterling is
required to be translated into pounds sterling for any purpose in
relation to this Agreement, it shall be translated into pounds sterling
at the closing mid-point pound spot rate applicable to that amount of
that non-sterling currency as shown in the Financial Times (London
Edition) published on the date of the calculation or payment (as
applicable) or, if the Financial Times (London Edition) is not
published on that day, the closing middle point spot rate for the
Business Day prior to the date of the calculation or payment (as
applicable) quoted by Barclays for pounds sterling applicable to
amounts of L100,000 or more.
2. ESCROW AGENT
The Interested Parties and the Security Trustee hereby appoint the
Escrow Agent as escrow agent, and the Escrow Agent agrees to act as
escrow agent, on the terms of this Agreement.
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3. CREATION OF THE ESCROW
3.1 ESCROW CASH ARRANGEMENTS
On the Trigger Date, the Company will immediately pay to the Escrow
Agent an amount of cash equal to L145,000,000 MINUS any amounts
received by the Escrow Agent pursuant to the Subsequently Sold Opco
Escrow Agreements MULTIPLIED by the Fraction.
3.2 CHARGED ESCROW CASH ARRANGEMENTS
3.2.1 Pursuant to clause 5.3 (ESOP Banks - Release pursuant to
clause 4.2) and clause 6 (Order of Application) of the Trust
Deed, the Security Trustee shall, in the circumstances
specified in those clauses of the Trust Deed:
(a) set aside from the Deposits an amount equal to the
Escrow Cash Amount; and
(b) pay the Escrow Cash Amount to the Escrow Agent to be
held on the terms and subject to the conditions of
this Agreement.
3.2.2 In circumstances where clause 3.2.1 applies:
(a) no payments will be made to the Escrow Agent in
accordance with clause 3.1 (Escrow Cash
Arrangements); and
(b) no ESOP Bank shall be restricted from pursuing its
claims in respect of the ESOP Contracts relating to
that ESOP Bank (whether directly or indirectly
through BCT or otherwise and whether in connection
with the Funding Letters, the PLC Guarantees or
otherwise). No such claims shall have been affected
by this Agreement, except as expressly stated in
clause 6 (Charged Escrow Cash Entitlement).
3.3 RELEASE OF CLAIMS
3.3.1 Following receipt of the Escrow Cash in full by the Escrow
Agent in accordance with clause 3.1 (Escrow Cash
Arrangements): PLC shall unconditionally and irrevocably
release all of its claims against each Opco to the extent that
they relate to (a) all or any of the ESOP Contracts and/or (b)
the Funding Letters and shall waive all past, present or
future rights it may have against such company in connection
with the same; and
3.3.2 each ESOP Bank shall unconditionally and irrevocably release
all of its claims (whether directly or indirectly through BCT
or otherwise) against each Opco (but, for the avoidance of
doubt, not against PLC) under, pursuant to or arising in
relation to (a) all ESOP Contracts to which it is a party
and/or (b) the Funding Letters and shall waive all past,
present or future rights it may have against such company in
connection with the same provided that nothing in this clause
3.3.2 shall affect in any way any rights or claims of (i)
Barclays under the Restructuring Undertaking Agreement, (ii)
any other ESOP Bank under its ESOP Lock-Up, (iii) any ESOP
Bank under or in connection with the Mobile Escrow Agreement
or any Subsequently Sold Opco Escrow Agreement, (iv) any ESOP
Bank to seek disclosure and production of documents or other
evidence in relation to any proceedings contemplated by
- 11 -
this Agreement or (v) (for the avoidance of doubt) any ESOP
Bank as against the Company in respect of the obligations of
the Company under this Agreement.
4. TERMS OF ESCROW
4.1 DURATION
4.1.1 Immediately upon receipt of any amounts constituting the
Escrow Cash or the Charged Escrow Cash, the Escrow Agent shall
deposit that amount of the Escrow Cash or the Charged Escrow
Cash (as applicable) into the Escrow Account.
4.1.2 No withdrawal or release (in whole or in part) of the Escrow
Cash Balance or the Charged Escrow Cash Balance (as
applicable) from the Escrow Account shall be permitted until
receipt by the Escrow Agent of a Payment Instruction or a
notice of a Final Judgment in accordance with clause 7.1
(Escrow Cash Balance - Payment Instruction or Final Judgment)
or clause 7.4 (Charged Escrow Cash Balance - Payment
Instruction or Final Judgment) (as applicable), provided that
such a withdrawal or release shall be permitted for the
purpose of investing any part of the Escrow Cash Balance or
the Charged Escrow Cash Balance (as applicable) in Investments
in accordance with clause 11.1 (Investment Instructions).
4.2 RIGHTS OF THE PARTIES
The Escrow Agent shall hold the Escrow Cash Balance or the Charged
Escrow Cash Balance (as applicable) on trust for any person entitled to
receive the proceeds in accordance with clauses 7.2 (Escrow Cash
Balance - Payment Terms) or 7.5 (Charged Escrow Cash Balance - Payment
Terms) on the terms of, and for the purposes set out in, this Agreement
and each Party acknowledges that it has no, and undertakes that it will
not assert any, rights of any nature (including, without limitation,
any rights of set off) to or in respect of the Escrow Cash Balance or
the Charged Escrow Cash Balance (as applicable) other than as expressly
set out in this Agreement.
4.3 INTEREST ON THE ESCROW CASH
The Company is entitled to receive, and the Escrow Agent shall pay to
the Company, any interest that is earned on the Escrow Cash in, or any
income received from any Investments generated in respect of, the
period from the Trigger Date up to and including 31 January 2004 on the
first Business Day of each month during that period with the final
payment being made on 31 January 2004, or if that day is not a Business
Day, the next following Business Day (or on such other basis or times
as shall be agreed in writing between the Company and the Escrow
Agent). Following 31 January 2004, any interest earned on, or any
income received from any Investments generated in respect of, the
Escrow Cash shall be added to, and form part of, the Escrow Cash
Balance.
4.4 PAYMENT MECHANISM
All payments of monies by the Escrow Agent pursuant to this Agreement
shall be made by electronic transfer of funds for same day value to an
account nominated by the receiving party.
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5. ESCROW CASH ENTITLEMENT
5.1 ESCROW CASH ENTITLEMENT - AGREEMENT
Each Interested Party shall negotiate in good faith with a view to
reaching agreement as to the Escrow Cash Entitlement of each ESOP Bank,
on the terms and on the basis of the principles and assumptions set out
in Schedule 1 (Determination of Escrow Cash Claim), within 30 Business
Days of the Trigger Date.
5.2 ESCROW CASH CLAIM - COURT DETERMINATION
If the Interested Parties fail to reach agreement pursuant to clause
5.1 (Escrow Cash Entitlement - Agreement) within 30 Business Days of
the Trigger Date, any Interested Party shall be entitled to apply to
the Court (with a copy to the other Interested Parties) for a
Determination in relation to each ESOP Bank.
5.3 WAIVER OF RIGHTS
The Parties hereby waive any right to argue that a Determination shall
be made on any terms other than as set out in Schedule 1 (Determination
of Escrow Cash Claim) or that an Interested Party has no standing to be
a party or to be heard on any application to the Court pursuant to
clause 5.2 (Escrow Cash Claim - Court Determination) or to the
arbitrator pursuant to clause 14 (Arbitration).
6. CHARGED ESCROW CASH ENTITLEMENT
6.1 CLAIMS AGAINST PARTICIPATING OPCOS
6.1.1 Once the Escrow Agent has received the Charged Escrow Cash in
accordance with clause 3.2.1, each ESOP Bank shall (unless it
has notified each other Party in writing that it irrevocably
waives any claim to any amount of the Charged Escrow Cash
Balance, in which case its Charged Escrow Cash Entitlement
shall be zero and it shall forthwith cease to be an Interested
Party), subject to clause 6.2 (Terms of Claims), pursue with
reasonable diligence, to the extent reasonably practicable,
any direct or indirect claims it has against the Participating
Opcos in respect of all ESOP Contracts to which it is a party
for the purposes of recovering for itself any amount payable
by the Participating Opcos in respect of the costs of
participation of all employees of such Participating Opcos in
the ESOP.
6.1.2 In determining whether it is reasonably practicable for it to
pursue a claim against a Participating Opco for the purposes
of clause 6.1.1, the matters that an ESOP Bank shall be
entitled to take into account include, without limitation, the
likely costs of pursuing such claim, the number of employees
of such Participating Opco that participated in the ESOP, the
prospects of recovering any amount from such Participating
Opco, the likely quantum of such recovery, the information and
evidence that it has or that it is likely to be able to obtain
and is entitled to use in relation to such claim and in
relation to such Participating Opco and the extent to which
BCT is likely to assist it in pursuing any indirect claim. For
the avoidance of doubt the existence of the Charged Escrow
Cash Balance shall not be a factor that an ESOP Bank is
entitled to take into account for this purpose.
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6.1.3 In relation to claims pursued by an ESOP Bank in accordance
with clause 6.1 or abandoned, compromised or settled in
accordance with clause 6.2 (Terms of Claims) against a
Participating Opco (the "RELEVANT OPCO"), the total amount
actually received by an ESOP Bank from or in respect of its
claims against the Relevant Opco MINUS the total amount of
that ESOP Bank's reasonable and proper legal costs and
disbursements (including the costs of obtaining expert
accounting evidence and assistance (if reasonably required)
incurred (but not recovered from any other party) in relation
to those claims against the Relevant Opco, shall be that ESOP
Bank's "RECOVERY".
6.1.4 In this Agreement no admission is made by the Company or PLC
that the participation of employees in the ESOP gives rise to
a liability to an ESOP Bank or otherwise.
6.2 TERMS OF CLAIMS
6.2.1 Each ESOP Bank shall, at the reasonable request of the
Company, provide the Company with a report on the status of
its claims against a Participating Opco, provided that:
(i) nothing in this clause shall require any ESOP Bank to
disclose any privileged or confidential information
(although, on receipt of a reasonable request from
the Company, any ESOP Bank shall, to the extent
practicable, take reasonable steps to obtain such
consent or releases in relation to confidential
information as may allow them to disclose it in such
report);
(ii) the Company shall bear the reasonable costs of
preparing such report (including, if applicable, the
costs incurred in obtaining any consent or releases
in relation to confidential information pursuant to
sub-clause (i) above); and
(iii) the Company shall keep such report confidential.
6.2.2 Each ESOP Bank shall (unless such notification or assignment
could reasonably be expected to be capable of prejudicing such
ESOP Bank) notify the Company at least 5 Business Days prior
to abandoning, compromising, settling or otherwise not
pursuing any direct or indirect claims against a Participating
Opco whereupon, if requested by, and at the cost of, the
Company within 3 Business Days of receipt of such
notification, that ESOP Bank shall, to the extent that such
rights and claims are under applicable laws capable of
assignment, and on receipt by that ESOP Bank of an indemnity
as to reasonable costs and any other liabilities relating to
or arising out of the claims on terms acceptable to that ESOP
Bank (such indemnity to be given, or secured, by a bank or
other financial institution acceptable to the ESOP Bank),
assign to the Company all of its rights and claims against
that Participating Opco in respect of all ESOP Contracts to
which that ESOP Bank is a party in consideration of the
Company paying to the ESOP Bank (a) an amount equal to the
compromise, settlement or agreement reached between the ESOP
Bank and that Participating Opco in respect of that claim or
(b) the sum of L1 if the claim is to be abandoned or otherwise
not pursued, or, if not so requested by the Company within 3
Business Days of receipt of such notification, that ESOP Bank
shall be entitled to abandon, compromise, settle or otherwise
not pursue such claims on such terms as it reasonably
considers appropriate.
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6.2.3 Nothing in this clause 6.2 shall allow the Company to bring,
continue or otherwise conduct any proceedings in the name of
any ESOP Bank nor, after any assignment to the Company,
otherwise hold out or represent that such ESOP Bank remains
party to, or is otherwise involved in, any proceedings
relating to the claims.
6.3 ABANDONMENT, COMPROMISE, SETTLEMENT
Any abandonment, compromise or settlement of, or failure to pursue, any
direct or indirect claims against a Participating Opco by an ESOP Bank
pursuant to clause 6.2 (Terms of Claims) shall not affect or prejudice
in any way its Charged Escrow Cash Entitlement provided that ESOP Bank
has complied with its obligations in all material respects under
clauses 6.1 (Claims against Participating Opcos) and 6.2 (Terms of
Claims).
6.4 CHARGED ESCROW CASH ENTITLEMENT - COURT DETERMINATION
Once its claims against the Participating Opcos have been pursued in
accordance with clause 6.1.1 (Claims against Participating Opcos)
and/or abandoned, compromised, settled or otherwise not pursued in
accordance with clause 6.2 (Terms of Claims), each ESOP Bank (other
than an ESOP Bank that has notified a waiver of its claims in
accordance with clause 6.1.1 (Claims against Participating Opcos)),
shall promptly notify in writing the other Interested Parties of the
amount of its Recovery (if any). After such notice has been given by
each ESOP Bank (other than an ESOP Bank that has notified a waiver of
its claims in accordance with clause 6.1.1 (Claims against
Participating Opcos)), each Interested Party shall negotiate in good
faith with a view to reaching agreement as to, and any Interested Party
shall be entitled to apply to the Court (with a copy to the other
Interested Parties) for the Court to determine, the amount (if any)
(the "CHARGED ESCROW CASH ENTITLEMENT") to which each ESOP Bank is
entitled (or would be entitled but for its Recovery or any abandonment,
compromise or settlement of, or failure to pursue, any claim in
accordance with clause 6.2 (Terms of Claims)) to recover directly
and/or indirectly through BCT, PLC or otherwise against, or in respect
of monies payable by, the Participating Opcos:
6.4.1 in the actual circumstances existing at the date on which the
Security Trustee is obliged under the Trust Deed to pay the
Charged Escrow Cash to the Escrow Agent;
6.4.2 insofar as relevant, after taking into account all relevant
competing claims against BCT; and
6.4.3 assuming that the Participating Opcos are able to discharge
their liabilities in full.
6.5 WAIVER OF RIGHTS
The Parties hereby waive any right to argue that an Interested Party
has no standing to be a party or to be heard on any application to the
Court pursuant to clause 6.4 (Charged Escrow Cash Entitlement - Court
Determination) or to the arbitrator pursuant to clause 14
(Arbitration).
7. RELEASE FROM ESCROW
7.1 ESCROW CASH BALANCE - PAYMENT INSTRUCTION OR FINAL JUDGMENT
7.1.1 Upon agreement in writing between the Interested Parties as to
the Escrow Cash Entitlement of each ESOP Bank, the Interested
Parties shall forthwith execute a Payment Instruction and
- 15 -
any Interested Party may forthwith deliver the same (together
with the ESOP Bank Certificate(s)) to the Escrow Agent (with a
copy at the same time to each other Interested Party)
whereupon the Escrow Agent shall release and pay the Escrow
Cash Entitlement of each ESOP Bank in accordance with Clause
7.2 (Escrow Cash Balance - Payment Terms).
7.1.2 Upon the occurrence of a Final Judgment following an
application to the Court under clause 5.2 (Escrow Cash Claim -
Court Determination), any Interested Party may notify the
Escrow Agent in writing (with a copy at the same time to each
other Interested Party) that such Final Judgment has been made
and of the terms thereof and shall attach to the notice a
certified copy of the Final Judgment (where available)
(together with the ESOP Bank Certificate(s) where the Court or
an arbitrator finds in favour of all or part of the claims of
an ESOP Bank), whereupon the Escrow Agent shall release and
pay the Escrow Cash Entitlement of each ESOP Bank in
accordance with Clause 7.2 (Escrow Cash Balance - Payment
Terms).
7.1.3 Each ESOP Bank undertakes that promptly upon agreement or
determination pursuant to clauses 5.1 (Escrow Cash Entitlement
- Agreement) or 5.2 (Escrow Cash Claim - Court Determination)
respectively, it shall complete and deliver an ESOP Bank
Certificate to each of the Interested Parties and the Escrow
Agent.
7.2 ESCROW CASH BALANCE - PAYMENT TERMS
Following receipt of a Payment Instruction and an ESOP Bank Certificate
pursuant to clause 7.1.1 or a notice of a Final Judgment pursuant to
clause 7.1.2 and, if applicable, an ESOP Bank Certificate (either date
being the "RECEIPT DATE"), the Escrow Agent shall immediately notify
each Interested Party in writing that it has received such Payment
Instruction or notice and an ESOP Bank Certificate (as applicable), and
shall, and is hereby irrevocably authorised by the Interested Parties
to, release from the Escrow Account ten clear Business Days after the
Receipt Date and pay from the Escrow Cash Balance the amounts, and in
the order of priority, specified below:
7.2.1 firstly, to the bank account specified in each ESOP Bank
Certificate, an amount equal to the Escrow Cash Entitlement
specified in the relevant ESOP Bank Certificate (subject to
any adjustments required to be made pursuant to clause 7.3
(Aggregate Recoveries by each ESOP Bank)) together with
Post-Determination Interest; and
7.2.2 secondly, to the Junior/Senior Mandatory Redemption Escrow
Account (as such term is defined in the Junior Notes) the
Escrow Cash Balance following payment (in full) to each ESOP
Bank of the amounts specified in clause 7.2.1.
7.3 AGGREGATE RECOVERIES BY EACH ESOP BANK
For the avoidance of doubt, the Parties agree that in no circumstances
shall the aggregate benefit received by an ESOP Bank (excluding any
costs awarded to such ESOP Bank by the Court or arbitrator) in respect
of (i) its Escrow Cash Entitlement and (ii) any monies received under
the Mobile Escrow Agreement exceed the ESOP Swap Liabilities of that
ESOP Bank.
7.4 CHARGED ESCROW CASH BALANCE - PAYMENT INSTRUCTION OR FINAL JUDGMENT
- 16 -
7.4.1 Upon agreement in writing between the Interested Parties as to
the Charged Escrow Cash Entitlement of each ESOP Bank, the
Interested Parties shall forthwith execute a Payment
Instruction and any Interested Party may forthwith deliver the
same (together with the ESOP Bank Certificate(s)) to the
Escrow Agent (with a copy at the same time to each other
Interested Party and the Security Trustee) whereupon the
Escrow Agent shall release and pay the Charged Escrow Cash
Entitlement of each ESOP Bank in accordance with clause 7.5
(Charged Escrow Cash Balance - Payment Terms).
7.4.2 Upon the occurrence of a Final Judgment following an
application to Court under clause 6.4 (Charged Escrow Cash
Entitlement - Court Determination), any Interested Party may
notify the Escrow Agent in writing (with a copy at the same
time to each other Interested Party and the Security Trustee)
that such Final Judgment has been made and of the terms
thereof and shall attach to the notice a certified copy of the
Final Judgment (where available) (together with the ESOP Bank
Certificate(s) where the Court or an arbitrator finds in
favour of all or part of the claims of an ESOP Bank),
whereupon the Escrow Agent shall release and pay the Charged
Escrow Cash Entitlement of each ESOP Bank in accordance with
Clause 7.5 (Charged Escrow Cash Balance - Payment Terms).
7.4.3 Each ESOP Bank undertakes that promptly upon agreement or
determination pursuant to clause 6.4 (Charged Escrow Cash
Entitlement - Court Determination), it shall complete and
deliver an ESOP Bank Certificate to each of the Interested
Parties and the Escrow Agent.
7.5 CHARGED ESCROW CASH BALANCE - PAYMENT TERMS
Following receipt of a Payment Instruction and an ESOP Bank Certificate
pursuant to clause 7.4.1 or a notice of a Final Judgment pursuant to
clause 7.4.2 and, if applicable, an ESOP Bank Certificate (either date
being the "CHARGED RECEIPT DATE"), the Escrow Agent shall immediately
notify each Interested Party and the Security Trustee in writing that
it has received such Payment Instruction or notice and an ESOP Bank
Certificate (as applicable), and shall and is hereby irrevocably
authorised by the Interested Parties to, release from the Escrow
Account ten clear Business Days after the Charged Receipt Date and pay
from the Charged Escrow Cash Balance the amounts, and in the order of
priority, specified below:
7.5.1
(a) firstly, to the bank account specified in each ESOP Bank
Certificate an amount equal to the Charged Escrow Cash
Entitlement specified in the relevant ESOP Bank Certificate
(subject to any adjustments required to be made pursuant to
clause 7.6 (Aggregate Charged Escrow Cash Recoveries by each
ESOP Bank) together with any interest accruing on that amount
(at the applicable rate on the Escrow Account), or income
received from any Investments generated in respect of the
period, from the Determination Date to the date on which
payment in full is made pursuant to this clause 7.5.1(a); and
(b) secondly:
- 17 -
(i) if the Charged Escrow Cash was deposited in the
Escrow Account following an enforcement of the
security constituted by the Security Documents, to
the Security Trustee by transfer to a Lockbox Account
(as defined in the Security Deeds), the Charged
Escrow Cash Balance following payment (in full) to
each ESOP Bank of the amounts specified in clause
7.5.1(a); or
(ii) if the Security has been released pursuant to clause
4.3 of the Trust Deed, to the Company, the Charged
Escrow Cash Balance following payment in full to each
ESOP Bank of the amounts specified in clause
7.5.1(a).
7.5.2 Pending payment of the Charged Escrow Cash Balance to the
Lockbox Account in accordance with clause 7.5.1(b)(i), the
Charged Escrow Cash Balance shall be held on trust by the
Escrow Agent for the Security Trustee, and upon deposit into
the Lockbox Account, the Charged Escrow Cash Balance shall be
subject to the security constituted by the Security Deeds and
shall be held by the Security Trustee on the terms and subject
to the conditions of the Trust Deed.
7.6 AGGREGATE CHARGED ESCROW CASH RECOVERIES BY EACH ESOP BANK
For the avoidance of doubt, the Parties agree that in no circumstances
shall the aggregate benefit received by an ESOP Bank (excluding any
costs awarded to such ESOP Bank by the Court or arbitrator) in respect
of (i) its Charged Escrow Cash Entitlement and (ii) any monies received
under the Mobile Escrow Agreement, exceed the ESOP Swap Liabilities of
that ESOP Bank.
8. THE MOBILE ESCROW AGREEMENT
8.1 PLC AND THE COMPANY UNDERTAKINGS - MOBILE OPCOS
PLC and the Company each undertake:
8.1.1 to ensure that the Mobile Escrow Agreement will continue to
apply separately from the arrangements described in this
Agreement;
8.1.2 to direct the escrow agent appointed under the Mobile Escrow
Agreement (the "MOBILE ESCROW AGENT") to pay and distribute
any monies released and/or to be released in accordance with
the Mobile Escrow Agreement from the escrow established
thereunder (the "MOBILE ESCROW") (other than monies released
from the Mobile Escrow to an ESOP Bank or to a
Non-Participating ESOP Bank) multiplied by the Fraction to the
Escrow Agent;
8.1.3 that any money they receive from the Mobile Escrow Agent will
be held by them on trust for the express purpose of paying
such amounts to the Escrow Agent; and
8.1.4 to forthwith pay any money held on trust pursuant to clause
8.1.3 to the Escrow Agent for distribution by the Escrow Agent
in accordance with this Agreement.
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8.2 DISTRIBUTION OF MOBILE ESCROW MONIES
8.2.1 Any money received by the Escrow Agent pursuant to clauses
8.1.2 or 8.1.4 (PLC and the Company Undertakings - Mobile
Opcos) will form part of the Escrow Cash Balance or the
Charged Escrow Cash Balance (as applicable).
8.2.2 If, prior to the receipt of any money by the Escrow Agent
pursuant to clauses 8.1.2 or 8.1.4 (PLC and the Company
Undertakings - Mobile Opcos), the Escrow Cash Balance or the
Charged Escrow Balance (as applicable) is released and paid in
full in accordance with clauses 7.2 or 7.5 (as applicable),
then on receipt of any such money the Escrow Agent shall, and
is hereby irrevocably authorised by the Parties to, release
from the Escrow Account ten clear Business Days after it has
notified each Interested Party and, in respect of the Charged
Escrow Cash Balance only, the Security Trustee in writing of
its intention to do so and pay from the Escrow Cash Balance or
the Charged Escrow Cash Balance (as applicable) the amounts
(including any unpaid amount of an ESOP Bank's Escrow Cash
Entitlement or Charged Escrow Cash Entitlement), and in the
order of priority, specified in clauses 7.2. (Escrow Cash
Balance - Payment Terms) or 7.5 (Charged Escrow Cash Balance -
Payment Terms) (as applicable).
8.3 MOBILE OPCOS
The Determination (pursuant to the terms and on the basis of the
assumptions set out in Schedule 1) or the determination to be made
pursuant to clause 6.4 (Charged Escrow Cash Entitlement - Court
Determination) will not apply to, or be made in respect of, the Mobile
Opcos.
8.4 NO AMENDMENT
Nothing contained in this Agreement shall affect, vary or amend the
terms of the Mobile Escrow Agreement and that agreement shall continue
to apply in accordance with its terms.
9. THE SUBSEQUENTLY SOLD OPCOS ESCROW AGREEMENTS
9.1 PLC AND THE COMPANY UNDERTAKINGS - SUBSEQUENTLY SOLD OPCOS
9.1.1 Upon a Marconi Group Company selling a Subsequently Sold Opco,
PLC and the Company shall direct and procure that the selling
Marconi Group Company pay that amount of the sale proceeds
that is equal to the Subsequently Sold Opco Liabilities of
that Subsequently Sold Opco into the escrow account detailed
in a Subsequently Sold Opco Escrow Agreement on substantially
similar terms as the Israel Agreement (where a Funding Letter
is located in relation to that Subsequently Sold Opco) or the
Singapore Agreement (where no Funding Letter is located in
relation to that Subsequently Sold Opco) which shall be
entered into prior to the sale of the Subsequently Sold Opco
by PLC, the Company, the Marconi Group Company that is selling
the Subsequently Sold Opco, the Agent, each ESOP Bank and an
escrow agent.
9.1.2 PLC and the Company shall, where practicable, give BCT, the
Agent and each ESOP Bank at least 14 Business Days notice in
writing prior to the sale by a Marconi Group Company of a
Subsequently Sold Opco of the intention to sell such company.
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9.2 TERMS OF SUBSEQUENTLY SOLD OPCO ESCROW AGREEMENTS
The Parties that are obliged pursuant to clause 9.1.1 to enter into
Subsequently Sold Opco Escrow Agreements shall ensure that each
Subsequently Sold Opco Escrow Agreement provides that on the Trigger
Date (if it occurs on or before the date specified in clause 4.2(a) of
the Restructuring Undertaking Agreement):
9.2.1 the monies held on escrow pursuant to each Subsequently Sold
Opco Escrow Agreement will, unless they have previously been
released in accordance with that Subsequently Sold Opco Escrow
Agreement, be released and paid to the Escrow Agent; and
9.2.2 each Subsequently Sold Opco Escrow Agreement will terminate
immediately following the payment stated in clause 9.2.1
having been made.
10. NON-PARTICIPATING ESOP BANKS
A Non-Participating ESOP Bank may become an ESOP Bank, if (i) each
Interested Party consents in writing to that Non-Participating ESOP
Bank becoming an ESOP Bank (and, for the avoidance of doubt, such
consent may be given or refused at the sole and absolute discretion of
each Interested Party) and (ii) that Non-Participating ESOP Bank
executes an ESOP Lock-Up and a deed of adherence (in substantially the
form set out at Schedule 6) agreeing to be bound by the terms of this
Agreement as if that Non-Participating ESOP Bank was an original party
to this Agreement, following which such Non-Participating ESOP Bank
shall be treated as an ESOP Bank in all respects under this Agreement.
11. DUTIES AND LIABILITY OF ESCROW AGENT
11.1 INVESTMENT INSTRUCTIONS
The Interested Parties may jointly instruct the Escrow Agent on the
investment of the Escrow Cash Balance or Charged Escrow Cash Balance
(as applicable) and the Escrow Agent shall be entitled to act on such
instructions. The Interested Parties may only instruct the Escrow Agent
to invest the Escrow Cash Balance or the Charged Escrow Cash Balance
(as applicable) in Investments and the Escrow Agent shall only invest
the Escrow Cash Balance or the Charged Escrow Cash Balance (as
applicable) in Investments. The Escrow Agent shall have the right to
liquidate any Investments held in order to provide funds necessary to
make required payments under this Agreement. The Escrow Agent shall
have no liability for any loss sustained as a result of any Investment
made pursuant to the joint instructions of the Interested Parties or as
a result of any liquidation of any Investment prior to its maturity or
for the failure of the Interested Parties to give the Escrow Agent
instructions to invest or reinvest the Escrow Cash Balance or the
Charged Escrow Cash Balance (as applicable).
11.2 DUTIES OF THE ESCROW AGENT
The Escrow Agent undertakes to perform only such duties as are
expressly set out in this Agreement and no duties shall be implied. The
Escrow Agent shall have no liability under and no duty to inquire as to
the provisions of any agreement other than this Agreement. The Escrow
Agent may rely upon and shall not be liable for acting or refraining
from acting upon any written notice, instruction or request furnished
to it hereunder and believed by it to be genuine and to have been
signed or
- 20 -
presented by the proper party or parties. The Escrow Agent shall be
under no duty to inquire into or investigate the validity, accuracy or
content of any such document. The Escrow Agent shall not be liable for
any action taken or omitted by it in good faith. The Escrow Agent may
execute any of its powers and perform any of its duties hereunder
directly or through agents (and shall be liable only for the careful
selection of any such agent) and may consult with counsel, accountants
and other skilled persons to be selected and retained by it. The Escrow
Agent shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the advice or opinion of any such
counsel, accountants or other skilled persons. In the event that the
Escrow Agent shall be uncertain as to its duties or rights hereunder or
shall receive instructions, claims or demands from any party hereto
which, in its opinion, conflict with any of the provisions of this
Agreement, it shall be entitled to refrain from taking any action and
its sole obligation shall be to keep safely all property held in escrow
until it shall be directed otherwise in writing by all of the
Interested Parties hereto in accordance with the terms of this
Agreement or by an Order of the Court. Anything in this Agreement to
the contrary notwithstanding, in no event shall the Escrow Agent be
liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if
the Escrow Agent has been advised of the likelihood of such loss or
damage and regardless of the form of action.
11.3 RESIGNATION OF THE ESCROW AGENT
11.3.1 The Escrow Agent may resign and be discharged from its duties
or obligations hereunder by giving 45 Business Days prior
notice in writing of such resignation to the Interested
Parties hereto specifying a date when such resignation is
intended to take effect, in which case the Interested Parties
may by agreement between themselves forthwith appoint a
successor Escrow Agent, which Escrow Agent shall be entitled
to request and receive reasonable remuneration for accepting
such appointment.
11.3.2 If within 45 Business Days days after notice of resignation,
the Interested Parties have not appointed a successor Escrow
Agent which accepts the appointment, the retiring Escrow Agent
may appoint a successor Escrow Agent which Escrow Agent shall
be entitled to request and receive reasonable remuneration for
accepting such appointment.
11.3.3 The resignation of the retiring Escrow Agent and the
appointment of any successor Escrow Agent will both become
effective only upon the successor Escrow Agent notifying all
the Parties that it accepts the appointment (the "ESCROW AGENT
EFFECTIVE DATE"). On giving the notification, the successor
Escrow Agent will succeed to the position of the retiring
Escrow Agent and the term "ESCROW AGENT" will mean the
successor Escrow Agent.
11.3.4 On the Escrow Agent Effective Date, the retiring Escrow Agent
shall transfer to the successor Escrow Agent the Escrow Cash
Balance or the Charged Escrow Cash Balance (as applicable) and
any Investments relating to the Escrow Cash Balance or the
Charged Escrow Cash Balance (as applicable).
11.3.5 The retiring Escrow Agent shall make available to the
successor Escrow Agent such documents and records and provide
such assistance as the successor Escrow Agent may reasonably
request for the purposes of performing its functions as the
Escrow Agent under this Agreement.
- 21 -
11.3.6 The Escrow Agent shall have the right to withdraw from the
Escrow Account an amount equal to any amount due and owing to
the Escrow Agent at the time of its retirement as Escrow
Agent, plus any costs and expenses the Escrow Agent shall
reasonably believe may be incurred by the Escrow Agent in
connection with its retirement as Escrow Agent and apply such
amount in payment of the amounts due and owing provided that,
the Escrow Agent shall forward to the Interested Parties a
copy of the relevant receipt or invoice evidencing such fees
and expenses or documentation evidencing the loss or liability
amount 5 Business Days prior to such withdrawal.
11.4 COMPANY INDEMNITY
11.4.1 Subject to clause 11.5 below, the Company shall indemnify and
hold harmless the Escrow Agent and its officers, staff and
agents from all loss, liability or expense (including the fees
and expenses of in house or outside counsel) arising out of or
in connection with (i) the Escrow Agent's execution and
performance of this Agreement, or (ii) its following any joint
instructions or other joint directions from the Interested
Parties in accordance with the terms hereof save as caused by
gross negligence or wilful misconduct by the Escrow Agent (the
"INDEMNIFIED AMOUNT").
11.4.2 In the event that the Company is unable to pay the Indemnified
Amount in whole or in part, and to the extent that the Escrow
Account has a credit balance, the Escrow Agent shall withdraw
an amount equal to the balance of the Indemnified Amount that
the Escrow Agent is unable to recover from the Company from
the Escrow Account and apply the amount withdrawn in payment
of the Indemnified Amount provided that the Escrow Agent shall
forward to the Interested Parties a copy of the relevant
receipt or invoice or liability amount of at least five
Business Days prior to such withdrawal.
11.4.3 The Parties acknowledge that the foregoing indemnities shall
survive the resignation or removal of the Escrow Agent or the
termination of this Agreement.
11.5 TAXATION
The Escrow Agent shall report and, as required, withhold any taxes
which it determines may be required by any law or regulation in effect
from time to time.
12. REIMBURSEMENT OF ESCROW AGENT
12.1 The Company shall pay to and indemnify the Escrow Agent in respect of
any and all reasonable out-of-pocket expenses and shall pay the fees of
the Escrow Agent in respect of any time spent by its officers or staff
or agents in connection with the performance of its duties under this
Agreement within 14 days of receipt of an invoice.
12.2 The Company will pay to the Escrow Agent its fees on the basis of the
fee letter entered into between the Company and the Escrow Agent on or
about the date of this Agreement.
- 22 -
13. ACKNOWLEDGEMENT OF EVENT OF DEFAULT AND UNDERTAKINGS
13.1 PLC AND THE COMPANY ACKNOWLEDGEMENT
With effect from the Effective Date but without affecting any rights an
ESOP Bank may have prior to the Effective Date and without prejudice to
any defence PLC or the Company may have prior to the Effective Date,
PLC and the Company acknowledge, solely for the purposes of admission
of each ESOP Bank's claims to the PLC Scheme, that:
13.1.1 a default, a Termination Event and/or an Event of Default has
occurred under the ESOP Swap Transactions and that a valid
claim has been made under the PLC Guarantees for the full
amount of BCT's liabilities to each ESOP Bank pursuant to the
ESOP Swap Transactions and the PLC Guarantees as at the
Effective Date; and
13.1.2 they waive any right to argue otherwise.
13.2 For the purposes of clause 13.1 (PLC and the Company Acknowledgement),
"DEFAULT", "TERMINATION EVENT" and "EVENT OF DEFAULT" shall have the
meanings as stated in the relevant ESOP Contracts and/or the PLC
Guarantees (as appropriate).
13.3 Documents
13.3.1 The Company and PLC each undertake to disclose to each ESOP
Bank (on the basis set out in the letter agreement dated 4
October 2002 between PLC, the Company, JP Morgan Chase Bank,
HSBC, Barclays and Bingham McCutchen LLP (the "PROTOCOL
AGREEMENT")) on a without prejudice basis all documents in
their possession or control (as opposed to the possession or
control of the Opcos), that they identify from an appropriate
and reasonable search, that are relevant to or evidence (i)
the legal relationship between all parties in connection with
the ESOP or (ii) the intention of any parties in relation to
the funding of the ESOP.
13.3.2 The Company and PLC each agree that each ESOP Bank may treat
as open and not confidential (notwithstanding the terms of the
Protocol Agreement) and, if so requested by any ESOP Bank,
undertake to provide on an open basis to each ESOP Bank, all
documents disclosed by them to each ESOP Bank on a without
prejudice basis (whether in accordance with clause 13.3.1 or
otherwise):
(a) 30 days after the Trigger Date; or
(b) immediately once the Escrow Agent has
received the Charged Escrow Cash in
accordance with clause 3.2.1.
13.3.3 The Company and PLC each undertake to use their reasonable
endeavours to procure that the Opcos provide to each ESOP
Bank, 30 days after the Trigger Date, on an open basis all
documents that have by then been disclosed by the Opcos
directly or indirectly to each ESOP Bank on a without
prejudice basis.
13.3.4 The Company and PLC each undertake, following disclosure on an
open basis in accordance with clause 13.3.2(a) of the
documents already disclosed on a without prejudice basis, to
- 23 -
disclose on an open basis to each ESOP Bank any documents not
already disclosed in their possession or control (as opposed
to the possession or control of the Opcos), that they identify
from an appropriate and reasonable search, that are relevant
to or evidence (i) the legal relationship between all parties
in connection with the ESOP or (ii) the intention of any
parties in relation to the funding of the ESOP.
13.3.5 After service of a notice in writing by an Interested Party on
the other Interested Parties stating that the Interested Party
serving the notice believes that negotiations as to the Escrow
Cash Entitlement of each ESOP Bank have irretrievably broken
down (which notice may only be served subject to clause 5.1),
the costs incurred by the Company in complying with the
obligations set out in clause 13.3.4 shall form part of the
costs incurred by the Company in relation to the Determination
for the purpose of clause 15 (Costs).
13.3.6 Nothing in this clause 13.3 shall require the Company or PLC
to disclose any documents in respect of which they are
entitled to assert legal professional privilege.
14. ARBITRATION
14.1 NO COURT DETERMINATION
In the event the Court has decided that (i) it is unable or unwilling
(for any reason) to make any determination or (ii) it does not have
jurisdiction to determine all or part of an application, in each case,
in relation to any matter or matters referred to it for determination
in accordance with clauses 5.2 (Escrow Cash Claim - Court
Determination) or 6.4 (Charged Escrow Cash Entitlement - Court
Determination), any Interested Party is entitled to refer that matter
or those matters to be finally resolved by arbitration in accordance
with clauses 14.2 (LCIA Rules) and 14.3 (Other Matters Relating To
Arbitration).
14.2 LCIA RULES
The matter or matters to be determined pursuant to clause 14.1 (No
Court Determination) shall be resolved by arbitration under the London
Court of International Arbitration ("LCIA") Rules, which Rules are
deemed to be incorporated by reference into this clause 14.2, save that
Articles 22.2 and 30.1 (but, in relation to Article 30.1, only insofar
as disclosure in relation to the arbitration is required for a purpose
contemplated by this Agreement) of the LCIA Rules shall not be so
incorporated and shall not apply to any arbitral proceedings pursuant
to clause 14 (Arbitration).
14.3 OTHER MATTERS RELATING TO ARBITRATION
For the purpose of the arbitration:
14.3.1 the number of arbitrators shall be one. In the event the
Interested Parties cannot agree on the sole arbitrator within
30 days of an Interested Party calling upon the others to do
so, he shall be appointed by the Court of the LCIA;
14.3.2 the arbitrator shall be and remain independent and impartial
of each Interested Party;
14.3.3 the language to be used in the arbitral proceedings shall be
English;
- 24 -
14.3.4 the seat, or legal place, of arbitration shall be London;
14.3.5 the governing law of the arbitration shall be English law;
14.3.6 the "parties" to the arbitral proceedings for the purpose of
the LCIA Rules shall be the Interested Parties.
15. COSTS
Liability for the costs incurred by each Interested Party in relation
to the Determination or the determination pursuant to clause 6.4
(Charged Escrow Cash Entitlement - Court Determination), shall be
determined by the Court or arbitrator (as applicable). For the
avoidance of doubt, such costs (including the costs of any arbitration
as determined by the LCIA Court or the arbitrator) shall not be paid
out of the Escrow Cash Balance or the Charged Escrow Cash Balance (as
applicable).
16. TERMINATION
16.1 Provided that each Interested Party that is a party to the Mobile
Escrow Agreement has confirmed to the Escrow Agent in writing that no
further monies will or may subsequently be received by the Escrow Agent
pursuant to clauses 8.1.2 or 8.1.4 (PLC and the Company Undertakings -
Mobile Opcos), this Agreement shall terminate upon the release and
payment in full of the Escrow Cash Balance or the Charged Escrow Cash
Balance (as applicable) by the Escrow Agent in accordance with this
Agreement.
16.2 The termination of this Agreement shall be without prejudice to any
accrued rights or causes of action of any Party and in the event that
this Agreement terminates clauses 11.2, 11.4, 13.1 and 13.2 shall
remain in full force and effect.
17. NOTICES
17.1 COMMUNICATION IN WRITING AND DELIVERY
All notices or other communications under or in connection with this
Agreement shall be given in writing and, unless otherwise stated, may
be made by letter or facsimile. Any such notice will be deemed to be
given as follows:
17.1.1 if by letter, when delivered personally or on actual receipt;
and
17.1.2 if by facsimile, when transmitted.
However, a notice given in accordance with the above but received on
any day other than a Business Day or after business hours in the place
of receipt will only be deemed to be given on the next Business Day in
that place.
17.2 ADDRESSES
The address and facsimile number of each Party (other than the Escrow
Agent, the Company and PLC) for all notices under or in connection with
this Agreement are:
- 25 -
17.2.1 those notified by that Party for this purpose to the Escrow
Agent on or before it becomes a Party; or
17.2.2 any other address or facsimile number notified by that Party
for this purpose to the Escrow Agent by not less than five
Business Days' notice.
17.3 The address and facsimile numbers of the Escrow Agent are:
HSBC Bank plc
Level 17
8 Canada Square
London E14 5HQ
Contact: Chris Merrett/Khalid Raja
Facsimile: 020 7991 4351
or such other address or facsimile number as the Escrow Agent may
notify to the other Parties by not less than five Business Days'
notice.
17.4 The address and facsimile numbers of the Company and PLC are:
New Century Park
Box 53
Coventry
Warwickshire
CV3 1HJ
Contact: Charlie Shepherd
Facsimile: 020 7409 7748
or such other address or facsimile number as the Company or PLC as the
case may be may notify to the other Parties by not less than five
Business Days' notice.
17.5 NOTIFICATION OF ADDRESS AND FAX NUMBER
The Escrow Agent shall, promptly upon request from any Party, give to
that Party the address or facsimile number of any other Party
applicable at the time for the purposes of this clause.
18. ANNOUNCEMENTS
18.1 NO ANNOUNCEMENTS
Subject to clause 18.2 (Permitted Announcements), no Party may, during
the term of this Agreement, make or send a public announcement,
communication or circular concerning the terms of, or the transactions
referred to in, this Agreement unless it has first obtained each other
Parties' written consent (not to be unreasonably withheld or delayed).
- 26 -
18.2 PERMITTED ANNOUNCEMENTS
Clause 18.1 (No Announcements) does not apply to a public announcement,
communication or circular if it is required by law, a regulation of a
stock exchange or the Panel on Takeovers and Mergers.
19. FURTHER ASSURANCE
Each Party shall do and execute, or arrange for the doing and executing
of, each necessary act, document and thing which is of a mechanical or
administrative nature and which is reasonably within its power to
implement this Agreement.
20. REMEDIES AND PARTIAL INVALIDITY
20.1 REMEDIES AND WAIVERS
No failure to exercise, or any delay in exercising, on the part of any
Party, any right or remedy under this Agreement shall operate as a
waiver, nor shall any single or partial exercise of any right or remedy
prevent any further or other exercise thereof or the exercise of any
other right or remedy.
20.2 CUMULATIVE RIGHTS
The rights and remedies provided in this Agreement are cumulative and
not exclusive of any rights or remedies provided by law.
20.3 PARTIAL INVALIDITY
If, at any time, any provision of this Agreement is or becomes illegal,
invalid or unenforceable in any respect under any law of any
jurisdiction, neither the legality, validity or enforceability of the
remaining provisions nor the legality, validity or enforceability of
the provision under the law of any other jurisdiction will in any way
be affected or impaired.
21. RIGHTS OF THIRD PARTIES
A person who is not a party to this Agreement has no right under the
Contracts (Rights of Third Parties) Act 1999 to enforce any term of
this Agreement save that the Opcos have the benefit of the release in
clause 3.3.2 (Release of Claims).
22. ASSIGNMENT
No Party shall assign, transfer, declare a trust of the benefit of or
in any other way alienate any of its rights under this Agreement
whether in whole or in part.
23. AMENDMENT
This Agreement may be amended or modified from time to time but only by
written agreement signed by:
23.1 each Party if such agreement is entered into before the Trigger Date;
or
- 27 -
23.2 the Company (acting with the approval of the trustee to be appointed
under the terms of the Junior Notes) and the ESOP Banks if such
agreement is entered into on or after the Trigger Date.
24. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall be
one and the same instrument.
25. GOVERNING LAW AND JURISDICTION
25.1 GOVERNING LAW
This Agreement is governed by, and shall be construed in accordance
with, English law.
25.2 JURISDICTION OF THE ENGLISH COURTS
Without prejudice to clause 14 (Arbitration), the courts of England
have exclusive jurisdiction to settle any dispute between any of the
Parties arising out of, or in connection with, this Agreement
(including a dispute regarding the existence, validity or termination
of this Agreement or the consequences of its nullity) (a "DISPUTE").
25.3 ACKNOWLEDGEMENT OF ENGLISH COURTS
Without prejudice to clause 14 (Arbitration), the Parties agree that
the courts of England are the most appropriate and convenient courts to
settle Disputes and, accordingly, no Party will argue to the contrary.
This Agreement has been entered into on the date stated at the beginning of this
Agreement.
- 28 -
SCHEDULE 1
DETERMINATION OF ESCROW CASH CLAIM
1. THE ESCROW CASH CLAIM
1.1 The "ESCROW CASH CLAIM" of an ESOP Bank shall be that amount which is
equal to the amount which that ESOP Bank would have received in respect
of the ESOP Swap Liabilities relating to that ESOP Bank (whether
directly or indirectly through BCT or otherwise and whether in
connection with the Funding Letters, the PLC Guarantees or otherwise)
as determined by the Court following a hypothetical insolvency of PLC
and the Company (the "HYPOTHETICAL INSOLVENCY") as if such procedure
had commenced on 28 August 2002 based on the insolvency procedure which
would most likely have been adopted (whether it be an administration,
liquidation or otherwise) and applying, amongst others, the assumptions
and principles set out in paragraphs 2 to 5 (inclusive) (the
"DETERMINATION").
1.2 For the avoidance of doubt, the Escrow Cash Claim shall include,
without limitation, that amount which that ESOP Bank would have
received in connection with a claim under the PLC Guarantees in the
Hypothetical Insolvency of PLC.
1.3 In making the Determination (unless specifically stated in paragraphs 2
to 5 (inclusive)), no factual or legal matters will be assumed and all
matters will be open to be determined by reference to what would have
happened in the Hypothetical Insolvency and clause 1.5 (Interpretation)
will apply in this regard.
2. MODELLING THE HYPOTHETICAL INSOLVENCY
The following principles and/or assumptions will apply for the purposes
of making the Determination:
2.1 without assuming that the ESOP Swap Transactions exist or create valid,
binding and enforceable obligations, the ESOP Swap Transactions have,
to the extent possible thereunder, been terminated and the ESOP Swap
Liabilities that exist as at the date of the Determination existed as
at 28 August 2002;
2.2 to the extent possible under the PLC Guarantees and to the extent that
they are held to constitute enforceable obligations, proper demands
have been made under the PLC Guarantees;
2.3 the Court may need to construct or determine a model of the likely
outcome of the Hypothetical Insolvency (the "MODEL");
2.4 an appropriate starting point for constructing or determining the Model
is the model constructed by PricewaterhouseCoopers entitled "2002.09.23
Insolvency Analysis Model" (the "PwC MODEL");
2.5 any or all of the assumptions and calculations contained in the PwC
Model:
(a) may no longer be relevant or continue to apply;
(b) may be varied to produce a different result (whether
favourable or otherwise); or
(c) may be replaced by alternative assumptions or calculations;
- 29 -
2.6 without prejudice to paragraph 3 of this Schedule 1 (Sold Opcos), the
Court will need to make certain estimates or assumptions concerning the
realisation values of assets of the Opcos (including, in so far as the
Court determines relevant, any Sold Opcos or Subsequently Sold Opcos or
Opcos that are dormant or have been dissolved or wound up, in each case
whether or not such Opcos have signed a Funding Letter and whether or
not a signed Funding Letter is located, but excluding the Mobile Opcos)
and the amount of intra-group and other assets and liabilities of the
Marconi Group Companies in the Hypothetical Insolvency;
2.7 any determination made in accordance with paragraph 2.6 of this
Schedule 1 shall be made by reference to values as at, and on the basis
of the facts in existence (whether or not known to be in existence) at
28 August 2002;
2.8 the realisation value of the assets of an Opco may or may not exceed
the liabilities of that Opco including any liabilities pursuant to a
Funding Letter and thus it will be possible for the Court to determine
that a claim that it determines to be valid under a Funding Letter
would, or alternatively, would not have been discharged in full, in
part or at all;
2.9 to the extent it deems relevant, the Court has the discretion to
determine how, in the Hypothetical Insolvency, the Hypothetical
Insolvency Practitioner of PLC would have exercised, or would have been
required to exercise, his discretion in relation to the Funding Letters
including whether the Hypothetical Insolvency Practitioner of PLC may
have been entitled to accept any inducement that a Hypothetical
Insolvency Practitioner of the Company may have decided to offer a
Hypothetical Insolvency Practitioner of PLC to exercise that discretion
in a particular manner or to release liabilities under the Funding
Letters; and
2.10 expert evidence will be available to the Court (whether commissioned by
the Court for its own purposes or volunteered by the Interested Parties
(or any of them)) to assist the Court in determining all matters and in
particular:
(a) the construction of the Model;
(b) the matters referred to in paragraph 2.6 of this Schedule 1;
and
(c) the approach the Hypothetical Insolvency Practitioner of each
of the Company and PLC would take in the Hypothetical
Insolvency.
3. SOLD OPCOS
The following principles and/or assumptions relating to the Sold Opcos
will apply for the purposes of making the Determination:
3.1 it will be absolutely assumed that, except where publicly known formal
insolvency proceedings had been initiated in respect of a Sold Opco at
28 August 2002, the Sold Opcos were solvent and able to satisfy all
their liabilities (including all their liabilities, if any, under the
Funding Letters) in full and, therefore, will satisfy all of the
entitlement of each ESOP Bank (whether as a direct claim or as an
indirect claim, through BCT or otherwise). If formal insolvency
proceedings in respect of a Sold Opco had been initiated at 28 August
2002 which were publicly known at that date, then such assumption will
not be made in relation to that Opco and the Determination will take
into account the
- 30 -
extent to which the Sold Opco concerned could have discharged its
obligations (if any) under the Funding Letter;
3.2 it will be rebuttably assumed that each Sold Opco has signed a Funding
Letter but no assumption will be made as to the interpretation of the
Funding Letter or as to whether or not it constituted an enforceable
obligation;
3.3 it will be rebuttably assumed that any Funding Letter signed by a Sold
Opco has not been released, remains in full force and effect and has
not been amended or varied; and
3.4 the value of any indemnity claim or warranty which a Sold Opco or the
relevant purchaser of that Sold Opco has against PLC, the Company or
any other Marconi Group Company shall not be deducted from, or be
relevant to a determination of, the amount which the ESOP Banks would
have recovered in accordance with this Schedule 1 in relation to that
Sold Opco and any other right of set-off exercisable by a Sold Opco or
the relevant purchaser of that Sold Opco shall be disregarded.
4. COMPETING CLAIMS
The Determination will be made after taking account of all competing
claims against BCT, including without limitation any claims or
entitlements of the Company to be reimbursed in respect of monies lent
by the Company to BCT in connection with the ESOP, subject to any
subordination (by whatever means) of such claims to the claims of the
ESOP Banks.
5. NO RELEASE
For the purpose of the Determination, the releases referred to in
clause 3.3 (Release of Claims) and, for the avoidance of doubt, a
release referred to in any Subsequently Sold Opco Escrow Agreement,
shall be ignored.
6. ARBITRATION
References in this Schedule 1 to the Court shall be deemed to be
references to the arbitrator in relation to the determination of any
matters by the arbitrator pursuant to clause 14 (Arbitration).
- 31 -
SCHEDULE 2
THE ESOP SWAP TRANSACTIONS
- -------------------------------------------------------------------------------------------------------------------
DATE OF ISDA DATE OF SCHEDULE TO
TRADE EFFECTIVE MASTER ISDA MASTER DATE OF
PARTY A PARTY B DATE DATE AGREEMENT AGREEMENT CONFIRMATION
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Salomon BCT 13/01/00 21/01/00 15/12/99 21/12/99 13/01/00
- -------------------------------------------------------------------------------------------------------------------
Salomon BCT 26/01/00 31/01/00 15/12/99 21/12/99 26/01/00
- -------------------------------------------------------------------------------------------------------------------
Salomon BCT 02/02/00 16/02/00 15/12/99 21/12/99 02/02/00
- -------------------------------------------------------------------------------------------------------------------
Barclays BCT 16/03/00 24/03/00 16/03/00 21/3/00 04/07/00
- -------------------------------------------------------------------------------------------------------------------
Barclays BCT 17/03/00 24/03/00 16/03/00 21/3/00 05/07/00
- -------------------------------------------------------------------------------------------------------------------
Barclays BCT 22/05/00 30/05/00 16/03/00 21/3/00 05/07/00
- -------------------------------------------------------------------------------------------------------------------
UBS BCT 15/06/00 23/06/00 16/06/00 17/07/00 19/06/00
- -------------------------------------------------------------------------------------------------------------------
- 32 -
SCHEDULE 3
FORM OF PAYMENT INSTRUCTION
[Date]
To: [ ] (as Escrow Agent)
Dear Sirs,
ESOP ESCROW AGREEMENT DATED [ ], 2002 BETWEEN MARCONI CORPORATION plc,
MARCONI plc, HSBC BANK plc AND BARCLAYS BANK (THE "ESCROW AGREEMENT").
Terms used in this Payment Instruction shall have the same meaning as set forth
in the Escrow Agreement.
In accordance with clause [o] of the Escrow Agreement, the Interested Parties
hereby authorise the Escrow Agent, subject to clause [7.2/7.5] of the Escrow
Agreement, to release and pay the [Escrow Cash Balance/Charged Escrow Cash
Balance] in accordance with the details set out below (the "PAYMENTS"):
- -------------------------------------------------------------------------------
RECIPIENT PARTY AMOUNT PAYMENT DETAILS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Yours faithfully
[Signatures of all Interested Parties to the Escrow Agreement]
- 33 -
SCHEDULE 4
SOLD OPCOS, MOBILE OPCOS AND SUBSEQUENTLY SOLD OPCOS
SCHEDULE 4.1
SOLD OPCOS
- --------------------------------------------------------------------------------------------
COMPANY NAME DATE OF DISPOSAL
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
Woods Air Movement Limited 31.01.01
- --------------------------------------------------------------------------------------------
ipsaris Limited (92%) 26.07.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems, Inc. 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Belgium N.V. 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems EMO Limited 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Espana, S.L. 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems France S.A.S. 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Hong Kong Limited 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems U.K. Limited 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems South Africa (Pty) Limited 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Canada Inc. 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Czech Republic sro 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Finland Oy 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems GmbH 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Italia SpA 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Puerto Rico Inc. 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Slovakia sro 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medizintechnik Deutschland GmbH 19.10.01
- --------------------------------------------------------------------------------------------
Marconi do Brasil Imagens Medicas Ltda 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Colombia Ltda 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Australia Pty. Limited 19.10.01
- --------------------------------------------------------------------------------------------
Picker International Del Caribe Inc 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems International Limited 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Asia Pacific, Inc. 19.10.01
- --------------------------------------------------------------------------------------------
- 34 -
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Hungary Kft. 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Poland Sp. zoo 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Medical Systems Sales Corporation 19.10.01
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Limited 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems SpA 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Latin America S.A. 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Srl 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems (NZ) Limited 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Inc. 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Verwaltungs GmbH 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems GmbH & Co. KG 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Technology GmbH 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Australia Limited 01.02.02
- --------------------------------------------------------------------------------------------
Gilbert & Barker Aust. Pty. Limited 01.02.02
- --------------------------------------------------------------------------------------------
Gilbert & Barker New Zealand Limited 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Commerce Systems Canada Limited 01.02.02
- --------------------------------------------------------------------------------------------
Gilbarco International Inc. 01.02.02
- --------------------------------------------------------------------------------------------
Beijing Chang Gi Service Station Equipment Company, Limited 01.02.02
- --------------------------------------------------------------------------------------------
Marconi Data Systems Inc. 05.02.02
- --------------------------------------------------------------------------------------------
Videojet Japan Inc. 05.02.02
- --------------------------------------------------------------------------------------------
Videojet Canada Limited. 05.02.02
- --------------------------------------------------------------------------------------------
Marconi Information Systems Limited 05.02.02
- --------------------------------------------------------------------------------------------
Marsh Stencil Machine Company 05.02.02
- --------------------------------------------------------------------------------------------
Marconi Data Systems B.V. 05.02.02
- --------------------------------------------------------------------------------------------
Marconi Data Systems GmbH 05.02.02
- --------------------------------------------------------------------------------------------
Marconi Data Systems Iberica S.L. 05.02.02
- --------------------------------------------------------------------------------------------
Marconi Data Systems Limited 05.02.02
- --------------------------------------------------------------------------------------------
Marconi Data Systems CP Limited 05.02.02
- --------------------------------------------------------------------------------------------
Videojet Europe B.V. 05.02.02
- --------------------------------------------------------------------------------------------
Videojet S.A. 05.02.02
- --------------------------------------------------------------------------------------------
Marconi Applied Technologies Limited 12.07.02
- --------------------------------------------------------------------------------------------
- 35 -
- --------------------------------------------------------------------------------------------
Marconi Applied Technologies Inc 12.07.02
- --------------------------------------------------------------------------------------------
Marconi Mobile Holdings SpA 02.08.02
- --------------------------------------------------------------------------------------------
Marconi Mobile SpA 02.08.02
- --------------------------------------------------------------------------------------------
Marconi Kominikasyon AS 02.08.02
- --------------------------------------------------------------------------------------------
Sirio Panel SpA 02.08.02
- --------------------------------------------------------------------------------------------
AMTEC SpA 02.08.02
- --------------------------------------------------------------------------------------------
Larimart SpA 02.08.02
- --------------------------------------------------------------------------------------------
PROD-EL SpA 02.08.02
- --------------------------------------------------------------------------------------------
Teleavio-Consorzio Telecomunicazioni Avionica S.r.L 02.08.02
- --------------------------------------------------------------------------------------------
Marconi Mobile Holdings Limited 02.08.02
- --------------------------------------------------------------------------------------------
Marconi Mobile Limited 02.08.02
- --------------------------------------------------------------------------------------------
Marconi Mobile (International) Limited 02.08.02
- --------------------------------------------------------------------------------------------
Marconi Secure Systems Limited 02.08.02
- --------------------------------------------------------------------------------------------
- 36 -
SCHEDULE 4.2
MOBILE OPCOS
- --------------------------------------------------------------------------------------
COMPANY NAME DATE OF DISPOSAL
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Marconi Mobile SpA 02.08.02
- --------------------------------------------------------------------------------------
Sirio Panel SpA 02.08.02
- --------------------------------------------------------------------------------------
AMTEC SpA 02.08.02
- --------------------------------------------------------------------------------------
Larimart SpA 02.08.02
- --------------------------------------------------------------------------------------
PROD-EL SpA 02.08.02
- --------------------------------------------------------------------------------------
Marconi Mobile Holdings Limited 02.08.02
- --------------------------------------------------------------------------------------
Marconi Mobile (International) Limited 02.08.02
- --------------------------------------------------------------------------------------
Marconi Mobile Limited 02.08.02
- --------------------------------------------------------------------------------------
Teleavio-Consorzio Telecomunicazioni Avconica S.r.L. 02.08.02
- --------------------------------------------------------------------------------------
- 37 -
SCHEDULE 4.3
SUBSEQUENTLY SOLD OPCOS
- --------------------------------------------------------------------------------------
COMPANY NAME DATE OF DISPOSAL
- --------------------------------------------------------------------------------------
Marconi Communications Israel Limited 04.10.02
- --------------------------------------------------------------------------------------
Metapath Software International (Singapore) Pte Limited 09.10.02
- --------------------------------------------------------------------------------------
Metapath Software International (Malaysia) Sdn Bhd 09.10.02
- --------------------------------------------------------------------------------------
Metapath Software International Philippines, Inc 09.10.02
- --------------------------------------------------------------------------------------
Metapath Software International (Thailand) Limited 09.10.02
- --------------------------------------------------------------------------------------
- 38 -
SCHEDULE 5
PARTICIPATING OPCOS
- 39 -
SCHEDULE 6
DEED OF ADHERENCE
THIS DEED dated [ - ], is supplemental to the ESOP Escrow Agreement dated [ - ]
and entered into between Marconi Corporation Plc, Marconi Plc, HSBC Bank plc and
Barclays Bank plc as amended supplemented or restated from time to time (the
"AGREEMENT").
Words and expressions defined in the Agreement have the same meaning when used
in this Deed.
[Institution] (the "ACCEDING INSTITUTION") confirms that it has been supplied
with a copy of the Agreement and hereby agrees with each other party to the
Agreement that with effect from the date hereof and in accordance with the
provisions of Clause 10 (Non Participating ESOP Banks) of the Agreement, the
Acceding Institution will become a party to, and be bound by and benefit from
and of the terms of the Agreement as an ESOP Bank and shall assume such
obligations under the Agreement as are specified therein.
The address and facsimile number for notices to the [Acceding Institution] for
the purposes of Clause 16 (Notices) of the Agreement is:
[ ]
Contact:
Facsimile:
This Deed is governed by and shall be construed in accordance with English law.
IN WITNESS WHEREOF this Deed has been executed by the parties hereto as a Deed
on the day and year first above written.
Signed as a Deed on behalf of
[name of Acceding Institution]
Director
Director/Secretary
* Delete as appropriate
- 40 -
SCHEDULE 7
FORM OF ESOP BANK CERTIFICATE
[Date]
To: [ ] (as Escrow Agent)
Dear Sirs,
ESOP ESCROW AGREEMENT DATED [ ], 2002 BETWEEN MARCONI CORPORATION plc,
MARCONI plc, HSBC BANK Plc, BARCLAYS BANK PLC (THE "ESCROW AGREEMENT")
Terms used in this certificate shall have the same meaning as set forth in the
Escrow Agreement.
In accordance with clause [7.1/7.2/7.4/7.5] of the Escrow Agreement, we [ESOP
BANK] hereby request that in your capacity as Escrow Agent you pay to [account
number] at [bank], [sort code] the amount of [ - ].
This amount is calculated on the basis of:
1.Our [Escrow Cash Entitlement/Charged Escrow Cash Entitlement] of [ - ];
[Our Escrow Cash Entitlement is calculated as follows:
(i) Our Escrow Cash Claim is L[ - ];
(ii) The aggregate value of our PLC Distribution together with the likely
value of future PLC Distributions to be received by us is L [ - ]
[(including net proceeds received on the sale of Company Securities of
[ ])];
(iii) Interest from the Record Date to the Determination Date is L[ - ]];
2. We confirm that our aggregate recoveries [do not exceed the limits specified
in clause 7.3 or 7.6 (as applicable)]/[exceed the limits specified in clause 7.3
or clause 7.6 (as applicable) and the following adjustment is required:
[ ]
3. In addition to the amount specified in paragraph 1 above, we are entitled to
interest on such amount at the rate and for the period specified in clause 7.2.1
or as the case may be clause 7.5.1 (a).
Yours faithfully
[Signed by [ - ] for and on behalf of [ - ] [ESOP BANK]]
- 41 -
EXECUTED by the Parties
Signed on behalf of
MARCONI CORPORATION PLC
Name: M.SKELLY
Signed on behalf of
MARCONI PLC
Name: M.SKELLY
Signed on behalf of
HSBC BANK PLC
Name: IAN MCMILLAN
Signed on behalf of
BARCLAYS BANK PLC
Name: BARRY COLE
- 42 -