In order to protect the interests of Scheme Creditors, and in particular to ensure the Scheme Assets are only used to settle Scheme Claims and permitted ancillary costs and to ensure that if at any time the Scheme Fund is less than a specified amount, dividend payments or any other distribution may not be made outside the Group, the Scheme Shares have been created and will be issued to the Scheme Shareholder under the terms of the Trust Deed.
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6.1 Rights of the PLC Scheme Share
The following is a summary of the rights which are to be attached to the PLC Scheme Share. The restrictions contained in Section B and Section C are dependent on the passing of the Resolution and, subject thereto, will fall away if the Scheme has not become effective by 30 June 2006.
A Rights to a distribution and return of capital
The PLC Scheme Share does not confer on the Scheme Shareholder any right to receive a distribution or any right to participate in any surplus capital of Cape, save that the Scheme Shareholder has the right to require Cape to redeem the PLC Scheme Share at its par value on or at any time after the termination of the Scheme, in accordance with the procedure specified in the PLC Articles.
B Matters requiring the consent of the Scheme Shareholder
Cape cannot, at any time after the Effective Date and before the termination of the Scheme (save to the extent that its shareholders have approved the same in a general meeting at which the Scheme Shareholder will be entitled to vote - see Voting Rights below) without the prior written consent of the Scheme Shareholder, engage in any of the activities specified in the PLC Articles which include, but are not limited to, the following:
(a) making any distribution to its shareholders other than is properly due and payable in respect of the 3.5 per cent. cumulative preference shares of £1 each in the share capital of Cape (the
“Preference Shares”) unless:
(i) the distribution is made after the first independent actuarial review in 2008;
(ii) at the time of the making of the proposed distribution, the Scheme Funding Percentage for the Relevant Financial Year (i.e. the Financial Year immediately preceding the Financial Year in which Cape proposes to make the distribution) has been certified in accordance with the terms of the Funding Agreement and the Scheme Directors have not requested an interim actuarial review be conducted under the Funding Agreement which has yet to be concluded;
(iii) the Scheme Funding Percentage for the Relevant Financial Year is greater than 110 per cent.;
(iv) at the time of the making of the proposed distribution, the Payment Percentage has not at any time in the previous 40 business days been less than 100 per cent; and (v) the directors of Cape have certified that in their reasonable opinion the Scheme
Funding Percentage for the two Financial Years following the Relevant Financial Year is anticipated to be not less than 110 per cent.,
(any distribution which does not require the prior written consent of the Scheme Shareholder by virtue of satisfying the above conditions is a “Permitted Dividend”) provided that no distribution may exceed the greater of (aa) 50 per cent. of the consolidated total operating profits of the Group and (bb) the aggregate of any Permitted Dividends made in the Relevant Financial Year;
(b) issuing, allotting or granting any option or right to subscribe for, or otherwise disposing of, any share in Cape having attached to it any rights which are not identical in all respects with those attached to the Ordinary Shares;
(c) doing anything which would result in CCS ceasing to be a subsidiary of Cape or disposing of any of the shares in CCS;
(d) doing any of the following, save for: (i) bona fide transactions with third parties on arm’s-length terms at fair market value for the benefit of the Group; (ii) those transactions with related parties which are expressly permitted under the PLC Articles (including transactions between Cape and any Group Company which is a wholly-owned subsidiary or subsidiary undertaking of Cape or between two or more Group Companies which are wholly-owned subsidiaries or subsidiary undertakings of Cape); and (iii) transactions entered into with directors which are permitted under the PLC Articles:
(i) entering into, granting, increasing or extending any security interest over, or acquiring or disposing of, any asset of any Group Company the fair market value of which exceeds the greater of £100,000 and 0.25 per cent. of the aggregate value of the Group’s net assets;
(ii) entering into, or increasing or extending any liability under, any guarantee or indemnity;
(iii) issuing, allotting, granting any options or right to subscribe for, or otherwise disposing of, any share capital in Cape;
(iv) undertaking any transactions with related parties, save where the Scheme Shareholder has received prior written confirmation from the auditors that, in their opinion, the proposed transaction is a bona fide transaction on arm’s-length terms at fair market value for the benefit of the Group and will not materially prejudice the interests of Scheme Creditors;
(e) winding up Cape or making any petition or application regarding the appointment of an administrator;
(f) changing the accounting conventions, policies and principles, save where the Scheme Shareholder has received prior written confirmation from the auditors that the interests of the Scheme Creditors, taken as a whole, will not materially be prejudiced; or
(g) removing the auditors or appointing new auditors.
The PLC Articles also provide that Cape must procure that no Group Company shall do any of the matters listed in paragraphs (c) to (g) above.
C Voting Rights
The PLC Scheme Share carries two votes for each vote which the holders of other classes of shares in issue at the time of the meeting at which the relevant resolution is proposed are entitled to exercise, on any resolution proposing (or any resolution the effect of which if passed would be) at any time after the Scheme becomes effective and before the termination of the Scheme to engage in any of a number of activities specified in the PLC Articles, which include, but are not limited to, the following:
(a) to create or issue any class of any share other than Ordinary Shares, to attach to any share any voting rights which are not identical in all respects with those attaching to the Ordinary Shares or to vary the rights of the Ordinary Shares, the deferred shares of one penny each in the share capital of Cape or the Preference Shares;
(b) to alter or to delete, or in any way derogate from the effect of, any Article which is relevant to the rights of the PLC Scheme Share;
(c) to do any of the following, save to the extent that it is a Permitted Dividend:
(i) make, approve, sanction or ratify any distribution, save for a redemption of any new redeemable shares issued in accordance with the PLC Articles;
(ii) give Cape authority to purchase its own shares;
(iii) approve or authorise any reduction of the issued share capital of Cape, save where the purpose of the reduction of capital is to remove losses of Cape and does not involve a return of value to its shareholders;
(d) to wind up Cape or to approve a company voluntary arrangement;
(e) to approve any increase in the borrowing levels set out under the PLC Articles;
(f) to remove the auditors or appoint new auditors;
(g) to take advantage of the voluntary regime offered by Article 11 of Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on Takeover Bids and in any subsequent legislation implementing the Directive in the United Kingdom; or
(h) to authorise or grant authority or power to Cape, its directors, any Group Company or any of the directors of a Group Company to do any of the matters set out in, or ratify anything done by Cape, its directors, any Group Company or any of the directors of a Group Company in breach of the matters listed in paragraph B above and this paragraph C.
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D Notice of and proceedings at general meetings
The Scheme Shareholder is entitled to receive notice of, and to attend (either by representative or by proxy), every general meeting of Cape and every separate general meeting of the holders of the shares of any class in Cape’s issued share capital. Cape will procure that each such notice, which the Scheme Shareholder is entitled to receive, is accompanied by: (i) an opinion from the solicitors to Cape stating whether, in their opinion, the Scheme Shareholder is entitled to vote on any of the resolutions and (ii) a certificate signed by two directors of Cape confirming that, since the last general meeting, no act or omission which required the prior written consent of the Scheme Shareholder under the PLC Articles has occurred without such consent. Save as provided in the PLC Articles (including in respect of those matters listed in paragraph C above), the Scheme Shareholder is not entitled to vote at a general meeting.
Where the business of a general meeting includes any matters requiring the consent of the Scheme Shareholder (including those set out in paragraph B above) or any resolutions on which the Scheme Shareholder is entitled to vote (including those set out in paragraph C above), a quorum will not exist unless the Scheme Shareholder is present either by representative or by proxy.
The Scheme Shareholder, present either by a representative appointed in accordance with the Companies Act or by proxy, has the right to demand a poll.
6.2 Rights of the CCS Scheme Share
The following is a summary of the rights attaching to the CCS Scheme Share.
A Rights to a distribution and return of capital
The CCS Scheme Share does not confer on the Scheme Shareholder any right to receive a distribution or any right to participate in any surplus capital of CCS, save the right to require CCS to redeem the CCS Scheme Share at its par value on or at any time after the termination of the Scheme, in accordance with the procedure set out in the CCS Articles.
B Matters requiring the consent of the Scheme Shareholder
CCS will not, at any time after the Effective Date and before the termination of the Scheme or 30 June 2006, if by then the Scheme has not become effective, (save to the extent the shareholders of CCS shall have approved the same in a general meeting at which the Scheme Shareholder will be entitled to vote -see Voting Rights below), without the prior written consent of the Scheme Shareholder do any of the activities listed in the CCS Articles, which include but are not limited to the following:
(a) make, approve, sanction or ratify the payment of any dividend or the making of any other distribution to any shareholders;
(b) approve the transfer of any ordinary share in CCS;
(c) carry on any business other than the handling and conduct of Scheme Claims in the UK and the holding and investment of funds to meet such claims (the “Business”), or make any change to the nature of the Business;
(d) acquire any asset other than in the proper performance of the Business;
(e) other than in the proper settlement of a Scheme Claim, transfer or relocate any asset of CCS outside the UK;
(f) dispose of or transfer any assets of CCS other than in the proper performance of the Business;
(g) enter into, grant, increase or extend any security interest over any assets of CCS;
(h) form or enter into any partnership, consortium or any other incorporated or unincorporated association;
(i) enter into, increase or extend any liability under any guarantee or indemnity (other than in the proper course of the Business);
(j) be wound up, or make any petition or application regarding the appointment of an administrator;
(k) issue or create any class of share, save for the issue of further ordinary shares to any existing
(l) change the accounting conventions, policies and principles, save where the Scheme Shareholder has received prior written confirmation from the auditors that the interests of the Scheme Creditors will not be materially prejudiced; or
(m) remove the auditors or appoint new auditors or change the actuaries appointed by CCS.
C Voting Rights
The CCS Scheme Share carries two votes for each vote which the holders of the ordinary shares in CCS in issue at the time of the meeting at which the relevant resolution is proposed are entitled to exercise, on any resolution which, at any time after the Scheme becomes effective and before the termination of the Scheme or 30 June 2006, if by then the Scheme has not become effective, is proposed as a special resolution or proposes any of the matters specified in the CCS Articles which include, but are not limited to, the following:
(a) to grant authority to allot relevant securities or to grant any option to subscribe for or acquire shares in CCS or issue any securities convertible into shares in CCS;
(b) to alter any of CCS’s share capital;
(c) to wind up CCS or to approve a company voluntary arrangement;
(d) to make, approve, sanction or ratify any distribution to any shareholders;
(e) to amend the CCS Articles or the memorandum of association of CCS;
(f) to disapply pre-emption rights on an allotment of equity securities;
(g) to vary the rights attaching to any shares in CCS;
(h) to give CCS authority to purchase its own shares, or to allow CCS to redeem its own shares out of capital;
(i) to remove the auditors or to appoint new auditors; or
(j) to authorise or grant authority or power to CCS or the directors of CCS to do any of the matters set out in, or ratify anything done by CCS or the directors of CCS in breach of, the matters listed in paragraph B above and this paragraph C.
D Notice of and proceedings at general meetings
The Scheme Shareholder is entitled to receive notice of, and to attend, every general meeting of CCS and every separate general meeting of the holders of the shares of any class in CCS’s issued share capital.
CCS will procure that each such notice which the Scheme Shareholder is entitled to receive is accompanied by: (i) an opinion from the solicitors to CCS stating whether in their opinion the Scheme Shareholder is entitled to vote on any of the resolutions and (ii) a certificate signed by two directors of CCS confirming that, since the last general meeting, no act or omission which required the prior written consent of the Scheme Shareholder under the CCS Articles has occurred without such consent.
Save as provided in the CCS Articles (including in respect of those matters listed in paragraph B above), the Scheme Shareholder will not be entitled to vote at a general meeting. Where the business of a general meeting includes any matters requiring the consent of the Scheme Shareholder (including those set out in paragraph B above) or any resolutions on which the Scheme Shareholder is entitled to vote (including those set out in paragraph C above), a quorum will not exist unless the Scheme Shareholder is present either by representative or by proxy.
The Scheme Shareholder, present either by a representative appointed in accordance with the Companies Act or by proxy, has the right to demand a poll.
E Scheme Directors
The CCS Scheme Share entitles the Scheme Shareholder to appoint two Scheme Directors to represent the interests of the Scheme Creditors and, by written notice, to the board of CCS to remove any Scheme Director from office. In the event that there are fewer than two Scheme Directors at any one time, the board of CCS shall, as soon as is practical, nominate in writing a candidate whom the board considers to be independent of CCS and of any Group Company, and whom the board also considers would be a suitable representative for the Scheme Creditors. The board of CCS will provide the Scheme Shareholder with a written statement setting out the reasons justifying its opinion as to the independence and
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suitability of such nominee. The Scheme Shareholder will then, if satisfied as to the independence and suitability of such nominee, approve the nomination and appoint the nominee to the board as a Scheme Director. If the Scheme Shareholder is not satisfied as to the independence and suitability of the nominee, the board of CCS will repeat this process until the Scheme Shareholder is so satisfied. The Scheme Directors will constitute a minority in the number of directors on the board of CCS.
It is proposed that a majority of the directors of CCS be directors appointed by the holder of the ordinary shares in CCS (namely Cape Security Services Limited, a wholly-owned subsidiary of Cape) in order to ensure that CCS is a member of the Group for tax purposes. If this were not so, valuable tax treatment might be lost.
On any resolution of the board of CCS (i) concerning any matter pertaining to any or all of the Funding Agreement, the Services Agreement, the Scheme Guarantee, the Contribution Claims Agreement, the PLC Reimbursement Agreement and the CCS Reimbursement Agreement, including, without limitation, the decision as to whether to enforce, or the manner or enforcement relating to, the rights of CCS under these agreements; and any termination or variation (including, without limitation, any modification, forgiveness, forbearance, indulgence, delay, failure to enforce, waiver, release, abandonment, compromise or any other variation in or of any payment or other obligation of any Group Company) of any or all of these agreements; (ii) approving the determination, variation or amendment of the Payment Percentage and calling for an independent actuarial review of the value of Scheme Claims for such purpose; (iii) approving the determination, variation or amendment of the investment criteria upon which the assets of CCS are held and invested in order to satisfy its obligations in relation to Scheme Claims under the Scheme Guarantee; or (iv) concerning the amendment, variation or termination of the Trust Deed, only the Scheme Directors will constitute a quorum and be entitled to vote thereon. The CCS Articles also provide that no director of CCS may delegate any of his powers in relation to those matters.
6.3 Trust Deed
Pursuant to the Trust Deed dated 14 March 2006 and entered into by Cape, CCS and Law Debenture, Law Debenture has agreed conditional upon the issue of the PLC Scheme Share and the Scheme becoming effective to hold each of the Scheme Shares on trust for Scheme Creditors, subject to and on the terms of the Trust Deed.
The Trust Deed provides that Law Debenture is able to exercise its voting and/or consent rights (set out in the summaries of the PLC Articles and the CCS Articles in paragraphs 6.1 and 6.2 above) to any matter in its absolute discretion provided that it complies with the requirements of the PLC Articles, the CCS Articles and the Trust Deed. It must not exercise any discretion as to whether to give consent or vote in
The Trust Deed provides that Law Debenture is able to exercise its voting and/or consent rights (set out in the summaries of the PLC Articles and the CCS Articles in paragraphs 6.1 and 6.2 above) to any matter in its absolute discretion provided that it complies with the requirements of the PLC Articles, the CCS Articles and the Trust Deed. It must not exercise any discretion as to whether to give consent or vote in