proposal in relation to schemes of arrangement · 2017. 2. 1. · schemes which are inconsistent...
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
This document is being provided to persons who are believed to be Scheme Creditors at the date of this document. If youhave assigned, sold, or otherwise transferred, or assign, sell or otherwise transfer, your interests as a Scheme Creditor beforethe Voting Record Date in respect of either Scheme please forward a copy of this document to the person or persons to whomyou have assigned, sold or otherwise transferred, or assign, sell or otherwise transfer, your interests as a Scheme Creditor.
If you are in any doubt as to the contents of this document or what action you should take, you are recommended to seek yourown independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or otherindependent professional adviser who, if you are taking advice in the UK, is authorised pursuant to the Financial Services andMarkets Act 2000, or from another appropriately authorised independent financial adviser if you are in a territory outside theUK.
This document is accompanied by the Cattles Form of Proxy and the Direct Participant Letter for voting on the CattlesCreditor Scheme and the WFSL Form of Proxy for voting on the WFSL Scheme. It is important that you read thisExplanatory Statement and the schemes of arrangement carefully for information about the Schemes and that you completeand return the Cattles Form of Proxy or, if you are a Bond Creditor, the Direct Participant Letter to vote in the CattlesCreditor Scheme and/or the WFSL Form of Proxy to vote in the WFSL Scheme.
PROPOSAL IN RELATION TO SCHEMES OF ARRANGEMENTUnder Part 26 of the Companies Act 2006
Between
CATTLES PLCand the
CATTLES SCHEME CREDITORS(as defined in this document)
AND
WELCOME FINANCIAL SERVICES LIMITEDand the
WFSL SCHEME CREDITORS(as defined in this document)
Meetings of the Scheme Creditors to consider separately the Cattles Creditor Scheme and the WFSL Scheme will be held on1 February 2011 at The Albert Hall Conference Centre, North Circus Street, Nottingham NG1 5AA in the order set out atpage 2 of this document. The notices convening these Scheme Meetings are set out at Appendix D of this document.Instructions about how to vote at the Cattles Scheme Meeting are set out at Appendix B to this document and instructionsabout how to vote at the WFSL Scheme Meeting are set out at Appendix C to this document.
For each of the Schemes, the Scheme Claims, being contingent rights to Scheme Payments, will not be, and are not requiredto be, registered with the SEC under the Securities Act, in reliance on the exemption from registration provided bySection 3(a)(10) of that Act. Neither the SEC nor any other US federal or state securities commission or regulatoryauthority has approved or disapproved the Scheme Claims or passed an opinion on the adequacy of this document.Any representation to the contrary is a criminal offence in the United States. Reference should also be made to of Part10 of this document.
Further important information is set out under Important Notice on pages 4 6.
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CONTENTS
Page
KEY DATES: EXPECTED TIMETABLE OF PRINCIPAL EVENTS............................................................. 2
SOURCES OF INFORMATION ABOUT THE SCHEMES.............................................................................. 3
IMPORTANT NOTICE ......................................................................................................................................... 4
NOTICE TO BOND CREDITORS IN RELATION TO THE CATTLES CREDITOR SCHEME................. 7
SECTION 1: EXPLANATORY STATEMENT .............................................................................................. 8
APPENDICES TO THE EXPLANATORY STATEMENT ............................................................................... 83
SECTION 2: THE SCHEMES............................................................................................................................ 107
PART 1: THE CATTLES CREDITOR SCHEME ......................................................................................... 109
APPENDICES TO THE CATTLES CREDITOR SCHEME.............................................................................. 145
PART 2: THE WFSL SCHEME ........................................................................................................................ 278
APPENDICES TO THE WFSL SCHEME........................................................................................................... 318
2
KEY DATES: EXPECTED TIMETABLE OF PRINCIPAL EVENTS1
Event Time and/or date
Voting Record Date 5 p.m. on 31 December 2010
Latest time for delivery of Direct Participant Letters byBondholders for the Cattles Scheme Meeting 5 p.m. on 28 January 2011
Latest time for lodging Forms of Proxy for the SchemeMeetings 5 p.m. on 28 January 2011
Scheme Meetings2 10 a.m. on 1 February 2011
Cattles Scheme Meeting (All Cattles Creditor SchemeCreditors other than the Pension Trustee) 10 a.m.
Cattles Scheme Meeting (Pension Trustee) 10.30 a.m.
WFSL Scheme Meeting (All WFSL Scheme Creditorsother than Cattles and the Pension Creditor) 11 a.m.
WFSL Scheme Meeting (Cattles) 11.30 a.m.
WFSL Scheme Meeting (Pension Trustee) Noon
The Scheme Meetings will all be held at The Albert Hall Conference Centre, North Circus Street, Nottingham NG15AA on 1 February 2011. The dates given below are based on current expectations and may be subject to change. Ifany of the dates change, Cattles and WFSL will give the Scheme Creditors adequate notice of the change.
Court Hearing3 10.30 a.m. on 21 February 2011
Effective Date of the Schemes/Record Date 22 February 2011
Bar Date for each of the Schemes4 5 p.m. on 22 May
Unless otherwise stated, all references in this document to times are to London time.
1 The dates in this timetable and mentioned throughout this document assume that none of the Scheme Meetings areadjourned.
2 The Scheme Meeting in relation to the Cattles Shareholder Scheme will be held on 31 January 2011.3 The Court will be requested to sanction the Schemes. The date for that hearing has not yet been settled, although it is
expected to take place on or about 21 February 2011. If this date changes, the dates of all subsequent steps, including theEffective Date, will be affected. In this event, the date of the hearing will be announced at the Scheme Meetings to theextent then known or otherwise notified to the Scheme Creditors.
4 The Bar Date in each Scheme is the date that is three months after the Effective Date. Notification of the exact date of theBar Date will be made to Scheme Creditors by writing to each Scheme Creditor that WFSL and Cattles (as the case maybe) is aware of and by placing a notice on the Scheme website. For each Scheme, Scheme Creditors with SchemeLiabilities (other than certain financial creditors) must notify Cattles or WFSL (as the case may be) of their SchemeLiabilities by submitting a Claim Form prior to the Bar Date or their Scheme Liabilities will be released in accordancewith the terms of each of the Schemes without any entitlement to receive any consideration whatsoever in respect of suchScheme Liabilities.
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SOURCES OF INFORMATION ABOUT THE SCHEMES
THE SCHEME WEBSITE
Copies of this document, and of the Forms of Proxy, the form of Direct Participant Letter and Claim Forms relating to eachof the Schemes, as well as information about the Scheme Meetings and additional information about Cattles, WFSL and theSchemes are available on the Scheme Website at http://www.cattles.co.uk/schemes.
THE SCHEME HELPLINE
The Scheme Helpline has been set up to assist you with any queries you may have about the Schemes. The Scheme Helplineis open on weekdays from 9am to 5pm; its number is 0845 293 7447.
Please do not go to Welcome Finance branches with any queries about the Schemes.
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IMPORTANT NOTICE
(A) INFORMATIONThe statements contained in this document are made as at the date of this document, unless another time is specified inrelation to them, and delivery of this document shall not give rise to any implication that there has not been any change in theinformation set out in this document since that date.
Nothing contained in this document shall constitute a warranty or guarantee of any kind, express or implied, and nothingcontained in this document shall constitute any admission of any fact or liability on the part of Cattles or any affiliate ofCattles or WFSL or any affiliate of WFSL with respect to any asset to which it or they may be entitled or any claim against itor them. Without prejudice to the generality of the foregoing, nothing in the Schemes or this Explanatory Statement or thedistribution thereof evidences to any person, or constitutes any admission by Cattles or WFSL, that a liability is owed to anyperson in respect of any claim or that any person is or may be a Scheme Creditor. The failure to distribute this document toany Scheme Creditor shall not constitute an admission by Cattles or WFSL that such person is not a Scheme Creditor.
No person has been authorised by Cattles or WFSL to give any information or make any representations concerning theSchemes which are inconsistent with the statements contained in this document and, if made, such representations may not berelied upon as having been so authorised.
This document has been prepared in connection with two schemes of arrangement under Part 26 of the Act, namely a schemebetween Cattles and the Cattles Scheme Creditors and a scheme between WFSL and the WFSL Scheme Creditors. Nothing inthis document or any other document issued with or appended to it should be relied on for any purpose other than to make adecision on the Schemes. In particular and without limitation, nothing in this document or any other document issued with orappended to it should be relied on in connection with the purchase of any shares, warrants, bonds, notes or assets of Cattles orany other company.
The information contained in this document has been prepared based upon information available to Cattles and WFSL. Tothe best of WFSL s and Cattles knowledge, information and belief, the information contained in this document is inaccordance with the facts and does not omit anything likely to affect the import of such information. Each of Cattles andWFSL has taken all reasonable steps to ensure that this document contains the information reasonably necessary to enableScheme Creditors to make an informed decision about the effect of the Schemes on them.
Nothing contained in this document shall be deemed to be a forecast, projection or estimate of Cattles , WFSL s or theGroup s future financial performance except where otherwise specifically stated.
This document contains certain statements, statistics and projections that are, or may be, forward-looking. The accuracy andcompleteness of all such statements, including, without limitation, statements regarding the Group s (or any affiliate s,including Cattles and WFSL s) future financial position, strategy, plans and objectives for the management of futureoperations, is not warranted or guaranteed. These statements typically contain words such as intends , expects ,anticipates , estimates and words of similar import. By their nature, forward-looking statements involve risk and
uncertainty because they relate to events and depend on circumstances that will occur in the future. Although Cattles andWFSL believes that the expectations reflected in such statements are reasonable, no assurance can be given that suchexpectations will prove to be correct. There are a number of factors which could cause actual results and developments todiffer materially from those expressed or implied by such forward-looking statements. These factors include, but are notlimited to, future collections being lower than expected, deterioration in general economic conditions, changes in theregulatory environment, fluctuations in interest and exchange rates, the outcome of litigation and government actions.
The distribution of this document to or in certain jurisdictions may be restricted by law or regulation and persons into whosepossession this document comes are requested to inform themselves about, and to observe, any such restrictions. Failure tocomply with any such restrictions could result in a violation of the laws of such jurisdictions. This document does notconstitute or contemplate an offer for, or the solicitation of an offer to purchase or subscribe for, any securities of Cattles orWFSL.
In this document: references to sterling , £ , pence or p are to the lawful currency of the UK; references to dollars ,US dollars , cents , US$ or $ are to the lawful currency of the United States; and references to euros or are
references to the lawful currency from time to time of member states of the European Communities that adopt or haveadopted the euro as their lawful currency under the legislation of the European Community for Economic and MonetaryUnion.
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The summary of the principal provisions of the Cattles Creditor Scheme contained in this document is qualified in its entiretyby reference to the Cattles Creditor Scheme itself, the full text of which is set out at Section 2 of this document. Similarly, thesummary of the principal provisions of the WFSL Scheme contained in this document is qualified in its entirety by referenceto the WFSL Scheme itself, the full text of which is also set out at Section 2 of this document. Each Scheme Creditor isadvised to read and consider carefully the text of each of the Schemes. This document and, in particular, the ExplanatoryStatement have been prepared solely to assist Scheme Creditors in respect of voting on the Schemes.
Scheme Creditors should not construe the contents of this document as legal, tax, financial or other advice, and shouldconsult with their own professional advisers as to the matters described in this document.
In the event of a conflict between the information and terms described in the Explanatory Statement and the Schemes,the terms of the Schemes shall prevail.
(B) OTHER JURISDICTIONSThe implications of the Schemes for Scheme Creditors who are residents or citizens of jurisdictions other than the UK maybe affected by the laws of the relevant jurisdiction. Such overseas Scheme Creditors should inform themselves about andobserve any applicable legal requirements. Any person outside the UK who is resident in, or who has a registered address in,or is a citizen of, an overseas jurisdiction and who is to receive any payment pursuant to the Schemes should consult his orher professional advisers and satisfy himself or herself as to the full observance of the laws of the relevant jurisdiction inconnection with the Schemes, including obtaining any requisite governmental or other consents, observing any other requisiteformalities and paying any issue, transfer or other taxes due in such jurisdiction.
Overseas Scheme Creditors should consult their own legal and tax advisers with respect to the legal and taxconsequences of the Schemes in their particular circumstances.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL ORTHE SOLICITATION OF AN OFFER TO BUY ANY SECURITY.
(C) INFORMATION FOR UNITED STATES AND OTHER OVERSEAS SCHEME CREDITORSThis document is not an offer of securities for sale in the United States. The Scheme Claims, being contingent rights toScheme Payments, have not been, and will not be, registered under the Securities Act or under the securities laws of anystate, district or other jurisdiction of the United States, Australia, Canada, Japan or South Africa and no regulatory clearancein respect of the Scheme Claims has been, or will be, applied for in any jurisdiction other than the UK. The Scheme Claimsmay not be offered or sold in the United States absent registration under the Securities Act or an exemption from registration.The Scheme Claims will be created in reliance upon the exemption from the registration requirements of the Securities Actprovided by Section 3(a)(10) thereof. See Part 10 of this document for further details.
Notice to US InvestorsThe Schemes relate to the liabilities of two companies incorporated under the laws of England and Wales and each is to bemade by means of a scheme of arrangement provided for under the laws of England and Wales. The Schemes are subject tothe disclosure requirements and practices applicable in the UK to schemes of arrangement, which differ from the disclosureand other requirements of US securities laws. The financial information included in this document has been prepared inaccordance with accounting standards applicable in the UK that may not be comparable to the financial statements of UScompanies. US generally accepted accounting principles (US GAAP) differ in certain significant respects from UK generallyaccepted accounting principles (UK GAAP) and International Financial Reporting Standards (IFRS). None of the financialinformation in this document has been audited in accordance with auditing standards generally accepted in the United Statesor the auditing standards of the Public Company Accounting Oversight Board (United States).
Enforceability of JudgmentsCattles is a public limited company incorporated under the laws of England and Wales. All of Cattles directors and executiveofficers are citizens or residents of countries other than the United States. As a result, it may not be possible for investors toeffect service of process within the United States upon such persons or Cattles, or to enforce against them judgments of UScourts, including judgments predicated upon civil liabilities under the securities laws of the United States or any state orterritory within the United States. There is substantial doubt as to the enforceability in the UK in original actions, or inactions for enforcement of judgments of US courts, based on the civil liability provisions of US federal securities laws.
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WFSL is a limited company incorporated under the laws of England and Wales. All of WFSL s directors and executiveofficers are citizens or residents of countries other than the United States. As a result, it may not be possible for investors toeffect service of process within the United States upon such persons or WFSL, or to enforce against them judgments of UScourts, including judgments predicated upon civil liabilities under the securities laws of the United States or any state orterritory within the United States. There is substantial doubt as to the enforceability in the UK in original actions, or inactions for enforcement of judgments of US courts, based on the civil liability provisions of US federal securities laws.
7
NOTICE TO BOND CREDITORS IN RELATION TO THE CATTLES CREDITOR SCHEMECattles has appointed Lucid Issuer Services Limited as its Information Agent in respect of the Cattles Creditor Scheme tofacilitate communications with the Bond Creditors. If Bond Creditors have queries relating to this document or what isrequired of them, they should contact the Information Agent whose contact details are as follows:
Lucid Issuer Services LimitedLeroy House
436 Essex RoadLondon N1 3QP
Phone: +44 (0)20 7704 0880Fax: +44 (0)20 7067 9098
E-mail: [email protected]
Attention of: Sunjeeve Patel/Thomas Choquet
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SECTION 1
EXPLANATORY STATEMENT
in compliance with Part 26 of the Companies Act 2006 for
SCHEMES OF ARRANGEMENTUnder Part 26 of the Companies Act 2006
between
CATTLES PLCand the
CATTLES SCHEME CREDITORS(as defined in this document)
AND
WELCOME FINANCIAL SERVICES LIMITEDand the
WFSL SCHEME CREDITORS(as defined in this document)
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CONTENTS OF EXPLANATORY STATEMENT
Part 1: Letter from the executive chairman of Cattles and WFSL
Part 2: Background to the Schemes
Part 3: Financing of the Group
Part 4: Financial information
Part 5: Overview of the Restructuring
Part 6: The Cattles Creditor Scheme
Part 7: The WFSL Scheme
Part 8: Further information relating to the Schemes
Part 9: Additional information
Part 10: Overseas Scheme Creditors
Part 11: Risk factors
Appendix A List of defined terms used in the Explanatory Statement
Appendix B Cattles Creditor Scheme - summary of action to be taken
Appendix C WFSL Scheme - summary of action to be taken
Appendix D Notice convening the Cattles Scheme Meeting and the WFSL Scheme Meeting
Appendix E Effects of US Chapter 15 injunctive relief
Appendix F Caveats, limitations and uncertainties relating to the insolvency analysis
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PART 1LETTER FROM THE EXECUTIVE CHAIRMAN OF CATTLES PLC AND
WELCOME FINANCIAL SERVICES LIMITED
Registered Office of Cattles: Registered Office of WFSL:
Kingston HouseCentre 27 Business ParkWoodhead RoadBirstall, BatleyWest Yorkshire WF17 9TD
Kingston HouseCentre 27 Business Park
Woodhead RoadBirstall, Batley
West Yorkshire WF17 9TD
(Registered in England andWales with registered number00543610)
(Registered in England andWales with registered number
00133540)
17 December 2010
Dear Scheme Creditor,
1. INTRODUCTION
1.1 I am writing this letter in my capacity as executive chairman of both Cattles and WFSL.
1.2 This letter forms part of the Explanatory Statement for the creditor schemes of arrangement in respect of Cattles andWFSL. There are separate Schemes for Cattles and WFSL, but this Explanatory Statement is common to both of them.
1.3 Please note that a list of the capitalised terms used in this letter and in the Explanatory Statement is set out at Appendix Ato this document.
1.4 The Cattles Creditor Scheme and the WFSL Scheme are part of a proposed restructuring of the Group (referred to in thisdocument as the Restructuring ). The objectives of the Restructuring are:(a) to maximise cash collections from the Group s Welcome Finance business;(b) to maximise the values of The Lewis Group and Shopacheck businesses; and(c) as a result of the above, to improve the expected return for creditors of Cattles, WFSL and other members of the Group
as compared to that which would be expected were they to enter into an insolvency procedure.
In addition, the Restructuring is intended to provide a more appropriate structure for all Group companies to return tosolvency and, where appropriate and at the appropriate time, commence solvent liquidations.
1.5 Cattles is also proposing a scheme of arrangement with its shareholders to transfer ownership of 100 per cent. of theshares in Cattles to Bovess (a newly incorporated company, the beneficial interest in which is ultimately owned by adiscretionary trust for general charitable purposes). The details of that scheme of arrangement are dealt with in a separateexplanatory statement which can be found on the Scheme Website. Cattles shareholders have been notified of the schemesbetween Cattles and WFSL and their respective creditors as, for the reasons set out in the Explanatory Statement, they mayhave claims in one or both of the Schemes.
1.6 A more detailed description of the proposed Restructuring and a summary of the terms of each of the Schemes is includedin this letter and elsewhere in the Explanatory Statement. The primary method of implementing the proposed Restructuring isPlan A , the terms of which are summarised below and elsewhere in the Explanatory Statement.
1.7 The proposed Restructuring includes Plan B as an alternative to Plan A, should Plan A fail. The terms of Plan B aresummarised below and elsewhere in the Explanatory Statement.
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1.8 This Explanatory Statement, which is provided pursuant to section 897 of the Act, is intended to provide you withsufficient information to make an informed decision on whether or not to approve the Cattles Creditor Scheme or the WFSLScheme, as appropriate, or, as will be the case if you are both a Cattles Scheme Creditor and a WFSL Scheme Creditor,whether or not to approve both Schemes.
1.9 Some people will be both Cattles Scheme Creditors and WFSL Scheme Creditors and will therefore be entitled to vote inboth the Cattles Scheme Meeting and the WFSL Scheme Meeting. To vote in both Schemes, please ensure that you fill out aCattles Form of Proxy or, if you are a Bond Creditor, a Direct Participant Letter for the Cattles Scheme Meeting and a WFSLForm of Proxy for the WFSL Scheme Meeting. The majority of this Explanatory Statement will be relevant to both CattlesScheme Creditors and WFSL Scheme Creditors, although Part 6 will be particularly relevant to Cattles Scheme Creditors andPart 7 will be particularly relevant to WFSL Scheme Creditors.
1.10 This document also explains why the Cattles Board considers the Cattles Creditor Scheme to be in the best interests ofthe Cattles Scheme Creditors and the WFSL Board considers the WFSL Scheme to be in the best interests of the WFSLScheme Creditors.
1.11 For the reasons given in paragraph 7 of Part 5 of this Explanatory Statement, the Cattles Board and the WFSL Board areboth unanimously of the view that the approval and implementation of both the Cattles Creditor Scheme and the WFSLScheme pursuant to Plan A is in the best interests of the respective Scheme Creditors, and would result in a better return tothem than that which they would be expected to achieve under Plan B. If Plan A fails, the Cattles Board expects that it will benecessary to place Cattles into administration.
1.12 Further, the WFSL Board and the Cattles Board are both unanimously of the view that if either the Cattles CreditorScheme or the Cattles Shareholder Scheme, or both (and, therefore, Plan A), fails, the approval and the implementation of theWFSL Scheme pursuant to Plan B remains in the best interests of both the Cattles Scheme Creditors and the WFSL SchemeCreditors. This is because it would improve the return that would otherwise be expected to be made by both the CattlesScheme Creditors and the WFSL Scheme Creditors if Plan B failed. The reasons for this are that:(a) as regards Cattles Scheme Creditors, if Plan B failed then Cattles would not receive the Plan B Payment (at Cattles
option, either £33 million or £30 39 million subject to a ratchet mechanism); and(b) as regards WFSL Scheme Creditors, if Plan B were to fail then, for the reasons described in detail at paragraph 7 of
Part 5, the WFSL Board believes that if neither Plan A nor Plan B is implemented then there would be a materiallydetrimental effect on WFSL s ability to collect out its loan book. This would have an adverse impact on returns tocreditors.
2. BACKGROUND TO THE RESTRUCTURING
2.1 The background to the problems that Cattles and WFSL have encountered is set out in detail in Part 2 of the ExplanatoryStatement.
2.2 In summary, both Cattles and WFSL are insolvent and, absent a restructuring, neither of them would be able to continueas a going concern. The proposed Restructuring of the Group (of which the Schemes form a key part) is the result of verylengthy and complex discussions with representatives of the Lenders, the Noteholders, the Pension Trustee and the FSCS. Inaddition, discussions have been held with a majority of the Bondholders. For both regulatory and practical reasons, it has notbeen possible to have similar discussions with other stakeholders such as the shareholders of Cattles.
3. WHO IS AFFECTED BY THE SCHEMES?3.1 The Cattles Creditor Scheme will affect all of the creditors of Cattles other than those who are creditors in respect ofCattles Excluded Liabilities. Cattles Excluded Liabilities is defined in the Cattles Creditor Scheme, but it includes ongoingbusiness liabilities, liabilities to employees and, under certain circumstances, liabilities for the provision of goods or serviceswhere the provision of goods or services began before the Record Date and will continue after the Record Date. For furtherdetails of Cattles Excluded Liabilities see paragraph 2.4 of Part 6.
3.2 The WFSL Scheme will affect all of the creditors of WFSL other than those who are creditors in respect of WFSLExcluded Liabilities. WFSL Excluded Liabilities is defined in the WFSL Scheme, but includes WFSL s liabilities to itsemployees and self-employed agents, liabilities in respect of its ongoing business and liabilities arising from any mis-sellingof PPI and, under certain circumstances, liabilities for the provision of goods or services where the provision of goods orservices began before the Record Date and will continue after the Record Date. For further details of WFSL ExcludedLiabilities see paragraph 2.4 of Part 7.
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4. KEY TERMS OF THE RESTRUCTURING
Overview4.1 As explained above, the primary method of implementing the proposed Restructuring is under Plan A. If Plan A were tofail, the first alternative to Plan A would be Plan B. Under Plan B, the Cattles Board expects that it would be necessary toplace Cattles into administration. If Plan B were also to fail, the Cattles Board expects that it would be necessary to placeCattles into liquidation and the WFSL Board expects that it would be necessary to place WFSL into administration. Theterms of Plan A and Plan B are summarised in further detail below.
4.2 Pursuant to the Restructuring Lock-Up Agreement, the details of which are summarised at paragraph 2 of Part 5 below,approximately 98 per cent. of the Lenders and all of the Noteholders, in their capacities as Consenting Creditors, haveconfirmed their support for Plan A and, if Plan A were to fail, Plan B.
Plan A4.3 Plan A provides that four schemes of arrangement will be proposed: the Cattles Shareholder Scheme, the Cattles CreditorScheme, the WFSL Scheme and the Co-guarantors Creditor Scheme.
Plan B4.4 Plan B assumes that Plan A has failed because either or both of the Cattles Shareholder Scheme and the Cattles CreditorScheme have not become effective.
4.5 If Plan A were to fail, the Cattles Board expects that it would be necessary to place Cattles into administration, and thatadministration forms a part of Plan B.
Elements common to Plan A and Plan B4.6 Plan A and Plan B both also include arrangements with the FSCS in relation to PPI and a compromise of the Group sobligations to the Pension Trustee. Additionally, both Plan A and Plan B are intended to be assisted by the provisions of theEmployee Retention Fund, which is expected to be established on or about 17 December 2010.
Plan A Payment and Plan B Payment4.7 Under Plan A, in accordance with the terms of the WFSL Scheme, WFSL will pay £49 million to Cattles by way of acompromise of the Cattles Intercompany Claim. This payment is referred to as the Plan A Payment .
4.8 If Plan A were to fail, pursuant to Plan B, in accordance with the terms of the WFSL Scheme, WFSL will pay to Cattlesnot less than £30 million, which may increase at Cattles option, either to (i) £33 million or (ii) subject to a ratchetmechanism, an amount which may not exceed £39 million, by way of a compromise of the Cattles Intercompany Claim. Thispayment is referred to as the Plan B Payment .
4.9 As described more fully at paragraph 6 of Part 5, the Plan A Payment was agreed by the Cattles Board and the WFSLBoard pursuant to operating guidelines which exist to govern circumstances where there is a potential conflict between theinterests of the two companies. Independent committees of the Cattles Board and the WFSL Board, each of which compriseddifferent individuals each acting in the interests of only one of the companies, and each of which was separately advised,agreed the compromise of the Cattles Intercompany Claim and the Plan A Payment. In the event that Plan B were to beimplemented, the relevant decision maker in respect of Cattles would be its Proposed Administrators, and it is they, inconjunction with the Cattles Board, who negotiated the Plan B Payment with the WFSL Board s independent committee.
4.10 The respective independent committees of the Cattles Board and the WFSL Board each believed, and do believe, thatthe Plan A Payment and the Plan B Payment would each be appropriate in the circumstances in which they would be made.
4.11 If Plan B fails, the Cattles Board expects that it would be necessary to place Cattles into liquidation and the WFSLBoard expects that it would be necessary to place WFSL into administration. In those circumstances, the Cattles Board andthe WFSL Board expect that Cattles would not receive any payment from WFSL with respect to the Cattles IntercompanyClaim.
4.12 The reason for this is that the Cattles Intercompany Claim is subordinated to the claims of certain bank creditors and, ifPlan B were to fail and WFSL were placed into administration, it would be effectively worthless. This raises the question ofwhy WFSL would make either the Plan A Payment or the Plan B Payment. The reason for the payments is that the WFSLBoard believes that there would be a material advantage to WFSL in terms of its ability to collect its loan book if Plan B were
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implemented as compared to if neither Plan A nor Plan B were implemented, and there would be an incrementally greateradvantage if Plan A were to be implemented as compared to the situation if Plan B were to be implemented. This is based onthe perceived value loss that would occur by having insolvency processes at Cattles and WFSL respectively. Any valueattributed to either advantage can only be an estimate. However, having received financial advice, having considered thepotential impact on WFSL of its entering into a formal insolvency process, and having considered the additional impact uponWFSL of Cattles entering into a formal insolvency process, the WFSL Board has concluded that each of the Plan A Paymentor the Plan B Payment would be appropriate in the circumstances in which either of them would be made.
4.13 Therefore:(a) if the Cattles Creditor Scheme or Cattles Shareholder Scheme does not become effective and Plan A fails, the Cattles
Scheme Creditors are very likely to obtain a lower return on their claims under Plan B than they would have receivedunder Plan A; and
(b) if the WFSL Scheme does not become effective and Plan B fails, the Cattles Scheme Creditors and the WFSL SchemeCreditors are very likely to obtain a lower return on their claims than they would have received under Plan B.
When considering (a) and (b) above it should be kept in mind that while Plan A would fail if the Cattles Creditor Scheme didnot become effective, Plan A would also fail if the WFSL Scheme did not become effective.
How the Cattles Creditor Scheme and the WFSL Scheme become effective4.14 In order for any scheme of arrangement to become effective it must be approved at a meeting of Scheme Creditors(referred to as a scheme meeting ) by a majority of the creditors to whom the scheme of arrangement applies. The requiredmajority is creditors holding 75 per cent. of the value of claims present in person or by proxy and voting at the schememeeting, and representing a simple majority in number of creditors present and voting at the scheme meeting.
4.15 In some schemes of arrangement, different classes of creditors are required to vote separately. This is required becausein such schemes the rights of creditors are so different or would be affected so differently by a scheme of arrangement as tomake it impossible for them to consult together in their common interest. In these cases the scheme must be approved by therequired majority of each class of creditors. This applies to both the Cattles Creditor Scheme and the WFSL Scheme. Cattlesintends to convene meetings of two classes of creditors for the purpose of voting on the Cattles Creditor Scheme (seeparagraph 2.4 of Part 8 below). WFSL intends to convene meetings of three classes of creditors for the purpose of voting onthe WFSL Scheme (see paragraph 2.5 of Part 8 below).
4.16 The Court has already ordered that Cattles and WFSL may convene meetings of creditors to consider the CattlesCreditor Scheme and the WFSL Scheme respectively. The next step in the process is for people who believe that they areCattles Scheme Creditors to submit a Cattles Form of Proxy or a Direct Participant Letter to vote in the Cattles SchemeMeeting and for people who believe they are WFSL Scheme Creditors to submit a WFSL Form of Proxy to vote in the WFSLScheme Meeting (although Cattles Scheme Creditors and WFSL Scheme Creditors may attend the relevant meeting in personand vote). This Explanatory Statement contains detailed instructions as to how to do this (see Appendices B and C below).
4.17 Assuming that a scheme of arrangement has been approved by the required majority or majorities of the relevantcreditors, it must receive the sanction of the Court before it can become effective. The company proposing the scheme willreport to the Court at a formal hearing that the scheme has obtained the approval of the relevant creditors and the Court willdecide whether the scheme is fair and should become effective. Any creditor who objects to the scheme would be able tomake representations to the Court on this occasion. If the Court sanctions the scheme then (subject to a number of conditionsprecedent) the scheme will become effective when the company files the Court order sanctioning the scheme with theRegistrar of Companies.
The Cattles Creditor Scheme4.18 The Cattles Creditor Scheme is set out in full at Section 2 of this document. A full summary of its terms is set out at Part6 of this Explanatory Statement.
4.19 In summary, the purpose of the Cattles Creditor Scheme is to achieve a higher return for Cattles Scheme Creditors thanthey would achieve in an administration or a liquidation.
4.20 In broad terms, the assets available for distribution to the Cattles Scheme Creditors if the Cattles Creditor Schemebecame effective would comprise:(a) £49 million, to be paid by WFSL to Cattles as summarised above;
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(b) approximately £5 million projected to be received from the intended future disposal of a property owned by CattlesProperties (Ruddington), which is currently occupied by WFSL;
(c) approximately £2 million in cash held by Cattles; and(d) the proceeds of any successful Outward Claims that Cattles may have,
in each case subject to the costs of administering the Cattles Creditor Scheme and realising Cattles assets, including anycosts incurred in pursuing any Outward Claims.
4.21 Assuming the Cattles Creditor Scheme is sanctioned and becomes effective:(a) Cattles Scheme Creditors will not be able to bring any action against Cattles in respect of Cattles Scheme Claims other
than through the process set out in the Cattles Creditor Scheme;(b) the value of each Cattles Scheme Creditor s claim will be agreed and/or determined under the terms of the Cattles
Creditor Scheme including via the claims submission and determination process set out in the Cattles Creditor Scheme;(c) each Cattles Scheme Creditor (unless they are a net debtor) will receive pro rata payments in respect of their
determined claim; and(d) on completion of the Cattles Creditor Scheme, each Cattles Scheme Creditor will release Cattles from all Scheme
Liabilities, and then Cattles is expected to commence a solvent liquidation.
The WFSL Scheme4.22 The WFSL Scheme is set out in full at Section 2 of this document. A full summary of its terms is set out at Part 7 of thisExplanatory Statement.
4.23 In summary, the purpose of the WFSL Scheme is to obtain a better result for WFSL Scheme Creditors than they wouldobtain if WFSL were to be placed into administration. As explained elsewhere in this Explanatory Statement (see inparticular paragraph 7 of Part 5, the WFSL Board believes that this purpose can be achieved by the WFSL Scheme because itbelieves that the returns to the WFSL Scheme Creditors would be materially lower if WFSL were placed into administrationthan if its liabilities were restructured in accordance with the WFSL Scheme (pursuant to Plan A or Plan B).
4.24 In broad terms, the assets available for distribution to the WFSL Scheme Creditors if the WFSL Scheme becameeffective would comprise:(a) the proceeds of future net cash collections of WFSL s Welcome Finance business, as well as any future sale of the
remaining loan book;(b) the realisable value of WFSL s Shopacheck business;
(c) the proceeds of any successful Outward Claims that WFSL may have against third parties; and(d) any residual assets held by WFSL at the end of the WFSL Scheme,
less the costs of administering the WFSL Scheme and realising WFSL s assets, including any costs incurred in pursuing anyOutward Claims.
4.25 Assuming the WFSL Scheme is sanctioned and becomes effective:(a) WFSL Scheme Creditors will not be able to bring any action against WFSL in respect of WFSL Scheme Claims other
than through the process provided for in the WFSL Scheme;(b) the value of each WFSL Scheme Creditor s claim (apart from Cattles claim) will be agreed and/or determined under
the terms of the WFSL Scheme including via the claims submission and determination process set out in the WFSLScheme. The Cattles Intercompany Claim owed by WFSL will be compromised in return for the Plan A Payment or thePlan B Payment;
(c) each WFSL Scheme Creditor (unless they are a net debtor) will receive pro rata payments in respect of their determinedclaim; and
(d) on completion of the WFSL Scheme, each WFSL Scheme Creditor will release WFSL from all Scheme Liabilities,including the Cattles Intercompany Claim owed by WFSL, and then WFSL is expected to commence a solventliquidation.
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Outward Claims4.26 The problems that Cattles and WFSL have encountered are set out in detail in Part 2 below. For these purposes, itsuffices to say that in early 2009 it was discovered that there had been a breakdown in internal controls which led to theGroup s impairment policies being applied incorrectly. In connection with this, Cattles and WFSL are considering potentialOutward Claims against certain of their former external advisers (see paragraph 5 of Part 5 below).
4.27 Cattles and WFSL have agreed a protocol to govern any Outward Claims that they might bring. The protocol isdiscussed in detail at paragraph 5.5 of Part 5 below. In broad terms, the protocol provides that Cattles and WFSL will consultwith each other in relation to bringing any such claims, may make requests of one another and shall take account of eachother s reasonable views in relation to any such claims. In particular, they shall consult in relation to:(a) any matter likely to be material to an Outward Claim;(b) the conduct of Outward Claims, including as to pursuit of or opposition to any appeals; and(c) any proposed settlement of an Outward Claim.
4.28 In the event of a disagreement as to (b) or (c) above, the final decision will be that of the company in whose name theclaim is brought unless the claim is brought by them both jointly, in which case the decision will be WFSL s, subject to aprovision that Cattles may pursue an appeal or accept a settlement offer if it indemnifies WFSL, and WFSL must do the same(for more detail on these provisions see paragraphs 5.5(a) and (e) of Part 5 below).
4.29 If an Outward Claim is brought by Cattles and WFSL jointly then, in relation to any decision to pursue an appeal oraccept a settlement, if one company wishes to pursue an appeal or refuse an offer to settle and the other does not wish to, thenthe former company shall indemnify the latter against the costs it incurs and any losses it suffers as a result of the appealbeing pursued or a settlement offer being rejected.
Other elements of the proposed Restructuring4.30 There are the following other key elements of the Restructuring (on both Plan A and Plan B unless otherwise indicated):(a) an agreement with the FSCS regarding payments in respect of PPI Liabilities of WFSL, and separate arrangements to
make provision for Unprotected PPI Liabilities;(b) a compromise with the Pension Trustee of its claim in respect of the Cattles Staff Pension Fund;
(c) the Co-guarantors Creditor Scheme, which would provide for the compromise of the obligations of various Groupcompanies as guarantors under the Group s financing arrangements, release various intercompany debts and rights ofcross-guarantee owed between them, and provide for the distribution of the assets of certain of those Group companiesto the creditors to whom they owe obligations as guarantors and, in one case, to the Pension Trustee (see paragraphs3.24 to 3.31 of Part 5).
Ownership of Cattles and WFSL4.31 Under Plan A, Cattles will propose a separate scheme of arrangement with its shareholders to transfer ownership of 100per cent. of the shares in Cattles to Bovess, to de-list the shares from the main market of the London Stock Exchange and tore-register Cattles as a private limited company. This scheme will give Scheme Creditors certainty as to the ownership ofCattles without them having to take ownership themselves. It will also have the benefit of giving Cattles shareholders somevalue for their shares and allowing them to crystallise any capital gains tax losses they may have incurred. In addition, thereare advantages in Cattles being de-listed from the London Stock Exchange (and thereby no longer having to comply with theon-going compliance requirements of a listed company) and re-registered as a private company, thereby providing a moreappropriate structure for the Group to maximise cash collections, achieve solvency and, where appropriate and at theappropriate time, commence solvent liquidations.
4.32 Under Plan B, Cattles will sell its shares in its direct subsidiaries (apart from its shares in Cattles Staff Pension FundLimited) to Bovess. This will assist in separating WFSL, and its Welcome Finance and Shopacheck businesses (as well asother Group subsidiaries, including TLG), from Cattles if Cattles enters into a formal insolvency process.
5. SUPPORT FOR THE SCHEME
5.1 Cattles, certain of its subsidiaries including WFSL and the Lock-Up Agent have entered into the Restructuring Lock-UpAgreement. The essential purpose of the Restructuring Lock-Up Agreement is to ensure that a majority of the Lenders andNoteholders vote in favour of the Restructuring. The Restructuring Lock-Up Agreement is discussed in greater detail atparagraph 2 of Part 5 below.
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5.2 Almost all of the Lenders have acceded to the Restructuring Lock-Up Agreement as Consenting Creditors, therebyconfirming their support for the proposed Restructuring. All of the Noteholders have acceded to the Restructuring Lock-UpAgreement as Consenting Creditors, thereby confirming their support for the proposed Restructuring.
6. THE DIRECTORS AND THE EFFECTS OF THE SCHEMES ON THEIR INTERESTS
6.1 The interests of the directors of Cattles and WFSL and their key terms of employment are set out in Part 9 of thisdocument.
6.2 The Schemes will have no effect on the interests of the directors of Cattles or WFSL or their key terms of employment,save as is referred to in relation to the terms of employment of the directors of Cattles and (in the case of Jamie DrummondSmith) WFSL, in Part 9 of this Explanatory Statement (see paragraph 9 of Part 9).
7. RISK FACTORS
7.1 There are a number of risks in relation to the implementation of the Schemes. The principal risk factors that the Schemesface are set out in Part 11 of this document.
8. ACTION TO BE TAKEN
8.1 Meetings will be held to vote on the Schemes at The Albert Hall Conference Centre, North Circus Street, NottinghamNG1 5AA on 1 February 2011.
8.2 There are separate Forms of Proxy for each Scheme. If you are a Cattles Scheme Creditor or a WFSL Scheme Creditor,please complete the Cattles Form of Proxy or the WFSL Form of Proxy, as appropriate, and return it to KPMG LLP at 8Salisbury Square, London, EC4Y 8BB or alternatively by fax to +44(0) 207 694 3011 or by email to [email protected] (ineach case marked for the attention of Mark Cook). Please note that you may be both a Cattles Scheme Creditor and a WFSLScheme Creditor. Please note (in relation to the Cattles Creditor Scheme) that if you are a Bond Creditor you must ensure thatyour Direct Participant completes and submits to the Information Agent a Direct Participant Letter instead of a Form ofProxy in relation to your claim under the Bonds, and you must complete a separate Form of Proxy in respect of any otherclaim. If you are a Bond Creditor, please complete a separate Cattles Form of Proxy or WFSL Form of Proxy, as appropriate,in respect of any claims you wish to make which are separate from your claim as a Bond Creditor. You are urged tocomplete these documents and provide them to KPMG LLP or the Information Agent (as appropriate) as soon aspossible, and before the relevant deadlines, which are:(a) for Cattles Scheme Creditors and WFSL Scheme Creditors to submit Cattles Forms of Proxy and WFSL Forms of
Proxy respectively, 5 pm on 28 January 2011; and(b) for Direct Participant Letters to be submitted to the Information Agent on behalf of Cattles Scheme Creditors who are
Bond Creditors, in their capacity as such, 5 pm on 28 January 2011.
8.3 To help you in completing these documents, detailed instructions have been included in Appendices B and C to thisdocument and the Forms of Proxy and the form of the Direct Participant Letter themselves.
8.4 Further information about the Schemes and important relevant documents and notifications can be found on the SchemeWebsite www.cattles.co.uk/schemes. Scheme Creditors are requested to check the Scheme Website regularly. A SchemeHelpline has also been set up to assist you with any queries you may have. The helpline number is 0845 293 7447. Calls tothe Scheme Helpline cost 2p per minute from a BT landline but the cost may vary if calling from other service providers.
9. RECOMMENDATION
9.1 As mentioned above, where necessary, the Cattles Board and the WFSL Board respectively have considered the proposalsindependently and with independent advice. For the reasons mentioned above and set out more fully in the rest of thisExplanatory Statement, the Cattles Board considers the Cattles Creditor Scheme, and the proposed Restructuring of which itforms a part, to be in the best interests of the Cattles Scheme Creditors and Cattles other creditors. For the reasonsmentioned above and set out more fully in the rest of this Explanatory Statement, the WFSL Board considers the WFSLScheme, and the proposed Restructuring of which it forms a part, to be in the best interests of the WFSL Scheme Creditorsand WFSL s other creditors.
9.2 Accordingly, the Cattles Board and the WFSL Board each unanimously recommend that Scheme Creditors vote in favourof the Schemes at the Scheme Meetings.
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Yours faithfully
Margaret Young
Executive Chairman of Cattles and WFSL
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PART 2BACKGROUND TO THE SCHEMES
1. INTRODUCTION
1.1 The Group is a consumer finance group providing instalment credit and other financial services to consumers in the UKwith non-standard credit profiles.
1.2 Cattles is the ultimate parent of the Group. There are three trading companies in the Group: WFSL, CL Finance and TLG(the latter two companies together operate the Lewis Group business). The remaining Group companies are non-trading,dormant or holding companies.
1.3 WFSL operates under the brand names Welcome Finance and Shopacheck. Welcome Finance operated the Group sprincipal lending business, providing secured and unsecured personal loans and hire purchase facilities to individuals whomay not have access to mainstream credit facilities, usually due to their employment, residency or credit histories. Thebusiness has approximately 400,000 loans outstanding and operates out of 122 branches in the UK. Welcome Finance ceasedto provide loans to new customers in March 2009 and ceased lending altogether in December 2009. Its interest rates werepriced to reflect the credit risk exposure.
1.4 Shopacheck is a home collected credit business providing personal loans to individuals who also may not have access tomainstream credit facilities for the reasons explained above. In addition, Shopacheck customers may also not have bankaccounts and so find home collected credit a convenient way to borrow money. Shopacheck has approximately 225,000customers and operates out of 71 branches in the UK.
1.5 The Lewis Group business, operated by TLG and CL Finance, historically purchased debt for its own account, andprovided debt recovery and investigation services to corporates, banks, building societies and local authorities. During 2010the Lewis Group ceased to purchase debt and adjusted its strategy away from debt purchasing to focus on collecting debt onbehalf of third parties.
1.6 On 20 February 2009, the Cattles Board announced a delay in the release of Cattles preliminary results pending thecompletion of a review of the adequacy of the Group s impairment provisions. Cattles instructed Deloitte to conduct thatimpairment review. Subsequently, Cattles commissioned Freshfields to conduct a forensic review with the assistance ofDeloitte.
1.7 On 10 March 2009, the Cattles Board reported that, based on information received as at that date, and subject tocompletion of its external audit, it believed that the Group had incurred a significant loss before tax for the year ended31 December 2008, and that it would be necessary to restate the Group s financial statements for the year ended 31 December2007. The Cattles Board also reported on 10 March 2009 that it believed Cattles was in breach of covenants under itsborrowing arrangements.
1.8 On 1 April 2009, the Cattles Board announced that Cattles was working closely with its key financial creditors to sustaintheir support for the Group s programme of action to stabilise its financial position and that it was undertaking certain coreactions in respect thereof, including:(a) the appointment of new management from both inside and outside Cattles to key roles (as described below);(b) the consideration of selected disposals of businesses and assets;(c) a controlled process of debt recovery and cash collection; and(d) the simplification of the Group s operating model to reduce costs.
1.9 In the same announcement on 1 April 2009, the Cattles Board announced that the independent review commissioned byCattles audit committee had confirmed the Cattles Board s belief that there had been a breakdown of internal controls whichhad resulted in the Group s impairment policies being applied incorrectly, and that Deloitte estimated that the Group wouldneed to make an accounting provision of around £700 million in excess of that originally anticipated with respect to the valueof customer loans held as at 31 December 2008.
1.10 In the 1 April 2009 announcement the Cattles Board also announced that it was considering whether to include anadditional provision consistent with IAS 39. IAS 39 is an accounting standard published by the International AccountingStandards Board, the purpose of which is to establish principles for recognising and measuring financial assets and financialliabilities. The Cattles Board believed that the adoption of such a policy would result in an incurred but not reportedimpairment provision of approximately £150 million with respect to the value of customer loans held as at 31 December2008.
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1.11 As a result of the matters referred to at paragraphs 1.6 to 1.10 above, there is a significant risk that Cattles and/or WFSLmay be subject to regulatory action for market abuse and/or other regulatory breaches which may give rise to a regulatoryfine.
1.12 On 23 April 2009, the Cattles Board announced that Cattles was not in a position to publish its report and accounts forthe year ended 31 December 2008 by 30 April 2009 (as is required by the UK Listing Authority Disclosure and TransparencyRules). In those circumstances, Cattles believed that the FSA would ordinarily require the suspension of trading of Cattlesshares and bonds with effect from 1 May 2009. Therefore, in order to avoid a disorderly market and to protect investors,Cattles requested an immediate suspension of trading in its securities pending publication of its audited report and accountsfor the year ended 31 December 2008, and trading in its securities was suspended on 23 April 2009 and has not sincerecommenced.
1.13 The Cattles Board announced on 22 June 2009 that Cattles was in constructive discussions with its debt providers with aview to obtaining a formal standstill agreement. The Cattles Board made a further announcement on 1 July 2009 stating thatit was continuing to work closely with its debt providers to secure their support for the Group s programme of action tostabilise its financial position.
1.14 On 1 July 2009, the Cattles Board also announced:(a) the appointment of Margaret Young, previously a non-executive director and chairman of the audit committee, as
executive chairman of Cattles with immediate effect, to be supported in that role by Robert East (see below) andsupported further by Jamie Drummond Smith, who had become interim finance director of Cattles on 24 April 2009;
(b) that the board of WFSL would be restructured with the appointment of Laura Barlow as executive chairman in aninterim capacity and Paul Mackin as managing director;
(c) that Norman Broadhurst had stepped down as chairman and as a director of Cattles with immediate effect (the CattlesBoard having previously announced that he would not seek re-election at the 2009 annual general meeting of Cattles,either as chairman or as a director of Cattles);
(d) that David Postings had stepped aside as chief executive of Cattles and would leave the Group immediately; and(e) that the employment of each of the six senior executives who had been suspended pending the final outcome of the
review conducted by Freshfields had been terminated with immediate effect (such executives being four seniorexecutives of WFSL and two directors of Cattles), that Cattles treasury and risk director was leaving the company withimmediate effect and that none of the departing executives would receive any compensation for loss of office.
1.15 The executives at (e) above subsequently brought separate claims against one of Cattles or WFSL in the EmploymentTribunal. These claims were subsequently settled (agreements being reached in the period June to September 2010). Nomoney was paid to any of the seven executives in connection with these settlements. These cases were settled only afterreceipt of legal advice and included a provision to the effect that the settlements were in full and final settlement of all claimsthat each party had against the other (except that Cattles, WFSL or their directors reserved their right to join any of the sevenexecutives to any legal proceedings subsequently brought against them by a third party for losses arising out of themisstatement of the Companies financial position or to seek a contribution from any of the seven executives in respect ofsuch third party proceedings).
1.16 Since the announcement on 1 July 2009, there have been further changes to the composition of the Cattles Board and theWFSL Board. Laura Barlow left the business at the end of January 2010 at which time Margaret Young became Chairman ofWFSL. David Lovett joined the WFSL Board as an independent director on 25 February 2010. Paul Mackin resigned on29 June 2010 with Robert East taking over as managing director of Group operations. Jamie Drummond Smith resigned asfinance director of Cattles and WFSL on 29 June 2010 and became chief restructuring officer of the Group on 1 September2010. Paul Felton-Smith became finance director of Cattles and WFSL on 29 June 2010.
1.17 On 6 July 2009, Cattles announced that it would not be making the payment of the coupon due on 5 July 2009 on the2017 Bonds. On 24 July 2009, Cattles announced that it had received a notice in respect of the 2017 Bonds from the BondTrustee stating that it had been instructed by a requisite percentage of the holders of the 2017 Bonds to accelerate, withimmediate effect, all amounts payable by Cattles to the holders of the 2017 Bonds.
1.18 The 24 July 2009 announcement also stated that the Cattles Board was considering Cattles position in light of theacceleration notice and the fact that it had received written expressions of support from representatives of its key financialcreditors towards achieving a consensual restructuring. The announcement also noted that Cattles remained in discussionswith its key financial creditors with a view to achieving this objective.
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1.19 On 15 July 2009, Cattles announced that all lenders under the £500 Million Syndicated Facility had agreed to extend thefacility s maturity from 14 July 2009 to 31 December 2009. In addition, it was announced that Cattles had entered intofurther agreements and facility amendments with all of its bank lenders and private placement noteholders in order tostabilise the financial position of WFSL and the other members of the Group pursuant to discussions around a widerrestructuring of the Group. It was also stated that Cattles and WFSL remained in discussions with all of their financialcreditors with a view to achieving a formal standstill agreement.
2. THE SEA2.1 On 25 November 2009, the Cattles Board announced that Cattles, WFSL, certain other members of the Group and, amongothers, certain Lenders, certain Guaranteed Hedging Counterparties, certain Unguaranteed Hedging Counterparties andcertain Noteholders had entered into a standstill and equalisation agreement (referred to in this document as the SEA ).
2.2 The key terms of the SEA are broadly:(a) a formal agreement by the key financial creditors to stand still and therefore agree not to take enforcement action
against Cattles, WFSL or other members of the Group;(b) obligations on WFSL to make interim distributions of surplus cash generated by the Group to the key financial
creditors, subject to the right of WFSL to forecast and retain a provision for working capital requirements and othercontingencies so as to enable all other known debts falling due to be paid in full. The SEA expressly provides that thisforecast will be prepared on a conservative basis to provide ongoing liquidity; and
(c) obligations on Cattles, WFSL and other members of the Group to ensure that the majority of cash generated by theGroup, prior to the distributions referred to above, be maintained in bank accounts that are subject to rights of set off infavour of the key financial creditors.
2.3 Entry into the SEA was, for Cattles, WFSL and the other Group companies who entered into it, the only available meansof obtaining sufficient credit to continue with the Group s operations while working to achieve a restructuring of the Group sdebts which retained the greatest value in the Group for the benefit of the Group s creditors. The stability derived from theSEA was considered essential if a restructuring for the benefit of creditors was to be possible. The rights of set off referred toat paragraph 2.2(c) above were available to the relevant financial creditors before the SEA was agreed, and it was a part ofthe terms of the SEA that they be maintained, albeit within the context of a standstill arrangement.
2.4 The effectiveness of the SEA was conditional upon the approval of the Bondholders and the accession of the BondTrustee to the SEA on behalf of the Bondholders. The Bondholders approval was given pursuant to resolutions passed atmeetings of the Bondholders on 17 December 2009 and the Bond Trustee acceded to the SEA on behalf of the Bondholdersafter having been authorised to do so pursuant to such resolutions. The SEA became effective on this date. In connection withthe effectiveness of the SEA and pursuant to the resolution passed by the holders of the 2017 Bonds as described above, theholders of the 2017 Bonds withdrew the acceleration notice in respect of the 2017 Bonds.
2.5 It was agreed as part of the SEA that Cattles would commence the Part 8 Claim proceedings to seek clarification as towhether certain intercompany debt claims it had against WFSL were subordinated to the claims of certain bank creditors bythe operation of cross-guarantee documentation entered into by Cattles, WFSL and certain subsidiaries. As the SEA wasentered into before the Part 8 Claim was finally determined, it was not possible at that time to calculate the proportionateclaim of the financial creditors of Cattles and/or WFSL against Cattles and therefore against the Group as a whole. So thatWFSL could make distributions despite this uncertainty, WFSL was obliged under the SEA to establish the Escrow Account.
2.6 Under the SEA distribution mechanism, prior to the final determination of the Part 8 Claim, WFSL was obliged to makeinterim distributions (after all other working capital requirements had been met or provided for) to the financial creditors withclaims against WFSL based on their proportionate claim against the Group assuming that the intercompany debt claims werenot subordinated. At the same time, WFSL was obliged to make distributions into the Escrow Account based on theproportionate claim of those financial creditors who only had claims against Cattles assuming that the intercompany debtclaims were not subordinated. The SEA provided that, once the Part 8 Claim was finally determined, the funds standing tothe credit of the Escrow Account would be paid out to the financial creditors in proportions reflecting the Court s decision.
3. SOME DEVELOPMENTS SINCE THE EXECUTION OF THE SEA3.1 Following the execution of the SEA, the Cattles Board made further announcements concerning changes to theorganisation of the Welcome Finance and Shopacheck businesses.
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3.2 On 16 December 2009, the Cattles Board announced that it could not recommend a business plan which would allow theWelcome Finance business to continue to lend to existing customers and that that business would henceforth focus oncollecting out existing loans.
3.3 On 5 February 2010, the Cattles Board announced the proposed closure of approximately 70 local Welcome Financemanagement branches and local Welcome Finance collections units nationwide and that WFSL was to enter into aconsultation process with staff affected by these proposals, of which approximately 450 would receive notice that they wereat risk of redundancy.
3.4 While the Welcome Finance business has ceased to make loans, the Shopacheck business continues to lend to newcustomers. On 1 March 2010, the Cattles Board announced that, as part of a review aimed at driving business growth, themanagement of Shopacheck had concluded that it could remove certain layers of management and support functions, and thatit would enter into a redundancy consultation process with staff, pursuant to which approximately 75 positions would be lost.
3.5 On 7 May 2010, the Cattles Board announced the proposed closure of 18 branches of Welcome Finance nationwide andthat WFSL was to enter into a consultation process with staff affected by the proposals, of whom approximately 155 wouldreceive notice that they were at risk of redundancy.
3.6 On 12 May 2010, Cattles filed its 2008 annual report and financial statements (being the Group s consolidated accounts)with Companies House. On the same day, WFSL also filed its annual report and financial statements at Companies House.
3.7 On 28 July 2010, the Cattles Board announced that the application of Cattles in respect of the Part 8 Claim had beenfinally determined to the effect that Cattles claims against its subsidiaries are subordinated to the claims of certain bankcreditors.
3.8 Cattles has also been in continued discussions and negotiations with its key financial creditors with a view to negotiatingand finalising the Restructuring outlined in this document.
3.9 On 29 November 2010, the Cattles Board announced the launch of the proposed Restructuring, and also made apreliminary announcement of the Group s audited accounts for the year ended 31 December 2009, which reported a furtheryear of very substantial losses arising from the issues relating to the Group s impairment provisions.
4. PPI4.1 WFSL has sold payment protection insurance (referred to in this document as PPI ) to a substantial number of itscustomers. Like very many other companies that sold PPI, WFSL has received a significant number of complaints relating tothe sale of PPI, and has to date dealt with these complaints in the ordinary course of its business.
4.2 As part of the Restructuring, WFSL intends to enter into a conditional agreement with the FSCS whereby, upon theWFSL Scheme becoming effective, WFSL will make a payment to the FSCS for the compensation of eligible claimants andthe FSCS will, from that point forward, pay eligible claimants in accordance with the FSA s COMP rules. The arrangementinvolves certain payments totalling £90 million to the FSCS, subject to certain adjustments. Save for an amount of £2 million,any amount of the payments to the FSCS not used to pay compensation and costs associated with paying compensation willbe repaid to WFSL during a period of between approximately three years and seven years and three months from the first dayof the month following the date on which the WFSL Scheme becomes effective. This could be a significant amount,depending on a number of factors, including the number of claims that are made.
4.3 The FSCS does not cover claims in respect of PPI sold prior to 14 January 2005 (any liability relating to such claims isreferred to in this document as an Unprotected PPI Liability ). Therefore, pursuant to the terms of the WFSL Scheme,WFSL will establish a trust for the purpose of meeting any claims in respect of Unprotected PPI Liabilities. It is intended thatliabilities relating to all such claims, if they are valid, be discharged in full. The amount held in trust will initially be£20 million, but may be increased to £22.5 million or such higher amount as may be agreed with the Creditors Committeeunder the terms of the WFSL Scheme. Any balance that reverts to WFSL s estate will be distributed subject to the terms ofthe WFSL Scheme.
4.4 The initial amount of £20 million which will be held on trust for the purpose of meeting claims in respect of PPI soldprior to 14 January 2005 was determined by reference to an informed estimate made by WFSL as to the likely amount thatwould be needed to meet such claims. That estimate took account of the number of PPI policies sold by WFSL prior to14 January 2005, claims received to date, an estimate of the number of claims which may be made in the future and, if made,be valid, and the average cost of redress to PPI purchasers with valid claims within the relevant pool of PPI purchasers.
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5. THE PART 8 CLAIM
5.1 In 2009 an issue arose as to whether the terms contained within certain cross-guarantee documentation entered into byvarious members of the Group operated to subordinate Cattles claims against its subsidiaries, including WFSL, to the claimsof certain bank creditors.
5.2 In order to resolve this issue, Cattles issued an application under Part 8 of the Civil Procedure Rules, seeking directions(this application is referred to elsewhere in this document as the Part 8 Claim ). A bank creditor and a representativeBondholder were parties to that application. After a hearing before the Court, a subsequent appeal to the Court of Appeal, andan unsuccessful application for leave to appeal to the Supreme Court, this issue was finally resolved in July 2010. The effectis that certain claims Cattles has against its subsidiaries that are Guarantor Companies (including WFSL) are effectivelysubordinated to the claims of certain bank creditors (Cattles plc v Welcome Financial Services and others [2010] EWCA Civ599, paragraphs 38 and 49 per Lloyd LJ).
5.3 The fact that the issues addressed by the Part 8 Claim took until July 2010 to be finally resolved had a significant impactupon the progress of the Restructuring as a whole due to the continuing uncertainty regarding the priority of WFSL screditors.
6. PENSION SETTLEMENT
6.1 Cattles, WFSL and TLG are currently participating employers in the Pension Fund, a defined benefit pension scheme, thetrustee of which is the Pension Trustee. The latest estimate of the Pension Fund deficit, calculated by the Pension Fund sactuary as at 25 August 2010 on the basis used in section 75 of the Pensions Act 1995, was £65 million.
6.2 Pursuant to the Pension Compromise, all claims of the Pension Trustee (including Section 75 Debts) in respect of thePension Fund against Cattles, WFSL and TLG, will be compromised for nominal payments. That compromise is conditionalupon, amongst other things, (i) the WFSL Scheme becoming effective, (ii) clearance and approval being obtained from thePensions Regulator, and (iii) the Pension Protection Fund confirming that it does not object to the regulated apportionmentarrangement set out in paragraph 4.28 of Part 9 below. The Pension Compromise would therefore become effective undereither Plan A or Plan B.
6.3 In return for compromising its claims pursuant to the Pension Compromise, the Pension Trustee will become a SchemeCreditor (and hence receive pro rata payments) in each of the Cattles Creditor Scheme and the WFSL Scheme, and will eitherreceive pro rata payments from TLG in accordance with the terms of the Co-guarantors Creditor Scheme or (if agreedbetween TLG and the Pension Trustee) a lump sum compromise payment (calculated on a pro rata basis). For the purposes ofany pro rata payments, the debts owed to the Pension Trustee by each of Cattles, WFSL and TLG will be amounts equal toeach company s Notional Section 75 Debt. Alternatively, (in respect of TLG only) the pro rata lump sum may be based onthe pension scheme actuary s estimate of the Section 75 Debt applicable to TLG as at 25 August 2010, if so agreed with thePension Trustee.
6.4 The amount of the debts owed by Cattles, WFSL and TLG under the Pension Compromise will be determined followingthe date on which the Pension Compromise becomes effective. The Pension Fund s actuary will calculate the amount of thedebts, with Cattles, WFSL and TLG having an opportunity to challenge the calculations (with reference to an independentactuary, if necessary, for final determination) if they consider that the assumptions used are unreasonable or there is amanifest error in the calculations.
7. THE NEED FOR THE RESTRUCTURING
7.1 Despite the measures taken by the Cattles Board outlined above, the Cattles Board and the WFSL Board have come to theview that there are no long term prospects for Welcome Finance resuming normal operations. The Group s smallerbusinesses, Shopacheck and the Lewis Group, continue to trade as normal.
7.2 As is demonstrated by the financial information set out in Part 4, the Group and its relevant subsidiaries, including andCattles and WFSL, is balance sheet insolvent. Its principal business, Welcome Finance, has ceased to take on new businessand is focused on recovering the amounts owed to it under loans that have previously been issued.
7.3 As set out above, the objectives of the Restructuring are:(a) to maximise cash collections from the Group s Welcome Finance business;(b) to maximise the values of the Lewis Group and Shopacheck businesses; and(c) as a result of the above, to improve the expected return for creditors of Cattles, WFSL and other members of the Group
as compared to that which would be expected were they to enter into an insolvency procedure.
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In addition, the Restructuring is intended to enable all Group companies to return to solvency and, where appropriate,commence solvent liquidations.
7.4 If both Plan A and Plan B fail, the Cattles Board expects that it will be necessary to place Cattles into liquidation and theWFSL Board expects that it will be necessary to place WFSL into administration. For the reasons set out in the Chairman sletter at Part 1 above and elsewhere in this Explanatory Statement, the Cattles Board and the WFSL Board each expect that, ifthis were to happen, the creditors of both Cattles and WFSL would receive less than they would otherwise receive if theRestructuring were to be implemented.
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PART 3FINANCING OF THE GROUP
1. FINANCING OF THE GROUP
1.1 The Group s principal financing arrangements consist of:(a) the Facilities;(b) the Notes;(c) the Bonds; and(d) the Hedging Arrangements.
1.2 These borrowings are described in more detail below. None of these borrowings is secured.
The Facilities1.3 The Facilities comprise:(a) the £500 Million Syndicated Facility;(b) the £800 Million Syndicated Facility;(c) the £215 Million Syndicated Facility;(d) the £135 Million Bilateral Facility; and(e) the £75 Million Bilateral Facility.
1.4 All of the available amounts under the facilities above have been fully drawn, save for the £215 Million SyndicatedFacility, of which £202 million has been drawn down, and the £135 Million Bilateral Facility, of which £90 million has beendrawn down. The undrawn element of each of these facilities has been cancelled.
1.5 Following breaches of covenants on the above facilities, they all became repayable on demand subject to the terms of theSEA.
The Notes1.6 The Notes comprise those notes issued pursuant to:(a) the US Dollar 2001 NPA, the notes issued pursuant to which were:
(i) the US$40 million 7.15 per cent. series A guaranteed senior unsecured notes due 12 December 2008; and(ii) the US$70 million 7.53 per cent. series B guaranteed senior unsecured notes due 12 December 2011;
(b) the Sterling 2001 NPA, the notes issued pursuant to which were:(i) the £30 million 7.64 per cent. series C guaranteed senior unsecured notes due 12 December 2011; and(ii) the £40 million 7.80 per cent. series D guaranteed senior unsecured notes due 12 December 2016; and
(c) the Multicurrency 2006 NPA, the notes issued pursuant to which were:(i) the US$20 million 6.17 per cent. series A guaranteed senior unsecured notes due 1 February 2011;(ii) the US$55 million 6.25 per cent. series B guaranteed senior unsecured notes due 1 February 2013;(iii) the 6 million 4.62 per cent. series C guaranteed senior unsecured notes due 1 February 2013;(iv) the £1 million 5.89 per cent. series D guaranteed senior unsecured notes due 1 February 2013; and(v) the £20 million 5.94 per cent. series E guaranteed senior unsecured notes due 1 February 2021.
The Bonds1.7 The Bonds comprise the following:(a) the 2014 Bonds, being the £350 million 6.875 per cent. bonds due 2014 issued by Cattles on 17 December 2003; and
(b) the 2017 Bonds, being the £400 million 7.125 per cent. bonds due 2017 issued by Cattles on 5 July 2007.
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The Hedging Arrangements1.8 The Hedging Arrangements comprise the derivative contracts that Cattles entered into to manage its exposures to interestrate and currency risks in relation to its fluctuations. During 2009, these Hedging Arrangements were all closed out andconverted into term loans with aggregate outstanding obligations of £86 million.
Defaults1.9 Defaults by Cattles are outstanding under each of the Facilities, Notes and Bonds. On 24 July 2009, the Companyreceived a notice from the Bond Trustee with respect to the 2017 Bonds stating that the Bond Trustee had been instructed bya requisite percentage of the holders of those bonds to accelerate, with immediate effect, all amounts payable by Cattles to theholders of those bonds. As noted in paragraph 2.4 of Part 2, above, such acceleration notice was withdrawn pursuant to aresolution of the holders of the 2017 Bonds passed on 17 December 2009, in connection with the SEA becoming effective.
Stand-alone cross-guarantees1.10 In addition to the guarantees provided by certain Group companies under specific financing documents (as indicatedabove), certain Group companies including WFSL are party to the following stand-alone cross-guarantee documents:(a) the RBS Intercompany Guarantee; and(b) the HSBC Intercompany Guarantee.
2. INTERCOMPANY BALANCES
2.1 Substantial sums are owed to Cattles by certain of its subsidiaries on intercompany balances. These sums largelyconstitute amounts borrowed by Cattles under the above institutional finance arrangements and then on-lent to itssubsidiaries. The outcome of the Part 8 Claim means that intercompany debts owing by subsidiaries who are also party to theRBS Intercompany Guarantee are subordinated behind the claims of certain Lenders. The largest such intercompany payablesas at 31 October 2010 are owed by WFSL (approximately £2.4 billion) and TLG (approximately £109 million), each ofwhich are parties to the RBS Intercompany Guarantee (with the effect that those payables are subordinated). In addition, anintercompany payable (approximately £8 million) is owed to Cattles by Cattles Properties (Ruddington), which is not a partyto the RBS Intercompany Guarantee, and therefore that payable is not subordinated.
2.2 Cattles owes sums to certain of its subsidiaries on intercompany balances, most of which are parties to the RBSIntercompany Guarantee (and therefore subordinated). The only material exception is Progressive Insurance CompanyLimited which is owed an intercompany payable by Cattles which as at 31 October 2010 was for approximately £33.3million.
2.3 WFSL is also owed intercompany payables by, and owes intercompany payables to, certain Group companies. As at31 October 2010, the largest such intercompany payables were owed to WFSL by Cattles Holdings (approximately £141million) and Compass Credit (approximately £8 million), and by WFSL (approximately £12 million) to Dial4aloan. CattlesHoldings Limited and Compass Credit are parties to the RBS Intercompany Guarantee.
2.4 There are also intercompany payables owed between certain other members of the Group, the most substantial of whichas at 31 October 2010 was owed to TLG by CL Finance Limited (approximately £134 million), most of which are parties tothe RBS Intercompany Guarantee.
2.5 Under the proposed Restructuring, most of these intercompany balances will be released, but unsubordinatedintercompany claims will not be released. The intercompany payable owed by WFSL to Cattles will be compromised, andultimately released, under the WFSL Scheme. Some intercompany balances, however (for example, the intercompanypayable owed by CL Finance to TLG), will not be released. The unsubordinated intercompany claims of ProgressiveInsurance Company Limited and Dial4aloan Limited will be Scheme Liabilities.
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PART 4FINANCIAL INFORMATION
1. FACTORS AFFECTING THE GROUP AND WFSL S PERFORMANCE IN THE 12 MONTHS TO 31 DECEMBER 20091.1 A summary of the performance during 2009 of the three business group units that make up the Group namely, WFSL,TLG and Cattles Invoice Finance is provided below. Details provided below are for the year ending 31 December 2009,unless stated otherwise.
WFSL1.2 During 2009, WFSL traded as Welcome Finance and Shopacheck, the Group s non-standard consumer lendingbusinesses, and Welcome Car Finance, a car retail operation, which was closed in April 2009. WFSL reported a pre-tax lossof £639.5 million and total net receivables at 31 December 2009 amounted to £1.2 billion.
1.3 On 7 January 2009, the Cattles Board announced that, in light of the continuing uncertain funding environment and theneed to take decisive action, it was taking a series of steps to reduce costs, preserve liquidity and significantly reshape theGroup. It announced that there would be a reduction in the volume of business that Cattles would write and that, whilst itwould continue to write new business in 2009, it was expected in early January that new business volumes in WelcomeFinance would be reduced by some 75 per cent. compared to 2008.
1.4 On 23 February 2009, the Cattles Board announced that, in order to preserve liquidity in the business, it was temporarilysuspending lending to new customers in Welcome Finance with immediate effect. At that time it was decided that WelcomeFinance would continue to offer renewal products to existing customers.
1.5 During the second half of 2009, a thorough analysis of the Group s businesses was undertaken. This analysis led theCattles Board to announce on 16 December 2009 that there would be no further lending by Welcome Finance and that itsexisting book would be collected out.
1.6 Welcome Finance reported a pre-tax loss of £635 million for the year ended 31 December 2009 and total net receivablesamounted to £1.1 billion as at 31 December 2009. The estimate of the fair value at 31 December 2009 of Welcome Finance sloans and receivables is £0.8 billion, which is calculated by discounting expected future cash flows from the loans andreceivables.
1.7 Welcome Car Finance was closed in April 2009 as a result of funding constraints. Consequently its revenue reduced by88.3 per cent. to £12.9 million and it made a loss, before tax, of £12.5 million for the year ended 31 December 2009.
TLG1.8 TLG reported a pre-tax loss in 2009 of £1.8 million. This reflected a continued cautious view of the outlook for the UKeconomy and the housing market in particular, which led to a downward valuation of the debt portfolios owned by TLG of£15.4 million. Debt purchases during the year totalled £41.6 million. During 2010, once its commitments to acquire furtherdebt were completed, TLG refocused its strategy on contingent debt collection.
Cattles Invoice Finance1.9 On 14 September 2009, the Group sold this business for a cash consideration of £70.8 million. Revenue from 1 January2009 to this date amounted to £14.8 million, and pre-tax profit for the same period was £5.2 million.
Balance sheet1.10 The Group balance sheet shows negative shareholders equity, at 31 December 2009, of £1.1 billion. This is primarily asa result of the continuing loan loss impairment charges which are incurred as the book continues to age.
1.11 Group net loans and receivables fell by 46.1 per cent. over the year to 31 December 2009 from £2.5 billion to £1.4billion, reflecting debt collection, interest charges and debt impaired.
Loans and receivables1.12 Welcome Finance, which accounted for 91.8 per cent. of the Group s gross loans and receivables as at 31 December2009, reduced its gross receivables by 14.5% to £2.9 billion as at 31 December 2009 as a result of cash collected in the yearof £730.9 million with no significant further lending. The loan loss provision increased by £547.0 million, to £1.8 billion asat 31 December 2009 (31 December 2008: £1.2 billion).
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1.13 Shopacheck s gross loans and receivables fell by 14.5 per cent. during 2009 to £114.8 million as at 31 December 2009reflecting tighter control over loan issuance.
1.14 The value of the Lewis Group s purchased loan book fell by 5.6 per cent. in 2009 from £153.9 million as at31 December 2008 to £145.3 million as at 31 December 2009. This primarily reflected the lower levels of purchased debt anda downward revaluation of the loan book.
2. RECENT FINANCIAL AND OPERATIONAL PERFORMANCE
2.1 None of the figures in this paragraph 2 have been audited and they may be subject to material change.
Welcome Finance2.2 Welcome Finance has historically provided direct repayment loans to over 400,000 customers from a nationwide branchnetwork. As noted above, on 16 December 2009, the Cattles Board announced to shareholders that it was unable torecommend that there should be further lending in Welcome Finance and that instead Welcome Finance s customers loansshould be collected out.
2.3 As a result of the cessation of new lending and the increased loan loss provisions referred to at paragraph 1.12 above,Welcome Finance has incurred a loss of £113.4 million for the ten months ended 31 October 2010. Under the InternationalFinancial Reporting Standards, Welcome Finance can only make provisions against incurred losses in its loan book andcannot make provisions for future expected credit losses. Consequently, with no new lending and an ageing book, WelcomeFinance will continue to incur trading losses.
2.4 Welcome Finance s cash collections in the first ten months of 2010 at £431.2 million met management s expectations.Net loans and receivables at 31 October 2010 amounted to £0.7 billion.
Shopacheck2.5 Shopacheck continues to lend to both new and existing customers. Shopacheck has made good progress during 2010 andits cash collections for the ten months ended 31 October 2010 were £126.6 million. Profit in the ten months ended 31 October2010 was £2.3 million and net loans and receivables at 31 October 2010 were £54.3 million. The Group will consider theoption of selling the Shopacheck business in the next two to three years.
The Lewis Group2.6 The Lewis Group continues to provide debt recovery and investigation services to external clients and also to bothWelcome Finance and Shopacheck. During 2009, The Lewis Group ceased acquiring debt portfolios, other than on forwardflow contractual arrangements, and its commitment to acquire further debt was completed in 2010; debt purchases in the tenmonths ended 31 October 2010 were £13.6 million.
2.7 Cash collections in the ten months to 31 October 2010 were ahead of plan at £84.1 million. Purchased debt balances at31 October 2010 were £126.3 million and profit in the ten months ended 31 October 2010 exceeded £10 million.
2.8 The Lewis Group has made progress in developing its contingent collections business during 2010, although the marketremains highly competitive.
3. THE GROUP S AND WFSL S FINANCIAL INFORMATION
The year ended 31 December 20093.1 The consolidated financial information for the Group and the financial information for Cattles and WFSL in the tablesbelow for the year ended 31 December 2009 have been extracted from the audited financial statements of the Group andWFSL respectively.
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3.2 The consolidated income statement of the Group and the income statement for WFSL are set out below:
WFSL2009
Group2009
£ m £ mInterest income ..................................................................................................................................... 411.5 427.9Fee and related income ........................................................................................................................ 70.0 76.2Other operating income ....................................................................................................................... 7.6Revenue................................................................................................................................................ 481.5 511.7Interest expense .................................................................................................................................... (142.0) (123.6)Loan loss charge................................................................................................................................... (760.5) (760.5)Staff costs.............................................................................................................................................. (122.8) (136.7)Other operating expenses..................................................................................................................... (95.7) (176.3)Loss before taxation........................................................................................................................... (639.5) (685.4)Taxation ................................................................................................................................................ 1.0 1.2Loss for the year from continuing operations ............................................................................... (638.5) (684.2)Loss for the year from discontinued operations ................................................................................. (10.5) (10.3)Loss for the year attributable to equity holders of the Company .............................................. (649.0) (694.5)
3.3 The consolidated balance sheet of the Group, and the balance sheets of Cattles and WFSL are set out below:
Cattles WFSL Group
£ m £ m £ mASSETSNon-current assetsIntangible assets .......................................................................................................... 0.9 1.1Property, plant and equipment.................................................................................... 0.1 4.3 10.6Loans and receivables external ............................................................................... 716.5 814.6Loans and receivables intra-group .......................................................................... 425.9Trade and other receivables ........................................................................................ 1.6 1.7Tax assets..................................................................................................................... 2.4
427.6 721.7 830.4Current assetsLoans and receivables external ............................................................................... 489.3 536.5Loans and receivables intra-group .......................................................................... 317.1Trade and other receivables ........................................................................................ 1.6 3.8 7.0Cash and cash equivalents .......................................................................................... 0.7 61.9 81.8
319.4 555.0 625.3Total assets 747.0 1,276.7 1,455.7LIABILITIESCurrent liabilitiesBorrowings external................................................................................................. 2,359.1 6.5 2,365.6Borrowings intra-group ........................................................................................... 82.1 2,538.7Trade and other payables ............................................................................................ 6.3 26.2 34.7Current tax liabilities................................................................................................... 3.0 1.2Deferred income.......................................................................................................... 12.4 12.4Provisions .................................................................................................................... 0.1 48.3 48.6
2,450.6 2,633.3 2,461.3Non-current liabilitiesBorrowings external................................................................................................. 14.5 5.6 20.2Borrowings intra-group ...........................................................................................Trade and other payables ............................................................................................ 4.5Preference shares......................................................................................................... 36.1
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Cattles WFSL Group
£ m £ m £ mDeferred income.......................................................................................................... 11.1 11.1Provisions .................................................................................................................... 53.6 54.2Retirement benefit obligation ..................................................................................... 17.6 17.6
32.1 106.4 107.6Total liabilities 2,482.7 2,739.7 2,568.9Net liabilities (1,735.7) (1,463.0) (1,113.2)
3.4 The consolidated cash flow statements of the Group, and the cash flow statements of Cattles and WFSL are set out below:
Cattles WFSL Group
£ m £ m £ mNet cash inflow / (outflow) from continuing operations................................................. (28.0) 482.9 456.9Cash flows from investing operationsProceeds from disposal of subsidiary undertakings ............................................................. 68.2Purchase of property, plant and equipment .......................................................................... (0.8) (2.8)Proceeds from sale of property, plant and equipment.......................................................... 0.7Purchase of intangible assets ................................................................................................. (4.0) (4.0)Net cash inflow / (outflow) from investing operations.................................................... (4.1) 61.4Cash flows from financing operationsIssue of new borrowings........................................................................................................ 25.0 25.0Repayment of borrowings...................................................................................................... (34.4) (2.5) (464.1)*Repayment of intra-group loans............................................................................................ 77.1 (425.9)Net cash (outflow) / inflow from financing operations ................................................... 67.7 (428.4) (439.1)Net increase in cash and cash equivalents from continuing operations ...................... 39.7 50.4 79.2Net cash flows from discontinued operations ...................................................................... (1.1) (5.3)Net increase in cash and cash equivalents........................................................................ 39.7 49.3 73.9
* This figure includes repayments made by Group companies, predominantly WFSL, as guarantors of Cattles debts.
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Management accounts as at 31 October 20103.5 The following information at 31 October 2010 is unaudited, and may be subject to material change.
3.6 The consolidated income statement of the Group and the income statement for WFSL are set out below:
WFSL Group
£ m £ mTotal income.................................................................................................................................. 280.2 314.6Interest expense ............................................................................................................................. (88.0) (89.6)Loan loss charge............................................................................................................................ (180.4) (180.3)Trading and overhead costs .......................................................................................................... (122.9) (179.1)Loss before taxation .................................................................................................................... (111.1) (134.4)
3.7 The consolidated balance sheet of the Group, and the balance sheets of Cattles and WFSL are set out below:
Cattles WFSL Group
£ m £ m £ mASSETSIntangible assets .......................................................................................................... 0.6 0.8Property, plant and equipment.................................................................................... 3.0 9.3Loans and receivables external ............................................................................... 796.0 922.3Loans and receivables intra-group .......................................................................... 557.3Cash balances .............................................................................................................. 2.4 130.5 153.8Other assets .................................................................................................................. 3.0 111.0 120.1Total Assets ................................................................................................................ 562.7 1,041.1 1,206.3LIABILITIESBorrowings external................................................................................................. 2,165.6 0.9 2,166.5Borrowings intra-group ........................................................................................... 2,470.4Current tax liabilities................................................................................................... 3.0 2.2Retirement benefit obligations ................................................................................... 2.9 2.9Other liabilities ............................................................................................................ 165.2 141.7 284.5Total Liabilities.......................................................................................................... 2,336.7 2,615.2 2,453.9Net Liabilities ............................................................................................................. (1,774.0) (1,574.1) (1,247.6)SHAREHOLDERS EQUITYShare capital ................................................................................................................ 52.6 100.0 52.6Share premium ............................................................................................................ 449.4 449.4Other reserves.............................................................................................................. 4.2Retained earnings ........................................................................................................ (2,280.2) (1,674.1) (1,749.6)Total Shareholders Equity ..................................................................................... (1,774.0) (1,574.1) (1,247.6)
3.8 The consolidated cash flow statements of the Group, and the cash flow statements of Cattles and WFSL are set out below:
Cattles WFSL** Group
£ m £ m £ mYTD YTD YTD
ReceiptsCollections ................................................................................................................... 557.8 653.3Other income ............................................................................................................... 61.1* 8.7 18.9Total Inflows .............................................................................................................. 61.1 566.5 672.2PaymentsCash advanced ............................................................................................................. 72.0 72.0Staff expenses.............................................................................................................. 1.1 69.3 77.1
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Cattles WFSL** Group
£ m £ m £ mYTD YTD YTD
Overheads and advisory fees ...................................................................................... 46.3 128.6 122.9PPI complaints............................................................................................................. 22.9 22.9Other payments............................................................................................................ 5.8 5.5 59.2Total Outflows ........................................................................................................... 53.2 298.3 354.1Net cash generated before repayment of funding and interest .......................... 7.9 268.2 318.1
* Funding of Cattles overheads by WFSL, provided in accordance with the terms of the SEA.** Figures for WFSL include the Shopacheck business as well as Welcome Finance.
Forecast information3.9 The forecast net cash generated by WFSL in the period to the end of 2013 which would be available for distribution toWFSL Scheme Creditors is set out below (Source: 2010 6+6 Plan and overlays described below):
WFSL
£ mNet cash generated by WFSL available for distribution to WFSL Scheme Creditors2011....................................................................................................................................................................... 89.02012....................................................................................................................................................................... 74.12013....................................................................................................................................................................... 167.1
3.10 The estimated cash available for WFSL Scheme Creditors reflects a series of adjustments to the 2010 6+6 Plan as aresult of the revision of certain predicted cashflows. These adjustments reflect:(a) WFSL s obligations to pay certain amounts totalling £90 million to the FSCS under the terms of the PPI Settlement
Agreement;(b) a £20 million trust fund for potential Unprotected PPI Liabilities;(c) an Employee Retention Fund of up to £18 million; and(d) an estimated Scheme Working Capital Allowance (as defined in the WFSL Scheme) of £5 million which, under the
terms of the WFSL Scheme, may increase to £25 million; and(e) a payment of £49 million to reflect WFSL making the Plan A Payment to Cattles.
3.11 Under the terms of the PPI Settlement Agreement, if Plan A is successfully implemented, WFSL must make top-uppayments to the FSCS in addition to the £90 million if WFSL meets or exceeds a business plan. This analysis assumes thatany such top up payments are subsequently released back to WFSL through the mechanism described in paragraph 3.12below.
3.12 The analysis above does not include any other potential release to WFSL of excess cash from the £90 million, althoughunder the terms of the PPI Settlement Agreement, any excess monies in the fund would be returned to WFSL betweenapproximately three years and seven years and three months from the first day of the month following the date on which theWFSL Scheme becomes effective, and would become available for distribution to WFSL Scheme Creditors.
3.13 The quantum of distributions to WFSL Scheme Creditors in any year will depend on a number of factors, including butnot limited to WFSL s financial performance, the timing of any asset disposals (including of the Shopacheck business) andthe eventual value of the Welcome Finance loan book, any proceeds received by WFSL from Outward Claims, the quantumof Unascertained Scheme Claims, and the Scheme Working Capital Allowance (which will increase from the £5 million sumshown above during 2013 to cover the costs of closing the Welcome Finance business).
3.14 In the event that Plan B is implemented rather than Plan A, then the Group s management expect that there will be someadverse impact on the forecast net cash generation shown above.
3.15 Forecast net cash generation for Cattles is not shown since, as stated earlier in this Explanatory Statement, Cattles has alimited number of key assets and is not expected to generate significant cash in the future.
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PART 5OVERVIEW OF THE RESTRUCTURING
1. INTRODUCTION
1.1 The objectives of the Restructuring are:(a) to maximise cash collections from the Welcome Finance business;(b) to maximise the values of The Lewis Group and Shopacheck businesses; and(c) as a result of the above, to improve the expected return for creditors of Cattles, WFSL and other members of the Group
as compared to that which would be expected were they to enter into an insolvency procedure.In addition, the Restructuring is intended to provide a more appropriate structure for all Group companies to return tosolvency and, where appropriate and at the appropriate time, commence solvent liquidations.
1.2 The Cattles Creditor Scheme and the WFSL Scheme are part of this Restructuring. A detailed summary of each of theirterms is set out at Parts 6 and 7 of this document and copies of each of the Schemes are set out at Section 2 of this document.
1.3 The primary method of implementing the proposed Restructuring is under Plan A. If Plan A were to fail, the firstalternative to Plan A would be Plan B. If Plan A were to fail, the Cattles Board expects that it would be necessary to placeCattles into administration, and that administration forms a part of Plan B. If Plan B were to fail, the Cattles Board expectsthat it would be necessary to place Cattles into liquidation and the WFSL Board expects that it would be necessary to placeWFSL into administration.
2. RESTRUCTURING LOCK-UP AGREEMENT
2.1 On 29 November 2010, Cattles, WFSL, the Obligors and the Lock-Up Agent entered into the Restructuring Lock-UpAgreement.
2.2 In broad terms, the purpose of the Restructuring Lock-Up Agreement is to ensure that a majority of the Lenders and theNoteholders support Plan A and, if Plan A were to fail, Plan B. A summary of the key terms of the Restructuring Lock-UpAgreement is set out below.
2.3 The Restructuring Lock-Up Agreement contains a mechanism by which, following the completion of their respectivecredit approvals processes, the Lenders and the Noteholders could accede to the Restructuring Lock-Up Agreement asConsenting Creditors and thereby be bound by the Restructuring Lock-Up Agreement in that capacity. By 3 December 2010,approximately 98 per cent. of the Lenders and all of the Noteholders had acceded to the Restructuring Lock-Up Agreement asConsenting Creditors.
2.4 Pursuant to a related process carried out during this period, representatives of Cattles held meetings with a number ofBondholders to discuss the terms of Plan A in order to establish whether they would support or would oppose the CattlesCreditor Scheme, with a view to establishing whether to launch Plan A. At the date of this Explanatory Statement, Cattles hasreceived some (non-binding) letters from Bondholders indicating that they will support the Cattles Creditor Scheme. TheCattles Board also understands that at least one Bondholder does not intend to support, or may oppose, the Cattles CreditorScheme.
2.5 After taking account of all expressions and commitments of support (and opposition) to the Restructuring, on29 November 2010, in accordance with the terms of the Restructuring Lock-Up Agreement, Cattles and WFSL confirmed tothe Lock-Up Agent that they had concluded, each in their absolute discretion, that they each had sufficient support from theircreditors to commence Plan A. Upon that date, the Restructuring Lock-Up Agreement became fully effective.
2.6 In summary, following the confirmation of Cattles and WFSL s decision to launch Plan A, the Restructuring Lock-UpAgreement provides that:(a) Cattles, WFSL and the Obligors are contractually bound to launch Plan A (and, if Plan A were to fail, Plan B);(b) the Consenting Creditors, Cattles, WFSL and the Obligors are contractually bound to take all actions which they are
reasonably requested to take in order to support, facilitate, implement or otherwise give effect to Plan A including,where relevant, to vote in favour of the Cattles Creditor Scheme, the WFSL Scheme and the Co-guarantors CreditorScheme;
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(c) the Consenting Creditors are required to ensure that, prior to any transfer of their claims which are subject to theRestructuring Lock-Up Agreement, the transferee accedes to the Restructuring Lock-Up Agreement as a ConsentingCreditor; and
(d) Cattles, WFSL and the Obligors have undertaken to the Consenting Creditors not to:(i) assign or transfer any of their rights or obligations under the Restructuring Lock-Up Agreement;(ii) take or consent to the taking of any action which would breach or be inconsistent with Plan A (or, if Plan A were
to fail, Plan B) or the Restructuring Lock-Up Agreement; or(iii) take or consent to the taking of any material corporate action (including changing the capital structure of any
member of the Group and entering into, materially amending or terminating any material contract),in each case subject to certain exceptions (including where such steps are necessary to implement Plan A (or, if Plan Awere to fail, Plan B)).
2.7 Under the Restructuring Lock-Up Agreement, the duties of the Lock-Up Agent are solely of a mechanical andadministrative nature.
2.8 In summary, the Restructuring Lock-Up Agreement will terminate:(a) on the date on which all of the documents necessary or desirable to implement or consummate Plan A (or, if Plan A
were to fail, Plan B) are unconditional or in full effect in accordance with their terms;(b) on 31 January 2011, if by that date a hearing has not yet been held to seek directions of the Court to convene creditor
meetings in connection with the WFSL Scheme;(c) if any Insolvency Event (as defined in the Cattles Creditor Scheme and the WFSL Scheme) occurs in relation to
Cattles or WFSL (other than, in the case of Cattles, as part of, or as anticipated by, Plan B);(d) if: (i) Cattles, WFSL or any Obligor does not comply with any material provision of the Restructuring Lock-Up
Agreement; or (ii) there occurs any event which will have a material adverse effect and, in each case, a certain majorityof the Consenting Creditors agree that it should terminate; or
(e) if Cattles, WFSL, TLG and a certain majority of the Consenting Creditors agree that it should terminate.
3. RESTRUCTURING STEPS FOR PLAN AOverview3.1 Plan A includes the following four schemes of arrangement, each of which is summarised below:(a) the Cattles Shareholder Scheme;(b) the Cattles Creditor Scheme;(c) the WFSL Scheme; and(d) the Co-guarantors Creditor Scheme.
3.2 Further, Plan A (and also Plan B) includes an agreement with the FSCS (referred to in paragraph 4 of Part 2, above), anda compromise with the Pension Trustee, each of which is summarised below.
The Cattles Shareholder Scheme3.3 The purpose of the Cattles Shareholder Scheme is to transfer ownership of 100 per cent. of the shares of Cattles toBovess, to de-list the shares from the main market of the London Stock Exchange and to re-register Cattles as a privatelimited company.
3.4 Bovess is a special purpose vehicle established for the purposes of implementing the Restructuring and is controlled byBovess Holdco, which is also a special purpose vehicle whose shares are held by a discretionary trust for general charitablepurposes. Both Bovess and Bovess Holdco have been established and are managed by SFM, a specialist corporate servicesprovider that has been engaged in connection with the Restructuring.
3.5 Bovess will, by way of the Cattles Shareholder Scheme (a Court-sanctioned scheme of arrangement under Part 26 of theAct), acquire the issued and to be issued shares of Cattles for a consideration of 1p per share. This offer will be governed bythe City Code, which governs the conduct of takeovers of public companies in the UK.
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3.6 In order to become effective, the Cattles Shareholder Scheme must be approved by a majority in number of theshareholders present and voting at a Court-convened shareholder meeting (either in person or by proxy), representing not lessthan 75 per cent. in value of the shares that are voted at the meeting. In addition, a special resolution necessary to implementthe Cattles Shareholder Scheme and the related reduction of capital of Cattles must be passed by shareholders at a generalmeeting of its shareholders.
3.7 Following the Court-convened meeting and the shareholder meeting, the Cattles Shareholder Scheme must be sanctionedby the Court. The Cattles Shareholder Scheme will become effective only once the Court orders sanctioning the CattlesShareholder Scheme and confirming the related reduction of capital are delivered to the Registrar of Companies (and, if theCourt so orders for the Cattles Shareholder Scheme to become effective, registered by the Registrar of Companies).
3.8 The Cattles Board will not deliver the Court orders sanctioning the Cattles Shareholder Scheme to the Registrar ofCompanies unless and until: (i) the FSA has approved, or has been deemed to approve, the indirect change of control ofWFSL resulting from the acquisition of Cattles by Bovess; (ii) the WFSL Scheme has become effective in accordance withits terms; and (iii) the Cattles Creditor Scheme has been sanctioned by the Court and the Cattles Board has confirmed that,subject to no Insolvency Event (as defined in the Cattles Shareholder Scheme) having occurred in relation to Cattles, theCourt order sanctioning the Cattles Creditor Scheme will be delivered to the Registrar of Companies immediately upon theWFSL Scheme having become effective.
3.9 Upon the Cattles Shareholder Scheme becoming effective, Bovess will become the owner of 100 per cent. of the shares inCattles and the shares will be de-listed from the London Stock Exchange.
3.10 It is expected that, subject to the fulfilment of the conditions to the Cattles Shareholder Scheme, it will become effectiveby the end of February 2011.
3.11 The Cattles Shareholder Scheme will give Scheme Creditors certainty as to the ownership of Cattles without themhaving to take direct ownership themselves. It will also have the benefit of giving Cattles shareholders some value for theirshares and allowing them to crystallise any capital gains tax losses they may have incurred. In addition, there are advantagesin Cattles being de-listed from the London Stock Exchange (and thereby no longer having to comply with the on-goingcompliance requirements of a listed company) and re-registered as a private company, providing a more appropriate structurefor the Group to maximise cash collections, achieve solvency and, where appropriate, commence solvent liquidations.
3.12 The Acquisition Amount has already been paid by WFSL into the Acquisition Account. If the Cattles ShareholderScheme becomes effective, Bovess will use the Acquisition Amount to satisfy the Acquisition Purposes. If either: (i) theCattles Shareholder Scheme does not become effective; or (ii) the Cattles Shareholder Scheme becomes effective and nofurther amounts are payable in respect of the Acquisition Purposes, the Funding Letter provides that Bovess will return toWFSL the amount standing to the credit of the Acquisition Account (including accrued interest thereon).
3.13 Pursuant to the SFM Engagement Letter, WFSL has also agreed to pay the fees, costs and expenses which SFM andBovess have incurred and will incur in connection with the Cattles Shareholder Scheme up until the point it lapses orbecomes effective.
3.14 The Bovess Life Costs Amount will be paid by WFSL into the Funding Account on or around: (i) the date on which theCattles Shareholder Scheme becomes effective following a successful implementation of Plan A; or (ii) the date on whichPlan B is completed. The Bovess Life Costs Amount has been calculated on the basis of the Corporate Services Deed havinga ten year term with no early termination of SFM s appointment as corporate services provider. If SFM s appointment ascorporate services provider to each of Bovess and Bovess Holdco is terminated, SFM is required to procure that Bovessreturns the amount standing to the credit of the Funding Account (together with any accrued interest thereon) to WFSL afterdeducting certain expenses incurred (and estimated to be incurred) by SFM in relation to such termination.
3.15 The funding by WFSL of: (i) the Acquisition Amount potentially due to shareholders and participants in Cattles shareincentive schemes under the Cattles Shareholder Scheme; (ii) the fees, costs and expenses incurred by SFM and/or Bovess inconnection with the implementation of the Restructuring pursuant to the SFM Engagement Letter; and (iii) (in Plan A only)the Bovess Life Costs Amount will constitute financial assistance under section 678(1) of the Act, as all such paymentswould be made by a subsidiary (i.e. WFSL) of a public company (i.e. Cattles) to assist in the acquisition of shares in thatpublic company. Such financial assistance would not ordinarily be permitted unless an exception under the Act applies. Oneexception in the Act (set out in section 681(2)(e)) is financial assistance given pursuant to an order of the Court under Part 26of the Act (an order sanctioning a compromise or arrangement with members or creditors). Accordingly, such financialassistance will be lawful if it is sanctioned by the Court and effected pursuant to the WFSL Scheme. Proposals for suchfunding form part of the WFSL Scheme and will be presented to the Court for sanction.
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3.16 The amount of fees, costs and expenses to be paid by WFSL under the SFM Engagement Letter that will be presented tothe Court for sanction will be capped at £2 million, based on estimates provided by SFM and Bovess. If the Court sanctionsthe payment of this amount but the actual amount of fees, costs and expenses incurred by them exceeds this amount, suchexcess will need to be met by SFM and/or Bovess rather than WFSL.
3.17 If the Cattles Shareholder Scheme does not become effective or the Court fails to sanction the financial assistance:(i) the full amount of the Acquisition Amount (together with accrued interest thereon) will be returned to WFSL; and(ii) pursuant to the SFM Engagement Letter WFSL will not be required to pay the fees, costs and expenses incurred by SFMand Bovess in relation to Plan A (i.e. there will be no unlawful financial assistance).
The Cattles Creditor Scheme3.18 The Cattles Creditor Scheme is set out in full at Section 2 of this document. A full summary of its terms is set out at Part6 of this document.
3.19 In summary, the purpose of the Cattles Creditor Scheme is to compromise the claims of certain creditors of Cattles inorder to achieve a better return on the claims of Cattles Scheme Creditors than they would obtain on an administration orliquidation of Cattles. A number of creditors (listed in Schedule 1 to the Cattles Creditor Scheme) are excluded from theCattles Creditor Scheme and will continue to be paid in full outside of the Cattles Creditor Scheme.
3.20 In broad terms, the assets available for distribution to the Cattles Scheme Creditors if the Cattles Creditor Schemebecame effective would comprise:(a) £49 million, to be paid by WFSL to Cattles as summarised above;(b) approximately £5 million projected to be received from the intended future disposal of a property owned by Cattles
Properties (Ruddington), which is currently occupied by WFSL;(c) approximately £2 million in cash held by Cattles; and(d) the proceeds of any successful Outward Claims that Cattles may have,
in each case subject to the costs of administering the Cattles Creditor Scheme and realising Cattles assets, including anycosts incurred in pursuing any Outward Claims.
The WFSL Scheme3.21 The WFSL Scheme is set out in full at Section 2 of this document. A full summary of its terms is set out at Part 7 of thisdocument.
3.22 The purpose of the WFSL Scheme is to compromise the claims of certain creditors of WFSL in order to achieve a betterreturn on the claims of WFSL Scheme Creditors than they would obtain on an administration of WFSL. A number ofcreditors are excluded from the WFSL Scheme and will continue to be paid in full outside of the WFSL Scheme.
3.23 In broad terms, the assets available for distribution to the WFSL Scheme Creditors if the WFSL Scheme becameeffective would comprise:(a) the proceeds of future net cash collections of WFSL s Welcome Finance business, as well as any future sale of the
remaining loan book;(b) the realisable value of WFSL s Shopacheck business;(c) the proceeds of any successful Outward Claims that WFSL may have against third parties; and(d) any residual assets held by WFSL at the end of the WFSL Scheme,
less the costs of administering the WFSL Scheme and realising WFSL s assets, including any costs incurred in pursuing anyOutward Claims.
Co-guarantors Creditor Scheme3.24 The Co-guarantors Creditor Scheme comprises:(a) the Ewbanks Scheme;
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(b) a deed of compromise between a number of Group companies which have given guarantees under the Facilities and theNote Agreements, and the creditors to whom they owe the relevant guarantee obligations (referred to as the Co-guarantors Compromise Deed ); and
(c) a deed of compromise, release and distribution between TLG, the other Guarantor Companies, the Pension Trustee (ifapplicable), and the creditors to whom TLG owes the relevant guarantee obligations (referred to as the TLGDistribution Deed ).
3.25 The Ewbanks Scheme will provide for the compromise of Ewbanks liabilities to the Guaranteed Creditors and it willprovide Ewbanks with a power of attorney to sign the Co-guarantors Compromise Deed and the TLG Distribution Deed onbehalf of each of the Co-guarantor Scheme Creditors.
3.26 Under the Co-guarantors Creditor Scheme, each of the Guarantor Companies Guarantor Obligations will be limited toan amount equal to its net assets. The Guarantor Companies have guaranteed Cattles debt under a number of FacilityAgreements and Note Agreements, and the Guarantor Companies owe Guarantor Obligations to different GuaranteedCreditors.
3.27 The Guarantor Companies with material assets will realise those assets for the benefit of the financial creditors ofCattles (being Lenders and Noteholders) to whom the Guarantor Companies have provided guarantees in respect of Cattlesdebt (referred to in this document as Guaranteed Creditors ).
3.28 In most cases this will mean realising their assets through asset sales and then making pro rata payments to theirrespective Guaranteed Creditors in respect of their Guarantor Obligations after providing in full for all other creditors.However, TLG and CL Finance, acting together, have a business which continues to be viable and generate an income. It isintended to keep this business operating with a view to a sale in the future. TLG and CL Finance s respective GuaranteedCreditors would benefit from the proceeds of any such sale. In the meantime, the TLG Distribution Deed and the Co-guarantors Compromise Deed provide for periodic payments to be made by TLG and CL Finance to their GuaranteedCreditors after providing in full for all other creditors.
3.29 The Lewis Group business, which is run by TLG and CL Finance, is a contingent debt collection business. Havingpreviously purchased debt for its own account, the Lewis Group business has now altered its strategy to focus on contingentdebt collection. In order to retain existing mandates and continue to win new mandates for contingent debt collection, TLGneeds to have a positive balance sheet and be creditworthy. The compromise that would be effected by the TLG DistributionDeed is intended to assist in meeting this imperative.
3.30 The Co-guarantor Compromise Deed also provides for the release of certain obligations owed between the GuarantorCompanies, but the primary purpose of the Co-guarantors Creditor Scheme is to provide a more efficient means of realisingthe assets available to the Guaranteed Creditors than would be provided by a formal insolvency process. It is intended to dothis by:(a) assisting in preventing multiple insolvencies in the Group and thereby assisting in providing to all of the Ewbanks
Scheme Creditors (who are all also WFSL Scheme Creditors and Cattles Scheme Creditors) the benefits referred to atparagraph 7 of Part 5;
(b) enabling the Lewis Group business to continue to generate funds for the benefit of TLG and CL Finance creditors and,subsequently, to allow that business to be sold for the benefit of the same creditors; and
(c) providing for the realisation of the assets of each of the Guarantor Companies which have material assets and thedistribution of those assets to those companies Guaranteed Creditors.
3.31 Cattles Scheme Creditors and WFSL Scheme Creditors in their capacities as such are not being asked to approve the Co-guarantors Creditor Scheme. The scheme creditors for the purposes of the Co-guarantors Creditor Scheme are a relativelysmall group of persons, and they will have access to an explanatory statement and voting instructions in connection with thatscheme.
PPI3.32 Under an agreement which has been reached between the FSCS and WFSL, the FSCS will pay PPI-related claims ofeligible PPI Claimants arising on or after 14 January 2005, in return for certain payments totalling £90 million from WFSL(which will in effect be repaid to WFSL to the extent that it is not used by the FSCS to pay compensation and costs). Inaddition, pursuant to the terms of the WFSL Scheme, WFSL will establish a trust for the purpose of meeting the cash redresscosts of all valid claims anticipated to be made in respect of PPI sold prior to 14 January 2005. These arrangements and theirterms are referred to in more detail at paragraph 4 of Part 2 above.
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Compromise with Pension Trustee3.33 Under a compromise agreement, all claims of the Pension Trustee against Cattles, WFSL and TLG (including theGroup s Section 75 Debt) in respect of the Pension Fund, will be compromised for a nominal payment of £1 for each ofCattles, WFSL and TLG.
3.34 In return for compromising its claims pursuant to the Pension Compromise, the Pension Trustee will become a SchemeCreditor (and hence receive pro rata payments) in each of the Cattles Creditor Scheme and the WFSL Scheme, and will eitherreceive pro rata payments from TLG in accordance with the terms of the Co-guarantors Creditor Scheme or (if agreedbetween TLG and the Pension Trustee) a lump sum compromise payment (calculated on a pro rata basis). For the purposes ofany pro rata payments, the debts owed to the Pension Trustee by each of Cattles, WFSL and TLG will be amounts equal toeach company s Notional Section 75 Debt. Alternatively, (in respect of TLG only) the pro rata lump sum may be based onthe pension scheme actuary s estimate of the Section 75 Debt applicable to TLG as at 25 August 2010, if so agreed with thePension Trustee.
3.35 Pensions Regulator and (in the case of the regulated apportionment arrangement only) Pension Protection Fund approvalare conditions precedent to the compromise (and the Restructuring) becoming effective.
The Employee Retention Fund3.36 It is expected that WFSL will establish the Employee Retention Fund on or about 17 December 2010 in order to securethe payment of specified employee benefits that WFSL is contractually obliged to pay to its employees. WFSL will maintainan account with Clydesdale Bank plc that will hold the ring-fenced Employee Retention Fund cash. WFSL will grant securityover this account in favour of Welcome Finance Group Limited which will hold the benefit of such security on trust for therelevant employees. In the event that WFSL becomes insolvent and does not pay the employee benefits as required, WelcomeFinance Group Limited will be able to enforce the security and apply the proceeds of enforcement against certain outstandingemployee benefits amounts.
3.37 The amount to be held in the Employee Retention Fund will be reviewed on a quarterly basis to reflect the amount ofemployee benefits required to be collateralised. Any surplus amounts in the Employee Retention Fund shall be transferred toaccounts of WFSL held with RBS or HSBC. WFSL will be obliged to top up the Employee Retention Fund to the extent thatemployee benefits required to be collateralised have increased since the last quarterly review date, subject to a maximum of£18 million.
3.38 The Employee Retention Fund has been established to enable WFSL to demonstrate to its employees that it has takensteps to ensure that their contractual benefits that would not be protected by the statutory National Insurance Fund willnonetheless be protected in the event of WFSL s insolvency. WFSL s management were concerned that they would beunable to retain key staff with a consequent material impairment of cash collections.
4. RESTRUCTURING STEPS FOR PLAN BOverview4.1 Plan B assumes that Plan A has failed. In those circumstances, the Cattles Board expects that it will be necessary to placeCattles into administration. Plan B is intended to meet the objectives of the Restructuring which are set out at paragraph 1.1above and elsewhere in this Explanatory Statement, in circumstances where either or both of the Cattles Shareholder Schemeand the Cattles Creditor Scheme have not become effective and, in so doing: (i) to obtain a better return for creditors ofCattles than they would obtain if Cattles were to be placed into liquidation; (ii) to obtain a better return for creditors of WFSLthan they would obtain if WFSL were to be placed into administration; and (iii) to obtain a better result for creditors of theGroup generally than they would obtain if Plan A and Plan B both failed and Cattles, WFSL and other Group companiesentered formal insolvency processes.
4.2 Under Plan B, pursuant to the WFSL Scheme, WFSL will pay the Cattles Plan B Payment to Cattles in accordance withthe Cattles Administrator Agreement. The Cattles Plan B Payment will not be available if Cattles entered liquidation or anyinsolvency process not envisaged as part of the Restructuring. This is because if neither Plan A nor Plan B is implementedthen Cattles will not receive the Plan A Payment or the Plan B Payment; the Cattles Intercompany Claim is subordinated andso Cattles would be unlikely to receive any payment in respect of it.
4.3 Pursuant to Plan B, the administrators of Cattles will:(a) cause Cattles to sell the shares held by Cattles in its immediate subsidiaries (other than Cattles Staff Pension Fund
Limited) to Bovess for a nominal payment; and
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(b) commit Cattles to vote in favour of the WFSL Scheme, pursuant to which any and all claims of Cattles against WFSLand other members of the Group (excluding claims against Cattles Properties (Ruddington) and certain ongoing tradingbalances) will be compromised in accordance with the terms of the WFSL Scheme.
4.4 As part of Plan B the administrators will apply to the Court for directions that Cattles carry out these steps. Thatapplication will be made concurrently with the application to the Court to appoint the administrators.
4.5 Following the sale, Bovess will become the immediate holding company of the sold entities and SFM will providecorporate services to Bovess and Bovess Holdco pursuant to the terms of the Corporate Services Deed.
4.6 Plan B includes two schemes of arrangement namely, the WFSL Scheme and the Co-guarantors Creditor Scheme, eachof which are summarised above. These will operate in broadly the same way as they would have done under Plan A, althoughthere would be some differences. In particular, the payment to be made by WFSL to Cattles under the WFSL Scheme if PlanA were to be implemented is materially different from that which would be made by WFSL to Cattles under the WFSLScheme if Plan B were to be implemented (see paragraph 6 below, in relation to the Plan A Payment and the Plan BPayment).
4.7 Further, like Plan A, Plan B includes agreements with the FSCS and a compromise with respect to the Pension Trustee,each of which have been summarised above. These will operate in the same way as they would have done under Plan A.
Administration of Cattles4.8 In broad terms, the assets available for distribution to creditors of Cattles if Cattles were to be placed into administrationunder Plan B would comprise:(a) up to £39 million, to be paid by WFSL to Cattles (i.e. the Plan B Payment);(b) approximately £5 million projected to be received from the intended future disposal of a property owned by Cattles
Properties (Ruddington), which is currently occupied by WFSL;(c) approximately £2 million in cash held by Cattles; and(d) the proceeds of any successful Outward Claims that Cattles may have, in each case subject to the costs of the
administration.
5. OUTWARD CLAIMS
5.1 Cattles and WFSL are both currently investigating potential Outward Claims each company might have against its formerexternal advisors in connection with the understatement of the impairment provision in Public Statements issued by theGroup (see paragraph 10 of Part 6 and paragraph 3 of Part 7 below).
5.2 Cattles and WFSL are advised by Berwin Leighton Paisner LLP in relation to the Outward Claims. Outward Claims willbe directed (for Cattles) by the Scheme Supervisors and (for WFSL) by the Outward Claims Manager.
5.3 It is critical to maintain confidentiality and legal privilege in relation to the Outward Claims so as to protect any value insuch claims for the ultimate benefit of Cattles Scheme Creditors and WFSL Scheme Creditors. It is therefore not possible toprovide any detail in this Explanatory Statement as to the nature and basis of any such claims.
5.4 To the extent any Outward Claims exist, Cattles and WFSL are likely to have separate and concurrent causes of actionagainst the potential defendants. To the extent possible given the need to preserve confidentiality and legal professionalprivilege, and subject to any conflicts of interest which might be identified, it is intended that Cattles and WFSL shareinformation and co-operate regarding these Outward Claims.
5.5 It is not yet decided how the proceeds of any successful Outward Claims would be allocated as between Cattles andWFSL because it is too early to know what such claims will be for, the basis on which they might be made, or the interestthat Cattles or WFSL might have in any such claims. However, in the event that Plan A is implemented, Cattles and WFSLhave agreed a protocol regarding Outward Claims, which prescribes the basis on which Cattles and WFSL wouldcommunicate and co-operate in relation to any Outward Claims which are likely to involve a claim for damages or an amountat stake which exceeds £100,000. That protocol provides, among other things, that:(a) Cattles and WFSL shall each provide to the other information reasonably requested which is relevant to the
investigation and/or prosecution of a potential Outward Claim (unless such information-sharing would be materiallyprejudicial to the interests of the disclosing company);
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(b) Cattles and WFSL shall each provide a report to the other summarising the results of any investigation into the meritsof any potential Outward Claim (unless making such a report would be materially prejudicial to the interests of thereporting company);
(c) Cattles and WFSL should consult with each other as to whether or not proceedings should be commenced in relation toany Outward Claims;
(d) each may request that the other enter into settlement negotiations for the purpose of settling an Outward Claim, andshall take account of the reasonable views of the other and consult the other on:(i) any matter likely to be material to an Outward Claim;(ii) the conduct of Outward Claims, including as to the pursuit or opposition to appeals; and(iii) any proposed settlement of an Outward Claim; and
(e) in the event of disagreement in relation to (d)(i) or (d)(iii) above, the final decision shall lie with the company in whosename the claim is brought. If the claim is brought by Cattles and WFSL jointly then the decision shall lie with WFSLalthough, in that instance only, in relation to any decision to pursue an appeal or to accept a proposed settlement of anOutward Claim:(i) if Cattles wishes to pursue an appeal/refuse an offer to settle and WFSL does not, then Cattles shall indemnify
WFSL in respect of the costs or any loss that WFSL may incur as a result of such pursuit or refusal to settle; and(ii) if WFSL wishes to pursue an appeal/refuse an offer to settle and Cattles does not, then WFSL shall indemnify
Cattles in respect of the costs or any loss that Cattles may incur as a result of such pursuit or refusal to settle.
The Scheme Supervisors and the Outward Claims Manager may agree to amend the terms of the Litigation Protocol.
5.6 In the event that Plan A fails and Plan B is implemented, Cattles (acting by its administrators) will seek to agree withWFSL a mutually beneficial protocol regarding any Outward Claims, the terms of which have yet to be agreed.
6. NEGOTIATIONS IN RELATION TO THE PLAN A PAYMENT AND THE PLAN B PAYMENT
6.1 As set out in Part 7, under the WFSL Scheme: (a) the Cattles Intercompany Claim will be compromised so that Cattlesrecourse to WFSL s assets shall be limited to the residual assets in a liquidation of WFSL after all other debts (plus statutoryinterest) and expenses have been paid in full or released, and all WFSL Scheme Liabilities owed to other WFSL SchemeCreditors have been paid in full or released; and (b) WFSL will pay to Cattles either the Plan A Payment or Plan B Payment(as the case may be).
6.2 In September 2010, the Cattles Board and the WFSL Board revised the operating guidelines which apply generally toissues where there are potential conflicts between those companies.
6.3 The operating guidelines include procedures to ensure that information in relation to matters where the interests of Cattlesand WFSL may conflict is kept confidential to the relevant board and/or the relevant independent directors, and appropriateprocedures in relation to the conduct of board meetings and the passing of resolutions at those board meetings.
6.4 Freshfields is the principal legal adviser to Cattles and its board and is legal adviser to WFSL and other group companiesand their respective boards. LG is the independent conflicts counsel for Cattles and its board. In addition, the directors ofboth Cattles and WFSL, in their personal capacities, are advised by SNR Denton UK LLP.
6.5 As part of those operating guidelines, the board of directors of each of Cattles and WFSL established a separatecommittee to consider the compromise of Cattles claims against WFSL, the Plan A Payment and the Plan B Payment.
6.6 The members of the Cattles committee are:(a) Frank Dee;(b) Robert East;(c) Paul Felton-Smith;(d) David Haxby; and(e) Alan McWalter.
6.7 LG is the legal adviser to Cattles and the Cattles committee in relation to the compromise of Cattles claims againstWFSL, the Plan A Payment and the Plan B Payment and the Litigation Protocol.
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6.8 The members of the WFSL committee are:(a) Jamie Drummond Smith;(b) David Lovett; and(c) Margaret Young.
6.9 Freshfields is the legal adviser to WFSL and the WFSL committee in relation to the compromise of Cattles claimsagainst WFSL, the Plan A Payment and the Plan B Payment.
6.10 The two committees and their respective advisers agreed and complied with a protocol governing their negotiations inrelation to these matters, the key elements of which are set out below.
6.11 Information that was relevant to the decision of the Cattles committee and of the WFSL committee was provided to bothcommittees.
6.12 The WFSL committee and its advisers discussed with the representatives of certain of the key financial creditors theamount and terms of the Plan A Payment and the Plan B Payment. Following this, the WFSL committee, on behalf of WFSL,made an offer to the Cattles committee in relation to the Plan A Payment and the Plan B Payment.
6.13 Upon receipt of this offer, the Cattles committee and its advisers considered the amount and terms of the Plan APayment and the Plan B Payment.
6.14 With respect to the Plan B Payment, which, as set out above, is payable in circumstances where Cattles entersadministration pursuant to Plan B, the Cattles committee considered the amount and terms of that offer with representativesof the potential joint administrators of Cattles. Those representatives confirmed that the amount and terms of the Plan BPayment were likely to be acceptable to the potential joint administrators if they were appointed as administrators of Cattlespursuant to Plan B.
6.15 Following these discussions, the three independent directors of Cattles (being David Haxby, Alan McWalter and RobertEast), on behalf of Cattles, indicated that the offer from WFSL in relation to the Plan A Payment and the Plan B Paymentwould be acceptable as part of the Restructuring.
Giving up the Liquidator Actions for the Plan B Payment6.16 The negotiation process described above was designed to ensure that, from the point of view of Cattles and CattlesScheme Creditors, the Plan A Payment and the Plan B Payment would be appropriate in the circumstances in which theywould be made.
6.17 The Liquidator Actions would not be available either in Plan A or in Plan B until any such time as Cattles were to beplaced into liquidation. The question therefore arises whether the benefit obtained for Cattles by the Plan A Payment or thePlan B Payment would be appropriate in the circumstances in which the payments would be made, in view of the fact that ineach case the Liquidator Actions would not be available unless and until Cattles were to be placed into liquidation.Specifically, the questions which fall to be considered are:(a) Question 1: if Plan A were to be implemented, would the benefit to Cattles arising from the Plan A Payment be a
benefit for which it would in the circumstances be appropriate to give up any potential Liquidator Actions until anysuch time as Cattles were to be placed into liquidation?; and
(b) if Plan B were to be implemented:(i) Question 2: would the differential between the Plan A Payment and the Plan B payment (which would be
between £10 million and £19 million) appropriately reflect the incrementally smaller benefit that is expected tobe conferred on WFSL and WFSL Scheme Creditors under Plan B as compared to Plan A?; and
(ii) Question 3: would the benefit to Cattles arising from the Plan B Payment be a benefit for which it would in thecircumstances be appropriate to give up any potential Liquidator Actions until any such time as Cattles were tobe placed into liquidation, while (because Cattles would be in administration) obtaining the benefit of anypotential Administrator Actions?
6.18 As to Questions 1 and 3, it is unlikely that any potential Liquidator Actions would be worth more than the amount of thePlan A Payment (£49 million), or any amount within the range that the Plan B Payment may represent (£33 million or £3039 million). As explained below, Cattles is not aware of any such potential claims that would be successful, and any suchclaims would be likely to be against individuals who do not have assets to the value of £49 million in any event. Thereforeeach of the Plan A Payment and the Plan B Payment almost certainly represent a benefit to Cattles and Cattles Scheme
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Creditors for which it would in the circumstances be appropriate to give up any potential Liquidator Actions until any suchtime as Cattles were to be placed into liquidation.
6.19 If Plan A fails and Plan B is implemented, then Cattles and its creditors will have the benefit of the AdministratorActions, because Cattles will be in administration, but will have given up the Liquidator Actions (at least until anyliquidation). However, if Plan B is implemented, then Cattles will have given up the Liquidator Actions for between£10 million and £19 million less than it would have done under Plan A (being the range of potential difference between thePlan A Payment and the Plan B Payment). Question 2 goes to whether the Liquidator Actions might be worth that.
6.20 Cattles has been legally advised, including in relation to the conduct of its directors and former directors, as to the legalimplications of the problems with the Welcome Finance impairment practices since those problems were discovered early in2009. Cattles has not been advised of any evidence that Liquidator Actions are available against Cattles directors or formerdirectors. If it transpired that the Liquidator Actions were potentially available against any of Cattles directors or formerdirectors, then it must be kept in mind that they would be actions against individuals, who may or may not have the benefit ofliability insurance, and any such insurance may well not respond to liability for one of the Liquidator Actions.
6.21 It should also be noted a liquidator or administrator is duty bound to investigate a company s affairs in the period up toits insolvency. If the Cattles Creditor Scheme and the WFSL Scheme are implemented, it is unlikely that there will be aninvestigation by a liquidator or administrator. However, the Outwards Claims for both Cattles and WFSL will be investigatedand, if appropriate, pursued by the Scheme Supervisors/the Outwards Claims Manager (who will be given full access to thebooks and records of Cattles and WFSL as part of this process). This issue is discussed further below but it is important tonote that in both cases, the relevant person is a licensed insolvency practitioner, completely independent of both boards, whowill be taking legal advice from a leading firm of solicitors (Berwin Leighton Paisner) and a Queen s Counsel.
7. THE BENEFITS OF THE RESTRUCTURING
7.1 In order for either Plan A or Plan B to become effective, Scheme Creditors will need to approve (in the requiredmajorities) at least one of those plans by voting in favour of the relevant Scheme in the Cattles Scheme Meeting or the WFSLScheme Meeting. In order for Scheme Creditors to decide whether to vote in favour of the Cattles Creditor Scheme or theWFSL Scheme, they will need to determine for themselves whether they believe the relevant Scheme will obtain a betterresult for them than the alternative to the relevant Scheme becoming effective would provide. As stated at page 5, SchemeCreditors should consider the information in this Explanatory Statement in reaching this decision, and they should seekindependent advice if they are unsure as to the best course of action.
7.2 The Cattles Board and the WFSL Board have each obtained advice from the Group s financial adviser, KPMG, as to thelikely effect on returns to Scheme Creditors if: (i) Plan A is implemented; (ii) Plan B is implemented; and (iii) neither Plan Anor Plan B is implemented with the result (the Cattles Board and the WFSL Board respectively expect) that it will benecessary to place Cattles into liquidation and to place WFSL into administration. The Cattles Board and the WFSL Boardhave considered the advice they have received and have formed the opinions summarised at paragraph 7.3 below. The basisof these opinions is referred to in this Explanatory Statement as the Insolvency Analysis . Important caveats, limitations anduncertainties relating to the Insolvency Analysis can be found at Appendix F.
7.3 In summary, as further explained below, the Insolvency Analysis indicates that:(a) Cattles Scheme Creditors would be likely to receive a better return on their Scheme Claims if Plan A were to be
implemented than they would be likely to receive in respect of those claims if Plan A were not to be implemented butPlan B were to be implemented;
(b) Cattles Scheme Creditors would be likely to receive a better return on their Scheme Claims if Plan B were to beimplemented than they would receive in respect of those claims if neither Plan A nor Plan B were to be implementedand Cattles was placed into liquidation; and
(c) WFSL Scheme Creditors would be likely to receive a better return on their Scheme Claims if Plan A or Plan B were tobe implemented than they would receive in respect of those claims if neither Plan A nor Plan B were to beimplemented and WFSL was placed into administration.
7.4 Under the Insolvency Analysis, the key benefits of the proposed Restructuring (whether implemented by Plan A or PlanB, and subject to what is said in this paragraph 7 about the relative benefits of the two plans) are, in summary, that theproposed Restructuring:(a) would deliver a better return to the Cattles Scheme Creditors and the WFSL Scheme Creditors than would formal
insolvency processes (other than the administration of Cattles contemplated in Plan B) involving either Cattles orWFSL, or both;
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(b) would avoid prolonged uncertainty as to the existence and value of Scheme Claims, when compared with the positionin a formal insolvency process involving either Cattles or WFSL, or both; and
(c) would reduce the delay that Scheme Creditors would experience in waiting to be paid in respect of their SchemeClaims, when compared to the position that would be the case in a formal insolvency process involving either Cattlesor WFSL or both.
7.5 Before explaining the factors on which the Insolvency Analysis is based, it is necessary to explain the alternative optionsand their implications for Cattles Scheme Creditors and WFSL Scheme Creditors.
7.6 The Insolvency Analysis indicates that:(a) if either or both of the Cattles Creditor Scheme and the Cattles Shareholder Scheme does not become effective (in
which case Plan A would fail), then Cattles financial circumstances are such that it would have no reasonableprospect of avoiding a formal insolvency process;(i) if the WFSL Scheme were to become effective but the Cattles Creditor Scheme did not become effective (i.e. if
Plan B were to be implemented), then the Cattles Board expects the formal insolvency process in respect ofCattles to be administration; and
(ii) if neither the Cattles Creditor Scheme nor the WFSL Scheme were to become effective then, in view of Cattlesfinancial circumstances, the Cattles Board expects the formal insolvency process to be liquidation rather thanadministration; and
(b) if the WFSL Scheme does not become effective (in which case Plan B fails), then WFSL s financial circumstances aresuch that it would have no reasonable prospect of avoiding a formal insolvency process and that process would likelybe administration.
7.7 In any case, if Cattles or WFSL (or both) enter a formal insolvency process, their potential Scheme Creditors would stillreceive a share of the assets available for distribution from Cattles or WFSL, as appropriate, which would be proportionate tothe shares of other creditors of the relevant company. However, as is explained further below, the Insolvency Analysisindicates that the returns to Scheme Creditors would be lower, and later, than they would be if Plan A or Plan B wereimplemented.
Administration of Cattles7.8 Under an administration, as part of Plan B the administrator would be appointed by the Court pursuant to anadministration order. The administrator would take charge of the relevant company s affairs while the administration orderwas in force, and would displace the company s directors from their management functions (although the administrator coulddelegate some of his powers to the directors).
7.9 The administration order would impose a moratorium on creditors taking action against the relevant company. That is, theorder would prevent creditors from taking steps to enforce security (had any been granted), or to repossess goods, and wouldprevent any other proceedings from being commenced or continued against the company.
7.10 The administrator is expected to assume responsibility for agreeing the existence and value of claims with creditors andfor distributing the assets of the company to creditors according to their proportionate rights against the company. Creditorswould receive a dividend which is usually expressed in terms of pence in the pound . The administrator would beresponsible for agreeing the existence and value of claims with creditors and for distributing the assets of the company tocreditors pro rata to their rights against the company. An administrator would invite all creditors to submit a proof of debtand would be likely to want to finalise the agreed position in relation to all claims before making any distributions, and thiscould lead to a substantial delay in the making of distributions.
7.11 The administration would be expected to deliver a better return to creditors than a liquidation would. This would be onthe basis that in Plan B, the Plan B Payment represents a benefit to the creditors that would not otherwise be available. Inaddition, the administration would allow for a more orderly, and therefore efficient, realisation of assets than would aliquidation. In a more orderly realisation of assets more value is retained and can be returned to creditors.
Liquidation of Cattles7.12 Under a liquidation, a liquidator would be appointed following a winding up order being made by the Court or thecompany being placed into liquidation by its shareholders or creditors. The liquidator would take charge of the company saffairs in order to collect in, realise and distribute to its creditors its assets and would be able to exercise certain powers (e.g.reviewing transactions previously entered into by the company) towards this end.
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7.13 The commencement of compulsory liquidation would automatically impose a moratorium on creditors commencing orcontinuing proceedings against Cattles. In the case of a voluntary liquidation the court may order a moratorium preventingproceedings from being commenced or continued against Cattles.
7.14 When the assets of a company have been realised and the liquidation is otherwise complete, the liquidator wouldproceed to distribute the available funds to creditors. Creditors would receive a dividend which is usually expressed in termsof pence in the pound . The liquidator would be responsible for agreeing the existence and value of claims with creditorsand for distributing the assets of the company to creditors pro rata to their rights against the company. A liquidator wouldinvite all creditors to submit a proof of debt and would be likely to want to finalise the agreed position in relation to allclaims before making any distributions, and this could lead to a substantial delay in the making of distributions.
7.15 Once the distributions are complete, the liquidator would then proceed formally to dissolve the company. Whereas in anadministration the administrator can allow a business to continue to generate income for the benefit of creditors or to enable asale as a going concern, a liquidation would proceed on the basis that the business must be wound up which limits theprospect of the liquidator achieving a sale of the business as a going concern. The employees may also have their contractsterminated. It is for this reason also that the level of creditors returns in a liquidation is often lower than in an administration.
The impact of an administration of Cattles in Plan B or a liquidation in the event that Plan A and Plan B both fail
7.16 The Insolvency Analysis contemplates an implementation of Plan B in which Cattles enters administration on31 December 2010, or a failure of both Plan A and Plan B following which Cattles enters liquidation on 31 December 2010.The analysis is based on draft management accounts as at 30 September 2010 and consideration of Cattles remainingrealisable assets (excluding Outward Claims). The Cattles Board is not aware of any events subsequent to 30 September 2010which would materially alter potential realisations and the Insolvency Analysis does not account for such events.
7.17 As stated above, Cattles assets primarily comprise:(a) in an administration as part of Plan B, up to £39 million, to be paid by WFSL to Cattles (i.e. the Plan B Payment);(b) approximately £5 million projected to be received by the intended future disposal of a property owned by Cattles
Properties (Ruddington), which is currently occupied by WFSL; and(c) the proceeds of any successful Outward Claims that Cattles may have,
in each case subject to the costs of administering the Cattles Creditor Scheme and realising Cattles assets.
7.18 In the event that Cattles were placed into liquidation, it is assumed that its cash held in bank accounts wouldimmediately be set off against Cattles debt to its banks. Also, no value can prudently be ascribed to any Outward Claims forthese purposes because of the significant uncertainty as to the likelihood of their success and as to the amount andrecoverability of damages were they to succeed.
7.19 Cattles interest in Cattles Properties (Ruddington) relates to a freehold property. The value of this property could berealised but there would be likely to be a negative impact on its realisable value if it were sold in the context of a formalinsolvency process such as administration. In any event, a significant part or potentially all of the value recoverable byCattles would likely be required to meet the costs of a formal insolvency.
7.20 In the event Plan A were to be implemented, the Cattles Intercompany Claim would realise £49 million. In the event thatPlan A failed and Plan B were to be implemented, that subordinated intercompany debt would realise up to £39 million (i.e.the amount of the Plan B Payment). In an administration or liquidation of Cattles in the event that neither Plan A nor Plan Bhad been implemented, no value would be ascribed to this asset.
7.21 The impact of the above analysis applied to Cattles assets is that:(a) if Plan A were to be implemented, then there would be at least the amount of the Plan A Payment (£49 million), before
costs, available for distribution to Scheme Creditors;(b) if Plan A were to fail and Plan B were to be implemented, then the amount available for distribution to creditors of
Cattles would be at least the amount of the Plan B Payment (£30 39 million), before costs; and(c) if both Plan A and Plan B were to fail, and Cattles were placed into liquidation, then the funds available (from asset
realisations, net of costs of the liquidation process) for distribution to creditors would be nil or very limited.
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Comparison of estimated outcomes Cattles
Plan A Plan B Insolvency
p in the £ 2.2 1.3-1.7 0.0
7.22 Subject to the caveats and assumptions set out at Appendix F, the Insolvency Analysis indicates that the return toCattles unsecured creditors is likely to be in the region of 2.2 pence in the pound in Plan A, 1.3-1.7 pence in the pound inPlan B, and nil pence in the pound in a liquidation of Cattles. The Insolvency Analysis in relation to Plan B is based on theassumption that the Plan B Payment received by Cattles would be the maximum amount, i.e. £39 million.
7.23 The estimated returns included in the Insolvency Analysis specifically exclude:(a) any discount to reflect the delay that is likely before payment and the time value of money;(b) any cash balances held at banks which it is assumed will be set off by Cattles banks if Plan A fails;
(c) the Liquidator Actions and the Administrator or Liquidator Actions (in scenarios in which they are not temporarilygiven up);
(d) any returns to Cattles Scheme Creditors and WFSL Scheme Creditors from other Group companies against which theyhave claims in relation to Guarantor Obligations;
(e) any adjustment to account for potential claims against Cattles and the liabilities and costs arising therefrom (seeparagraph 3 of Part 6 below);
(f) the potential value to Cattles of any Outward Claims; and(g) any returns to Cattles Scheme Creditors from other Group companies against which they have claims in relation to
Guarantor Obligations.
Conclusion as to the effect of formal insolvency processes on Cattles Scheme Creditors7.24 In light of the considerations set out above, the Cattles Board believes that the Cattles Creditor Scheme is in the bestinterests of Cattles Scheme Creditors, because it would provide a better return for them than would the first alternative (anadministration of Cattles in the context of Plan B), and because it would provide an even better result for them than thesecond alternative (a liquidation of Cattles following the failure of both Plan A and Plan B).
The impact of an administration of WFSL in the event that Plan A and Plan B both fail7.25 The Insolvency Analysis contemplates that an administrator of WFSL would be likely to consider that the most effectivemethod of realising the assets of WFSL would be to collect out its loan book i.e. obtain repayments of loans fromcustomers to whom the Welcome Finance business has provided credit facilities rather than to sell those receivables. TheInsolvency Analysis also contemplates that an administrator of WFSL would seek to realise the value in the Shopacheckbusiness division by selling that business division.
7.26 The principal concern in relation to the realisation of assets for distribution to creditors in the event that WFSL is placedinto administration is what is sometimes known as the insolvency delta . The insolvency delta is a reference to the perceivedeffect that the fact of entering a formal insolvency process has by way of a material adverse impact on the financialcircumstances of a company. In the context of a company whose financial circumstances depend largely on its ability tocollect loans made to consumers, the insolvency delta is believed to be particularly significant. This is because entering aformal insolvency process would lead to adverse press coverage, which in turn may drive a change in customers attitudetowards repayment and also cause uncertainty for collection staff, whose performance is critical to the success, and survival,of the business. It is believed that these adverse affects can contribute to a downward spiral in which the costs of collectingreceivables increases while the value of the loan book as a collectable asset decreases.
7.27 It is to be expected that any administrator appointed to WFSL would attempt to mitigate the effect of the insolvencydelta by communicating with borrowers in an effort to convey the message that they must continue to make repaymentsnotwithstanding that the company has been placed into administration.
7.28 It is very difficult to predict the effect of the insolvency delta in a particular case, and various factors could affect it. Forexample, it is possible that the maturity of WFSL s loan portfolio (i.e. many of the borrowers are nearing the end of their
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repayments, having been repaying their loans for some time) will exacerbate the effect of the delta. Therefore it is possiblethat the Insolvency Analysis underestimates its effect and that the estimated returns for WFSL Scheme Creditors in the eventthat both Plan A and Plan B fail (see paragraph 7.32 of Part 5 below) are too high.
7.29 There are other ways in which an administration might have an adverse effect on WFSL s realisation of its assets. Oneissue that is similar to the insolvency delta concern is the impact of WFSL being in administration regarding its planned saleof the Shopacheck business. It is possible that the likely press coverage of an administration of WFSL would create confusionand uncertainty in the business which would make a sale of Shopacheck more difficult or at least decrease its realisable value.
7.30 It is also possible that an administration of WFSL would have a direct practical effect on its operations. WFSL scollections infrastructure would need to remain in place for some time, but if the company were to be placed intoadministration it could be difficult to retain the collections staff on whom the business relies.
7.31 In estimating the impact of an administration on the return to WFSL Scheme Creditors, the Insolvency Analysis assumesthat all of WFSL s cash balances would be set off by its banks when it enters administration, and so would not be available tobe distributed to WFSL s other creditors. Beyond this, it is difficult to make predictions about the realisable value of WFSL sassets in an administration, because it is so difficult to predict the effect of the insolvency delta. However, subject to thatuncertainty, the Insolvency Analysis does attempt to estimate likely returns, and these may be compared with likely returnsunder Plan A and under Plan B.
Comparison of estimated outcomes WFSL
Plan A Plan B Insolvency
p in the £ 25 20 22 14
7.32 Unlike an administration, the WFSL Scheme is not expected to have a material impact on collections or on the ultimaterealisable value of Shopacheck. Subject to the caveats and assumptions set out at Appendix F, the Insolvency Analysisindicates that the return to WFSL s unsecured creditors is likely to be in the region of 25 pence in the pound in Plan A, 20 22pence in the pound in Plan B, and 14 pence in the pound if WFSL is placed into administration.
7.33 The estimated returns in the Insolvency Analysis specifically exclude:(a) any discount to reflect the delay that is likely before payment and the time value of money;(b) (in the event that both Plan A and Plan B fail, and WFSL is placed into a formal insolvency process) any cash balances
held at banks which it is assumed will be set off by WFSL s banks;(c) any adjustment to reflect the fact that the Employee Retention Fund is established;(d) any returns to Cattles Scheme Creditors and WFSL Scheme Creditors from other Group companies against which they
have claims in relation to Guarantor Obligations;(e) any adjustment to account for potential claims against WFSL and the liabilities and costs arising therefrom (see
paragraph 3 of Part 7 below);(f) any surplus of cash that might exist pursuant to the PPI Settlement Agreement; and(g) any proceeds from any Outward Claims.
Conclusion as to the effect of formal insolvency processes on WFSL Scheme Creditors7.34 The Insolvency Analysis indicates that, under Plan A, the WFSL Scheme Creditors would be likely to obtain a return ontheir Scheme Claims (estimated to be 25 pence in the pound).
7.35 Subject to the caveats and assumptions set out at Appendix F, the Insolvency Analysis indicates that, if Plan A fails andPlan B is implemented, the WFSL Scheme Creditors would be likely to obtain a smaller return on their Scheme Claims,which is estimated to be between 20 and 22 pence in the pound. As mentioned above, this includes an assumption that thePlan B Payment made by WFSL to Cattles would be the maximum amount, i.e. £39 million.
7.36 Finally, the Insolvency Analysis indicates that, if neither Plan A nor Plan B is implemented, and WFSL is placed intoadministration, the WFSL Scheme Creditors would be likely to obtain an even smaller return on their Scheme Claims, whichis estimated to be 14 pence in the pound.
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7.37 Therefore, the WFSL Board believes that the WFSL Scheme is in the best interests of WFSL Scheme Creditors, becauseit would obtain a better return for them than they would obtain in an administration of WFSL.
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PART 6THE CATTLES CREDITOR SCHEME
1. OVERVIEW
1.1 Cattles proposes to enter into the Cattles Creditor Scheme with the Cattles Scheme Creditors pursuant to Part 26 of theAct. The key terms of the Cattles Creditor Scheme are summarised below.
1.2 A copy of the Cattles Creditor Scheme is set out in full at Section 2 of this document.
1.3 The Cattles Creditor Scheme will compromise the Scheme Liabilities of Cattles. Scheme Liabilities include most ofCattles liabilities, including those owed by Cattles to its financial creditors but will not affect rights of creditors in respect ofExcluded Liabilities (Schedule 1).
1.4 Assuming the Cattles Creditor Scheme is sanctioned and becomes effective:
(a) the value of each Cattles Scheme Creditor s claim will be agreed and/or determined through the claims submission anddetermination process set out in the Cattles Creditor Scheme;
(b) each Cattles Scheme Creditor (unless they are a net debtor) will receive pro rata payments in respect of theirdetermined claim (each of which is known as a Scheme Payment); and
(c) on completion of the Cattles Creditor Scheme, each Cattles Scheme Creditor will release Cattles from all SchemeLiabilities.
2. WHO WILL BE AFFECTED BY THE CATTLES CREDITOR SCHEME?2.1 The Cattles Creditor Scheme will affect any person who is a creditor of Cattles in respect of a Scheme Liability.
2.2 A Scheme Liability includes any Liabilities owed by Cattles to:(a) the Lenders, the Bondholders, the Noteholders and the Hedging Counterparties under the Facilities, the Bonds, the
Notes and the Hedging Arrangements respectively; and(b) the Pension Trustee, including any Section 75 Debt.
2.3 Scheme Liabilities also include the potential other Liabilities described in paragraph 3 below.
2.4 Scheme Liability does not, however, include the following liabilities (known in the Cattles Creditor Scheme as ExcludedLiabilities ):(a) any ordinary course business liability of Cattles: (i) properly incurred after the Record Date of the Cattles Creditor
Scheme (including, without limitation, the funding of any Outward Claims by Cattles); or (ii) that may arise after theRecord Date as a result of an obligation properly incurred by Cattles before the Record Date and adopted by Cattlesafter the Effective Date;
(b) all Liabilities of Cattles to employees, directors or officers of Cattles or other Group companies (but not including theseven named former senior employees of the Group, some of whom were former directors of Cattles) in respect of theirwages, bonuses, expenses, other remuneration, pension contributions, contractual indemnities, notice pay (includingpay in lieu of benefits due during any notice period), redundancy pay, and payments due under staff retentionarrangements or performance incentive arrangements;
(c) any Liability of Cattles for a fine or criminal or regulatory penalty;(d) any Liability of Cattles to Her Majesty s Revenue & Customs in respect of:
(i) corporation tax (including corporation tax on chargeable gains) for the years ending 31 December 2008,31 December 2009 or 31 December 2010;
(ii) value added tax;(iii) PAYE and National Insurance contributions (both employers and employees ) relating to the month in which the
Effective Date occurs and the preceding month; and(iv) withholding tax due in respect of interest payments made by WFSL within three months prior to the Effective
Date;(e) any Liability of Cattles under a lease, other than certain specified Liabilities which relate to leases;
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(f) provided the aggregate amount paid in respect of Liabilities of Cattles covered by this clause 9.4(f) (excluding theLiabilities of Cattles to any legal, financial or other professional advisers) does not exceed £1 million any Liability to acreditor of Cattles as consideration for the provision of goods or services to Cattles or another member of the Groupthat remains unpaid as at the Effective Date (specifically including such liabilities owed to the Excluded TradeCreditors set out in Schedule 9);
(g) any payments of adverse costs awards;(h) any payments to the Scheme Supervisors under the Cattles Creditor Scheme;(i) any Liability of Cattles to any local authority in respect of business rates;(j) fees and expenses of all agents under the Facilities Agreements or under the Agency Arrangements;(k) certain Liabilities of Cattles under the Pension Compromise;(l) certain monthly fees, costs and expenses (including adviser fees) of the Co-ordinating Committee which have been
incurred on or before the Effective Date; and(m) any payments properly made by Cattles under the Cattles Creditor Scheme.
3. POTENTIAL OTHER LIABILITIES
3.1 Apart from the financial creditors of Cattles, the Cattles Creditor Scheme will also compromise those potential Liabilitiesof Cattles that may have arisen as a result of the recent history of the Group.
3.2 As explained above, there was a breakdown of internal controls which resulted in the Group s impairment policies beingapplied incorrectly. In particular, certain of the former executive directors of Cattles and certain of the former seniorexecutives of WFSL appear to have, over a period of time, provided incomplete and misleading information and documentsand/or failed to escalate matters of concern relating to the impairment of the Group s loans to the full Cattles Board and theaudit committee of the Cattles Board. The provision of such incomplete and misleading information and documents, inconjunction with the withholding of certain other information and documents, combined to mask the true state of the loanbook of the Group and, in particular, the correct level of arrears within that book.
3.3 Accordingly, a number of the Public Statements made by Cattles (which include Cattles 2008 rights issue prospectus, itsprospectuses for the issue of the Bonds, its annual and half-yearly reports, its interim management statements and its regularstock exchange announcements) contained inaccurate financial and other information. It is possible that investors (includingcurrent and former holders of the Shares, Notes and Bonds) that invested in the debt and/or equity securities of Cattles mayhave a claim against Cattles and/or WFSL (see paragraph 3 of Part 7 below) for loss that they may have suffered. Suchclaims could include claims at common law and under FSMA.
4. CONDITIONS TO THE CATTLES CREDITOR SCHEME BECOMING EFFECTIVE
4.1 The Cattles Creditor Scheme will become effective and legally binding on Cattles and the Cattles Scheme Creditors, inaccordance with its terms on the date on which an office copy of the Cattles Court Order is delivered to the Registrar ofCompanies of England and Wales for registration.
4.2 An office copy of the Cattles Court Order will not be delivered to the Registrar of Companies of England and Wales forregistration unless and until:(a) the Court makes orders sanctioning the Cattles Shareholder Scheme and confirming the proposed capital reduction and
the directors of Cattles have confirmed that, subject to no Insolvency Event (as defined in the Cattles ShareholderScheme) having occurred in relation to Cattles, such Court orders will be delivered to the Registrar of Companies ofEngland and Wales for registration immediately upon the WFSL Scheme becoming effective; and
(b) the WFSL Scheme becoming effective in accordance with its terms.
4.3 The Cattles Creditor Scheme will not become effective if:(a) either of the above conditions has not been satisfied; or(b) a Pre-Effective Date Insolvency Event (as defined in the Cattles Creditor Scheme) has occurred in relation to Cattles,
on or before 31 May 2011.
4.4 Provided all of the above conditions are satisfied, Cattles expects that the Cattles Creditor Scheme will become effective,on or about 22 February 2011 (referred to in the Cattles Creditor Scheme as the Effective Date ). The Cattles Creditor
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Scheme will only become effective when an office copy of the Cattles Court Order is delivered to the Registrar of Companiesof England and Wales for registration.
5. WHAT HAPPENS WHEN THE CATTLES CREDITOR SCHEME BECOMES EFFECTIVE?
Notice of the Effective Date and distribution of Claim Forms5.1 Within two weeks of the Effective Date, Cattles will notify Cattles Scheme Creditors that the Cattles Creditor Scheme hasbecome effective. This will be done by placing a notice on the Scheme Website, by submitting a notice into the ClearingSystems, by sending a notice to each person that Cattles believes may be a Cattles Scheme Creditor and by publishing anotice in the Scheme Publications. These notices will invite Cattles Scheme Creditors to submit their claims in the CattlesCreditor Scheme and set out the Bar Date for the receipt of such claims.
5.2 The notice will invite Cattles Scheme Creditors to enter the details of their claims against Cattles on an Electronic ClaimForm to be found at the Scheme Portal (www.zcinfoportal.com). Cattles Scheme Creditors may also request a Paper ClaimForm from the Scheme Supervisors who will send a copy of the Paper Claim Form to the Scheme Creditor as soon as isreasonably practicable after receipt of the request.
5.3 As explained in more detail below, the purpose of the Electronic Claim Form and Paper Claim Form is to allow eachCattles Scheme Creditor to set out its claim against Cattles in respect of Scheme Liabilities.
Stay of Proceedings and Discharge of Scheme Liabilities5.4 Subject to a small number of limited exceptions, from the Effective Date, Cattles Scheme Creditors will not be permittedto bring proceedings against Cattles in respect of any Scheme Liabilities.
6. COMPLETION AND SUBMISSION OF THE CLAIM FORMS
6.1 The Cattles Creditor Scheme sets out a process for the determination of those claims submitted by Cattles SchemeCreditors prior to the Bar Date.
6.2 Apart from the claims of the Pension Trustee and certain financial creditors of Cattles (for which see paragraph 8.3below), for all claims in the Cattles Creditor Scheme a Cattles Scheme Creditor must complete an Electronic Claim Form orPaper Claim Form setting out the details of the Scheme Liabilities it believes it is or will be owed by Cattles. Such claims,once submitted, are referred to in the Cattles Creditor Scheme as Submitted Scheme Claims .
6.3 Each Claim Form should be completed in accordance with the instructions incorporated in it and should include (withoutlimitation):(a) the identity of the Cattles Scheme Creditor submitting the claim;(b) a description of the nature of each Submitted Scheme Claim and how it arose;(c) the value of the Submitted Scheme Claim as at the Effective Date;(d) the legal basis of the Liability of Cattles; and(e) any other facts which would assist the Scheme Supervisors in considering the Submitted Scheme Claim.
6.4 Cattles Scheme Creditors should provide relevant documentation in support of their Submitted Scheme Claims with theirElectronic Claim Forms and Paper Claim Forms.
7. THE BAR DATE
7.1 Claim Forms, together with any supporting documentation, must be sent to the Scheme Supervisors to arrive on or beforethe Bar Date.
7.2 The Bar Date is the first Business Day falling three months after the Effective Date. Currently, the expected date of theBar Date is 22 May 2011. This, however, may change as it depends on the date of the Effective Date, which itself may besubject to change. As noted above, Cattles Scheme Creditors will be notified of the Bar Date with the notice of the EffectiveDate described at paragraph 5.1 above. Cattles Scheme Creditors may revise their Submitted Scheme Claims, as set out ontheir Electronic Claim Forms and Paper Claim Forms, up to but not after the Bar Date.
7.3 A Cattles Scheme Creditor will be entitled to a payment under the Cattles Creditor Scheme only in respect of SubmittedScheme Claims received by the Scheme Supervisors on or before the Bar Date provided such Submitted Scheme Claim is
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determined to be an Ascertained Scheme Claim for the purposes of the Cattles Creditor Scheme. A Submitted Scheme Claimreceived by the Scheme Supervisors after the Bar Date will not qualify for a payment under the Cattles Creditor Scheme.
8. DETERMINATION OF SCHEME CLAIMS
8.1 The Scheme Supervisors will review each Electronic Claim Form and Paper Claim Form and any supportingdocumentation to consider whether:(a) details of the Scheme Liabilities are adequately supported by the documentation provided with the Claim Forms;(b) details of the quantum of the Scheme Liabilities are sufficient, and the basis of the calculation is reasonable and has
been accurately applied; and(c) there is any set-off to be applied to the claim.
8.2 Following their review, the Scheme Supervisors shall notify the relevant Cattles Scheme Creditor that their SubmittedScheme Claim either:(a) has been agreed, and that after taking into account any set-off, their total claim will then become an Ascertained
Scheme Claim. Until a Submitted Scheme Claim becomes an Ascertained Scheme Claim it is an UnascertainedScheme Claim; or
(b) has not been agreed and is being disputed by the Scheme Supervisors. In those circumstances their claim will become aDisputed Scheme Claim.
8.3 Cattles is aware of, and has agreed the quantum of, claims held by certain of the Cattles Scheme Creditors, in particularcertain of its financial creditors. Such Cattles Scheme Creditors will not be obliged to submit a claim in the Cattles CreditorScheme. Instead these previously ascertained amounts shall (subject to the accrual of interest and other adjustments)) formthe agreed basis of the relevant Scheme Creditor s Ascertained Scheme Claim.
8.4 Claims shall be valued in accordance with Rules 2.85 to 2.89 of the Insolvency Rules 1986. These are the valuationprovisions that would apply in an administration. They include the operation of mandatory set-off, which would apply in anadministration in which distributions were being made. As a result, what is due from each party to the other in respect of theirmutual dealings shall be set off against the sums due from the other.
9. DEALING WITH DISPUTED SCHEME CLAIMS
9.1 If a claim cannot be agreed by the Scheme Supervisors, in certain circumstances a Cattles Scheme Creditor can apply tothe Court for it to resolve the dispute over the existence or value of the claim. This approach is intended to mirror the abilityof a creditor in an administration to appeal an administrator s decision. This form of dispute resolution is intended to be moreflexible and timely than traditional litigation in the Court.
9.2 The Court will determine the existence and value of the Disputed Scheme Claims and that will become the CattlesScheme Creditor s Ascertained Scheme Claim. If costs are awarded against the Cattles Scheme Creditor as a result of theProceedings they shall be payable to Cattles in full. If costs are awarded against Cattles, such costs shall be payable to therelevant Cattles Scheme Creditor in full.
10. THE COMPANY S FORECAST
10.1 Following the Effective Date, Cattles will prepare a draft forecast estimating the total cash costs that it will have to payand any anticipated receipts from the Effective Date until the expected date of Cattles dissolution. This forecast (which isreferred to in the Cattles Creditor Scheme as the Company s Forecast ) will not include: (i) payments to be made to CattlesScheme Creditors under the Cattles Creditor Scheme; (ii) the costs associated with the Outward Claims; and (iii) the SchemeSupervisors remuneration, expenses and disbursements.
10.2 The Scheme Supervisors will, in consultation with the Creditors Committee, then attempt to agree the draft Company sForecast. If ultimately it cannot be agreed, the Scheme Supervisors are empowered to call for any one or more of the Boardof Cattles to resign. If that occurs, within five Business Days (or such longer period as it takes to find and validly appointreplacement director(s)) the Board shall resign and the Scheme Supervisors, in consultation with the Creditors Committee,will appoint new members to the Board. In those circumstances, the new Board will be asked to agree the Company sForecast.
10.3 The Scheme Supervisors, in consultation with the Creditors Committee, can from time to time call for Cattles toprepare a new or revised Company s Forecast for the period from the date of the request until the likely date for thedissolution of the company.
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11. SCHEME PAYMENTS
11.1 Following the determination of their Submitted Scheme Claim, each Scheme Creditor who has an Ascertained SchemeClaim will be entitled to receive Scheme Payments in respect of their Ascertained Scheme Claim (unless they are a net debtorof Cattles).
11.2 Each Quarter Date, Cattles shall provide a report (referred to in the Cattles Creditor Scheme as the Cash Report ) to theScheme Supervisors which sets out:(a) the total amount of cash held by Cattles at that Quarter Date; and(b) a revised Company s Forecast or confirmation that the current Company s Forecast does not need updating.
11.3 Within ten Business Days of receipt of the Cash Report, the Scheme Supervisors will consider:(a) the Cash Report;(b) the Company s Forecast;(c) the Scheme Supervisors estimate of the future costs of the Outward Claims including any provision for adverse costs
awards; and(d) the Scheme Supervisors estimate of the future costs of the Scheme Supervisor s remuneration, expenses,
to assess, in consultation with the Creditors Committee, whether to make a distribution under the Cattles Creditor Scheme toCattles Scheme Creditors and the cash available for such distribution. It is at the Scheme Supervisors sole discretion whetherto make a distribution and how much to distribute. The sum they decide to distribute is referred to in the Cattles CreditorScheme as the Net Distributable Assets.
11.4 Following the decision to make a distribution, the Scheme Supervisors shall:(a) aggregate the Net Distributable Assets available at the Quarter Date with all amounts of Net Distributable Assets
determined previously (this aggregated amount is referred to in the Cattles Creditor Scheme as the Cumulative NetDistributable Assets ); and
(b) compare it to the aggregate value of all the Ascertained Scheme Claims and Unascertained Scheme Claims as at thatdate.
11.5 This will allow the Scheme Supervisors to calculate the Payment Percentage for that Quarter Date.
11.6 Following the calculation of the Payment Percentage, each Cattles Scheme Creditor with an Ascertained Scheme Claimshall be entitled to be a paid an amount (i.e. his Scheme Payment) calculated as follows:
(A x B) (C + D)
where:(a) A is the value of that Cattles Scheme Creditor s Ascertained Scheme Claim;(b) B is the Payment Percentage;(c) C is any amount that has already been paid to the Cattles Scheme Creditor in breach of the terms of the Cattles Creditor
Scheme plus any unpaid adverse costs awards that have been awarded against the Cattles Scheme Creditor; and(d) D is the amount of any Scheme Payments previously paid to the Cattles Scheme Creditor.
11.7 Following each subsequent Quarter Date on which the Scheme Supervisors decide to make a distribution, they will carryout the above calculation. If the Payment Percentage has risen since the previous Quarter Date upon which a distribution wasmade, a Cattles Scheme Creditor who qualifies for a payment will be paid the incremental increase as its Scheme Payment.Thus, if the Payment Percentage increases during the lifetime of the Cattles Creditor Scheme, a Cattles Scheme Creditor willrecover a growing percentage of his Ascertained Scheme Claims.
11.8 As noted above, when calculating the Payment Percentage, the Scheme Supervisors will take into account the value ofall Unascertained Scheme Claims. Cattles will create a trust fund, known as the Unascertained Payments Trust Fund. On anyQuarter Date, this will hold sufficient money to pay each holder of an Unascertained Scheme Claim what he would havereceived had his claim become an Ascertained Scheme Claim by that date. This is to ensure that once an UnascertainedScheme Claim is determined under the Cattles Creditor Scheme and becomes an Ascertained Scheme Claim, the relevantCattles Scheme Creditor will catch-up and receive the same percentage of its Ascertained Scheme Claim as those that hadbeen determined and paid earlier.
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12. TREATMENT OF THE PENSION TRUSTEE
12.1 The Pension Trustee s claim against Cattles will not be dealt with through the claims submission process describedabove. Instead its claim will be compromised under the terms of the Pension Compromise. Following the determination of itsclaim it will be entitled to receive Scheme Payments in respect of that claim like any other Cattles Scheme Creditor with anAscertained Scheme Claim.
13. COVENANTS AND SCHEME REVERSION
13.1 Under the Cattles Creditor Scheme, Cattles will give a number of covenants in relation to the ongoing management ofthe business. These covenants are set out in Schedule 10 of the Cattles Creditor Scheme. In summary, these covenants placerestrictions on, among other matters, borrowing money, disposals, liabilities and acquisitions by Cattles going forward.
13.2 Each Quarter Date, Cattles must deliver to the Scheme Supervisors a certificate stating whether any of the covenantslisted in Schedule 10 have been breached since the last Quarter Date or are likely to be breached before the next QuarterDate.
13.3 If the certificate states that a covenant listed in Schedule 10 has been breached since the previous Quarter Date or islikely to be breached in the period prior to the next Quarter Date, the Scheme Supervisors, in consultation with the CreditorsCommittee, shall attempt to agree with Cattles a proposal to remedy or waive the breach.
13.4 If that proposal cannot be agreed, the Scheme Supervisors may, in consultation with the Creditors Committee, call forany one or more of the Cattles Board to resign. If that occurs, within five Business Days (or such longer period as it takes tofind and validly appoint replacement director(s)) the Cattles Board shall resign and the Scheme Supervisors, in consultationwith the Creditors Committee, will appoint new members to the Cattles Board. In those circumstances, the new CattlesBoard will be asked to agree the remedy or waiver proposal.
13.5 In certain circumstances the Cattles Creditor Scheme may be ended early. This is known as a Scheme Reversion. Thefollowing are Scheme Reversion Decision Events:(a) scheme reversion occurring in respect of the WFSL Scheme; and(b) an Insolvency Event occurring in respect of Cattles after the Bar Date.
13.6 If a Scheme Reversion Decision Event occurs, the Scheme Supervisors will call a meeting of Cattles Scheme Creditorsto consider and decide whether to: (i) take no action; (ii) agree any remedial proposals; or (iii) confirm that a SchemeReversion should occur.
13.7 On a Scheme Reversion, the Cattles Creditor Scheme will come to an end and, subject to the exceptions describedbelow, the provisions of the Cattles Creditor Scheme will cease to be binding on both Cattles and the Cattles SchemeCreditors. In particular:(a) all Scheme Liabilities shall be released apart from those that have become Ascertained Scheme Claims or
Unascertained Scheme Claims. This will mean that, in respect of any Cattles Scheme Creditors that failed to submit aclaim before the Bar Date, their claim will be released on the occurrence of a Scheme Reversion;
(b) the unpaid part of any Ascertained Scheme Claim will become an enforceable debt of Cattles and may be proved in anyliquidation of Cattles; and
(c) for the remaining Unascertained Scheme Claims, once they are determined by Cattles, the holders of the determinedclaims:(i) will be entitled to a catch-up payment from the Unascertained Payments Trust Fund to ensure that they are paid
the same percentage of their determined claim as the holders of Ascertained Scheme Claims had receivedthrough the Cattles Creditor Scheme before the Scheme Reversion; and
(ii) following such catch-up payment, the unpaid part of their determined claim shall become an enforceable debt ofCattles.
14. SCHEME COMPLETION
14.1 A Scheme Certified Liquidation is a voluntary liquidation, where the Cattles Board have formed the opinion andcertified to the Scheme Supervisors that they have made a full enquiry into Cattles affairs and that, having done so, theyhave formed the opinion that Cattles will be able to pay any debts reasonably likely to be admitted to proof in the liquidationin full, together with interest, within 12 months of the date of the commencement of the liquidation. Cattles will then be
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placed into liquidation under the Insolvency Act. This is referred to in the Cattles Creditor Scheme as a Scheme CertifiedLiquidation.
14.2 A Scheme Certified Liquidation cannot be commenced during the first seven years and three months from the EffectiveDate without the prior written consent of the Creditors Committee, acting reasonably. Thereafter, a Scheme CertifiedLiquidation may be commenced without the consent of the Creditors Committee. The seven year, three month periodmatches the period under the WFSL Scheme in which it is not possible to commence a Scheme Certified Liquidation inrespect of WFSL.
14.3 On a Scheme Certified Liquidation, each Cattles Scheme Creditor agrees that any payments in respect of AscertainedScheme Claims or Unascertained Scheme Claims shall not be made until all the other Liabilities of Cattles, including anyexpenses of the liquidation, have been paid in full. Each Cattles Scheme Creditor agrees that any sums it receives in such aliquidation are in full satisfaction of what it is entitled to receive under the Cattles Creditor Scheme and under the InsolvencyAct.
14.4 On Scheme Completion, all Scheme Liabilities will be released.
15. THE SCHEME SUPERVISORS
15.1 The Scheme Supervisors shall be appointed to supervise, administer and implement the Cattles Creditor Scheme, andcarry out their functions as set out in the Cattles Creditor Scheme. The Scheme Supervisors shall be Simon Appell, AlastairBeveridge and Stuart MacKellar of Zolfo Cooper LLP of 10 Fleet Place, London, EC4M 7RB. The Scheme Supervisors, incarrying out their functions and exercising their powers under the Cattles Creditor Scheme, shall act as agents of Cattles.
15.2 The Scheme Supervisors shall (among other things):(a) determine and agree the value of the Submitted Scheme Claims in accordance with the terms of the Cattles Creditor
Scheme;(b) monitor Cattles compliance with the terms of the Cattles Creditor Scheme;(c) provide reports to, and generally update, the Creditors Committee in relation to the Cattles Creditor Scheme;(d) conduct the Outward Claims; and(e) prepare regular reports for the Cattles Scheme Creditors.
15.3 To exercise their functions the Scheme Supervisors shall have all the powers necessary to enable them to carry out theirfunctions and responsibilities.
15.4 The Scheme Supervisors remuneration and expenses, and all costs incurred by them on behalf of Cattles in carrying outtheir functions and exercising their powers under the Cattles Creditor Scheme, shall be met by Cattles. Such remuneration isto be approved, in the first instance, by the Creditors Committee. If approval cannot be obtained, then the SchemeSupervisors can seek approval at a meeting of the Cattles Scheme Creditors. The powers and duties of the SchemeSupervisors are set out in more detail in the Cattles Creditor Scheme.
15.5 The Scheme Supervisors shall be indemnified by Cattles against any liability (other than any liability arising as a resultof their own negligence, breach of duty, breach of trust, fraud or dishonesty) sustained or incurred by the Scheme Supervisorsarising from the exercise of any power, function or discretion vested in them under the Cattles Creditor Scheme.
16. THE CREDITORS COMMITTEE
16.1 There shall be a Creditors Committee under the Cattles Creditor Scheme. The purpose of the Creditors Committee is torepresent the interests of the Cattles Scheme Creditors during the implementation of the Cattles Creditor Scheme and toprovide input into such implementation.
16.2 The Creditors Committee shall consist of not less than three nor more than six persons unless the Scheme Supervisorsin consultation with the Creditors Committee agree otherwise (but in any event any change cannot reduce the minimumnumber below three or increase the upper limit beyond seven).
16.3 The following Cattles Scheme Creditors shall be the initial Committee Members:(a) The Royal Bank of Scotland plc;(b) Lloyds TSB Bank plc;(c) a Lender;
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(d) a Noteholder with a least 50 per cent of its Scheme Liabilities arising under the Notes;(e) a Bondholder with a least 50 per cent of its Scheme Liabilities arising under the Bonds; and(f) a Bondholder with a least 50 per cent of its Scheme Liabilities arising under the Bonds.
16.4 The Pension Trustee will be a non-voting observer on the Creditors Committee.
16.5 At the initial meeting of the Creditors Committee its members shall elect by a majority vote a chairman, who shall havea deciding vote at any meeting of the Creditors Committee. In the absence of a majority the Scheme Supervisors shallconvene a meeting of the Cattles Scheme Creditors to elect a chairman of the Creditors Committee. The Cattles CreditorScheme provides for the chairman s replacement if he resigns or ceases to be a member of the Creditors Committee leavingan even number of members of the committee.
16.6 The Creditors Committee will hold regular meetings at which it will consider, among other matters, the reportsprepared by the Scheme Supervisors referred to above. It will also have powers to call for the resignation of a SchemeSupervisor. Many of the Scheme Supervisors powers have to be exercised in consultation with the Creditors Committee.
16.7 Under the Cattles Creditor Scheme, each member of the Creditors Committee shall receive a fee of £5,000 per quarterfor so long as they serve on the Creditors Committee. This fee is to compensate them for their work on the CreditorsCommittee. In addition, the Creditors Committee is entitled to engage legal and financial advisers to assist it and the costs ofsuch advisers will be paid for by Cattles.
17. MEETING OF CATTLES SCHEME CREDITORS
17.1 In certain circumstances, the Cattles Creditor Scheme provides for a meeting of the Cattles Scheme Creditors to beconvened. Any resolution put to such a meeting, apart from a resolution to consider whether a Scheme Reversion shouldoccur, will be passed if a majority in value of the Ascertained Scheme Claims of Cattles Scheme Creditors (or, if prior to theBar Date, Ascertained Scheme Claims and Submitted Scheme Claims (not being Disputed Scheme Claims)), present andvoting, votes in favour of it.
17.2 A two thirds majority by value of Ascertained Scheme Claims of Cattles Scheme Creditors (or, if prior to the Bar Date,Ascertained Scheme Claims and Submitted Scheme Claims (not being Disputed Scheme Claims)) present and voting isrequired to pass a vote to enter Scheme Reversion.
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PART 7THE WFSL SCHEME
1. OVERVIEW
1.1 WFSL proposes to enter into the WFSL Scheme with the WFSL Scheme Creditors pursuant to Part 26 of the Act. Thekey terms of the WFSL Scheme are summarised below.
1.2 A copy of the WFSL Scheme is set out in full at Section 2 of this document.
1.3 The WFSL Scheme will compromise the Scheme Liabilities of WFSL Scheme Creditors. Scheme Liabilities include mostof WFSL s liabilities, including those owed by WFSL to its financial creditors.
1.4 Assuming the WFSL Scheme is sanctioned and becomes effective:(a) the value of each WFSL Scheme Creditor s claim will be agreed and/or determined through the claims submission and
determination process set out in the WFSL Scheme;(b) each WFSL Scheme Creditor (unless they are a net debtor) will receive pro rata payments in respect of their determined
claim (each of which is known as a Scheme Payment); and(c) on completion of the WFSL Scheme, each WFSL Scheme Creditor will release WFSL from all Scheme Liabilities.
2. WHO WILL BE AFFECTED BY THE WFSL SCHEME?2.1 The Scheme will affect any person who is a creditor of WFSL in respect of a Scheme Liability (which, for the avoidanceof doubt, includes Cattles and the Pension Trustee).
2.2 A Scheme Liability includes any liabilities owed by WFSL to:(a) the Lenders, the Noteholders and the Guaranteed Hedging Counterparties under the guarantees given by WFSL of
Cattles financial obligations (see paragraph 1 of Part 3 for more details of these guarantees); and(b) the Pension Trustee, including any Section 75 Debt; and(c) Cattles and certain Group members in respect of Group indebtedness (see paragraph 12 below).
2.3 Scheme Liabilities also include the potential other Liabilities described in paragraph 3 below.
2.4 Scheme Liability does not, however, include the following liabilities (known as Excluded Liabilities in the WFSLScheme):(a) any ordinary course business liability of WFSL (i) properly incurred after the Record Date (including, without
limitation, but subject to clause 9.1.3 of the WFSL Scheme, the funding of any Outward Claims by WFSL or with theprior agreement of the Creditors Committee similar claims by Cattles) or (ii) that may arise after the Record Date as aresult of an obligation properly incurred by WFSL before the Record Date and adopted by WFSL after the Record Dateas envisaged by the WFSL Scheme (for the avoidance of doubt not including obligations where WFSL has given noticeto terminate such arrangements). For the avoidance of doubt, and without limitation, this does not include SchemedLease Liabilities or any costs associated with the winding up or dissolution of any members of the Group in excess ofthe cap of £150,000 pursuant to Schedule 3 to the WFSL Scheme;
(b) all Liabilities of WFSL to employees, directors or officers of WFSL or other Group companies (but not including theseven named former senior employees of the Group, including directors of WFSL) in respect of their wages, bonuses,expenses, other remuneration, pension contributions, contractual indemnities, notice pay (including pay in lieu ofbenefits due during any notice period), redundancy pay, and payments due under staff retention arrangements orperformance incentive arrangements;
(c) all Liabilities of WFSL to self employed agents;(d) any PPI Liability, including for the avoidance of doubt any fees payable to the Financial Ombudsman Service, any
Liability of WFSL to the FSCS under the PPI Settlement Agreement and the Claims Handling Agreement;(e) any Liability of WFSL for a fine or criminal or regulatory penalty;(f) any Liability of WFSL to Her Majesty s Revenue & Customs in respect of:
(i) corporation tax (including corporation tax on chargeable gains) for the years ending 31 December 2008,31 December 2009 or 31 December 2010;
(ii) value added tax;
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(iii) PAYE and NIC (both employers and employees ) relating to the month in which the Effective Date occurs andthe preceding month; and
(iv) withholding tax due in respect of interest payments made by WFSL within three months prior to the EffectiveDate;
(g) any Liability of (i) WFSL under a lease or hire purchase agreement, and (ii) of Moneytopia Limited, ProgressiveFinancial Services Limited, Shopacheck Financial Services Limited and Welcome Insurance Services Limited under alease where the leased property has been or is occupied by WFSL, other than a Schemed Lease Liability;
(h) provided the aggregate amount paid in respect of Liabilities of WFSL covered by this paragraph 8 do not exceed£10,000,000 (excluding from this amount, Liabilities under Schedule 3 to the WFSL Scheme), any liability to acreditor of WFSL as consideration for the provision of goods or services to WFSL or another member of the Group thatremains unpaid as at the Record Date;
(i) any payments of adverse costs awards pursuant to clause 3.8.4 of the WFSL Scheme;(j) any payments to the Scheme Supervisors or the Outward Claims Manager pursuant to the WFSL Scheme;(k) any Liability of WFSL to any local authority in respect of business rates;(l) any payments made by WFSL to satisfy any costs associated with the liquidation or dissolution of any members of the
Group, subject to an aggregate maximum amount of £150,000;(m) any Liability of WFSL under the Deed of Indemnity entered into by WFSL and CSP Leeds Limited dated 5 August
2010 (save for any liability under clause 1 of that Deed of Indemnity), any Liability of WFSL under the EngagementLetter (as defined in the Pensions Compromise) and any liability under clauses 10.1, 10.2 and 11 of the PensionsCompromise;
(n) fees and expenses of all agents under the Facilities Agreements or under the Agency Arrangements;(o) certain monthly fees, costs and expenses (including adviser fees) of the Co-ordinating Committee which have been
incurred on or before the Effective Date; and(p) any payments properly made by WFSL pursuant to the WFSL Scheme (apart from any Scheme Payment or any
payments in respect of an Ascertained Scheme Claim) including, but not limited to, clauses 3.8.4, 4.2, 4.3, 4.4, 6.4, 8.7,8.8, 8.9, 9.5, 9.6, 10.4.5, 10.9 and 10.10 of the WFSL Scheme.
2.5 The Excluded Liabilities in the WFSL Scheme fall into broadly three categories:(a) liabilities which need to be paid in full in order to allow the WFSL business to continue to operate and to generate
value for the WFSL Scheme Creditors (see, e.g., paragraphs 2.4(a) and (b) above);(b) liabilities in respect of PPI claims relating to PPI sold before 14 January 2005 (see paragraph 2.4(d) above); and(c) liabilities which may be characterised as the costs to WFSL of implementing the WFSL Scheme (this would include
payments of fees to the Scheme Supervisors).
3. POTENTIAL OTHER LIABILITIES
3.1 Apart from the financial creditors of WFSL, the WFSL Scheme will also compromise those potential liabilities of WFSLthat may have arisen as a result of the recent history of WFSL. The basis of how these liabilities might have arisen is set outin paragraph 3.2 of Part 6 above. There would be significant legal difficulties involved in bringing such claims againstWFSL.
4. CONDITIONS TO THE WFSL SCHEME BECOMING EFFECTIVE
4.1 The WFSL Scheme shall become effective on the date on which an office copy of the order of the Court sanctioning theWFSL Scheme is delivered to the Registrar of Companies of England and Wales for registration. WFSL shall not deliver anoffice copy of the order of the Court sanctioning the WFSL Scheme to the Registrar of Companies of England and Wales forregistration, thereby making the WFSL Scheme effective, until the satisfaction of the following conditions:(a) the approval of a majority in number representing 75 per cent. in value of the WFSL Scheme Creditors present and
voting at the WFSL Scheme Meeting (whether in person or by proxy);(b) the making by the Court of the WFSL Court Order sanctioning the WFSL Scheme pursuant to section 899 of the Act;(c) the satisfaction of all the conditions precedent to the Pension Compromise (save the conditions in that agreement that
the WFSL Scheme and the TLG Compromise become effective);
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(d) the satisfaction of all the conditions precedent to the PPI Settlement Agreement (save the condition in that agreementthat the WFSL Scheme become effective);
(e) the only reason for the TLG Compromise not becoming effective is its execution by the Pension Trustee;(f) either: (i) the making by the Court of orders sanctioning the Cattles Shareholder Scheme and confirming the proposed
capital reduction (on Plan A) and the Cattles Board having confirmed that, subject to no Insolvency Event (as definedin the Cattles Shareholder Scheme) having occurred in relation to Cattles, such Court orders will be delivered forregistration to the Registrar of Companies of England and Wales immediately upon the WFSL Scheme becomingeffective; or (ii) the satisfaction of all the conditions precedent to the Plan B SPA;
(g) the FSA notifies in writing its approval under section 189(4) of FSMA of Bovess (and any other person who wouldacquire control as a result of the Completion (as defined in the WFSL Scheme)) acquiring control over WFSL (in eachcase in respect of the level of control that would result from Completion (as defined in the WFSL Scheme)), suchapproval being either unconditional in all respects (save as to the period within which the change in control must occur)or subject to conditions reasonably satisfactory to the parties (acting reasonably and in good faith) or the FSA beingtreated as having approved the acquisition of control by each such person in accordance with section 189(6) of FSMA;provided that if:(i) the conditions in paragraphs 4.1(a) to (f) have not been satisfied; or(ii) a Pre-Effective Date Insolvency Event (as defined in the WFSL Scheme) has occurred in relation to WFSL,on or before 31 May 2011, WFSL shall not deliver, or procure delivery of, the office copy of the order of the Courtsanctioning the WFSL Scheme to the Registrar of Companies of England and Wales and the WFSL Scheme shall notbe made effective.
4.2 It is expected, however, that these conditions will be fulfilled, and the WFSL Scheme will become effective on or about22 February 2011 (referred to in the WFSL Scheme as the Effective Date ). The WFSL Scheme will only become effectivewhen an office copy of the WFSL Court Order is delivered to the Registrar of Companies of England and Wales forregistration, which is permitted only upon the satisfaction of the conditions listed in paragraphs 4.1 (a) to (f) above.
5. WHAT HAPPENS WHEN THE WFSL SCHEME BECOMES EFFECTIVE?Notice of the Effective Date and distribution of Claim Forms5.1 Within two weeks of the Effective Date, WFSL will notify WFSL Scheme Creditors that the WFSL Scheme has becomeeffective. This will be done by placing a notice on the Scheme Website, by sending a notice to each person that WFSLbelieves may be a WFSL Scheme Creditor for whom it has contact details and by publishing a notice in the SchemePublications. These notices will invite WFSL Scheme Creditors to submit their claims in the WFSL Scheme and set out theBar Date for the receipt of such claims.
5.2 At the same time, WFSL will send a blank Claim Form to each WFSL Scheme Creditor of which it is aware and forwhich it has contact details (except the Pension Trustee and certain financial creditors whose Scheme Claims have been pre-agreed under the terms of the WFSL Scheme). In addition, WFSL will send a Claim Form to any person or entity that notifiesWFSL that believes he, she or it may be a WFSL Scheme Creditor. A copy of the Claim Form will also be available to bedownloaded from the Scheme Website.
5.3 As explained in more detail below, the purpose of the Claim Form is to allow each WFSL Scheme Creditor to set out itsclaim against WFSL in respect of Scheme Liabilities. Save in relation to the Pension Trustee, WFSL shall be under noobligation to make any payments in respect of Scheme Liabilities that have not been submitted on a Claim Form, other thanthose financial creditors whose Scheme Claims have been pre-agreed under the terms of the WFSL Scheme.
Stay of Proceedings and Discharge of Scheme Liabilities5.4 Subject to a small number of limited exceptions, from the Effective Date, WFSL Scheme Creditors will not be permittedto bring proceedings against WFSL in respect of any Scheme Liabilities.
6. COMPLETION AND SUBMISSION OF THE CLAIM FORMS
6.1 The WFSL Scheme sets out a process for the determination of those claims submitted by WFSL Scheme Creditors (otherthan Cattles, the Pension Trustee and certain financial creditors) prior to the Bar Date.
6.2 For all claims in the WFSL Scheme (other than those belonging to Cattles, the Pension Trustee and certain financialcreditors), a WFSL Scheme Creditor must complete a Claim Form setting out the details of the Scheme Liabilities it believes
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it is or will be owed by WFSL. Such claims, once submitted, are referred to as Submitted Scheme Claims in the WFSLScheme.
6.3 Each Claim Form should be completed in accordance with the instructions incorporated in it and should include (withoutlimitation):(a) the identity of the WFSL Scheme Creditor;(b) a description of its Submitted Scheme Claim;(c) the value of the Submitted Scheme Claim as at the Record Date;(d) the legal basis of the alleged liability of WFSL; and(e) any other facts or matters which would assist the Scheme Supervisors in considering the Submitted Scheme Claim.
6.4 WFSL Scheme Creditors should provide relevant documentation in support of their Submitted Scheme Claims with theirClaim Forms.
7. THE BAR DATE
7.1 Claim Forms, together with any Supporting Documentation, must be sent to the Scheme Supervisors to arrive on orbefore the Bar Date.
7.2 The Bar Date is the first Business Day falling three months after the Effective Date. Currently, the expected date of theBar Date is 22 May 2011. This, however, may change as it depends on the date of the Effective Date, which itself may besubject to change. As noted above, WFSL Scheme Creditors will be notified of the Bar Date with the notice of the EffectiveDate described at paragraph 5.1 above. WFSL Scheme Creditors may revise their Submitted Scheme Claims, as set out ontheir Claim Forms, up to but not after the Bar Date.
7.3 A WFSL Scheme Creditor will be entitled to a payment under the WFSL Scheme only in respect of Submitted SchemeClaims received by the Scheme Supervisors on or before the Bar Date. A Submitted Scheme Claim received by the SchemeSupervisors after the Bar Date will not qualify for a payment under the WFSL Scheme.
8. DETERMINATION OF SCHEME CLAIMS
8.1 The Scheme Supervisors will review each Claim Form and supporting documentation submitted prior to the Bar Date toconsider whether:(a) details of the Scheme Liabilities are adequately supported by the documentation provided with the Claim Form;(b) details of the quantum of the Scheme Liabilities are sufficient, and the basis of the calculation is reasonable and has
been accurately applied; and
(c) there is any set-off to be applied to the claim.
8.2 Following their review, the Scheme Supervisors shall notify the relevant WFSL Scheme Creditor that their SubmittedScheme Claim either:(a) has been agreed and that after taking into account any set-off, their total claim will then become an Ascertained
Scheme Claim. Until a Submitted Scheme Claim becomes an Ascertained Scheme Claim it is an UnascertainedScheme Claim; or
(b) has not been agreed and is being disputed by the Scheme Supervisors. In those circumstances their claim, or part of it,will become a Disputed Scheme Claim.
8.3 WFSL is aware of, and has agreed the quantum of, claims held by certain of its financial creditors. Such WFSL SchemeCreditors will not be obliged to submit a claim in the WFSL Scheme. Instead these previously ascertained amounts shall(subject to the accrual of interest and other adjustments) form the agreed basis of the relevant Scheme Creditor s AscertainedScheme Claim.
8.4 Claims (other than that of the Pension Trustee) shall be valued in accordance with Rules 2.85 to 2.89 of the InsolvencyRules 1986. These are the valuation provisions that would apply to an administration. They include the operation ofmandatory set off, which would apply in an administration in which distributions were being made. As a result, what is duefrom each party to the other in respect of their mutual dealings shall be set off against the sums due from the other.
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9. DEALING WITH DISPUTED SCHEME CLAIMS
9.1 If a claim cannot be agreed by the Scheme Supervisors, in certain circumstances a WFSL Scheme Creditor can apply tothe Court for it to resolve the dispute over the existence or value of the claim. This approach is intended to mirror the abilityof a creditor in an administration to appeal an administrator s decision. This form of dispute resolution is intended to be moreflexible and timely than traditional litigation in the Court.
9.2 The Court will determine the existence and value of the disputed claims and that will become the WFSL SchemeCreditor s Ascertained Scheme Claim. If costs are awarded against the WFSL Scheme Creditor as a result of the proceedings,they shall be payable to WFSL in full. If costs are awarded against WFSL, such costs shall be payable by WFSL to therelevant WFSL Scheme Creditor in full.
10. SCHEME PAYMENTS
10.1 Following the determination of their Submitted Scheme Claim, the relevant Scheme Creditor will be entitled to receiveScheme Payments in respect of their Ascertained Scheme Claim (unless they are a net debtor of WFSL).
10.2 The WFSL Scheme provides for a series of Distribution Period End Dates on which the Scheme Supervisors willdetermine the level of Scheme Payment to be made to each Scheme Creditor in respect of their Ascertained Scheme Claim.
10.3 In summary, there will be a Distribution Period End Date on a monthly basis during the lifetime of the WFSL Scheme,and distributions will be made provided there is more than £1 million available to distribute.
10.4 To determine the Payment Percentage on any Distribution Period End Date, WFSL shall report to the SchemeSupervisors the Net Free Cash available at that Distribution Date. In broad terms, the Net Free Cash is the sum of money heldby WFSL to pay claims under the WFSL Scheme. It does not include sums required to pay Excluded Liabilities or workingcapital. Net Free Cash is defined at Schedule 1 to the WFSL Scheme.
10.5 To calculate the Payment Percentage:(a) the Scheme Supervisors shall aggregate the Net Free Cash available at the Distribution Period End Date with all
amounts of Net Free Cash determined previously (this aggregated amount being the Cumulative Net Free Cash as atthe latest Distribution Period End Date); and
(b) the Payment Percentage shall be the percentage of the total of the aggregate value of Ascertained Scheme Claims, thatcould be paid from Cumulative Net Free Cash subject to a maximum of 100 per cent.
10.6 This will allow the Scheme Supervisors to calculate, on a prudent basis, the Payment Percentage for that DistributionPeriod End Date.
10.7 On each Distribution Date, each Scheme Creditor with an Ascertained Scheme Claim shall be entitled to be paid anamount (i.e. his Scheme Payment) calculated as follows:
(A x B) (C + D)where
(a) A is the value of that Scheme Creditor s Ascertained Scheme Claim;(b) B is the Payment Percentage;(c) C is any amount that has already been paid to the WFSL Scheme Creditor in breach of the terms of the WFSL Scheme
plus any unpaid adverse costs awards that have been awarded against the WFSL Scheme Creditor; and(d) D is the sum of Scheme Payments made to that Scheme Creditor prior to the relevant Distribution Period End Date.
10.8 On each subsequent Distribution Date, the Scheme Supervisors will carry out the above calculation. If the PaymentPercentage has risen since the previous Distribution Period End Date, a Scheme Creditor that qualifies for a payment will bepaid the incremental increase as its Scheme Payment. Thus, if the Payment Percentage increases during the lifetime of theWFSL Scheme, a WFSL Scheme Creditor will recover a growing percentage of its Ascertained Scheme Claims.
10.9 As noted above, when calculating the Payment Percentage, the Scheme Supervisors will take into account the value ofall Unascertained Scheme Claims. WFSL will create a trust fund, known as the Unascertained Payments Fund. On anyDistribution Period End Date, this will hold sufficient money to pay each holder of an Unascertained Scheme Claim what hewould have received had his claim become an Ascertained Scheme Claim by that date. This is to ensure that once anUnascertained Scheme Claim is determined under the Scheme and becomes an Ascertained Scheme Claim, the relevant
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WFSL Scheme Creditor will catch-up and receive the same percentage of its Ascertained Scheme Claim as those that hadbeen determined and paid earlier.
11. PPI LIABILITIES
11.1 The WFSL Scheme establishes a trust to pay Unprotected PPI Liabilities, which are excluded under the WFSL Scheme.On the WFSL Scheme becoming effective, WFSL will pay £20 million into the trust (the basis on which this amount hasbeen determined is referred to at paragraph 4.3 of Part 2, above). From then on, WFSL may only pay Unprotected PPILiabilities from the money in the trust. If it appears that there is insufficient money in the trust to pay all Unprotected PPILiabilities in full, WFSL with the consent of the Scheme Supervisors may pay an additional £2.5 million into the trust. If theScheme Supervisors refuse such consent, or if that additional sum proves insufficient, further amounts may be paid into thetrust, but only with the consent of the Creditors Committee. If the Creditors Committee does not provide such consent, theScheme Supervisors may convene a meeting of the Scheme Creditors to approve the proposed additional payment.
11.2 On a Scheme Reversion (see paragraph 15 below), WFSL shall estimate the amount required in the trust to ensure thatall remaining claimants are paid what they would have been paid had their claims been determined and become AscertainedScheme Claims in the WFSL Scheme. Any amounts in the trust in excess of the estimated remaining amount will be releasedto form part of the general assets of WFSL.
12. TREATMENT OF CATTLES CLAIMS
12.1 Cattles claims against WFSL will not be dealt with through the claims submission process described above inparagraphs 6 to 9 of Part 7. Instead, its claim will be compromised so that its recourse to WFSL s assets shall be limited to anamount equal to the net realisable value of the residual assets of WFSL in a liquidation after all other debts and expenseshave been paid in full or released, and all WFSL Scheme liabilities owed to other WFSL Scheme Creditors have been paid infull, plus interest, or released, in accordance with the terms of the WFSL Scheme.
12.2 The Scheme also provides for the payment by WFSL of the Plan A Payment or Plan B Payment to Cattles (as the casemay be). This is explained in more detail in Part 5 above.
13. TREATMENT OF THE PENSION TRUSTEE
13.1 The Pension Trustee s claim against WFSL will also not be dealt with through the claims submission process describedabove. Instead its claim will be compromised under the terms of the Pension Compromise. Following the determination of itsclaim it will be entitled to receive Scheme Payments in respect of that claim like any other WFSL Scheme Creditor with anAscertained Scheme Claim.
14. COVENANTS AND TRIGGER EVENTS
14.1 Under the WFSL Scheme, WFSL has given a number of covenants in relation to the ongoing management of thebusiness. These covenants are set out in Schedule 6 of the WFSL Scheme. In summary, these covenants include:(a) each financial year, WFSL must provide to the Scheme Supervisors and the Creditors Committee for them to agree a
forecast for the future performance of the business (known as the Updated Forecast ). The forecast will include aprojection for the net cash collections by the business;
(b) on the last Business Day of January, April, July and October, WFSL must deliver to the Scheme Supervisors, amongother things, a certificate setting out the cash collections for the period in question and the forecasts for that period;
(c) the Other Covenants a number of other covenants which place restrictions on, among other matters, borrowingmoney, disposals, liabilities and acquisitions by WFSL going forward.
14.2 With regard to the above, if the actual net cash received during a period is less than 100 per cent. of what was forecast,this will constitute a Stage One Trigger Event . WFSL must then produce remedial a plan, to the satisfaction of the SchemeSupervisors, to remedy the shortfall. If (i) no plan can be agreed, (ii) a Stage One Trigger Event Occurs on two consecutivequarters, (iii) the shortfall between cash received and the forecast breaches certain minimum limits or (iv) the cumulativetotal of all cash received by that date is less than the total amount of cash forecast to be received by that date, this willconstitute a Stage Two Trigger Event . This means that WFSL must produce an Updated Forecast to be agreed with theScheme Supervisors.
14.3 If:(a) under an Updated Forecast, the amount of cash expected to be received is less than under the earlier forecast; or(b) the Updated Forecast cannot be agreed;
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it will constitute a Stage Three Trigger Event .
14.4 On a Stage Three Trigger Event, the Scheme Supervisors must prepare a report for Scheme Creditors analysing, in broadterms, their likely returns under the WFSL Scheme, taking into account the Stage Three Trigger Event, compared to whatthey would receive on an administration of WFSL.
15. SCHEME REVERSION
15.1 In certain circumstances the WFSL Scheme is permitted to end early. This is known as a Scheme Reversion. Thefollowing are Scheme Reversion Decision Events:(a) the Scheme Supervisors circulating to the WFSL Scheme Creditors a report following a Stage Three Trigger Event ;(b) a breach of certain of the covenants set out in the WFSL Scheme;(c) a meeting of WFSL Scheme Creditors being convened under clause 5.4.5 of the WFSL Scheme and the resolution to
approve the relevant payment or measures being defeated;(d) the FSCS issuing a non-payment notice under the PPI Settlement Agreement to WFSL pursuant to the PPI Settlement
Agreement;(e) the circumstances set out in paragraphs (a) and (b) of clause 18.1 (Scheme Reversion) of the PPI Settlement Agreement
occur prior to the second anniversary of the WFSL Scheme s Effective Date;(f) the circumstances set out in paragraphs (a) and (b) of clause 18.2 (Scheme Reversion) of the PPI Settlement Agreement
occur prior to the second anniversary of the WFSL Scheme s Effective Date;(g) at any time, the aggregate amount of WFSL s liability to the FSCS under the PPI Settlement Agreement and the Claims
Handling Agreement exceeds (1) the aggregate of the Initial FSCS Payment, the Additional FSCS Payment and anyBAU Payments that WFSL makes to the FSCS, and (2) any Top-Up Payments paid by WFSL at that time; and
(h) an Insolvency Event occurring in respect of WFSL on or after the Bar Date of the WFSL Scheme.
15.2 If a Scheme Reversion Decision Event occurs, the Scheme Supervisors will call a meeting of WFSL s Scheme Creditorsto consider and decide whether to: (i) take no action; (ii) agree any remedial proposals; or (iii) confirm that a SchemeReversion should occur.
15.3 On a Scheme Reversion, the WFSL Scheme will come to an end and, subject to the exceptions described below, theprovisions of the WFSL Scheme will cease to be binding on both WFSL and the WFSL Scheme Creditors. In particular:(a) all Scheme Liabilities shall be released apart from those that have become Ascertained Scheme Claims or
Unascertained Scheme Claims. This will mean that the claims of any Scheme Creditors which were not submittedbefore the Bar Date will be released on the occurrence of a Scheme Reversion;
(b) certain funds from the trust created for Unprotected PPI Liabilities shall be released to form part of the general assets ofWFSL (see paragraph 11.2 above);
(c) the unpaid part of any Ascertained Scheme Claim will become an enforceable debt of WFSL and may be proved in anyliquidation of WFSL; and
(d) for the remaining Unascertained Scheme Claims, once they are determined by WFSL, the holders of the determinedclaims:(i) will be entitled to a catch-up payment from the Unascertained Payments Fund to ensure that they are paid the
same percentage of their determined claim as the holders of Ascertained Scheme Claims had received throughthe WFSL Scheme before the Scheme Reversion; and
(ii) following such catch-up payment, the unpaid part of their determined claim shall become an enforceable debt ofWFSL.
16. SCHEME COMPLETION
16.1 A Scheme Certified Liquidation is a voluntary liquidation, where the WFSL Board has certified to the SchemeSupervisors it has made a full enquiry into WFSL s affairs and that, having done so, they have formed the opinion that WFSLwill be able to pay any debts reasonably likely to be admitted to proof in the liquidation in full, together with interest, within12 months of the date of the commencement of the liquidation. WFSL will then be placed into liquidation under theInsolvency Act. This is referred to in the WFSL Scheme as a Scheme Certified Liquidation.
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16.2 A Scheme Certified Liquidation cannot be commenced during the first seven years and three months from the EffectiveDate without the prior written consent of the Creditors Committee, acting reasonably. Thereafter, a Scheme CertifiedLiquidation may be commenced without the consent of the Creditors Committee. The seven year, three month period hasbeen chosen as it is possible that the FSCS may return money to WFSL within that time period.
16.3 On a Scheme Certified Liquidation, each WFSL Scheme Creditor agrees that any payments in respect of AscertainedScheme Claims or Unascertained Scheme Claims shall not be made until all the other Liabilities of WFSL, including anyexpenses of the liquidation, have been paid in full. Each WFSL Scheme Creditor agrees that any sums it receives in such aliquidation are in full satisfaction of what it is entitled to receive under the WFSL Scheme and under the Insolvency Act.
16.4 The WFSL Scheme will be completed when there are no longer any Unascertained Scheme Claims to be determined andall Ascertained Scheme Claims have been paid in full or when WFSL has commenced a Scheme Certified Liquidation andthe assets of WFSL have been reduced to nil or a de minimis amount.
16.5 On a Scheme Completion, all Scheme Liabilities will be released.
17. THE SCHEME SUPERVISORS
17.1 The Scheme Supervisors shall be appointed to supervise, administer and implement the WFSL Scheme, and carry outtheir functions as set out in the WFSL Scheme. The Scheme Supervisors shall be Richard Dixon Fleming, Christine MaryLaverty (both KPMG partners) and Edward George Boyle (a KPMG director), each of whom are licensed insolvencypractitioners. The Scheme Supervisors, in carrying out their functions and exercising their powers under the WFSL Scheme,shall act as agents of WFSL.
17.2 The Scheme Supervisors shall (among other things):(a) determine and agree the value of the Submitted Scheme Claims in accordance with the terms of the WFSL Scheme;(b) monitor WFSL s compliance with the terms of the WFSL Scheme; and(c) provide reports to, and generally update, the Creditors Committee in relation to the WFSL Scheme.
17.3 Except where the WFSL Scheme allocates specific functions to the Scheme Supervisors, the affairs, business andproperty of WFSL shall continue to be managed by the WFSL Board.
17.4 To exercise their functions the Scheme Supervisors shall have all the powers necessary to enable them to carry out theirfunctions and responsibilities.
17.5 The Scheme Supervisors remuneration and expenses, and all costs incurred by them on behalf of WFSL in carrying outtheir functions and exercising their powers under the WFSL Scheme, shall be met by WFSL. Such remuneration is to beapproved, in the first instance, by the Creditors Committee. If approval cannot be obtained, then the Scheme Supervisors canseek approval at a meeting of the WFSL Scheme Creditors, and if approval cannot be obtained at such a meeting, the SchemeSupervisors may seek the approval of the Court. The powers and duties of the Scheme Supervisors are set out in more detailin Section 6 of the Scheme.
17.6 The Scheme Supervisors shall be indemnified by WFSL against any Liability (other than any Liability arising as a resultof their own negligence, breach of duty, breach of trust, fraud or dishonesty) sustained or incurred by the Scheme Supervisorsarising from the exercise of any power, function or discretion vested in them under the WFSL Scheme.
18. THE OUTWARD CLAIMS MANAGER
18.1 The initial Outward Claims Manager shall be Michael Rollings of Rollings and Co LLP, 6 Snow Hill, London, EC1A2AY. His role is to conduct and handle, in conjunction with the Creditors Committee, the outwards claims litigation onbehalf of WFSL. Such potential causes of action are described further at paragraph 5 of Part 5.
18.2 The Outward Claims Manager shall have all of the powers necessary or desirable to enable him to discharge his dutiesand responsibilities under the Scheme subject to the provisions of the Scheme.
18.3 The Outward Claims Manager shall be indemnified by WFSL against any liability (other than any liability arising as aresult of his own negligence, breach of duty, breach of trust, fraud or dishonesty) sustained or incurred by him arising fromthe exercise of any power, function or discretion vested in him under the WFSL Scheme.
18.4 The Outward Claims Manager s remuneration and expenses, and all costs incurred by him on behalf of WFSL incarrying out his functions and exercising his powers under the WFSL Scheme, shall be met by WFSL. Such remuneration is
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to be approved, in the first instance, by the Creditors Committee. If approval cannot be obtained, then the Outward ClaimsManager can seek approval at a meeting of the WFSL Scheme Creditors.
19. THE CREDITORS COMMITTEE
19.1 There shall be a Creditors Committee under the WFSL Scheme. The purpose of the Creditors Committee is torepresent interests of the WFSL Scheme Creditors during the implementation of the WFSL Scheme and to provide input intosuch implementation.
19.2 The Creditors Committee shall consist of not less than three nor more than five persons unless the Scheme Supervisorsin consultation with the Creditors Committee agree otherwise (but in any event any change cannot reduce the minimumnumber below three or increase the upper limit beyond seven).
19.3 The following WFSL Scheme Creditors shall be the initial Committee Members:(a) The Royal Bank of Scotland plc;(b) Lloyds TSB Bank plc;(c) a Lender under a Facilities Agreement;(d) another Lender under a Facilities Agreement; and(e) a Noteholder under a Note Agreement.
19.4 The FSCS and the Pension Trustee will be non-voting observers on the Creditors Committee.
19.5 The Creditors Committee will hold regular meetings at which it will consider, among other matters, the reportsprepared by the Scheme Supervisors referred to at paragraph 17.2(c) above. It will also have powers to call for the resignationof a Scheme Supervisor. Many of the Scheme Supervisors and Outward Claims Manager s powers have to be exercised inconsultation with the Creditors Committee.
19.6 Under the WFSL Scheme, each member of the Creditors Committee shall receive a fee of £5,000 per quarter for solong as they serve on the Creditors Committee. This fee is to compensate them for their work on the WFSL CreditorsCommittee. In addition, the Creditors Committee is entitled to engage legal and financial advisers to assist it and the costs ofsuch advisers will be paid for by WFSL.
20. MEETING OF SCHEME CREDITORS
20.1 In certain circumstances, the WFSL Scheme provides for a meeting of the WFSL Scheme Creditors to be convened.Any resolution put to such a meeting, apart from a resolution to consider whether Scheme Reversion should occur, will bepassed if a majority in value of the Ascertained Scheme Claims of Scheme Creditors (or, if prior to the Bar Date, AscertainedScheme Claims and Submitted Scheme Claims (not being Disputed Scheme Claims)), present and voting, votes in favour ofit. A two thirds majority by value of Ascertained Scheme Claims of Scheme Creditors (or, if prior to the Bar Date,Ascertained Scheme Claims and Submitted Scheme Claims (not being Disputed Scheme Claims)) present and voting isrequired to pass a vote to enter Scheme Reversion.
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PART 8FURTHER INFORMATION RELATING TO THE SCHEMES
1. VOTING ON THE SCHEMES
1.1 Separate Scheme Meetings will be held to vote on the Cattles Creditor Scheme and the WFSL Scheme.
1.2 Only those Cattles Scheme Creditors who are Cattles Scheme Creditors as at the Voting Record Date, being 5.00 p.m. on31 December 2010, are entitled to attend and vote at the Cattles Scheme Meeting, either in person or by proxy. Similarly,only those WFSL Scheme Creditors who are WFSL Scheme Creditors as at the Voting Record Date, being 5.00 p.m. on31 December 2010, are entitled to attend and vote at the WFSL Scheme Meetings, either in person or by proxy.
1.3 Only the votes of Scheme Creditors voting at the Scheme Meetings in person or by proxy can be taken into account forthe purpose of establishing whether the requisite approvals for the Schemes have been obtained.
1.4 A Bond Creditor which wishes to vote at the Cattles Scheme Meeting in respect of a claim for indebtedness or interestunder its Bond must procure that a Direct Participant Letter is completed rather than a Cattles Form of Proxy. This isexplained in more detail at Appendix B below. If the Bond Creditor has any other types of Scheme Claim against eitherWFSL or Cattles, it must also complete a Cattles Form of Proxy and/or a WFSL Form of Proxy (as the case may be) inrespect only of those other types of Scheme Claim.
1.5 Full details of how to vote at the Cattles Scheme Meeting and the WFSL Scheme Meetings are set out at Appendices Band C to this document respectively.
2. SCHEME MEETINGS AND THE COURT HEARING
2.1 The amount of a claim admitted for voting purposes does not constitute an admission of the existence or amount of theclaim and will not bind any member of the Group or the Scheme Creditors concerned.
2.2 An opportunity will be given at each Scheme Meeting for Scheme Creditors to ask any questions they may have inrelation to the Scheme being considered at that Scheme Meeting. Scheme Creditors will also be entitled to attend the CourtHearing to sanction the Schemes (which will take place only if the Schemes are approved at the relevant Scheme Meetings).Scheme Creditors will be notified at each Scheme Meeting of the precise date of the Court Hearing and of the subsequentsteps to the extent they are then known.
2.3 As mentioned in Part 1, in both the Cattles Creditor Scheme and the WFSL Scheme, different classes of creditors will berequired to vote separately, because their rights as creditors are so different or would be affected so differently by theSchemes as to make it impossible for them to consult together in their common interest. The Cattles Creditor Scheme and theWFSL Scheme must each be approved by the required majority of each class of creditors.
2.4 Cattles intends to convene meetings of two classes of creditors for the purpose of voting on the Cattles Creditor Scheme:(a) the first class meeting will consist of the Pension Trustee alone; its claim arises in respect of a deficit in the Cattles
Staff Pension Fund, and this would be dealt with under the Cattles Creditor Scheme in a way that differs from the wayclaims of other Cattles Scheme Creditors would be dealt with; and
(b) the second class meeting will consist of the remaining Cattles Scheme Creditors.
2.5 WFSL intends to convene meetings of three classes of creditors for the purpose of voting on the WFSL Scheme:(a) the first class meeting will consist of Cattles alone, as a creditor of WFSL in respect of certain intercompany balances;
Cattles claims would be dealt with under the WFSL Scheme in a way that differs from the way claims of other WFSLScheme Creditors would be dealt with;
(b) the second class meeting will consist of the Pension Trustee alone; its claim arises in respect of a deficit in the CattlesStaff Pension Fund, and this would be dealt with under the WFSL Scheme in a way that differs from the way claims ofother WFSL Scheme Creditors would be dealt with; and
(c) the third class meeting will consist of the remaining WFSL Scheme Creditors.
3. VALUE OF A SCHEME CREDITOR S CLAIM FOR VOTING PURPOSES
3.1 Claims of Scheme Creditors will be valued, for voting purposes only, by the Court-appointed chairman of each SchemeMeeting.
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3.2 The chairman may, for voting purposes only, reject a claim in whole or in part if he or she considers that it does notconstitute a fair and reasonable assessment of the relevant sums owed to the relevant Scheme Creditor by Cattles or WFSL(as the case may be) or if the relevant Scheme Creditor has not complied with the voting procedures described in thisdocument. If a claim is unascertained, contingent or disputed (in part) but the chairman is able to place a minimum value onthat claim, she will admit the claim for voting purposes at that value. If a claim is disputed in its entirety, or the chairman isotherwise unable to place a minimum value on it, that claim shall be valued at £1 for voting purposes.
3.3 It is possible that the determination of Scheme Claims for voting purposes at the Scheme Meetings will give rise tocomplex issues of legal liability and valuation. If necessary, either of the Scheme Meetings will be adjourned while votes areassessed.
3.4 In this eventuality the Independent Vote Assessor will assist the chairman of the Cattles Scheme Meeting or the WFSLScheme Meeting, as appropriate, by providing an impartial view as to the appropriate assessment and valuation of claims. Toensure impartiality, the Independent Vote Assessor will not be told whether any particular claim relates to a vote for oragainst the relevant Scheme. It is intended that the Independent Vote Assessor will be Lord Hoffmann, a retired law lord (seeparagraphs 12 and 13 of Appendix B and paragraphs 9 and 10 of Appendix C).
3.5 The amount of a Scheme Creditor s claim admitted by the chairman for voting purposes does not in itself constitute anadmission of the existence or amount of a claim and will not bind Cattles or WFSL or their respective Scheme Creditors forany other purpose. The value of a claim of a Scheme Creditor, for voting purposes only, will be taken net of any applicableset-off or counterclaim.
3.6 The chairman will report her decisions to the Court at the Court Hearing, with details of any such claim and the reasonsfor the decision.
4. US CHAPTER 15 INJUNCTIVE RELIEF
4.1 Cattles and/or WFSL may commence a case under Chapter 15 of Title 11 of the United States Code in the United StatesBankruptcy Court, Southern District of New York seeking, among other things, permanent injunctive relief to aid in theimplementation of their respective Schemes. For more details about such relief please see Appendix E.
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PART 9ADDITIONAL INFORMATION
(A) CATTLES1. DIRECTORS
1.1 The current members of the Cattles Board and their functions are:
Name Position
Margaret A. Young Executive ChairmanPaul J. Felton-Smith Finance DirectorRobert D. East Managing DirectorDavid A. Haxby Non-executive DirectorFrank R. Dee Non-executive DirectorAlan J. McWalter Non-executive Director
2. DIRECTORS AND OTHER INTERESTS
Directors interests in Shares2.1 As at the date of this document, the interests in the share capital of Cattles of the Directors (all of which are beneficial)were as follows:
Director Number of SharesPercentage of current
issued share capital
Margaret A. Young ........................................................................................... 7,250 0.001Paul J. Felton-Smith ..........................................................................................Robert D. East ...................................................................................................Frank R. Dee...................................................................................................... 24,500 0.005David A. Haxby................................................................................................. 12,059 0.002Alan J. McWalter ..............................................................................................
Directors service contracts and benefits2.2 The Executive Directors have entered into service contracts with Cattles, the particulars of which are set out below:
NameDate ofAgreement Expiry Terms
Basic salary(£)
Paul J. Felton-Smith 23 July 2010 No term specified: terminable on onemonth s written notice by either party.
£2,000 per dayworked
Margaret A. Young 30 March 2010 Term: to the end of the Transition Phase(effectively, when the Restructuring hasbeen completed) or terminable on 1month s written notice by either party.
£2,230 per dayworked
Robert D. East 16 June 2008(varied 30 March2010 and amendedwith effect from1 January 2011, asdescribed inparagraphs 9.2 to9.6 below inrespect of WFSL)
Indefinite term: terminable on 6 monthswritten notice by Robert East and 12months written notice by Cattles.
£300,000 perannum plus£10,000 permonth
2.3 The service contracts of each of the Executive Directors provide that Cattles may terminate the employment by making apayment in lieu of notice to the Executive Director, in lieu of the notice period (or remainder of the notice period). Wherenotice of termination has been served by either party, Cattles is entitled to place the Executive Directors on garden leave .
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2.4 Margaret A. Young and Robert D. East are entitled to participate in a discretionary bonus plan applicable in respect of theTransition Phase i.e. until, effectively, the end of the Restructuring. The maximum bonus opportunity for each six month
period during the Transition Phase is £162,500 for Margaret A. Young, and £80,000 for Robert D. East. If Cattles has enteredinto administration, however, the maximum bonus entitlement would reduce to £138,000 and £68,000 respectively for eachsix month period. (In this case, the bonus is calculated on a pro-rata basis in respect of the period worked during theTransition Phase up to the date of the administration as a proportion of the six month period concerned.) The awards ofbonuses will be based on the relevant Executive Director s achievement of certain key objectives (as determined at thediscretion of the Remuneration Committee) and will not form part of pensionable earnings.
2.5 Paul J. Felton-Smith is entitled to participate in a discretionary bonus plan for each six month period during hisemployment. The maximum bonus opportunity is 50 per cent. of Paul Felton-Smith s accumulated salary based on thenumber of days actually worked during the six month period. The awards of bonuses will be based on Paul Felton-Smith sachievement of certain key objectives for each six month period (as determined at the discretion of Cattles remunerationcommittee).
2.6 Robert D. East is entitled to an allowance of an amount equal to 20 per cent. of his salary in lieu of any obligation onCattles to contribute to any pension arrangement on his behalf. Paul J. Felton-Smith and Margaret A. Young are not entitledto any pension benefits in their roles as Executive Director.
2.7 Each of the Executive Directors is also entitled to reimbursement of reasonable expenses including reasonable costs oftravel to work within the UK. The Executive Directors have agreed to covenants restricting publication or disclosure of anyconfidential information concerning the business or affairs of Cattles or any Group company or any of its or their customers.
2.8 It should be noted that none of the directors of Cattles receive a release under the terms of the Schemes for Cattles.
Letters of Appointment2.9 The Non-Executive Directors have been appointed to the Cattles Board by way of standard letters of appointment, theparticulars of which are set out below:
Name Date of Letter Expiry Terms Basic salary (£)
David A. Haxby 22 June 1999 Minimum term of threeyears which will berenewed for furtherperiods as agreed withCattles or terminable inaccordance withCattles Articles ofAssociation asamended from time totime.
£60,000 per annum
Frank R. Dee 30 June 2004 Three year terms to berenewed at CattlesAGM or terminable on6 months writtennotice by either party.
£67,500 per annum
Alan J. McWalter 6 September 2005 Three year terms to berenewed at CattlesAGM or terminable on6 months writtennotice by either party.
£57,500 per annum
2.10 Except as disclosed in this paragraph 2 and in paragraph 9 of this Part 9, there are no service agreements or letters ofappointment between Cattles or any other member of the Cattles Group and any Cattles Director.
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3. DIRECTORS CONFIRMATIONS
3.1 Save as disclosed in paragraphs 3.2 to 3.4 below none of the Cattles Directors has during the last five years:(a) been convicted in relation to a fraudulent offence;(b) been associated with any bankruptcy, receivership or liquidation while acting in the capacity of a member of the
administrative, management or supervisory body or as senior manager of any company;(c) been subject to any official public incrimination and/or sanction by statutory or regulatory authorities (including
designated professional bodies); or(d) been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of any
company.
3.2 Following an introduction by that company s banks, Paul Felton-Smith joined Choices UK plc as its Turnaround Directorin July 2007 to assist with the re-financing of the company. After extensive discussions with interested parties had failed toproduce an acceptable offer, Choices UK plc entered into administration in September 2007.
3.3 Following an introduction by that company s banks, Paul Felton-Smith joined MICE Group plc as its Chief RestructuringOfficer in April 2007 to restructure the company. Ultimately MICE Group plc entered into administration in June 2007.
3.4 Following an introduction by that company s banks, Paul Felton-Smith joined Highbury House Communications plc inJune 2005 and then became its Finance Director in September 2005 to re-structure the existing facilities and re-finance thebusiness. Ultimately Highbury House Communications plc went into administrative receivership in January 2006.
4. MATERIAL CONTRACTS
4.1 Save as set out in paragraph 4.2 below, no member of the Group has entered into any material contract (not being acontract entered into in the ordinary course of business) during the two years immediately preceding the date of thisdocument or has entered into at any time any other contract which contains any provision under which any member of theGroup has any obligations or entitlement material to the Group as at the date of this document.
4.2 The contracts referred to in paragraph 4.1 above are:(a) the SEA (described at paragraph 2 of Part 2);(b) the CIF Disposal Agreement (described below);(c) the Corporate Services Deed (described below);(d) the Share Declaration of Trust (described below);(e) the Funding Letter (described below);(f) the Implementation Agreement (described below);(g) the SFM Engagement Letter (described below);(h) the Pensions Compromise Agreement (described below);(i) the Escrow Agreement and Schedule of Contributions (described below);(j) the documents pertaining to the PPI arrangements with the FSCS, being the PPI Settlement Agreement and the Claims
Handling Agreement (described below);(k) the Restructuring Lock-up Agreement (described below);(l) a settlement agreement between Cattles, WFSL and the Noteholders in relation to a dispute concerning the
quantification of the Noteholders claims against Cattles, WFSL and the Group (described below); and(m) the ERF Security Agreement.
CIF Disposal Agreement4.3 The CIF Vendors, Cattles and the CIF Purchaser entered into the CIF Disposal Agreement, under which the Sellersagreed to dispose of the entire issued share capital of CIF and its subsidiary Cattles Invoice Finance (Oxford) Limited (i.e. theCIF Group) to the CIF Purchaser.
4.4 The consideration for the disposal was £10.8 million in cash plus the repayment of inter company loans of £59.6 million.Of the total consideration paid of £70.4 million, an amount of £2.4 million was held back pending resolution of certain issues,
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including the future collection performance of the CIF Group loan book for the two years ending 14 September 2011. As atthe Latest Practicable Date, £0.9 million of this amount has been paid to the Sellers and £1.5 million is still being held back.
4.5 Under the CIF Disposal Agreement, the CIF Vendors gave certain warranties that are customary for a transaction of thisnature. As is also customary in a transaction of this nature, the CIF Vendors covenanted to pay to the CIF Purchaser anamount equal to any tax liabilities which arise in the CIF Group in respect of the period prior to completion.
4.6 Claims for breach of warranty or the tax covenant under the CIF Disposal Agreement are subject to certain financial andtime limitations and other usual restrictions. The CIF Vendors have no liability for a breach of warranty or a claim under thetax covenant unless, except in the case of fraud: (a) an individual claim exceeds £10,000; and (b) all claims in aggregateexceed £300,000. The overall cap on liability under the warranties and the tax covenant is an amount equal to theconsideration for the shares in CIF, save for claims made under the warranties given in relation to the invoice financeagreements and related documents entered into by the CIF Group, where the cap on liability is £25 million.
4.7 The CIF Vendors liability for claims under the warranties (other than claims relating to tax) expires 18 months after thedate of completion (being 14 September 2009). The CIF Vendors liability for warranty claims relating to tax expires on thesixth anniversary of the end of the accounting period in which completion occurred.
4.8 In addition to the warranties, the CIF Vendors agreed to give indemnities to the CIF Purchaser for: (i) any non-disclosureof commissions paid by the CIF Group to introducers of business; (ii) any breaches by the CIF Group of FSMA in the way inwhich PPI has been marketed and sold and; (iii) certain existing litigation claims against the CIF Group. The limitationsdescribed in respect of the warranties and the tax covenant also apply to these indemnities save that, instead of an 18 monthtime limit, the indemnities have a time limit of five years and claims under the indemnities of more than £10,000 will becomepayable to the CIF Purchaser once they reach a threshold of £75,000, rather than the £300,000 threshold which applies to thewarranties and the tax covenant.
4.9 The CIF Vendors obligations under the warranties, covenants to pay and indemnities, set out above, have beenguaranteed by Cattles.
4.10 The CIF Disposal Agreement also contained a restrictive covenant under which the CIF Vendors and all other membersof the Group are prevented, for a period of two years from completion, from competing with the business carried on by theCIF Group at completion or soliciting its customers, suppliers or employees. Subject to the fulfilment of certain criteria, thereis an exception for circumstances where a member of the Group acquires any company or business, an incidental part ofwhich is a business which competes with the business carried on by the CIF Group at completion.
Corporate Services Deed4.11 Under the Corporate Services Deed, SFM has agreed to provide either two corporate bodies and one natural person orthree natural persons to act as directors of each of Bovess and Bovess Holdco and to provide either one corporate body or onenatural person to act as company secretary of each of Bovess and Bovess Holdco. SFM will also provide a registered office,maintain the statutory books, make all necessary filings, arrange for board and shareholder meetings and maintain theaccounts of each of Bovess and Bovess Holdco.
4.12 Bovess and Bovess Holdco will pay SFM remuneration for the services it will provide under the Corporate ServicesDeed calculated by reference to SFM s normal hourly rates in force from time to time. Bovess and Bovess Holdco will alsopay all the costs and expenses incurred in connection with their ongoing operation (e.g. legal costs, tax agent costs andauditor costs) and liquidation. Bovess will also reimburse SFM for all fees, costs and disbursements properly incurred bySFM, SFM s advisers and the directors/secretary of Bovess and Bovess Holdco in performing their duties under theCorporate Services Deed. As noted in paragraph 3.14 of Part 5 above, in order to enable Bovess and Bovess Holdco to paysuch fees, costs and expenses, WFSL has agreed in the Corporate Services Deed to pay to Bovess an amount equal to theBovess Life Costs Amount on or around (i) the date that the Cattles Shareholder Scheme becomes effective or (ii) the date onwhich Plan B becomes effective. SFM, Bovess and Bovess Holdco have each acknowledged and agreed in the CorporateServices Deed that such amount will be the only amount available to Bovess and Bovess Holdco to pay such fees, costs andexpenses. WFSL has no obligation to transfer any further moneys. If the Corporate Services Deed is terminated, SFM will berequired to procure that Bovess returns the amounts standing to the credit of the Funding Account to WFSL after deductingcertain expenses incurred (and estimated to be incurred) by SFM in relation to such termination.
4.13 Bovess has undertaken to, among others, Cattles and WFSL in the Corporate Services Deed that, without the priorwritten consent of WFSL, it will not, among other things: (i) have any employees; (ii) acquire any property; (iii) make anydividend or any other distribution (including by way of return of capital) except for a final dividend or final distribution of upto £10,000 per year; (iv) borrow any money; (v) dispose of or otherwise seek to transfer or encumber any of the shares in
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Cattles or any subsidiary of Cattles or (vi) exercise its direct voting or other rights in Cattles other than in accordance withWFSL s instructions. Bovess Holdco and the Share Trustee have given similar undertakings.
4.14 The Corporate Services Deed terminates automatically on the date (the Long Stop Date ) that is the earlier of:(i) 31 March 2021; and (ii) the date that the first action is taken with respect to the liquidation of Bovess and Bovess Holdco(which SFM is only permitted to take once all the companies below Bovess have themselves been liquidated). The CorporateServices Deed can also be terminated earlier than the Long Stop Date in the circumstances set out below.
4.15 Bovess and Bovess Holdco can (with the prior written consent of WFSL) terminate SFM s appointment on threemonths prior written notice.
4.16 SFM can terminate its appointment on giving three months prior written notice.
4.17 Bovess and Bovess Holdo (with the prior written consent of WFSL) have the right to terminate SFM s appointmentimmediately on notice if SFM: (i) commits a material breach and fails to remedy the same within 30 days; (ii) enters into aninsolvency process; (iii) ceases to carry on its business or a substantial part of its business; or (iv) consolidates, merges ortransfers its assets to another entity or there is a change of control of SFM.
4.18 WFSL can terminate SFM s appointment on three months prior written notice and it also has the right to terminateSFM s appointment immediately on notice if any of the events referred to in the paragraph above occur.
Share Declaration of Trust4.19 The Share Trustee and WFSL have entered into the Share Declaration of Trust, which establishes the charitable trust inrespect of the shares in Bovess Holdco held by the Share Trustee. The Share Declaration of Trust includes certainundertakings in favour of WFSL that are also given by the Share Trustee in the Corporate Services Deed (for example, theundertaking not to create any security interest over, or dispose of, the shares it holds in Bovess Holdco).
4.20 The Share Trustee can retire at any time with WFSL s prior written consent. It will retire automatically upon thetermination of SFM s appointment under the Corporate Services Deed, subject to the proviso that such retirement will notbecome effective until: (i) a replacement trustee has been appointed by WFSL; and (ii) the Share Trustee has transferred withfull title guarantee its holding of shares in Bovess Holdco to the replacement share trustee.
Funding Letter4.21 Under the Funding Letter, WFSL agreed that, prior to the issue of the announcement of the Scheme Proposal on29 November 2010, it would transfer an amount equal to the Acquisition Amount to the Acquisition Account. Such transferwas made by WFSL on 26 November 2010. If the Cattles Shareholder Scheme becomes effective, the Funding Letterprovides that Bovess shall apply the Acquisition Amount towards satisfying the Acquisition Purposes. If the SchemeProposal terminates, lapses or is withdrawn, the Funding Letter provides that Bovess shall, forthwith, return to WFSL theAcquisition Amount (together with any accrued interest thereon).
Implementation Agreement4.22 Cattles and Bovess are parties to the Implementation Agreement, which provides, amongst other things, for theimplementation of the Cattles Shareholder Scheme, and contains certain assurances and confirmations between the parties. Inparticular, the parties to the Implementation Agreement have agreed to take all steps and actions, and to prepare alldocuments, necessary for the implementation of the Cattles Shareholder Scheme on a timely basis (and in accordance with anagreed timetable) and in accordance with the requirements of the City Code, the Court and applicable law and regulation.
4.23 The Implementation Agreement contains no break fee or exclusivity provisions.
4.24 The Implementation Agreement will terminate: (i) if agreed in writing between Bovess and Cattles; (ii) if the CattlesShareholder Scheme lapses or terminates; (iii) if, in the joint opinion of Bovess and Cattles, any condition to the CattlesShareholder Scheme becomes incapable of satisfaction; (iv) if the Financial Assistance Payments are not authorised andapproved by the Court in accordance with section 681(2)(e) of the Act in its order sanctioning the WFSL Scheme; (v) if theCattles Board withdraw or qualify their recommendation to Cattles shareholders to vote in favour of the resolutions to beproposed at the meetings to approve the Cattles Shareholder Scheme; or (vi) if the Cattles Shareholder Scheme does notbecome effective by 31 May 2011.
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SFM Engagement Letter4.25 WFSL has entered into the SFM Engagement Letter which sets out the services that SFM will provide in connectionwith the implementation of the Restructuring. In consideration for the provision of such services, WFSL has agreed to payany fees, costs and expenses incurred by SFM and Bovess (including legal and financial advisory fees) in connection with theRestructuring (subject to an office copy of the Court order sanctioning the Financial Assistance Payments that form part ofthe WFSL Scheme being delivered to the Registrar of Companies). Upon such sanction of the Financial Assistance Paymentsbecoming effective, a 50 per cent. uplift will be applied to certain of these fees, costs and expenses to reflect the risk taken bySFM that such fees, costs and expenses will not be paid at all.
Pension Compromise Agreement4.26 Cattles, WFSL, TLG, CSP Leeds Limited and the Pension Trustee have entered into the Pension Compromise.
4.27 Cattles, WFSL and TLG are participating employers in the Pension Fund, the trustee of which is the Pension Trustee.The latest estimate of the Pension Fund deficit calculated by the Pension Fund s actuary as at 25 August 2010, on the basisused in section 75 of the Pensions Act 1995, was £65 million.
4.28 Pursuant to the Pension Compromise, it is envisaged that all claims of the Pension Trustee (including liability undersection 75 of the Pensions Act 1995) in respect of the Pension Fund against Cattles, WFSL and TLG will be compromised fornominal payments by way of a regulated apportionment arrangement under the Occupational Pension Scheme (EmployerDebt) Regulations 2005 (the Employer Debt Regulations) which will allocate the balance of their section 75 debts onto CSPLeeds Limited (a new participating employer incorporated expressly for this purpose). That compromise is conditional upon,amongst other things: (i) the WFSL Scheme and, if applicable the Cattles Scheme becoming effective; (ii) the Restructuring;(iii) clearance being obtained from the Pensions Regulator; and (iv) the Pensions Regulator issuing a notice of approval of,and the Pension Protection Fund confirming that it does not object to, the regulated apportionment arrangement as requiredby the Employer Debt Regulations.
4.29 In return for compromising its claims pursuant to the Pension Compromise, the Pension Trustee will become a SchemeCreditor (and hence receive pro rata payments) in each of the Cattles Creditor Scheme and the WFSL Scheme, and will eitherreceive pro rata payments from TLG in accordance with the terms of the Co-guarantors Creditor Scheme or (if agreedbetween TLG and the Pension Trustee) a lump sum compromise payment (calculated on a pro rata basis). For the purposes ofany pro rata payments, the debts owed to the Pension Trustee by each of Cattles, WFSL and TLG will be amounts equal toeach company s Section 75 Debt calculated as at the date immediately prior to the date on which the Pension Compromisebecomes effective (such amounts being the Notional Section 75 Debts as defined in the compromise agreement).Alternatively, (in respect of TLG only) the pro rata lump sum may be based on the pension scheme actuary s estimate of thesection 75 debt applicable to TLG as at 25 August 2010, if so agreed with the Pension Trustee.
4.30 The amount of the Notional Section 75 Debts will be determined in accordance with the terms of the PensionCompromise and not under the determination process in the WFSL Scheme and Cattles Creditor Scheme. The PensionCompromise provides that the Pension Fund s actuary will calculate the amount of the Notional Section 75 Debt for each ofCattles, WFSL and TLG, with Cattles, WFSL and TLG having an opportunity to challenge the calculations (with reference toan independent actuary, if necessary, for final determination) if they consider that the assumptions used by the Pension Fundactuary are unreasonable or there is a manifest error in the calculations.
Escrow agreement and schedule of contributions4.31 The Pension Trustee and Cattles have entered into a revised schedule of contributions in respect of the Pension Fund on1 October 2010. Pursuant to that revised Schedule of Contributions, Cattles, WFSL, TLG, the Pension Trustee and WrigleysSolicitors LLP (solicitors for the Pension Trustee) have entered into the Escrow Agreement on 1 October 2010.
4.32 The Pension Trustee is not a party to the SEA (paragraph 2 of Part 2 above). The revised schedule of contributions andrelated escrow agreement provide for WFSL to make additional contributions to the Pension Fund to ensure that the PensionFund has (broadly) been treated rateably with the financial creditors under the SEA pending completion of the proposedrestructuring.
4.33 Under the revised schedule of contributions, WFSL agreed to make an interim pension payment directly to the PensionFund within two business days of the execution of the schedule of contributions. The purpose of this payment was to ensurethat the Pension Fund had been treated rateably to that date with the SEA creditors on a subordination ineffective basis. Thisresulted in a payment of £2.611 million being paid to the Pension Fund by WFSL on 4 October 2010.
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4.34 Pursuant to the escrow agreement, WFSL agreed to pay a special contribution to the Pension Fund, subject to certainconditions. The purpose of the special contribution is to seek to ensure that the Pension Fund will have been treated rateablywith the SEA creditors on a subordination effective basis as at the date of the proposed restructuring (or, if earlier, on aninsolvency of the Group). This resulted in a payment of £9.116 million (being the estimated amount of the specialcontribution) being paid into an escrow account held by Wrigleys Solicitors LLP on 4 October 2010, to provide the PensionTrustee with equivalent protection from insolvency risk to the SEA creditors. The initial amount paid into escrow will bereassessed at the restructuring effective date or the date of insolvency (see below), with true-up/true-down mechanisms toconfirm rateable treatment at that stage. Any funds remaining in escrow following true-up/true-down will be returned toWFSL.
4.35 Part of the escrow funds will be released to the Pension Fund when the following conditions have been satisfied: (i) thePension Trustee has executed the Pensions Compromise; (ii) clearance being obtained from the Pensions Regulator; and(iii) the Pensions Regulator issuing a notice of approval of, and the Pension Protection Fund confirming that it does notobject to, the regulated apportionment arrangement as required by the Employer Debt Regulations. However, £4.044 million(referred to in the Pensions Compromise as the Hold-back Amount ) will be retained in escrow until the restructuringeffective date (or earlier insolvency) to enable the true-up/true-down mechanism to operate.
4.36 Alternatively, the escrow funds (or any Hold-back Amount ) will be released to the Pension Fund on an insolvency ofall the participating employers (Cattles, WFSL and TLG) or insolvencies of both Cattles and WFSL and a TLG compromise,provided that the insolvencies were not directly caused by the Pension Trustee, Pensions Regulator or Pension ProtectionFund (in which case the escrow funds or Hold-back Amount will be returned to WFSL).
4.37 The revised schedule of contributions also provided for Cattles to meet the legal, actuarial and financial adviserexpenses incurred by the Pension Fund in connection with the restructuring
PPI arrangements the PPI Settlement Agreement4.38 WFSL and the FSCS have entered into the PPI Settlement Agreement to make provision for the payment of certainpotential liabilities of WFSL which relate to its historic mediation of PPI.
4.39 Pursuant to the PPI Settlement Agreement, WFSL is required to pay the FSCS £90 million on account of the FSCSpaying compensation to protected PPI policyholders in accordance with the compensation rules and guidance applicable tothe FSCS and on account of the costs of paying compensation. WFSL is required to make additional payments to the FSCS ifnet cash collections by WFSL over a prescribed period are equal to or exceed those set out in a business plan.
4.40 Save for an amount of £2 million, any part of the amount paid to the FSCS by WFSL under the PPI SettlementAgreement which is not used for paying compensation or costs will in effect be repaid to WFSL over a period ofapproximately three years to seven years and three months from the first day of the month following the date that the WFSLScheme becomes effective, provided that WFSL has paid all amounts due under the PPI Settlement Agreement. If certainamounts due to the FSCS have not been paid, any amount not used for paying compensation or costs will not be repaid toWFSL until the eighth year from the first day of the month following the date that the WFSL Scheme becomes effective. Ifthe FSCS uses all amounts paid to it by WFSL for paying compensation or costs, there will be no repayment due to WFSL.
PPI arrangements the PPI Claims Handling Services Agreement4.41 WFSL and the FSCS have agreed to enter into a Claims Handling Services Agreement in relation to the administrationof the compensation payments contemplated by the PPI Settlement Agreement. The Claims Handling Services Agreement isin agreed form as at the date of this document, save that in limited respects its terms depend on the completion of final duediligence and service readiness tests in respect of WFSL s IT systems and infrastructure. It will be signed prior to the PPISettlement Agreement becoming effective. The Claims Handling Services Agreement will come into force once each of theWFSL Scheme and PPI Settlement Agreement have become effective in accordance with their respective terms.
4.42 WFSL will provide the Services to the FSCS for a minimum term of three years and six months from the Effective Dateof the WFSL Scheme, unless the Claims Handling Services Agreement is terminated earlier (see 4.44 and 4.45 below). TheServices include contacting eligible PPI Claimants, assessing claims and providing reports to the FSCS. The FSCS will payWFSL s agreed costs of providing the Services but WFSL is not permitted to make a profit.
4.43 The FSCS has step-in rights in the event of service failures (or likely failures) by WFSL; it may also bring in a thirdparty at any time during the term of the Claims Handling Services Agreement to perform any Services in relation to PPILiabilities on either a temporary or permanent basis. WFSL is required to give the FSCS and any third party access to itspremises and/or systems in these circumstances.
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4.44 The FSCS may terminate the Claims Handling Services Agreement immediately on notice if WFSL commits certainspecific breaches of the agreement. The FSCS also has the right to terminate the Claims Handling Services Agreement on 30days written notice if the agreement generates adverse publicity for the FSCS, and on three months written notice withoutcause at any time.
4.45 WFSL is entitled to terminate the Claims Handling Services Agreement following the FSCS failure to pay undisputedcharges, or on six months written notice, which cannot be given until after the third anniversary of the agreement havingbecome effective.
The Restructuring Lock-Up Agreement4.46 On 29 November 2010, Cattles, WFSL, the Lock-Up Agent and the Obligors entered into the Restructuring Lock-UpAgreement. Certain of the Group s financial creditors (the Consenting Creditors) have acceded to the Restructuring Lock-UpAgreement.
4.47 The Restructuring Lock-Up Agreement provides that:(a) Cattles, WFSL and the Obligors are contractually bound to launch the proposed Restructuring according to Plan A and,
if Plan A fails for any reason, Plan B;(b) the Consenting Creditors, Cattles, WFSL and the Obligors are contractually bound to take all actions which they are
reasonably requested to take, in order to support, facilitate, implement or otherwise give effect to Plan A including,where relevant, to vote in favour of the Cattles Creditor Scheme, the WFSL Scheme and the Co-guarantors CreditorScheme;
(c) the Consenting Creditors are required to ensure that, prior to any transfer of their claims which are subject to theRestructuring Lock-Up Agreement, the transferee accedes to the Restructuring Lock-Up Agreement as a ConsentingCreditor; and
(d) Cattles, WFSL and the Obligors will not:(i) assign or transfer any of their rights or obligations under the Restructuring Lock-Up Agreement;(ii) take or consent to the taking of any action which would breach or be inconsistent with the Restructuring Lock-Up
Agreement; or(iii) take or consent to the taking of any material corporate action (including changing the capital structure of any
member of the Group and entering into, materially amending or terminating any material contract),in each case subject to certain exceptions (including where such steps are necessary to implement Plan A (or, if Plan Afails, Plan B)).
4.48 Under the Restructuring Lock-Up Agreement, the duties of the Lock-Up Agent are solely of a mechanical andadministrative nature.
4.49 The Restructuring Lock-Up Agreement will terminate:(a) on the date on which all of the documents necessary or desirable to implement or consummate Plan A (or, if Plan A
fails, Plan B) are unconditional or in full effect in accordance with their terms;(b) on 31 January 2011, if by that date a hearing has not yet been held to seek directions of the Court to convene creditor
meetings in connection with the WFSL Scheme;(c) if an insolvency process commences in relation to Cattles or WFSL (other than, in the case of Cattles, as part of, or as
anticipated by, Plan B);(d) if (i) Cattles, WFSL or any Obligor does not comply with any material provision of the Restructuring Lock-Up
Agreement; or (ii) there occurs any event which will have a material adverse effect and, in each case, a certain majorityof the Consenting Creditors agree that it should terminate;
(e) if Cattles, WFSL, TLG and a certain majority of the Consenting Creditors agree that it should terminate.
Settlement agreement with Noteholders4.50 On 3 December 2010, WFSL and Cattles settled a dispute with the Noteholders regarding the quantification of theNoteholders claims against those companies and the other members of the Group. At the time of the settlement, theNoteholders were claiming to be owed an additional £38,500,000 as of 31 October 2010. Following discussions with Queen sCounsel, WFSL and Cattles agreed with the Noteholders to settle the dispute fully and finally by agreeing an additional
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£14,400,000 to the Noteholders claims. This additional amount will form part of the Noteholders claims in the CattlesCreditor Scheme and the WFSL Scheme.
ERF Security Agreement4.51 It is expected that WFSL will enter into the ERF Security Agreement in respect of the Clydesdale Account on or around17 December 2010.
4.52 The amount standing to the credit of the Clydesdale Account will be held as security for the Protected Payments. It isintended that WFSL will continue to pay the Protected Payments to the eligible employees on a business-as-usual basis.However, in the event that WFSL becomes insolvent and does not pay the Protected Payments to the eligible employeeswhen they become due, the Security Trustee will be able to enforce the ERF Security Agreement and apply amounts standingto the credit of the Clydesdale Account in satisfaction of the amounts owing to the relevant employees in respect of theProtected Payments.
4.53 On a quarterly basis, the Security Trustee will review the amount standing to the credit of the Clydesdale Account andthe amount required to cover the Protected Payments that would be owed to the eligible employees still in WFSL semployment. WFSL will provide information to the Security Trustee to assist it to determine the amount necessary to be heldin the Clydesdale Account.
4.54 To the extent that the Security Trustee determines that there is excess collateral in the Clydesdale Account, it willrelease the excess collateral from the Clydesdale Account and WFSL will transfer that amount to an account it holds withRBS or HSBC. Similarly, to the extent that the Security Trustee determines that there is insufficient collateral in theClydesdale Account to cover the Protected Payments owed by WFSL to the eligible employees, WFSL will be required totop-up the account. Once all of the Protected Payments and all other amounts secured under the ERF Security Agreementhave been discharged, the Security Trustee will discharge the ERF Security Agreement.
4.55 Under the ERF Security Agreement, WFSL will indemnify the Security Trustee for any costs it incurs in preserving orenforcing its rights under the ERF Security Agreement as well as any costs it may incur in connection with a payment out ofthe Clydesdale Account being impeached or declared void for any reason. In addition, WFSL is required to pay on demandthe reasonable costs of the Security Trustee in respect of directors fees and expenses and the costs of a winding-up of theSecurity Trustee following discharge of the Security. The indemnities under the ERF Security Agreement are limited to anaggregate amount of £100,000 and the Security Trustee is entitled to apply the amounts standing to the credit of theClydesdale Account to discharge amounts owing to it under the ERF Security Agreement.
5. LITIGATION
5.1 Save as set out in paragraphs 5.2 to 5.4 of this Part 9, no member of the Group is or has been engaged in nor, so far asCattles is aware, has pending or is threatened with, any governmental, legal or arbitration proceedings, during a periodcovering at least the 12 months preceding the date of this document, which may have, or have had in the recent past,significant effects on the Group s financial position or profitability. However, although no legal proceedings in respect of anyOutward Claims have yet been commenced, Cattles is currently considering whether or not to institute any such legalproceedings.
5.2 The Part 8 Claim was a matter which might have had a significant impact on the Group s financial position. However,this has now been concluded (see paragraphs 2.5 and 2.6 of Part 2 above).
5.3 As noted at paragraph 1.11 of Part 2 above, there is a significant risk that Cattles and/or WFSL may be subject toregulatory action for market abuse and/or other regulatory breaches. In the event of such regulatory action, the sanctionwhich Cattles and/or WFSL might face is at present uncertain.
5.4 As noted at paragraph 4.1 of Part 2 above, WFSL has received a number of complaints relating to the mis-selling of PPI.Some of these complaints ended up in litigation or in complaints being made to the Financial Ombudsman Service. Themethod of dealing with PPI claims going forward is set out at paragraph 4 of Part 2 above.
6. CATTLES COMPANY BACKGROUND
6.1 Cattles was incorporated and registered in England and Wales on 21 January 1955 with registered number 543610 as alimited company under the Companies Act 1948 with the name Cattle s (Holdings) Limited. Its name was changed to Cattles(Holdings) PLC on 5 March 1982, when it was re-registered as a public company under the Companies Acts 1948 to 1980.Its name was changed to Cattles plc on 5 June 1995.
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6.2 Cattles is domiciled in England and Wales and its registered office is at Kingston House, Centre 27 Business Park,Woodhead Road, Birstall, Batley, West Yorkshire WF17 9TD.
7. SUBSIDIARIES AND PRINCIPAL ESTABLISHMENTS
Subsidiaries
7.1 The principal subsidiaries of Cattles are as follows:
Name Class of Shares Shareholder
Percentageowned/votingpower held Nature of business
Welcome Financial Services Limited Ordinary £1 shares Cattles HoldingsLimited
100 Instalment credit
Ordinary 1p shares Cattles HoldingsLimited
A Preference 1pshares
ProgressiveInsurance CompanyLimited
B Preference 1pshares
ProgressiveInsurance CompanyLimited
IrredeemablePreference 1p shares
Compass CreditLimited
The Lewis Group Limited Ordinary £1 shares Lewis Group(Holdings)Limited
100 Debt collectionand investigationservices
C L Finance Limited Ordinary £1 shares Lewis Group(Holdings) Limited
100 Debt purchase
7.2 The registered office of all of the above companies (all of which, save for The Lewis Group Limited, were incorporatedin England and Wales) is Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, West YorkshireWF17 9TD. The Lewis Group Limited was incorporated in Scotland and has its registered office at Rowan House, 70Buchanan Street, Glasgow G1 3JF.
7.3 Cattles indirectly holds 100 per cent. of the shares and holds all the voting power in these shares.
Principal establishments7.4 The following are the principal establishments of the Group:
Location TenureRent perannum Term
Kingston House, Batley ............................................................................................... Leasehold £ 147,000 2011Ruddington Fields, Nottingham .................................................................................. Freehold N/A N/AAbbeyfields, Nottingham............................................................................................. Leasehold £ 162,640 2020Bishops House, Nottingham........................................................................................ Leasehold £ 163,000 2020Iridium Court, Hull....................................................................................................... Leasehold £ 71,000 2013Lawrence House, Cleckheaton .................................................................................... Leasehold £ 280,424 2015
7.5 In addition, the Group occupies approximately a further 220 properties in the UK. These properties are primarily officeswhich are usually located in secondary retail positions. These properties are mainly small leasehold premises on generallyshort leases and are not material on an individual basis.
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(B) WFSL8. DIRECTORS
8.1 The current members of the WFSL Board and their functions are:
Name Position
Robert East Managing Director (as of 1 January 2011)Margaret A. Young Executive ChairmanPaul J. Felton-Smith Finance DirectorJamie Drummond Smith Chief Restructuring OfficerFrank R. Dee Non-executive DirectorDavid Lovett Non-executive Director
9. DIRECTORS AND OTHER INTERESTS
Directors interests in Shares9.1 No Director of WFSL has any interest in the share capital of WFSL. Their interests in the share capital of Cattles areshown at paragraph 2.1 of this Part 9 above.
Directors service contracts and benefits9.2 The service contracts of Margaret A. Young and Paul J. Felton-Smith, particulars of which are set out in paragraph 2.2above, were entered into jointly with Cattles and WFSL. In addition, Jamie Drummond Smith and Robert East have enteredinto service contracts with WFSL, particulars of which are set out below:
Name Date of Agreement Expiry Terms Basic salary (£)
Robert East 10 December 2010(takes effect from 1January 2011)
No specified term:terminable on 6months written noticeby either party
£400,000 per annum
Jamie DrummondSmith
6 October 2010 An initial fixed term of50 working days from1 September 2010:terminable by eitherparty on 1 month swritten notice expiringon or after the initialfixed term
£2,000 per day worked
9.3 Jamie Drummond Smith s and Robert East s service contracts provide that WFSL may terminate their employment bymaking a payment in lieu of notice to them, in lieu of the notice period (or remainder of the notice period). Where notice oftermination has been served by either party, WFSL is entitled to place both Jamie Drummond Smith and Robert East ongarden leave .
9.4 Jamie Drummond Smith is entitled to participate in a discretionary bonus plan for the period from 1 September to31 December 2010 and for each six month period from 31 December 2010. The maximum bonus opportunity is 50 per cent.of his accumulated basic salary based on the number of days actually worked during the relevant period. Robert East isentitled to participate in a discretionary bonus plan for this period from 1 January 2011 to 31 December 2011 and themaximum bonus opportunity is £200,000 per annum. The awards of bonuses will be based on their achievement of certainkey objectives for each relevant period (as determined at the discretion of Cattles remuneration committee).
9.5 Jamie Drummond Smith is not entitled to any pension benefits in his role as an Executive Director of WFSL. Robert Eastis entitled to an allowance of £60,000 per annum from 1 January 2011 in lieu of any obligation on WFSL to contribute to anypension arrangement on his behalf.
9.6 Jamie Drummond Smith and Robert East are also entitled to reimbursement of reasonable expenses including reasonablecosts of travel to work within the UK. Jamie Drummond Smith and Robert East have agreed to covenants restrictingpublication or disclosure of any confidential information concerning the business or affairs of WFSL or any Group companyor any of its or their customers.
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9.7 It should be noted that none of the directors of WFSL receive a release under the terms of the WFSL Scheme.
Letters of Appointment9.8 David Lovett s services as an independent non-executive director of WFSL are provided under a letter dated 11 January2010 from AlixPartners Limited to WFSL which varies the terms of the engagement letter dated 12 June 2009 fromAlixPartners Limited to WFSL. AlixPartners Limited receives a fee of £620 per hour worked by David Lovett on WFSL sbusiness. Either AlixPartners Limited or WFSL may terminate the AlixPartners Limited engagement on 30 days writtennotice. There is no separate letter of appointment for Frank R. Dee s services as a non-executive director of WFSL.
9.9 Other than as disclosed in this paragraph and in paragraph 2 of this Part 9, there are no service agreements or letters ofappointment between WFSL or any other member of the Cattles Group and any WFSL Director.
10. DIRECTORS CONFIRMATIONS
10.1 Save as disclosed in paragraphs 3.2 to 3.4 above none of the WFSL Directors has during the last five years:(a) been convicted in relation to a fraudulent offence;(b) been associated with any bankruptcy, receivership or liquidation while acting in the capacity of a member of the
administrative, management or supervisory body or as senior manager of any company;(c) been subject to any official public censure and/or sanction by statutory or regulatory authorities (including designated
professional bodies); or(d) been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of any
company.
(C) GENERAL11. THE COSTS OF CATTLES AND WFSL IN RELATION TO THE RESTRUCTURING
11.1 The aggregate amount of fees for Cattles and WFSL s advisers in respect of the Restructuring was £19.7 million as at30 November 2010. In addition, the Group has agreed to pay the fees for the advisers in respect of the Restructuring to theLenders and the Noteholders and, to some extent, the Bondholders and other parties involved in the Restructuring.
12. CONSENTS
12.1 KPMG LLP has given and not withdrawn its consent to the inclusion of its name and the references to it in the form andcontext in which it appears.
12.2 Zolfo Cooper LLP has given and not withdrawn its consent to the inclusion of its name and the references to it in theform and context in which it appears.
12.3 LG has given and not withdrawn its consent to the inclusion of its name and the references to it in the form and contextin which it appears.
12.4 Berwin Leighton Paisner LLP has given and not withdrawn its consent to the inclusion of its name and the references toit in the form and context in which it appears.
12.5 Freshfields has given and not withdrawn its consent to the inclusion of its name and the references to it in the form andcontext in which it appears.
12.6 Mike Rollings and Rollings & Co LLP have given and not withdrawn their consent to the inclusion of their names andthe references to them in the form and context in which they appear.
12.7 SNR Denton UK LLP has given and not withdrawn its consent to the inclusion of its name and the references to it in theform and content in which it appears.
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13. DOCUMENTS AVAILABLE FOR INSPECTION
Cattles13.1 Copies of the following documents may be inspected free of charge at the offices of Cattles at its registered officeaddress and the offices of Freshfields at 65 Fleet Street, London EC4Y 1HS during usual business hours on any weekdayuntil and including the date of the Cattles Scheme Meeting:(a) the memorandum and articles of association of Cattles;(b) the service contracts and letters of appointment of the Directors referred to in paragraph 2 of this Part 7 above;(c) the material contracts referred to in paragraph 4 of this Part 7 above;(d) the Annual Report and Financial Statements for the year ended 31 December 2008;(e) the Annual Report and Financial Statements for the year ended 31 December 2009; and(f) this document.
WFSL13.2 Copies of the following documents may be inspected free of charge at the offices of WFSL at its registered officeaddress and the offices of Freshfields at 65 Fleet Street, London EC4Y 1HS during usual business hours on any weekdayuntil and including the date of the WFSL Scheme Meeting:(a) the memorandum and articles of association of WFSL;(b) the service contracts and letters of appointment of the Directors referred to in paragraph 9 of this Part 9 above;(c) the material contracts referred to in paragraph 4 of this Part 9 above;(d) the audited financial statements for the year ended 31 December 2008;(e) the audited financial statements for the year ended 31 December 2009; and(f) this document.
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PART 10OVERSEAS SCHEME CREDITORS
1.1 This document does not constitute an offer to sell or an invitation to purchase or subscribe for any securities or asolicitation of an offer to buy any securities pursuant to this document or otherwise in any jurisdiction in which such offer orsolicitation is unlawful. This document does not constitute a prospectus or a prospectus equivalent document.
1.2 The implications of the Schemes for overseas persons may be affected by the laws of the relevant jurisdictions. Overseaspersons should inform themselves about and observe any applicable legal requirements. It is the responsibility of eachoverseas person to satisfy himself as to the full observance of the laws of the relevant jurisdiction in connection therewith,including the obtaining of any governmental, exchange control or other consents which may be required, or the compliancewith other necessary formalities which are required to be observed and the payment of any issue, transfer or other taxes duein such jurisdiction.
United States1.3 The Scheme Claims that may arise in connection with the Schemes will not be, and are not required to be, registeredunder the Securities Act and will be created in reliance upon the exemption from the registration requirements of theSecurities Act provided by Section 3(a)(10) of that Act.
1.4 Scheme Claims in favour of a Scheme Creditor who is neither an affiliate (within the meaning of the Securities Act),for the purposes of the Securities Act, of Cattles prior to or after the Effective Date, would not be restricted securities underthe Securities Act and such Scheme Claims may be sold by such person in ordinary secondary market transactions withoutrestriction under the Securities Act.
1.5 The Scheme Claims have not been and will not be listed on a US securities exchange or quoted on any inter-dealerquotation system in the United States. Cattles does not intend to take any action to facilitate a market in Scheme Claims inthe United States. Consequently, Cattles believes that it is unlikely that an active trading market in the United States willdevelop for the Scheme Claims.
1.6 Neither the SEC nor any other US federal or state securities commission or regulatory authority has approved ordisapproved the Scheme Claims or passed an opinion upon the accuracy or adequacy of this document. Any representation tothe contrary is a criminal offence in the United States. Scheme Creditors who are citizens or residents of the United States orother jurisdictions outside the UK should consult their own legal and tax advisers with respect to the legal and taxconsequences of their particular circumstances.
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PART 11RISK FACTORS
1. OVERVIEW
1.1 This Part 11 sets out the principal risk factors affecting the implementation of the two Schemes. Additional risks anduncertainties not presently known to Cattles or WFSL or that Cattles or WFSL do not presently consider to be material, basedon the information currently available to them, may also have a material adverse effect on the ability of either of them toimplement their respective Schemes in a timely manner, or at all.
1.2 All statements in this document are to be read subject to, and are qualified in their entirety by, the matters referred to inthis Part 11.
2. IMPLEMENTATION OF THE SCHEMES
2.1 If either or both of the Cattles Creditor Scheme or the Cattles Shareholder Scheme does not become effective, Plan A willhave failed and the Cattles Board expects that it will be necessary to place Cattles into administration, pursuant to Plan B.Pursuant to the Restructuring Lock-Up Agreement, the details of which are summarised in Part 9, almost all of the Lendersand all of the Noteholders have confirmed their support for the Cattles Board to place Cattles into administration pursuant toPlan B. In such event, the Cattles Board expects that the Cattles Scheme Creditors are likely to obtain a lower return on theirclaims under Plan B than they would have received under Plan A, and the amounts to be received will be subject to increaseduncertainty and delay.
2.2 If WFSL is unable to implement the WFSL Scheme, Plan B will have failed and the WFSL Board expects that it will benecessary to place WFSL into administration and the Cattles Board expects that it will be necessary to place Cattles intoliquidation. In such event, the Cattles Board and the WFSL Board, respectively, expect that the Cattles Scheme Creditors andWFSL Scheme Creditors are likely to obtain a lower return on their claims than they would have received under Plan B, andthe amounts to be received will be subject to increased uncertainty and delay.
3. EFFECTIVENESS OF THE SCHEMES REQUIRES THE APPROVAL OF SCHEME CREDITORS
3.1 In order for either Scheme to become effective, it must be approved by the relevant Scheme Creditors (i.e. the WFSLScheme Creditors must approve the WFSL Scheme and the Cattles Scheme Creditors must approve the Cattles CreditorScheme). If the requisite majorities of Scheme Creditors do not vote in favour of a Scheme, that Scheme will not becomeeffective.
4. EVEN IF SCHEME CREDITORS APPROVE A SCHEME, THAT SCHEME MAY BE OBJECTED TO AND MAY NOT BE COMPLETED
4.1 If a Scheme is approved at the relevant Scheme Meeting, it is possible that a person with an interest in that Scheme(whether a Cattles Scheme Creditor or WFSL Scheme Creditor (as the case may be) or another person) may raise objectionsto that Scheme and attend the Court Hearing to sanction the Scheme to make representations that the Scheme ought not besanctioned. It is also possible that, even if a Scheme were sanctioned by a judge at first instance, the interested person couldseek to appeal that decision to the Court of Appeal.
4.2 Therefore, there can be no assurance that objections will not be made at or before the Court Hearing or that an appeal willnot be made against the grant of the Court Order for either Scheme; or that any such objections or appeal will not delay orpossibly prevent either Scheme from becoming effective. Specific examples of potential challenges are discussed atparagraphs 4.3 to 4.7 below.
Challenge to the convening of the Cattles Scheme Meeting with a single class of Cattles Scheme Creditors4.3 Cattles shareholders may claim to be Cattles Scheme Creditors. Their claims may arise in relation to their subscribingfor, purchasing or holding shares, in light of the fact that some Public Statements issued by Cattles prior to February 2009,including the 2008 rights issue prospectus, contained inaccurate financial information about Cattles and the Group (seeparagraph 3.3 of Part 6).
4.4 There is an argument that any claims of Cattles shareholders who purchased shares as subscribers which arise from thecircumstances referred to above should be subordinated to the claims of Cattles general creditors, and therefore to the claimsof other Cattles Scheme Creditors. Such an argument may be based on an assertion that section 74(2)(f) of the Insolvency Actapplies to the claims. If section 74(2)(f) did so apply, then Cattles Scheme Creditors whose claims were subordinated byapplication of that provision may have to be treated differently to other Cattles Scheme Creditors. In that case it would benecessary to convene a meeting for a separate class of Cattles Scheme Creditors.
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4.5 Cattles legal advisers believe that the better view is that section 74(2)(f) does not apply to any claims that Cattlesshareholders may have in relation to their purchasing or holding Cattles shares. It is possible that a person will object to theCattles Scheme Meeting being constituted with only one class, although if such an objection were to be raised it shouldgenerally have been raised at the hearing at which the Court gave Cattles leave to convene the Scheme Meetings.
Objection to Cattles financial creditors voting at the Cattles Scheme Meeting4.6 The fairness of the Cattles Creditor Scheme may be questioned on the basis that if Cattles financial creditors vote infavour of the Cattles Creditor Scheme they may do so in order to obtain a collateral advantage which would be derived froman improved result for WFSL and therefore an improved return to them in their capacity as WFSL Scheme Creditors.
4.7 The Cattles Board is satisfied that the Cattles Intercompany Claim would be compromised at an appropriate level undereither Plan A or Plan B, and that the Plan A Payment and the Plan B Payment have been properly and fairly negotiatedbetween Cattles and WFSL (see paragraph 6 of Part 5). On that basis, the Cattles Board believes that a challenge to thefairness of the Cattles Creditor Scheme of the kind referred to above would be defeated.
5. EFFECTIVENESS OF A SCHEME REQUIRES THE SANCTION OF THE COURT
5.1 In order for a Scheme to become effective, it must receive the sanction of the Court. The Court will not sanction aScheme unless it is satisfied that the correct procedures have been followed, that the proposed arrangements are fair and thatthere are no other reasons why the Scheme should not be approved. There can be no assurance that the Court will determinethat a Scheme is fair or that the Court will not conclude that there are other reasons why a Scheme should not be approved.
6. COMPLETION OF THE SCHEME IS SUBJECT TO A NUMBER OF IMPORTANT CONDITIONS
6.1 The effectiveness of the Cattles Creditor Scheme is subject to a number of important conditions including the WFSLScheme becoming effective in accordance with its terms. If the WFSL Scheme does not become effective, the CattlesCreditor Scheme will not become effective.
6.2 The effectiveness of the Cattles Creditor Scheme is subject to the occurrence of an Insolvency Event (as defined in theCattles Creditor Scheme), which would include, in particular, the taking of any formal step in preparation for placing Cattlesinto a formal insolvency process. Such an event could include, e.g. the presentation of a winding up petition in respect ofCattles (if it is not frivolous or vexatious) or the resolution by the directors of Cattles to place the company into a formalinsolvency process. If such an event occurs on or before 31 May 2011, then Cattles shall not deliver the order of the Courtsanctioning the Cattles Creditor Scheme to the Registrar of Companies, and so the Cattles Creditor Scheme shall not becomeeffective. If such an event occurs before the Bar Date for the purposes of the Cattles Creditor Scheme then, save for certainlimited provisions, the Cattles Creditor Scheme shall cease to have effect.
6.3 Completion of the WFSL Scheme may be prevented, even once it has become effective, by an event which leads to aScheme Reversion (for more detail on the possibility of a Scheme Reversion see paragraph 15 of Part 7, above).
7. EVEN IF A SCHEME BECOMES EFFECTIVE, THE SUMS TO BE RECEIVED UNDER THAT SCHEME ARE UNCERTAIN
7.1 In both Schemes, certain Scheme Payments are contingent payments and are not certain to be made. There is no guaranteein the Cattles Creditor Scheme that any Outward Claim Amounts will be paid to Cattles Scheme Creditors, as Cattles maydecide not to make any Outward Claims and, if it does, such Outward Claims may not be successful. Similarly, there is noguarantee in the WFSL Scheme that any Outward Claim Amounts will be paid to WFSL Scheme Creditors, as WFSL maydecide not to make any Outward Claims and, if it does, such Outward Claims may not be successful.
8. EVEN IF A SCHEME BECOMES EFFECTIVE, CERTAIN EVENTS MAY CAUSE A THE SCHEME TO END EARLIER THAN IT WOULDHAVE DONE OTHERWISE
8.1 The Cattles Creditor Scheme provides that, if there is an Insolvency Event in relation to Cattles (essentially the takingof a formal step towards placing the company into a formal insolvency process, e.g. the presentation of a winding up petitionor a resolution of the Cattles Board to place the company into a formal insolvency process) then, depending on when thatevent happens, the Cattles Creditor Scheme may either not become effective in accordance with its terms, or (if it has alreadybecome effective) may cease to be effective.
8.2 The WFSL Scheme contains a number of covenants with which WFSL is required to comply, and breach of thosecovenants, and a limited number of other events, could ultimately trigger what is referred to in the WFSL Scheme as aScheme Reversion . Following a Scheme Reversion, the provisions of the WFSL Scheme would broadly cease to have
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effect and WFSL s obligations to pay WFSL Scheme Creditors under the terms of the WFSL Scheme would becomeenforceable against WFSL. Examples of events that may lead to a Scheme Reversion include that:(a) the number and value of Unprotected PPI Claims that are made against WFSL, and of any other category of Excluded
Liability for the purposes of the WFSL Scheme, may be materially greater than has been anticipated; and(b) an unexpected and material claim may be identified in respect of which the creditor has not been given any notice of
the WFSL Scheme, and in respect of which the WFSL Scheme would not take effect to compromise the claim.
9. RISKS RELATING TO THE GROUP S BUSINESSES AND MARKETS
The Group s financial performance is affected by borrower credit quality which is influenced by general economicconditions in the UK9.1 Risks arising from changes in credit quality and the recoverability of loans are inherent in the Group s businesses.Adverse changes in the credit quality of WFSL s borrowers arising from a general deterioration in economic conditions orUK interest rates, unemployment or house price reductions or Government cuts in spending or benefits, could affect therecoverability and value of WFSL s assets and require an increase in WFSL s loan loss charge and/or other provisions.
Operational risks are inherent in the Group s businesses, which are dependent on the ability to process a large number oftransactions efficiently and accurately9.2 The Group s businesses are dependent on the ability to process a large number of transactions efficiently and accurately.Operational risks are present in all of the Group s businesses, including the risk of loss resulting from inadequate or failedinternal and external processes, documentation, information technology and systems, fraud, failure to comply with regulatoryrequirements, human error, equipment failures, or from external events.
The loss of personnel could adversely impact upon the results of the Group s operationsKey senior personnel (WFSL only)9.3 The Group s performance depends significantly on the efforts and expertise of its key senior personnel. The unexpectedloss of the services of one or more of these individuals could have an adverse effect on the Group s operating results.Notwithstanding the establishment of the Employee Retention Fund, there can be no assurance that such individuals will notleave the Group, and there can be no assurance that the Group will be able to replace key senior personnel quickly ifnecessary in the future.
Collections staff9.4 The Group s performance depends significantly on the efforts of a large number of collection staff who, by making directcontact with customers of the Group s business, facilitate cash collections from those customers.
The possible failure of the IT systems9.5 A significant operational failure of the IT systems of Cattles or WFSL may adversely impact the ability of Cattles and/orWFSL to operate its business effectively.
Greater than forecast costs could adversely impact the Group s financial position9.6 If the Group s costs are in fact greater than have been forecast, this could have an adverse effect on the Group s financialposition. In particular, such an eventuality may arise from potential liabilities relating to the sale of PPI by WFSL prior toJanuary 2005. These policies are not covered under the agreement with the FSCS referred to at paragraph 4 of Part 2 above.
10. GREATER THAN ANTICIPATED UNPROTECTED PPI LIABILITIES
10.1 If the claims and related costs in respect of Unprotected PPI Liabilities exceed the £20 million that is initially providedfor them in accordance with the WFSL Scheme, and additional funds are not made available in accordance with clause 5.4.5of the WFSL Scheme, then, subject to the terms of the WFSL Scheme, that may lead to there being a Scheme Reversion.
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APPENDIX A:LIST OF DEFINED TERMS USED IN THE EXPLANATORY STATEMENT
The following definitions shall apply to the words and phrases used in this document except in the Schemes set out atSection 2 of this document or where the context requires otherwise:
£500 Million Syndicated Facility means the £500 million syndicated credit facility dated 14 July 2004 between Cattles asborrower, certain Group companies including WFSL and Ewbanks as guarantors, The Royal Bank of Scotland plc as facilityagent and the lenders from time to time;
£800 Million Syndicated Facility means the £800 million syndicated credit facility dated 10 July 2006 between Cattles asborrower, certain Group companies including WFSL and Ewbanks as guarantors, The Royal Bank of Scotland plc as facilityagent and the lenders from time to time;
£215 Million Syndicated Facility means the £215 million syndicated credit facility dated 17 April 2008 between Cattles asborrower, certain Group companies including WFSL and Ewbanks as guarantors, The Royal Bank of Scotland plc as facilityagent and the lenders from time to time;
£135 Million Bilateral Facility means the £135 million bilateral credit facility dated 30 June 2008 between Cattles asborrower, certain Group companies including WFSL and Ewbanks as guarantors and The Royal Bank of Scotland plc aslender and facility agent;
£75 Million Bilateral Facility means the £75 million bilateral credit facility dated 12 August 2004 between Cattles asborrower, certain Group companies including WFSL and Ewbanks as guarantors and The Royal Bank of Scotland plc aslender;
2010 6+6 Plan means, in relation to either Cattles, WFSL or the Group, the relevant company s or the Group s cash flowforecast from 1 July 2010 to 31 December 2013, as approved by the Cattles Board;
2014 Bonds means the £350 million 7.875 per cent. bonds due 2014 constituted by a trust deed dated 17 December 2003between Cattles as issuer and the Bond Trustee (as amended, restated and/or supplemented from time to time);
2017 Bonds means the £400 million 8.125 per cent. bonds due 2017 constituted by a trust deed dated 5 July 2007 betweenCattles as issuer and the Bond Trustee (as amended, restated and/or supplemented from time to time);
Acquisition Account means the sterling denominated account in the name of Bovess into which the Acquisition Amount hasbeen deposited;
Acquisition Amount means £5.3 million, being the aggregate of the amount required for the Acquisition Purposes;
Acquisition Purposes means payment of the 1p per share cash consideration due to Cattles shareholders under the CattlesShareholder Scheme and any payments required to be made to participants in Cattles share incentive schemes;
Act means the Companies Act 2006, as amended from time to time;
Action means any action or legal proceeding including, without limitation, arbitration, mediation or any judicial, quasi-judicial, administrative or regulatory action, proceedings or process whatsoever;
Additional FSCS Payment means a payment of £40 million from WFSL to the FSCS pursuant to the PPI SettlementAgreement;
Administrator Actions means the actions that are available to an administrator under the Insolvency Act, including undersections 238 and 239 in relation to transactions at an undervalue and in relation to preferential payments to creditorsrespectively;
Ascertained Scheme Claim means:(a) in relation to the Cattles Creditor Scheme, a Submitted Scheme Claim which has been agreed by the Scheme
Supervisors in accordance with clause 3.7.2 or 3.7.7 of the Cattles Creditor Scheme or by the Court in accordance withclause 3.8.1 of the Cattles Creditor Scheme; and
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(b) in relation to the WFSL Scheme, a Submitted Scheme Claim which has been agreed by the Scheme Supervisors inaccordance with clause 3.7.2 or 3.7.6 of the WFSL Scheme or by the Court in accordance with clause 3.8.1 of theWFSL Scheme;
Bankruptcy Code means Title 11 (Bankruptcy) of the United States Code;
Bankruptcy Court means the United States Bankruptcy Court for the Southern District of New York;
Bar Date means in relation to either the Cattles Creditor Scheme or the WFSL Scheme the first Business Day falling threemonths after the Effective Date;
BAU Payments means certain payments made pursuant to the PPI Settlement Agreement either (i) by WFSL to the FSCS; or(ii) by the FSCS to WFSL, in respect of any PPI Liabilities discharged by WFSL prior to the date on which the WFSLScheme became effective;
Bond Claim means the claim that a Bondholder has against Cattles in respect of the amounts of principal and interestoutstanding on the Bonds that it holds;
Bond Creditor means a Cattles Scheme Creditor whose Cattles Scheme Claim arises from any amount outstanding under the2014 Bonds or the 2017 Bonds as at 5.00 pm on the Voting Record Date;
Bond Trustee means HSBC Trustee (C.I.) Limited in its capacity as trustee under the trust deeds which relate to either orboth of the 2014 Bonds and the 2017 Bonds;
Bondholders means the holders from time to time of the 2014 Bonds and the 2017 Bonds;
Bonds means the 2014 Bonds and the 2017 Bonds;
Bovess means Bovess Limited, a private limited company incorporated under the laws of England and Wales with registerednumber 07366975;
Bovess Holdco means Bovess Holding Limited, a private company with limited liability incorporated under the laws ofEngland and Wales with registered number 07366959;
Bovess Life Costs Amount means the amount of £2,500,200, being the amount expected to be paid by Bovess: (i) to SFM forthe provision of corporate services; (ii) to meet ongoing operational costs and expenses of Bovess and Bovess Holdco; and(iii) to reimburse all fees, costs and disbursements properly incurred by SFM, its advisers and the directors/secretary ofBovess and Bovess Holdco in performing their duties under the Corporate Services Deed;
Business Day means a day, other than a Saturday or a Sunday, on which banks are open for general business in London andNew York;
Cattles means Cattles plc, a public limited company incorporated under the laws of England and Wales with companynumber 00543610;
Cattles Administrator Agreement means an agreement to be entered into under Plan B between Cattles, its administratorsappointed under Plan B and WFSL governing, among other things, Cattles support for the WFSL Scheme and the paymentof the Plan B Payment;
Cattles Board means the board of directors of Cattles from time to time;
Cattles Court Order means an order of the Court sanctioning the Cattles Creditor Scheme;
Cattles Creditor Scheme means the proposed scheme of arrangement under Part 26 of the Act between Cattles and theCattles Scheme Creditors in its present form or with any modifications or additions approved or imposed by the Court inaccordance with clause 10.2 thereof;
Cattles Form of Proxy means any instrument approved by the Scheme Supervisors in accordance with clause 8.3.3 of theCattles Creditor Scheme for the purpose of appointing a person to attend the Cattles Scheme Meeting on behalf of a CattlesScheme Creditor and vote in their place;
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Cattles Holdings means Cattles Holdings Limited, a private limited company incorporated under the laws of England andWales with company number 05976786;
Cattles Intercompany Claim means any and all Liabilities owed to Cattles by each of the members of the Group, save forCattles Properties (Ruddington) Limited and certain ongoing trading balances;
Cattles Properties (Ruddington) means Cattles Properties (Ruddington) Limited, a private limited company incorporatedunder the laws of England and Wales with company number 04681891, which is an indirect subsidiary of Cattles which ownsthe land on which the Group s corporate headquarters is situated;
Cattles Scheme Creditor means any person who is, or claims to be, a creditor of Cattles in respect of a Cattles CreditorScheme Liability at the Record Date;
Cattles Scheme Meeting means the Scheme Meeting to be held in relation to the Cattles Creditor Scheme;
Cattles Shareholder Scheme means the recommended cash acquisition of Cattles by Bovess which is proposed to be effectedby a scheme of arrangement under Part 26 of the Act;
Chapter 15 Case means the action contemplated in Appendix E to this Explanatory Statement, which Cattles or WFSL maycommence in the Bankruptcy Court under Chapter 15 of the Bankruptcy Code;
CIF means Cattles Invoice Finance Limited, a private limited company incorporated under the laws of England and Waleswith company number 02483505;
CIF Disposal Agreement means the share purchase agreement dated 10 August 2009 between the CIF Vendors, Cattles andthe CIF Purchaser, further details of which are set out in Part 9 of the Explanatory Statement;
CIF Group means CIF and its subsidiary Cattles Invoice Finance (Oxford) Limited;
CIF Purchaser means ABS FS Limited, a private limited company incorporated under the laws of England and Wales withcompany number 06927667;
CIF Vendors means Recordpoint, Statusclaim, Supremeaccess and Westernissue;
City Code means the City Code on Takeovers and Mergers;
Claim Form means:(a) in relation to the Cattles Creditor Scheme, the claim form in substantially the same form as the example in Schedule 3
to the Cattles Creditor Scheme, to be completed by Cattles Scheme Creditors (or their duly authorised agents) detailingSubmitted Scheme Claims against Cattles; and
(b) in relation to the WFSL Scheme, the claim form in substantially the same form as the example in Schedule 5 to theWFSL Scheme, to be completed by WFSL Scheme Creditors (or their duly authorised agents) detailing SubmittedScheme Claims against WFSL;
Claims Handling Services Agreement means the agreement between WFSL and the FSCS, described in Part 9 of thisExplanatory Statement, pursuant to which WFSL is to provide the Services to the FSCS;
Clearing Systems means Euroclear and Clearstream, Luxembourg;
Clearstream, Luxembourg means Clearstream Banking, société anonyme;
CL Finance means CL Finance Limited, a company incorporated under the laws of England and Wales with companynumber 01108021;
Co-guarantors Compromise Deed means the deed of compromise, release and distribution to be entered into by a number ofGroup companies and their Guaranteed Creditors pursuant to the Ewbanks Scheme;
Co-guarantors Creditor Scheme means the arrangements to be effected by the Ewbanks Scheme, the Co-guarantorsCompromise Deed, the TLG Distribution Deed and, if relevant, the TLG Bilateral Deed;
Co-guarantor Scheme Creditors means the lenders under the Facilities and the Noteholders in their capacities as schemecreditors for the purposes of the Ewbanks Scheme;
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COMP means the compensation rules and guidance applicable to the FSCS as made by the FSA and as contained in thecompensation section of the FSA Handbook as replaced, varied or amended from time to time;
Compass Credit means Compass Credit Limited, a private limited company incorporated under the laws of England andWales with company number 00235117;
Consenting Creditors means those Lenders and Noteholders who have acceded to the Restructuring Lock-Up Agreement;
Corporate Services Deed means the corporate services deed dated 29 November 2010 between, amongst others, SFM,Bovess, Bovess Holdco, the Share Trustee, Cattles and WFSL, further details of which are set out in Part 9 of theExplanatory Statement;
Court means the High Court of Justice of England and Wales;
Court Hearing means, in relation to the Cattles Creditor Scheme and/or the WFSL Scheme, the hearing before the Court atwhich Cattles and/or WFSL, as appropriate, will if the Cattles Creditor Scheme and/or the WFSL Scheme, as appropriate, hasbeen approved by the required majority of Scheme Creditors at the relevant Scheme Meeting, seek the Court s sanction forthe relevant Scheme(s) pursuant to section 899 of the Act;
Creditors Committee means:(a) in relation to Cattles, the committee of Cattles Scheme Creditors constituted in accordance with Section 7 of the Cattles
Creditor Scheme; and(b) in relation to WFSL, the committee of WFSL Scheme Creditors constituted in accordance with Section 10 of the
WFSL Scheme;
Custody Instructions means instructions to be given by any relevant Direct Participant to the Clearing System in which anyrelevant Bonds are held;
Deloitte means Deloitte LLP, the United Kingdom member firm of Deloitte Touche Tohmatsu Limited;
Dial4aloan means Dial4aloan Limited, a private limited company incorporated under the laws of England and Wales withcompany number 03958533;
Direct Participant means, in relation to any Bondholder and either of the Clearing Systems, the person who in respect of theBondholder may perform activities allowed in the Clearing System on behalf of the Bondholder without using anintermediary;
Direct Participant Letter means the letter to be completed and submitted to the Information Agent by a Bondholder s DirectParticipant prior to the Voting Instruction Deadline in accordance with Part 3 of Appendix B to this Explanatory Statement sothat a Bond Creditor s vote may be counted at the Cattles Scheme Meeting;
Disputed Scheme Claim means:(a) in relation to the Cattles Creditor Scheme, a Submitted Scheme Claim which has not been agreed by the Scheme
Supervisor within six months of the Bar Date (or such earlier time as has been determined in accordance with clause3.7.2 of the Cattles Creditor Scheme) and has therefore become a Disputed Scheme Claim for the purposes of clause3.7.2 of the Cattles Creditor Scheme; and
(b) in relation to the WFSL Scheme, a Submitted Scheme Claim which has not been agreed by the WFSL SchemeSupervisor within six months of the Bar Date, (or such earlier time as has been determined in accordance with clause3.7.2 of the WFSL Scheme) and has therefore become a Disputed Scheme Claim for the purposes of clause 3.7.2 ofthe WFSL Scheme;
Distribution Dates means, in relation to the Cattles Creditor Scheme or the WFSL Scheme, the dates specified as being dateson which the Scheme Supervisor will determine the amounts of the Scheme Payments to be made to each Cattles SchemeCreditor or WFSL Scheme Creditor, as appropriate, and referred to in the Cattles Creditor Scheme and the WFSL Scheme asthe Distribution Dates ;
Effective Date means: (a) in relation to the Cattles Creditor Scheme, the date on which the Cattles Creditor Scheme becomeseffective in accordance with clause 1.5.1 thereof; and (b) in relation to the WFSL Scheme, the date on which the WFSLScheme becomes effective in accordance with clause 1.5.1 thereof;
Electronic Claim Form has the meaning given to it in the Cattles Creditor Scheme;
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Employee Retention Fund means the employee retention fund referred to in paragraphs 3.36 and 3.38 of Part 5 (Overview ofthe Restructuring) of this Explanatory Statement;
Escrow Account means an account that WFSL was obliged under the SEA to establish to hold funds on trust for the financialcreditors pending resolution of the Part 8 Claim;
Euroclear means Euroclear Bank S.A./N.V.;
Ewbanks means Ewbanks Mail Order Limited, a private limited company incorporated under the laws of England and Waleswith company number 00457490;
Ewbanks Scheme means the proposed scheme of arrangement under Part 26 of the Act pursuant to which it is proposed thatthe Co-guarantors Creditor Scheme will be put into effect;
Excluded Liabilities means:(a) in relation to the Cattles Creditor Scheme, each of the liabilities set out in Schedule 1 to the Cattles Creditor Scheme;
and(b) in relation to the WFSL Scheme, each of the liabilities set out in Schedule 3 to the WFSL Scheme;
Explanatory Statement means this statement, which is required by section 897 of the Act in relation to each of the CattlesCreditor Scheme and the WFSL Scheme for the purpose of explaining the effect of those schemes to the Cattles SchemeCreditors and the WFSL Scheme Creditors;
Facilities means the £500 Million Syndicated Facility, the £800 Million Syndicated Facility, the £215 Million SyndicatedFacility, the £135 Million Bilateral Facility and the £75 Million Bilateral Facility;
Financial Assistance Payments means the payments by WFSL:(a) to Bovess of the Acquisition Amount;(b) to Bovess and/or SFM of the fees, costs and expenses incurred and to be incurred by SFM and/or Bovess in connection
with the implementation of the Restructuring under the terms of the SFM Engagement Letter; and(c) to Bovess of the Bovess Life Costs Amount;
Forms of Proxy means the Cattles Form of Proxy and the WFSL Form of Proxy;
Freshfields means Freshfields Bruckhaus Deringer LLP, solicitors to the Group;
FSA means the UK s Financial Services Authority;
FSCS means the Financial Services Compensation Scheme, the UK s compensation fund of last resort for customers ofauthorised financial services firms, established pursuant to FSMA;
FSMA means the Financial Services and Markets Act 2000, as amended and updated from time to time;
Funding Account means an account in the name of Bovess into which the Bovess Life Costs Amount will be paid pursuantto the terms of the Corporate Services Deed;
Funding Letter means the letter between Bovess, Cattles and WFSL dated 26 November 2010 dealing with the payment ofthe Acquisition Amount by WFSL to Bovess, further details of which are set out in Part 9 of the Explanatory Statement;
Group means the group of companies of which Cattles is, prior to the Restructuring, the ultimate parent company;
Guaranteed Creditors means the financial creditors of Cattles (being lenders under Facility Agreements and Noteholders) towhom the Guarantor Companies have provided guarantees in respect of Cattles debt;
Guaranteed Hedging Counterparties means HSBC and RBS in relation to certain of the Hedging Arrangements;
Guarantor Companies means the Group companies whose obligations to the Guaranteed Creditors will be compromisedunder the Co-guarantors Creditor Scheme, who have all given guarantees to the Guaranteed Creditors;
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Hedging Arrangements means the derivative contracts, some of which were guaranteed, that Cattles entered into to manageits exposures to interest rate and currency risks fluctuations, which arrangements were all closed out and converted into termloans with a principal value of £86 million during 2009;
Hedging Counterparties means Cattles counterparties in the Hedging Arrangements;
HSBC Intercompany Guarantee means the composite joint and several guarantee documentation entered into betweenHSBC as the bank and certain members of the Group including Cattles and WFSL as guarantors and principals;
IAS 39 means the standard published by the International Accounting Standards Board and called IAS 39 , the purpose ofwhich is to establish principles for recognising and measuring financial assets and financial liabilities;
Implementation Agreement means the implementation agreement between Bovess and Cattles dated 29 November 2010,details of which are set out at paragraphs 4.22 to 4.24 of Part 9;
Independent Vote Assessor means an independent third party who will, if required, assist the chairman of the Cattles SchemeMeeting and/or the chairman of the WFSL Scheme meeting in assessing Scheme Claims for voting purposes in accordancewith Appendices B and C;
Information Agent means Lucid Issuer Services Limited, which Cattles has appointed as its agent in respect of the CattlesCreditor Scheme to facilitate communications with Bond Creditors;
Initial FSCS Payment means the initial payment of £50 million by WFSL to the FSCS pursuant to the PPI SettlementAgreement;
Insolvency Event means in relation to either Cattles or WFSL each of:(a) the taking of any formal step being preparatory to and/or the occurrence of (i) a winding up of the company (by the
presentation of a winding up petition to the court or a resolution of the directors or members of the company), (ii) itsdissolution or (iii) its administration pursuant to Schedule B1 of the Insolvency Act;
(b) the appointment of a receiver, compulsory manager or other similar officer over the company or any of its significantassets; and
(c) any event which is analogous to those above;
but shall not include:(d) any winding-up petition, administration application or application for the appointment of a receiver, compulsory
manager or other similar officer which is frivolous, vexatious or contested in good faith and is discharged, permanentlystayed or dismissed within 14 days of presentation; or
(e) the Scheme Certified Liquidation;
KPMG means KPMG LLP;
Lenders means a Syndicated Lender or RBS as lender under the £135 million bilateral credit facility and the £75 millionbilateral credit facility referred to in paragraphs 1.3(d) and (e) respectively of Part 3 of this Explanatory Statement;
LG means Lawrence Graham LLP, the independent conflicts counsel for Cattles and the Cattles Board;
Liability means any liability of a person, whether it is present, future, prospective or contingent, whether its amount is fixedor undetermined, whether or not it involves the payment of money or performance of any act or obligation and whether itarises at common law, in equity or by statute, in England or in any other jurisdiction, or in any other manner whatsoever,including, without limitation, claims in respect of breach of contract, tort, restitution, breach of trust, financial indebtedness,guarantee or indemnity claims, claims arising by way of subrogation, contribution or counter-indemnity, claims formisrepresentation, negligence, wilful default or fraud, mis-selling claims, claims under the Financial Services and MarketsAct 2000, Consumer Credit Act 1974 or Pensions Act 1995 or 2004 and any other claims which may arise ancillary to anysuch financial liability, but in all cases excluding:(a) any liability which is barred by statute or is otherwise unenforceable; or(b) a liability under a contract that is void or, being voidable, has been avoided;
Liquidator Actions means the remedies that are available to a liquidator under the Insolvency Act, including those undersection 213 and section 214 for fraudulent trading and for wrongful trading respectively;
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Litigation Protocol means the protocol agreed between Cattles and WFSL referred to at paragraphs 4.27 to 4.29 of Part 1,and at paragraph 5.5 of Part 5;
Lock-Up Agent means The Royal Bank of Scotland plc, in its capacity as lock-up agent pursuant to the terms of theRestructuring Lock-Up Agreement;
Long Stop Date means the earlier of: (i) 31 March 2021; and (ii) the date that the first action is taken with respect to theliquidation of Bovess and Bovess Holdco;
Multicurrency 2006 NPA means the multicurrency note purchase agreement dated 1 February 2006 (as amended from timeto time) between Cattles and the purchasers named therein in respect of:(a) the US$20 million principal amount of 6.17 per cent. Series A guaranteed senior unsecured notes due on 1 February
2011;(b) the US$55 million principal amount of 6.25 per cent. Series B guaranteed senior unsecured notes due 1 February 2013;(c) the 6 million principal amount of 4.62 per cent. Series C guaranteed senior unsecured notes due 1 February 2013;(d) the £1 million principal amount of 5.89 per cent. Series D guaranteed senior unsecured notes due 1 February 2013; and(e) the £20 million principal amount of 5.94 per cent. Series E guaranteed senior unsecured notes due 1 February 2021,
in each case, issued by Cattles;
Net Distributable Assets has the meaning given to it in the Cattles Creditor Scheme;
Net Free Cash means the amount of cash available for Scheme Payments in the WFSL Scheme, as determined from time totime in accordance with the method prescribed in Schedule 1 to the WFSL Scheme;
Note Agreements means the US Dollar 2001 NPA, the Sterling 2001 NPA or the Multicurrency 2006 NPA;
Noteholders means those Scheme Creditors whose Scheme Liabilities arise in connection with the Note Agreements;
Notes means the notes issued by Cattles which are the subject of the Note Agreements;
Notional Section 75 Debt means, in relation to a company, the amount of that company s Section 75 debt as will becalculated immediately prior to the compromise referred to in paragraph 4.28 of Part 9 becoming effective;
Obligors means C L Finance Limited, Cattles Holdings Limited, Compass Credit Limited, Dial4aloan Limited, EwbanksMail Order Limited, Lewis Group (Holdings) Limited, Moneytopia Limited, Progressive Financial Services Limited,Shopacheck Financial Services Limited, TLG, U.K. Debt Defaulters Register Ltd, Welcome Insurance Services Limited,Welcome Retail Services Limited, Progressive Holdings Limited, Progressive Insurance Company Limited, MoneytopiaBank Limited, Welcome Mortgages Limited, Recordpoint Limited, Statusclaim Limited, Supremeaccess Limited andWesternissue Limited;
Official Rate means the official rate as that term is defined in section 251 of the Insolvency Act 1986, as amended;
Outward Claims means any demand or claim made or brought by Cattles or WFSL against any party pursuant to contract,tort or otherwise;
Outward Claims Amounts means such recoveries (net of taxes and other costs) as may be received by Cattles or WFSL insettlement or satisfaction of any Outward Claims litigation;
Outward Claims Manager means Mike Rollings of Rollings & Co LLP, who will be appointed pursuant to the WFSLScheme to direct the Outward Claims on behalf of WFSL;
Part 8 Claim means the litigation described in paragraph 5 of Part 2 of this Explanatory Statement;
Payment Percentage means the percentage of a Cattles Scheme Creditor s or a WFSL Scheme Creditor s AscertainedScheme Claim which is payable by Cattles or WFSL in accordance with the Cattles Creditor Scheme or the WFSL Scheme ata Distribution Date;
Pension Compromise means the compromise deed between the Pension Trustee, Cattles, WFSL and other certain Groupcompanies, dated 19 November 2010, as amended by a deed of variation, dated 14 December 2010;
Pension Fund means the Cattles Staff Pension Fund, which was established by a deed dated 20 August 1952;
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Pension Protection Fund means the UK s Pension Protection Fund;
Pension Trustee means Cattles Staff Pension Fund Limited, a private limited company incorporated under the laws ofEngland and Wales with company number 03444694, which is the trustee of the Pension Fund, and its successors as trustee,including (if applicable) the Board of the Pension Protection Fund as its successor pursuant to the Pensions Act 2004;
Pensions Regulator means the UK s Pensions Regulator;
Plan A means the proposed solvent restructuring of Cattles, WFSL and other members of the Group;
Plan A Payment means a sum totalling £49 million to be paid by WFSL to Cattles towards repayment of the principal of theinter-company debt owed by WFSL to Cattles in accordance with the terms of the WFSL Scheme;
Plan B means the proposed administration of Cattles and the solvent restructuring of WFSL and other members of theGroup;
Plan B SPA means a sale and purchase agreement to be entered into under Plan B between Bovess, Cattles and theadministrators appointed to Cattles under Plan B pursuant to which Bovess will acquire one ordinary share of one pound inCattles Trustee, 5,138,350 ordinary shares of five pence each in Compass, 100 million ordinary shares of one pound each inTLG Holdings and one ordinary share of one pound in Welcome Finance Group Limited, a company incorporated in Englandand Wales with company number 06327124;
Plan B Payment means the payment(s) to be paid by WFSL to Cattles towards repayment of the principal of the inter-company debt owed by WFSL to Cattles in accordance with the Cattles Administrator Agreement or the balance of such sum,if any payment has previously been made by WFSL since the date of that agreement in accordance with the terms of theWFSL Scheme or under the Cattles Administrator Agreement (such payments to be, at the opinion of Cattles, (i) £33 million,or (ii), subject to a ratchet mechanism, an amount which may not exceed £39 million);
PPI means payment protection insurance;
PPI Claimant means any person to whom WFSL owes a PPI Liability and who, in addition, is an eligible claimant underCOMP and satisfies all other relevant requirements under COMP;
PPI Liability means any Liability of WFSL to one of its retail customers which is a protected claim for the purposes ofCOMP 5.2.1R in the FSA Handbook (as modified or amended), and which arises from the sale by WFSL of PPI on or after14 January 2005;
PPI Settlement Agreement means the agreement between WFSL and the FSCS, the purpose of which is to provide forpayment by the FSCS of certain potential liabilities of WFSL which arise from its historic mediation of PPI;
Proceedings means any process, action, step, or other legal (or quasi legal) or judicial (or quasi judicial) proceeding(including, without limitation, any demand, arbitration, alternative dispute resolution, expert determination process, judicialreview, adjudication, execution, seizure, distraint, lien, enforcement of judgment, or enforcement of any security interest orright of set-off or any proceeding for the purpose of placing the Company into administration, liquidation or any insolvency,reconstruction, bankruptcy or analogous proceeding in any jurisdiction;
Proposed Administrators means Simon Jonathan Appell, Alastair Paul Beveridge and Stuart Charles Edward Mackellar,licensed insolvency practitioners and partners in the firm of Zolfo Cooper LLP;
Public Statements means statements made by Cattles to the public, including the prospectus dated 23 April 2008 in relationto a 9 for 20 rights issue of up to 163,262,142 New Cattles Shares , the offering circular dated 12 December 2003 in relationto the 2014 Bonds, the prospectus dated 2 July 2007 in relation to the 2017 Bonds, Cattles annual and half-yearly reports,Cattles interim management statements and Cattles regular stock exchange announcements;
Quarter Date means 31 March, 30 June, 30 September and 31 December in each year;
RBS Intercompany Guarantee means the unlimited intercompany composite guarantee documentation entered into betweenRBS as lender and certain members of the Group including Cattles and WFSL as guarantors and debtors;
Record Date means, in respect of either the Cattles Creditor Scheme or the WFSL Scheme, the Effective Date;
Record Time means 5 pm on 31 December 2010;
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Recordpoint means Recordpoint Limited, a company incorporated under the laws of England and Wales with companynumber 02906681;
Restructuring means the proposed restructuring of the Group, whether by Plan A or Plan B;
Restructuring Lock-Up Agreement means a restructuring lock-up agreement dated 29 November 2010 between Cattles,WFSL, certain other members of the Group, The Royal Bank of Scotland plc, as Lock-Up Agent, and almost all of theLenders and all of the Noteholders;
Review Date means, in relation to the Cattles Creditor Scheme, the first Business Day after the Bar Date, and the firstBusiness Day after the date that is at the end of each subsequent six month period;
Scheme Certified Liquidation means, in relation to either the Cattles Creditor Scheme or the WFSL Scheme, any voluntaryliquidation of Cattles or WFSL, as appropriate, where a majority of the board of directors of the company have certified tothe Scheme Supervisors no more than five Business Days before the passing of the members resolution to wind-up that theyhave made a full enquiry into the company s affairs and that, having done so, they have formed the opinion that the companywill be able to pay any debts reasonably likely to be admitted to proof in the liquidation in full, together with interest at theOfficial Rate, within 12 months of the date of the certificate;
Scheme Claims means claims made in respect of Scheme Liabilities for the purposes of the Cattles Creditor Scheme or theWFSL Scheme;
Scheme Completion means, in relation to either the Cattles Creditor Scheme or the WFSL Scheme, the occurrence of a date,following the Bar Date, when the aggregate of all Unascertained Scheme Claims is nil and either:(a) all Ascertained Scheme Claims have been paid in full; or
(b) Cattles or WFSL (as appropriate) is in liquidation and the assets of the Liquidation Trust have been reduced to nil or ade minimis amount, in accordance with clause 9.3.1(b) of the Cattles Creditor Scheme or clause 12.2(b) of the WFSLScheme, as appropriate;
Scheme Creditors means each Cattles Scheme Creditor and/or each WFSL Scheme Creditor;
Scheme Helpline means the helpline set up in order to assist Scheme Creditors in relation to their Scheme Claims on thenumber 0845 293 7447;
Scheme Lease Liability means any of the liabilities specified in Schedule 8 to the WFSL Scheme, being Liabilities of WFSLin relation to certain leases;
Scheme Liability means:(a) in relation to both the Cattles Creditor Scheme and the WFSL Scheme, any Liability of Cattles or WFSL (before the
application of any set-off), other than an Excluded Liability, which either:(i) has arisen as at the Record Date; or(ii) may arise after the Record Date as a result of an obligation incurred or of an event occurring before the Record
Date; or(b) the potential claims of the Pension Trustee against both Cattles and WFSL under section 75 or section 75A of the
Pensions Act 1995 or, to the extent these claims are compromised under the Pension Compromise, the amount owed tothe Pension Trustee by Cattles and WFSL under the terms of the Pension Compromise and referred to therein as theNotional Section 75 Debt ;
Scheme means either the Cattles Creditor Scheme or the WFSL Scheme, as appropriate and Schemes means both the CattlesCreditor Scheme and the WFSL Scheme;
Scheme Meeting means, in relation to the Cattles Creditor Scheme, the Cattles Shareholder Scheme or the WFSL Scheme,the meeting summoned by the Court under section 896 of the Act for the purpose of obtaining the approval of Cattles SchemeCreditors, WFSL Scheme Creditors or Cattles shareholders for the Cattles Creditor Scheme, the WFSL Scheme or the CattlesShareholder Scheme, as appropriate;
Scheme Payments means:(a) in relation to the Cattles Creditor Scheme, any payments made to a Cattles Scheme Creditor in accordance with
Section 4 of the Cattles Creditor Scheme; and
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(b) in relation to the WFSL Scheme, any payments made to a WFSL Scheme Creditor in accordance with Section 6 of theWFSL Scheme;
Scheme Publications means The Financial Times (International Edition), The Daily Telegraph and the Daily Mail;
Scheme Proposal means the proposed acquisition of Cattles by Bovess pursuant to the Cattles Shareholder Scheme and theother matters relevant thereto;
Scheme Reversion Decision Event means one of the specified events which could trigger a Scheme Reversion, assummarised in paragraph 15 of Part 7 (The WFSL Scheme) of this Explanatory Statement, and pursuant to Section 7 of theWFSL Scheme;
Scheme Reversion means the early conclusion of the WFSL Scheme following the occurrence of one of certain specifiedevents, as summarised in paragraph 15 of Part 7 (The WFSL Scheme) of this Explanatory Statement, and pursuant toSection 7 of the WFSL Scheme;
Scheme Supervisors means:(a) in relation to the Cattles Creditor Scheme, any of the persons appointed under Section 7 of the Cattles Creditor
Scheme; and(b) in relation to the WFSL Scheme, any of the persons appointed under Section 8 of the WFSL Scheme;
Scheme Website means the world wide web page or pages linked to universal resource locatorhttp://www.cattles.co.uk/schemes;
SEA means the standstill and equalisation agreement dated 25 November 2009 between, among others, Cattles, WFSL,certain members of the Group, the Lenders and the Noteholders;
SEC means the United States Securities and Exchange Commission;
Section 75 Debt means, in relation to a Group company, the amount owed by the Group company to the Pension Trusteeunder section 75 or section 75A of the Pensions Act 1995;
Securities Act means the US Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder;
Services means the claims handling services in relation to PPI Liabilities to be provided by WFSL under the Claims HandlingServices Agreement;
SFM means Structured Finance Management Limited, a private limited company incorporated under the laws of England andWales with registered number 3853947;
SFM Engagement Letter means the engagement letter dated 6 September 2010 between WFSL and SFM (as amended by anaddendum dated 21 September 2010), further details of which are set out in Part 9 of the Explanatory Statement;
Share Declaration of Trust means the declaration of trust over shares in Bovess Holdco dated 29 November 2010 betweenthe Share Trustee and WFSL, further details of which are set out in Part 9 of the Explanatory Statement;
Share Trustee means SFM Corporate Services Limited, a private limited company incorporated under the laws of Englandand Wales with registered number 3920255;
Shopacheck means the business division of WFSL known as Shopacheck , which, unlike Welcome Finance, continues tooperate normally;
Statusclaim means Statusclaim Limited, a private limited company incorporated under the laws of England and Wales withcompany number 02903444;
Sterling 2001 NPA means the Sterling note purchase agreement dated 12 December 2001 (as amended from time to time)between Cattles and the purchasers named therein in respect of:(a) the £30,000,000 principal amount of 7.64 per cent. Series C guaranteed senior unsecured notes due 12 December 2011;
and(b) the £40,000,000 principal amount of 7.80 per cent. Series D guaranteed senior unsecured notes due 12 December 2016,
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in each case issued by Cattles;
Submitted Scheme Claim means any purported Scheme Liability in respect of which a Cattles Scheme Creditor or a WFSLScheme Creditor has submitted a Scheme Claim in accordance with the Cattles Creditor Scheme or the WFSL Scheme, asappropriate;
Supremeaccess means Supremeaccess Limited, a private limited company incorporated under the laws of England and Waleswith company number 02913219;
Syndicated Lender means a person who is a party to the £500 Million Syndicated Facility, the £800 Million SyndicatedFacility, or the £215 Million Syndicated Facility as a lender;
TLG means The Lewis Group Limited, a private limited company incorporated under the laws of Scotland with companynumber SC127043;
TLG Bilateral Deed means the bilateral compromise deed to be executed by TLG and by the Pension Trustee, if the PensionTrustee and TLG so agree;
TLG Compromise means the TLG Distribution Deed or, if the Pension Trustee and TLG so agree, the TLG Bilateral Deed;
TLG Distribution Deed means the deed of compromise, release and distribution to be entered into by a number of Groupcompanies, including TLG, and (if the TLG Bilateral Deed is not entered into) by the Pension Trustee, pursuant to theEwbanks Scheme;
Top-Up Payment means any additional payment to be made by WFSL to the FSCS pursuant to the PPI SettlementAgreement;
UK means the United Kingdom of Great Britain and Northern Ireland;
Unascertained Payments Fund means:(a) in relation to the Cattles Creditor Scheme, the trust to be established and maintained by Cattles under clause 5.3.1 of
the Cattles Creditor Scheme; and(b) in relation to the WFSL Scheme, the trust to be established and maintained by WFSL under clause 6.3.1 of the WFSL
Scheme;
Unascertained Scheme Claim means, in relation to either the Cattles Creditor Scheme or the WFSL Scheme: (i) a SubmittedScheme Claim which has not become an Ascertained Scheme Claim nor been rejected in accordance with the Cattles CreditorScheme or the WFSL Scheme, as appropriate, and includes a prudent provision by the Scheme Supervisors for potentialadverse cost awards which Cattles or WFSL, as appropriate, may incur in determining such Submitted Scheme Claim; or(ii) in relation to the Pension Trustee, the sum estimated by the Scheme Supervisors in accordance with the terms of theCattles Creditor Scheme or the WFSL Scheme, as appropriate;
Unguaranteed Hedging Counterparties means Bayerische Landesbank, London Branch, Barclays Bank plc, Allied IrishBanks plc, Lloyds TSB Bank plc, National Australia Bank Limited, Fortis Bank, UK Branch, Bank of Scotland TreasuryServices plc, Calyon, Landesbank Baden-Württemberg, London Branch, and the Governor and Company of the Bank ofIreland (London Branch), in relation to certain of the Hedging Arrangements;
Unprotected PPI Liability means any liability of WFSL for a claim in respect of PPI sold prior to 14 January 2005;
Updated Forecast means, in relation to the WFSL Scheme only, each forecast agreed between WFSL and the SchemeSupervisor or otherwise determined by the Scheme Supervisor in each case in accordance with paragraph 2 of Schedule 6(Covenants) to the WFSL Scheme;
US Dollar 2001 NPA means the US dollar note purchase agreements dated 12 December 2001 (as amended from time totime) between Cattles and the purchasers named therein in respect of:(a) the US$40,000,000 principal amount of 7.15 per cent. Series A guaranteed senior unsecured notes due 12 December
2008; and(b) the US$70,000,000 principal amount of 7.53 per cent. Series B guaranteed senior unsecured notes due 12 December
2011,in each case, issued by Cattles;
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Voting Instruction Deadline means 5.00 pm on 28 January 2011;
Voting Record Date means, in relation to either the Cattles Creditor Scheme or the WFSL Scheme, 31 December 2010;
Welcome Finance means the business division of WFSL known as Welcome Finance which was previously the Group sprincipal lending business and which has now ceased lending;
Westernissue means Westernissue Limited, a company incorporated under the laws of England and Wales with companynumber 02930977;
WFSL means Welcome Financial Services Limited, a company incorporated under the laws of England and Wales withregistered number 00133540;
WFSL Board means the board of directors of WFSL from time to time;
WFSL Court Order means the order of the Court sanctioning the WFSL Scheme pursuant to section 899 of the Act;
WFSL Form of Proxy means any instrument approved by the Scheme Supervisor in accordance with clause 11.3.4 of theWFSL Scheme for the purpose of appointing a person to attend the WFSL Scheme Meeting on behalf of a WFSL SchemeCreditor and vote in their place;
WFSL Scheme Creditor means:(a) the Pension Trustee in relation to the amount owed to the Pension Trustee by WFSL under the terms of the Pension
Compromise and referred to therein as the Notional Section 75 Debt ; or(b) any person who is, or claims to be, a creditor of WFSL in respect of a Scheme Liability, at the Record Date;
WFSL Scheme means the proposed scheme of arrangement under Part 26 of the Act between WFSL and the WFSL SchemeCreditors in its present form or with any modifications or additions approved or imposed by the Court in accordance withclause 13.2 thereof; and
WFSL Scheme Meeting means the Scheme Meeting to be held in relation to the WFSL Scheme.
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APPENDIX B:CATTLES CREDITOR SCHEME SUMMARY OF ACTION TO BE TAKEN
THIS NOTE SETS OUT INSTRUCTIONS AND GUIDANCE FOR VOTING AT THE CATTLES SCHEMEMEETING. ALL CATTLES SCHEME CREDITORS ARE REQUESTED TO READ THE GENERAL ADVICE ATPARTS 1 AND 2 OF THIS NOTE, AND CATTLES SCHEME CREDITORS WHO ARE BOND CREDITORS5 AREREQUESTED TO READ THE GUIDANCE AT PART 2 OF THIS NOTE.
PART 1 GENERAL GUIDANCE
CATTLES SCHEME MEETING
1. Before the Cattles Creditor Scheme can become effective and binding on Cattles and the Cattles Scheme Creditors,resolutions to approve it must be passed by the Cattles Scheme Creditors by the majority required by section 899 of the Act.This majority is a majority in number representing 75 per cent. in value of the Cattles Scheme Creditors who, being soentitled, are present in person (or, if a corporation, by a duly authorised representative) or by proxy and vote at the CattlesScheme Meeting. The Cattles Scheme Meeting has been ordered by the Court to be summoned to take place on 1 February2011 at The Albert Hall Conference Centre, North Circus Street, Nottingham NG1 5AA.
2. Formal notice of the Cattles Scheme Meeting is shown at Appendix D to this document.
3. If the Cattles Scheme Creditors do not approve the Cattles Creditor Scheme at the Cattles Scheme Meeting, then Cattleswill not be able to implement the Cattles Creditor Scheme and a significant element of the Restructuring will not take place.
DEADLINE FOR VOTING AT THE CATTLES SCHEME MEETING
Cattles Scheme Creditors (other than Bond Creditors in their capacities as such)4. As explained in more detail in paragraphs 17 to 22 of this Appendix B, Cattles Scheme Creditors (other than BondCreditors in their capacities as such) who wish to vote at the Cattles Scheme Meeting but who do not intend to attend themeeting must complete and submit a Cattles Form of Proxy in order to vote. Cattles Scheme Creditors who do not intendto attend and vote at the Cattles Scheme Meeting must submit Cattles Forms of Proxy to the Scheme Supervisorsbefore 5.00 pm on 28 January 2011.
5. Submission of a Cattles Form of Proxy, or failure to submit a Cattles Form of Proxy before the deadline of 5.00 p.m. on28 January 2011, will not preclude a Cattles Scheme Creditor from voting in person or by proxy at the relevant CattlesScheme Meeting, provided that the Cattles Scheme Creditor or his proxy is able to establish his identity and entitlement tovote at that Cattles Scheme Meeting.
Bond Creditors6. As explained in more detail in Part 3, Bond Creditors must ensure that their Direct Participant completes and submits tothe Information Agent a Direct Participant Letter to vote at the Cattles Scheme Meeting. Direct Participant Letters must besubmitted to the Information Agent before the Voting Instruction Deadline (5.00 pm on 28 January 2011).
7. Failure to deliver a Direct Participant Letter before the Voting Instruction Deadline will mean that the voting instructionscontained in that Direct Participant Letter will be disregarded for the purposes of voting at the Cattles Scheme Meeting andthe Bond Creditor will not be able to vote at the Cattles Scheme Meeting.
8. Please note that if you are a Bond Creditor you may still have Cattles Scheme Claims other than for amounts outstandingunder the 2014 Bonds or the 2017 Bonds. If you do have such other Cattles Scheme Claims, then you must still follow theprocedure described at Part 2 below for Cattles Scheme Creditors (other than Bond Creditors in their capacities as such).
Assessment of Claims for Voting Purposes9. Only those Cattles Scheme Creditors who are Cattles Scheme Creditors as at the Voting Record Date, being 5.00 pm on31 December 2010, are entitled to attend and vote, either in person or by proxy at the Cattles Scheme Meeting.
5 A Bond Creditor is someone whose Cattles Creditor Scheme Liability arises from any amount outstanding under the 2014 Bonds or 2017 Bonds as at 5.00 pm onthe Voting Record Date.
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10. The assessment of claims for voting purposes shall be carried out by the Court-appointed chairman of the Cattles SchemeMeeting. The chairman may, for voting purposes only, reject a claim in whole or in part if she considers that it does notconstitute a fair and reasonable assessment of the relevant sums owed to the relevant Cattles Scheme Creditor by Cattles or ifthe relevant Cattles Scheme Creditor has not complied with the voting procedures described in this document. If a claim isunascertained, contingent or disputed (in part) but the chairman is able to place a minimum value on that claim, she mayadmit the claim for voting purposes at that value. If a claim is disputed in its entirety, or the chairman is otherwise unable toplace a minimum value on it, that claim may be valued at £1 for voting purposes.
11. Due to the nature of the potential claims against Cattles, it is anticipated that the assessment of claims for voting purposesmay, in certain instances, give rise to complex issues of legal liability and valuation. The Cattles Scheme Meeting may beadjourned while such issues are determined.
12. The Independent Vote Assessor will assist the chairman of the Cattles Scheme Meeting, where so requested, to assess andvalue Cattles Scheme Creditors claims for voting purposes. The Independent Vote Assessor will assist the chairman of theCattles Scheme Meeting in providing an impartial approach to the assessment and valuation of such claims. If required, heshall produce a report for the chairman setting out his conclusions and this report will be provided to the Court at the hearingsto sanction the Cattles Creditor Scheme (on the assumption that the Cattles Creditor Scheme is passed at the Cattles SchemeMeeting). Where a claim for voting purposes is presented to the Independent Vote Assessor for assessment, to ensureimpartiality, the chairman of the Cattles Scheme Meeting will not disclose to the Independent Vote Assessor whether the voteis for or against the Cattles Creditor Scheme.
13. It is proposed that Lord Hoffmann, a retired law lord, be appointed as the Independent Vote Assessor.
14. The chairman of the Cattles Scheme Meeting will report to the Court, at the Court hearing to sanction the Cattles CreditorScheme (which it is anticipated will take place on 21 February 2011), her decision to reject claims (if any), with details ofthose claims and the reasons for rejection.
15. For the purposes of voting at the Cattles Scheme Meeting and determining whether or not the statutory majorities ofcreditors voting at the meeting are achieved, claims that arise in currencies other than sterling will be converted into sterling.The rate of exchange used for this purpose will be the Voting Rate.
16. The admission and valuation of any claim for voting purposes does not (in itself) constitute an admission of the existenceor value of the claim and will not bind any member of the Group or the Cattles Scheme Creditors concerned.
PART 2: CATTLES SCHEME CREDITORS (OTHER THAN BONDCREDITORS IN THEIR CAPACITIES AS SUCH)
COMPLETION OF CATTLES FORM OF PROXY
17. Each Cattles Scheme Creditor (other than a Bond Creditor in his capacity as such) or its duly authorised representative (asthe case may be) should complete the Cattles Form of Proxy in accordance with the instructions printed on it. Such CattlesScheme Creditors are encouraged to complete and return their Cattles Form of Proxy whether or not they intend to be presentat the Cattles Scheme Meeting in case, for any reason, that Cattles Scheme Creditor is unable to attend the Cattles SchemeMeeting.
18. If you are a Bond Creditor you may still have Cattles Scheme Claims other than for amounts outstanding under the 2014Bonds or the 2017 Bonds. If you do have such other Cattles Scheme Claims, then you must still follow the proceduredescribed in this Part 2.
19. All Cattles Scheme Creditors with Scheme Claims (other than Bond Creditors in their capacity as such) should include, inaccordance with the instructions on the Cattles Form of Proxy, the following information in their Cattles Form of Proxy:(a) their identity;
(b) a description of the nature of their Cattles Creditor Scheme Liability and how such Cattles Creditor Scheme Liabilityarose;
(c) the value of their Cattles Creditor Scheme Liability;(d) details of the basis for calculating that value and, if applicable, the legal basis for liability; and(e) any other facts that would assist Cattles in considering the Cattles Creditor Scheme Liability.
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20. The admission and valuation of any claim for voting purposes does not (in itself) constitute an admission of the existenceor value of the claim and will not bind any member of the Group or the Cattles Scheme Creditors concerned.
21. In order for Cattles Scheme Creditors to vote at the Cattles Scheme Meeting, they must either attend the meeting inperson or must send completed Cattles Forms of Proxy to KPMG LLP at 8 Salisbury Square, London, EC4Y 8BB oralternatively fax them to +44(0) 207 694 3011 or email them to [email protected] (in each case marked for the attention ofMark Cook) by 5 pm on 28 January 2011, or must lodge completed Cattles Forms of Proxy with the chairman of the CattlesScheme Meeting at the Cattles Scheme Meeting.
22. Completion and return of a Cattles Form of Proxy will not prevent a Cattles Scheme Creditor from subsequentlyattending and voting in person if he so wishes. If a Cattles Scheme Creditor (other than a Bond Creditor in his capacity assuch) appoints a person as his proxy who is not the chairman of the meeting, then his proxy must attend the meeting in orderto vote. A proxy need not be a Cattles Scheme Creditor.
Attending the Cattles Scheme Meeting23. Each Cattles Scheme Creditor (other than a Bond Creditor in his capacity as such) or his proxy who wishes to attend theCattles Scheme Meeting in person will be required to register his attendance by presenting himself, together with theduplicate copy of his Cattles Form of Proxy, where possible, at the registration desk prior to the commencement of themeeting. A Cattles Scheme Creditor (other than a Bond Creditor in his capacity as such) who wishes to attend the CattlesScheme Meeting in person is encouraged to complete the Cattles Form of Proxy and either return it to Cattles prior to 5.00pm on 28 January 2011 or bring it in person to the Cattles Scheme Meeting and hand it in at the registration desk no laterthan one hour before the scheduled start time of the Cattles Scheme Meeting.
24. Thereafter, a Cattles Scheme Creditor (other than a Bond Creditor in his capacity as such) may lodge a completed CattlesForm of Proxy with the chairman of the Cattles Scheme Meeting at the Cattles Scheme Meeting. A Cattles Scheme Creditor(other than a Bond Creditor in his capacity as such) who attends the Cattles Scheme Meeting in person but has not previouslyprovided a Cattles Form of Proxy will also need to provide evidence of his personal identity (for example, a passport or otherpicture identification) and an individual attending on behalf of a body corporate should provide evidence of their identity andtheir authorisation to represent that body corporate (for example, a valid power of attorney and/or board minutes).
PART 3: CATTLES SCHEME CREDITORS WHO ARE BOND CREDITORS
GENERAL
25. Cattles Scheme Creditors who are Bond Creditors should immediately contact their Direct Participant (through anyintermediaries, if appropriate) to ensure that a valid Direct Participant Letter is submitted in respect of their Bond Claim.
26. It will be the responsibility of Direct Participants to obtain from the intermediaries and/or Bond Creditors on whosebehalf they are acting in accordance with the procedures established between them, whatever information or instructions theymay require to identify in a Direct Participant Letter a Cattles Scheme Creditor and to provide the information, instructionsand confirmations required by the Direct Participant Letter. To assist this process, Bond Creditors (through intermediaries, ifappropriate) are strongly encouraged to contact the Direct Participant through which they hold their Bonds to enable thatDirect Participant to complete a Direct Participant Letter and return such Direct Participant Letter to the Information Agentprior to the Voting Instruction Deadline.27. By no later than the Voting Instruction Deadline, the relevant Direct Participant will be required to instruct the relevantClearing System in which the Bonds the subject of the Direct Participant Letter are held, by giving Custody Instructions tothat effect to the relevant Clearing Systems. The procedure for doing this is described further below.
28. If a person is in any doubt as to whether or not it is a Bond Creditor, such person should contact the Information Agent on+44 (0)20 7704 0880.
29. Bond Creditors may also wish to refer to the diagram shown in the schedule to this note on page 101 of this document tosee the relationship between Bond Creditors, intermediaries and a Direct Participant.
Appointment of Information Agent30. The Information Agent has been appointed to facilitate communications with Bond Creditors. The Information Agent sremuneration and expenses, and all costs incurred by it on behalf of Cattles, shall be met by Cattles.
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INSTRUCTING PROCEDURE IN RESPECT OF BONDS HELD IN A CLEARING SYSTEM
31. Direct Participants should ensure that Euroclear and/or Clearstream, Luxembourg (as the case may be) has/have receivedirrevocable instructions (with which it has complied) in respect of all Bonds which are the subject of a Direct ParticipantLetter. Bond Creditors procuring the submission of Direct Participant Letters should instruct their Direct Participant toconfirm (and Direct Participants should ensure that) the Direct Participant Letter cross references the relevant CustodyInstruction reference number.
32. The Information Agent will use all reasonable endeavours to assist Direct Participants to complete their Direct ParticipantLetters validly, should it receive any Direct Participant Letters which are not valid. However, failure to deliver a valid DirectParticipant Letter in the manner and within the deadlines referred to above will mean that voting instructions will bedisregarded for the purposes of voting at the Cattles Scheme Meeting and the Bond Creditor will not be able to vote at theCattles Scheme Meeting.
33. None of Cattles, the Information Agent or any other person will be responsible for any loss or liability incurred by aCattles Scheme Creditor who is a Bond Creditor as a result of any determination by the Information Agent that a DirectParticipant Letter contains an error or is incomplete, even if this is subsequently shown not to have been the case.
VOTING AT THE CATTLES SCHEME MEETING
34. In order to vote at the Cattles Scheme Meeting, each Bond Creditor (through any intermediaries if appropriate) shouldinstruct its Direct Participant to complete and sign the Direct Participant Letter as described below and submit it to theInformation Agent on behalf of Cattles.
COMPLETING THE DIRECT PARTICIPANT LETTER
35. Each Bond Creditor will need to give his Direct Participant information and instructions as to voting and certain othermatters.
36. In summary each Bond Creditor may elect either to:(a) attend and vote at the Cattles Scheme Meeting in person; or(b) instruct the chairman of the Cattles Scheme Meeting as its proxy to cast its vote in accordance with the wishes of such
Bond Creditor; or(c) appoint someone else as its proxy (to attend and vote at the Cattles Scheme Meeting in person on its behalf),
in each case, by ensuring that such election is recorded in the Direct Participant Letter delivered on his behalf and thatthe voting intention section of the Direct Participant Letter is completed.
37. Bond Creditors are recommended to appoint a proxy (either the chairman or someone else of its choice who would bewilling to attend the Cattles Scheme Meeting) in any event, even if that Bond Creditor intends to attend and vote in person, incase such Bond Creditor is unable to do so for some reason. If a Bond Creditor appoints a proxy and then decides to attendand vote at the Cattles Scheme Meeting in person, that Bond Creditor will be entitled to do so.
38. Bond Creditors should also ensure that the following is included in the Direct Participant Letter:(a) their identity;(b) details of the Bonds to which the Direct Participant Letter relates, including the ISIN number, the amount held at the
relevant Clearing System, the identity of the relevant Clearing System, the account number of the Direct Participant inthe relevant Clearing System and the reference number of the Custody Instructions;
(c) the value of their Bond Claim;(d) the appropriate confirmations to be given by the Direct Participant; and(e) voting instructions.
DELIVERY OF DIRECT PARTICIPANT LETTERS
39. The Direct Participant Letters should be sent by Direct Participants as soon as possible to the Information Agent and, inany event, on or before the Voting Instruction Deadline, being 5.00 pm on 28 January 2011.
40. Each Bond Creditor should note that unless a valid Direct Participant Letter is delivered on or before the VotingInstruction Deadline, the voting instructions contained in that Direct Participant Letter will be disregarded for the purposes of
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voting at the Cattles Scheme Meeting and the Bond Creditor will not be able to vote at the Cattles Scheme Meeting in itscapacity as a Bond Creditor.
41. Any Direct Participant Letter and Custody Instructions delivered will be irrevocable after the Voting Instruction Deadlineunless and until the Cattles Creditor Scheme is not approved by the requisite majority at the Cattles Scheme Meeting or theCattles Creditor Scheme is withdrawn.
42. By delivering a Direct Participant Letter to the Information Agent, the Direct Participant confirms to Cattles and theInformation Agent that Custody Instructions in respect of the Bonds which are the subject of the Direct Participant Letterhave been issued to the relevant Clearing System with effect from or before the Voting Instruction Deadline in accordancewith the normal procedures of such Clearing System and after taking into account the deadlines imposed by such ClearingSystem, instructs the relevant Clearing System to transmit to the Information Agent (for onward transmission to the SchemeSupervisors) the information contained within the Custody Instructions, and gives the other confirmations required by theDirect Participant Letter.
ATTENDING THE CATTLES SCHEME MEETING
43. The Cattles Scheme Meeting will take place at The Albert Hall Conference Centre, North Circus Street, Nottingham NG15AA.
44. If a Bond Creditor wishes to attend the Cattles Scheme Meeting, it should produce a duplicate copy of the DirectParticipant Letter, evidence of corporate authority (if applicable) (for example, a valid power of attorney and/or boardminutes) and evidence of personal identity (for example, a passport or other picture identification) at the registration desk nolater than one hour before the scheduled time of the Cattles Scheme Meeting.
45. Any proxy attending the Cattles Scheme Meeting on behalf of a Bond Creditor should produce a duplicate copy of theDirect Participant Letter in which he is named as proxy. Where this copy can be matched against one of the copies providedby the Information Agent to Cattles, that Bond Creditor s proxy will be admitted to the Cattles Scheme Meeting uponproviding evidence of his personal identity (for example, a passport or other picture identification). Where the DirectParticipant Letter cannot be produced by the person purporting to have been appointed by a Bond Creditor as its proxy, thatperson will need to provide evidence of his personal identity (for example, a passport or other picture identification) and,provided that the evidenced identity conforms with the details in the relevant copy of the form of proxy submitted by theInformation Agent to Cattles, that person will be admitted to the Cattles Scheme Meeting.
46. If a Bond Creditor appoints the chairman of the Cattles Scheme Meeting as its proxy, there is no need for him to take theDirect Participant Letter to the Cattles Scheme Meeting.
REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
47. Each Bond Creditor who submits, delivers, or procures the delivery of, a Direct Participant Letter represents, warrantsand undertakes to Cattles and the Information Agent that:(a) it is lawful to seek voting instructions from him in respect of the Cattles Creditor Scheme;
(b) he is assuming all of the risks inherent in participating in the Cattles Creditor Scheme and has undertaken all theappropriate analysis of the implications of the Cattles Creditor Scheme without relying on Cattles or the InformationAgent;
(c) the Bonds which are the subject of the Direct Participant Letter are, at the time of submission or delivery of such DirectParticipant Letter (and will continue to be) held by him (directly or indirectly) or on his behalf at Euroclear orClearstream, Luxembourg;
(d) by instructing the relevant Clearing System, he will be deemed to have authorised the relevant Clearing System toprovide details concerning his identity, his holdings of Bonds and his applicable account details to Cattles and theInformation Agent and their respective legal and financial advisers at the time the Direct Participant Letter issubmitted;
(e) neither the Information Agent nor any of its affiliates, directors, officers or employees has made any recommendationas to whether, or how, to vote in relation to the Cattles Creditor Scheme, and that he has made his own decision withregard to voting based on any legal, tax or financial advice that he has deemed necessary to seek;
(f) all authority conferred or agreed to be conferred pursuant to these representations, warranties and undertakings shall bebinding on the successors, assigns, heirs, executors, trustees in bankruptcy and legal representatives of such BondCreditor and shall not be affected by, and shall survive, the death or incapacity of such Bond Creditor;
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(g) no information has been provided to him by Cattles, the Information Agent or any of their respective affiliates,directors, officers or employees with regard to the tax consequences to Bondholders or Bond Creditors arising fromvoting in favour of the Cattles Creditor Scheme, and that he is solely liable for any taxes or similar payments imposedon him under the laws of any applicable jurisdiction as a result of voting in favour of the Cattles Creditor Scheme, andthat he will not and does not have any right of recourse (whether by way of reimbursement, indemnity or otherwise)against Cattles, the Information Agent or any of their affiliates, directors, officers or employees in respect of such taxesor similar payments; and
(h) (A) he is, and on the date of the Cattles Scheme Meeting will be, outside the United States and not acting on a non-discretionary basis on behalf of a person who is located within the United States or (B) he is, or is acting on behalf of, aperson (or persons) that is, (x) a qualified institutional buyer within the meaning of Rule 144A under the Securities Actor (y) an accredited investor as defined in Rule 501 under the Securities Act.
48. Any Bond Creditor who is unable to give the representation in sub-paragraph (h) above should contact Cattles directly assoon as possible, as there may be additional procedures involved in respect of such Bond Creditor s participation in theCattles Creditor Scheme.
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SCHEDULE
The following diagram illustrates the relationship between certain persons (including Bond Creditors) with interests in the2014 Bonds or the 2017 Bonds held in global form through the Clearing Systems:
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APPENDIX C:WFSL SCHEME SUMMARY OF ACTION TO BE TAKEN
THIS NOTE SETS OUT INSTRUCTIONS AND GUIDANCE FOR VOTINGAT THE WFSL SCHEME MEETING
WFSL SCHEME MEETING
1. Before the WFSL Scheme can become effective and binding on WFSL and the WFSL Scheme Creditors, resolutions toapprove it must be passed by the WFSL Scheme Creditors by the majority required by section 899 of the Act. This majorityis a majority in number representing 75 per cent. in value of the WFSL Scheme Creditors who, being so entitled, are presentin person (or, if a corporation, by a duly authorised representative) or by proxy and vote at the WFSL Scheme Meeting. TheWFSL Scheme Meeting has been ordered by the Court to be summoned to take place on 1 February 2011 at The Albert HallConference Centre, North Circus Street, Nottingham NG1 5AA.
2. Formal notice of the WFSL Scheme Meeting is shown at Appendix D of this document.
3. If the WFSL Scheme Creditors do not approve the WFSL Scheme at the WFSL Scheme Meeting, then WFSL will not beable to implement the WFSL Scheme and the Restructuring, as proposed, will not take place.
DEADLINE FOR VOTING AT THE WFSL SCHEME MEETING
4. As explained in more detail below, WFSL Scheme Creditors who wish to vote at the WFSL Scheme Meeting but who donot intend to attend the meeting must complete and submit a WFSL Form of Proxy in order to vote. WFSL Forms of Proxymust be submitted to WFSL before 5.00 pm on 28 January 2011.
5. Submission of a WFSL Form of Proxy, or failure to submit a WFSL Form of Proxy before the deadline of 5.00 pm on28 January 2011, will not preclude a WFSL Scheme Creditor from voting in person or by proxy at the relevant WFSLScheme Meeting, provided that the WFSL Scheme Creditor or his proxy is able to establish his identity and entitlement tovote at that WFSL Scheme Meeting.
Assessment of Claims for Voting Purposes6. Only those WFSL Scheme Creditors who are WFSL Scheme Creditors as at the Voting Record Date, being 5.00 pm on31 December 2010, are entitled to attend and vote, either in person or by proxy, at the WFSL Scheme Meeting.
7. The assessment of claims for voting purposes shall be carried out by the Court-appointed chairman of the WFSL SchemeMeeting. The chairman may, for voting purposes only, reject a claim in whole or in part if she considers that it does notconstitute a fair and reasonable assessment of the relevant sums owed to the relevant WFSL Scheme Creditor by WFSL or ifthe relevant WFSL Scheme Creditor has not complied with the voting procedures described in this document. If a claim isunascertained, contingent or disputed (in part) but the chairman is able to place a minimum value on that claim, she mayadmit the claim for voting purposes at that value. If a claim is disputed in its entirety, or the chairman is otherwise unable toplace a minimum value on it, that claim may be valued at £1 for voting purposes.
8. Due to the nature of the potential claims against WFSL, it is anticipated that the assessment of claims for voting purposesmay, in certain instances, give rise to complex issues of legal liability and valuation. The Cattles Scheme Meeting may beadjourned while such issues are determined.
9. The Independent Vote Assessor will assist the chairman of the WFSL Scheme Meeting, where so requested, to assess andvalue Scheme Creditors claims for voting purposes. The Independent Vote Assessor will assist the chairman of the WFSLScheme Meeting in providing an impartial approach to the assessment and valuation of such claims. If required, he shallproduce a report for the chairman setting out his conclusions and this report will be provided to the Court at the hearings tosanction the WFSL Scheme (on the assumption that the WFSL Scheme is passed at the WFSL Scheme Meeting). Where aclaim for voting purposes is presented to the Independent Vote Assessor for assessment, to ensure impartiality, the chairmanof the WFSL Scheme Meeting will not disclose to the Independent Vote Assessor whether the vote is for or against theWFSL Scheme.
10. It is proposed that Lord Hoffmann, a retired law lord, be appointed as the Independent Vote Assessor.
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11. The chairman will report to the Court, at the Court Hearing to sanction the WFSL Scheme (which it is anticipated willtake place on 21 February 2011), her decision to reject claims (if any), with details of those claims and the reasons forrejection.
12. For the purposes of voting at the Scheme Meetings and determining whether or not the statutory majorities of creditorsvoting at the meeting are achieved, claims will be converted, if appropriate, into sterling. The rate of exchange used for thispurpose will be the Voting Rate.
13. The amount of the claim admitted for voting purposes does not (in itself) constitute an admission of the existence oramount of the claim and will not bind any member of the Group or the WFSL Scheme Creditors concerned.
COMPLETION OF WFSL FORM OF PROXY
14. Each WFSL Scheme Creditor or its duly authorised representative (as the case may be) should complete the WFSL Formof Proxy in accordance with the instructions printed on it. Such WFSL Scheme Creditors are encouraged to complete andreturn their WFSL Form of Proxy whether or not they intend to be present at the WFSL Scheme Meeting in case, for anyreason, they are unable to attend the WFSL Scheme Meeting.
15. All WFSL Scheme Creditors with WFSL Scheme Liabilities should include, in accordance with the instructions on theWFSL Form of Proxy, the following information in their WFSL Form of Proxy:(a) their identity;(b) a description of the nature of their WFSL Scheme Liability and how such Scheme Liability arose;(c) if the WFSL Scheme Liability derives from the WFSL Scheme Creditor having been a holder of, or being interested in
shares or Notes, details of its holding or interest, including the value at which, and the dates on which, the holding orinterest was bought and sold (if applicable);
(d) the value of their WFSL Scheme Liability;(e) details of the basis for calculating that value and, if applicable, the legal basis for liability; and(f) any other facts that would assist WFSL in considering the WFSL Scheme Liability.
16. The amount of the claim admitted for voting purposes does not (in itself) constitute an admission of the existence oramount of the claim and will not bind any member of the Group or the WFSL Scheme Creditors concerned.
17. In order for WFSL Scheme Creditors to vote at the WFSL Scheme Meeting, they must either attend the meeting in personor must send completed WFSL Forms of Proxy to KPMG LLP at 8 Salisbury Square, London, EC4Y 8BB or alternativelyfax them to +44(0) 207 694 3011 or email them to [email protected] (in each case marked for the attention of Mark Cook)by 5 pm on 28 January 2011, or must lodge completed WFSL Forms of Proxy with the chairman of the WFSL SchemeMeeting at the WFSL Scheme Meeting.
18. Completion and return of a WFSL Form of Proxy will not prevent that WFSL Scheme Creditor from subsequentlyattending and voting in person if he so wishes. If a WFSL Scheme Creditor appoints a person as his proxy who is not thechairman of the meeting, then his proxy must attend the meeting in order to vote. A proxy need not be a WFSL SchemeCreditor.
Attending the WFSL Scheme Meeting19. Each WFSL Scheme Creditor or his proxy who wishes to attend the WFSL Scheme Meeting in person will be required toregister his attendance by presenting himself, together with the duplicate copy of his WFSL Form of Proxy, where possible,at the registration desk prior to the commencement of the meeting. A WFSL Scheme Creditor who wishes to attend theWFSL Scheme Meeting in person is encouraged to complete the WFSL Form of Proxy and either return it to WFSL prior to5.00 pm on 28 January 2011 or bring it in person to the WFSL Scheme Meeting and hand it in at the registration desk no laterthan one hour before the scheduled time of the WFSL Scheme Meeting.
20. Thereafter, a WFSL Scheme Creditor may lodge a completed WFSL Form of Proxy with the chairman of the WFSLScheme Meeting at the WFSL Scheme Meeting. A WFSL Scheme Creditor who attends the WFSL Scheme Meeting inperson (but has not previously provided a WFSL Form of Proxy) will also need to provide evidence of his personal identity(for example, a passport or other picture identification) and an individual attending on behalf of a body corporate shouldprovide evidence of their identity and their authorisation to represent that body corporate (for example, a valid power ofattorney and/or board minutes).
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APPENDIX D:NOTICE CONVENING THE CATTLES SCHEME MEETING AND THE
WFSL SCHEME MEETINGIN THE HIGH COURT OF JUSTICE Nos. 10070 and 10072 of 2010CHANCERY DIVISIONCOMPANIES COURT
IN THE MATTER OF CATTLES PLC
AND IN THE MATTER OF WELCOME FINANCIAL SERVICES LIMITED
AND IN THE MATTER OF THE COMPANIES ACT 2006
NOTICE OF SCHEME MEETINGS
NOTICE IS HEREBY GIVEN that by an Order dated 16 December 2010 made in the above matters the Court has directedthat meetings (the Scheme Meetings) be convened of the Scheme Creditors (as defined in each of the schemes ofarrangement referred to below) of the above companies (the Scheme Companies) for the purposes of considering and, ifthought fit, approving (with or without modification) the schemes of arrangement proposed to be made between each SchemeCompany and their respective Scheme Creditors (the Schemes of Arrangement).
The Scheme Meetings to consider each of the Schemes of Arrangement will be held at The Albert Hall Conference Centre,North Circus Street, Nottingham NG1 5AA on 1 February 2011. The Cattles Plc Scheme Meetings will be held first and shallcommence at 10.00 am. The Scheme Meetings for Welcome Financial Services Limited shall commence at 11.00 am, or as atsuch later time as the preceding Cattles Scheme Meetings have concluded or have been adjourned.
A copy of the Scheme of Arrangement proposed by each Scheme Company and a copy of the statement required to beprovided pursuant to section 897 of the Companies Act 2006 (the Explanatory Statement) are available to be downloadedfrom www.cattles.co.uk/schemes (the Scheme Website). Voting and proxy forms for Scheme Creditors to vote on eachScheme of Arrangement (the Forms of Proxy) may also be downloaded from the Scheme Website. Scheme Creditors maycontact the Scheme Helpline on 0845 293 7447 if they wish to receive paper copies of the above documents.
Scheme Creditors may vote in person at the Scheme Meetings or they may appoint another person, whether a SchemeCreditor or not, as their proxy to attend and vote in their place.
Scheme Creditors are requested to complete, sign and submit a Form of Proxy for each Scheme of Arrangement upon whichthey are voting in accordance with the instructions printed on such forms and the procedures described in the ExplanatoryStatement. The Forms of Proxy must be sent to KPMG LLP at 8 Salisbury Square, London, EC4Y 8BB or alternatively byfax to +44(0) 207 694 3011 or by email to [email protected] (in each case marked for the attention of Mark Cook) by 5p.m. on 28 January 2011, but if forms are not so submitted they may, if properly completed and signed, be handed to thechairman at the relevant Scheme Meeting.
Bond Creditors, as such term is defined in the Explanatory Statement, must ensure that a Direct Participant Letter (as definedin the Explanatory Statement) is completed in order to vote on the Scheme of Arrangement proposed by Cattles plc. A copyof the Direct Participant Letter may be downloaded from the Scheme Website. Bond Creditors may contact the SchemeHelpline on 0845 293 7447 if they wish to receive a paper copy of the Direct Participant Letter. It is requested that the DirectParticipant Letter be completed, signed and submitted in accordance with the instructions printed on it and the proceduresdescribed in the Explanatory Statement. The Direct Participant Letters must be sent to Lucid Issuer Services at Lucid IssuerServices Limited, Leroy House, 436 Essex Road, London, N1 3QP or alternatively by fax to +44 (0)207 067 9098 or byemail to [email protected] (in each case marked for the attention of Sunjeeve Patel/Thomas Choquet) as soon as possibleand in an event before 5 p.m. on 28 January 2011.
By the Order referred to above, the Court has appointed Margaret Young or, failing her, Jamie Drummond Smith, to act aschairman of each of the Scheme Meetings and has directed the chairman to report the result of such meetings to the Court.
The Schemes of Arrangement will be subject to the subsequent approval of the Court.
For further information in this regard, please contact the Scheme Helpline on 0845 293 7447.
Dated 16 December 2010
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APPENDIX E:EFFECTS OF US CHAPTER 15 INJUNCTIVE RELIEF
Cattles and/or WFSL may commence a case under Chapter 15 of Title 11 of the United States Code (the Bankruptcy Code)in the United States Bankruptcy Court, Southern District of New York (the Bankruptcy Court) seeking, among other things,permanent injunctive relief to aid in the implementation of their respective Schemes (the Chapter 15 Case). In which caseCattles and/or WFSL will seek an order from the Bankruptcy Court containing relief in substantially the following form:
1. that their respective Scheme be given full force and effect and be binding on and enforceable against all Scheme Creditorsof Cattles and/or WFSL in the United States;
2. that all claims of Scheme Creditors of Cattles and/or WFSL be adjudicated pursuant to the terms of their respectiveSchemes;
3. except as provided in their respective Schemes, that all Scheme Creditors of Cattles and/or WFSL are permanentlyenjoined and restrained from:(a) taking or continuing any act to obtain possession of, or exercise control over, any of Cattles and/or WFSL or any of the
property of Cattles and/or WFSL in the United States (Property), and transferring, relinquishing, or disposing of anyProperty of Cattles and/or WFSL;
(b) commencing or continuing any action or legal proceeding (including, without limitation, arbitration, mediation or anyjudicial, quasi-judicial, administrative or regulatory action, proceedings or process whatsoever), including by way ofcounterclaim (each individually, an Action), against any of Cattles and/or WFSL or any Property of Cattles and/orWFSL and seeking discovery of any nature against any of Cattles and/or WFSL;
(c) commencing or continuing any act or Action to create, perfect or enforce any lien, set off, or other claim against Cattlesand/or WFSL or any of Cattles and/or WFSL s Property;
(d) invoking, enforcing or relying on the benefits of any statute, rule or requirement of federal, state, or local law orregulation requiring Cattles and/or WFSL to establish or post, security in the form of a bond, letter of credit orotherwise as a condition of prosecuting or defending any Action; provided, however, that nothing in the order shall inany respect affect any security in existence at the Effective Date or the replacements for such security; and
(e) withdrawing from, setting off against, or otherwise applying property that is the subject of any trust or escrowagreement or similar arrangement in which Cattles and/or WFSL has an interest in excess of amounts expresslyauthorized by the terms of the contract and any related trust, or other agreement pursuant to which such trust, escrow orsimilar arrangement has been established;
4. that the Bankruptcy Court shall retain jurisdiction with respect to the enforcement, amendment, or modification of theorder or requests for any additional relief in the Chapter 15 Case and all adversary proceedings in connection therewithproperly commenced and within the jurisdiction of the Bankruptcy Court; and
5. that the order be served:(a) by United States mail, first class postage prepaid, on the date prescribed by the United States Bankruptcy Court upon
all known Scheme Creditors of Cattles and/or WFSL of whose address Cattles and/or WFSL is aware (or their counsel,if known to Cattles and/or WFSL); and
(b) by publication in The Wall Street Journal (US Edition) and the international editions of the Financial Times on the dateprescribed by the United States Bankruptcy Court (or as soon as reasonably practicable thereafter);
6. and that such service will be good and sufficient service and adequate notice for all purposes.
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APPENDIX F:CAVEATS, LIMITATIONS AND UNCERTAINTIES RELATING TO THE
INSOLVENCY ANALYSIS
1. Neither Cattles, WFSL, their advisers nor the Directors make any representation or warranty that the actual Returnsobtained by Scheme Creditors would or would not approximate to the estimates contained in paragraph 7 of Part 5.
2. Nothing in paragraph 7 of Part 5 constitutes a valuation. Where present values for different scenarios are shown they areprovided for illustrative purposes only and are subject to the assumptions set out in this appendix.
3. The Insolvency Analysis represents an illustrative estimate of insolvency values and recovery percentages based uponhypothetical insolvency proceedings as at 31 December 2010.
4. The analysis in relation to Cattles assumes that an administration of Cattles would be a liquidating administration and theanalysis is therefore based on Cattles draft management accounts at 30 September 2010 and an assessment of the realisableassets thereon.
5. In the case of WFSL, the analysis is based on overlays reflecting the estimated impact of an administration which havebeen applied to the Group 2010 6+6 plan. The Group 2010 6+6 plan includes forecast cash collections from WelcomeFinance s receivables and the cost base to realise those receivables out to the end of the business plan period at 31 December2013. The Group 2010 6+6 plan also includes the value of the remaining assets at the end of this period and the costs thatcontinue beyond this period. The insolvency analysis assumes that there would be a trading administration of WFSL thatwould oversee the collect out or sale of Welcome Finance s assets over the remaining life of the business. An administratorwould give regular consideration to the efficiency and cost effectiveness of collections when deciding on the appropriatelength of time over which to trade the business.
6. In so far as insolvency might be an event that occurs in the future, the ultimate return to creditors will be determined by aseries of circumstances relevant at the time of the insolvency. There may be unforeseen events, changes in economicconditions, and many other potential variations that could impact upon and change this analysis.
7. The Insolvency Analysis has been prepared on the basis of certain assumptions which Cattles, WFSL and their advisersbelieve are reasonable in the circumstances. However, the assumptions are subject to significant uncertainties which arebeyond Cattles or WFSL s control, and unanticipated events and circumstances might materially affect the anticipatedresults.
8. Furthermore, given in particular the nature of WFSL s asset base (a large portfolio of UK sub-prime loans for whichthere is no precedent of collecting out such a portfolio in an administration), estimating an illustrative insolvency recovery isextremely complicated and dependent on professional judgement.
9. Neither the assumptions nor the numbers generated in this comparison have been audited. While the insolvency values arepresented with some specificity, the actual results achieved would in all likelihood vary, and could vary in ways that may bematerial. Accordingly, there can be no assurance that the assumptions employed in determining the insolvency value of theassets will result in accurate estimations of such insolvency values, given they are subjective in nature.
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SECTION 2
SCHEMES OF ARRANGEMENT
Under Part 26 of the Companies Act 2006
Between
CATTLES PLCand the
CATTLES SCHEME CREDITORS(as defined in this document)
ANDWELCOME FINANCIAL SERVICES LIMITED
and the
WFSL SCHEME CREDITORS(as defined in this document)
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109
PART 1 THE CATTLES CREDITOR SCHEME
No. 10070 of 2010
IN THE HIGH COURT OF JUSTICECHANCERY DIVISIONCOMPANIES COURT
IN THE MATTER OF CATTLES PLC
and
IN THE MATTER OF THE COMPANIES ACT 2006
SCHEME OF ARRANGEMENT(under Part 26 of the Companies Act 2006)
between
CATTLES PLC
and
THE SCHEME CREDITORS(as defined herein)
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SECTION 1PRELIMINARY
1.1 Definitions
In the Scheme, unless inconsistent with the subject or context, the following expressions have the following meanings:
2014 Bonds means the £350m 6.875 per cent. bonds due 2014 constituted by a trust deed dated 17 December 2003 betweenthe Company as issuer and HSBC Trustee (C.I.) Ltd as trustee (as amended, restated and/or supplemented from time to time);
2017 Bonds means the £400m 7.125 per cent. bonds due 2017 constituted by a trust deed dated 5 July 2007 between theCompany as issuer and HSBC Trustee (C.I.) Ltd as trustee (as amended, restated and/or supplemented from time to time);
Act means the Companies Act 2006;
Adjourned Meeting means a meeting of scheme creditors adjourned in accordance with clause 5.2.2(b);
Adjusted Claim means in respect of a Scheme Creditor s claims under or in connection with the Finance Documents a sumequal to (for the avoidance of doubt only (b) below shall apply to a Scheme Creditor s claim in respect of the SettlementAgreement):(a) the difference (positive or negative) between the estimated maximum distribution from the Escrow Account to a
Scheme Creditor as set out in Schedule 4 and the actual distribution from the Escrow Account to that Scheme Creditor(provided that at a time when no such actual distribution has been made, the difference shall be deemed to be £0); plus
(b) any interest accrued whether or not due or payable up to the Effective Date in accordance with the relevant FinanceDocument; plus
(c) a sum (positive or negative) equal to the amount by which a Scheme Creditor s Ascertained Scheme Claim will have tobe adjusted to take account of movements in foreign exchange rates for the period between 31 October 2010 and theEffective Date (where relevant); plus
(d) a sum (positive or negative) equal to the amount by which a Scheme Creditor s Ascertained Scheme Claim will have tobe adjusted to take account of the movement in make whole under clause 12.1 of the Note Agreements for the periodbetween 31 October 2010 and the Effective Date; plus
(e) any other contractual amount owed by the Company to the Scheme Creditor pursuant to a Finance Document incurredor falling due between 31 October 2010 and the Effective Date;
Affiliate means a subsidiary or a holding company of a person or any other subsidiary of that holding company;
Agency Arrangement means an arrangement whereby any of the Scheme Creditors referred to in clause 3.7.2 appoint anagent (being formerly an agent under a Finance Document) to act as agent for such Scheme Creditors and such arrangementis made between the agent and the relevant Scheme Creditors and may also be made with the Company and/or the SchemeSupervisors;
Alternate means any other senior executive, senior employee or professional adviser appointed by a Committee Member orNominated Representative pursuant to clause 7.1.13;
Ascertained Scheme Claim means a (i) Submitted Scheme Claim which has been agreed by the Scheme Supervisors inaccordance with clause 3.7.6 or 3.8.5 or the Court, in accordance with clause 3.8.2 or (ii) has been ascertained in accordancewith clause 3.7.2 and Schedule 4 or (iii) the claim of the Pension Creditor which has been ascertained in accordance withclause 3.10;
Bar Date means the first Business Day falling three months after the Effective Date;
Base Rate means the Bank of England base rate from time to time;
Board means the board of directors of the Company, from time to time;
Bondholder means an entity with an interest in a Bond where at least 50 per cent of that entity s Scheme Liabilities arisesunder the Bonds;
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Bonds means the 2014 Bonds and 2017 Bonds;
Bovess means Bovess Limited, a company incorporated and registered in England and Wales with company number07366975 whose registered office is at 35 Great St. Helen s, London EC3A 6AP;
Bovess Holding means Bovess Holding Limited, a company incorporated in England and Wales with company number07366959 whose registered office is at 35 Great St. Helen s, London EC3A 6AP;
Business Day means a day (other than a Saturday or a Sunday) on which banks are open for general business in London;
Cash Report means the report provided in accordance with clause 4.3.1;
Catch-up Payment means a payment made in accordance with clause 5.4.1;
Cattles Shareholder Scheme means the scheme of arrangement proposed between Cattles and its members the provisions ofwhich include the acquisition of the entire issued share capital of Cattles by Bovess;
CDDA means the Company Directors Disqualification Act 1986;
Claim Form means the either a Paper Claim Form or an Electronic Claim Form;
Clearing Systems mean Euroclear and Clearstream, Luxembourg;
Clearstream, Luxembourg means Clearstream Banking, société anonyme;
Committee Confidential Information means:(a) all information and documents provided to each Committee Member or observer as a member or observer (as the case
may be) of a Creditors Committee; and(b) all discussions at and proceedings of the meetings of the Creditors Committee,
save to the extent (i) such matters are already in the public domain or (ii) in relation to information known by such person(other than as a result of a breach of clauses 7.1.4, 7.1.9 and 7.1.10);
Committee Member means a member from time to time of the Creditors Committee;
Company means Cattles plc, a company incorporated under the laws of England and Wales, with registered number00543610 whose registered office is at Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, WestYorkshire, England, WF17 9TD;
Company s Forecast means a forecast prepared in accordance with clause 4.2;
Completion means completion of the acquisition of the shares in Cattles pursuant to the Cattles Shareholder Scheme;
Co-ordinating Committee means a committee comprising The Royal Bank of Scotland plc, HSBC Bank plc and Lloyds TSBBank plc appointed pursuant to the co-ordination committee appointment letter dated 31 July 2009, to act as joint co-ordinators of the lenders under the Facilities Agreements;
Court means the High Court of Justice of England and Wales;
Covenants means the covenants set out in Schedule 9 and referred to in clause 5.1;
Covenant Certificate means the certificate referred to in clause 5.1.2;
Creditors Committee means the committee of Scheme Creditors constituted in accordance with Section 7 of the Scheme;
Creditors Resolution means any resolution passed by the Scheme Creditors at a meeting of Scheme Creditors convened andat which business is transacted;
Cumulative Net Distributable Assets means an amount calculated in accordance with clause 4.4.1;
Deed of Release means the deed of release to be executed by any Scheme Supervisor on behalf of Scheme Creditors, in theform of Schedule 2 (subject to minor technical and administrative changes);
Disputed Scheme Claim means a Submitted Scheme Claim to which clause 3.7.8 applies;
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Effective Date means the date on which the Scheme becomes effective, in accordance with clause 1.5.1;
Electronic Claim Form means the form to be completed on the Scheme Portal by Scheme Creditors (or their duly authorisedagents) detailing Submitted Scheme Claims against the Company;
Escrow Account means the trust account in the name of WFSL which is held on trust for certain of the Scheme Creditors setup under the SEA;
Euroclear means Euroclear Bank S.A./N.V.;
Expected Company Dissolution means the date upon which the Company estimates that the Scheme and any liquidation ofthe Company shall be completed;
Excluded Liability means each of those liabilities set out in Schedule 1;
Excluded Trade Creditors means those persons listed in Schedule 8;
Explanatory Statement means the statement explaining the effect of the Scheme to Scheme Creditors in compliance withSection 897 of the Act;
Facilities Agreement means(a) the £800 million syndicated credit facility dated 10 July 2006 between, amongst others, the Company as borrower,
WFSL as a guarantor and The Royal Bank of Scotland plc as facility agent and the lenders from time to time;(b) the £500 million syndicated credit facility dated 14 July 2004 between, amongst others, the Company as borrower,
WFSL as a guarantor and The Royal Bank of Scotland plc as facility agent and the lenders from time to time;(c) the £215 million syndicated credit facility dated 17 April 2008 between, amongst others, the Company as borrower,
WFSL as a guarantor and The Royal Bank of Scotland plc as facility agent and the lenders from time to time;(d) the £135 million bilateral credit facility dated 30 June 2008 between, amongst others, the Company as borrower, WFSL
as a guarantor and The Royal Bank of Scotland plc as lender and facility agent; and(e) the £75 million bilateral credit facility dated 12 August 2004 between, amongst others, the Company as borrower,
WFSL as a guarantor and The Royal Bank of Scotland plc as lender,
each as amended and/or supplemented prior to 31 October 2010;
Final Court Order means the order of the Court sanctioning the Scheme under section 899 of the Act;
Finance Document means (a) one of the Facilities Agreements or (b) a Note Agreement or (c) a Hedge Agreement or (d) theSettlement Agreement;
Financial Indebtedness means any indebtedness for or in respect of:(a) moneys borrowed;(b) any acceptance credit (including any dematerialised equivalent);(c) any bond, note, debenture, loan stock or other similar instrument;(d) any redeemable preference share;(e) any agreement treated as a finance or capital lease in accordance with generally accepted accounting principles in the
jurisdiction of incorporation of the Company;(f) receivables sold or discounted (otherwise than on a non-recourse basis);(g) the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the
deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset;(h) any derivative transaction protecting against or benefitting from fluctuations in any rate or price (and, except for non-
payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount);(i) any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a
borrowing;(j) any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument
issued by a bank or financial institution; or
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(k) any guarantee, indemnity or similar assurance against financial loss of any person in respect of any item referred to inthe above paragraphs;
FSMA means the Financial Services and Markets Act 2000;
Group means the Company and all of its subsidiaries (within the meaning of section 1159 of the Act);
Hedge Agreements means each of the agreements listed at Schedule 5 each as amended, supplemented and/or replaced priorto 31 October 2010;
Insolvency Act means the Insolvency Act 1986;
Insolvency Event means each of:(a) the taking of any formal step being preparatory to and/or the occurrence of (i) a winding up of the Company (by the
presentation of a winding up petition to the court or a resolution of the directors or members of the Company), (ii) itsdissolution or (iii) its administration pursuant to Schedule B1 of the Insolvency Act;
(b) the appointment of a receiver, compulsory manager or other similar officer over the Company or any of its significantassets; and
(c) any event which is analogous to those above;but shall not include:(d) any winding-up petition, administration application or application for the appointment of a receiver, compulsory
manager or other similar officer which is frivolous, vexatious or contested in good faith and is discharged, permanentlystayed or dismissed within 14 days of presentation; or
(e) the Scheme Certified Liquidation;
Insolvency Rules means the Insolvency Rules 1986 (SI 1986/1925);
ISDA Master Agreement means a 1987 ISDA Master Agreement, a 1992 ISDA Master Agreement or a 2002 ISDA MasterAgreement;
Liability means any liability of a person, whether it is present, future, prospective or contingent, whether its amount is fixedor undetermined, whether or not it involves the payment of money or performance of any act or obligation and whether itarises at common law, in equity or by statute, in England or in any other jurisdiction, or in any other manner whatsoever,including, without limitation, claims in respect of breach of contract, tort, restitution, breach of trust, financial indebtedness,guarantee or indemnity claims, claims arising by way of subrogation, contribution or counter-indemnity, claims formisrepresentation, negligence, wilful default or fraud, mis-selling claims, claims under FSMA, Consumer Credit Act 1974 orPensions Act 1995 or 2004 and any other claims which may arise ancillary to any such financial liability, but in all casesexcluding:(a) any liability which is barred by statute or is otherwise unenforceable; or(b) a liability under a contract that is void or, being voidable, has been avoided;
Lender means a lender under one or more Facilities Agreements where at least 50 per cent. of that entity s Scheme Liabilitiesarises under Facilities Agreements;Litigation Protocol means any litigation protocol agreed between the Company and WFSL;
Multicurrency 2006 NPA means the multicurrency note purchase agreement dated 1 February 2006 (as amended from timeto time) between the Company and the purchasers named therein in respect of:(a) the US$20,000,000 principal amount of 6.17% Series A Guaranteed Senior Unsecured Notes due on 1 February 2011;(b) the US$55,000,000 principal amount of 6.25% Series B Guaranteed Senior Unsecured Notes due 1 February 2013;(c) the 6,000,000 principal amount of 4.62% Series C Guaranteed Senior Unsecured Notes due 1 February 2013;(d) the £1,000,000 principal amount of 5.89% Series D Guaranteed Senior Unsecured Notes due 1 February 2013; and(e) the £20,000,000 principal amount of 5.94% Series E Guaranteed Senior Unsecured Notes due 1 February 2021,in each case, issued by the Company;
Net Distributable Assets means the total cash that the Scheme Supervisors have concluded in accordance with clause 4.3.3that the Company shall from time to time distribute;
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Nominated Representative means any senior executive, other senior employee or professional adviser appointed by aCommittee Member pursuant to clause 7.1.12;
Note Agreements means the US Dollar 2001 NPA, the Sterling 2001 NPA or the Multicurrency 2006 NPA;
Noteholder means a holder of Notes where at least 50 per cent. of that entity s Scheme Liabilities arises under the NoteAgreements;
Notes means those notes issued pursuant to the Note Agreements;
Notional Section 75 Debt has the meaning ascribed to it in the Pension Compromise;
Official Rate means the official rate of interest (as defined in section 251 of the Insolvency Act);
Outward Claims Amount means such recoveries as may be received by the Company in settlement or satisfaction of anyOutwards Claims Litigation;
Outwards Claims Litigation means any demand or claim made or brought by the Company against any party pursuant tocontract, tort or otherwise;
Paper Claim Form means the claim form in substantially the same form as the example in Schedule 3, to be completed byScheme Creditors (or their duly authorised agents) detailing Submitted Scheme Claims against the Company;
Payment Percentage means the percentage calculated in accordance with clause 4.4;
Pension Claim means the amount owed to the Pension Creditor by the Company as the Notional Section 75 Debt under theterms of the Pension Compromise;
Pension Compromise means the compromise deed between the Pension Creditor, the Company and other certain Groupcompanies, dated 19 November 2010 as amended by the Deed of Variation in the form set out at Schedule 7;
Pension Creditor means Cattles Staff Pension Fund Limited, as trustee of the Cattles Staff Pension Fund, established by atrust deed dated 20 August 1952 or its successors as trustee thereof or the Board of the Pension Protection Fund as itssuccessor pursuant to the Pensions Act 2004;
Post means delivery by pre-paid first class post or airmail;
Pre-Effective Date Insolvency Event means the occurrence of any of the following in relation to the Company:(a) winding-up, dissolution or administration (whether out of court or otherwise);(b) the appointment of a liquidator, receiver, administrator or similar officer (in each case, whether out of court or
otherwise);(c) a resolution of the Company or its directors being passed to petition or apply for the Company s winding-up or
administration (whether out of court or otherwise); or(d) any person presenting a petition or an application for its winding-up or administration (whether out of court or
otherwise) which has not been dismissed or struck out within 14 days;
Proceedings means any process, action, step, or other legal (or quasi legal) or judicial (or quasi judicial) proceeding(including, without limitation, any demand, arbitration, alternative dispute resolution, expert determination process, judicialreview, adjudication, execution, seizure, distraint, lien, enforcement of judgment, or enforcement of any security interest orright of set-off or any proceeding for the purpose of placing the Company into administration, liquidation or any insolvency,reconstruction, bankruptcy or analogous proceeding in any jurisdiction;
Quarter Date means 31 March, 30 June, 30 September and 31 December in each year;
Record Date means the Effective Date;
Remedy Proposal means a proposal by the Scheme Supervisors in accordance with clause 5.1.4
Representative means a person determined to be a representative in accordance with clause 2.7;
Scheme means this scheme of arrangement in its present form or with any modifications thereof or additions theretoapproved or imposed by the Court in accordance with clause 10.2;
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Scheme Certified Liquidation means any voluntary liquidation of the Company where the Board has certified to the SchemeSupervisors no more than 25 Business Days before the passing of the member s resolution to wind-up that they have made afull enquiry into the Company s affairs and that, having done so, they have formed the opinion that the Company will be ableto pay any debts reasonably likely to be admitted to proof in the liquidation in full, together with interest at the Official Rate,within 12 months of the date of the commencement of the liquidation;
Scheme Completion shall have the meaning given to it in clause 9.3.1;
Scheme Creditor means(a) the Pension Creditor; and(b) any person who is, or claims to be, a creditor of the Company in respect of a Scheme Liability, at the Record Date;
Schemed Directors means those individuals listed in Schedule 10;
Schemed Lease means a lease described in Schedule 11(a)-(d) (inclusive) or of the property listed in Schedule 11(e);
Scheme Lease Liability means any liabilities specified in Schedule 11;
Scheme Liability means:(a) any Liability of the Company (before the application of any set-off, as applicable), other than an Excluded Liability,
which either:(i) has arisen on or prior to the Record Date; or(ii) may (subject to clause 2.5.1) arise after the Record Date as a result of an obligation incurred or as a result of an
event occurring or act done on or before the Record Date; or(b) the potential claims of the Pension Creditor against the Company under sections 75 or 75A of the Pensions Act 1995
(as applicable) or, to the extent these claims are compromised under the Pension Compromise, the Pension Claim;
Scheme Payment means any payment made to a Scheme Creditor in accordance with section 4;
Scheme Portal means the world wide web page or pages linked to universal resource locator www.zcinfoportal.com;
Scheme Publications means The Financial Times (International Edition), The Daily Telegraph and the Daily Mail;
Scheme Reversion Decision Event means any of the events specified in clause 5.2.1;
Scheme Reversion means the occurrence of a Scheme Reversion Decision Event followed by either (i) a resolution of theScheme Creditors pursuant to clause 5.2.2 or (ii) the happening of the events set out in clause 5.2.3;
Scheme Supervisor means any of the persons appointed under section 6;
Scheme Supervisors Agreement means the agreement to be entered into on or prior to the Effective Date between theScheme Supervisors and the Company described in clause 6.1.2;
Scheme Supervisors Report means a written report delivered by the Scheme Supervisors to the Creditors Committeepursuant to clause 6.3.3(b);
Scheme Website means the world wide web page or pages linked to universal resource locatorhttp://www.cattles.co.uk/schemes;
Settlement Agreement means the agreement between the holders of the Notes and the Company, WFSL and other membersof the Group as detailed in the letter from Clifford Chance LLP to Freshfields Bruckhaus Deringer LLP dated 3 December2010;
SEA means the standstill and equalisation agreement dated 25 November 2009 between, amongst others, the Company,WFSL and The Royal Bank of Scotland plc;
Shareholder means a current or former holder of shares in the Company;
Shareholder Observer means the observer permitted to attend meetings of the Creditors Committee pursuant to clause7.1.3(g);
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Sterling 2001 NPA means the Sterling note purchase agreement dated 12 December 2001 (as amended from time to time)between the Company and the purchasers named therein in respect of:(a) the £30,000,000 principal amount of 7.64% Series C Guaranteed Senior Unsecured Notes due 12 December 2011; and(b) the £40,000,000 principal amount of 7.80% Series D Guaranteed Senior unsecured notes due 12 December 2016,
in each case, issued by the Company;
Submitted Scheme Claim means any purported Scheme Liability in respect of which a Scheme Creditor has submitted aClaim Form in accordance with clause 3.5.3 and 3.5.4;
Submitted Scheme Claimant means a person who has submitted a Submitted Scheme Claim, unless his Submitted SchemeClaim has been finally rejected in accordance with clause 3.8.1 or 3.8.3;
TSA means the transitional services agreement dated 3 July 2009 between, among others, the Company and WFSL;
Unascertained Payments Trust Fund means the trust fund established and maintained by the Company under clause 4.6.1;
Unascertained Scheme Claim means (i) a Submitted Scheme Claim which has not become an Ascertained Scheme Claimnor been rejected in accordance with clause 3.8.1 or 3.8.3 and includes a prudent provision by the Scheme Supervisors forpotential adverse cost awards which the Company may incur in determining such Submitted Scheme Claim or (ii), in relationto the Pension Creditor, the sum estimated in accordance with clause 3.10.2;
US Dollar 2001 NPA means the US dollar note purchase agreements dated 12 December 2001 (as amended from time totime) between the Company and the purchasers named therein in respect of:(a) the US$40,000,000 principal amount of 7.15% Series A Guaranteed Senior Unsecured Notes due 12 December 2008;
and
(b) the US$70,000,000 principal amount of 7.53% Series B Guaranteed Senior Unsecured Notes due 12 December 2011,
in each case, issued by the Company;
WFSL means Welcome Financial Services Limited, a private limited company incorporated in England and Wales withcompany number 00133540; and
WFSL Scheme means the scheme of arrangement between WFSL and certain of its creditors under Part 26 of the Act.
1.2 In the Scheme, unless the context otherwise requires or otherwise expressly provides for:(a) references to parts, clauses, subclauses and schedules are references to parts, clauses, subclauses and schedules of the
Scheme;(b) references to a person include references to an individual, firm, partnership, company, corporation, unincorporated
body of persons or any state or state agency;(c) references to a statute, statutory provision or regulatory rule or guidance include references to the same as subsequently
modified, amended or re-enacted from time to time;(d) the singular includes the plural and vice versa and words importing one gender shall include all genders;(e) headings to parts, clauses and schedules are for ease of reference only and shall not affect the interpretation of the
Scheme;(f) references to a period of days shall include Saturdays, Sundays and public holidays. Where the date which is the final
day of a period of days is not a Business Day, that date will be adjusted so that it is the first following day that is aBusiness Day;
(g) references to Sterling or to £ are references to the lawful currency of the United Kingdom of Great Britain andNorthern Ireland from time to time; and
(h) references to time shall be to London time (Greenwich Mean Time or British Summer Time as appropriate).
1.3 The CompanyThe Company was incorporated in England and Wales on 21 January 1955 as a private limited company under theCompanies Act 1948 with registered numbered 00543610 with the name Cattle s (Holdings) Limited. On 5 March 1982, itsname was changed to Cattle s (Holdings) plc when it was re-registered as a public company under the Companies Act 1948
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to 1980. Its name was changed to Cattles plc on 5 June 1995. The issued share capital of the Company is 526,066,902ordinary shares.
1.4 The Purpose of the SchemeThe purpose of the Scheme is to provide a procedure for the agreement, valuation and compromise of Scheme Liabilities andto maximise recoveries in order to give a better return to Scheme Creditors than they would receive on an administration orliquidation of the Company while meeting the Company s Liabilities to its other creditors in the ordinary course of business.
1.5 Effective Date1.5.1 The Scheme shall become effective on the date on which an office copy of the Final Court Order is delivered to theRegistrar of Companies of England and Wales for registration in accordance with clause 1.5.2.
1.5.2 The Company shall not deliver an office copy of the Final Court Order to the Registrar of Companies of England andWales for registration until the satisfaction of the following conditions:(a) the making by the Court of orders sanctioning the Cattles Shareholder Scheme and confirming the proposed capital
reduction and the directors of the Company having confirmed that, subject to no insolvency event (as defined in theCattles Shareholder Scheme) having occurred in relation to the Company, such Court orders will be delivered to theRegistrar of Companies of England and Wales for registration immediately upon the WFSL Scheme becomingeffective; and
(b) the WFSL Scheme becoming effective on its terms;provided that if:
(c) the conditions in 1.5.2(a) and 1.5.2(b) have not been satisfied; or(d) a Pre-Effective Date Insolvency Event has occurred in relation to the Company;on or before 31 May 2011, the Company shall not deliver, or procure delivery of, the office copy of the Final Court Order tothe Registrar of Companies of England and Wales and the Scheme shall not be made effective.
1.5.3 If an Insolvency Event occurs in relation to the Company before the Bar Date, save for the provisions in 1.1, 1.5.3, 2.9,6.6, 6.7, 7.7, 7.8, 7.9, 7.10, 10.1 and 10.6, all the provisions under the Scheme shall cease to apply.
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SECTION 2
THE SCHEME
2.1 Application of the SchemeThe Scheme shall apply to all Scheme Liabilities and bind all Scheme Creditors. The Scheme shall not affect the rights ofcreditors of the Company in respect of any Excluded Liabilities.
2.2 Stay of Proceedings2.2.1 Subject to the provisions of clauses 2.2.2 and 2.2.3, no Scheme Creditor shall be permitted to commence or continueany Proceedings against the Company, in any jurisdiction.
2.2.2 A Scheme Creditor shall only be permitted to commence Proceedings against the Company:(a) in accordance with the provisions of clause 2.2.3;(b) with the consent of the Scheme Supervisors; or(c) in response (by way of claim or counterclaim) to Proceedings commenced or continued by the Company against the
Scheme Creditor and where the subject matter of the Proceedings commenced by the Scheme Creditor is the sametransaction or occurrence as the subject of the Proceedings commenced or continued by the Company.
2.2.3 A Scheme Creditor in respect of a Scheme Lease Liability shall, subject to the terms of the relevant Scheme Lease(and/or any associated documents), be permitted to bring a claim for forfeiture, re-entry or other action or legal proceedingsbrought solely with the purpose of determining such Scheme Lease.
2.2.4 No order, judgment, decision or award obtained by a Scheme Creditor in breach of clause 2.2.2 shall give rise to anAscertained Scheme Claim. The Scheme Creditor shall not be entitled to rely on such an order, judgment, decision or awardto evidence a Submitted Scheme Claim and shall have no right to enforce the order, judgment, decision or award or to seek toplace the Company into administration, liquidation or any insolvency, reconstruction, bankruptcy or analogous proceeding inany jurisdiction in reliance upon such an order.
2.3 Enforcement of Scheme LiabilitiesScheme Creditors are not permitted to commence any Proceedings against the Company, any Scheme Supervisor, the Boardor any member of the Board, any officer of the Company or any other person, in any jurisdiction, to enforce payment of anAscertained Scheme Claim, Scheme Payment or any other Scheme Liability or any part of it, unless the Company or theScheme Supervisors have acted or failed to act in either case in breach of the Scheme or any of them is reasonably anticipatedto be about to act or fail to act in breach of a provision of the Scheme that is not minor or technical in nature. The moratoriumdescribed in the previous sentence shall cease to apply after a Scheme Reversion. For the avoidance of doubt, the moratoriumin this clause shall not prevent any Scheme Creditor commencing any Proceedings against any current or former member ofthe Board or officer of the Company or any other person to enforce payment of any Liability which is not a Liability of theCompany in respect of an Ascertained Scheme Claim, Scheme Payment or Scheme Liability.
2.4 Effect of Proceedings prohibited by clauses 2.2 and 2.32.4.1 If a Scheme Creditor obtains any money, benefit, property or advantage at the expense of the Company in breach ofclauses 2.2 or 2.3, he shall be treated as having received, on account of his entitlement to a Scheme Payment, an advancepayment equal to the amount or gross value of such money, benefit, property or advantage, and the extent, if any, to which heis entitled to a Scheme Payment shall be reduced accordingly.
2.4.2 For the purpose of clause 2.4.1, the value of any amount obtained shall be the gross value as conclusively determinedby the Scheme Supervisor, acting in good faith, and may include, without limitation, such amount as it considers appropriateby way of interest; or costs, charges or expenses incurred by the Company as a consequence of the Proceedings.
2.4.3 To the extent that the gross value exceeds the value of the Scheme Payment to which the Scheme Creditor wouldotherwise be entitled, the Scheme Creditor shall hold the excess on trust for the Company and shall immediately pay it to theCompany without set-off, deduction, retention, abatement or counterclaim. Interest will accrue on the excess, from the dateon which the value is obtained by the Scheme Creditor, at a rate of 2 per cent. above Base Rate.
2.4.4 The Company shall have the right to seek injunctive or other relief or remedy:(a) in respect of the breach or anticipated breach of clauses 2.2 or 2.3; and
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(b) in respect of any loss which the Company may suffer as a result of the breach of clauses 2.2 or 2.3.
2.5 Interest2.5.1 Scheme Creditors shall be entitled to claim interest on Scheme Liabilities, only to the extent that interest is a SchemeLiability. Subject to clause 2.5.4, Scheme Liabilities shall not accrue interest following the Record Date, (except that witheffect from a Scheme Reversion, interest may be claimed on Ascertained Scheme Claims as though it had accrued from theRecord Date at the Official Rate). For the avoidance of doubt, Scheme Creditors release all claims they would have had inrespect of interest, but for the provisions of this clause.
2.5.2 To the maximum extent possible, all Scheme Payments shall be repayments of principal amounts owed in respect ofScheme Liabilities, rather than interest.
2.5.3 For the purposes of a Scheme Liability comprising interest, all necessary apportionments will be made to enable a claimin respect of such interest to be made for a period up to the Record Date.
2.5.4 If there is any surplus remaining under the Scheme after having paid all Ascertained Scheme Claims in full, suchsurplus shall be applied in paying interest at the Official Rate on those Ascertained Scheme Claims in respect of the periodsduring which, owing to the effect of clause 2.5.1, they have been outstanding since the Record Date.
2.6 Valuation of claims and set-offAll Scheme Liabilities (other than those in respect of the Pension Claim) shall be valued in accordance with Rules 2.85 to2.89 of the Insolvency Rules, as though the Company had entered administration on the Record Date and the administratorhad given notice under Rule 2.95 of the Insolvency Rules on that date that he intended to make a distribution to unsecuredcreditors.
2.7 Representatives2.7.1 To the extent a Scheme Creditor does not take part in the Scheme on his own behalf, the Scheme Supervisors may, intheir absolute discretion, determine any person purporting to represent that Scheme Creditor to be his Representative.
2.7.2 Unless notified to the contrary by the Scheme Creditor, the Scheme Supervisors may, in their absolute discretion, treat aRepresentative as fully authorised to represent the Scheme Creditor concerned for all purposes in connection with theScheme.
2.7.3 The Company shall accept from the Representative any payment owed to the Company by the principal(s) of theRepresentative and may make any payment owed to the principal(s) under the Scheme to the Representative. Such paymentsby the Company shall discharge the Company from any further obligation in respect of the Scheme Liability as though it hadbeen paid to the Scheme Creditor. Neither the Scheme Supervisors nor the Company shall have any liability to a SchemeCreditor arising from the operation of this clause.
2.7.4 Any action required to be taken under this Scheme by a Scheme Creditor may and shall be taken by any Representativeof a Scheme Creditor, unless taken by the Scheme Creditor directly.
2.8 Scheme releasesNothing in this Scheme, other than the releases set out at clauses 2.5 and 2.9, shall be construed as resulting in any release,extinguishment, modification, compromise or waiver of any Liability owed by the Company until the earlier of:(a) Scheme Reversion pursuant to Section 5; and(b) Scheme Completion, pursuant to clause 9.3.1.
2.9 Deed of releaseEach of the Scheme Creditors hereby irrevocably authorises any of the Scheme Supervisors from the Effective Date to enterinto, execute and deliver as a deed the Deed of Release, on behalf of each of the Company, each Scheme Creditor and anyperson to whom a Scheme Creditor has transferred or assigned or purported to transfer or assign a Scheme Liability.
2.10 No admission of liabilitySave as expressly set out in this Scheme or in the Explanatory Statement, nothing in the Scheme or the ExplanatoryStatement or the circulation thereof to any person evidences or constitutes any admission by the Company or the SchemeSupervisors that the person is a Scheme Creditor or that a Liability is owed to any person in respect of any claim or right. The
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agreement by the Company or the Scheme Supervisors of a Submitted Scheme Claim is purely for the purposes of theScheme and does not constitute any admission of Liability for any other purpose.
2.11 Continuation of Operations2.11.1 Except insofar as specific functions are to be performed by the Scheme Supervisors (as set out in Section 6 andelsewhere) the affairs, business and property of the Company shall continue to be managed by the Board. The Company,acting through the Board consistent with its regulatory and fiduciary responsibilities, shall remain solely responsible for theconduct of the future trading business of the Company.
2.11.2 Neither the Scheme Supervisors nor (for the avoidance of doubt) the members of the Creditors Committee shall haveany personal liability in respect of any ongoing trading activities by the Company or any debts incurred by the Company inrespect of such trading.
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SECTION 3DETERMINATION OF SUBMITTED SCHEME CLAIMS
3.1 The Pension Creditor s Scheme LiabilitiesClauses 3.2 to 3.9 shall not apply to Scheme Liabilities owed to the Pension Creditor. Clause 3.10 applies to the SchemeLiabilities owed to the Pension Creditor.
3.2 Record DateAll Submitted Scheme Claims shall be valued as at the Record Date, except that Scheme Creditors and the SchemeSupervisors shall take into account:(a) any information which has come to light since the Record Date that assists with the valuation of the Scheme Liability;
and(b) the termination of any contract or arrangement since the Record Date.
3.3 Assignment3.3.1 Subject to clauses 3.3.2 to 3.3.5, the Scheme Supervisors shall be under no obligation to recognise any assignment ortransfer (or purported assignment or transfer) of the whole or part of a Scheme Liability or Ascertained Scheme Claim (or thebenefit thereof) after the Record Date for the purposes of determining entitlements under this Scheme and the Company shallhave no obligations hereunder to any person other than a Scheme Creditor.
3.3.2 Where the Scheme Supervisors have received from the relevant parties notice in writing, in the form of Schedule 6 dulycompleted, of an assignment or transfer of the whole or part of a Scheme Creditor s Scheme Liability or Ascertained SchemeClaim, the Scheme Supervisors shall agree to recognise such assignment or transfer, for the purposes of the Company makingScheme Payments under this Scheme.
3.3.3 Such assignment or transfer shall only take effect for the purposes of the Scheme when the Scheme Supervisors givenotice to the Scheme Creditor and the assignee or transferee that they have recognised the assignment or transfer. Such anotice shall be given promptly by the Scheme Supervisors in the case of an assignment or transfer falling within clause 3.3.2.
3.3.4 Any assignee or transferee of a Scheme Liability or Ascertained Scheme Claim so recognised by the SchemeSupervisors shall be bound by the terms of the Scheme and shall be considered a Scheme Creditor for the purposes of theScheme, in place of the assignor or transferor.
3.3.5 Recognition of the assignment or transfer of a Scheme Liability by the Scheme Supervisors does not constituteacceptance by the Scheme Supervisors of the validity or amount of any Scheme Liability and shall have no such consequenceunder the Scheme.
3.3.6 Scheme Creditors may disclose to any of their officers, directors, employees, professional advisers, auditors andAffiliates and their Affiliates may disclose to any of their officers, directors, employees, professional advisers and auditorsany information which that Scheme Creditor has acquired under or in connection with the Scheme or otherwise in relation tothe Company as such Scheme Creditor considers appropriate if any person to whom such information is given undertakes tokeep such information confidential and agrees not to disclose to anyone (except that there shall be no requirement to obtainsuch undertaking if the recipient is subject to professional obligations to maintain the confidentiality of the information).
3.3.7 Scheme Creditors may disclose to (or through) any person with whom it may enter or has entered into, any kind oftransfer, assignment, participation or other agreement relating to a Scheme Liability or Ascertained Scheme Claim anyinformation which that Scheme Creditor has acquired under or in connection with the Scheme or otherwise in relation to theCompany provided such person to whom the information is to be given undertakes to keep such information confidential andagrees not to disclose it to anyone except to the extent such disclosure is:(a) to such professional advisers as the Scheme Creditor considers appropriate and who (save in the case of legal advisers
and auditors provided that it is made clear to them that such matters are confidential) have agreed to be bound byclause 3.3.7;
(b) to HM Revenue & Customs or any other governmental, public or official body for taxation purposes;(c) required to be disclosed by law, regulation or any court, governmental or competent regulatory authority;(d) in relation to matters that are already in the public domain; or(e) in relation to information known by such person (other than as a result of a breach of this provision).
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3.4 Notice of Effective DateNot more than two weeks after the Effective Date, the Company shall give notice that the Scheme has become effective andof the Bar Date, in the following ways:(a) by an appropriate posting on the Scheme Website;(b) by notice through the Clearing Systems;(c) by notice to each person who the Company believes may be a Scheme Creditor or, if they have previously been sent a
letter by the Company inviting them to do so, has registered with the Company to receive correspondence inconnection with the Scheme; and
(d) by notice in the Scheme Publications, including an invitation to Scheme Creditors to request a Claim Form.
3.5 Claim Forms3.5.1 The notice in clause 3.4, shall invite Scheme Creditors to enter the details of their Scheme Liabilities on an ElectronicClaim Form to be found at the Scheme Portal. A Scheme Creditor may also request a Paper Claim Form from the SchemeSupervisors who will send a copy of the Paper Claim Form to the Scheme Creditor as soon as is reasonably practicable afterreceipt of the request.
3.5.2 Each Scheme Creditor notified shall be invited to set out the details of their Scheme Liabilities by completing anElectronic Claim Form or a Paper Claim Form.
3.5.3 Electronic Claim Forms must be finalised and submitted through the Scheme Portal prior to the Bar Date. Paper ClaimForms must be sent to the Scheme Supervisors to arrive on or before the Bar Date.
3.5.4 The Electronic Claim Form and the Paper Claim Form should be completed in accordance with their respectiveinstructions and should include:(a) the identity of the Submitted Scheme Claimant;(b) a description of the nature of each Submitted Scheme Claim and how it arose;(c) the value of the Submitted Scheme Claim;(d) the legal basis of the Liability of the Company; and(e) any other facts which would assist the Scheme Supervisors in considering the Submitted Scheme Claim.
3.5.5 Without prejudice to the power of the Scheme Supervisors to request further information, Scheme Creditors shallprovide to the Scheme Supervisors such supporting evidence as they consider sufficient to justify their Submitted SchemeClaim.
3.5.6 Submitted Scheme Claimants shall also submit to the Scheme Supervisors on request such additional information as isreasonably required for the Company to make claims against third parties.
3.5.7 Submitted Scheme Claimants may submit to the Scheme Supervisors a revised Paper Claim Form and/or ElectronicClaim Form and/or revised information in respect of a Submitted Scheme Claim, together with any relevant supportingdocumentation, at any time up to and including the Bar Date.
3.5.8 Subject to clause 3.7.4, after the Bar Date, Scheme Creditors are not entitled to make or revise a Submitted SchemeClaim or provide further information (unless required to do so in accordance with the Scheme).
3.6 Requirement to submit Claim FormSubject to clause 3.7.2 in order to be entitled to any Scheme Payment, Scheme Creditors must, on or prior to the Bar Date,submit a Claim Form. No payments will be made in respect of Scheme Liabilities that are not submitted as SubmittedScheme Claims.
3.7 Determination of Submitted Scheme Claims
3.7.1 The Scheme Supervisors shall examine each Claim Form returned to them in accordance with clause 3.6. Suchexamination shall include (without limitation) consideration of whether:(a) details of Scheme Liabilities are adequately supported by any documentation submitted with the Claim Form;(b) details of the quantum of the Scheme Liabilities are sufficient and the basis of calculation is reasonable and has been
accurately applied; and
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(c) there is any set-off to which clause 2.6 does or may apply.
3.7.2 Notwithstanding the other provisions of clause 3, with respect to Scheme Liabilities arising out of or in connection witha Finance Document, the amounts set out in Schedule 4 (if there is any amount set out against a Scheme Creditor s name)shall, as at the Effective Date, automatically comprise the relevant Scheme Creditors Ascertained Scheme Claim. TheScheme Supervisors and each Scheme Creditor agree that the Scheme Creditor s Adjusted Claim shall be determined inaccordance with the terms of the WFSL Scheme. Following the determination of a Scheme Creditor s Adjusted Claim underthe WFSL Scheme, the agreed or resolved Adjusted Claim shall be added to that Scheme Creditor s Ascertained SchemeClaim. If a Scheme Creditor s Adjusted Claim is not being determined under the WFSL Scheme, then, by no later than 25Business Days after the Effective Date, the Scheme Supervisors shall advise each such Scheme Creditor (or any agentappointed by the Scheme Creditor whether appointed pursuant to an Agency Arrangement or otherwise) of its proposedAdjusted Claim. On receipt of the proposed Adjusted Claim, the Scheme Creditor (or such agent) shall have 25 BusinessDays to agree the value of the Adjusted Claim with the Scheme Supervisors. If no agreement can be reached within that 25Business Day period, the part of the Adjusted Claim that is not agreed shall be deemed to be a Disputed Scheme Claim to beresolved in accordance with clause 3.8. On determination of an Adjusted Claim by agreement pursuant to this clause 3.7.2and/or resolution pursuant to clause 3.8, such Adjusted Claim (as agreed or resolved as applicable) shall be added to theScheme Creditor s Ascertained Scheme Claim. Subject to the Settlement Agreement, nothing in this Scheme, in particular inthis clause or Schedule 4, shall (i) prevent the relevant Scheme Creditors making any other Submitted Scheme Claims arisingout of or in connection with either the Facilities Agreements, the Note Agreements, the Hedge Agreements or otherwise or(ii) constitute an admission as to the basis upon which an Ascertained Scheme Claim or any other claim has been or shouldbe calculated.
3.7.3 Up to the Bar Date, the Scheme Supervisors may give notice to a Submitted Scheme Claimant specifying furtherinformation or evidence they reasonably require to assist them in agreeing its Submitted Scheme Claim.
3.7.4 After the Bar Date, if the Scheme Supervisors do not agree with the Submitted Scheme Claim, or do not consider thesupporting information to be adequate, they shall notify the Submitted Scheme Claimant of that fact and the reasons, as soonas reasonably practicable (taking into account the volume of Submitted Scheme Claims received), and shall request anyfurther information or evidence that would assist them in deciding upon the Submitted Scheme Claim.
3.7.5 The Submitted Scheme Claimant shall respond within such reasonable time limit as the Scheme Supervisors mayspecify and shall similarly respond to any subsequent requests for information from the Scheme Supervisors.
3.7.6 If the Scheme Supervisors agree with the Submitted Scheme Claim, or agree with the Scheme Creditor a value forwhich the Submitted Scheme Claim should be admitted as an Ascertained Scheme Claim, clause 3.7.7 shall apply. If theScheme Supervisors do not agree with the Submitted Scheme Claim, clause 3.7.8 shall apply.
3.7.7 If the Scheme Supervisors agree with the Submitted Scheme Claim, they shall notify the Submitted Scheme Claimantof their agreement, in writing, as soon as reasonably practicable following that determination. The Submitted Scheme Claimwill become an Ascertained Scheme Claim on the date the notice is sent.
3.7.8 If the Submitted Scheme Claim is not agreed by the Scheme Supervisors within six months of the Bar Date, (or at suchearlier time as the Scheme Supervisors shall determine or such later time to which the Scheme Supervisors and the SubmittedScheme Claimant shall both agree or acquiesce) such part (if any) of the Submitted Scheme Claim as is not agreed shallbecome a Disputed Scheme Claim. The part (if any) of the Submitted Scheme Claim that is agreed shall be added to theScheme Creditor s Ascertained Scheme Claim if that Scheme Creditor already has such a claim otherwise it will constitutethat Scheme Creditor s Ascertained Scheme Claim (without prejudice to the outcome of the dispute regarding the disputedportion).
3.7.9 Where a Submitted Scheme Claim (or part thereof) becomes a Disputed Scheme Claim, the Scheme Supervisors shallforthwith notify the Submitted Scheme Claimant, in writing, that the whole or part of its Submitted Scheme Claim hasbecome a Disputed Scheme Claim including brief reasons as to why they have not agreed the whole or part of the SubmittedScheme Claimant s Submitted Scheme Claim.
3.8 Resolution of Disputed Scheme Claims3.8.1 A Submitted Scheme Claimant who receives notice that the whole or part of his Submitted Scheme Claim has become aDisputed Scheme Claim, shall be entitled within 21 days of receipt of such notice to give notice to the Scheme Supervisorsthat it is appealing the rejection of its Disputed Scheme Claim and seek resolution of the existence or proper value of itsSubmitted Scheme Claim by means of proceedings issued in the Companies Court of the Chancery Division of the Court as ifthe Disputed Scheme Claim were an appeal of an administrator s decision under rule 2.78 of the Insolvency Rules.
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3.8.2 If a final judgment is given against the Company in proceedings begun under clause 3.8.1 then, on the date suchjudgment becomes incapable of further appeal, the Disputed Scheme Claim will become an Ascertained Scheme Claim forthe amount of the judgment.
3.8.3 If a final judgment is given against the Submitted Scheme Claimant in proceedings begun under clause 3.8.1 then, onthe date such judgment becomes incapable of further appeal, (i) the Disputed Scheme Claim will become an AscertainedScheme Claim at the value determined by the final judgment and shall be added to that Scheme Creditor s AscertainedScheme Claim if that Scheme Creditor already has such a claim otherwise it will constitute the Scheme Creditor sAscertained Scheme Claim or (ii) in the case of a judgment which values the Submitted Scheme Claim at zero, shall give noentitlement to a Scheme Payment under the Scheme in respect of the Disputed Claim.
3.8.4 If any legal or other costs are awarded against the Company in respect of proceedings begun under clause 3.8.1, suchamounts shall be payable by the Company to the relevant Scheme Creditor in full. If any legal or other costs are awarded inthe Company s favour in respect of proceedings begun under clause 3.8.1, such amounts shall be payable to the Company infull.
3.8.5 If the Submitted Scheme Creditor does not give notice under clause 3.8.1 and begin such proceedings within 21 days ofreceipt of the Scheme Supervisors notice, then its Disputed Scheme Claim shall become an Ascertained Scheme Claim at thevalue accepted by the Scheme Supervisor or, if rejected entirely by the Scheme Supervisors, shall give no entitlement to aScheme Payment under the Scheme.
3.8.6 Nothing in this clause 3.8 shall prevent the Scheme Supervisor from agreeing in writing with the Scheme Creditor thevalue of the Scheme Liability to which its Unascertained Scheme Claim relates, in which case the Unascertained SchemeClaim shall become an Ascertained Scheme Claim for the amount agreed.
3.9 Variation of time limitsWhere the Scheme Supervisors are satisfied that, due to exceptional circumstances outside the control of a Submitted SchemeClaimant, that Submitted Scheme Claimant has failed to comply with any time limit, other than the Bar Date, the SchemeSupervisors may, in their absolute discretion, extend that time limit for that Submitted Scheme Claimant by notice to theSubmitted Scheme Claimant.
3.10 Pension Creditor s Scheme Liabilities3.10.1 The Pension Creditor s Scheme Liabilities shall be determined in accordance with the terms of the PensionCompromise. On the final determination of the Pension Creditor s Scheme Liabilities in accordance with the terms of thePension Compromise, the amount so determined shall be the Pension Creditor s Ascertained Scheme Claim.
3.10.2 Until the Pension Creditor s Scheme Liabilities become an Ascertained Scheme Claim in accordance with clause3.10.1, such Pension Creditor s Scheme Liabilities shall be estimated by the Scheme Supervisors as if they were the PensionCreditor s Unascertained Scheme Claim and such estimated amount shall be deemed to be the Pension Creditor sUnascertained Scheme Claim.
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SECTION 4DISTRIBUTIONS
4.1 Scheme Assets4.1.1 Subject to the terms of the Scheme, all assets of the Company shall be available to pay Scheme Liabilities.
4.1.2 Subject to a Scheme Reversion, the Company may use any of its assets to pay Excluded Liabilities in full.
4.1.3 Liabilities which are neither Scheme Liabilities nor Excluded Liabilities shall not be paid out of the assets of theCompany without the consent of the Scheme Supervisors.
4.2 The Company s Forecast4.2.1 Within a reasonable time of the Effective Date, the Company shall deliver to the Scheme Supervisors and the CreditorsCommittee a draft Company s Forecast for the period between the Effective Date and the Expected Company Dissolutionprepared in accordance with clauses 4.2.2 and 4.2.3. The draft shall be delivered to the Scheme Supervisors and theCreditors Committee in electronic format and hard copy.
4.2.2 Subject to clause 4.2.3, the Company s Forecast shall set out the Company s estimate of the total cash costs that theCompany will have to pay and any anticipated cash receipts, in the case of the first Company s Forecast delivered after theEffective Date, for the period from the Effective Date until the Expected Company Dissolution and otherwise for the periodfrom the last Quarter Date until the Expected Company Dissolution. Such Company s Forecast shall include, withoutlimitation, a reasonable provision for the costs associated with the winding-up or dissolution of the Company.
4.2.3 The Company s Forecast shall not include an estimate in respect of:(a) any payments to be made to Scheme Creditors under the Scheme;(b) any cash costs in connection with the Outwards Claims Litigation (including a provision for adverse costs awards); and(c) any cash costs in connection with the Scheme Supervisors remuneration, expenses and disbursements (including,
without limitation the cost of any legal and/or financial advisers engaged by the Scheme Supervisors or the Companyon behalf of the Scheme Supervisors).
4.2.4 Within ten Business Days of receiving a draft Company s Forecast the Scheme Supervisors, in consultation with theCreditors Committee, must promptly notify the Company whether they accept that draft.
4.2.5 If a draft Company s Forecast is not accepted pursuant to clause 4.2.4 above, the Scheme Supervisors, the CreditorsCommittee and the Company must consult, in good faith, and use all reasonable endeavours to agree changes to the draftsuch that it can be accepted pursuant to clause 4.2.4 above as soon as practicable and, in any event, within five Business Daysof the Scheme Supervisors notifying the Company that the draft Company s Forecast is not accepted.
4.2.6 If after the five Business Days period referred to in clause 4.2.5, the Scheme Supervisors, the Creditors Committee andthe Company remain unable to agree the changes to the relevant draft Company s Forecast in accordance with clause 4.2.5,the Scheme Supervisors may, after consultation with the Creditors Committee, call for any one or more of the directors ofthe Company to resign. Within five Business Days of such a request (or such longer period as it takes to find and appointvalidly a replacement director) each director so called upon shall resign and the Scheme Supervisors, again after consultationwith the Creditors Committee, shall appoint new members to the Board. Following the appointment of the new members tothe Board, the Scheme Supervisors and the Creditors Committee shall attempt to agree the changes to the draft Company sForecast in accordance with clause 4.2.5.
4.2.7 The Company shall deliver a copy of each Company s Forecast to the Creditors Committee within five Business Daysof it being accepted pursuant to this clause.
4.2.8 The Company shall update and/or prepare a new Company s Forecast at the request of the Scheme Supervisors, actingin consultation with the Creditor s Committee. The Company shall provide a new draft Company s Forecast to the CreditorsCommittee and the Scheme Supervisors within a reasonable time of such request. The provisions of clauses 4.2.1 to 4.2.7shall apply, mutatis mutandis, to such new draft Company s Forecast.
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4.3 Net Distributable Assets4.3.1 By no later than five Business Days after each Quarter Date, the Company shall provide a Cash Report to the SchemeSupervisors, which comprises:(a) a report setting out the Company s total cash, being the aggregate of its cleared cash balances net of any and all
overdrafts and excluding any monies held in trust accounts held by the Company as at the Quarter Date;(b) either a revised Company s Forecast from the Quarter Date to Expected Company Dissolution or confirmation that the
Company s Forecast calculated in accordance with clause 4.2 does not require updating or amending.
4.3.2 Within ten Business Days of receipt of the Cash Report, the Scheme Supervisors will consider:(a) the Cash Report;(b) the Company s Forecast;(c) the Scheme Supervisors estimate of the future costs of the Outwards Claims Litigation including any provision for
adverse costs awards; and(d) the Scheme Supervisors estimate of the future costs of the Scheme Supervisors remuneration, expenses and
disbursements (including the cost of any legal and/or financial advisers engaged by the Company or the SchemeSupervisors who are providing advice to the Scheme Supervisors),
to assess, in consultation with the Creditors Committee, whether to make a distribution under the Scheme to SchemeCreditors in accordance with clauses 4.4 and 4.5 and the cash available for such distribution.
4.3.3 If the Scheme Supervisors conclude in their sole discretion, but in consultation with the Creditors Committee, that theywish the Company to make a distribution to Scheme Creditors in accordance with clauses 4.4 and 4.5 then such clauses shallapply. In those circumstances, the Scheme Supervisors shall notify the Creditors Committee and the Company of theirdecision, including stating the amount of Net Distributable Assets as at the relevant Quarter Date.
4.4 Calculation of Payment Percentage4.4.1 The Scheme Supervisors shall aggregate the Net Distributable Assets available at the Quarter Date as determined inaccordance with clause 4.3.2 with all amounts of Net Distributable Assets determined previously but avoiding any double-counting. This aggregated amount shall be the Cumulative Net Distributable Assets at the latest Quarter Date.
4.4.2 Within a reasonable time of concluding that a distribution ought to be made in accordance with clause 4.3.3, theScheme Supervisors, in accordance with clause 4.4.3 below, may set the Payment Percentage in respect of payments out ofthe Net Distributable Assets.
4.4.3 At such time, the Scheme Supervisors shall determine the Payment Percentage, being the proportion of eachAscertained Scheme Claim which they consider can be paid to Scheme Creditors, taking into account the Cumulative NetDistributable Assets and the value of Ascertained Scheme Claims (taking into account clause 4.4.5).
4.4.4 The Scheme Supervisors shall not set the Payment Percentage at any level unless they consider, on the basis of theinformation and advice referred to at clause 4.4.7 below, that the Cumulative Net Distributable Assets would be sufficient forthe Company to make payments at that level to all Scheme Creditors having Ascertained Scheme Claims (taking into accountclause 4.4.5).
4.4.5 For the purpose of calculating the Payment Percentage only, the Scheme Supervisors shall treat all UnascertainedScheme Claims as though they were Ascertained Scheme Claims.
4.4.6 If, having set a Payment Percentage, the Scheme Supervisors consider that the Cumulative Net Distributable Assets arenot sufficient for the Company to satisfy the entitlements of each Scheme Creditor as contemplated in clause 4.4.3 without areduction of the Payment Percentage, the Scheme Supervisors shall reduce the Payment Percentage to such level as theyconsider appropriate.
4.4.7 Subject to clause 6.4.2(i), for the purpose of determining the Payment Percentage, the Scheme Supervisors shall obtainand consider such financial information or advice as they need in order to make an informed decision.
4.5 Scheme Payments4.5.1 Following the calculation of the Payment Percentage, the Scheme Supervisors shall determine the Scheme Payment foreach Scheme Creditor with an Ascertained Scheme Claim. Each Scheme Creditor with an Ascertained Scheme Claim shall be
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entitled to be paid a Scheme Payment (and the Company shall pay) an amount equal to the value of that Scheme Payment,calculated as:
(A x B) (C + D)
where:(a) A is the value of that Scheme Creditor s Ascertained Scheme Claim;(b) B is the Payment Percentage;(c) C is (i) the amount deemed to have been paid in respect of Proceedings, in accordance with clause 2.4.1 and not already
paid directly to the Company by the Scheme Creditor outside of the Scheme Payments and/or (ii) the amount of anylegal or other costs awarded against the Scheme Creditor in respect of proceedings begun under clause 3.8.1 (to theextent they remain unpaid by the Scheme Creditor); and
(d) D is the amount of any Scheme Payments previously paid to the Scheme Creditor.
4.5.2 Following the calculation of the Payment Percentage and the level of Scheme Payment to be made in respect of eachAscertained Scheme Claim, the Scheme Supervisors shall notify the Company of the Scheme Payments required to be paidand the amounts required to be paid into the Unascertained Scheme Trust Fund under clause 4.6.
4.5.3 Where Scheme Payments are due, the Company shall make those Scheme Payments, within five Business Daysfollowing notification from the Scheme Supervisors. However, the Company shall not be obliged to make a payment to aScheme Creditor of less than £100, unless and until there is, in the reasonable opinion of the Scheme Supervisors, noprospect of any future Scheme Payments. Any such amounts shall be added to the Unascertained Payments Trust Fundearmarked for such Scheme Creditor and shall be paid to such Scheme Creditor when it receives its next Scheme Payment.
4.5.4 If there is an arithmetical error in respect of any Scheme Payment, such error may be taken into account and correctedby the Scheme Supervisors through the necessary reduction or increase in the amount of the relevant Scheme Creditor ssubsequent Scheme Payment(s).
4.5.5 If an incorrect amount is paid to a Scheme Creditor under this clause then:(a) if the amount paid is lower than the amount that the Scheme Creditor is properly entitled to have received, the Scheme
Supervisors shall direct the Company to pay the balance to the Scheme Creditor as soon as reasonably practicable afterthe error is noticed by the Company or the Company is notified of such error; or
(b) if the amount paid is higher than the amount that the Scheme Creditor is properly entitled to have received, then theoverpayment shall be deducted from the next Scheme Payment (and, if necessary subsequent Scheme Payments) to bemade to that Scheme Creditor.
4.6 Reserving for Unascertained Scheme Claims4.6.1 Where, in calculating the Payment Percentage under clause 4.2, the Scheme Supervisors have taken account of thevalue of Unascertained Scheme Claims, the Company shall create the Unascertained Payments Trust Fund, of all amountswhich would have been paid as Scheme Payments in respect of such Unascertained Scheme Claims, if they had beenAscertained Scheme Claims at that time.
4.6.2 The Unascertained Payment Trust Fund shall be held on trust by the Company for the benefit of Scheme Creditors inrespect of their Unascertained Scheme Claims.
4.6.3 If any Unascertained Scheme Claim subsequently becomes an Ascertained Scheme Claim, the Scheme Supervisorsshall, as soon as reasonably practicable, calculate as a Scheme Payment for the relevant Scheme Creditor, such amount as ifits Ascertained Scheme Claim had been an Ascertained Scheme Claim as at each Quarter Date. The Scheme Supervisors shallnotify the Company of the relevant Scheme Payment required to be paid to the Scheme Creditor from the UnascertainedPayments Trust Fund. If the amount reserved in the Unascertained Payments Trust Fund in respect of an UnascertainedScheme Claim exceeds the amount of the relevant Ascertained Scheme Claim, the surplus shall be released from theUnascertained Payments Trust Fund into the general assets of the Company.
4.6.4 If any Unascertained Scheme Claim is rejected under clause 3.7 and does not become a Disputed Scheme Claim, thenany amount reserved in the Unascertained Payments Trust Fund in respect of that Unascertained Scheme Claim (includingany amount reserved in respect of costs) shall be released from the Unascertained Payments Trust Fund into the generalassets of the Company.
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4.7 Currency of PaymentIf the Company is requested by a Scheme Creditor to make a Scheme Payment in a currency other than Sterling, it may do so,but the exchange rate risk shall be borne by the Scheme Creditor. The exchange rate to be used for any such conversion shallbe at the Company s paying bank s spot rate. Any conversion fees shall be borne by the Company.
4.8 Method of Payment4.8.1 All Scheme Payments by the Company to a Scheme Creditor shall be made, at the option of the Company, either:(a) by cheque in favour of the Scheme Creditor, or such other person as the Scheme Creditor requests in writing, sent by
Post to that person;(b) where the Scheme Creditor has designated a bank account in writing, by electronic transfer to that bank account;(c) to the Scheme Creditor s Representative; or(d) by any other appropriate method determined by the Scheme Supervisors or the Company and agreed by the Scheme
Creditor.
4.8.2 The Scheme Creditor shall bear all risk of payment under clause 4.8.1 and, at the discretion of the Company, may berequired to bear any costs incurred. No Scheme Creditor shall be entitled to any interest on its Ascertained Scheme Claim dueto a delay in payment or technical difficulties with payment.
4.8.3 A Scheme Payment shall be deemed for all purposes to have been made on the date that the cheque is posted orelectronic transfer instruction given.
4.8.4 The Scheme Creditors acknowledge that the Scheme Supervisors and not the Board are responsible for determining thevalue of the Scheme Payments payable to Scheme Creditors in accordance with the terms of the Scheme.
4.9 Unclaimed PaymentsIf a cheque sent under clause 4.8.1(a) or (c) has not been presented for payment within four months of the date of issue, theCompany shall notify the Scheme Supervisors and the Scheme Supervisors will make reasonable efforts to bring this to theattention of the Scheme Creditor, and may, at their discretion request that the Company cancel and reissue the cheque, butotherwise the Scheme Creditor will be deemed after six months from the date of issue to have been paid the amountrepresented by the un-presented cheque.
4.10 Notice of PaymentThe Scheme Supervisors shall notify Scheme Creditors at each time they set or increase the Payment Percentage. TheScheme Supervisors will determine, in consultation with the Creditors Committee, the relevant form, terms and frequency ofadditional notifications required by Scheme Creditors of Scheme Payments and Payment Percentages.
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SECTION 5COVENANTS AND SCHEME REVERSION
5.1 Covenants5.1.1 The Company gives to the Scheme Creditors the covenants set out in Schedule 9.
5.1.2 Within five Business Days of each Quarter Date the Company must deliver to the Scheme Supervisors a CovenantCertificate stating whether any of the covenants listed in Schedule 9 have been breached since the previous Quarter Date orare likely to be breached in the period prior to the next Quarter Date.
5.1.3 If the Covenant Certificate states that a covenant listed in Schedule 9 has been breached since the previous Quarter Dateor is likely to be breached in the period prior to the next Quarter Date or the Company fails to deliver a Covenant Certificateand the Scheme Supervisors conclude, after consultation with the Creditors Committee, that such breach, potential breachor failure to deliver a Covenant Certificate is capable of being remedied then the provisions of clause 5.1.4 shall apply. If,however, the Scheme Supervisors, after consultation with the Creditors Committee, conclude that the breach, potentialbreach or failure to deliver a Covenant Certificate cannot be remedied then the provisions of clause 5.1.5 apply.
5.1.4 The Scheme Supervisors shall prepare, in consultation with the Creditors Committee, a Remedy Proposal setting outthe measures to remedy or prevent the breach or likely breach or failure to deliver a Covenant Certificate and shall attempt toagree such Remedy Proposal with the Company. If after a reasonable time, the Scheme Supervisors and the Company areunable to agree the relevant Remedy Proposal in accordance with this clause 5.1.4, the Scheme Supervisors may, afterconsultation with the Creditors Committee, call for one or more of the directors of the Company to resign. Within fiveBusiness Days of such a request (or such longer period as it takes to find and appoint validly a replacement director) eachdirector so called upon shall resign and the Scheme Supervisors, again after consultation with the Creditors Committee, shallappoint new members to the Board. Following the appointment of the new members of the Board, the Scheme Supervisorsshall attempt to agree a Remedy Proposal in accordance with this clause 5.1.4.
5.1.5 The Scheme Supervisors shall discuss and agree with the Creditors Committee what action should be taken in relationto the relevant breach of covenant or failure to deliver a Covenant Certificate. Such action may (without limitation) include:(a) waiving the breach or failure to deliver a Covenant Certificate;(b) requesting that one or more members of the Board resign, in which circumstances, within five Business Days of such a
request (or such longer period as it takes to find and appoint validly a replacement director) each member of the Boardso requested shall resign and the Scheme Supervisors, after consultation with the Creditors Committee, shall appointnew members to the Board; or
(c) convening a meeting of the Scheme Creditors at which the Scheme Creditors may resolve to call for one or moremembers of the Board to resign. If such resolution is passed, each member of the Board so requested shall resign withinfive Business Days of such a request (or such longer period as it takes to find and appoint validly a replacementdirector) and the Scheme Supervisors, after consultation with the Creditors Committee, shall appoint new members tothe Board.
5.2 Scheme Reversion Decision Event5.2.1 Each of the following shall be a Scheme Reversion Decision Event:(a) Scheme Reversion (as defined in the WFSL Scheme) of the WFSL Scheme; and(b) an Insolvency Event occurring in respect of the Company on or after the Bar Date.
5.2.2 On the occurrence of a Scheme Reversion Decision Event, the Scheme Supervisors shall forthwith convene a meetingof Scheme Creditors in accordance with clause 8.1.2. Such meeting or any adjournment of that meeting may then resolveeither:(a) to take no action in respect of the Scheme Reversion Decision Event;(b) to agree a proposal by the Company or recommend to the Company such measures as the meeting considers
appropriate for the Scheme Reversion Decision Event to be remedied and, if a recommendation is made, for themeeting to be adjourned for up to ten Business Days to allow the Company to decide whether to take the recommendedmeasures and the Company shall report its decision to the Adjourned Meeting; or
(c) that Scheme Reversion shall occur on the date of the resolution.
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5.2.3 If at a meeting of Scheme Creditors convened in accordance with clause 5.2.2, a resolution in accordance with clauses5.2.2(a) or 5.2.2(b) is not passed in accordance with clause 8.3.2 and the meeting is not adjourned, a Scheme Reversion shalloccur.
5.3 Scheme Reversion5.3.1 With effect from a Scheme Reversion:(a) Scheme Liabilities shall be released, other than those Scheme Liabilities which have become Ascertained Scheme
Claims or remain Unascertained Scheme Claims;(b) the unpaid part of any Ascertained Scheme Claims shall become enforceable debts of the Company, free of the
restrictions in clauses 2.2, 2.3 and 2.5;(c) the Unascertained Payment Trust Fund shall remain available to pay Unascertained Scheme Claims in accordance with
clause 4.6; and(d) save for the provisions in clauses 1.1, 2.9, 5.3, 5.4, 6.6, 6.7, 7.7, 7.8, 7.9, 7.10, 10.1 and 10.6 all terms and conditions
under the Scheme shall cease to apply.
5.4 Determination and payment of Unascertained Scheme Claims on a Scheme Reversion5.4.1 With effect from a Scheme Reversion, on the determination of the value of a Scheme Creditor s Unascertained SchemeClaim (the Determined Value) by judgment, agreement or otherwise, the Scheme Creditor shall (subject to any rights of setoff) be entitled to be paid a Catch-up Payment from the Unascertained Payment Trust Fund calculated in accordance withclause 5.4.2.
5.4.2 A Catch-Up Payment is an amount equal to the aggregate value of all Scheme Payments that a Scheme Creditor wouldhave been entitled to receive and would have received prior to the Scheme Reversion if it had an Ascertained Scheme Claimof an amount equal to its Determined Value at the time Scheme Payments had been made in respect of Ascertained SchemeClaims prior to the Scheme Reversion.
5.4.3 A Scheme Creditor whose Unascertained Scheme Claim has been determined in accordance with clause 5.4.1 and hasreceived a Catch-Up Payment, shall have an enforceable debt of the Company in respect of the unpaid part of the DeterminedValue of its claim free from the restrictions in clauses 2.2, 2.3 and 2.5.
5.4.4 If the amount reserved in the Unascertained Payments Trust Fund in respect of an Unascertained Scheme Claimexceeds the Catch-Up Payment paid in respect of that Unascertained Scheme Claim in accordance with clause 5.4.2, thesurplus shall be released from the Unascertained Payments Trust Fund into the general assets of the Company.
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SECTION 6THE SCHEME SUPERVISORS
6.1 The Scheme Supervisors6.1.1 Any Scheme Supervisor must be a licensed insolvency practitioner within the meaning of section 390 of the InsolvencyAct and duly qualified in the reasonable opinion of the Company to discharge the function of a Scheme Supervisor under theScheme. Where more than one person has been appointed as a Scheme Supervisor, they may exercise and perform thepowers, rights, duties and functions of the Scheme Supervisors under the Scheme jointly or severally.
6.1.2 A Scheme Supervisor shall not take office until he or his firm has entered into the Scheme Supervisors Agreement,which shall include provisions as to his remuneration and expenses, and has contracted to be bound by the terms of theScheme to the extent that they apply to him as Scheme Supervisor. The Company acknowledges and agrees that the SchemeSupervisors are permitted to exercise all the powers given to them and rely upon all the provisions relevant to them under theScheme.
6.1.3 The Scheme Supervisors shall initially be Simon Appell, Alastair Beveridge and Stuart MacKellar of Zolfo Cooper LLPof 10 Fleet Place, London, EC4M 7RB. They have given and not withdrawn their consent to the Company to act as SchemeSupervisors from the Effective Date and have contracted with the Company pursuant to the Scheme Supervisors Agreementto be bound by the terms of the Scheme to the extent such terms apply to the Scheme Supervisors. The Company with theagreement of the Creditors Committee shall have the power to appoint any successors.
6.1.4 In exercising their powers and carrying out their duties under the Scheme, the Scheme Supervisors shall act as agents ofthe Company.
6.1.5 Any function or power conferred on the Company or its officers, whether by statute or by its memorandum or articles ofassociation, which could be exercised in such a way as to interfere with the exercise by the Scheme Supervisors of theirfunctions and powers in relation to the Company or the Scheme, shall not be so exercised except with the consent of theScheme Supervisors, which may be given either generally or in relation to particular cases. Any such consent given by theScheme Supervisors may be withdrawn. Provided that nothing in this clause shall relieve the Board from its duties inaccordance with the Act or otherwise.
6.2 Vacation of office6.2.1 A Scheme Supervisor shall vacate office if he:(a) becomes bankrupt;(b) is disqualified from acting as a director under CDDA;(c) is admitted to hospital because of mental disorder or is the subject of an order concerning his mental disorder made by
a Court having jurisdiction in England or elsewhere in such matters, such that he is, in the opinion of the CreditorsCommittee, unable to carry out his duties as Scheme Supervisor;
(d) is convicted of an indictable offence or be convicted of any offence by a court having jurisdiction in any other countrywhere that offence, if committed in England and Wales, would have been an indictable offence under English law;
(e) resigns his office by giving 60 days notice in writing to the Company and the Creditors Committee or such shorterperiod of notice as may be agreed by the Company and the Creditors Committee or resigns his office with immediateeffect by giving notice in writing to the Company and the Creditors Committee if he considers that he should forprofessional regulatory reasons or in the event of non-payment of his fees when due and such fees have been approvedby the Creditors Committee, a meeting of Scheme Creditors or pursuant to a final order of the Court in each casepursuant to clause 6.9; or
(f) is removed by the Creditors Committee in accordance with clause 7.4.4(b).
6.3 Role of the Scheme Supervisors6.3.1 The Scheme Supervisors shall discharge the duties and responsibilities imposed upon them by the Scheme.
6.3.2 The Scheme Supervisors shall act in good faith with reasonable skill and care in the interests of the Scheme Creditors asa whole and shall exercise their powers, duties and functions under the Scheme with a view to ensuring that the Scheme isimplemented in accordance with its terms.
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6.3.3 Without prejudice to the generality of clause 6.3.1, the Scheme Supervisors shall in addition:(a) monitor on a basis agreed with the Creditors Committee the Company s compliance with the terms of the Scheme;(b) provide a Scheme Supervisors Report to the Creditors Committee on the conduct of the affairs of the Company in
relation to the Scheme and the operation of the Scheme, the conduct of the Outward Claims Litigation and the extentand details of the Submitted Scheme Claims and Disputed Scheme Claims at the end of each period of every threemonths from the Effective Date or as otherwise agreed with the Creditors Committee;
(c) attend meetings of the Creditors Committee and meetings of the Scheme Creditors convened in accordance with theScheme, for any purpose in relation to the operation of the Scheme (and subject always to clauses 7.3.5 and 8.1.4);
(d) so far as they are able provide the Creditors Committee with such information as it may from time to time reasonablyrequire in relation to matters of relevance to the Creditors Committee; and
(e) control, consider and conduct in consultation with the Creditors Committee, any Outwards Claims Litigation.
6.4 Powers of the Scheme Supervisors6.4.1 The Scheme Supervisors shall have all of the powers necessary or desirable to enable them to discharge their duties andresponsibilities under the Scheme (although it is acknowledged that the Scheme Supervisor cannot exercise any power thatwould result in their assuming control of the Company s affairs so as to supplant the Board);
6.4.2 Without prejudice to the generality of clause 6.4.1, the Scheme Supervisors shall be entitled:(a) to have access to such Company information or personnel as they may from time to time require on the affairs of the
Company that relate to the operation of the Scheme;(b) to delegate to or employ any person as they see fit for the carrying out of their powers, rights, duties and functions
under the Scheme;(c) on behalf of the Company, to negotiate and/or compromise Submitted Scheme Claims, in accordance with the
provisions of the Scheme;(d) to do all acts and to execute in the name and on behalf of the Company any deed, receipt or other document necessary
for or incidental to their role under the Scheme;(e) to request the Company to make any payment that is necessary for or incidental to the performance of the Scheme
Supervisors or the Company s functions;(f) to apply to Court for directions in relation to any particular matter arising in the course of the Scheme;(g) to liaise with the Creditors Committee and to attend Creditors Committee meetings if invited;(h) to convene a meeting of Scheme Creditors in accordance with clause 8.1.2, if appropriate;(i) to engage (or require the Company to engage) legal and financial advisers from time to time (provided that, without the
consent of the Creditors Committee, at any particular time, the Scheme Supervisors may engage a maximum of onelegal adviser in any jurisdiction in addition to the legal advisors engaged in respect of any Outward Claims Litigationand one financial adviser) as reasonably required, in order to advise and assist the Scheme Supervisors in connectionwith the conduct of their functions and powers under the Scheme;
(j) to receive Board papers, to attend meetings of the Board at their discretion and to address the Board (it is howeveracknowledged by the Company, the Creditors Committee and the Scheme Creditors that the Scheme Supervisors arenot expected to attend meetings of the Company s executive committee);
(k) to instruct the Company to make payments pursuant to the terms of the Scheme; and(l) to have all the power necessary or desirable to enable them to control and conduct the Outward Claims Litigation
including, without limitation, the power (in consultation with the Creditors Committee) to:(i) compromise and settle any proceedings in connection with the Outward Claims Litigation;(ii) engage experts;(iii) provide any indemnities to WFSL in accordance with any Litigation Protocol in connection with the Outwards
Claims Litigation;
(iv) commence and/or defend proceedings in the name of the Company; and(v) enter into or amend any Litigation Protocols or agreements.
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6.5 VacancyIf there are no Scheme Supervisors in office or only one Scheme Supervisor in office, the Company with the agreement of theCreditors Committee shall forthwith fill the vacancy.
6.6 Liability of Scheme Supervisors6.6.1 Except to the extent required by law, no Scheme Creditor shall be entitled to challenge the validity of any act done oromitted to be done in good faith and with due care by the Scheme Supervisors in accordance with and to implement theprovisions of the Scheme or the exercise by the Scheme Supervisors in good faith and with due care of any power conferredupon them for the purposes of the Scheme if exercised in accordance with and to implement the provisions of the Scheme.
6.6.2 A Scheme Supervisor shall not be liable for any loss resulting from any act he does or omits to do, unless any such lossis attributable to his own negligence, breach of statutory duty, breach of trust, fraud or dishonesty.
6.7 Indemnity6.7.1 The Scheme Supervisors shall be entitled to an indemnity out of the property of the Company against:(a) all Proceedings brought or made against them in respect of any act done or omitted to be done in relation to the
Company by them in good faith, without negligence, breach of duty, breach of trust, fraud or dishonesty in the courseof performing their duties and functions under the Scheme; and
(b) all costs, charges, expenses and liabilities properly incurred by each of them in the course of performing their dutiesand functions under the Scheme.
6.7.2 In addition to the general provisions of clause 6.7.1, the Scheme Supervisors shall be entitled to an indemnity out of theproperty of the Company:(a) against any liability incurred by them in defending any Proceedings, whether civil or criminal, in respect of any
negligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to the operation of the Scheme, where:(i) judgment is given in their favour; or(ii) where they are acquitted; and
(b) in connection with any application in any such Proceedings where relief is granted to them by a court from liability fornegligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to the operation of the Scheme.
6.8 InsuranceThe Company will, in consultation and as agreed with the Scheme Supervisors:(a) purchase and maintain for the Scheme Supervisors insurance from the date of their appointment against any liability for
which the Company would be obliged to indemnify them in accordance with clause 6.7; and(b) subject to clause 6.8(a), within seven Business Days of the first demand by the Scheme Supervisors, pay the costs
incurred by a Scheme Supervisor in defending proceedings of the nature described in clause 6.7.1(a), provided thatsuch Scheme Supervisor gives the Company an undertaking to reimburse it (with interest) at the conclusion of thoseProceedings, where such Scheme Supervisor is not entitled to an indemnity under clause 6.7.
6.9 Remuneration and expenses of Scheme SupervisorsThe Scheme Supervisors shall be remunerated by the Company in respect of their role in the Scheme and all acts reasonablyincidental thereto and in accordance with the agreement referred to in clause 6.1.2. Such remuneration is to be approved bythe Creditors Committee and such approval shall not be unreasonably withheld. If approval cannot be obtained within areasonable period, the Scheme Supervisors may convene a meeting of the Scheme Creditors in accordance with clause 8.1.2to determine the level of the Scheme Supervisors costs, charges, expenses and liabilities. If approval cannot be obtained at ameeting of the Scheme Creditors, the Scheme Supervisors shall be permitted to apply, or cause the Company to apply, to theCourt for directions as if Rules 2.106 to 2.108 of the Insolvency Rules applied, mutatis mutandis, to the Scheme Supervisors.
6.10 Outwards Claims Litigation6.10.1 The Scheme Supervisors will manage and as appropriate conduct the Outward Claims Litigation on behalf of theCompany in accordance with any Litigation Protocol, consulting with the Creditors Committee in such manner as theCreditors Committee shall reasonably require and as shall not prejudice the Outwards Claims Litigation. The SchemeSupervisors shall not incur any costs or expenses in connection with the Outwards Claims Litigation without the priorconsent of the Creditors Committee (not to be unreasonably withheld) provided that this consent arrangement may be
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replaced by a litigation protocol agreed between the Scheme Supervisors and the Creditors Committee (in consultation withthe Company).
6.10.2 The Scheme Creditors acknowledge that the Scheme Supervisors (in consultation with the Creditors Committee) andnot the Board are responsible for the conduct of the Outwards Claims Litigation.
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SECTION 7CREDITORS COMMITTEE
7.1 Constitution of the Creditors Committee7.1.1 There shall be a Creditors Committee under the Scheme.
7.1.2 The Creditors Committee shall consist of not less than three nor more than seven persons unless the SchemeSupervisors in consultation with the Creditors Committee agree otherwise (but in any event any change cannot reduce theminimum number below three or increase the upper limit beyond seven).
7.1.3 The following creditors shall be the initial Committee Members:(a) The Royal Bank of Scotland plc;(b) Lloyds TSB Bank plc;(c) a Lender;(d) a Noteholder;(e) a Bondholder;(f) a Bondholder; and(g) a Shareholder who is a Scheme Creditor. And in addition this Committee Member shall be entitled to be accompanied
to Creditors Committee meetings by another Shareholder who is a Scheme Creditor. Such person to attend CreditorCommittee meetings as an observer.
7.1.4 The Pension Creditor and the Shareholder Observer each are appointed as a non-voting observer to the CreditorsCommittee for as long as it wishes to remain so and is entitled both to attend all meetings of the Creditors Committee andreceive all papers produced for and by the Creditors Committee. The Pension Creditor and the Shareholder Observer eachare entitled to receive all information, documents and notices at the same time (and to the same extent) as each CommitteeMember is entitled to receive such information, documents or notices. The Pension Creditor and the Shareholder Observereach agrees to be bound by any guide agreed in accordance with Clause 7.1.7.
7.1.5 At the initial meeting of the Creditors Committee, the members of the Creditors Committee shall elect by majorityvote a chairman of the Creditors Committee who shall have the deciding vote at any meeting of the Creditors Committee. Inthe absence of a majority the Scheme Supervisors shall convene a meeting of the Scheme Creditors to vote upon which of theCommittee Members shall be appointed as the chairman of the Creditors Committee.
7.1.6 If the chairman appointed pursuant to clause 7.1.5 or this clause 7.1.6 resigns as chairman or ceases to be a member ofthe Creditors Committee and there is an even number of Committee Members, the members of the Creditors Committeeshall elect by majority vote a replacement chairman of the Creditors Committee who shall have the deciding vote at anymeeting of the Creditors Committee. In the absence of a majority the Scheme Supervisors shall convene a meeting of theScheme Creditors to vote upon which of the Committee Members shall be appointed as the replacement chairman of theCreditors Committee.
7.1.7 If the Scheme Supervisors become concerned about a conflict of interest or potential conflict of interest in respect ofany Committee Member or observer to the Creditors Committee, they may propose to the Creditors Committee a conduct ofmeeting guide to address this issue in the context of the conduct of the Creditors Committee meetings. Such guide shalladdress how any conflicts of interest of any Committee Member or observers are to be resolved. Each Committee Membershall, acting reasonably and in good faith, attempt to agree such guide. If it does not prove possible to agree the guide withina reasonable time of it having been proposed, the Scheme Supervisors may apply to the Court for directions to resolve anyissues regarding the guide and/or such issue of conflict or potential conflict.
7.1.8 Subject to clauses 3.3.6, 3.3.7 and 7.1.9, the Committee Members each agrees to keep the Committee ConfidentialInformation completely and absolutely confidential.
7.1.9 Each of the Committee Members, the Pension Creditor and the Shareholder Observer agrees that it will not disclose orpermit any of the Committee Confidential Information to be disclosed to any person except to the extent such disclosure is:(a) to any of their any officers, directors, employees, auditors and Affiliates and their Affiliates may disclose to any of
their officers, directors, employees and auditors as the Committee Member, the Pension Creditor or the ShareholderObserver considers appropriate if any person to whom such information is given have agreed to be bound byclauses 7.1.4 and 7.1.9;
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(b) to such professional advisers as the Committee Member, the Pension Creditor or the Shareholder Observer considersappropriate and who (save in the case of legal advisors and auditors provided that it is made clear to them that suchmatters are confidential) have agreed to be bound by clauses 7.1.4 and 7.1.9;
(c) to HM Revenue & Customs or any other governmental, public or official body for taxation purposes; or(d) required to be disclosed by law, regulation or any court, governmental or competent regulatory authority.
7.1.10 Each of the Committee Members, the Pension Creditor and the Shareholder Observer may not disclose to any person(apart from their legal advisers) any document (in any form) provided to them by or on behalf of the Scheme Supervisors inconnection with the Outwards Claims Litigation or by any of their advisers which the Scheme Supervisors in connection withthe Outwards Claims Litigation or any of their advisers has marked or has stated in writing to be legally privileged, withoutthe prior written consent of the Scheme Supervisors.
7.1.11 The following shall be eligible for subsequent appointment as Committee Members:(a) any Scheme Creditor who has an Ascertained Scheme Claim (whether an individual, a body corporate or a
partnership); and(b) any other person with the written consent of the Scheme Supervisors, which consent may be revoked by the Scheme
Supervisors at any time, if it becomes clear that person is not a Scheme Creditor.
7.1.12 Each Committee Member which is a body corporate or a partnership may, by notice in writing to the CreditorsCommittee, appoint a senior executive, other senior employee or professional adviser as its Nominated Representative torepresent that Committee Member at any meeting of the Creditors Committee.
7.1.13 Any Committee Member or Nominated Representative who is an individual may, by notice in writing to the CreditorsCommittee, appoint a senior executive, other senior employee or professional adviser as an Alternate to attend and vote in hisplace at any meeting of the Creditors Committee.
7.1.14 Any Nominated Representative or Alternate shall have the same powers and shall be subject to the same duties andlimitations as the Committee Member whom the Nominated Representative or Alternate represents.
7.2 Membership of the Creditors Committee7.2.1 The Creditors Committee may at any time appoint any person who is eligible to be so appointed to be a CommitteeMember, whether to fill a vacancy or as an additional Committee Member, so that the total number of Committee Membersshall not exceed the maximum number specified in clause 7.1.2. In appointing additional Committee Members, the CreditorsCommittee shall endeavour to ensure that the composition of the Creditors Committee is such that:(a) on or prior to the Bar Date it represents a proper balance of the interests of Submitted Scheme Claimants (but excluding
for this purpose any Submitted Scheme Claimant s Disputed Scheme Claim) (and taking into account the SchemeSupervisors views on the likely success or failure and the likely quantum of such Scheme Creditors SubmittedScheme Claims) and the Scheme Creditors who have Ascertained Scheme Claims, but taking into account the quantumof different Scheme Creditors Ascertained Scheme Claims; or
(b) after the Bar Date it represents a proper balance of the interests of the Scheme Creditors who have Ascertained SchemeClaims, but taking into account the quantum of different Scheme Creditors Ascertained Scheme Claims.
7.2.2 The Scheme Creditors may, by a Creditors Resolution passed at a meeting of Scheme Creditors convened and at wherebusiness is transacted, pursuant to section 8, remove any Committee Member from office and without prejudice to theCreditors Committee s powers under clause 7.2.1 may by Creditors Resolution appoint any person who is eligible to beappointed under clause 7.1.3 to be a Committee Member either to fill a vacancy or in addition to the existing CommitteeMembers, but so that the total number of Committee Members shall not exceed the maximum number specified in clause7.1.2.
7.2.3 The office of a Committee Member shall be vacated if any of the situations set out in clauses 7.2.4 to 7.2.5 applies or ifthat Committee Member:(a) resigns by notice in writing addressed to the Creditors Committee;(b) is removed from office by a Creditors Resolution;(c) if the Committee Member ceases to become a Scheme Creditor (or is found not to have been one); or
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(d) fails to attend three consecutive meetings of the Creditors Committee, unless the Creditors Committee (excluding thatCommittee Member) resolves by a majority of two-thirds of the Committee Members present at a meeting of theCreditors Committee that he should continue as a Committee Member.
7.2.4 In the case of an individual, the office of a Committee Member shall be vacated if that individual:(a) transfers or assigns a Scheme Liability or Ascertained Scheme Claim in accordance with clause 3.3 such that he is no
longer a Scheme Creditor;(b) dies;(c) is admitted to hospital because of mental disorder or is the subject of an order concerning his mental disorder made by
a court having jurisdiction in England or elsewhere in such matters;(d) becomes bankrupt or is subject to an individual voluntary arrangement or analogous process under the law of any
jurisdiction to which he is subject;(e) becomes disqualified from acting as a director under the law of any jurisdiction to which he is subject; or(f) is convicted of an indictable offence, other than a road traffic offence.
7.2.5 In the case of a body corporate or partnership, the office of a Committee Member shall be vacated if that body corporateor partnership is dissolved or has transferred or assigned its Scheme Liabilities or Ascertained Scheme Claims in accordancewith clause 3.3 such that the relevant body corporate or purchasing is no longer a Scheme Creditor.
7.2.6 In the case of a person appointed with the consent of the Scheme Supervisors under clause 7.1.11(b), the office of thatCommittee Member shall be vacated if that person has his written consent under that clause revoked by the SchemeSupervisors.
7.2.7 Any person entitled to appoint a Nominated Representative or an Alternate may from time to time revoke thatappointment and appoint another Nominated Representative or Alternate by notice in writing to the Creditors Committee,the Scheme Supervisors and the Company.
7.2.8 The appointment of a Nominated Representative or an Alternate (as the case may be) shall terminate automatically if:(a) his appointment is revoked by his appointor; or(b) the person whom that Nominated Representative or Alternate represents ceases to be a Committee Member; or(c) the Nominated Representative or Alternate ceases to be a senior executive, senior employee or professional adviser of
the Committee Member whom he represents; or(d) the Nominated Representative or Alternate dies, becomes bankrupt or is disqualified from acting as a director in each
case under the law of any jurisdiction to which he is subject or is convicted of an indictable offence.
7.3 Proceedings of the Creditors Committee7.3.1 The Company may appoint a representative or representatives to attend any meeting of the Creditors Committee for thepurposes of observing the meeting only. The Creditors Committee may resolve to remove the Company representative fromany meeting or part of any meeting, following which resolution, the representative shall withdraw, as resolved.
7.3.2 Where a majority of the Creditors Committee considers it appropriate, the meeting of the Creditors Committee may beconducted and held in such a way that persons who are not present together at the same place may attend it. Where a meetingis conducted and held in this manner, a Committee Member attends the meeting if that Committee Member is able to exerciseany rights which that Committee Member may have to speak and vote at the meeting. Such meetings shall be conducted inaccordance with the regime set out in rule 12A.26 of the Insolvency Rules.
7.3.3 Save as otherwise specifically provided in the Scheme, the Creditors Committee may convene, adjourn and otherwiseregulate its meetings in such manner as it considers appropriate. The quorum at any meeting of the Creditors Committeeshall be at least 50% of the Committee Members, attending in person or by conference call, provided that if a quorum is notpresent within 15 minutes from the time appointed for a meeting, or if during a meeting such a quorum ceases to be present,the meeting shall stand adjourned to such time and place as may be determined by the majority of the Committee Memberspresent and the Committee Members present at any such meeting reconvened following an adjournment shall constitute aquorum. Each Committee Member shall have one vote and, except as otherwise provided in the Scheme, matters arising at ameeting shall be decided by a majority of votes cast at the meeting.
7.3.4 The Creditors Committee shall meet with the Scheme Supervisors as often as necessary and in any event and unlessotherwise agreed with the Creditors Committee at least once every three months. The Creditors Committee shall hold such
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further meetings as it considers desirable for the purpose of performing its functions under the Scheme. A meeting of theCreditors Committee shall be called as soon as reasonably practicable if so requested by at least two Committee Members orif the Scheme Supervisors otherwise consider it appropriate. Except with the consent of all Committee Members, no meetingof the Creditors Committee may be called on less than five Business Days notice and, except with the consent of allCommittee Members, no business may be transacted at any such meeting other than that set out in the notice of that meeting.
7.3.5 Each Committee Member (including any Nominated Representative or Alternate) and the Scheme Supervisors (or theirrepresentatives) shall be entitled to attend and receive notice of all meetings of the Creditors Committee. The SchemeSupervisors shall be entitled to attend and speak, but not to vote, at all meetings of the Creditors Committee.Notwithstanding the previous provisions of this sub-clause 7.3.5, if so requested by the Creditors Committee, the SchemeSupervisors (or their representative(s)) shall absent themselves from all or such part of a meeting of the Creditors Committeeas the Creditors Committee may specify.
7.3.6 The Creditors Committee shall ensure that proper minutes shall be kept of all proceedings of the Creditors Committeeand such minutes shall at all reasonable times be open to inspection by any Committee Member. Copies of such minutes shallbe sent as soon as practicable after each meeting to the Scheme Supervisors and each Committee Member. A resolution inwriting (other than a resolution under clause 7.4.4(b)) agreed to by all Committee Members for the time being shall be validand effective as if passed at a meeting of the Creditors Committee duly convened and held. Each Committee Members maysignify his agreement to a proposed written resolution when the Creditors Committee receives from him a documentidentifying the resolution to which it relates and indicating his agreement to the resolution. The document may be sent to themembers of the Creditors Committee in hard copy form or in electronic form.
7.4 Powers7.4.1 The Creditors Committee shall have all the powers necessary or desirable to enable them to discharge their duties andresponsibilities under the Scheme including without limitation in connection with their taking decisions and/or exercisingdiscretion.
7.4.2 Before each meeting of the Creditors Committee convened pursuant to clause 7.3.4 the Scheme Supervisors shallsubmit to the Creditors Committee their report for the period since the last such report was prepared (or, with the consent ofthe Creditors Committee in the case of the first such meeting, since the Effective Date) and, unless the Creditors Committeeagrees otherwise, at least one of them shall attend (or, with the consent of the Creditors Committee appoint a representativeto attend) at any meeting of the Creditors Committee at which that Scheme Supervisors Report is considered for thepurpose of giving such explanations and information as the Creditors Committee may require.
7.4.3 The Scheme Supervisors Report, incorporating such amendments and redactions (if any) as may be agreed by theScheme Supervisors and the Creditors Committee, shall be made available to the Scheme Creditors in accordance withclause 8.1.7.
7.4.4 The Creditors Committee shall be entitled:(a) to require at least one of the Scheme Supervisors to attend any meeting of the Creditors Committee;(b) by a resolution passed by at least three-fourths by number (rounded up to the nearest whole number) of all the
Committee Members to call upon a Scheme Supervisor to resign, provided that each such Scheme Supervisor and eachCommittee Member have been given at least 20 Business Days notice of the proposed resolution and of the reasonswhy the resolution is to be put to the Creditors Committee and have been given a reasonable opportunity to makerepresentations at the meeting at which the resolution is proposed. If the Scheme Supervisor declines to resign within 5Business Days of a resolution of the Creditors Committee calling for his resignation a resolution requiring his removalshall be put before the next meeting of the Scheme Creditors and, if passed, the Scheme Supervisor shall vacate theoffice of Scheme Supervisor; and
(c) upon removal of a Scheme Supervisor or if a Scheme Supervisor ceases to hold office for any other reason, to appointany person qualified to act under clause 6.1.1 to be a Scheme Supervisor in their place (and a resolution requiringratification of such appointment shall be put before the next meeting of Scheme Creditors pending which the appointeeshall have full power to act as a Scheme Supervisor) save that if a resolution is passed at a meeting of SchemeCreditors requiring the removal of any of the Scheme Supervisors pursuant to clause 7.4.4(b) such appointment may bemade by the Scheme Creditors at such meeting.
7.4.5 The Creditors Committee shall be entitled to engage legal and financial advisers from time to time as reasonable inorder to assist them in carrying out their functions as the Creditors Committee. At any particular time, the CreditorsCommittee may only engage one legal adviser in any jurisdiction and one financial adviser. Reasonable costs of suchadvisers will be paid by the Company from the assets of the Company within 10 Business Days of demand.
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7.4.6 The Creditors Committee and the Company shall use reasonable endeavours to ensure that there are at least two dulyqualified Scheme Supervisors in office at all times.
7.4.7 For the avoidance of doubt and subject to clauses 7.2.4(a) and 7.2.5, a Committee Member may assign or sub-participate the whole or part of a Scheme Liability and/or Ascertained Scheme Claim in accordance with clause 3.3.
7.5 Majority Scheme Creditors instructions7.5.1 The Creditors Committee shall, subject to clause 7.6.1, (i) be entitled to exercise or refrain from exercising any right,power, authority or discretion vested in it as the Creditors Committee as it thinks fit and in any event to act in accordancewith any instructions given to it by a majority of the Scheme Creditors and (ii) not be liable (nor shall any of its members) forany act (or omission) if it acts (or refrains from taking any action)(a) in accordance with an instruction of a majority of the Scheme Creditors; or(b) in good faith.
7.5.2 For the purposes of this clause, a majority means a simple majority by value of the (i) Ascertained Scheme Claims or(ii) if on or prior to the Bar Date, the Ascertained Scheme Claims and Submitted Scheme Claims (but excluding for thispurpose any Disputed Scheme Claims) of the Scheme Creditors entitled to vote and voting at a meeting of Scheme Creditorsin accordance with sub-clause 8.1.6.
7.5.3 For the purposes of clause 7.5, on or prior to the Bar Date, the value for which a Submitted Scheme Creditor votes shallbe such sum as the Scheme Supervisor values in good faith such Submitted Scheme Claim (taking into account the SchemeSupervisors view on the likely success or failure and the likely quantum of such Scheme Creditors Submitted SchemeClaims).
7.6 Duties7.6.1 Each Committee Member, each Nominated Representative, and each Alternate shall (and each Committee Membershall procure that any Nominated Representative or Alternate appointed by it or any Alternate appointed by its NominatedRepresentative shall), in performing their functions as such in relation to the Scheme, act bona fide in what such personreasonably considers to be the interests of the Scheme Creditors as a whole. For the avoidance of doubt (but withoutprejudice to its specific powers as set out by the Scheme) it shall not be the duty of the Creditors Committee to monitor thecarrying out of the Scheme or the activities of the Scheme Supervisors.
7.6.2 It shall be the duty of each Committee Member who is in any way, whether directly or indirectly, interested in acontract or arrangement or proposed contract or arrangement with the Company (other than any which arises as a result of theprovisions of the Scheme) to declare (or procure that its Nominated Representative or Alternate or its NominatedRepresentative s Alternate shall declare) the nature of his or its interest at a meeting of the Creditors Committee where thatcontract or arrangement is under consideration. For this purpose a general notice given to the Creditors Committee to theeffect that a Committee Member is an associate (within the meaning of section 435 of the Insolvency Act) of a specifiedcompany or firm and is to be regarded as interested in any such contract or arrangement with that company or firm shall bedeemed a sufficient declaration of interest in relation to any such contract or arrangement. Such a Committee Member shallnot be counted in the quorum, shall not be entitled to vote in relation to any matter relating specifically to any such contract,shall retire from the meeting for so long as the matter is discussed and voted upon and shall not receive any information, norbe entitled to inspect any part of the minutes of a meeting or the Creditors Committee, relating thereto.
7.6.3 Each Nominated Representative or Alternate shall be entitled to report to the Committee Member appointing him on theproceedings of the Creditors Committee and, so far as necessary for that purpose, to disclose confidential information of theCompany to those officers, employees and professional advisers of that member or appointer who need to know it inconnection with (where a Nominated Representative or Alternate is disclosing information) the performance of his or itsresponsibilities as a Committee Member, provided that such information does not to his or its knowledge (after due enquiry)relate to any matter where any such appointer has an interest in conflict with the Company (other than a general conflictarising as the result of the status of Committee Member or the appointers of a Nominated Representative or Alternate asScheme Creditors). Each Committee Member shall, and shall procure that its Nominated Representative or Alternate or itsNominated Representative s Alternate and its officers, employees and professional advisers shall preserve the confidentialityof such information and shall use such information only for the purposes of their performing their responsibilities andfunctions (or their Nominated Representative s or Alternate s or their Nominated Representative Alternate s responsibilitiesand functions) in relation to the Creditors Committee.
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7.7 Responsibility7.7.1 No Scheme Creditor, Scheme Supervisor or the Company shall be entitled to challenge the validity of any act done oromitted to be done in good faith by any Committee Member (or Nominated Representative or Alternate) (aside in respect ofthe Scheme Supervisors pursuant to clause 6.9) in accordance with and to implement the provisions of the Scheme or theexercise by any such Committee Member (or Nominated Representative or Alternate) in good faith of any power conferredupon it or him by or for the purposes of the Scheme if exercised in accordance with and to implement the provisions of theScheme and no such Committee Member (or Nominated Representative or Alternate) shall be liable for any loss or damageunless such loss or damage is attributable to its or his fraud.
7.7.2 No Committee Member (or Nominated Representative or Alternate) will be liable for any action taken by it (or anyinaction) under or in connection with the Scheme, unless directly caused by its bad faith or wilful misconduct.
7.7.3 For the avoidance of doubt, the Creditors Committee will have no fiduciary duties and will owe no duty of care to theCompany or to any of the Scheme Creditors.
7.8 Validation of acts7.8.1 All acts done by the Creditors Committee or any member of the Creditors Committee or any person acting as aCommittee Member or as a Nominated Representative or Alternate shall, notwithstanding that it is afterwards discoveredthere was some defect in the appointment of a Committee Member or person acting as aforesaid, or that any of them weredisqualified, be valid if every such person had been duly appointed and qualified.
7.9 Fees7.9.1 The Company agrees to pay each Committee Member a fee of £5,000 plus VAT which shall be paid quarterly in arrearsto each Committee Member until the date of which the appointment of that Committee Member is terminated in accordancewith the terms of the Scheme. The first payment shall be due on the last Business Day of the first whole calendar monthfalling three months after the Effective Date. Each subsequent payment is due on the last Business Day of each calendarmonth at three monthly intervals. No part of any fee will be refunded if an appointment does not continue for the wholemonth concerned.
7.10 Expenses7.10.1 Each member of the Creditors Committee, each Nominated Representative and each Alternate shall be entitled to bereimbursed by the Company from the assets of the Company upon written demand to the Company for their reasonable out ofpocket expenses incurred in attending meetings of the Creditors Committee, or otherwise engaged on Creditors Committeebusiness, provided that such meetings are held in London or in such other place as the Scheme Supervisors may from time totime agree. Where a Committee Member, its Nominated Representative or any Alternate appointed by the CommitteeMember, its Nominated Representative must travel to attend a Creditors Committee meeting in London (or such other placeas the Scheme Supervisors have agreed), that Committee Member or Nominated Representative or Alternate shall (and anysuch Committee Member shall procure that such Nominated Representative or Alternate shall) use all reasonable endeavoursto appoint as its Nominated Representative or Alternate (as the case may be) for that meeting an individual who is based inthe locality of the venue of that Creditors Committee meeting (although there is no obligation for a Shareholder who is aCommittee Member to reside in London). Where the cost of an air fare is so permitted, it shall be the cost of an economyclass fare only.
7.11 Creditors Committee Vacancies7.11.1 If at any time there are less than three members of the Creditors Committee or such lesser number as permitted byclause 16.1, the Creditors Committee may continue to exercise all its functions under the Scheme (other than those providedfor in clauses 7.4.4) for a period of 28 days, during which time the remaining Committee Members shall endeavour to fill thevacancies on the Creditors Committee.
7.11.2 If the Creditors Committee fails to fill vacancies on the Creditors Committee within such period of 28 days, theScheme Supervisors shall use all reasonable endeavours to appoint, within a further 14 days, such additional SchemeCreditors to the Creditors Committee as are required to fill such vacancies.
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SECTION 8MEETINGS OF SCHEME CREDITORS
8.1 Convening of Meetings8.1.1 Meetings of Scheme Creditors are to be convened as follows:(a) the Scheme Supervisors shall, unless the Scheme Supervisors and the Creditors Committee agree otherwise, convene a
meeting of the Scheme Creditors at least once every 12 months; and(b) the Creditors Committee may at any time require the Company to convene a meeting of the Scheme Creditors to
consider a resolution:(i) for the removal of a Scheme Supervisor pursuant to clause 7.4.4(b);(ii) for the appointment of a Scheme Supervisor pursuant to clause 7.4.4(c); or(iii) for such other purpose as it thinks fit;and any such resolution shall be passed or rejected in accordance with the remainder of section 8.
8.1.2 The Scheme Supervisors may at any time convene a meeting of the Scheme Creditors for such purpose as they think fit.
8.1.3 Any five or more Scheme Creditors who have Ascertained Scheme Claims of an aggregate value in excess of 15 percent of all Ascertained Scheme Claims or any 20 Scheme Creditors with Ascertained Scheme Claims may by notice inwriting to the Scheme Supervisors require them to convene a meeting of Scheme Creditors for such purpose as they think fit.The relevant Scheme Creditors must specify the purpose for which the meeting is required and it shall be the duty of theScheme Supervisors to summon a meeting of Scheme Creditors as soon as reasonably practicable for that purpose and to givesuch notice of the meeting as is necessary to enable such purpose to be carried out effectively in accordance with theprovisions of the Scheme. At least one of the Scheme Supervisors shall be required to attend such meetings.
8.1.4 A majority in excess of two-thirds in value of the Scheme Creditors attending a meeting of the Scheme Creditors mayresolve to remove the Scheme Supervisors from any meeting or part of any meeting, following which resolution the SchemeSupervisors shall withdraw, as resolved.
8.1.5 The following shall be entitled to attend a meeting of Scheme Creditors and to vote at that meeting:(a) on or before the Bar Date, any Submitted Scheme Claimant; and(b) at any time any Scheme Creditor with an Ascertained Scheme Claim.
8.1.6 The Company may appoint a representative or representatives to attend any meeting of Scheme Creditors for thepurposes of observing the meeting only. A majority of the Scheme Creditors by value attending such meeting may resolve toremove the Company representative from any meeting or part of any meeting, following which resolution any suchrepresentatives shall withdraw, as resolved.
8.1.7 The most recent Scheme Supervisors Report referred to in clause 7.4.3 (as amended and/or redacted) shall be laidbefore each meeting of Scheme Creditors convened pursuant to clause 8.1.1(a) or 8.1.1(b) as the Creditors Committee or theScheme Supervisors (as the case may be) deem necessary or desirable and copies of all previous Scheme SupervisorsReports shall be made available at such meeting. If the Scheme Supervisors or the Creditors Committee (as the case may be)agree that such a meeting is not required, the Scheme Supervisors shall make such Scheme Supervisors Report (as amendedand or redacted in accordance with clause 7.4.3) available to Scheme Creditors and send a copy of the Scheme SupervisorsReport (as amended and or redacted in accordance with clause 7.4.3) to any Scheme Creditors who requests a copy.
8.1.8 At least 10 Business Days notice shall be given of a meeting of Scheme Creditors to:(a) each Submitted Scheme Claimant;(b) where called by the Creditors Committee, to the Scheme Supervisors;(c) where called by the Scheme Supervisors, to each Committee Member, and(d) the Company.
8.1.9 The accidental omission to give notice of a meeting of Scheme Creditors to, or the non-receipt of a notice of such ameeting by, any person entitled to receive notice (other than the Scheme Supervisors) shall not invalidate the proceedings atthat meeting.
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8.2 Resolution8.2.1 If a meeting of Scheme Creditors is convened at a time when a resolution is to be put to remove a Scheme Supervisorwhich, if passed, would result in there being fewer than two Scheme Supervisors in office, the notice of meeting shall alsoinclude a resolution that a named person qualified to act under clause 6.1.1 and willing to be appointed, be appointed as aScheme Supervisor in their place.
8.3 Voting8.3.1 Subject to clause 8.3.2, a resolution put to a meeting of Scheme Creditors shall be effective only if it is approved by amajority in value of the Ascertained Scheme Claims (or if on or prior to the Bar Date, Ascertained Scheme Claims andSubmitted Scheme Claims (not being Disputed Scheme Claims) of Scheme Creditors which are present and voting either inperson or by proxy at a meeting.
8.3.2 A resolution to consider the matters set out at clause 5.2.2 shall only be passed provided a majority in excess of two-thirds in value of the Scheme Creditors attending the meeting of the Scheme Creditors either in person or by proxy votes infavour of that resolution.
8.3.3 Every Scheme Creditor entitled to vote shall have the right to appoint any person as his proxy to attend and vote insteadof him. The instrument appointing a proxy may be in any form which the Scheme Supervisors may approve and must belodged at the place specified in the notice of the meeting for the lodging of proxies not less than 48 hours before the meeting(or adjourned meeting) at which it is to be used.
8.3.4 No business shall be transacted at any meeting of Scheme Creditors unless a quorum is present when the meetingproceeds to business, four Scheme Creditors present in person or by proxy and having the right to vote at the meeting shall bea quorum, unless the Scheme Supervisors and the Creditors Committee agree a smaller number. If a quorum is not presentwithin 15 minutes from the time appointed for a meeting, or if during a meeting such a quorum ceases to be present, themeeting shall stand adjourned to such time and place as may be determined by the majority of the Scheme Creditors presentand the Scheme Creditors present at any such meeting reconvened following an adjournment shall constitute a quorum. Allresolutions put to the vote of any meeting shall be decided on a poll (rather than on a show of hands).
8.3.5 One of the Scheme Supervisors shall preside (or shall nominate a representative to preside) at each meeting of theScheme Creditors (unless the Creditors Committee resolves otherwise and other than at a meeting at which a resolution toremove a Scheme Supervisor is proposed, when the Creditors Committee shall select the individual to preside over suchmeeting) but if the Scheme Supervisor (or his nominated representative) or, if relevant, the individual selected by theCreditors Committee, is not present within 30 minutes after the time appointed for opening the meeting or is unwilling topreside, the Scheme Creditors present in person or by proxy shall choose some member of the Creditors Committee or, if nosuch member is present or if all such members present decline to preside, one of themselves, to be chairman of the meeting.If no person is willing to preside as chairman of the meeting, the meeting shall be adjourned for seven days, and, if no personis willing to preside as chairman of such meeting reconvened following an adjournment, the meeting shall be dissolved.
8.3.6 On or prior to the Bar Date and for the purposes of clause 8.3, the value for which a Submitted Scheme Claimant votesshall be such sum as the Scheme Supervisor values in good faith such Submitted Scheme Claim (but excluding for thispurpose any Submitted Scheme Claimant s Disputed Scheme Claim) and taking into account the Scheme Supervisors viewson the likely success or failure and the likely quantum of such Scheme Creditors Submitted Scheme Claims.
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SECTION 9LIQUIDATION AND COMPLETION OF THE SCHEME
9.1 Wind-downSubject to the terms of the Scheme (including, without limitation, the covenants and undertakings of the Company in respectof expenditures), the Company shall, unless otherwise agreed with the Creditors Committee, reduce and wind-down theCompany in as economical and efficient a manner as is reasonably possible.
9.2 Scheme Certified Liquidation9.2.1 Bovess and Bovess Holding each undertake not to commence any steps to wind-up the Company other than as part of aScheme Certified Liquidation nor seek to appoint an administrator to the Company pursuant to Schedule B1 of theInsolvency Act.
9.2.2 The Company, the Board, Bovess and Bovess Holding each agree that a Scheme Certified Liquidation shall not becommenced during the first seven years and three months from the Effective Date without the prior written consent of theCreditors Committee acting reasonably. Thereafter, a Scheme Certified Liquidation may be commenced without the consentof the Creditors Committee.
9.2.3 Upon a Scheme Certified Liquidation, Scheme Creditors with Ascertained Scheme Claims and Unascertained SchemeClaims agree that any payments in respect of such Ascertained Scheme Claims and Unascertained Scheme Claims shall bepostponed until all other Liabilities of the Company including the expenses of any liquidation have been paid in full.
9.2.4 Each Scheme Creditor agrees that any distributions it has or shall receive in the Scheme Certified Liquidation are in fullsatisfaction of what it is entitled to receive under the Scheme and under the Insolvency Act.
9.2.5 In a Scheme Certified Liquidation, Scheme Creditors agree that they shall be creditors in respect of their AscertainedScheme Claims only, and shall have the right to prove, claim or assert a right of recovery in the liquidation in respect of suchAscertained Scheme Claims.
9.2.6 In a Scheme Certified Liquidation, the provisions contained in clauses 4.4 and 4.5 shall cease to apply.
9.3 Scheme Completion9.3.1 The Scheme shall be completed on Scheme Completion, being a date, following the Bar Date when the aggregate of allUnascertained Scheme Claims shall be nil and either:(a) all Ascertained Scheme Claims have been paid in full; or(b) the Company is in a Scheme Certified Liquidation and the assets of the Company have been reduced to nil or a de
minimis amount.
9.4 Scheme Completion9.4.1 Effective upon Scheme Completion:(a) the Scheme Supervisors shall give notice on the Scheme Website and to any Scheme Creditor with an Ascertained
Scheme Claim that Scheme Completion has occurred;(b) the Scheme Payments made to a Scheme Creditor (if any) shall be the Company s total and complete Liability to each
Scheme Creditor in respect of each Scheme Liability;(c) the Scheme Payments made to a Scheme Creditor shall be in full and final settlement of all and any Ascertained
Scheme Claims of that Scheme Creditor;(d) all Scheme Liabilities shall be released; and(e) save for the provisions of clauses 1.1, 2.3, 2.9, 5.1, 5.4, 6.6, 6.7, 7.7, 7.8, 7.9, 7.10, 9.1, 9.3, 9.4 and 10.1 and 10.6 and
any other provision relating to the compromise of Scheme Liabilities, all of which shall survive Scheme Completion,the obligations and rights under the Scheme shall end.
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SECTION 10GENERAL SCHEME PROVISIONS
10.1 Effective DateThe Scheme shall become effective on the Effective Date.
10.2 Modification of the SchemeThe Company may at any court hearing to sanction the Scheme consent on behalf of the Scheme Creditors to anymodification of or addition to the Scheme or any terms or conditions that would not directly or indirectly have a materiallyadverse effect on the interests of any Scheme Creditor (whose consent is not obtained) under the Scheme (taking into accountfor this purpose only its interests as a Scheme Creditor).
10.3 Application of the SchemeThe provisions of this Scheme shall apply to each Scheme Creditor whether or not he participates in the Scheme in any wayand at any stage.
10.4 Notices10.4.1 Any notice or other written communication to be given under or in relation to the Scheme shall be given in writing andshall be deemed to have been duly given if it is delivered by hand or sent by pre-paid first class post or airmail:(a) in the case of the Company, to its registered address or to such other address as the Company may give notice of to
Scheme Creditors for this purpose, in any case marked for the attention of Robert East;(b) in the case of the Scheme Supervisors, to Zolfo Cooper LLP, 10 Fleet Place, London, EC4M 7RB (for the attention of
Simon Appell) or to such other address as the Scheme Supervisors may give notice of to Scheme Creditors for thispurpose; and
(c) in the case of a Scheme Creditor, to its last known address according to the Company.
10.4.2 Any notice or written communication given under the Scheme shall be deemed to have been delivered on the earliestof:(a) if delivered by hand, the first Business Day after it is delivered;(b) if sent by pre-paid first class post or airmail, the second Business Day after posting if the recipient is in the country of
dispatch, otherwise the seventh Business Day after posting;(c) if sent electronically, the first Business Day beginning after the expiration of 24 hours from the time it was sent; or(d) the Business Day on which the notice or communication is actually received by the recipient.
10.5 Electronic communicationsNotwithstanding anything to the contrary in the Scheme, any notice or communication required to be or which may be sentunder the Scheme may, at the option of the Company, the Creditors Committee, the relevant Scheme Creditor, the SchemeSupervisors or Committee Member, be given or sent by the Company, the Committee Member, the Creditors Committee, theScheme Supervisors or the relevant Scheme Creditor in electronic form (i.e. by email or fax) to the address or numberspecified for that purpose by that Scheme Creditor, the Creditors Committee, the Committee Member, the SchemeSupervisors or the Company.
10.6 Governing law and jurisdictionThe Scheme and any non-contractual obligations arising out of or in connection with the Scheme shall be governed by andconstrued in accordance with the laws of England and Wales. The Court shall have exclusive jurisdiction to hear anddetermine any suit, action or proceeding and to settle any dispute which may arise out of or in connection with theExplanatory Statement or any provision of the Scheme, or any act or omission under the Scheme or in any way in connectionwith its administration. For such purposes, the Scheme Creditors irrevocably submit to the jurisdiction of the Court.
Dated this 10 day of December 2010.
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SCHEDULE 1 TO THE SCHEMECATTLES EXCLUDED LIABILITIES
1. Any ordinary course business liability of the Company (i) properly incurred after the Record Date (including, withoutlimitation, but subject to clause 6.10, funding of any Outwards Litigation Claims by the Company, including any adversecosts awards in connection with the Outwards Claims Litigation) or (ii) that may arise after the Record Date as a result of anobligation properly incurred by the Company before the Record Date and adopted by the Company after the Record Date asenvisaged by the Scheme (for the avoidance of doubt not including obligations where the Company has given notice toterminate such arrangements. For the avoidance of doubt, and without limitation, this does not include Schemed LeaseLiabilities;
2. All Liabilities of the Company to employees, directors or officers of the Company or other Group companies (but notincluding the Schemed Directors) in respect of their wages, bonuses, expenses, other remuneration, pension contributions,contractual indemnities, notice pay (including pay in lieu of benefits due during any notice period), redundancy pay, andpayments due under staff retention arrangements or performance incentive arrangements;
3. Provided the aggregate amount paid in respect of Liabilities of the Company covered by this paragraph 3 (excluding theLiabilities of the Company (i) to any legal, financial or other professional advisers, (ii) in respect of the purchase by theCompany of directors and officers insurance, (iii) that are to be paid by other Group companies under the terms of the TSAand (iv) under any other paragraph of this Schedule 1) do not exceed £1,000,000, any Liability to a creditor of the Companyas consideration for the provision of goods or services to the Company or another member of the Group that remains unpaidas at the Record Date (specifically including such liabilities owed to the Excluded Trade Creditors set out in Schedule 8);
4. Any Company liability for a fine or criminal or regulatory penalty;
5. Any Company liability to Her Majesty s Revenue & Customs in respect of:(a) corporation tax (including corporation tax on chargeable gains) for the years ending 31 December 2008, 31 December
2009 or 31 December 2010;(b) value added tax;(c) PAYE and NIC (both employers and employees ) relating to the month in which the Effective Date occurs and the
preceding month; and(d) withholding tax due in respect of interest payments made by the Company within three months prior to the Effective
Date;
6. Any liability under a lease, other than a Schemed Lease Liability;
7. Any payments of adverse costs awards pursuant to clause 3.8.4;
8. Any payments to the Scheme Supervisors pursuant to the Scheme;
9. Any Liability of the Company to any local authority in respect of business rates;
10. Fees and expenses of all agents under the Facilities Agreements or under the Agency Arrangements;
11. Any Liability of the Company under clause 10.1 of the Pension Compromise;
12. All monthly fees, costs and expenses (including adviser fees) of the Co-ordinating Committee under the Co-ordinatorsAppointment Letter dated 31 July 2009 and related Fee Letter between the Company, WFSL and the Co-ordinatingCommittee which have been incurred on or before the Effective Date; and
13. Any payments properly made by the Company pursuant to the Scheme.
146
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147
SCHEDULE 2 TO THE SCHEME
DEED OF RELEASE
2011
THE SCHEME SUPERVISOR
in favour of
THE RELEASED PERSONS
THE ADVISERS
DEED OF RELEASE
148
CONTENTS
CLAUSE page
1. INTERPRETATION........................................................................................................................................ 149
2. APPLICATION OF DEED ............................................................................................................................. 149
3. RELEASE AND DISCHARGE...................................................................................................................... 149
4. FURTHER ASSURANCE............................................................................................................................... 150
5. GOVERNING LAW AND ENFORCEMENT............................................................................................. 150
149
THIS DEED OF RELEASE is made on 2011
BY:(1) of [ ] (the Scheme Supervisor),
IN FAVOUR OF:(2) THE RELEASED PERSONS (as defined below); and(3) THE ADVISERS (as defined below).
WHEREAS:(A) The Company has entered into the Scheme with its Scheme Creditors.(B) The Scheme Supervisor appointed under the Scheme is authorised, under the terms of the Scheme, to execute and deliverthis Deed on behalf of each of Company and the Scheme Creditors.(C) It is intended that this document takes effect as a deed notwithstanding the fact that a party may only execute thisdocument under hand.
THIS DEED WITNESSES:1. INTERPRETATION
1.1 Definitions
Advisers means each of the advisers of the Company listed at Appendix 2 to this Deed.
Company means Cattles plc, a company incorporated in England and Wales with company number 00543610.
Released Persons means the persons listed at Appendix 1 to this Deed.
Restructuring means the restructuring of the Group.
Scheme means the scheme of arrangement pursuant to Part 26 of the Companies Act 2006 between the Company and theScheme Creditors sanctioned by the High Court prior to the date of this Deed.
1.2 Incorporated Definitions
1.3 Words and expressions defined in the Scheme have the same meanings when used in this Deed unless otherwise providedor the context otherwise requires.
1.4 In this Deed, unless the context otherwise requires or otherwise expressly provides for:(a) references to clauses are references to clauses of this Deed;(b) references to a person include references to an individual, firm, partnership, company, corporation, unincorporated
body of persons or any state or state agency;(c) references to a statute or statutory provision include references to the same as subsequently modified, amended or re-
enacted from time to time;(d) the singular includes the plural and vice versa and words importing one gender shall include all genders; and(e) headings to clauses are for ease of reference only and shall not affect the interpretation of this deed.
2. APPLICATION OF DEED
The provisions of this Deed shall apply to each Scheme Creditor or any person to whom a Scheme Creditor has transferred orassigned or purported to transfer or assign a liability of the Company under the Scheme.
3. RELEASE AND DISCHARGE
3.1 With effect from (and including) the date of this Deed, the Scheme Supervisor (on behalf of the Company and theScheme Creditors), without prejudice to the provisions of the Scheme, hereby waives, releases, terminates and dischargesfully and absolutely any and all Liability of the Released Persons to each of the Company and the Scheme Creditors inrelation to or in connection with or in any way arising out of a Scheme Liability, a Submitted Scheme Claim, the
150
implementation of the Scheme or the Restructuring. The waiver, release, termination and discharge in this clause applies tothe Released Persons in their capacity as members of the Co-ordinating Committee only and has no application to theReleased Persons in any other capacity.
3.2 The variation, waiver, release, termination and discharge in clause 3.1 shall not release any Liability of any person arising from fraud on the part of that person.
3.3 With effect from (and including) the date of this Deed, the Scheme Supervisor (on behalf of the Company and theScheme Creditors), without prejudice to the provisions of the Scheme, hereby waives, releases, terminates and dischargesfully and absolutely any and all Liability of the Advisers to each of the Company and the Scheme Creditors in relation to orin connection with or in any way arising out of a Scheme Liability, an Ascertained Scheme Claim, a Submitted SchemeClaim, the implementation of the Scheme or the Restructuring.
3.4 The waiver, release, termination and discharge in clause 3.3 shall not release any Liability of any person arising fromfraud on the part of that person.
4. FURTHER ASSURANCE
The Scheme Supervisor (on behalf of each of the Company and the Scheme Creditors) agrees and undertakes to execute anddeliver to the Released Persons and the Advisers all such documents and do all such acts as shall be reasonably required toachieve the variation, waiver, release, termination and discharge referred to in Clause 3.1.
5. GOVERNING LAW AND ENFORCEMENT
This Deed and any non-contractual obligations arising out of or in relation to this Deed are governed by and shall beconstrued in accordance with, English law. Any dispute arising out of or in connection with, or concerning the carrying intoeffect of, this deed shall be subject to the exclusive jurisdiction of the High Court of Justice of England and Wales and theparties hereby submit to the exclusive jurisdiction of that court for these purposes.
THIS DEED has been executed and delivered as a deed on the date stated at the beginning of this Deed.
151
The Scheme Supervisor (for and on behalf of each of the Company and the Scheme Creditors)SIGNED as a DEED andDELIVERED by
)))
in the presence of: )Witness Signature:
Name:Address:
152
APPENDIX 1THE RELEASED PERSONS
The Royal Bank of Scotland plc in its capacity as a member of the Co-ordinating Committee
HSBC Bank plc in its capacity as a member of the Co-ordinating Committee
Lloyds TSB Bank plc in its capacity as a member of the Co-ordinating Committee
153
APPENDIX 2THE ADVISERS
Allen & Overy LLP
Ernst & Young LLP
Clifford Chance LLP
FTI Consulting Limited
154
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155
SCHEDULE 3 TO THE SCHEMESPECIMEN CLAIM FORM
PLEASE READ THE GENERAL INSTRUCTIONS ANDGUIDANCE NOTES PRIOR TO COMPLETING THIS
FORM
CATTLES PLC
SCHEME OF ARRANGEMENT UNDER PART 26 OF THE COMPANIES ACT 2006
CLAIM FORM
General Instructions
1. This is a Claim Form, as referred in the Cattles plc scheme of arrangement (the Scheme), which came into effect on [insertdate]. This form is to be used by Scheme Creditors (as that term is defined in the Scheme) in order to submit a claim in theScheme.
2. Terms used in this document which are not defined in this document (e.g. Scheme Payment and Scheme Supervisors ,both referred to below) have the same meanings as are given to them in the Scheme.
3. As stated in the Scheme, in order to be entitled to any Scheme Payments under the Scheme, you must complete a ClaimForm and submit it to the Scheme Supervisors so that it arrives on or before the Bar Date, which is [insert date].
4. Before completing this Claim Form please read the guidance notes on page 160.
5. If necessary, please use additional sheets of paper to provide further information. If you do use additional sheets of paper,please ensure that each one is securely fastened to your claim form, that each one is clearly marked with the name of theScheme Creditor and the words Claim Form additional information , and also that it is clear to which question(s) thatadditional information relates.
IN ADDITION TO COMPLETING THIS CLAIM FORM, PLEASE PROVIDE FULL DOCUMENTATION TOEVIDENCE THE NATURE, VALIDITY AND VALUE OF YOUR SUBMITTED SCHEME CLAIM(S).
156
Part A General details
1. NAME OF SCHEME CREDITOR(i)
2. ADDRESS OF SCHEME CREDITOR(ii)
3. CONTACT NAME( iii)
4. CONTACT EMAIL ADDRESS
5. CONTACT TELEPHONE NUMBER(S)6. CONTACT FAX NUMBER
To be signed below by the Scheme Creditor or a duly authorised individual on behalf of a Scheme Creditor. If you are a dulyauthorised representative, agent or attorney of a Scheme Creditor, please enter the capacity in which you have signed theform (for example director, partner or agent and/or attorney) below.
A signature on this form shall constitute the giving of a warranty that:(a) the signatory has been duly authorised by the relevant Scheme Creditor to the sign the form on its behalf; and(b) all of the information you have provided on this Claim Form, and any additional information you have provided
with it, is true and accurate to the best of your knowledge and belief.
157
PRINT NAME:
POSITION:
SIGNATURE: DATE:
158
Part B Claim Details1. PLEASE DESCRIBE THE NATURE OF EACH SUBMITTED SCHEME CLAIM AND HOW IT AROSE (EG THE CONTRACT /
AGREEMENT UNDER WHICH IT ARISES):(iv)
2. DATE THAT THE SUBMITTED SCHEME CLAIM WAS INCURRED:
3. PLEASE STATE THE TOTAL VALUE OF YOUR SUBMITTED SCHEME CLAIM AS AT THE RECORD DATE, INCLUDING THESPLIT BETWEEN PRINCIPAL, INTEREST AND ANY OTHER CONSTITUENT AMOUNTS:(v)
CONSTITUENT PART(WHERE RELEVANT)
AMOUNT
PRINCIPAL
INTEREST
OTHER (PLEASE DESCRIBE)
4. PLEASE STATE THE LEGAL BASIS OF YOUR CLAIM AGAINST THE COMPANY:(vi)
5. IS ANY PARTY JOINTLY LIABLE FOR THE SUBMITTED SCHEME CLAIM? IF SO, PLEASE IDENTIFY THE PARTY(IES) INQUESTION AND SPECIFY THE NATURE OF THE CLAIM AGAINST EACH ONE:
6. PLEASE STATE ANY OTHER FACTS OF WHICH YOU ARE AWARE WHICH WOULD ASSIST THE SCHEME SUPERVISORS INCONSIDERING THE SUBMITTED SCHEME CLAIM:(vii)
159
HOW TO SUBMIT THIS CLAIM FORM
On completing this Claim Form, please send, together with any additional material you are providing with it, to theaddress below, TO ARRIVE ON OR BEFORE THE BAR DATE, BEING [INSERT DATE].
[Address][Address][Address][Address][Address]
For the attention of: [insert name(s)]
160
Part C Guidance notes
(i) The name of the Scheme Creditor should be the full legal name of the Scheme Creditor including (if relevant) itscompany number.
(ii) If the Scheme Creditor is a company then the address given should be its registered address or the place to whichcorrespondence should be directed. If the Scheme Creditor is an individual then the address given should be their homeaddress or the place to which correspondence should be directed.
(iii ) Please give the name of the person for whose attention correspondence relating to the Scheme Claim should bedirected.
(iv) The description of the nature of the Submitted Scheme Claim and how it arose should describe the circumstancesgiving rise to the Submitted Scheme Claim in sufficient detail for the Scheme Supervisors to determine the validity ofthe Submitted Scheme Claim and its amount.
This should include, for example, the date on which any relevant agreement was signed and the date and location ofany relevant events. If the Submitted Scheme Claim derives from the Scheme Creditor having been a holder of, orbeing interested in, notes issued by the Company, then you should include details of the Scheme Creditor s holding orinterest, including the date on which and value at which it was bought and sold (if applicable).
Scheme Supervisors may request further information from Scheme Creditors in relation to any Submitted SchemeClaims.
(v) Please explain the value given to the Submitted Scheme Claim.
The value of the Submitted Scheme Claim should be expressed in Sterling unless the Submitted Scheme Claim arisesin another currency. If the Submitted Scheme Claim arises in another currency then you should explain why it does,and express the value of the claim in the relevant currency.
If the Submitted Scheme Claim is the sum of a number of amounts (e.g. a principal amount, plus interest), then youshould state what those constituent amounts are and what they represent. Other amounts could include, for example,lease rental obligations, dilapidations claims, VAT etc.
Where insufficient space has been provided to detail all the components of your claim, such as is likely to be the casefor complex leasehold liability claims, please provide your calculations and assumptions on additional sheets of papersecurely fastened to you Claim Form, clearly marked on each one with the name of the Scheme Creditor and the wordsClaim Form additional information , and make clear to which question this additional information relates.
(vi) When stating the legal basis of the Liability of the Company, you should explain the legal nature of the claim that theScheme Creditor is making, e.g. claim for a debt owed under a credit facility or claim for breach of contract .
(vii) In addition to stating any other facts of which you are aware which would assist the Scheme Supervisors in consideringthe Submitted Scheme Claim, you should provide any evidence you have which supports the Submitted Scheme Claim.
PLEASE PROVIDE FULL DOCUMENTATION IN SUPPORT OF THE SUBMITTED SCHEME CLAIM(S).
161
SCHEDULE 4 TO THE SCHEMEAGREED CLAIMS IN ACCORDANCE WITH CLAUSE 3.7.2
1. The sums below show the agreed Liabilities (excluding any accrued interest) of the Scheme Creditors whose Liabilitiesarise under or in connection with (i) the Facilities Agreements, (ii) the Note Agreements, (iii) the Hedge Agreements and(iv) the Settlement Agreement as at 31 October 2010.
2. The sums below show the principal amount outstanding (for the avoidance of doubt the principal amount does not includeany compounding of interest) for each of the Scheme Creditors referred to in paragraph 1 above as at 31 October 2010 less anestimated maximum distribution to each of those Scheme Creditors from the Escrow Account.
3. At the time of the launch of this Scheme, the calculation methodology for distributions to each of the Scheme Creditorsreferred to in paragraph 1 above from the Escrow Account was still being determined in accordance with the terms of theSEA. The distribution amounts included in the table below reflect the estimated highest possible returns to each of theScheme Creditors referred to above under the range of methodologies currently being considered.
4. For the avoidance of doubt, the inclusion below of such amounts is without prejudice to the rights of each individualScheme Creditor and does not constitute an acknowledgement by any Scheme Creditor of the claims of any other SchemeCreditor in connection with the Escrow Account. Similarly, the figures included in the table below were not intended toaffect and shall not affect the final determination of the amounts to be distributed to each of the Scheme Creditors referred toin paragraph 1 above from the Escrow Account in accordance with the terms of the SEA.
5. Subject to the Settlement Agreement, nothing in this Scheme, in particular in clause 3.7.2 or this Schedule, shall (i) preventthe relevant Scheme Creditors making any other Submitted Scheme Claims arising out of or in connection with either theFacilities Agreements, the Note Agreements, the Guaranteed Hedge Agreements or otherwise or (ii) constitute an admissionas to the basis upon which an Ascertained Scheme Claim or any other claim has been or should be calculated.
162
£75m and£135m bilateral
Principal
as at 31 October2010
£500msyndicate
Principal
as at 31 October2010
£800msyndicate
Principal
as at 31 October2010
£215msyndicate
Principal
as at 31 October2010
GuaranteedHedge
Counterparty
Principal
as at 31 October2010
Total claims beforeSEA escrowadjustment
Principal
as at 31 October2010
Estimatedmaximum
possible returnfrom SEA
escrow
Total Claims
The Royal Bank of ScotlandPlc 109,432,332.32 35,698,340.02 53,456,364.45 50,851,207.68 249,438,244.47 (17,798,631.82) 231,639,612.65Allied Irish Banks, Plc 17,849,170.01 28,510,061.04 46,359,231.06 (3,341,480.19) 43,017,750.87Banco Poplare Sc, LondonBranch 3,569,834.00 3,563,757.64 7,133,591.64 (514,358.41) 6,619,233.23The Governor and Companyof the Bank of Ireland 17,818,788.15 17,818,788.15 (1,282,813.59) 16,535,974.56Bank of Scotland plc 17,849,169.95 21,382,545.78 39,231,715.72 (2,828,354.75) 36,403,360.98Bank of Taiwan, LondonBranch 7,139,668.01 7,127,515.26 14,267,183.26 (1,028,716.81) 13,238,466.45Barclays Bank Plc 7,406,536.68 7,406,536.68 (533,212.80) 6,873,323.89BAWAG P.S.K. Bank fürArbeit und Wirtschaft undÖsterreichischePostsparkasseAktiengesellschaft 17,849,170.01 17,849,170.01 (1,288,978.45) 16,560,191.56Bayerische Landesbank,London Branch 17,849,170.01 28,510,061.04 46,359,231.06 (3,341,480.19) 43,017,750.87Crédit AgricoleCorporate & InvestmentBank 28,510,061.04 28,510,061.04 (2,052,501.74) 26,457,559.31Danske Bank A/S 14,279,336.01 42,765,091.57 57,044,427.58 (4,109,935.37) 52,934,492.21DZ Bank AG, LondonBranch 3,569,834.00 3,563,757.63 3,388,817.74 10,522,409.37 (756,418.03) 9,765,991.34Emirates Bank InternationalPJSC 3,569,834.00 7,127,515.26 10,697,349.25 (770,921.12) 9,926,428.13First Commercial BankLtd., London Branch 7,139,668.01 7,139,668.01 (515,591.38) 6,624,076.63Fortis Bank, UK BranchHSBC Bank plc 28,558,672.02 42,765,091.57 33,888,177.35 4,683,502.12 109,895,443.06 (7,835,540.42) 102,059,902.64Hua Nan Commercial BankLtd., London Branch 3,569,834.00 3,569,834.00 (257,795.69) 3,312,038.31
163
£75m and£135m bilateral
Principal
as at 31 October2010
£500msyndicate
Principal
as at 31 October2010
£800msyndicate
Principal
as at 31 October2010
£215msyndicate
Principal
as at 31 October2010
GuaranteedHedge
Counterparty
Principal
as at 31 October2010
Total claims beforeSEA escrowadjustment
Principal
as at 31 October2010
Estimatedmaximum
possible returnfrom SEA
escrow
Total Claims
Landesbank Baden-Württemberg 14,255,030.52 14,255,030.52 (1,026,250.87) 13,228,779.65Lloyds TSB Bank 35,698,340.02 42,765,091.57 78,463,431.58 (5,656,709.51) 72,806,722.07Malayan Banking Berhad,London Branch 7,127,515.26 7,127,515.26 (513,125.43) 6,614,389.82National Australia BankLimited A.B.N. 12 004 044937 24,988,838.02 28,510,061.04 20,123,551.16 73,622,450.22 (5,294,475.30) 68,327,974.92National Bank of Egypt(UK) Limited 7,127,515.26 7,127,515.26 (513,125.43) 6,614,389.82NM Rothschild & SonsLimited 5,354,751.01 5,354,751.01 (386,693.54) 4,968,057.48
164
£75m and£135m bilateral
Principal
as at 31 October2010
£500msyndicate
Principal
as at 31 October2010
£800msyndicate
Principal
as at 31 October2010
£215msyndicate
Principal
as at 31 October2010
GuaranteedHedge
Counterparty
Principal
as at 31 October2010
Total claims beforeSEA escrowadjustment
Principal
as at 31 October2010
Estimatedmaximum
possible returnfrom SEA
escrow
Total Claims
State Bank OfIndia, LondonBranch 3,569,834.00 7,127,515.26 10,697,349.25 (770,921.12) 9,926,428.13SumitomoMitsui BankingCorporationEurope Limited 14,255,030.52 14,255,030.52 (1,026,250.87) 13,228,779.65The Bank OfTokyo-Mitsubishi Ufj,Ltd 3,569,834.00 5,156,663.17 8,726,497.17 (629,035.17) 8,097,462.01Morgan StanleyInternational Ltd 559,170.55 559,170.55 (40,255.91) 518,914.63Deutsche BankAG 2,219,523.30 1,289,168.35 3,508,691.66 (253,093.01) 3,255,598.65Burlington LoanManagement Ltd 7,246,763.02 7,246,763.02 (523,325.25) 6,723,437.77York CapitalManagement LP 15,722,015.90 31,539,612.34 5,183,192.89 52,444,821.13 (3,776,201.63) 48,668,619.50JP MorganChase Bank,N.A 9,739,921.72 18,086,536.84 8,268,397.36 36,094,855.92 (2,596,060.97) 33,498,794.94J.P. MorganSecuritiesLimited 1,098,899.92 740,653.66 1,839,553.57 (132,678.38) 1,706,875.20MarathonLuxembourgSarl 8,273,168.50 7,451,429.41 15,724,597.91 (1,133,891.88) 14,590,706.03Monarch MasterFunding LLC 741,916.51 741,916.51 (53,577.53) 688,338.98Canyon CapitalFinance Sarl 38,848,890.18 67,900,434.41 23,512,368.89 130,261,693.49 (9,373,238.34) 120,888,455.15Goldman SachsInternational 6,750,749.12 6,750,749.12 (486,001.21) 6,264,747.91BNP ParibasS.A., London 21,419,004.02 16,196,594.63 37,615,598.65 (2,712,802.46) 34,902,796.19
165
BranchACMO S.a.r.l 142,550.31 142,550.31 (10,262.51) 132,287.80Saberasu JapanInvestments IIB.V 712,751.52 712,751.52 (51,312.54) 661,438.98
109,432,332.32 356,983,400.16 570,201,220.85 145,215,713.06 4,683,502.12 1,186,516,168.51 (85,216,019.62) 1,101,300,148.89
Note: The estimated maximum return to the banks as a whole (excluding the Guaranteed Hedge Counterparty) from the SEA Escrow is split between each bank facilityusing the 9 March 2009 total claims of each bank facility. The total for each bank facility is split between the banks participating in the relevant facility pro-rata to thebanks 31 October 2010 claims in the relevant facility shown above
166
Holder Series Principal Make whole SettlementAmount
Total claims(excluding
accrued interest)before SEA
escrowadjustment
Estimatedmaximum possiblereturn from SEA
escrow
Total claims(excluding
accrued interest)£
As at 31 October2010
As at 31 October2010
As at 31 October2010
As at 31 October2010
Anchorage Illiquid Opportunities OffshoreMaster, L.P. 12,465,376.94 1,354,601.23 1,877,149.01 15,697,127.18 (1,050,126.93) 14,647,000.25Aviva Annuity UK Limited 24,777,452.02 7,508,236.72 841,799.16 33,127,487.89 (1,906,563.10) 31,220,924.79Aviva Life & Pensions UK Limited 24,457,886.65 8,492,627.78 1,097,654.04 34,048,168.47 (1,997,457.37) 32,050,711.11Corporate Debt Opportunities Fund L.P. 1,521,640.72 214,298.30 209,832.84 1,945,771.87 (125,881.18) 1,819,890.69Gateway Recovery Trust 6,340,169.68 892,909.59 874,303.51 8,107,382.78 (524,504.93) 7,582,877.86GLG European Distressed Fund 1,521,640.72 214,298.30 209,832.84 1,945,771.87 (125,881.18) 1,819,890.69GLG Market Neutral Fund 3,043,281.45 428,596.60 419,665.69 3,891,543.74 (251,762.37) 3,639,781.37Hartford Life Insurance Company 1,150,059.58 99,598.09 183,198.72 1,432,856.39 (98,081.34) 1,334,775.05Marathon Credit Dislocation Fund LP 1,521,640.72 214,298.30 209,832.84 1,945,771.87 (125,881.18) 1,819,890.69Pacific Life Insurance Company 9,857,654.93 853,698.07 1,570,274.93 12,281,627.93 (840,697.32) 11,440,930.61Penteli Master Fund Ltd 507,213.57 71,432.77 69,944.28 648,590.62 (41,960.39) 606,630.23Prudential Retirement Insurance andAnnuity Company 6,340,169.68 892,909.59 874,303.51 8,107,382.78 (524,504.93) 7,582,877.86State Street Nominees (Henderson) 4,097,411.77 339,151.49 237,560.29 4,674,123.55 (287,114.50) 4,387,009.04The Prudential Insurance Company ofAmerica 16,100,836.55 1,394,373.53 2,564,782.41 20,059,992.50 (1,373,138.97) 18,686,853.53UBS AG, London Branch 24,808,959.34 2,086,843.73 1,415,334.33 28,311,137.40 (1,733,972.20) 26,577,165.20UBS Limited 13,029,809.35 554,353.05 1,744,531.58 15,328,693.97 (1,004,258.35) 14,324,435.62Total 151,541,203.68 25,612,227.14 14,400,000.00 191,553,430.82 (12,011,786.26) 179,541,644.56
167
Unguaranteed HedgeCounterparty
Principal as at 31October 2010
Estimatedmaximum possiblereturn from SEA
Escrow Total claims
Allied Irish Banks, Plc .......................................................... 6,386,311.60 (8,640.98) 6,377,670.62The Governor and Company of The Bank of Ireland ......... 3,122,300.00 (4,224.62) 3,118,075.38Bank of Scotland Plc............................................................. 5,871,675.00 (7,944.65) 5,863,730.35Barclays Bank Plc ................................................................. 2,183,000.00 (2,953.70) 2,180,046.30Bayerische Landesbank, London Branch ............................ 10,978,000.00 (14,853.75) 10,963,146.25Crédit Agricole Corporate & Investment Bank................... 7,204,976.00 (9,748.67) 7,195,227.33Fortis Bank, UK Branch ....................................................... 2,761,664.04 (3,736.66) 2,757,927.38Landesbank Baden-Württemberg......................................... 5,725,000.00 (7,746.20) 5,717,253.80Lloyds TSB Bank.................................................................. 3,938,391.00 (5,328.83) 3,933,062.17National Australia Bank Limited ......................................... 9,029,538.01 (12,217.39) 9,017,320.62
57,200,855.65 (77,395.46) 57,123,460.19
168
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169
SCHEDULE 5 TO THE SCHEME
HEDGE AGREEMENTS
1. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 26 January 1993 between Midland Bankplc and the Company.(a) Confirmation dated 14 June 2006 supplements, forms part of and is subject to the 26 January 1993 ISDA Master
Agreement and relating to a £10,000,000 interest rate swap (HSBC reference: SW4848065).(b) Confirmation dated 4 December 2006 supplements, forms part of and is subject to the 26 January 1993 ISDA
Master Agreement and relating to a £20,000,000 interest rate swap (HSBC reference:ISWO63389903\SW518697ML).
(c) Confirmation dated 6 September 2007 supplements, forms part of and is subject to the 26 January 1993 ISDAMaster Agreement and relating to a £30,000,000 interest rate swap (HSBC reference:ISWO72509958\SW591916ML).
(d) Confirmation dated 30 November 2007 supplements, forms part of and is subject to the 26 January 1993 ISDAMaster Agreement and relating to a £20,000,000 interest rate swap (HSBC reference:ISWO73349849\SW606071ML).
(e) Confirmation dated 18 December 2007 supplements, forms part of and is subject to the 26 January 1993 ISDAMaster Agreement and relating to a £30,000,000 interest rate swap (HSBC reference:ISWO73529770\SW608849ML).
(f) Confirmation dated 30 June 2008 supplements, forms part of and is subject to the 26 January 1993 ISDA MasterAgreement and relating to a £30,000,000 interest rate swap (HSBC reference: ISWO81829849\SW644510ML).
2. Confirmation dated 12 October 2005 relating to a £10,000,000 interest rate swap (HSBC reference: SW 456194ML)subject to a deemed ISDA Master Agreement as described in the Confirmation.
3. Confirmation dated 9 October 2006 relating to a £10,000,000 interest rate swap (HSBC reference: IRC_499272ML)subject to a deemed ISDA Master Agreement as described in the Confirmation.
4. Interest Rate and Currency Exchange Agreement dated 2 June 1988 between Midland Bank plc and Cattles.5. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 10 December 2001 between Allied Irish
Banks PLC and the Company.(a) Confirmation dated 21 December 2004 supplements, forms part of and is subject to the 10 December 2001 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (AIB reference: 1006175).(b) Confirmation dated 11 October 2005 supplements, forms part of and is subject to the 10 December 2001 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (AIB reference: 1006915).(c) Confirmation dated 14 June 2006 supplements, forms part of and is subject to the 10 December 2001 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (AIB reference: 1007344).(d) Confirmation dated 6 October 2006 supplements, forms part of and is subject to the 10 December 2001 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (AIB reference: 1007515).(e) Confirmation dated 28 December 2006 supplements, forms part of and is subject to the 10 December 2001 ISDA
Master Agreement and relating to a £15,000,000 interest rate swap (AIB reference: 1007675).(f) Confirmation dated 18 December 2007 supplements, forms part of and is subject to the 10 December 2001 ISDA
Master Agreement and relating to a £30,000,000 interest rate swap (AIB reference: 1008296).6. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 30 January 2008 between The Governor
and Company of the Bank of Ireland (London Branch) and the Company.(a) Confirmation dated 6 August 2008 supplements, forms part of and is subject to the 30 January 2008 ISDA
Master Agreement and relating to a £20,000,000 interest rate swap (BoI reference: 163299B//788244).
(b) Confirmation dated 23 October 2008 supplements, forms part of and is subject to the 30 January 2008 ISDAMaster Agreement and relating to a £20,000,000 interest rate swap (BoI reference: 169494B//822475).
7. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 19 July 2001 between Bank of ScotlandTreasury Services PLC and the Company.(a) Confirmation dated 19 December 2007 supplements, forms part of and is subject to the 19 July 2001 ISDA
Master Agreement and relating to a £30,000,000 interest rate swap (BoS reference: 1319489TS).
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(b) Confirmation dated 22 October 2008 supplements, forms part of and is subject to the 19 July 2001 ISDA MasterAgreement and relating to a £15,000,000 interest rate swap (BoS reference: 1627170TS).
(c) Confirmation dated 31 May 2005 supplements, forms part of and is subject to the 19 July 2001 ISDA MasterAgreement and relating to a £10,000,000 interest rate swap (HBOS reference: 645701TS).
(d) Confirmation dated 11 October 2005 supplements, forms part of and is subject to the 19 July 2001 ISDA MasterAgreement and relating to a £10,000,000 interest rate swap (HBOS reference: 728022TS).
(e) Confirmation dated 27 December 2006 supplements, forms part of and is subject to the 19 July 2001 ISDAMaster Agreement and relating to a £20,000,000 interest rate swap (HBOS reference: 1034894TS).
8. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 5 March 2002 between Barclays BankPLC and the Company.(a) Confirmation dated 22 December 2004 supplements, forms part of and is subject to the 5 March 2002 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (Barclays reference: 680283B\1).(b) Confirmation dated 31 May 2005 supplements, forms part of and is subject to the 5 March 2002 ISDA Master
Agreement and relating to a £10,000,000 interest rate swap (Barclays reference: 818898B/1).(c) Confirmation dated 5 August 2008 supplements, forms part of and is subject to the 5 March 2002 ISDA Master
Agreement and relating to a £20,000,000 interest rate swap (Barclays reference: 2577454B).(d) Confirmation dated 12 November 2001 supplements, forms part of and is subject to the 6 February 1995 ISDA
Master Agreement and relating to a USD/sterling cross currency swap (Barclays reference: 245189B\502281).(e) Confirmation dated 16 November 2001 supplements, forms part of and is subject to the 6 February 1995 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (Barclays reference: 246113B\502844).9. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 19 February 1999 between Bayerische
Landesbank Girozentrale (acting through its London Branch) and the Company.10. Confirmation dated 12 November 2001 relating to a USD/Sterling cross currency swap (Bayerische Landesbank
Girozentrale reference: 63821L/24013; Deal reference: 65821L) subject to a deemed ISDA Master Agreement asdescribed in the Confirmation.
11. Confirmation dated 13 June 2006 relating to a £10,000,000 interest rate swap (Bayern LB reference: 311271L/440094;Deal reference: 311271L) subject to a deemed ISDA Master Agreement as described in the Confirmation.
12. Confirmation dated 4 December 2006 relating to a £20,000,000 interest rate swap (Bayern LB reference:398937L/519297; Deal reference: 398937L) subject to a deemed ISDA Master Agreement as described in theConfirmation.
13. Confirmation dated 22 December 2006 relating to a £20,000,000 interest rate swap (Bayern LB reference:410062L/532014; Deal reference: 410062L) subject to a deemed ISDA Master Agreement as described in theConfirmation.
14. Confirmation dated 6 September 2007 relating to a £20,000,000 interest rate swap (Bayern LB Deal reference:558446L) subject to a deemed ISDA Master Agreement as described in the Confirmation.
15. Confirmation dated 19 December 2007 relating to a £30,000,000 interest rate swap (Bayern LB reference:628434L/752438; Deal reference: 628434L) subject to a deemed ISDA Master Agreement as described in theConfirmation.
16. Confirmation dated 30 November 2007 relating to a £20,000,000 interest rate swap (Bayern LB reference:614823L/740365; Deal reference: 614823L) subject to a deemed ISDA Master Agreement as described in theConfirmation.
17. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 5 December 2006 between Calyon andthe Company.
18. Confirmation dated 23 February 2007 relating to a £20,000,000 interest rate swap (Calyon reference: 1207361L/)subject to a deemed ISDA Master Agreement as described in the Confirmation.
19. Confirmation dated 5 November 2007 relating to a £20,000,000 interest rate swap (Calyon reference:1719982L/TSJ038) subject to a deemed ISDA Master Agreement as described in the Confirmation.
20. Confirmation dated 10 August 2008 relating to a £20,000,000 interest rate swap (Calyon reference: 2415665L/) subjectto a deemed ISDA Master Agreement as described in the Confirmation.
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21. Confirmation dated 18 December 2007 relating to a £30,000,000 interest rate swap (Calyon reference: 1825204L/)subject to a deemed ISDA Master Agreement as described in the Confirmation.
22. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 8 December 2003 between Fortis BankSA/NV (acting through its London Branch) and the Company.(a) Confirmation dated 17 August 2004 supplements, forms part of and is subject to the 8 December 2003 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (Fortis reference: 870566/870567).(b) Confirmation dated 26 May 2005 supplements, forms part of and is subject to the 8 December 2003 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (Fortis reference: 870566/870567).(c) Confirmation dated 22 December 2006 supplements, forms part of and is subject to the 8 December 2003 ISDA
Master Agreement and relating to a £20,000,000 interest rate swap (Fortis reference: 162837/162836).23. Confirmation dated 5 October 2006 relating to a £10,000,000 interest rate swap (Fortis reference: 161997/161998)
subject to a deemed ISDA Master Agreement as described in the Confirmation.24. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 31 July 2007 between Landesbank
Baden-Württemberg (London Branch) and the Company.(a) Confirmation dated 2 November 2007 supplements, forms part of and is subject to the 31 July 2007 ISDA Master
Agreement and relating to a £20,000,000 interest rate swap (LBBW reference: 071031.734.0/048120M).(b) Confirmation dated 3 December 2007 supplements, forms part of and is subject to the 31 July 2007 ISDA Master
Agreement and relating to a £20,000,000 interest rate swap (LBBW reference: 071130.021.0/052658M).(c) Confirmation dated 19 December 2007 supplements, forms part of and is subject to the 31 July 2007 ISDA
Master Agreement and relating to a £30,000,000 interest rate swap (LBBW reference: 071218.370.0/055017M).25. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 19 July 2001 between Lloyds Bank TSB
PLC and the Company.(a) Confirmation dated 22 December 2004 supplements, forms part of and is subject to the 19 July 2001 ISDA
Master Agreement and relating to a £10,000,000 interest rate swap (Lloyds reference: IS 04005939).(b) Confirmation dated 27 May 2005 supplements, forms part of and is subject to the 19 July 2001 ISDA Master
Agreement and relating to a £10,000,000 interest rate swap (Lloyds reference: IS 05002437).(c) Confirmation dated 11 October 2005 supplements, forms part of and is subject to the 19 July 2001 ISDA Master
Agreement and relating to a £10,000,000 interest rate swap (Lloyds reference: IS 05004809).(d) Confirmation dated 4 January 2006 supplements, forms part of and is subject to the 19 July 2001 ISDA Master
Agreement and relating to a USD/Sterling currency swap (Lloyds reference: CS 06000010).(e) Confirmation dated 21 June 2006 supplements, forms part of and is subject to the 19 July 2001 ISDA Master
Agreement and relating to a £10,000,000 interest rate swap (Lloyds reference: IS 06003808).(f) Confirmation dated 6 October 2006 supplements, forms part of and is subject to the 19 July 2001 ISDA Master
Agreement and relating to a £10,000,000 interest rate swap (Lloyds reference: IS 06006294).(g) Confirmation dated 27 December 2006 supplements, forms part of and is subject to the 19 July 2001 ISDA
Master Agreement and relating to a £20,000,000 interest rate swap (Lloyds reference: IS 06008531).(h) Confirmation dated 3 December 2007 supplements, forms part of and is subject to the 19 July 2001 ISDA Master
Agreement and relating to a £20,000,000 interest rate swap (Lloyds reference: IS 07012219).(i) ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 19 March 2004 between National
Australia Bank Limited and the Company.(j) Confirmation dated 6 September 2007 supplements, forms part of and is subject to the 19 March 2004 ISDA
Master Agreement and relating to a £20,000,000 interest rate swap (NAB reference: 80222136/80241536).26. Confirmation dated 5 January 2005 relating to a £10,000,000 interest rate swap (NAB reference: 80143747/80151928)
subject to a deemed ISDA Master Agreement as described in the Confirmation.27. Confirmation dated 19 July 2005 relating to a £10,000,000 interest rate swap (NAB reference: 80156781/80166334)
subject to a deemed ISDA Master Agreement as described in the Confirmation.28. Confirmation dated 10 October 2005 relating to a £10,000,000 interest rate swap (NAB reference:
80162108/80172508) subject to a deemed ISDA Master Agreement as described in the Confirmation.29. Confirmation dated 30 March 2006 relating to a £20,000,000 interest rate swap (NAB reference: 80175800/80187624)
subject to a deemed ISDA Master Agreement as described in the Confirmation.
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30. Confirmation dated 20 April 2006 relating to a USD/Sterling currency swap (NAB reference: 80167762/80178890)subject to a deemed ISDA Master Agreement as described in the Confirmation.
31. Confirmation dated 13 June 2006 relating to a £10,000,000 interest rate swap (NAB reference: 80181088/80193462)subject to a deemed ISDA Master Agreement as described in the Confirmation.
32. Confirmation dated 5 October 2006 relating to a £10,000,000 interest rate swap (NAB reference: 80190134/80203345)subject to a deemed ISDA Master Agreement as described in the Confirmation.
33. Confirmation dated 8 December 2006 relating to a £20,000,000 interest rate swap (NAB reference:80195525/80209525) subject to a deemed ISDA Master Agreement as described in the Confirmation.
34. Confirmation dated 12 April 2007 relating to a £20,000,000 interest rate swap (NAB reference: 80208624/80224456)subject to a deemed ISDA Master Agreement as described in the Confirmation.
35. Confirmation dated 3 July 2008 relating to a £30,000,000 interest rate swap (NAB reference: 80254524/80278597)subject to a deemed ISDA Master Agreement as described in the Confirmation.
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SCHEDULE 6 TO THE SCHEME
FORM OF NOTICE OF ASSIGNMENT OR TRANSFER
To: The Scheme Supervisors
From: [Insert the name of the Scheme Creditor] (Assignor)
We refer to the scheme of arrangement between Cattles plc and its Scheme Creditors, dated [�] (the Scheme).
1. Words and expressions defined in the Scheme have the same meanings when used in this Notice unless otherwiseprovided or the context otherwise requires.
2. On [Insert the date of the transfer or assignment] the Assignor confirms, by signing this Notice below, that it validlyassigned and/or transferred the [whole] [or part]1 of its Scheme Liability and/or Ascertained Scheme Claim to [Insertthe name of the Assignee] of [Insert address and other contact details of the Assignee] (the Assignee).
3. The Assignee, by signing this Notice below, hereby confirms that it agrees to be bound by the terms of the Scheme.
Assignor Assignee
Date
1 Delete as applicable. Where the assignment is of a part only, please set out how the right to the Scheme Liability/Ascertained Scheme Claim is split between theAssignor and the Assignee
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SCHEDULE 7 TO THE SCHEMEPENSION COMPROMISE
DECEMBER 2010
CATTLES PLC
WELCOME FINANCIAL SERVICES LIMITED
THE LEWIS GROUP LIMITED
CSP LEEDS LIMITED
CATTLES STAFF PENSION FUND LIMITED
CONSOLIDATED COMPROMISE DEED ASAMENDED BY A DEED OF VARIATIONRELATING TO THE CATTLES STAFF
PENSION FUND
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THIS DEED is made this day of December 2010
BETWEEN
(1) CATTLES PLC (company number 543610) whose registered office is at Kingston House, Centre 27 Business Park,Woodhead Road, Birstall, Batley, West Yorkshire, WF17 9TD (the Company);
(2) WELCOME FINANCIAL SERVICES LIMITED (company number 133540) whose registered office is at KingstonHouse Centre 27, Business Park, Woodhead Road, Birstall, Batley, West Yorkshire WF17 9TD (WFSL) and THELEWIS GROUP LIMITED (company number SC127043) whose registered office is at Rowan House, 70 BuchananStreet, Glasgow, G1 3JF (TLG) (together, the Participating Employers);
(3) CSP LEEDS LIMITED (company number 7222034) whose registered office is at Kingston House Centre 27,Business Park, Woodhead Road, Birstall, Batley, West Yorkshire WF17 9TD (Newco); and
(4) CATTLES STAFF PENSION FUND LIMITED (company number 3444694) whose registered office is at KingstonHouse, Centre 27 Business Park, Woodhead Road, Birstall, Batley, WF17 9TD (the Trustee).
WHEREAS
(A) This Deed relates to the Cattles Staff Pension Fund (the Scheme) which was established by a trust deed dated 20 August1952.
(B) This Deed is supplemental to a Deed of Variation, Removal and Appointment dated 2 April 1996 which adopted the trustdeed and rules (the Trust Deed and Rules respectively), which currently govern the Scheme (as amended from time to time).
(C) The Trustee is the current trustee of the Scheme.
(D) The parties to this Deed (together the Parties, each of them being a Party) wish to reach a mutually acceptablecompromise of the liabilities to the Scheme of each of the Company and the Participating Employers, as part of a broaderrestructuring of those Parties liabilities to certain of their financial creditors.
(E) In anticipation of such a mutually acceptable compromise being reached and in particular in order to ensure that theeligibility of the Scheme to enter the Pension Protection Fund may be maintained, the Scheme, which was closed to futureaccrual of benefits on 14 May 2010 and therefore became a frozen scheme for the purposes of the Occupational PensionSchemes (Employer Debt) Regulations 2005 (the Employer Debt Regulations), was temporarily unfrozen on 9 August 2010in order to allow a new participating employer, Newco, to adhere to the Scheme and for two employees of Newco to becomemembers of the Scheme, with a view to Newco becoming the last employer in the Scheme for statutory purposes (the lastman standing ) following the compromise taking effect. The Scheme was subsequently re-frozen on and from 16 August2010.
(F) The Parties acknowledge that Newco is to be used only as a means to maintain the eligibility of the Scheme to enter thePension Protection Fund under The Pension Protection Fund (Entry Rules) Regulations 2005 and The Pension ProtectionFund (Multi-employer Schemes) (Modification) Regulations 2005 and that Newco has not (save under a Deed of Indemnitybetween Newco and WFSL dated 5 August 2010), and will never have, any funds or assets available to meet any liability itmay have to or in respect of the Scheme.
(G) It is intended that the compromise will include a compromise for a nominal sum of all the Company s and theParticipating Employers obligations to and in respect of the Scheme, including any past, present or future statutory debtsunder section 75 or section 75A of the Pensions Act 1995 (section 75 debts). The Company and the Participating Employerswill in future make payments to the Scheme on a rateable basis with other creditors of the Company and the ParticipatingEmployers as set out in this Deed. The Company and WFSL are each proposing a scheme of arrangement pursuant to Part 26of the Companies Act 2006 under which the Company and WFSL will, respectively, make such payments to the Scheme andTLG is proposing to execute either a compromise, release and distribution deed or a bilateral deed, in relation to which eithersuch payments or an alternative lump sum payment will be made to the Scheme.
(H) The Trustee has taken legal, actuarial and financial advice and has reached the conclusion that a compromise on this basiswill be in the best interests of the Scheme, in circumstances where (without a compromise) insolvency of the Company andthe Participating Employers is considered inevitable and the compromise is anticipated to result in the Scheme receivingsignificantly more than the dividend that it would receive on such insolvency.
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(I) This Deed is conditional upon (amongst other things) implementation of the broader restructuring referred to in Recital(D) above, being Plan A (as defined below) becoming effective in accordance with its terms or, if Plan A fails, Plan B (asdefined below) becoming effective in accordance with its terms.
(J) In respect of WFSL and, in the case of Plan A, the Company, this Deed is intended to be a legally enforceable agreementwithin Regulation 2(3)(b) of the Pension Protection Fund (Entry Rules) Regulations 2005, that is to say part of anarrangement under section 425 of the Companies Act 1985 (now Part 26 of the Companies Act 2006), the effect of which isto reduce the amount of the debt due to the Scheme under section 75 or section 75A of the Pensions Act 1995 which may berecovered by, or on behalf of, the Trustee.
(K) Under this Deed, the Company and the Participating Employers will each enter into a regulated apportionmentarrangement (as defined in the Employer Debt Regulations) with the Trustee in order to apportion their liabilities (other thantheir liabilities to make the compromise payments in respect of the section 75 debts) to Newco.
(L) The Parties do not consider that the Former Employers are employers for statutory purposes as evidenced by a Trusteeresolution dated 21 September 2010.
(M) Once this Deed has become unconditional and the Company has made the compromise payments in respect of thesection 75 debts (or procured that such payments have been made), it is intended that:
(N) Newco will be the last man standing in the Scheme and the Company and the Participating Employers shall each ceaseto be an employer for all statutory purposes and in particular (but without limitation to the foregoing) for the purposes of:
(O) The Pension Protection Fund (Entry Rules) Regulations 2005 (by virtue of the operation of regulation 1(5)(b)(i) or (ii));
(P) The Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 (by virtue of the operation ofregulation 1(3)(b)(i) or (ii));
(Q) The Occupational Pension Schemes (Employer Debt) Regulations 2005 (by virtue of the operation of regulation 9(8),(12) or (14));
(R) paragraph 3(1), Schedule 2, The Occupational Pension Schemes (Scheme Funding) Regulations 2005 (by virtue of theoperation of paragraph 3(2));
(S) the Pensions Regulator (Financial Support Directions etc) Regulations 2005 (by virtue of the operation of regulation15(2)(a) or (b)); and
(T) the Occupational Pension Schemes (Investment) Regulations 2005 (by virtue of the operation of regulation 1(5)(a));
(U) thereafter and following the transfer of the ownership of Newco to the Trustee and the transfer of the ownership of theTrustee to the Chairman of the Trustee Board, the Company and the Participating Employers shall each cease to be anEmployer for the purposes of the Trust Deed and Rules and Newco will become the principal employer of the Scheme with
the express intention that the Scheme will be separate and distinct from the Group; and
(V) all further payments made to the Scheme by the Company and the Participating Employers shall be made under the termsof this Deed only and not in the capacity of employer in the Scheme for any purpose.
(W) In due course, it is envisaged that the Trustee will then wind-up the Scheme and that a qualifying insolvency event (asdefined in section 127(3), Pensions Act 2004) will occur in relation to Newco and that the Scheme will enter into a PPFassessment period. It is intended that the Scheme s eligibility to enter the PPF is to be maintained notwithstanding thecompromise effected by this Deed.
(X) An application for clearance has been made to the Pensions Regulator in relation to all the steps envisaged by this Deed.
IT IS AGREED THAT
1. DEFINITIONS AND INTERPRETATION
1.1 In this Deed, unless the context otherwise requires (and save to the extent otherwise defined herein):
Actuary means the actuary appointed to the Scheme from time to time under section 47 of the Pensions Act 1995;
Amerial means Amerial Limited, a company registered in England and Wales under number 5436719;
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Bidco means Bovess Limited, a company registered in England and Wales under company number 073666975;
Business Day means any day, other than a Saturday, Sunday or public or bank holiday, on which banks are generally openfor business in the City of London;
Cattles Creditor Scheme means the scheme of arrangement pursuant to Part 26 of the Companies Act 2006 as set out in theCattles Scheme Document;
Cattles Scheme Creditors has the meaning given to the term Scheme Creditors in the Cattles Scheme Document;
Cattles Scheme Document means the draft of the Cattles Creditor Scheme as set out in Schedule 9;
Chairman of the Trustee Board means Duncan Brown or any current or new director of the Trustee appointed as hissuccessor;
CIF Payment means the payment of £3,065,400 made to the Scheme on 25 November 2009 in respect of the section 75 debttriggered when there was an employment-cessation event in relation to Cattles Invoice Finance Limited (company number02483505) as a result of its disposal on 14 September 2009 to a company controlled by funds managed by AnaCap FinancialPartners GP, LP;
Company Claim means the Notional Section 75 Debt certified or determined under clause 4 in respect of the Company;
Conditions means the conditions precedent set out in clause 2 or, where the context requires, such of them as may from timeto time be unsatisfied;
Costs includes all costs, charges, expenses, disbursements, taxes (direct or indirect, including stamp duty and stamp dutyreserve tax), interest and professional fees, whether incurred directly or indirectly;
Current Employers means the Company and the Participating Employers;
Deed of Alteration means the Deed of Alteration entered into under clause 2.1(a);
Deed of Alteration and Substitution means the Deed of Alteration and Substitution entered into under clause 2.1(g);
Effective Date means the date on which all of the Conditions are satisfied;
Employer Debt Regulations means the Occupational Pension Schemes (Employer Debt) Regulations 2005;
employment-cessation event has the same meaning as in the Employer Debt Regulations;
Engagement Letter means the letter entered into between Amerial, WFSL and Robin Johnson dated 16 June 2010 in respectof his appointment as a director of Newco;
Escrow Letter means the letter dated 1 October 2010 between the Trustee, WFSL, TLG and Wrigleys Solicitors LLPestablishing an escrow in relation to certain payments envisaged under the Schedule of Contributions;
Former Employers means the companies listed at Schedule 7, which formerly participated in the Scheme, but had ceased todo so on or before 13 May 2010;
Group means the Company, its subsidiaries and subsidiary undertakings from time to time and Orphanco, but shall excludethe Trustee and Newco;
Holdco means Bovess Holding Limited, a company registered in England and Wales under company number 07366959;
Independent Actuary means an actuary appointed by agreement between the Current Employers and the Trustee or, failingsuch agreement, by the President for the time being of the Institute and Faculty of Actuaries at the request of either theCurrent Employers or the Trustee;
Long Stop Date means 31 May 2011 or such later date as agreed under clause 2.2;
Notional Section 75 Debts has the meaning given in clause 4.2;
Orphanco means Bidco and Holdco, forming the orphan company structure comprising Bidco, which is wholly owned byHoldco, the share capital of which is held by a share trustee for certain charitable purposes;
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Plan A means a scheme of arrangement under Part 26 of the Companies Act 2006 of the shareholders of the Company(whereby the Company will be acquired by Bidco), schemes of arrangement under Part 26 of the Companies Act 2006 of thecreditors of the Company and WFSL (a Cattles Creditor Scheme and a WFSL Creditor Scheme respectively) and the TLGCompromise;
Plan B means the Company entering into administration, a sale by the Company (in administration) of the shares in itsimmediate subsidiaries (other than the Trustee) to Bidco, a WFSL Creditor Scheme and the TLG Compromise;
PPF means the Pension Protection Fund, a statutory corporation established under Part 2 of the Pensions Act 2004 (or whereappropriate the Board of the PPF);
regulated apportionment arrangement has the same meaning as in the Employer Debt Regulations;
Regulated Apportionment Arrangement Deed means the deed in the form set out at Schedule 4, to be entered into by theCompany, the Participating Employers, Newco and the Trustee;
Restructuring Effective Date means the date the elements of Plan A or Plan B, as applicable, become effective in accordancewith their terms;
Schedule of Contributions means the current schedule of contributions for the Scheme dated 26 June 2008 (asamended/substituted on 1 October 2010);
the Pensions Regulator means the body corporate called the Pensions Regulator established under Part 1 of the Pensions Act2004;
TLG Claim means the Notional Section 75 Debt certified or determined under clause 4 in respect of TLG;
TLG Compromise means either the compromise, release and distribution deed to be executed by (amongst others) TLG andthe Trustee, a draft of which is set out in Part C of Schedule 9 (the TLG Distribution Deed) or, if the Trustee and TLG soagree, the bilateral compromise deed to be executed by TLG and by the Trustee, the agreed form of which is set out in Part Dof Schedule 9 (the TLG Bilateral Deed);
TLG Creditors means the persons who, from time to time, are owed any Liability (as defined in the TLG Distribution Deed)by TLG as guarantor under any of the Finance Documents (as defined in the TLG Distribution Deed);
Trustee Account means account number 11319576 with sort code 16-22-11 at The Royal Bank of Scotland, IBAN No.:GB97 RBOS 1622 1111 3195 76 and BIC No.: RBOS GB 2L (or such other bank account in the name of the Trustee asnotified to the other Parties by the Trustee);
Trustee Board means the directors of the Trustee;
WFSL Claim means the Notional Section 75 Debt certified or determined under clause 4 in respect of WFSL;
WFSL Creditor Scheme means the scheme of arrangement pursuant to Part 26 of the Companies Act 2006 as set out in theWFSL Scheme Document;
WFSL Scheme Creditors has the meaning given to the term Scheme Creditors in the WFSL Scheme Document; and
WFSL Scheme Document means the draft of the WFSL Creditor Scheme, as set out in Schedule 9 .
1.2 Except where the context otherwise requires, any reference to an enactment or regulation is a reference to it as alreadyamended and includes a reference to any repealed enactment or regulation which it may re-enact or otherwise replace, with orwithout amendment, and to any future re-enactment, replacement and/or amendment of it.
1.3 Except where the context otherwise requires, the singular shall include the plural (and vice versa) and words importingthe masculine gender shall include the feminine gender.
1.4 The headings in this Deed shall not affect its interpretation.
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2. CONDITIONS PRECEDENT
2.1 The obligations of the Parties under this Deed (other than this clause 2, clause 7, clause 8, clauses 12 to 18 and clause 20)are conditional upon:(a) the Company and the Trustee entering into a Deed of Alteration in the form set out at Schedule 1 (and the Actuary
giving the opinion referred to in Schedule 1 ) in order to ensure that the Scheme is clearly a Part 6 scheme for thepurposes of triggering an assessment period under the Pension Protection Fund (Multi-employer Schemes)(Modification) Regulations 2005;
(b) clearance (in a form satisfactory to the Company, WFSL and TLG and, in so far as it is relevant to them, in a formsatisfactory to Newco and Orphanco), in relation to the steps envisaged by this Deed being obtained from the PensionsRegulator (under Part 1 of the Pensions Act 2004) for parties that are listed at Schedule 2;
(c) the Company giving notice in the form set out at Schedule 3 Part A and the Participating Employers each giving noticein the form set out at Schedule 3 Part B to the Trustee under regulation 9(4) of the Employer Debt Regulations (suchnotices being to trigger the relevant section 75 debts immediately prior to Plan A or Plan B, as applicable, becomingeffective in accordance with their terms and, in the case of the notice given by the Company, to terminate theCompany s, the Participating Employers and the Former Employers liability to pay any further contributions orpayments to the Trustee (or any of its officers or directors in their capacity as such) or the Scheme under the TrustDeed and Rules);
(d) the Current Employers, Newco and the Trustee entering into a Regulated Apportionment Arrangement Deed in theform set out at Schedule 4, (such deed being to apportion section 75 debts to Newco with effect from RestructuringEffective Date) and (y) the Pensions Regulator approving the regulated apportionment arrangements documented bysuch Deed by issuing a notice of approval under regulation 7A(1)(c) of the Employer Debt Regulations and (z) theBoard of the PPF confirming in writing that it does not object to the regulated apportionment arrangements underregulation 7A(1)(d) of the Employer Debt Regulations;
(e) under Plan A the following conditions being satisfied:(i) all the conditions to the Cattles Creditor Scheme are satisfied other than the condition that the WFSL Creditor
Scheme has become effective;(ii) the WFSL Creditor Scheme becoming effective; and(iii) the TLG Compromise becoming effective.
or under Plan B the following conditions being satisfied:(iv) the Company entering into administration;(v) a sale by the Company (in administration) of the shares in its immediate subsidiaries (excluding the Trustee) to
Bidco;(vi) the WFSL Creditor Scheme becoming effective; and(vii) the TLG Compromise becoming effective;
(f) written confirmation being provided by the Trustee to the Company in the form attached as schedule 9 that, in theopinion of the Trustee (acting reasonably) there has been no amendment made by the Company to the form of theCattles Scheme Document, the WFSL Scheme Document or if applicable the TLG Distribution Deed which wouldresult in:(i) the Trustee s rights under the Cattles Scheme Document, the WFSL Scheme Document or the TLG Distribution
Deed relating to how its claim is to be valued and ascertained being altered; and(ii) the other rights of the Trustee (whether to receive payment or otherwise) under the Cattles Scheme Document,
the WFSL Scheme Document or the TLG Distribution Deed being materially different from the other CattlesScheme Creditors, WFSL Scheme Creditors or TLG Creditors respectively,
without the written agreement of the Trustee;(g) the Company, the Trustee and Newco entering into a Deed of Alteration and Substitution in the form set out at
Schedule 5 in order to make Newco the principal employer in the Scheme (and to make a consequential amendment tothe Scheme), (such deed being to take effect conditionally upon the due carrying out of the actions envisaged in sub-clause 3.1 below).
2.2 If the Conditions either are not fulfilled or are not waived by the Company and the Trustee on or before the Long StopDate (or such later date as the Company and the Trustee may agree) (save that the Condition at sub-clause 2.1(b) above may
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not be waived without the consent of Newco and, if applicable, Orphanco, such consent not to be unreasonably withheld,conditioned or delayed) all rights and liabilities of the Parties under this Deed shall cease and determine and no Party shallhave any claim against any other Party save in respect of this clause 2, clause 7, clauses 12 to 18, clause 20 and anyantecedent breach of this Deed.
2.3 The Trustee, the Company, the Participating Employers and Newco shall each use all reasonable endeavours to procurethe fulfilment of each of the Conditions as soon as reasonably practicable. The Trustee will procure that the Actuary gives theopinions referred to in the schedules to the deeds set out at Schedule 1 and Schedule 5 . The Trustee shall use all reasonableendeavours to procure that the Condition at sub-clause 2.1(f) has been fulfilled within five Business Days from the date of thehearing at which the High Court orders the convening of the meeting of creditors to vote on the WFSL Creditors Schemepursuant to Section 896 of the Companies Act 2006.
3. SECTION 75 DEBTS COMPROMISE PAYMENT
3.1 On or before the fifth Business Day after the Restructuring Effective Date, the Company or, in the case of Plan Bbecoming effective according to its terms, WFSL for the purposes only of (a) below, shall (in the following order):(a) procure the payment of £3 to the Trustee by electronic funds transfer (for same day value) to the credit of the Trustee
Account, such sum being inclusive of sums payable by or on behalf of the Current Employers under the RegulatedApportionment Arrangement Deed (such sums representing each Current Employer s regulated apportionmentarrangement share within the meaning of regulation 2(1) of the Employer Debt Regulations) and procure the paymentof any cessation expenses attributable to the Current Employers (which shall be paid by them or on their behalf) asenvisaged in the Regulated Apportionment Arrangement Deed. Confirmation from The Royal Bank of Scotland plc (orother bank in relation to the Trustee Account, as applicable) to the Trustee of the receipt of such amounts in suchaccount shall be conclusive evidence as to payment of them by the Company to the Trustee in accordance with thisDeed;
(b) procure that WFSL transfers its share(s) in Newco to the Trustee; and(c) transfer its share(s) in the Trustee to the Chairman of the Trustee Board, to hold as nominee on behalf of the Trustee
Board. For the purposes of articles 14 and 15 of the Trustee s articles of association, this Deed constitutes:(i) notice that:
(A) the Company wishes to transfer its share(s); and(B) the Chairman of the Trustee Board is the intended purchaser of the same; and
(ii) acknowledgment by the Trustee Board that the Trustee Board:(A) approves of the intended purchaser; and(B) will register the transfer.
3.2 The Trustee shall as soon as is practicable upon receiving confirmation from The Royal Bank of Scotland plc (or otherbank in relation to the Trustee Account, as applicable) of the receipt of the amounts paid under clause 3.1, send a receipt inthe form set out at Schedule 6 to the Company, attaching a copy of the confirmation received from The Royal Bank ofScotland plc (or other bank in relation to the Trustee Account, as applicable). As soon as practicable after the RestructuringEffective Date and in any event no later than two Business Days thereafter, the Trustee shall also provide writtenconfirmation of the amount of the cessation expenses in respect of the Current Employers to be paid as envisaged in clause3.1.
3.3 Upon the due carrying out of the actions envisaged in clause 2 and sub-clause 3.1 above, the Parties acknowledge andagree that (save as envisaged by this Deed):(a) with effect from the making of payments envisaged under this clause 3.1(a) Newco will be the last man standing in
the Scheme and the Current Employers shall each cease to be employers for all statutory purposes and in particular(but without limitation to the foregoing) for the purposes of:(i) The Pension Protection Fund (Entry Rules) Regulations 2005 (by virtue of the operation of regulation 1(5)(b)(i)
or (ii));(ii) The Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 (by virtue of the
operation of regulation 1(3)(b)(i) or (ii));(iii) The Occupational Pension Schemes (Employer Debt) Regulations 2005 (by virtue of the operation of regulation
9(8), (12) or (14));
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(iv) paragraph 3(1), Schedule 2, The Occupational Pension Schemes (Scheme Funding) Regulations 2005 (by virtueof the operation of paragraph 3(2));
(v) the Pensions Regulator (Financial Support Directions etc.) Regulations 2005 (by virtue of the operation ofregulation 15(2)(a) or (b)); and
(vi) the Occupational Pension Schemes (Investment) Regulations 2005 (by virtue of the operation of regulation1(5)(a)),
and acknowledge their understanding that the Former Employers have already so ceased;(b) Newco will become the principal employer in the Scheme, pursuant to the Deed of Alteration and Substitution;(c) the Company thereby terminates the liability of itself and each of the Participating Employers and the Former
Employers to pay any further contributions or payments to the Trustee (or any of its officers or directors in theircapacity as such) or the Scheme under the Trust Deed and Rules or otherwise (save under clauses 4 and 5). The Trusteeaccepts (with immediate effect) notice of such termination for the purposes of the Trust Deed so that the CurrentEmployers and the Former Employers cease to participate in the Scheme and are no longer Employers as defined inthe Trust Deed;
(d) subject to clauses 4 and 5, the Current Employers and the Former Employers cease to have any liability (current orfuture, actual or contingent) to pay any sums due or to become due to the Trustee (or any of its officers or directors intheir capacity as such), whether before or after the date of the payment prescribed in clause 3.1(a);
(e) the Deed of Indemnity entered into by the Company and the Trustee (and consented to by the then directors of theTrustee) dated 14 May 2010 is cancelled by the provisions of this Deed and no longer of any effect, so that theCompany and WFSL have no further liability (current or future, actual or contingent) under the terms of that Deed,regardless of when any action giving rise to liability may have taken place;
(f) WFSL s obligations under clause 1 of the Deed of Indemnity entered into by WFSL and Newco dated 5 August 2010(whether current or future, actual or contingent) will terminate automatically and immediately;
(g) the Current Employers and the Former Employers cease to have any liability (current or future, actual or contingent) topay any Costs which may be payable in relation or incidental to the Scheme (including any expenses or professionalfees in respect of the Chairman of the Trustee Board, who has confirmed his agreement to this by executing the releaseappended to Schedule 8 ), its termination or administration and in relation to this Deed, the obtaining of professionaladvice and the seeking of such approvals as the Trustee may decide;
(h) WFSL ceases to have any liability (current or future, actual or contingent and whether in respect of liabilities arisingbefore the Restructuring Effective Date or otherwise) to pay any Costs which may be payable in relation or incidentalto Newco, save for any Costs incurred under the Engagement Letter, under which Newco and WFSL agreed:(i) to pay Amerial a fee for the provision of Robin Johnson s services in respect of work reasonably carried out in
relation to his appointment as a director of Newco;(ii) to reimburse Robin Johnson for all reasonable and properly documented expenses he incurs in performing his
role as a director of Newco; and(iii) to the extent possible, to use their reasonable endeavours to maintain appropriate directors and officers liability
insurance for the benefit of Robin Johnson in the performance of his duties under the Engagement Letter (subjectto the provisions of the Companies Act 2006) during his appointment.
(i) the Current Employers cease to have any liability (current or future, actual or contingent and whether in respect ofliabilities arising before the Restructuring Effective Date or otherwise) to make payments under the Schedule ofContributions, save as provided by clause 10 (Costs and payments).
3.4 Following the due carrying out of the actions envisaged in clause 2 and sub-clause 3.1 above (and at least one daythereafter), the Trustee and Newco shall procure that an insolvency event is triggered in relation to Newco with the intentionthat a qualifying insolvency event (as defined in section 127(3), Pensions Act 2004) will occur in relation to Newco and theintention that the Scheme shall enter into a PPF assessment period within any timeframe required by the PPF whenconfirming that it does not object to the regulated apportionment arrangement (referred to in clause 2.1(d)(z)).
4. CALCULATION OF TRUSTEE CLAIMS
4.1 The Current Employers will, following the compromise described at clause 3 taking effect, make payments to the Schemein accordance with clause 5 below, based (where applicable) on the Notional Section 75 Debts, calculated in accordance withthis clause 4.
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4.2 The Trustee shall procure that the Actuary will calculate the amount of the section 75 debts in respect of each of theCurrent Employers, in each case as at the Restructuring Effective Date, but immediately prior to the compromise described atclause 3 taking effect (the Notional Section 75 Debts), as soon as is practicable and in any event within three months fromthe Restructuring Effective Date. For the avoidance of doubt, the Notional Section 75 Debts shall be the amounts which eachCurrent Employer would have been liable to pay to the Trustee under section 75 or section 75A of the Pensions Act 1995 asat the Restructuring Effective Date, had (i) those liabilities not been apportioned to Newco under the RegulatedApportionment Arrangement Deed and the compromise described in clause 3 not taken effect and (ii) if applicable, in thecase of Plan B, there been no relevant insolvency event in respect of the Company prior to the Restructuring EffectiveDate.
4.3 The Trustee shall procure that, for the purposes of calculating the Notional Section 75 Debts, the Actuary takes intoaccount as an asset of the Scheme:(a) the amount attributable (taking account where appropriate of investment return, whether positive or negative) to
payments made to the Scheme since 1 March 2009 (including, without limitation, the deficit recovery contributionsmade on 25 November 2009 and 31 March 2010, any interim pension payments and special contributions under theSchedule of Contributions and the CIF Payment); and
(b) any amount held in escrow under the Escrow Letter, to the extent it is, or will be released to the Scheme in accordancewith the Escrow Letter (and any True-up Amount (as defined in the Escrow Letter) that is, or will be, paid to theScheme in accordance with the Escrow Letter).
4.4 The Current Employers shall use their reasonable endeavours to assist the Trustee in expediting the calculation of theNotional Section 75 Debts and undertake to procure that all such information within their possession as the Actuary mayreasonably request for the purpose of calculating the Notional Section 75 Debts shall be made available to the Actuary assoon as reasonably practicable.
4.5 The Trustee shall obtain from the Actuary and provide to the Current Employers details of the methods and assumptionsof any calculation of the Notional Section 75 Debts (the methods and assumptions together, the Actuarial Assumptions).
4.6 Following calculation by the Actuary of the amounts of the Notional Section 75 Debts, the Trustee shall procure that theActuary will notify the Current Employers of the amounts of the Notional Section 75 Debts so calculated. The Trustee shallobtain from the Actuary and provide, on request by the Current Employers, such anonymous membership data, benefit detailsand asset valuations (the Base Data) as the Current Employers may reasonably request in writing for the purposes ofreviewing the calculation.
4.7 The Current Employers shall be entitled to review the Actuarial Assumptions and the calculation of the NotionalSection 75 Debts solely for the purposes of confirming:(a) that, in the opinion of the Current Employers, the Actuarial Assumptions are reasonable; and(b) that the calculation of the amounts of the Notional Section 75 Debts (including, for the avoidance of doubt, the relative
amounts allocated to each Current Employer) has been performed by the Actuary without manifest error (both as tocalculation and as to the Base Data on which the calculation is based).
4.8 The Current Employers may only refuse to accept the Actuarial Assumptions and calculation of the Notional Section 75Debts in accordance with the following sub-clauses:(a) the Current Employers (or any one or more of them) shall notify the Trustee within fifteen Business Days of their
receiving notification of both the Actuarial Assumptions and the amounts of the Notional Section 75 Debts if theyconsider either that the Actuarial Assumptions are not reasonable or that there is a manifest error in the NotionalSection 75 Debts (or both). If no Current Employer notifies the Trustee within such time period, it shall be deemed(irrespective of any subsequent notification) that the Current Employers accept the Actuarial Assumptions andcalculation;
(b) the relevant Current Employer(s) shall provide reasoning for the non-acceptance;(c) as soon as practicable (and in any event no later than fifteen Business Days) after receipt of any non-acceptance
notification, the Current Employers and the Trustee shall use reasonable endeavours to agree the amount of theNotional Section 75 Debts; and
(d) if the Current Employers and the Trustee are unable to resolve all differences of views on the Actuarial Assumptionsused and the calculation of the Notional Section 75 Debts within fifteen Business Days, or such longer period as therelevant Parties may agree following receipt by the Trustee of a non-acceptance notification from the Current
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Employers, then the matter in dispute may, at the instigation of either the Current Employers (or any one or more ofthem) or the Trustee, be referred to the Independent Actuary.
4.9 The Independent Actuary shall:(a) (if the Actuarial Assumptions are disputed) determine whether the Actuarial Assumptions are reasonable; and/or(b) (if the calculations and/or Base Data are disputed) determine whether there is manifest error in the calculations and/or
Base Data.
4.10 Following his determination in clause 4.9 above, the Independent Actuary shall determine the amounts of the NotionalSection 75 Debts:(a) (if he determines the Actuarial Assumptions to be unreasonable) by changing the Actuarial Assumptions used to the
minimum extent necessary, in his opinion, to make them reasonable and adjusting the calculated amounts so that theyhave been calculated in accordance with such revised Actuarial Assumptions; and/or
(b) (if he determines that the calculations and/or Base Data include a manifest error), by adjusting the calculated amountsin order for them to be calculated in accordance with the correct Base Data and Actuarial Assumptions (whether or notadjusted under clause (a) above),
or if he does not determine that the Actuarial Assumptions are unreasonable or that the calculations and/or Base Data includea manifest error, by confirming the amounts calculated by the Actuary.
4.11 Any decision of the Independent Actuary shall be final and binding on all concerned and shall be given by him as anexpert and not as an arbitrator. The Current Employers and the Trustee shall provide all information within their respectivepossession or control to the Independent Actuary as he may reasonably request in writing in order to reach his decision on theNotional Section 75 Debts. The expenses of the Independent Actuary (if any) shall be borne equally by the CurrentEmployers.
4.12 Following the earlier of:(a) none of the Current Employers advising the Trustee that they consider the Actuarial Assumptions to be unreasonable or
that there is a manifest error in the calculation of one or more of the Notional Section 75 Debts under clause 4.8(a)above; or
(b) any dispute notified to the Trustee in accordance with clause 4.8(a) being resolved by agreement between the CurrentEmployers and the Trustee as set out in clause 4.8 above (but not, for the avoidance of doubt, if clause 4.9 applies),
the Trustee shall procure that the Actuary certifies the amount of each of the Notional Section 75 Debts as soon aspracticable and shall notify the amount of the total of the Notional Section 75 Debts to the Current Employers.
5. ONGOING PAYMENTS
5.1 Following calculation and certification by the Actuary (or determination by the Independent Actuary) of the amount ofthe Notional Section 75 Debts under clause 4, the amount of the Notional Section 75 Debts so calculated and certified (ordetermined) shall form the basis for the Trustee s claim to receive payments on a pro rata basis to those of the othercompromised creditors under the creditors schemes of arrangement, the payment or payments under the TLG Compromiseor payments under the other compromises forming part of Plan A or Plan B, as set out in this clause 5.
5.2 If Plan A becomes effective in accordance with its terms, the Trustee will be entitled to receive:(a) payments under the Cattles Scheme Document as a Cattles Scheme Creditor (in respect of the Company Claim only);(b) payments under the WFSL Scheme Document as a WFSL Scheme Creditor (in respect of the WFSL Claim only); and(c) a payment or payments (as applicable) from TLG under the TLG Compromise and subject to the relevant terms (in
respect of the TLG Claim only).
5.3 If Plan B becomes effective in accordance with its terms, the Trustee will prove for the amount of the Notional Section 75Debt attributable to the Company and any other expenses attributable to the Company pursuant to the Employer DebtRegulations (save to the extent that such expenses have already been taken into account in the calculation of the NotionalSection 75 Debt) in the Company s administration and will receive:(a) payments under the WFSL Scheme Document as a WFSL Scheme Creditor (in respect of the WFSL Claim only); and(b) a payment or payments (as applicable) from TLG under the TLG Compromise and subject to the relevant terms (in
respect of the TLG Claim only).
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5.4 For the avoidance of doubt, the WFSL Claim shall be an amount owed to the Trustee for the purposes of the definition ofPension Claim in the WFSL Scheme Document and the Company Claim shall be an amount owed to the Trustee for the
purposes of the definition of Pension Claim in the Cattles Scheme Document.
6. FULL AND FINAL SETTLEMENT
6.1 Subject to:(a) this Deed becoming unconditional in all respects under clause 2;(b) the due carrying out of the actions envisaged in clause 3.1; and(c) the terms of clause 6.3 below,the Trustee:
(i) accepts the payments due to it under clause 3.1(a) in full and final settlement of all its and the Scheme s rightsand claims (other than those under this Deed or any document to be entered into pursuant to this Deed) known orunknown, arising before or after the date of this Deed in respect of the Scheme, the Trust Deed and Rules orotherwise howsoever against the Current Employers, the Former Employers or any other employer (past, presentor future) other than Newco, or against any of their respective past, present or future directors, officers,employees, advisers, agents or shareholders; and
(ii) hereby releases each member of the Group absolutely from all liabilities, claims and demands of any naturewhatsoever, whether actual or contingent, whether in contemplation or not, known or unknown, which it mayhave (including, without limitation, any claims under section 75 or 75A of the Pensions Act 1995 or under theTrust Deed or the Rules) to the Trustee or in relation to the Scheme (other than those under this Deed or anydocument to be entered into pursuant to this Deed).
6.2 Without prejudice to its rights under this Deed, the Trustee hereby acknowledges and agrees that neither it nor theScheme shall now or hereafter bring or seek to assert any claim or counterclaim against the Current Employers (other thanunder clauses 4 and 5 of this Deed or any document to be entered into pursuant to this Deed), the Former Employers or anyother employer (past, present or future) other than Newco, or against any of their respective past, present or future directors,officers, employees, advisers, agents or shareholders, under or in relation to the Scheme.
6.3 The Trustee and the Current Employers agree that the only claims the Trustee shall have against them are those arisingunder clauses 4 and 5 of this Deed and all further payments made to the Scheme by the Current Employers shall be madeunder the terms of this Deed and not in the capacity of employer in the Scheme for any purpose. For the avoidance ofdoubt, the claims arising under clauses 4 and 5 of this Deed (save for the Trustee s ability to prove for the amount of theNotional Section 75 Debt and other expenses attributable to the Company in the Company s administration as envisaged byclause 5.3 if Plan B becomes effective in accordance with its terms) shall be released upon the date on which:(a) if Plan A becomes effective in accordance with its terms, the claims of the Cattles Scheme Creditors, the WFSL
Scheme Creditors and the TLG Creditors (or the Trustee as applicable) are released under the terms of the CattlesScheme Document, the WFSL Scheme Document and the TLG Compromise respectively.
(b) if Plan B becomes effective in accordance with its terms, the claims of the WFSL Scheme Creditors and the TLGCreditors (or the Trustee as applicable) are released under the terms of the WFSL Scheme Document and the TLGCompromise respectively.
6.4 It is agreed that this clause 6 is intended to benefit and may be enforced by all members of the Group (present or future),whether or not they are a party to this Deed.
6.5 For the avoidance of doubt, the Parties acknowledge that Newco is to be used only as a means to maintain the eligibilityof the Scheme to enter the Pension Protection Fund under The Pension Protection Fund (Entry Rules) Regulations 2005 andThe Pension Protection Fund (Multi-employer Schemes) (Modification) Regulations 2005 and that Newco has not (saveunder a Deed of Indemnity between Newco and WFSL dated 5 August 2010), and will never have, any funds or assetsavailable to meet any liability it may have to or in respect of the Scheme.
7. LOCK-UP
7.1 Subject to the conditions precedent in clauses 2.1(a), 2.1(b), 2.1(c), 2.1(d), 2.1(f) and 2.1(g) having been fulfilled, theTrustee irrevocably undertakes to:(a) vote, or instruct any proxy appointed by it to vote, (i) in favour of the WFSL Creditor Scheme and, if applicable, the
Cattles Creditor Scheme and (ii) in favour of any reasonable amendment, waiver, consent or other proposal as may be
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reasonably necessary for the implementation of the WFSL Creditor Scheme and, if applicable, the Cattles CreditorScheme on terms consistent with the forms set out in Schedule 9 ;
(b) execute the final form (or agreed form, as applicable) of the TLG Compromise, provided that all the conditions to thisAgreement have been satisfied apart from:(i) under Plan A, the condition in clause 2.1(e)(iii) (the TLG Compromise becoming effective); or(ii) under Plan B, the condition in clause 2.1(e)(vii) (the TLG Compromise becoming effective); and
(c) take all actions which it is reasonably required to take in order to support, facilitate, implement or otherwise give effectto the WFSL Creditor Scheme, the TLG Compromise and, if applicable, the Cattles Creditor Scheme.
8. ASSIGNMENT
8.1 No Party shall, or shall purport to:(a) assign, whether absolutely or by way of security, all or any part of its rights or benefits under this Deed to any third
party; or
(b) assign, transfer, delegate or subcontract any of its duties, liabilities or obligations under this Deed to any third party,
save that the Trustee may assign all or any part of its rights to the Board of the PPF (in accordance with the Pensions Act2004) or to a successor as trustee of the Scheme.
9. FURTHER ASSURANCES
9.1 Each Party shall, at the cost of the Party requiring such action (other than in respect of those actions specified in thisDeed), take all such further actions and execute all such further documents as the other Parties may from time to timereasonably require in order to give the requesting Party the full benefit of all of the provisions of this Deed.
10. COSTS AND PAYMENTS
10.1 The Current Employers shall pay (or account, as appropriate) to the Scheme (i) the amounts in respect of costs as set outin the Schedule of Contributions and which are referable to the period up to and including the Restructuring Effective Dateand (ii) the cessation expenses attributable to the particular Current Employer referred to in clause 3.1(a) and the RegulatedApportionment Arrangement Deed.
10.2 WFSL will meet the costs of the insolvency practitioner appointed on the occurrence of a qualifying insolvency event(as defined in section 127(3), Pensions Act 2004) in respect of Newco, up to a maximum of £10,000 plus VAT. WFSL willalso pay the True-up Amount (if any) (as defined in the Escrow Letter).
10.3 Except as otherwise expressly provided in this Deed (including under clause 3.3(h)), each Party shall pay its own costs,charges, and expenses incurred in the negotiation, preparation, execution and implementation of this Deed and the documentsreferred to in it.
11. TRUSTEE DIRECTORS
11.1 WFSL confirms that, for so long as any director of the Trustee remains an employee of WFSL, WFSL shall permit suchdirector(s) to take a reasonable amount of paid time off work for undertaking their trustee duties.
12. NOTICES
12.1 Any notice or other communication to be made or given under this Deed shall be in writing and may be delivered byhand, facsimile transmission or prepaid registered or recorded delivery post.
12.2 Any such notice or other communication shall be addressed as provided in sub-clause 12.4 and, if so addressed, shall bedeemed to have been duly given or made as follows:(a) if delivered by hand, on the first Business Day following delivery;(b) if sent by facsimile transmission, following transmission shown on the transmission report from the machine from
which the facsimile was sent in its entirety to the facsimile number of the recipient; and(c) if sent by prepaid registered or recorded delivery post, on the Business Day after posting if the address of the recipient
is in the country of despatch, otherwise on the fifth Business Day after posting.
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12.3 In proving service, it shall be sufficient to prove that the envelope containing the notice or other communication wasproperly addressed and delivered either by hand to that address or into the custody of the postal authorities as a prepaidregistered or recorded delivery post letter or that the notice or other communication was transmitted by facsimile to thefacsimile number of the relevant party specified in this clause.
12.4 The relevant addressee, address and facsimile number of each party for the purposes of this agreement, subject to sub-clause 12.5 are:
Name of Party Address Facsimile No.
Cattles plc Kingston House, Centre 27 Business Park, Woodhead Road, Birstall,Batley, WF17 9TD
01924 442255
Welcome Financial ServicesLimited
Kingston House, Centre 27 Business Park, Woodhead Road, Birstall,Batley, WF17 9TD
0115 984 9229
The Lewis Group Limited Rowan House, 70 Buchanan Street, Glasgow,G1 3JF
0870 751 3131
CSP Leeds Limited Kingston House, Centre 27 Business Park, Woodhead Road, Birstall,Batley, WF17 9TD
020 7173 8585
Cattles Staff Pension FundLimited
Kingston House, Centre 27 Business Park, Woodhead Road, Birstall,Batley, WF17 9TD
0113 244 6101
12.5 A party may notify the other party/parties to this Deed of a change to its name, relevant addressee, address or facsimilenumber provided that such notification shall only be effective on:(a) the date specified in the notification as the date (being a date not less than five clear Business Days after the date upon
which such notification is deemed to be given) on which the change is to take place; or(b) if not date is specified or the date specified is less than five clear Business Days after the date on which such
notification is deemed to be given, the date falling five clear Business Days after notice of any such change is deemedto be given.
13. WHOLE AGREEMENT
13.1 This Deed (together with all documents which are required by its terms to be entered into by the Parties or any of themand all other documents which are in the agreed form and are entered into by the Parties or any of them in connection withthis Deed) sets out the whole agreement between the Parties relating to the subject matter of this Deed and supersedes anyprior agreement (whether oral or written) relating to the subject matter of this Deed.
13.2 It is agreed that:(a) no Party shall have any claim or remedy in respect of any statement, representation, warranty or undertaking, made by
or on behalf of any other Party in relation to the subject matter of this Deed which is not expressly set out in this Deed(and any document referred to in it). The Trustee acknowledges that neither the Company nor the ParticipatingEmployers nor any person on their behalf (including any officer of either of them) is under any duty (save as set out inthis Deed or any document, to be entered into in connection with this Deed) to disclose any fact, matter or futureintention relating to the Company or any member of its Group, their assets, liabilities, profits or losses; and
(b) except for any liability in respect of a breach of this Deed or any document referred to in it, no Party shall owe any dutyof care or have any liability in tort or otherwise to any other Party in relation to the subject matter of this Deed.
13.3 This clause 13 shall not exclude any liability for, or remedy in respect of, fraudulent misrepresentation.
14. WAIVERS, RIGHTS AND REMEDIES
14.1 No failure or delay by any Party in exercising any right or remedy provided by law or under this Deed (or any documentreferred to in it) shall impair such right or remedy or operate or be construed as a waiver or variation of it or preclude itsexercise at any subsequent time and no single or partial exercise of any such right or remedy shall preclude any furtherexercise of it or the exercise of any other remedy.
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15. COUNTERPARTS
15.1 This Agreement may be executed in any number of counterparts, and by each party on separate counterparts. Eachcounterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpartof this Agreement by e-mail attachment or telecopy shall be an effective mode of delivery.
16. VARIATIONS
16.1 No variation of this Deed shall be valid unless it is in writing and signed by or on behalf of each of the parties to thisDeed. Such variation need not be executed as a deed.
16.2 The rights of the Parties to agree any variation under this Deed are not subject to the consent of any person that is not aparty to this Deed, save that any variation made after the Restructuring Effective Date that would:(a) result in an increase in the quantum of the claim of the Trustee against WFSL under clause 4; or(b) result in WFSL having an additional or continuing liability to the Fund that is not currently envisaged by this Deed,
in circumstances where that amendment would have a detrimental impact on the rights of the WFSL Scheme Creditors (otherthan the Trustee) in the WFSL Creditor Scheme shall require the prior written consent of the Scheme Supervisor (as definedin the WFSL Scheme Document).
17. INVALIDITY
17.1 Each of the provisions of this Deed is severable. If any such provision is held to be or becomes invalid or unenforceablein any respect under the law of any jurisdiction, it shall have no effect in that respect and the parties shall use all reasonableefforts to replace it in that respect with a valid and enforceable substitute provision the effect of which is as close to itsintended effect as possible.
18. NO THIRD PARTY ENFORCEMENT RIGHTS
18.1 Save in respect of any member of the Group (present or future) and as set out in clause 18.3 below, this Deed is notintended to, nor shall it, create any rights, entitlements, claims or benefits enforceable by any person that is not a party to it.No other person shall derive any benefit or have any rights, entitlement or claim in relation to this Deed by virtue of theContracts (Rights of Third Parties) Act 1999.
18.2 Each such member of the Group (present or future) shall be entitled to enforce this Deed as if it had been a party to thisDeed (but subject to clause 16).
18.3 Notwithstanding clause 18.1, the Scheme Supervisor (as defined in clause 16.2) shall be entitled to enforce theprovisions of clause 16.2.
19. OVERRIDING EFFECT OF THIS DEED
19.1 The provisions of this Deed shall have overriding effect and, to the extent that any of the provisions in this Deed areinconsistent with the terms of the Trust Deed and Rules, the provisions of this Deed shall prevail.
19.2 The Trustee will procure that the Actuary gives an opinion that the alterations to the Trust Deed and Rules made by thisDeed do not substantially prejudice the rights and interest of any person already a Member (as defined in the Trust Deed andRules) at the date of such alterations or alter the scale of contributions or pensions.
19.3 The Trust Deed and Rules shall be considered to be amended accordingly.
20. GENERAL
20.1 The obligations and liabilities of the Current Employers under this Deed are entered into by each of them severally. Theliability of each Current Employer under this Deed shall extend only to any loss or damage or any breach by it under thisDeed.
20.2 This Deed shall be binding on each of the Parties and their respective successors and personal representatives.
20.3 This Deed is delivered by each party when (and shall not have effect until) it is dated.
20.4 This Deed is governed by, and shall be interpreted according to, the laws of England. The English courts shall haveexclusive jurisdiction in relation to all disputes arising out of or in connection with this Deed, including disputes arising out
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of or in connection with: (i) the creation, validity, effect, interpretation, performance or non-performance of, or the legalrelationships established by, this Deed; and (ii) any non-contractual obligations arising out of or in connection with this Deed.For such purposes each party irrevocably submits to the jurisdiction of the English courts.
20.5 The Parties confirm for the purposes of section 82(3) of the Pensions Act 2004 that they (and their advisers) consent tothe Company disclosing a copy of any warning notice or draft warning notice received from the Pensions Regulator inconnection with the clearance application referred to in clause 2.1(b) to the key financial creditors of the Group (and theiradvisers) (the Authorised Recipients) on a confidential basis, provided that if the warning notice contains any adviceprovided to the Trustees by PKF (UK) LLP any Authorised Recipient shall have first signed a hold harmless letter in aform reasonably required by PKF (UK) LLP (save that such hold harmless letter shall not require indemnities to be givenby the Authorised Recipients).
20.6 The Trustee confirms that the Current Employers may provide copies of any documentation provided to them underclause 4 to the Authorised Recipients (as defined in clause 20.5 above) on a confidential basis.
20.7 For the avoidance of doubt, the Parties confirm that:(a) on Plan A becoming effective as defined in this Deed, Plan A shall also be deemed to become effective for the
purposes of (and as defined in) the Escrow Letter; and(b) on Plan B becoming effective as defined in this Deed, Plan B shall also be deemed to become effective for the purposes
of (and as defined in) the Escrow Letter,
notwithstanding, in either case, any difference in the definitions of Plan A and Plan B in this Deed and the Escrow Letter.
20.8 WFSL, TLG and the Trustee agree that, subject to receiving written agreement from Wrigleys Solicitors LLP, paragraph21 of the Escrow Letter shall be amended by replacing 31 March 2011 with 30 June 2011 .
20.9 Notwithstanding any other provision in this Deed (including, for the avoidance of doubt but without limitation to thegenerality of the foregoing, clauses 3.3(c), 3.3(d), 6.1 and 6.2), nothing in this Deed shall operate to compromise or otherwisereduce any debt due to the Scheme under section 75 or 75A of the Pensions Act 1995 (save for those due from the Company,WFSL and/or TLG in Plan A and WFSL and/or TLG in Plan B) to the extent that such compromise or reduction would causethe Scheme to cease to be an eligible scheme under Regulation 2(2) of the Pension Protection Fund (Entry Rules)Regulations 2005.
IN WITNESS whereof this document has been executed as a deed the day and year first above written
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SCHEDULE 1
Deed of Alteration
DATED 2010
(1) CATTLES STAFF PENSION FUND LIMITED
(2) CATTLES PLC
DEED OF ALTERATION (C)
relating to
Cattles Staff Pension Fund
(Note: Actuary s opinion needed: see clause 13 (a) of the Trust Deed)
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DEED OF ALTERATION DATED 2010
BETWEEN:(1) CATTLES STAFF PENSION FUND LIMITED (company number 3444694) registered office Kingston House,
Centre 27 Business Park, Woodhead Road, Birstall, Batley, WF17 9TD (the Trustee)(2) CATTLES PLC (company number 543610) registered office Kingston House, Centre 27 Business Park, Woodhead
Road, Birstall, Batley, WF17 9TD (the Company)
BACKGROUND(A) This deed relates to the Cattles Staff Pension Fund (the Scheme) which was established by a trust deed dated 20 August
1952.(B) This deed is supplemental to a Deed of Variation, Removal and Appointment dated 2 April 1996 which adopted the
trust deed and rules (the Trust Deed and Rules respectively) which currently govern the Scheme (as amended fromtime to time).
(C) The Trustee is the current trustee of the Scheme. The Company, together with Welcome Financial Services Limited(WFSL), The Lewis Group Limited (TLG) and CSP Leeds Limited (Newco) are all Employers participating in theScheme.
(D) By Clause 13 of the Trust Deed, the Trustees, with the consent of the Company, may by deed or written instrumentalter, modify or add to all or any of the provisions of the Trust Deed and the Rules, subject as set out in Clause 13.
(E) The Trustee, with the consent of the Company, wishes to alter the Trust Deed in the manner set out in the Schedule tothis deed in connection with a proposed restructuring of the Company and its subsidiaries. As part of suchrestructuring, it is proposed that the liabilities of each of the Company, WFSL and TLG, including their debts underSection 75 and Section 75A of the Pensions Act 1995, will be compromised as described in a deed entered into by theCompany, WFSL, TLG, Newco and the Trustee dated [�] (as amended by a deed of variation dated [�]) (theCompromise Deed). It is intended that the restructuring, and the compromise described above, will be effected wheneither Plan A or Plan B (as defined in the Compromise Deed) become effective in accordance with their terms.
(F) The alterations to the Trust Deed set out in the Schedule to this Deed are made in compliance with the provisions ofClause 13.
(G) The Actuary has given an opinion that the alterations to the Trust Deed made by this deed do not substantiallyprejudice the rights and interest of any person already a Member at the date of such alterations or alter the scale ofcontributions or pensions. A copy of that opinion is attached to this deed.
OPERATIVE PROVISIONS1. This deed replaces the Deed of Alteration (C) dated 19 November 2010 between the Company and the Trustee which shallhave no effect.
2. In exercise of the power conferred by Clause 13 of the Trust Deed and every other power so enabling it, the Trustee, withthe consent of the Company, alters the Trust Deed in the manner set out in the Schedule to this deed with effect from the dateof this deed.
3. Save where indicated within the terms of this deed, the words and phrases used in this deed have the same meaning as inthe Trust Deed and Rules.
4. If any term or provision in this deed shall be held to be illegal or unenforceable, in whole or in part, under any enactmentor rule of law, such term or provision shall to that extent be deemed not to form part of this deed but the validity andenforceability of the remainder of the terms and provisions of this deed shall not be affected.
5. This deed is governed and is to be interpreted in accordance with the laws of England.
6. This deed may be executed in as many parts as there are signatories to it. When each signatory has executed at least onepart of this deed, it shall be as effective as if all of the signatories had executed all the parts of it. Each part of this deed maybe treated as an original of this deed.
7. This deed is delivered by each party when (and shall not have effect until) it is dated.
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SCHEDULE
1. The following new definition shall be inserted into clause 1.1:Compromise Deed means the Compromise Deed dated [�] (as amended by a deed of variation dated [14 December 2010])
entered into by the Company, the Trustees and certain of the Employers
2. Clause 16.2 shall be deleted and replaced with the following new clause 16.2:If either:
(a) the Company terminates the liability of all the Employers in exercise of the power contained in clause 16.1(a) or(b) the Company terminates its liability in respect of all its present or former employees in exercise of the power contained
in clause 16.1(b),then (subject as below) every Employer s liability to pay contributions in respect of benefits conferred on all its present orformer employees shall terminate, the Scheme shall thereupon be determined and the provisions of clause 18 shall apply,PROVIDED ALWAYS that if the Trustees in their absolute discretion think fit (at any time within six months after suchtermination), the Scheme shall not be determined but the Fund shall be continued as a closed fund subject to the then existingRules (unless amended in accordance with clause 13) until the Trustees in their absolute discretion decide to determine theScheme. Nevertheless, the liability of the Employers under the Scheme shall be terminated except in respect of any amountsdue on or before the date upon which the notice takes effect. For the avoidance of doubt, this clause 16.2 shall not apply onCattles plc (company number 543610), for itself and on behalf of the Participating Employers and the Former Employers(each as defined in the Compromise Deed), terminating their liability as envisaged under the Compromise Deed.
3. Clause 16.3 shall be deleted and replaced with the following new clause 16.3:If any of the Employers (or the Company on its behalf), other than the Company, terminates its liability in respect of all its
present and former employees in exercise of the power contained in clause 16.1 (b), any employees who are in PensionableService or Service of the Employer at the date that the notice required by clause 16.1 takes effect who do not then becomeemployees in Pensionable Service or Service of another Employer shall be treated as having left employment of an Employeron the date of the expiry of the notice .
4. Clause 16.4 shall be deleted and replaced by the following new clause 16.4:If the Company or any other Employer (or the Company on its behalf) terminates its liability in respect of one or more but
not all of its present employees in exercise of the power conferred by clause 16.1 (b), the employees who are in PensionableService or Service of the Employer, referred to in the notice required to be given under clause 16.1 shall be treated as havingleft employment of an Employer on the date of the expiry of the notice .
5. Clause 17.3 shall be deleted and replaced with the following new clause 17.3:If any of the Employers goes into liquidation or (if a firm) is dissolved, any employees who are in Pensionable Service or
Service of the Employer at the date of liquidation or dissolution who do not (on such date within two months of suchliquidation or dissolution as the Company shall determine) become employees in Pensionable Service or Service of anotherEmployer shall be treated as having left employment of an Employer on the date of liquidation or dissolution .
6. Clause 17.4 shall be deleted and replaced with the following new clause 17.4:If an Employer ceases to be an Associate of the Company then that Employer will immediately cease to participate in the
Scheme and any employees in Pensionable Service or Service of that Employer at the date of such cessation who do not (onsuch date within two months of such cessation as the Company shall determine) become employees in Pensionable Service orService of another Employer shall be treated as having left employment of an Employer on the date of such cessation .
7. Clause 18.1 shall be altered as follows:(a) By the deletion of the first sentence and its replacement with the following sentence:
If the Scheme shall at any time be determined in accordance with the terms of the Trust Deed and Rules, the Trusteesshall give notice of such determination to all Persons affected .
(b) By the deletion of the third sentence and its replacement with the following sentence:The Fund shall, after payment of all costs, charges and expenses attributable thereto, be applied by the Trustees: .
(c) From the paragraph headed SECONDLY , delete the words:or out of that part of the Fund relating to the Persons affected, and
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from the next paragraph delete the words:or the said part thereof .
8. Clauses 18.3, 18.4 and 18.5 shall be deleted.
EXECUTED as a DEED by CATTLES STAFF PENSION FUND LIMITED acting by two directors/a director and thesecretary
Signature of Director:
Print name:
Signature of Director/Secretary:
Print name:
EXECUTED as a DEED by CATTLES PLCacting by two directors/a director and the secretary/a director in the presence of a witness
Signature of Director:
Print name:
Witness:
Witness full name:
Witness address:
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Actuary s opinion
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SCHEDULE 2
Clearance applicants
List of Applicants and details
Part A: Company Applicants
1. The Company and its subsidiaries (save for those listed in Parts B and C)
Company nameRegistrationnumber
Relationship to Cattles Staff Pension Fund(if any)
Cattles plc 543610 Principal employerC L Finance Limited 1108021Cash Flow Services Limited 4573036Cattles Holdings Limited 5976786Cattles Properties (Ruddington) Limited 4681891Cattles Provident Trust Limited 512228Cattles Trustee Limited 2998215Compass Credit Limited 235117Dial4aloan Limited 3958533Ewbanks Mail Order Limited 457490 Former employer see
correspondence and Trusteeresolution at Appendix 16
Lewis Debt Services Limited SC237628Lewis Group (Holdings) Limited SC154199Lewis Investigation Services Limited SC237516Moneytopia Limited 652955Moneytopia Bank Limited 215285Progressive Finance Company Limited* 106370CProgressive Financial Services Limited 1682540 Former employer see
correspondence and Trusteeresolution at Appendix 16
Progressive Holdings Limited* 103524CProgressive Insurance Brokers Limited 4523449Progressive Insurance Company Limited* 103523CRecordpoint Limited 2906681Scottish Bureau of Investigation Limited SC76285Shopacheck Financial Services Limited 7067456Shopacheck Limited 274611 Former employer see
correspondence and Trusteeresolution at Appendix 16
Statusclaim Limited 2903444Supremeaccess Limited 2913219The Lewis Group Limited SC127043 Participating employerUK Debt Defaulters Register Limited SC170934Welcome Car Finance Limited 4495923Welcome Finance Group Limited 6327124Welcome Finance Limited 4571109Welcome Financial Services Limited 133540 Participating employerWelcome Insurance Services Limited 2230654Welcome Mortgages Limited 1974074
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Company nameRegistrationnumber
Relationship to Cattles Staff Pension Fund(if any)
Welcome Retail Services Limited 226015 Former employer seecorrespondence and Trusteeresolution at Appendix 16
Westernissue Limited 2930977
* denotes Isle of Man registered company
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2. Directors
Name Position Company
Mrs Margaret Young Executive Chairman Cattles plc
Director Shopacheck Financial Services Limited,Welcome Financial Services Limited, LewisGroup (Holdings) Limited, The Lewis GroupLimited and C L Finance Limited
Mr Robert East Managing Director Cattles plc
Director All companies listed above save for thefollowing:Cattles Trustee LimitedShopacheck Financial Services LimitedWelcome Financial Services Limited
Mr Paul Felton-Smith Group Finance Director Cattles plc, Welcome Financial ServicesLimited, Lewis Group (Holdings) Limited, TheLewis Group Limited and C L Finance Limited
Mr Frank Dee Non-executive Director Cattles plc, Cattles Trustee Limited andWelcome Financial Services Limited
Mr Alan McWalter Non-executive Director Cattles plc and Cattles Trustee Limited
Mr David Haxby Non-executive Director Cattles plc and Cattles Trustee Limited
Mr Roland Todd Company Secretary All companies listed above
Mr David Lovett Non-executive Director Welcome Financial Services Limited
Mr David Berry Managing Director C L Finance Limited; Lewis Group (Holdings)Limited and The Lewis Group Limited
Dr Roger William Lucas Director C L Finance Limited, Lewis Group (Holdings)Limited and The Lewis Group Limited
Ms Elisabeth Kendray Director C L Finance Limited, Lewis Group (Holdings)Limited and The Lewis Group Limited
Mr Michael Craig Farey6 Director C L Finance Limited, Lewis Group (Holdings)Limited and The Lewis Group Limited
Mr Mark Bardsley Director Shopacheck Financial Services Limited (andCattles Staff Pension Fund Limited seebelow)
Mr Nicholas Illingworth Director Shopacheck Financial Services Limited (andCattles Staff Pension Fund Limited seebelow)
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Name Position Company
Mr Jamie Drummond-Smith Director All companies listed above save for thefollowing:
C L Finance LimitedCattles plcCattles Trustee LimitedLewis Group (Holdings) LimitedShopacheck Financial Services LimitedThe Lewis Group Limited
Mr Colin Anderson Director Progressive Insurance Company Limited,Progressive Holdings Limited and ProgressiveFinance Company Limited
[Mr Martin Cooke]7 Proposed director Welcome Finance Group Limited
6 Due to resign on 4 November 20107 To be confirmed.
3. Other
Name Position Company
Mr Mike Norgrove Former employee Welcome Financial Services LimitedMs Laura Barlow Former director Welcome Financial Services LimitedMr Jonathan Briggs Current employee Welcome Financial Services LimitedMr Jon Park Current consultant Welcome Financial Services Limited
Part B: Newco Applicants
Company Name
Registrationnumber if
applicable /Position Company
CSP Leeds Limited 7222034 Participating employerMr Robin Johnson Director Director of participating employerAmerial Limited 05436719 Service company providing Robin Johnson s
services to CSP Leeds Limited
Part C: Bidco Applicants and Holdco Applicants
Company Name
Registrationnumber if
applicable /Position Relationship to Cattles Staff Pension Fund (if any)
Bovess Limited 07366975 Proposed new owner of the Company (or WFSL)Bovess Holding Limited 07366959 Holding company of Bovess LimitedStructured Finance Management
Limited (SFM) 3853947Share trustee
SFM Corporate Services Limited(SFMCSL) 3920255
Owner of share trustee
Mr Robert Berry Director of the four companiesabove
Mr Jonathan Keighley Director of the four companiesabove
Ms Jocelyn Coad Director of the four companiesabove
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Company Name
Registrationnumber if
applicable /Position Relationship to Cattles Staff Pension Fund (if any)
Ms Helena Whitaker Bidco and Holdco CompanySecretaryDirector of SFM and SFMCSL.
Mr James Macdonald Director of SFM and SFMCSLMr John Paul Nowacki Director of SFM and SFMCSLMr Vinoy Nursiah Director of SFM and SFMCSLMs Claudia Wallace Director of SFM and SFMCSLMr Alexander Ohlsson Director of SFM
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SCHEDULE 3Notices to trigger section 75 debts and to terminate liability under the Trust
Deed and RulesPART A
[Employer letterhead]Cattles Staff Pension Fund LimitedKingston House Centre 27 Business ParkWoodhead RoadBirstall, Batley West Yorkshire WF17 9TD
[Date]
Dear Sirs
Compromise Deed between Cattles plc, Welcome Financial Services Limited, The Lewis Group Limited, CSP LeedsLimited and the Trustee, dated [�] (the Compromise Deed)
Notices:(1) to trigger the Company s section 75 debt; and
(2) to terminate the liability of the Company, the Participating Employers and Former Employers to pay any furthercontributions or payments to the Trustee (or any of its officers or directors in their capacity as such) or the Schemeunder the Trust Deed and Rules by Cattles plc (the Company) for itself and on behalf of the Participating Employersand Former Employers
Terms defined in the Compromise Deed shall bear the same meaning when used in this notice.
The Company hereby gives notice to the Trustee:1. for the purposes of regulation 9(4) of the Employer Debt Regulations, such that an employment-cessation event (as
defined in those Regulations) shall be treated as having occurred (to the extent that it can be so treated) with effect fromimmediately prior to Plan A or Plan B, as applicable, becoming effective in accordance with their terms; and
2. to terminate its liability and the liability of the Participating Employers and Former Employers to pay contributions inrespect of benefits conferred upon all their present or former employees under the Scheme, in accordance with clause16.1 of the Trust Deed, with effect upon the due carrying out of the actions envisaged in clause 2 and sub-clause 3.1 ofthe Compromise Deed.
Yours faithfully
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PART B[Employer letterhead]
Cattles Staff Pension Fund LimitedKingston House Centre 27 Business ParkWoodhead RoadBirstall, BatleyWest Yorkshire WF17 9TD
[Date]
Dear Sirs
Compromise Deed between Cattles plc, Welcome Financial Services Limited, The Lewis Group Limited, CSP LeedsLimited and the Trustee, dated [�] (the Compromise Deed)
Notice to trigger section 75 debt by [Welcome Financial Services Limited]/[The Lewis Group Limited] (the Company)
Terms defined in the Compromise Deed shall bear the same meaning when used in this notice.
The Company hereby gives notice to the Trustee for the purposes of regulation 9(4) of the Employer Debt Regulations, suchthat an employment-cessation event (as defined in those Regulations) shall be treated as having occurred with effect fromimmediately prior to Plan A or Plan B, as applicable, becoming effective in accordance with their terms.
Yours faithfullyFor and on behalf of [Welcome Financial Services Limited]/[The Lewis Group Limited]
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SCHEDULE 4
Regulated Apportionment Arrangement Deed
DATED 2010
(1) CATTLES PLC(2) WELCOME FINANCIAL SERVICES LIMITED and
THE LEWIS GROUP LIMITED(4) CSP LEEDS LIMITED
(5) CATTLES STAFF PENSION FUND LIMITED
REGULATED APPORTIONMENT ARRANGEMENTDEED
CATTLES STAFF PENSION FUND
Freshfields Bruckhaus Deringer LLP
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THIS DEED is made this day of 2010
BETWEEN :(1) CATTLES PLC (company number 543610) whose registered office is at Kingston House, Centre 27 Business Park,
Woodhead Road, Birstall, Batley, WF17 9TD (the Company);(2) WELCOME FINANCIAL SERVICES LIMITED (company number 133540) whose registered office is at Kingston
House Centre 27, Business Park, Woodhead Road, Birstall, Batley, West Yorkshire WF17 9TD; and THE LEWISGROUP LIMITED (company number SC127043) whose registered office is at Rowan House, 70 Buchanan Street,Glasgow, G1 3JF (the Participating Exiting Employers);
(3) CSP LEEDS LIMITED (company number 7222034) whose registered office is at Kingston House Centre 27,Business Park, Woodhead Road, Birstall, Batley, West Yorkshire WF17 9TD (Newco); and
(4) CATTLES STAFF PENSION FUND LIMITED (company number 3444694) whose registered office is at KingstonHouse, Centre 27 Business Park, Woodhead Road, Birstall, Batley, WF17 9TD (the Trustee).
WHEREAS:(A) This Deed relates to the Cattles Staff Pension Fund (the Scheme) which was established by a trust deed dated 20 August1952.
(B) This Deed is supplemental to a Deed of Variation, Removal and Appointment dated 2 April 1996 which adopted the trustdeed and rules (the Trust Deed and Rules respectively), which currently govern the Scheme (as amended from time to time).
(C) The Scheme is a multi-employer scheme for the purposes of section 75A of the Pensions Act 1995.
(D) The Trustee is the current trustee of the Scheme.
(E) The Participating Exiting Employers participate in the Scheme. The Company is the ultimate parent company of theParticipating Exiting Employers (together, including the Company, the Exiting Employers). It is proposed that the liabilitiesof the Exiting Employers, including their Section 75 Debts (as defined below), and any liability for any cessation expenses,will be compromised as described in a Deed entered into by the Company, the Participating Exiting Employers, Newco andthe Trustee dated [�] (as amended by a deed of variation dated [�]) (the Compromise Deed).
(F) Before this Deed comes into effect (upon Plan A or Plan B (as defined in the Compromise Deed), as applicable,becoming effective in accordance with their terms), the Company and the Participating Exiting Employers will give notice tothe Trustee for the purposes of regulation 9(4) of the Occupational Pension Schemes (Employer Debt) Regulations 2005 (asamended) (the Employer Debt Regulations) in order to trigger their Section 75 Debts (as defined below) immediately beforethis Deed comes into effect (to the extent that such debt or debts have not already been triggered).
(G) The Company and the Trustee agree that a regulated apportionment arrangement (as defined in the Employer DebtRegulations) should be implemented in respect of the Exiting Employers, and that such arrangement should be effectedpursuant to the power contained in clause 19 of the Trust Deed.
(H) The arrangement set out in this Deed (the Arrangement) is intended to be within the requirements for a regulatedapportionment arrangement to provide that the Exiting Employers share of the difference under Regulation 6(2)(b) of theEmployer Debt Regulations shall be a regulated apportionment arrangement share of £1 each.
(I) The Trustee and the Company agree that the Arrangement is in accordance with the Employer Debt Regulations and inparticular that it is in accordance with Regulation 6(4)(a) and satisfies the conditions in Regulation 7A(1)(a) to (d), because:
a. the Trustee is of the opinion that there is a reasonable likelihood of an assessment period commencing in relationto the Scheme within the twelve months following the date this Deed takes effect;
b. the Trustee and Newco agree to the Arrangement;c. the Arrangement has been approved by the Pensions Regulator by issuing a notice of approval; andd. the PPF has confirmed that it does not object to the Arrangement.
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(J) The Arrangement, being a regulated apportionment arrangement, falls within Regulation 2(4)(b) of the Pension ProtectionFund (Entry Rules) Regulations 2005 and is not intended to or anticipated to compromise a debt in a way that would renderthe Scheme ineligible for entry into the Pension Protection Fund.
IT IS AGREED THAT1. INTERPRETATION
In this Deed, the following terms shall have the respective meanings ascribed to them below, unless the context requiresotherwise:
assessment period has the same meaning as in the Employer Debt Regulations;
employment-cessation event has the same meaning as in the Employer Debt Regulations and in relation to the ExitingEmployers means their cessation of participation in the Scheme following notice to the Trustee, as referred to in recital(F) above;
Exit Amount means the amount specified in clause 3.1(a) below;
Exiting Employers means the Company and the Participating Exiting Employers;
regulated apportionment arrangement has the same meaning as in the Employer Debt Regulations;
regulated apportionment arrangement share has the same meaning as in the Employer Debt Regulations;
Restructuring Effective Date has the same meaning as in the Compromise Deed;
Section 75 Debt means a debt payable under sections 75 and (if applicable) 75A of the Pensions Act 1995, as modified by theEmployer Debt Regulations; and
share of the difference has the same meaning as in the Employer Debt Regulations.
2. EFFECT
The provisions of clauses 3 and 4 of this Deed shall take effect and come into force upon the Restructuring Effective Date,providing that:(a) the Pensions Regulator has approved the regulated apportionment arrangements documented by this Deed by issuing a
notice of approval; and(b) the PPF has confirmed that it does not object to the regulated apportionment arrangements documented by this Deed.
3. REGULATED APPORTIONMENT ARRANGEMENT
3.1 The Parties agree, pursuant to clause 19 of the Trust Deed that:(a) for the purposes of the Employer Debt Regulations the Exiting Employers share of the difference will be the regulated
apportionment arrangement share of £1 each (together with any cessation expenses attributable to each ExitingEmployer, the Exit Amount); and
(b) the Exiting Employers will pay the Exit Amount in accordance with clause 3 of the Compromise Deed or it will be paidby the Company (or, in the case of Plan B (as defined in the Compromise Deed) becoming effective according to itsterms, by WFSL) on their behalf; and
(c) subject to the provisions of the Compromise Deed, other than in respect of the Exit Amount, an Exiting Employer willhave no further liability to the Scheme (save for the liability to contribute under the Trust Deed and Rules, whichliability is to terminate in accordance with the Compromise Deed) in respect of the relevant event triggering aSection 75 Debt and will be fully discharged from any obligations to the Scheme (save as aforesaid). For the avoidanceof doubt, the cessation expenses incurred by the Trustee in relation to the Exiting Employers will be confirmed in themanner envisaged in clause 3.2 of the Compromise Deed and paid in the manner envisaged by clause 3.1 of theCompromise Deed.
3.2 The Trustee confirms that the conditions set out in Regulation 7A(1)(a) to (d) of the Employer Debt Regulations aresatisfied.
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4. APPORTIONMENT OF LIABILITIES
The liabilities (other than the Exit Amount) attributable to the Exiting Employers are apportioned (and therefore for thepurposes of regulation 6(4)(a) of the Employer Debt Regulations, are attributed) to Newco, and shall therefore be taken intoaccount in calculating the liability share as defined in the Employer Debt Regulations of Newco for the purposes of anySection 75 Debt payable by it in the future.
5. GENERAL
5.1 The terms of this Deed may be amended by a deed executed by the parties hereto (save that the consent of the ExitingEmployers is not needed to such an amendment if the liability of the Exiting Employers is not increased).
5.2 Each of the parties undertakes to do all things required to be done by it to implement this Deed and the matters envisagedby the parties and shall co-operate with the other parties so as to facilitate the implementation by them of this Deed.
5.3 This Deed may be executed in any number of counterparts which taken together shall constitute one document, and anyparty may execute this Deed by signing any one or more of such counterparts.
5.4 A person who is not a party to this Deed has no right under the Contracts (Rights of Third Parties) Act 1999 to enforceany term of this Deed but this does not affect any right or remedy of a third party which exists or is available apart from thatAct.
5.5 This Deed is governed by, and shall be construed in accordance with, English law.
EXECUTED as a deedEXECUTED as a deed by )CATTLES PLC )acting by )a director and its secretary )or two directors or a director )in the presence of a witness )
Director:
Witness:
Witness full name:
Witness address:
EXECUTED as a deed by )WELCOME FINANCIAL SERVICES )LIMITED acting by )a director and its secretary )or two directors or a director )in the presence of a witness )
Director:
Witness:
Witness full name:
Witness address:
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EXECUTED as a deed by )THE LEWIS GROUP LIMITED )acting by )a director and its secretary )or two directors or a director )in the presence of a witness )
Director:
Witness:
Witness full name:
Witness address:
EXECUTED as a deed by )CSP LEEDS LIMITED )acting by )its sole director )
Director:
Witness:
Witness full name:
Witness address:
EXECUTED as a deed by )CATTLES STAFF PENSION FUND )LIMITED )acting by )a director and its secretary )or two directors )
Director:
Director / Secretary:
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SCHEDULE 5
Deed of Alteration and Substitution
DATED 2010
(1) CATTLES STAFF PENSION FUND LIMITED
(2) CATTLES PLC
(3) CSP LEEDS LIMITED
DEED OF ALTERATION ANDSUBSTITUTION
relating to
Cattles Staff Pension Fund
(Note: Actuary s opinion needed:- see clause 13(a) of the Trust Deed)
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DEED OF ALTERATION AND SUBSTITUTION dated 2010
BETWEEN:(1) CATTLES STAFF PENSION FUND LIMITED (company number 3444694) registered office Kingston House,
Centre 27 Business Park, Woodhead Road, Birstall, Batley, WF17 9TD (the Trustee)(2) CATTLES PLC (company number 543610) registered office Kingston House, Centre 27 Business Park, Woodhead
Road, Birstall, Batley, WF17 9TD (the Present Company)(3) CSP LEEDS LIMITED (company number 07222034) registered office Kingston House Centre 27, Business Park,
Woodhead Road, Birstall, Batley, West Yorkshire WF17 9TD (the New Company)
BACKGROUND(A) This deed relates to the Cattles Staff Pension Fund (the Scheme) which was established by a trust deed dated 20 August
1952.(B) This deed is supplemental to a Deed of Variation, Removal and Appointment dated 2 April 1996 which adopted the
trust deed and rules (the Trust Deed and Rules respectively) which currently govern the Scheme (as amended fromtime to time).
(C) The Present Company is the Company under the Scheme as at the date hereof. Welcome Financial Services Limited(WFSL) and The Lewis Group Limited (TLG) are two of the other Employers participating in the Scheme.
(D) The Trustee is the current trustee of the Scheme.(E) By Clause 13 of the Trust Deed, the Trustee, with the consent of the Present Company, may by deed or written
instrument alter, modify or add to all or any of the provisions of the Trust Deed and the Rules, subject as set out inClause 13.
(F) The Trustee, with the consent of the Present Company, wishes to alter the Trust Deed in the manner set out in theSchedule to this deed.
(G) The alteration to the Trust Deed set out in the Schedule to this Deed is made in compliance with the provisions ofClause 13.
(H) The Actuary has given an opinion that the alteration to the Trust Deed made by this deed does not substantiallyprejudice the rights and interest of any person already a Member at the date of such alterations or alter the scale ofcontributions or pensions. A copy of that opinion is attached to this deed.
(I) By a Deed of Accession dated 5 August 2010, in connection with a proposed restructuring of the Present Company andits subsidiaries, which it is anticipated is likely to include a proposal to compromise such companies liabilities (if any)to the Scheme as part of a restructuring effected by a scheme of arrangement of the creditors of the Present Companyunder Part 26 of the Companies Act 2006, the New Company became an Employer for the purposes of the Scheme, sothat (amongst other things) the eligibility of the Scheme to enter the Pension Protection Fund may be maintainedfollowing any such compromise as a result of the New Company being the last employer in the Scheme for statutorypurposes (the last man standing ).
(J) The New Company has agreed to become the Company for the purposes of the Scheme in connection with theproposed restructuring of the Present Company and its subsidiaries, which, it is intended, will be effected when eitherPlan A or Plan B (as defined in the Compromise Deed entered into by the Present Company, WFSL, TLG, the NewCompany and the Trustee dated [�] (the Compromise Deed)) become effective in accordance with their terms.
OPERATIVE PROVISIONS1. Save where indicated within the terms of this deed, the words and phrases used in this deed have the same meaning as inthe Trust Deed and Rules.
2. In exercise of the power conferred by Clause 13 of the Trust Deed and every other power so enabling it, the Trustee, withthe consent of the Present Company, alters the Trust Deed in the manner set out in the Schedule to this deed with effectimmediately prior to the substitution of the Present Company under clause 3 below.
3. As required by the definition of the Company set out in clause 1.1 of the Trust Deed, the New Company herebycovenants with the Trustee to undertake the powers and duties of the Company under the Scheme with effect from andconditionally upon the due carrying out of the actions envisaged in sub-clause 3.1 of the Compromise Deed.
4. The Trustee hereby agrees to the New Company acting as the Company in substitution of the Present Company.
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5. The Present Company hereby consents to the foregoing agreement.
6. With effect from and conditionally upon the due carrying out of the actions envisaged in sub-clause 3.1 of the CompromiseDeed, all rights, powers and duties vested in the Present Company relating to the Scheme are transferred by this deed to theNew Company, which assumes responsibility for the future exercise of those rights, powers and duties.
7. If any term or provision in this deed shall be held to be illegal or unenforceable, in whole or in part, under any enactmentor rule of law, such term or provision shall to that extent be deemed not to form part of this deed but the validity andenforceability of the remainder of the terms and provisions of this deed shall not be affected.
8. This deed is governed and is to be construed in accordance with the laws of England.
9. This deed may be executed in as many parts as there are signatories to it. When each signatory has executed at least onepart of this deed, it shall be as effective as if all of the signatories had executed all the parts of it. Each part of this deed maybe treated as an original of this deed.
10. This deed is delivered by each party when (and shall not have effect until) it is dated.
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THE SCHEDULE
1. A new clause 17.5 shall be inserted into the Trust Deed as follows:
If an insolvency event occurs in respect of the Company then all the powers of the Company and other Employers under theTrust Deed and Rules, whether fiduciary or not, shall vest in and be exercisable by the Trustees. For the purposes of thisclause, the expression insolvency event has the meaning attributed to it by Section 121, Pensions Act 2004.
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EXECUTED as a DEED by CATTLES STAFF PENSION FUNDLIMITED
Signature of Director:
Print name:
Signature of Director/Secretary:
Print name:
EXECUTED as a DEED by CATTLES PLC
Signature of Director:
Print name:
Signature of Director/Secretary:
Print name:
EXECUTED as a DEED by CSP LEEDS LIMITED
Signature of Director:
Print name:
Signature of Director/Secretary:
Print name:
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Actuary s opinion
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SCHEDULE 6Receipt and confirmation
[Trustee letterhead]
Cattles plcKingston House Centre 27 Business ParkWoodhead RoadBirstall, BatleyWest Yorkshire WF17 9TD
[Date]
Dear Sirs
Compromise Deed between Cattles plc, Welcome Financial Services Limited, The Lewis Group Limited, CSP LeedsLimited and the Trustee, dated [�] (the Compromise Deed)
Receipt of payment by the Trustee
Terms defined in the Compromise Deed shall bear the same meaning when used in this receipt of payment.
In its capacity as trustee of the Scheme, the Trustee hereby confirms to the Company its receipt of £3 from [the Company] aspayment of the amount due from the Company and the Participating Employers (as defined in the Compromise Deed),calculated under clause 3 of the Regulated Apportionment Arrangement Deed and receipt of £[ ] from [the Company] aspayment of the cessation expenses notified by the Trustee under clause 3.2 of the Compromise Deed.
A copy of the confirmation from [Bank] to the Trustee of the receipt of the payment is attached to this receipt.
For and on behalf ofCattles Staff Pension Fund Limited
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SCHEDULE 7Former Employers
Company Company No.
1. Welcome Retail Services Limited 226015
2. Shopacheck Limited 274611
3. Progressive Financial Services Limited 1682540
4. Ewbanks Mail Order Limited 457490
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SCHEDULE 8Release and consent by Chairman of the Trustee Board
To: Cattles plcWelcome Financial Services LimitedThe Lewis Group LimitedCSP Leeds LimitedCattles Staff Pension Fund Limited
[Date]
Dear Sirs
Compromise Deed between Cattles plc, Welcome Financial Services Limited, The Lewis Group Limited, CSP LeedsLimited and the Cattles Staff Pension Fund Limited dated [�] (the Compromise Deed)
Release and consent by Chairman of the Trustee Board
Terms defined in the Compromise Deed shall bear the same meaning when used in this notice.
I, Duncan Brown, hereby release and consent to the Current Employers and Former Employers ceasing to have any liability(current or future, actual or contingent) to pay any expenses or professional fees which may be payable in relation orincidental to the Scheme in respect of me, in accordance with clause 3.3(g) of the Compromise Deed.
Yours faithfully
Chairman of the Trustee Board
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SCHEDULE 9Part A : WFSL Scheme Document
217
Part B : Cattles Scheme Document
218
Part C : TLG Distribution Deed
219
Dated: 2011
Between:
THE GUARANTOR COMPANIES(as defined herein)
and
THE TLG CREDITORS (as defined herein)
and
THE CL FINANCE CREDITORS (as defined herein)
and
THE PENSION TRUSTEE (as defined herein)
TLG COMPROMISE, RELEASE ANDDISTRIBUTION DEED
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This deed is dated 2011
PARTIES:(1) the Guarantor Companies;(2) the TLG Creditors;(3) the CL Finance Creditors; and(4) the Pension Trustee,
each as defined herein, (together, the Parties and each individual Guarantor Company, TLG Creditor, CL Finance Creditorand the Pension Trustee a Party).
BACKGROUND:(A) Cattles and the Group are in the process of effecting a financial restructuring.
(B) The Guarantor Companies are all members of the Group.
(C) The TLG Creditors and CL Finance Creditors are all financial creditors of Cattles who are parties to one or more of theTLG Finance Documents, under which TLG and CL Finance owe them Guarantor Obligations.
(D) Pursuant to the financial restructuring of Cattles and the Group, the Ewbanks Scheme became effective on [�] 2011.Pursuant to the Ewbanks Scheme, the TLG Creditors, the CL Finance Creditors and Ewbanks have agreed to enter into thisdeed. The Guarantor Companies other than Ewbanks have separately confirmed their support for the financial restructuring ofthe Group, including the compromises under the Ewbanks Scheme and this deed.
(E) On 19 November 2010, TLG and the Pension Trustee (among others) entered into the Pensions Compromise Agreement,pursuant to which the Pension Trustee has agreed to enter into this deed (or a bilateral compromise with TLG of the TLGNotional Section 75 Debt).
(F) On [�], TLG Holdings transferred the entire issued share capital in TLG to CL Finance.
(G) Pursuant to this deed, the TLG Creditors rights against TLG in connection with the Guarantor Obligations will becompromised and ultimately released. Agreed distributions from TLG will be made to the TLG Creditors in proportion totheir respective TLG Creditor Claims.
(H) Further, pursuant to the Ewbanks Scheme, Ewbanks is authorised to execute and deliver this deed on behalf of the TLGCreditors and the CL Finance Creditors.
AGREED TERMS:1. DEFINITIONS AND INTERPRETATION
1.1 In this deed the following words and expressions have the following meanings:
Affiliate means a subsidiary or a holding company of a person or any other subsidiary of that holding company;
Available Dividend Amount means an amount which is available to TLG to pay distributions and which the board ofdirectors of TLG has decided it would, but for the provisions of clause 10.2(b), declare as a dividend;
Business Day means a day other than a Saturday or a Sunday on which banks are open for general business in London;
Cattles means Cattles plc, a company incorporated under the laws of England and Wales with company number 543610;
Cattles Intercompany Claim means any and all of the Liabilities owed to Cattles by TLG as at the effective date of theWFSL Creditor Scheme except any Liabilities due from TLG to Cattles under the terms of the TSA as at the effective date ofthe WFSL Creditor Scheme;
CL Finance means CL Finance Limited, a company incorporated under the laws of England and Wales with companynumber 01108021;
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CL Finance Creditor Claim means any claim against CL Finance as a guarantor of the debts of Cattles, including, withoutlimitation, any claim against CL Finance in relation to a TLG Finance Document;
CL Finance Creditors means any Guaranteed Creditor who is (or claims to be) a creditor of CL Finance in respect of a CLFinance Creditor Claim;
Co-guarantors Compromise Deed means the deed entered into by the Guarantor Companies, other than TLG, and theGuaranteed Creditors pursuant to the Ewbanks Scheme;
Committee Confidential Information means:(a) all information and documents provided to each Committee Member, as members of the TLG and CL Finance
Creditors Committee; and(b) all discussions at and proceedings of the meetings of the TLG and CL Finance Creditors Committee,
save to the extent (i) such matters are already in the public domain or (ii) in relation to information known by suchCommittee Member (other than as a result of a breach of clause 1.4 of Schedule 3);
Committee Member means a member from time to time of the TLG and CL Finance Creditors Committee;
Court means the High Court of Justice of England and Wales;
Deed Effective Date means the date that this deed becomes effective in accordance with clause 2;
Deed of Accession means a deed in the form set out at Schedule 6, completed and executed on behalf of an acceding TLGCreditor or CL Finance Creditor;
Disposal Event means a sale of shares by any company which is a member of the Group, which sale removes TLG and/or CLFinance from the Group;
Distributable Amount the amount, if any, by which the TLG Cash Amount exceeds £4 million;
Distribution Period End Date means the First Distribution Period End Date and each of the subsequent dates listed inSchedule 7;
Ewbanks means Ewbanks Mail Order Limited, a private limited company incorporated under the laws of England and Waleswith company number 00457490;
Ewbanks Scheme means a scheme of arrangement under Part 26 of the Companies Act 2006 between Ewbanks and theScheme Creditors (as defined therein) dated [�];
Excluded Intercompany Debt means any Intercompany Debt listed in Schedule 8;
Final TLG Payment means the final payment TLG makes to, or reserves for the TLG Creditors and the Pension Trusteeunder this deed (which may be less than the applicable Distributable Amount), which will be the payment following whichTLG will have distributed to, and/or reserved for, the TLG Creditors and the Pension Trustee an aggregate amount equal tothe amount of the Cattles Intercompany Claim;
First Distribution Period End Date means the earliest date listed in Schedule 7 which occurs after the date that is fourcalendar months after the Deed Effective Date;
Group means Cattles Holdings Limited and Compass Credit and their direct and indirect subsidiaries from time to time;
Guaranteed Creditor means any Scheme Creditor, as defined in the Ewbanks Scheme;
Guarantor Companies means each of the companies listed in Schedule 1;
Guarantor Obligations means any Liability owed by any Guarantor Company, as a guarantor of the debts of Cattles, to anyof the Guaranteed Creditors;
Intercompany Debt means all present and future debts, monetary claims, monies, obligations or liabilities, whether actual orcontingent, owed by TLG to any Guarantor Company or owed by any Guarantor Company to TLG, except, in each case, inconnection with the Guarantor Obligations;
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Liability means any liability of a person, whether it is present, future, prospective or contingent, whether its amount is fixedor undetermined, whether or not it involves the payment of money or performance of any act or obligation and whether itarises at common law, in equity or by statute, in England and Wales or in any other jurisdiction, or in any other mannerwhatsoever, including, without limitation, claims in respect of breach of contract, tort, restitution, breach of trust, financialindebtedness, guarantee or indemnity claims, claims for misrepresentation, negligence, wilful default or fraud, mis-sellingclaims, claims under the Financial Services and Markets Act 2000, Consumer Credit Act 1974 or Pensions Act 1995 or 2004and any other claims which may arise ancillary to any such financial liability, but in all cases excluding:(a) any liability which is barred by statute or is otherwise unenforceable; or(b) a liability under a contract that is void or, being voidable, has been avoided;
Obligor Companies means TLG and CL Finance;
Pension Fund means the Cattles Staff Pension Fund, which was established by a trust deed dated 20 August 1952 and iscurrently governed by a deed of variation, removal and appointment dated 2 April 1996 (as amended from time to time);
Pension Trustee means Cattles Staff Pension Fund Limited, a private limited company incorporated under the laws ofEngland and Wales with company number 03444694, which is the trustee of the Pension Fund, or its successors as trustees,or the Board of the Pension Protection Fund as its successor pursuant to the Pensions Act 2004;
Pension Trustee Amount means such proportion of an Available Dividend Amount as would have been paid to the PensionTrustee, had the Available Dividend Amount been a Distributable Amount and had the Final TLG Payment not yet beenmade;
Pensions Compromise Agreement means the agreement dated 19 November 2010 (as amended on 14 December 2010)between, among others, TLG and the Pension Trustee under which:(a) all the obligations of TLG to and in respect of the Pension Fund (including any past, present or future debts under
section 75 of the Pensions Act 1995) will be compromised for a nominal sum (which will include TLG and the PensionTrustee entering into a regulated apportionment arrangement as defined in the Occupational Pension Schemes(Employer Debt) Regulations 2005 (as amended)); and
(b) the TLG Notional Section 75 Debt will be determined and will become payable by TLG to the Pension Trustee;
Proceedings means any process, action, step, or other legal (or quasi legal) or judicial (or quasi judicial) proceeding(including, without limitation, any demand, arbitration, alternative dispute resolution, expert determination process, judicialreview, adjudication, execution, seizure, distraint, lien, enforcement of judgment, or enforcement of any security interest orright of set-off or any proceeding for the purpose of placing a company into administration, liquidation or any insolvency,reconstruction, bankruptcy or analogous proceeding) in any jurisdiction;
TLG means The Lewis Group Limited, a company incorporated under the laws of Scotland, with company numberSC127043;
TLG and CL Finance Covenants means the covenants set out in Schedule 4;
TLG and CL Finance Creditors Committee means the committee representing the TLG Creditors and the CL FinanceCreditors together, constituted in accordance with clause 13 and Schedule 3;
TLG Cash Amount means, on any Distribution Period End Date in relation to which it is calculated, the aggregate balance ofall of TLG s bank accounts, not taking into account monies held in client or trust accounts or otherwise held on trust forclients, or any other person;
TLG Compliance Report means the report to be provided to the TLG and CL Finance Creditors Committee in accordancewith clause 3.3(d)(iii);
TLG Creditor Claim means any claim against TLG as a guarantor of the debts of Cattles, including, without limitation, anyclaim against TLG in relation to a TLG Finance Document, but ignoring the effects of clause 4.1;
TLG Creditor means any Guaranteed Creditor who is (or claims to be) a creditor of TLG in respect of a TLG Creditor Claim;
TLG Deed Administrator means a person appointed by the Obligor Companies under clause 3.1;
TLG Deed Administrators Agreement means the agreement by which a person agrees to be appointed as TLG DeedAdministrator and to be bound by the deed and dealing with his or her remuneration, costs and expenses, to be entered into
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on or prior to the Deed Effective Date between the TLG Deed Administrators and the Obligor Companies or on anappointment of subsequent TLG Deed Administrators;
TLG Deed Claim means a TLG Creditor Claim or the TLG Notional Section 75 Debt;
TLG Estimated Realisable Value means the total estimated realisable value of TLG, being the estimated realisable value ofTLG s assets, less i) the costs of realisation; ii) the estimated expenses of its liquidation; and iii) an estimate of any Liabilitiesowed by TLG to any third party, excluding its Guarantor Obligations;
TLG Finance Document means any of the agreements and instruments listed in Schedule 2, each as amended, supplementedor varied from time to time;
TLG Holdings means Lewis Group (Holdings) Limited, a company incorporated under the laws of Scotland with companynumber SC154199;
TLG Notional Section 75 Debt means the amount of the TLG Claim (as defined in the Pensions Compromise Agreement)that TLG will owe the Pension Trustee under the Pensions Compromise Agreement, which amount is to be determined underthat agreement;
TSA means the transitional services agreement dated 3 July 2009 between, among others, Cattles and TLG;
Unascertained TLG Deed Claim has the meaning given to that term in clause 7.9;
Unascertained TLG Deed Claims Trust Fund means a fund held in a bank account by TLG the balance of which is on trustfor the purpose of making payments to TLG Creditors and/or the Pension Trustee in accordance with the terms of this deed;
WFSL means Welcome Financial Services Limited, a company incorporated under the laws of England and Wales withcompany number 00133540;
WFSL Ascertained Scheme Claim means the Ascertained Scheme Claim (as defined in the WFSL Creditor Scheme) of aTLG Creditor finally determined under clause 3.7.2 or 3.8 of the WFSL Creditor Scheme, to the extent it arises out of or inconnection with a TLG Finance Document and including any Adjusted Claim (within the meaning of the WFSL CreditorScheme) which relates to that Ascertained Scheme Claim; and
WFSL Creditor Scheme means the scheme of arrangement under Part 26 of the Act dated [ ] between WFSL and certain ofits creditors.
1.2 In this deed, unless the context otherwise requires or otherwise expressly provides for:(a) references to clauses and schedules are references to clauses and schedules of this deed;(b) references to a person include references to an individual, firm, partnership, company, corporation, unincorporated
body of persons or any state or state agency;(c) references to a statute or statutory provision include references to the same as subsequently modified, amended or re-
enacted from time to time;(d) the singular includes the plural and vice versa and words importing one gender shall include all genders;(e) headings to parts, clauses and schedules are for ease of reference only and shall not affect the interpretation of this
deed; and(f) references to:
(i) Sterling or to £ are references to the lawful currency of the United Kingdom of Great Britain and NorthernIreland from time to time;
(ii) Dollars or to $ are references to the lawful currency of the United States of America from time to time; and(iii) Euros or to are references to the lawful currency from time to time of member states of the European
Communities that adopt or have adopted the euro as their lawful currency under the legislation of the EuropeanCommunity for Economic and Monetary Union.
2. EFFECT OF THIS DEED
2.1 The Parties hereby agree that upon its execution by or on behalf of all of the Parties this deed shall immediately be fullyand effectively binding upon all of them, subject to the condition precedent in clause 2.2 having been satisfied.
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2.2 The condition precedent referred to in clause 2.1 is that the Co-guarantors Compromise Deed shall have been signed byall of its parties and all conditions precedent to the Co-guarantors Compromise Deed shall have been satisfied, save for therequirement that this deed becomes effective in accordance with its terms.
3. THE TLG DEED ADMINISTRATORS
3.1 The Obligor Companies will appoint Christine Mary Laverty, Richard Dixon Fleming and Edward George Boyle ofKPMG LLP, 8 Salisbury Square, London, EC4Y 8BB to be the TLG Deed Administrators on the Deed Effective Date,subject to their having entered into a TLG Deed Administrators Agreement. TLG and CL Finance together, with theagreement of the TLG and CL Finance Creditors Committee, shall have the power to appoint any successors to the TLGDeed Administrators, provided that such persons are qualified in accordance with clause 3.2 and have given, and notwithdrawn, their consent to act as TLG Deed Administrators.
3.2 Each of the TLG Deed Administrators appointed under clause 3.1 is, and any person appointed to succeed them inaccordance with clause 3.1 must be, a licensed insolvency practitioner within the meaning of section 390 of the InsolvencyAct 1986 and duly qualified in the reasonable opinion of the Obligor Companies to discharge the functions of the TLG DeedAdministrators under this deed. Where more than one person has been appointed as a TLG Deed Administrator, they mayexercise and perform the powers, rights, duties and functions of the TLG Deed Administrators under this deed jointly orseverally.
3.3 Role of the TLG Deed Administrators
(a) The TLG Deed Administrators shall discharge the duties and responsibilities imposed upon them by clauses 5, 7, 9, 14and 16 of this deed.
(b) In exercising their powers and carrying out their duties under this deed, the TLG Deed Administrators shall act asagents of TLG and CL Finance.
(c) The TLG Deed Administrators shall act in good faith with reasonable skill and care in the interests of the TLGCreditors and the CL Finance Creditors and the Pension Trustee and shall exercise their powers, duties and functionsunder this deed with a view to ensuring that this deed is implemented in accordance with its terms.
(d) Without prejudice to the generality of clause 3.3(c), the TLG Deed Administrators shall in addition:(i) fulfil their duties as set out in clauses 7.1 and 9 with respect to payments under this deed;(ii) monitor on a basis to be agreed with the TLG and CL Finance Creditors Committee the Obligor Companies
compliance with the TLG and CL Finance Covenants;(iii) provide a written report to the TLG and CL Finance Creditors Committee on each of TLG s and CL Finance s
compliance with the TLG and CL Finance Covenants at the end of each period of every three months from theDeed Effective Date or as otherwise agreed with the TLG and CL Finance Creditors Committee (each a TLGCompliance Report);
(iv) so far as they are able, provide the TLG and CL Finance Creditors Committee with such information as it mayfrom time to time reasonably require in relation to matters of relevance to the TLG and CL Finance CreditorsCommittee; and
(v) as soon as reasonably practicable following the Deed Effective Date, notify the TLG Creditors of the amount ofthe Cattles Intercompany Claim.
3.4 Powers of the TLG Deed Administrators
The TLG Deed Administrators shall be entitled:(a) to have access to such information as they may from time to time require on the affairs of TLG and CL Finance that
relate to the TLG and CL Finance Covenants and the Obligor Companies compliance therewith;(b) to attend meetings of the boards of directors of TLG and CL Finance, at the TLG Deed Administrators discretion, to
receive any papers relating to those meetings and to address the boards of directors;(c) to delegate to or employ any person as they see fit for the carrying out of their powers, rights, duties and functions in
relation to the operation of this deed and under the TLG Deed Administrators Agreement;(d) to request TLG or CL Finance to make any payment that is necessary for or incidental to the performance of the TLG
Deed Administrators functions;
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(e) to liaise with the TLG and CL Finance Creditors Committee and to attend TLG and CL Finance Creditors Committeemeetings if invited;
(f) to convene meetings of the TLG Creditors if appropriate; and(g) to exercise the powers expressly given to them in this deed and any other powers necessary or desirable for the full and
proper implementation of this deed.
3.5 Vacation of office
A TLG Deed Administrator shall vacate office if he:(a) becomes bankrupt;(b) is disqualified from acting as a director under the Company Directors Disqualification Act 1986;(c) is admitted to hospital because of mental disorder or is the subject of an order concerning his mental disorder made by
a court having jurisdiction in England or elsewhere in such matters;(d) is convicted of an indictable offence or is convicted of any offence by a court having jurisdiction in any other country
where that offence, if committed in England and Wales, would have been an indictable offence under English law;(e) resigns his office by giving 60 days notice in writing to TLG and the TLG and CL Finance Creditors Committee or
such shorter period of notice as may be agreed by to TLG and the TLG and CL Finance Creditors Committee orresigns his office with immediate effect by giving notice in writing to to TLG and the TLG and CL Finance CreditorsCommittee if he considers that he should for professional regulatory reasons or in the event of non-payment of his feeswhen due and such fees have been approved by the TLG and CL Finance Creditors Committee, a meeting of the TLGCreditors and the CL Finance Creditors or pursuant to a final order of the Court in each case pursuant to clause 3.10; or
(f) is removed by the TLG and CL Finance Creditors Committee, in accordance with clause 4.2(b) of Schedule 3.
3.6 Vacancy
If there is no TLG Deed Administrator in office, including at the Deed Effective Date, TLG and CL Finance with theagreement of the TLG and CL Finance Creditors Committee shall forthwith fill the vacancy.
3.7 Liability of TLG Deed Administrators
(a) Except to the extent required by law, no TLG Creditor or CL Finance Creditor shall be entitled to challenge the validityof any act done or omitted to be done in good faith and with due care by the TLG Deed Administrators in accordancewith and to implement the provisions of this deed or the exercise by the TLG Deed Administrators in good faith andwith due care of any power conferred upon them for the purposes of this deed if exercised in accordance with and toimplement the provisions of this deed.
(b) A TLG Deed Administrator shall not be liable for any loss resulting from any act he does or omits to do, unless anysuch loss is attributable to his own negligence, breach of statutory duty, breach of trust, fraud or dishonesty.
3.8 Indemnity
(a) The TLG Deed Administrators shall be entitled to an indemnity in respect of:(i) all Proceedings brought or made against them in respect of any act alleged to have been done or omitted to be
done in relation to this deed by them in good faith, without negligence, breach of duty, breach of trust, fraud ordishonesty in the course of performing their duties and functions under this deed; and
(ii) all costs, charges, expenses and Liabilities properly incurred by the TLG Deed Administrators in the course ofperforming their functions under this deed to be approved by the TLG and CL Finance Creditors Committee,such approval not to be unreasonably withheld.
(b) If the approval required under clause 3.8(a)(ii) cannot be obtained within a reasonable period, the TLG DeedAdministrators may convene a meeting of the TLG Creditors to determine the level of the TLG Deed Administratorscosts, charges, expenses and Liabilities. If approval cannot be obtained at a meeting of the TLG Creditors, the TLGDeed Administrators shall be permitted to apply, or cause TLG to apply, to the Court for directions as if Rules 2.106 to2.108 of the Insolvency Rules 1986 applied, mutatis mutandis, to the TLG Deed Administrators.
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(c) In addition to the general provisions of clause 3.8(a), the TLG Deed Administrators shall be entitled to an indemnity inrespect of:(i) any Liability incurred by them in defending any Proceedings, whether civil or criminal, in respect of any
negligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to the operation of this deed,where:
(A) judgment is given in their favour; or(B) they are acquitted; and
(ii) any application in any such Proceedings as are referred to in clause 3.8(c)(i) where relief is granted to them by acourt from liability for negligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to theoperation of this deed.
(d) Any indemnity to which the TLG Deed Administrators are entitled in accordance with clause 3.8(a) or (c) shall be paidpro rata to the estimated realisable value of the remaining assets of the Obligor Companies, from the remaining assetsof the Obligor Companies at that time. The Obligor Companies shall be jointly and severally liable to the TLG DeedAdministrators under the terms of this clause 3.8(d).
3.9 Insurance
The Obligor Companies will, in consultation and as agreed with the TLG Deed Administrators:(a) make reasonable endeavours to purchase and maintain for the TLG Deed Administrators insurance against any liability
for which the Obligor Companies would be obliged to indemnify them in accordance with clause 3.8; and(b) subject to clause 3.9(a), pay the costs incurred by a TLG Deed Administrator in defending Proceedings of the nature
described in clause 3.8(c)(i), provided that such TLG Deed Administrator gives the Obligor Companies an undertakingto reimburse them (with interest) at the conclusion of those Proceedings, where such TLG Deed Administrator is notentitled to an indemnity under clause 3.8.
3.10 Remuneration and expenses of TLG Deed Administrators
The TLG Deed Administrators shall be remunerated, and shall have their reasonable costs and expenses reimbursed, by theObligor Companies in respect of their role in this deed and all acts reasonably incidental thereto in accordance with the termsof the TLG Deed Administrators Agreement. Such remuneration is to be approved by the TLG and CL Finance CreditorsCommittee and such approval shall not be unreasonably withheld. If approval cannot be obtained within a reasonable period,the TLG Deed Administrators may convene a meeting of the TLG Creditors and the CL Finance Creditors to determine thelevel of the TLG Deed Administrators costs, charges, expenses and liabilities. If approval cannot be obtained at a meeting ofthe TLG Creditors and the CL Finance Creditors, the TLG Deed Administrators shall be permitted to apply, or cause TLG toapply, to the Court for directions as if Rules 2.106 to 2.108 of the Insolvency Rules 1986 applied, mutatis mutandis, to theTLG Deed Administrators.
3.11 Continuation of operations
Except insofar as specific functions are to be performed by the TLG Deed Administrators as set out in this section, theaffairs, business and property of TLG shall continue to be managed by its board of directors. TLG, acting through the boardof directors consistent with its regulatory and fiduciary responsibilities, shall remain solely responsible for the conduct of thefuture trading business of TLG.
4. COMPROMISE
4.1 Subject to clause 4.2, from the Deed Effective Date, the aggregate value of all TLG Deed Claims shall be limited to thelower of:(a) the TLG Estimated Realisable Value from time to time; and(b) the Cattles Intercompany Claim,
and each TLG Creditor Claim and the TLG Notional Section 75 Debt shall be limited to its pro rata share thereof.
4.2 If at any time after the Deed Effective Date, but before the earlier of:(a) a Disposal Event; and(b) the date of the final distribution in the liquidation of TLG,
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any third party makes a valid claim against TLG or CL Finance for any Liability which would require TLG or CL Finance topay more than £2 million or, in the case of a claim for breach of contract, £5 million (unless such payment is recoverablefrom a third party) the TLG and CL Finance Creditors Committee may resolve that clauses 4.1, 5, 9, 10 and 11 of this deedshall cease to have any further effect.
5. RELEASE
5.1 Subject to clause 10.3, upon a Disposal Event occurring with respect to TLG or on the date on which TLG has paid allTLG Deed Claims in full or has realised its TLG Estimated Realisable Value and distributed all of the TLG Cash Amount, inaccordance with the terms of this deed:(a) the TLG Deed Administrators shall give notice of that Disposal Event or date to the TLG Creditors and the Pension
Trustee;(b) the total aggregate value of all Guarantor Obligations of TLG and the TLG Notional Section 75 Debt shall be equal to
the total aggregate amount of the distributions made by TLG to each TLG Creditor and the Pension Trustee;(c) the payments made to each TLG Creditor and the Pension Trustee by TLG shall be in full and final settlement of all
and any Guarantor Obligations or TLG Notional Section 75 Debt owed to that TLG Creditor or the Pension Trustee;(d) all Guarantor Obligations owed by TLG and the TLG Notional Section 75 Debt shall be released and forever
discharged; and(e) all obligations of TLG under this deed shall be released and forever discharged.
6. INTERCOMPANY RELEASES
6.1 From the Deed Effective Date, any and all Liabilities owed in relation to, in connection with or in any way arising out ofthe Guarantor Obligations by TLG to any other Guarantor Company or by any Guarantor Company other than TLG to TLGshall be irrevocably waived, released, terminated and forever discharged fully and absolutely.
6.2 From the Deed Effective Date:(a) each Guarantor Company irrevocably waives, releases, terminates and discharges fully and absolutely TLG from any
and all Intercompany Debts owed to it by TLG (excluding any Excluded Intercompany Debts); and(b) TLG irrevocably waives, releases, terminates and discharges fully and absolutely each Guarantor Company from any
Intercompany Debts owed to it by that Guarantor Company (excluding any Excluded Intercompany Debts).
7. TLG DEED CLAIMS
7.1 The TLG Deed Administrators shall liaise with the Scheme Supervisors (within the meaning of the WFSL CreditorScheme) in order to determine the value of each TLG Creditor s WFSL Ascertained Scheme Claim.
7.2 As soon as is reasonably practicable after the TLG Deed Administrators have been notified that a TLG Creditor s WFSLAscertained Scheme Claim has been determined and of its amount, the TLG Deed Administrators shall calculate that TLGCreditor s TLG Creditor Claim based on that TLG Creditor s WFSL Ascertained Scheme Claim, and shall notify the TLGCreditor of the proposed amount of its TLG Creditor Claim.
7.3 If a TLG Creditor does not agree with the proposed amount of its TLG Creditor Claim, it shall notify the TLG DeedAdministrator. If the TLG Creditor Claim of a TLG Creditor is not agreed between the TLG Creditor and the TLG DeedAdministrators within 20 Business Days of the TLG Creditor being notified of the proposed amount of its TLG CreditorClaim under clause 7.2 (or such later time to which the TLG Deed Administrators and the TLG Creditor shall both agree oracquiesce) such part (if any) of the TLG Deed Claim as is not agreed shall become a Disputed TLG Deed Claim. The part (ifany) of the TLG Deed Claim that is agreed shall stand as the TLG Creditor s TLG Deed Claim (without prejudice to theoutcome of the dispute regarding the disputed portion). The TLG Deed Administrators shall forthwith give notice to the TLGCreditor of the Disputed TLG Deed Claim.
7.4 A TLG Creditor who receives notice of a Disputed TLG Deed Claim shall be entitled within 21 days of receipt of suchnotice to give notice to the TLG Deed Administrator that it is appealing the Disputed TLG Deed Claim and to seek resolutionof the existence or proper value of its Disputed TLG Deed Claim by means of proceedings issued in the Companies Court ofthe Chancery Division of the Court, as if the Disputed TLG Deed Claim were an appeal of an administrator s decision underrule 2.78 of the Insolvency Rules.
7.5 If a final judgment is given against TLG in proceedings begun under clause 7.4 then, on the date such judgment becomesincapable of further appeal, the Disputed TLG Deed Claim will have been determined at the amount of the judgment.
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7.6 If a final judgment is given against the TLG Creditor in proceedings begun under clause 7.4 then, on the date suchjudgment becomes incapable of further appeal, (i) the Disputed TLG Deed Claim will become determined at the valuedetermined by the final judgment; or (ii) in the case of a judgment which values the Disputed TLG Deed Claim at zero, thejudgment shall give no entitlement to any payment under this deed, other than in respect of any amount already determinedunder clause 7.3.
7.7 If any legal or other costs are awarded against either party to the dispute, they shall be payable in full and shall not besubject to any set-off or form any part of a TLG Deed Claim.
7.8 Nothing in this clause 7 shall prevent the TLG Deed Administrator from agreeing in writing with a TLG Creditor thevalue of his TLG Deed Claim at any time.
7.9 If, on any Distribution Period End Date, any TLG Deed Claim has not yet been determined then, when making theirpayment calculations under clause 9.2, the TLG Deed Administrators shall include a reasonable and prudent estimate of suchTLG Deed Claim, as though it had been determined (an Unascertained TLG Deed Claim), and inform TLG and the relevantTLG Creditor or the Pension Trustee (as appropriate) of the value of the Unascertained TLG Deed Claim, which shall bebinding on TLG for no other purpose.
8. PENSION TRUSTEE
8.1 If, before the First Distribution Period End Date, TLG shall have agreed with the Pension Trustee, as envisaged by theprovisions of the Pensions Compromise Agreement (or otherwise), that it will make one or more payments to the PensionTrustee (under a separate bilateral compromise) in full and final settlement of the TLG Notional Section 75 Debt, then:(a) this deed shall be effective to bind all Parties other than the Pension Trustee, notwithstanding that it has not been
executed by the Pension Trustee;(b) the TLG Notional Section 75 Debt shall not be a TLG Deed Claim for the purposes of this deed and the Pension
Trustee shall not be entitled to any payment under the terms of this deed;
(c) without limiting the generality of clause 8.1(b), references in this deed to TLG Deed Claims shall be read as referencesto TLG Creditor Claims and (insofar as they relate to the Pension Trustee and the TLG Notional Section 75 Debt)clauses 7.9, 9.2, 9.3, 9.5, 9.6, 10.2 and 10.3 of this deed shall cease to have any effect and other provisions shall beinterpreted with any necessary modification; and
(d) nothing in this deed, including for the avoidance of doubt clause 4.2 and the TLG and CL Finance Covenants, shallprevent TLG from using any of its assets to make such payment to the Pension Trustee as it shall have agreed.
8.2 For the avoidance of doubt, clauses 4 and 5 shall apply to the TLG Notional Section 75 Debt, but not to TLG s section 75debt (as defined in Recital G of the Pensions Compromise Agreement), which liability shall be compromised instead inaccordance with the terms of the Pensions Compromise Agreement.
9. DISTRIBUTIONS BY TLG9.1 Within five Business Days following the First Distribution Period End Date and each subsequent Distribution Period EndDate TLG shall:(a) calculate the TLG Cash Amount;(b) determine whether there is a Distributable Amount;(c) if there is a Distributable Amount, determine what that amount is; and(d) inform the TLG Deed Administrators of any Distributable Amount.
9.2 Within 10 Business Days of being informed of the Distributable Amount, the TLG Deed Administrators shall calculatethe payments to be made to the TLG Creditors and the Pension Trustee in order to ensure that the Distributable Amount ispaid rateably to the determined value of their TLG Deed Claims, subject to clause 7.9. The TLG Deed Administrators shallthen promptly give notice of those payments to TLG and, in respect of their own payments, to the Pension Trustee and eachTLG Creditor. The TLG Creditors and the Pension Trustee acknowledge that the TLG Deed Administrators and not the boardof directors of TLG are responsible for determining the value of the payments under this deed, in accordance with its terms.
9.3 Subject to clause 9.4, not later than five Business Days after being informed by the TLG Deed Administrators of thepayments due to each of the TLG Creditors and the Pension Trustee, TLG shall make those payments from the DistributableAmount.
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9.4 Where, when making their payment calculations under clause 9.2, the TLG Deed Administrators have taken account ofUnascertained TLG Deed Claims, TLG shall create the Unascertained TLG Deed Claims Trust Fund, of all amounts whichwould have been paid under clause 9.3, if the Unascertained TLG Deed Claims had been determined TLG Deed Claims onthe Distribution Period End Date.
9.5 The Unascertained TLG Deed Claims Trust Fund shall be held on trust by TLG for the benefit of the TLG Creditors andthe Pension Trustee (where relevant) in respect of their Unascertained TLG Deed Claims.
9.6 If any Unascertained TLG Deed Claim subsequently becomes a determined TLG Deed Claim, the TLG DeedAdministrators shall, as soon as reasonably practicable, calculate the amount which would have been paid to the TLGCreditor or Pension Trustee, as if its TLG Deed Claim had been determined on the previous Distribution Period End Dates.The TLG Deed Administrators shall notify TLG of the relevant payment required to be made to the TLG Creditor or thePension Trustee from the Unascertained TLG Deed Claims Trust Fund and TLG shall make that payment to the TLGCreditor or Pension Trustee. If the amount reserved in the Unascertained TLG Deed Claims Trust Fund in respect of anUnascertained TLG Deed Claim exceeds the amount of the relevant TLG Deed Claim, the surplus shall be released from theUnascertained TLG Deed Claims Trust Fund into the general assets of TLG.
10. FINAL TLG PAYMENT
10.1 Not more than three Business Days after it has made the Final TLG Payment, TLG shall give notice in writing to theTLG Deed Administrators and to CL Finance of its having made the Final TLG Payment.
10.2 Following the date on which the Final TLG Payment is made, if at any time TLG considers in its sole discretion that it isable and intends to declare and pay a dividend in favour of its parent, CL Finance:(a) it shall calculate the Available Dividend Amount;
(b) it shall calculate the Pension Trustee Amount;(c) if in its sole discretion it then declares the dividend and declares such dividend to be payable in cash, it shall declare
that dividend at an amount equal to the Available Dividend Amount less the Pension Trustee Amount; and(d) on payment in cash of the dividend referred to in (c) above to CL Finance, TLG shall pay an amount equal to the
Pension Trustee Amount to the Pension Trustee,
in each case, unless a Disposal Event shall have occurred before the payment is made.
10.3 Unless otherwise agreed with the TLG Creditors and the Pension Trustee, no Party will be a party to a Disposal Eventwithout undertaking to the TLG Creditors and the Pension Trustee that they shall each be entitled to such proportion of theproceeds of the Disposal Event as they would have been entitled to if that part of the proceeds which represents the value ofTLG that was realised by the Disposal Event (net of that part of the disposal costs attributable to TLG) had been aDistributable Amount and had the Final TLG Payment not yet been made.
11. AGREEMENT NOT TO SUE
Each Party agrees, on behalf of itself and on behalf of its parent, subsidiaries, successors, assigns, transferees, representatives,principals, agents, officers or directors, and save in respect of any breach of the terms of this deed, not to sue, commence,voluntarily aid in any way, prosecute or cause to be commenced or prosecuted against any other Party or its parent,subsidiaries, successors, assigns, transferees, representatives, principals, agents, officers or directors, any action, suit or otherproceeding concerning the Guarantor Obligations (or any Liability of one Guarantor Company to another in relation to theGuarantor Obligations) in England and Wales or in any other jurisdiction.
12. WARRANTY AS TO AUTHORITY
Each Party warrants and represents to the other Parties with respect to itself that it has the full right, power and authority toexecute, deliver and perform this deed.
13. TLG AND CL FINANCE CREDITORS COMMITTEE
There shall be a committee of the TLG Creditors and the CL Finance Creditors, and that committee shall be constituted andshall act in accordance with the terms set out in Schedule 3.
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14. COVENANTS
14.1 TLG Holdings, TLG and CL Finance give to the TLG Creditors and CL Finance Creditors the TLG and CL FinanceCovenants set out in Schedule 4.
14.2 Subject to any contrary provisions of Schedule 4, the TLG and CL Finance Creditors Committee shall have soleauthority to take action on behalf of the TLG Creditors and CL Finance Creditors in response to any breach of the TLG andCL Finance Covenants.
14.3 If any TLG Compliance Report indicates that any of the TLG and CL Finance Covenants set out in clauses 4.3, 5 and 6of Schedule 4 has been breached, the TLG Deed Administrators shall within ten Business Days take steps to convene ameeting of the TLG and CL Finance Creditors Committee. Such meeting or any adjournment of that meeting may thenresolve either:(a) to take no action in respect of the breach of covenant; or(b) to agree a proposal by TLG Holdings, TLG or CL Finance or recommend to TLG Holdings, TLG or CL Finance such
measures as the meeting considers appropriate for the breach of covenant to be remedied and, if a recommendation ismade, for the meeting to be adjourned for up to ten Business Days to allow TLG Holdings, TLG or CL Finance todecide whether to take the recommended measures.
14.4 TLG Holdings and Cattles Holdings Limited covenant that:(a) they shall not be a party to any transaction giving rise to a Disposal Event without the consent of the TLG and CL
Finance Creditors Committee; and
(b) following any resolution of the TLG and CL Finance Creditors Committee made after consultation with the TLG DeedAdministrators that a transaction giving rise to a Disposal Event would be in the best interests of TLG Creditors, CLFinance Creditors and the Pension Trustee, they shall use reasonable endeavours to enter into such a transaction assoon as is reasonably practicable.
15. NOTICES
15.1 Any notice or other written communication to be given under or in relation to this deed shall be given in writing andshall be deemed to have been duly given if it is delivered by hand or sent by post to the following addresses, or such otheraddress as shall be notified by the relevant Party from time to time:(a) in the case of TLG, to Mere Way, Ruddington Fields Business Park, Ruddington, Notts, NG11 6NZ and marked for the
attention of Robert East, always with a copy to the TLG Deed Administrators;(b) in the case of the TLG Deed Administrators, to KPMG LLP, 8 Salisbury Square, London EC4Y 8BB, marked for the
attention of Chris Laverty, Richard Fleming and Ed Boyle; and(c) in the case of any TLG Creditor or the Pension Trustee, to its last known address according to the TLG Deed
Administrators.
15.2 Any notice or written communication given under this deed shall be deemed to have been delivered on the earliest of:(a) if delivered by hand, the first Business Day after it is delivered;(b) if sent by post, the second Business Day after posting if the recipient is in the country of dispatch, otherwise the
seventh Business Day after posting;(c) if sent electronically, the first Business Day beginning after the expiration of 24 hours from the time it was sent; or(d) the Business Day on which the notice or communication is actually received by the recipient.
15.3 Notwithstanding anything to the contrary in this deed, any notice or communication required to be or which may be sentunder this deed may, at the option of the TLG Deed Administrators or any Party be given or sent by the TLG DeedAdministrators or the relevant Party in electronic form (i.e. by email or fax) to the address or number specified for thatpurpose by the TLG Deed Administrators or any Party.
16. ASSIGNMENT
16.1 Subject to clauses 16.2 to 16.5, TLG and the TLG Deed Administrators shall be under no obligation to recognise anyassignment or transfer (or purported assignment or transfer) of the whole or any part of any Guarantor Obligations (or thebenefit thereof) after the Deed Effective Date for the purposes of determining entitlements under this deed, and TLG shallhave no obligations hereunder to any person other than a TLG Creditor, a CL Finance Creditor or the Pension Trustee.
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16.2 Subject to clause 16.3, where the TLG Deed Administrators have received from the purported assignor and assignee of aGuarantor Obligation:(a) notice in writing, duly completed in the form set out in Schedule 5, of an assignment or transfer, of the whole or part of
any Guarantor Obligations owed to a TLG Creditor; and(b) a Deed of Accession,
the TLG Deed Administrators and TLG shall agree to recognise such assignment or transfer for the purposes of TLG makingdistributions under this deed.
16.3 No TLG Creditor or CL Finance Creditor shall assign or transfer any Guarantor Obligation (or the benefit thereof) owedto it to any person (the Assignee) unless and to the extent that such TLG Creditor or CL Finance Creditor simultaneouslyassigns or transfers to the Assignee (i) all Guarantor Obligations (or the benefit thereof) owed to it; and (ii) all of its schemeclaims against Cattles which correspond to the underlying debt which is guaranteed by the relevant Guarantor Obligations.Any other purported assignment or transfer shall be void and shall not be entitled to recognition by the TLG DeedAdministrators or TLG.
16.4 An assignment or transfer shall only take effect for the purposes of this deed when the TLG Deed Administrator givesnotice to the TLG Creditor and/or CL Finance Creditor and the assignee or transferee that they have recognised theassignment or transfer, such notice to be given promptly by the TLG Deed Administrator.
16.5 Any assignee or transferee in respect of a Guarantor Obligation so recognised by the TLG Deed Administrator shall bebound by the terms of this deed and shall be considered a TLG Creditor and a CL Finance Creditor for the purposes of thisdeed, in place of the assignor or transferor.
17. DISCLOSURE OF INFORMATION
17.1 TLG Creditors and CL Finance Creditors may disclose to any of their officers, directors, employees, professionaladvisers, auditors and Affiliates and their Affiliates may disclose to any of their officers, directors, employees, professionaladvisers and auditors any information which that TLG Creditor or CL Finance Creditor has acquired under or in connectionwith this deed or otherwise in relation to TLG as such TLG Creditor or CL Finance Creditor considers appropriate if anyperson to whom such information is given undertakes to keep such information confidential and agrees not to disclose it toanyone (except that there shall be no requirement to obtain such undertaking if the recipient is subject to professionalobligations to maintain the confidentiality of the information).
17.2 TLG Creditors and CL Finance Creditors may disclose to (or through) any person with whom it may enter or has enteredinto, any kind of transfer, assignment, participation or other agreement relating to a TLG Deed Claim any information whichthat TLG Creditor or CL Finance Creditor has acquired under or in connection with this deed or otherwise in relation to TLGprovided such person to whom the information is to be given undertakes to keep such information confidential and agrees notto disclose it to anyone except to the extent such disclosure is:(a) to such professional advisers as the TLG Creditor or CL Finance Creditor considers appropriate and who (save in the
case of legal advisers and auditors provided that it is made clear to them that such matters are confidential) have agreedto be bound by clause 17.1;
(b) to HM Revenue & Customs or any other governmental, public or official body for taxation purposes;(c) required by law, regulation or any court, governmental or competent regulatory authority;(d) in relation to matters that are already in the public domain; or(e) in relation to information known by such person (other than as a result of a breach of this provision).
18. SEVERABILITY
If any provision of this deed is found to be void or unenforceable, that provision shall be deemed to be deleted from this deedand the remaining provisions of this deed shall continue in full force and effect and the Parties shall use their respectivereasonable endeavours to procure that any such provision is replaced by a provision which is valid and enforceable, andwhich gives effect to the spirit and intent of this deed.
19. ENTIRE AGREEMENT
19.1 This deed, and, where applicable to a Party, the Co-guarantors Compromise Deed and the Ewbanks Scheme constitutethe entire understanding and agreement between the Parties in relation to its subject matter and supersede any priorarrangement in relation to their subject matter.
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19.2 Each Party acknowledges that it has not entered into this deed in reliance wholly or partly on any representation orwarranty made by or on behalf of any other Party (whether orally or in writing) other than as expressly set out in this deed.
20. GOVERNING LAW AND JURISDICTION
This deed and any non-contractual obligations arising out of or in connection with this deed shall be governed by, andconstrued in accordance with, the laws of England and Wales. Any dispute arising out of or in connection with, or concerningthe carrying into effect of, this deed and any non-contractual obligations arising out of, or in connection with, this deed shallbe subject to the exclusive jurisdiction of the Court, and the Parties hereby submit to the exclusive jurisdiction of the Courtfor these purposes.
21. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999The Parties agree that the terms of this deed are not enforceable by any third party under the Contracts (Rights of ThirdParties) Act 1999, save that:(a) the TLG Deed Administrators are intended to benefit from and may rely upon the terms of clause 3; and(b) the CL Finance Creditors are intended to benefit from and may rely upon the terms of clauses 3, 13 and 14, Schedule 3
and Schedule 4.
22. FURTHER ASSURANCE
The Parties shall deliver or cause to be delivered such instruments and other documents at such times and places as arereasonably necessary or desirable, and shall take any other action reasonably requested by any of the other Parties for thepurpose of putting this deed into effect.
23. COUNTERPARTS
This deed may be executed in any number of counterparts, and by each Party on separate counterparts. Each counterpart is anoriginal, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this deed bye-mail attachment or fax shall be an effective mode of delivery.
24. VARIATION
Any variation of this deed shall be in writing and signed by or on behalf of each Party, save that any variation with regard toclause 14 need not have the consent of the Pension Trustee, provided that such amendment does not affect the PensionTrustee.
This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.
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SCHEDULE 1GUARANTOR COMPANIES
1. C L FINANCE LIMITED (company number 01108021).2. CATTLES HOLDINGS LIMITED (company number 05976786).3. COMPASS CREDIT LIMITED (company number 00235117).4. DIAL4ALOAN LIMITED (company number 03958533).5. EWBANKS MAIL ORDER LIMITED (company number 00457490).6. LEWIS GROUP (HOLDINGS) LIMITED (company number SC154199).7. MONEYTOPIA BANK LIMITED (company number 00215285).8. MONEYTOPIA LIMITED (company number 00652955).9. PROGRESSIVE FINANCIAL SERVICES LIMITED (company number 01682540).10. RECORDPOINT LIMITED (company number 02906681).11. SHOPACHECK LIMITED (company number 00274611).12. STATUSCLAIM LIMITED (company number 02903444).13. SUPREMEACCESS LIMITED (company number 02913219).14. THE LEWIS GROUP LIMITED (company number SC127043).15. U.K. DEBT DEFAULTERS REGISTER LTD (company number SC170934).16. WELCOME INSURANCE SERVICES LIMITED (company number 02230654).17. WELCOME RETAIL SERVICES LIMITED (company number 00226015).18. WESTERNISSUE LIMITED (company number 02930977).
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SCHEDULE 2TLG FINANCE DOCUMENTS
Any of the following documents in respect of which TLG or CL Finance owes guarantee obligations:
1. The £800 million syndicated credit facility dated 10 July 2006 between Cattles as borrower, certain of its subsidiaries asguarantors, The Royal Bank of Scotland plc as facility agent and the lenders from time to time.
2. The £500 million syndicated credit facility dated 14 July 2004 between Cattles as borrower, certain of its subsidiaries asguarantors, The Royal Bank of Scotland plc as facility agent and the lenders from time to time.
3. The £215 million syndicated credit facility dated 17 April 2008 between Cattles as borrower, certain of its subsidiaries asguarantors, The Royal Bank of Scotland plc as facility agent and the lenders from time to time.
4. The £135 million bilateral credit facility dated 30 June 2008 between Cattles as borrower, certain of its subsidiaries asguarantors and The Royal Bank of Scotland plc as lender and facility agent.
5. The £75 million bilateral credit facility dated 12 August 2004 between Cattles as borrower, certain of its subsidiaries asguarantors and The Royal Bank of Scotland plc as lender.
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SCHEDULE 3TLG AND CL FINANCE CREDITORS COMMITTEE
1. CONSTITUTION OF THE TLG AND CL FINANCE CREDITORS COMMITTEE
1.1 The TLG and CL Finance Creditors Committee shall consist of not less than three nor more than five persons.
1.2 The following creditors shall be the initial Committee Members:(a) The Royal Bank of Scotland plc;(b) Lloyds TSB Bank plc; and(c) a TLG Creditor or a CL Finance Creditor.
1.3 Subject to clause 1.4 below, the Committee Members agree to keep all Committee Confidential Information that theyreceive in connection with their membership of or attendance at meetings of the TLG and CL Finance Creditors Committeecompletely and absolutely confidential.
1.4 Each of the Committee Members agree that they will not disclose or permit any of the Committee ConfidentialInformation to be disclosed to any person except to the extent such disclosure is:(a) to any of their officers, directors, employees, auditors and Affiliates and their Affiliates may disclose to any of their
officers, directors, employees and auditors as the Committee Member considers appropriate if any person to whomsuch information is given has agreed to be bound by clause 1.3;
(b) to such professional advisers as the Committee Member considers appropriate and who (save in the case of legaladvisers and auditors provided that it is made clear to them that such matters are confidential) have agreed to be boundby clause 1.3, to the same extent as the Committee Members;
(c) to HM Revenue & Customs or any other governmental, public or official body for taxation purposes; or(d) required to be disclosed by law, regulation or any court, governmental or competent regulatory authority.
1.5 If, from time to time, there is an even number of Committee Members, the TLG and CL Finance Creditors Committeemay by majority vote choose a chairman from among their number or, in the absence of a majority, the TLG DeedAdministrators shall choose a chairman. That chairman shall have the deciding vote at any meeting of the TLG and CLFinance Creditors Committee.
1.6 Any TLG Creditor or CL Finance Creditor (whether an individual, a body corporate or a partnership) shall be eligible forsubsequent appointment as a Committee Member.
1.7 Each Committee Member which is a body corporate or a partnership may, by notice in writing to the TLG and CLFinance Creditors Committee, appoint a senior executive, other senior employee or professional adviser as its nominatedrepresentative (a Nominated Representative) to represent that Committee Member at any meeting of the TLG and CLFinance Creditors Committee.
1.8 Any Committee Member or Nominated Representative who is an individual may, by notice in writing to the TLG and CLFinance Creditors Committee, appoint a senior executive, other senior employee or professional adviser as an alternate (anAlternate) to attend and vote in his place at any meeting of the TLG and CL Finance Creditors Committee.
1.9 Any Nominated Representative or Alternate shall have the same powers and shall be subject to the same duties andlimitations as the Committee Member whom the Nominated Representative or Alternate represents.
2. MEMBERSHIP OF THE TLG AND CL FINANCE CREDITORS COMMITTEE
2.1 The TLG and CL Finance Creditors Committee may at any time appoint any person who is eligible to be so appointed tobe a Committee Member, whether to fill a vacancy or as an additional Committee Member, so that the total number ofCommittee Members shall not exceed five. In appointing new Committee Members, the TLG and CL Finance CreditorsCommittee shall endeavour to ensure that the composition of the TLG and CL Finance Creditors Committee is such that itrepresents a proper balance of the interests of the TLG Creditors and the CL Finance Creditors as a whole.
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2.2 The office of a Committee Member shall be vacated if any of the situations set out in clauses 2.3 to 2.5 applies or if thatCommittee Member:(a) resigns by notice in writing addressed to the TLG and CL Finance Creditors Committee;(b) is removed from office by a vote of the majority of TLG Creditors and CL Finance Creditors;(c) if the Committee Member ceases to become a TLG Creditor or a CL Finance Creditor (or is found never to have been
one); or(d) fails to attend three consecutive meetings of the TLG and CL Finance Creditors Committee, unless the TLG and CL
Finance Creditors Committee (excluding that Committee Member) resolves by a majority of two-thirds of theCommittee Members present at a meeting of the TLG and CL Finance Creditors Committee that he should continue asa Committee Member.
2.3 In the case of an individual, the office of a Committee Member shall be vacated if that individual:(a) transfers or assigns the Guarantor Obligations in respect of which he is a TLG Creditor or CL Finance Creditor, in
accordance with clause 16 of the deed, such that he is no longer a TLG Creditor or CL Finance Creditor;(b) dies;(c) is admitted to hospital because of mental disorder or is the subject of an order concerning his mental disorder made by
a court having jurisdiction in England or elsewhere in such matters;(d) becomes bankrupt or is subject to an individual voluntary arrangement or analogous process under the law of any
jurisdiction to which he is subject;(e) becomes disqualified from acting as a director under the law of any jurisdiction to which he is subject; or(f) is convicted of an indictable offence, other than a road traffic offence.
2.4 In the case of a body corporate or partnership, the office of a Committee Member shall be vacated if that body corporateor partnership is dissolved or has transferred or assigned the Guarantor Obligations in respect of which he is a TLG Creditoror a CL Finance Creditor, in accordance with clause 16 of the deed, such that the relevant body corporate or partnership is nolonger a TLG Creditor or CL Finance Creditor.
2.5 In the case of a person appointed by the TLG Deed Administrators under clause 11.2, the office of that CommitteeMember shall be vacated if that person has his written consent under that clause revoked by the TLG Deed Administrators.
2.6 Any person entitled to appoint a Nominated Representative or an Alternate may from time to time revoke thatappointment and appoint another Nominated Representative or Alternate by notice in writing to the TLG and CL FinanceCreditors Committee, the TLG Deed Administrators and TLG or CL Finance, as appropriate.
2.7 The appointment of a Nominated Representative or an Alternate (as the case may be) shall terminate automatically if:(a) his appointment is revoked by the person who appointed him; or(b) the person whom that Nominated Representative or Alternate represents ceases to be a Committee Member; or(c) the Nominated Representative or Alternate ceases to be a senior executive, senior employee or professional adviser of
the Committee Member whom he represents; or(d) the Nominated Representative or Alternate dies, becomes bankrupt or is disqualified from acting as a director in each
case under the law of any jurisdiction to which he is subject or is convicted of an indictable offence.
3. PROCEEDINGS OF THE TLG AND CL FINANCE CREDITORS COMMITTEE
3.1 TLG and CL Finance may each appoint a representative or representatives to attend any meeting of the TLG and CLFinance Creditors Committee for the purposes of observing the meeting only. The TLG and CL Finance CreditorsCommittee may resolve to remove such representatives from any meeting or part of any meeting, following which resolution,the representative shall withdraw, as resolved.
3.2 Where a majority of the TLG and CL Finance Creditors Committee considers it appropriate, the meeting of the TLG andCL Finance Creditors Committee may be conducted and held in such a way that persons who are not present together at thesame place may attend it. Where a meeting is conducted and held in this manner, a Committee Member attends the meeting ifthat Committee Member is able to exercise any rights which that Committee Member may have to speak and vote at themeeting. Such meetings shall be conducted in accordance with the regime set out in rule 12A.26 of the Insolvency Rules1986.
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3.3 Save as otherwise specifically provided in the deed, the TLG and CL Finance Creditors Committee may convene,adjourn and otherwise regulate its meetings in such manner as it considers appropriate. The quorum at any meeting of theTLG and CL Finance Creditors Committee shall be at least 50 per cent. of the Committee Members, attending in person orby conference call, provided that if a quorum is not present within 15 minutes from the time appointed for a meeting, or ifduring a meeting such a quorum ceases to be present, the meeting shall stand adjourned to such time and place as may bedetermined by the majority of the Committee Members present and the Committee Members present at any such meetingreconvened following an adjournment shall constitute a quorum. Each Committee Member shall have one vote and, except asotherwise provided in the deed, matters arising at a meeting shall be decided by a majority of votes cast at the meeting.
3.4 The TLG and CL Finance Creditors Committee shall meet with the TLG Deed Administrators as often as necessary andin any event following the production by the TLG Deed Administrators of a Compliance Report which indicates that one ormore of the TLG and CL Finance Covenants has been breached. A meeting of the TLG and CL Finance CreditorsCommittee shall be called as soon as reasonably practicable if so requested by at least two Committee Members or if theTLG Deed Administrators otherwise consider it appropriate. Except with the consent of all Committee Members, no meetingof the TLG and CL Finance Creditors Committee may be called on less than five Business Days notice and, except with theconsent of all Committee Members, no business may be transacted at any such meeting other than that set out in the notice ofthat meeting.
3.5 Each Committee Member (including any Nominated Representative or Alternate) and the TLG Deed Administrators (ortheir representatives) shall be entitled to attend and receive notice of all meetings of the TLG and CL Finance CreditorsCommittee. The TLG Deed Administrators shall be entitled to attend and speak, but not to vote, at all meetings of the TLGand CL Finance Creditors Committee. Notwithstanding the previous provisions of this clause 3.5, if so requested by theTLG and CL Finance Creditors Committee, the TLG Deed Administrators (or their representative(s)) shall absentthemselves from all or such part of a meeting of the TLG and CL Finance Creditors Committee as the TLG and CL FinanceCreditors Committee may specify.
3.6 The TLG and CL Finance Creditors Committee shall ensure that proper minutes are kept of all proceedings of the TLGand CL Finance Creditors Committee and such minutes shall at all reasonable times be open to inspection by any CommitteeMember. Copies of such minutes shall be sent as soon as practicable after each meeting to the TLG Deed Administrators andeach Committee Member.
3.7 A resolution in writing agreed to by all Committee Members for the time being shall be valid and effective as if passed ata meeting of the TLG and CL Finance Creditors Committee duly convened and held. Each Committee Member may signifyhis agreement to a proposed written resolution when the TLG and CL Finance Creditors Committee receives from him adocument identifying the resolution to which it relates and indicating his agreement to the resolution. The document may besent to the members of the TLG and CL Finance Creditors Committee in hard copy form or in electronic form.
4. POWERS
4.1 The TLG and CL Finance Creditors Committee shall have all the powers necessary or desirable to enable them todischarge their duties and responsibilities under the deed including without limitation in connection with their takingdecisions and/or exercising discretion.
4.2 The TLG and CL Finance Creditors Committee shall be entitled:(a) to require at least one of the TLG Deed Administrators to attend any meeting of the TLG and CL Finance Creditors
Committee;(b) by a resolution passed by at least three-fourths by number (rounded up to the nearest whole number) of all the
Committee Members to call upon a TLG Deed Administrator to resign, provided that each such TLG DeedAdministrator and each Committee Member have been given at least 20 Business Days notice of the proposedresolution and of the reasons why the resolution is to be put to the TLG and CL Finance Creditors Committee andhave been given a reasonable opportunity to make representations at the meeting at which the resolution is proposed. Ifthe TLG Deed Administrator declines to resign within five Business Days of a resolution of the TLG and CL FinanceCreditors Committee calling for his resignation a resolution requiring his removal shall be put before a meeting of theTLG Creditors and CL Finance Creditors and, if passed, the TLG Deed Administrator shall vacate their position; and
(c) upon removal of a TLG Deed Administrator or if a TLG Deed Administrator ceases to hold office for any other reason,to appoint any person qualified to act under clause 3.2 of the deed to be a TLG Deed Administrator in their place.
4.3 The TLG and CL Finance Creditors Committee shall be entitled to engage such legal and financial advisers from time totime as is reasonable in order to assist them in carrying out their functions as the TLG and CL Finance Creditors Committee.At any particular time, the TLG and CL Finance Creditors Committee may only engage one legal adviser in any jurisdiction
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and one financial adviser. Reasonable costs of such advisers will be paid by TLG and CL Finance within 10 Business Days ofdemand.
4.4 The TLG and CL Finance Creditors Committee and the Obligor Companies shall use reasonable endeavours to ensurethat there are at least two duly qualified TLG Deed Administrators in office at all times.
4.5 For the avoidance of doubt and subject to clause 2.2(c), a Committee Member may transfer, assign or sub-participate thewhole or part of any Guarantor Obligations in respect of which they are a TLG Creditor or CL Finance Creditor inaccordance with clause 16 of the deed.
5. MAJORITY TLG CREDITOR AND CL FINANCE CREDITORS INSTRUCTIONS
5.1 The TLG and CL Finance Creditors Committee shall (i) be entitled to exercise or refrain from exercising any right,power, authority or discretion vested in it as the TLG and CL Finance Creditors Committee as it thinks fit and in any eventto act in accordance with any instructions given to it by a majority of the TLG Creditors and the CL Finance Creditors; and(ii) not be liable (nor shall any of its members) for any act (or omission) if it acts (or refrains from taking any action):(a) in accordance with an instruction of a majority of the TLG Creditors and the CL Finance Creditors; or(b) in good faith.
5.2 For the purposes of clause 5.1, a majority means a simple majority by value of the aggregate TLG Creditor Claims andCL Finance Creditor Claims of the TLG Creditors and CL Finance Creditors.
6. DUTIES
6.1 Each Committee Member, each Nominated Representative, and each Alternate shall (and each Committee Member shallprocure that any Nominated Representative or Alternate appointed by it or any Alternate appointed by its NominatedRepresentative shall), in performing their functions as such in relation to the deed, act bona fide in what such personconsiders to be the interests of the TLG Creditors and CL Finance Creditors as a whole. For the avoidance of doubt (butwithout prejudice to its specific powers as set out by the deed) it shall not be the duty of the TLG and CL Finance CreditorsCommittee to monitor the carrying out of the deed or the activities of the TLG Deed Administrators.
6.2 It shall be the duty of each Committee Member who is in any way, whether directly or indirectly, interested in a contractor arrangement or proposed contract or arrangement with TLG or CL Finance (other than any which arises as a result of theprovisions of the deed) to declare (or procure that its Nominated Representative or Alternate or its NominatedRepresentative s Alternate shall declare) the nature of his or its interest at a meeting of the TLG and CL Finance CreditorsCommittee where that contract or arrangement is under consideration. For this purpose a general notice given to the TLG andCL Finance Creditors Committee to the effect that a Committee Member is an associate (within the meaning of section 435of the Insolvency Act 1986) of a specified company or firm and is to be regarded as interested in any such contract orarrangement with that company or firm shall be deemed a sufficient declaration of interest in relation to any such contract orarrangement. Such a Committee Member shall not be counted in the quorum, shall not be entitled to vote in relation to anymatter relating specifically to any such contract, shall retire from the meeting for so long as the matter is discussed and votedupon and shall not receive any information, nor be entitled to inspect any part of the minutes of a meeting or the TLG and CLFinance Creditors Committee, relating thereto.
6.3 Each Nominated Representative or Alternate shall be entitled to report to the Committee Member appointing him on theproceedings of the TLG and CL Finance Creditors Committee and, so far as necessary for that purpose, to discloseconfidential information of TLG and CL Finance to those officers, employees and professional advisers of that member orappointer who need to know it in connection with (where a Nominated Representative or Alternate is disclosing information)the performance of his or its responsibilities as a Committee Member, provided that such information does not to his or itsknowledge (after due enquiry) relate to any matter where any such appointer has an interest in conflict with TLG or CLFinance (other than a general conflict arising as the result of the status of Committee Member or the appointers of aNominated Representative or Alternate as TLG Creditors or CL Finance Creditors). Each Committee Member shall, and shallprocure that its Nominated Representative or Alternate or its Nominated Representative s Alternate and its officers,employees and professional advisers shall, preserve the confidentiality of such information and shall use such informationonly for the purposes of their performing their responsibilities and functions (or their Nominated Representative s orAlternate s or their Nominated Representative Alternate s responsibilities and functions) in relation to the TLG and CLFinance Creditors Committee.
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7. RESPONSIBILITY
7.1 No TLG Creditor, CL Finance Creditor or TLG Deed Administrator and neither TLG nor CL Finance shall be entitled tochallenge the validity of any act done or omitted to be done in good faith by any Committee Member (or NominatedRepresentative or Alternate) (aside in respect of the TLG Deed Administrators pursuant to clause 3.7 of the deed) inaccordance with and to implement the provisions of the deed or the exercise by any such Committee Member (or NominatedRepresentative or Alternate) in good faith of any power conferred upon it or him by or for the purposes of the deed ifexercised in accordance with and to implement the provisions of the deed and no such Committee Member (or NominatedRepresentative or Alternate) shall be liable for any loss or damage unless such loss or damage is attributable to its or hisfraud.
7.2 No Committee Member (or Nominated Representative or Alternate) will be liable for any action taken by it or him (orany inaction) under or in connection with the deed, unless directly caused by its bad faith or wilful misconduct.
7.3 For the avoidance of doubt, the TLG and CL Finance Creditors Committee will have no fiduciary duties and will owe noduty of care to TLG or CL Finance or to any of the Guaranteed Creditors.
8. VALIDATION OF ACTS
All acts done by the TLG and CL Finance Creditors Committee or any member of the TLG and CL Finance CreditorsCommittee or any person acting as a Committee Member or as a Nominated Representative or Alternate shall,notwithstanding that it is afterwards discovered there was some defect in the appointment of a Committee Member or personacting as aforesaid, or that any of them were disqualified, be valid if every such person had been duly appointed andqualified.
9. EXPENSES
Each member of the TLG and CL Finance Creditors Committee, each Nominated Representative and each Alternate shall beentitled to be reimbursed by Obligor Companies from the assets of the Obligor Companies upon written demand to theObligor Companies for their reasonable out of pocket expenses incurred in attending meetings of the TLG and CL FinanceCreditors Committee, or otherwise engaged on TLG and CL Finance Creditors Committee business, provided that suchmeetings are held in London or in such other place as the TLG Deed Administrators may from time to time agree. Where aCommittee Member, its Nominated Representative or any Alternate appointed by the Committee Member must travel toattend a TLG and CL Finance Creditors Committee meeting in London (or such other place as the TLG Deed Administratorshave agreed), that Committee Member, Nominated Representative or Alternate shall (and any such Committee Member shallprocure that such Nominated Representative or Alternate shall) use all reasonable endeavours to appoint as its NominatedRepresentative or Alternate (as the case may be) for that meeting an individual who is based in the locality of the venue ofthat TLG and CL Finance Creditors Committee meeting. Where the cost of an air fare is so permitted, it shall be the cost ofan economy class fare only.
10. FEES
TLG agrees to pay each Committee Member a fee of £5,000 plus VAT which shall be paid quarterly in arrears to eachCommittee Member until the date on which the appointment of that Committee Member is terminated in accordance with theterms of this deed. The first payment shall be due on the last Business Day of the first whole calendar month falling threemonths after the Deed Effective Date. Each subsequent payment is due on the last Business Day of each calendar month atthree monthly intervals. No part of any fee will be refunded if an appointment does not continue for the whole monthconcerned.
11. TLG AND CL FINANCE CREDITORS COMMITTEE VACANCIES
11.1 If at any time there are less than three members of the TLG and CL Finance Creditors Committee, the TLG and CLFinance Creditors Committee may continue to exercise all its functions under the deed (other than those provided for inclause 4.2(b)) for a period of 28 days, during which time the remaining Committee Members shall endeavour to fill thevacancies on the TLG and CL Finance Creditors Committee.
11.2 If the TLG and CL Finance Creditors Committee fails to fill vacancies on the TLG and CL Finance CreditorsCommittee within such period of 28 days, the TLG Deed Administrators shall use all reasonable endeavours to appoint,within a further 14 days, such additional TLG Creditors or CL Finance Creditors to the TLG and CL Finance CreditorsCommittee as are required to fill such vacancies.
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SCHEDULE 4TLG AND CL FINANCE COVENANTS
Objective of the CovenantsThe overriding objective of the covenants set out in this schedule are for the Obligors to meet or exceed the OriginalForecast.
1. DEFINITIONSIn this Schedule:
Actual Net Free Cash means, for any period, the actual Net Free Cash for that period.
Calculation Certificate means a certificate substantially in the form of Annex 1.
Calculation Date means the last Business Day in each of January, April, July and October provided that the first CalculationDate shall only occur following the first Quarter Date which occurs at least three months after the Effective Date (as definedin the WFSL Creditor Scheme).
Calculation Period means:(a) in respect of the first Calculation Date, the preceding Quarter; and(b) in respect of any other Calculation Date, the preceding two Quarters.
Clause means a clause of this Schedule, unless the context requires otherwise;
Cumulative Actual Net Free Cash means, in respect of any Calculation Date, all the Actual Net Free Cash generatedbetween:(a) the first day of the month following the month in which the Effective Date (as defined in the WFSL Creditor Scheme)
occurs; and(b) the Quarter Date immediately preceding that Calculation Date.
Cumulative Forecast Net Free Cash means, in respect of any Calculation Date, all the Forecast Net Free Cash forecast tobe generated between:(a) the first day of the month following the month in which the Effective Date (as defined in the WFSL Creditor Scheme)
occurs; and(b) the Quarter Date immediately preceding that Calculation Date.
Cumulative Net Free Cash Percentage means each percentage calculated for the purposes of paragraph (d) of Clause 4.1(Calculations).
Divergence Certificate means a certificate substantially in the form of Annex 2.
Financial Indebtedness means any indebtedness for or in respect of:(a) moneys borrowed;(b) any acceptance credit (including any dematerialised equivalent);(c) any bond, note, debenture, loan stock or other similar instrument;(d) any redeemable preference share;(e) any agreement treated as a finance or capital lease in accordance with generally accepted accounting principles in the
jurisdiction of incorporation of the company except in the ordinary course of business;(f) receivables sold or discounted (otherwise than on a non-recourse basis);(g) the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the
deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset;(h) any derivative transaction protecting against or benefitting from fluctuations in any rate or price (and, except for non-
payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount);
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(i) any other transaction (including any forward sale or purchase agreement) which has the commercial effect of aborrowing;
(j) any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrumentissued by a bank or financial institution; or
(k) any guarantee, indemnity or similar assurance against financial loss of any person in respect of any item referred to inthe above paragraphs.
Financial Model means the financial model used by the Obligors to prepare the Original Forecast as amended pursuant toClause 3.2 (Changes).
Financial Year means each period beginning on 1st January and ending on the next 31 December.
Forecast means the latest of the Original Forecast and each Updated Forecast.
Forecast Net Free Cash means, for any period, the forecast Net Free Cash for that period as set out in the relevant Forecast.
Net Free Cash means, in respect of any period, the amount shown as the Obligors net operating cash generation in theFinancial Model.
For the avoidance of doubt, Net Free Cash does not include:
(i) intercompany amounts paid or received by an Obligor to or from another member of the Group other than amounts paid orreceived by an Obligor to or from WFSL on an arms length basis as payment for collection services and other items in theordinary course of business provided to or from WFSL by that Obligor;
(ii) receipts by an Obligor held on trust for third parties as client money and payments to said third parties of money held ontrust.
Net Free Cash Percentage means each percentage calculated for the purposes of paragraph (c) of Clause 4.1 (Calculations).
Obligor means TLG, TLG Holdings and CL Finance.
Original Forecast means the 2010 (6+6) Plan financial forecast prepared by the Obligors in respect of their Financial Years2011 to 2013.
Quarter means each period of three months ending on a Quarter Date.
Quarter Date means 31 March, 30 June, 30 September and 31 December in each year.
Security Interest means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any otheragreement or arrangement having a similar effect.
Terminal Value means the terminal valuation of the Obligors as at 31 December 2013 of £50.9m as ascribed to the Obligorsby WFSL and Lexicon Partners Limited in September 2010.
Threshold means the (i) total Net Free Cash in, and for the period of, the Original Forecast and; (ii) the Terminal Value.
Updated Forecast means each forecast for the Obligors accepted by the TLG Deed Administrators in accordance withClause 2 (Forecast).
Updated Terminal Value means the terminal valuation of the Obligors as at 31 December 2013 ascribed to the Obligors byan independent valuation expert (using the same methodology by which the Terminal Value was calculated) and accepted bythe Obligors and the TLG Deed Administrators.
2. FORECAST2.1 Delivery of Updated Forecasts(a) Subject to paragraph (b) below, on or before 31 October in each Financial Year and if required in accordance with
Clause 4.3, the Obligors must deliver to the TLG Deed Administrators and the TLG and CL Finance CreditorsCommittee a draft Updated Forecast.
(b) The Obligors need not deliver to the TLG Deed Administrators and the TLG and CL Finance Creditors Committee adraft Updated Forecast pursuant to paragraph (a) above if it has delivered a draft Updated Forecast to the TLG Deed
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Administrators and the TLG and CL Finance Creditors Committee in accordance with paragraph (a) above) within theprevious two months.
2.2 Basis and FormEach draft Updated Forecast must be:(a) prepared using the Financial Model and otherwise on the same basis and covering the same period of time (Financial
Years 2011-2013) as the Original Forecast; and(b) delivered to the TLG Deed Administrators and the TLG and CL Finance Creditors Committee in electronic format and
summary outputs in hard copy.
2.3 Acceptance of draft Updated Forecast(a) Within ten Business Days of receiving a draft Updated Forecast, the TLG Deed Administrators, in consultation with
the TLG and CL Finance Creditors Committee, must promptly notify the Obligors whether they accept that draft asbeing prepared in accordance with this Schedule.
(b) If a draft Updated Forecast is not accepted pursuant to paragraph (a) above, the TLG Deed Administrators, the TLGand CL Finance Creditors Committee and the Obligors must consult, in good faith, and use all reasonable endeavoursto agree changes to the draft such that it can be accepted pursuant to paragraph (a) above as soon as practicable and, inany event, within five Business Days of the TLG Deed Administrators notifying the Obligors that the draft UpdatedForecast is not accepted.
(c) the Obligors shall deliver a copy of each Updated Forecast to the TLG and CL Finance Creditors Committee withinfive Business Days of it being accepted pursuant to this Clause.
2.4 Divergence CertificateWithin two Business Days of an Updated Forecast being accepted pursuant to Clause 2.3 (Acceptance of draft UpdatedForecast), the Obligors must deliver to the TLG Deed Administrators a Divergence Certificate setting out the aggregateActual Net Free Cash and the Forecast Net Free Cash in the last Updated Forecast as a percentage of the aggregate Net FreeCash in the Original Forecast (the Total Net Free Cash Percentage)
3. FINANCIAL MODEL3.1 InconsistencyIf any term of this Schedule is inconsistent with the Financial Model, the Schedule will prevail.
3.2 Changes(a) Without imposing any verification obligation on the TLG Deed Administrators, the TLG Deed Administrators and the
Obligors may each make proposals for changes to the Financial Model which they believe in good faith are necessaryfor:(i) the accurate calculation of the percentages and amounts to be calculated under this Schedule; or(ii) the accurate projection of Forecast Net Free Cash.
Any proposal made under this subclause must be accompanied by reasons for that proposal.(b) If the TLG Deed Administrators and the Obligors are unable to agree on any change referred to above within
15 Business Days from the date on which the change is proposed, the relevant change shall not be made.
4. QUARTERLY TESTING4.1 CalculationsOn each Calculation Date, the Obligors must deliver to the TLG Deed Administrators a Calculation Certificate setting out:(a) the Forecast Net Free Cash for the relevant Calculation Period;(b) the Actual Net Free Cash for the relevant Calculation Period;(c) the Actual Net Free Cash for the relevant Calculation Period as a percentage of the Forecast Net Free Cash for the
relevant Calculation Period (the Net Free Cash Percentage); and(d) the Cumulative Actual Net Free Cash as a percentage of Cumulative Forecast Net Free Cash (the Cumulative Net Free
Cash Percentage).
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4.2 Stage One Trigger Event(a) If on any Calculation Date the Net Free Cash Percentage is less than 95 per cent. (a Stage One Trigger Event), the
Obligors must within five Business Days of that Calculation Date produce a remedial plan (each a Remedial Plan) forthe TLG Deed Administrators detailing how the relevant deficit in Actual Net Free Cash can be cured by the nextCalculation Date.
(b) Any deficit in Actual Net Free Cash which is the subject of a Remedial Plan shall be added to the aggregate ForecastNet Free Cash amount used to calculate the Net Free Cash Percentage at the next Calculation Date.
(c) If, on any Calculation Date the Net Free Cash Percentage or the Cumulative Net Free Cash Percentage is greater than110 per cent., the Obligors must within five Business Days of that Calculation Date produce an explanation (each anExplanation) to the satisfaction of the TLG Deed Administrators setting out the reasons for the Net Free CashPercentage or the Cumulative Net Free Cash Percentage (as the case may be) exceeding 110 per cent.
4.3 The Obligors Valuation(a) If:
(i) the Obligors do not produce a Remedial Plan or an Explanation as required under Clause 4.2 to the satisfaction ofthe TLG Deed Administrators or the TLG Deed Administrators conclude that the relevant over-performance isdue to early settlements; or
(ii) a Stage One Trigger Event as set out in Clause 4.2(a) occurs on two consecutive Calculation Dates; or(iii) on any Calculation Date (other than the first Calculation Date) the Cumulative Net Free Cash Percentage is less
than 100 per cent.; or(iv) requested by the TLG Deed Administrators; or(v) any Total Net Free Cash Percentage is less than 100 per cent.
the Obligors must, within three Business Days of the relevant request or Calculation Date (as the case may be), engage andinstruct a valuer and make reasonable endeavours to provide to the TLG and CL Finance Creditors Committee an UpdatedTerminal Value and an Updated Forecast within fifteen Business Days of the date the valuer is engaged.(b) If the Forecast Net Free Cash in, and for the period of, any Updated Forecast plus the related Updated Terminal Value
is less than 100 per cent. but equal to or greater than 90 per cent. of the Threshold for the same period, the Obligorsmust, within four weeks of the relevant request or Calculation Date (as the case may be), prepare a report (to thesatisfaction of the TLG Deed Administrators) to the TLG and CL Finance Creditors Committee setting out the reasonsfor the shortfall and the amended strategic proposals and forecasts for the Obligors. The TLG and CL FinanceCreditors Committee may amend the strategic proposals, the covenants, or require the Company to accept newstrategic proposals for the Obligors.
(c) If the Forecast Net Free Cash in, and for the period of, any Updated Forecast plus the related Updated Terminal Valueis less than 90 percent of the Threshold for the same period, the Obligors must, within four weeks of the relevantrequest or Calculation Date (as the case may be), prepare a report (to the satisfaction of the TLG Deed Administrators)to the TLG Creditors and CL Finance Creditors setting out the reasons for the shortfall and the amended strategicproposals and forecasts for the Obligors. The TLG Creditors and CL Finance Creditors may amend the strategicproposals, the covenants or require the Company to accept new strategic proposals for the Obligors.
5. SETTLEMENTTLG must agree with the TLG Deed Administrator some settlement policy guidelines within two months of the EffectiveDate (as defined in the WFSL Creditor Scheme) and comply with those settlement policy guidelines and not make anychanges to those guidelines without the consent of the TLG and CL Finance Creditors Committee.
6. OTHER COVENANTS6.1 Negative pledge(a) Except as provided below, no Obligor may create or allow to exist any Security Interest on any of its assets.(b) Paragraph (a) does not apply to any lien arising by operation of law and in the ordinary course of trading.(c) No Obligor may:
(i) sell, transfer or otherwise dispose of any of its assets on terms where such asset is, or such assets are, or may beleased to or re-acquired or acquired by it or any of its related entities unless in the ordinary course of trading;
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(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms unless in the ordinary course oftrading;
(iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-offor made subject to a combination of accounts; or
(iv) enter into any other preferential arrangement having a similar effect,
in circumstances where the transaction is entered into primarily as a method of raising Financial Indebtedness or of financingthe acquisition of an asset.
6.2 Financial IndebtednessNo Obligor may, without the prior consent of the TLG and CL Finance Creditors Committee, incur any FinancialIndebtedness.
6.3 MergersNo Obligor may, without the prior consent of the TLG and CL Finance Creditors Committee, enter into any amalgamation,demerger, merger or reconstruction.
6.4 AcquisitionsNo Obligor may, without the prior consent of the TLG and CL Finance Creditors Committee, make any acquisition orinvestment in an aggregate amount exceeding £250,000 in any 12 month period. This Clause shall not apply to investmentalready included in the Original Forecast.
6.5 Change of businessNo Obligor may, without the prior consent of the TLG and CL Finance Creditors Committee:(a) carry on any business other than the business carried on the Effective Date (as defined in the WFSL Creditor Scheme);
or(b) make any substantial change to the general nature of its business from that carried out on the Effective Date (as defined
in the WFSL Creditors Scheme).
6.6 Disposals(a) Except as set out in paragraph (b) below, no Obligor may, without the prior consent of the TLG and CL Finance
Creditors Committee, either in a single transaction or in a series of transactions and whether related or not, dispose ofall or any part of its assets.
(b) Paragraph (a) above does not apply to any disposal in the ordinary course of business which is for cash where the bookvalue of the assets being disposed of, when aggregated with the book value of any other assets disposed of by theObligors pursuant to this paragraph, is not greater than £250,000.
6.7 LiabilitiesNo Obligor may, without the prior consent of the TLG and CL Finance Creditors Committee, incur any liability (other thanto the extent that the new liability replaces an existing liability on the same terms) after the Effective Date (as defined in theWFSL Creditor Scheme) if such liability, when aggregated with all other liabilities incurred by the Obligors in the previous12 months, is greater than £1,000,000. This clause shall not apply to any liability incurred in relation to the holding of clientmonies on trust.
6.8 Operating expenditureThe Obligors may not, without the prior consent of the TLG and CL Finance Creditors Committee, incur operatingexpenditure not referred to in the relevant Forecast in an aggregate amount exceeding £1,000,000 in any 12 month period.
6.9 LendingNo Obligor may be the creditor in respect of any form of credit to any person other than in the ordinary course of its trading.
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6.10 Dividends(a) Subject to (b) below, no Obligor may, other than in accordance with the express terms of this deed:
(i) declare, make or pay any dividend (or interest on any unpaid dividend), charge, fee or other distribution (whetherin cash or in kind) on or in respect of its share capital (or any class of its share capital);
(ii) repay or distribute any dividend or share premium reserve; or(iii) pay any management, advisery or other fee to or to the order of its shareholders unless in the ordinary course.
(b) Following the Final TLG Payment, TLG shall not retain any assets available for distribution (within the meaning ofsection 830 of the Companies Act 2006), which would cause the net assets of TLG to exceed £11.8 million, or anyother figure agreed with the TLG and CL Finance Creditors Committee, following consultation with the TLG DeedAdministrators.
6.11 Wind-downSubject to the terms of this deed (including without limitation covenants and undertakings of the Obligors in respect ofexpenditures), the Obligors shall, unless otherwise agreed with the TLG and CL Finance Creditors Committee, seek todevelop the Obligors business with a view to its sale no later than three months after 31 December 2013. The Obligors shallconsult with the TLG and CL Finance Creditors Committee in connection with such prospective development and sale andany proposed change in strategy.
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ANNEX 1FORM OF CALCULATION CERTIFICATE
[On the letterhead of the Obligors]To: The TLG Deed Administrators
Dear Sirs,
Capitalised terms defined in the compromise, release and distribution deed dated [�] 2011 between the Guarantor Companies,the TLG Creditors, the CL Finance Creditors and the Pension Trustee (each as defined therein) have, unless expressly definedin this certificate, the same meaning in this certificate.
This is the Calculation Certificate for the Calculation Date occurring on [ ]. It relates to the Calculation Period endingon [ ].
Relevant figures for the Calculation PeriodForecast Net Free CashActual Net Free CashNet Cash Free PercentageCumulative Net Free Cash Percentage
Attached to this certificate are details of our calculations of the above figures.
We hereby confirm that none of the settlement and other covenants set out in Clause 5 and 6 in Schedule 4 have beenbreached in the Calculation Period.
Yours faithfully,
For the Obligors
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ANNEX 2FORM OF DIVERGENCE CERTIFICATE
[On the letterhead of the Obligors]To: The TLG Deed Administrators
Dear Sirs,
Capitalised terms defined in the compromise, release and distribution deed dated [�] 2011 between the Guarantor Companies,the TLG Creditors, the CL Finance Creditors and the Pension Trustee (each as defined therein) have, unless expressly definedin this certificate, the same meaning in this certificate.
This is the Divergence Certificate in relation to the Updated Forecast dated [ ].
Relevant figure for the Calculation PeriodTotal Net Free Cash Percentage
Attached to this certificate are details of our calculations of the above figures.
Yours faithfully,
For the Obligors
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SCHEDULE 5FORM OF NOTICE OF ASSIGNMENT OR TRANSFER
To: TLG
Copy to: The TLG DEED ADMINISTRATORS
From: [THE TLG CREDITOR OR CL FINANCE CREDITOR WHICH HAS ASSIGNED ITS INTEREST](Assignor)
Compromise, release and distribution deed dated [�] 2011 between the Guarantor Companies, the TLG Creditor, theCL Finance Creditors and the Pension Trustee, each as defined therein (the TLG Compromise Deed)
1. We refer to the TLG Compromise Deed. This is a Notice of Assignment. Terms defined in the TLG Compromise Deedhave the same meanings when used in this Notice of Assignment.
2. The Assignor confirms by signing this Notice below that, on [DATE], it validly assigned and/or transferred the whole ofthe Guarantor Obligations owed to it by TLG and/or CL Finance and Cattles to [NAME OF ASSIGNEE] of [ADDRESSAND, IF RELEVANT, REGISTERED COMPANY NUMBER].
Assignor
Date
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SCHEDULE 6FORM OF DEED OF ACCESSION
To: TLG
Copy to: The DEED ADMINISTRATORS
From: [ ]
Date: [ ]
Compromise, release and distribution deed dated [�] 2011 between the Guarantor Companies, the TLG Creditor, theCL Finance Creditors and the Pension Trustee, each as defined therein (the TLG Compromise Deed)
1. We refer to the TLG Compromise Deed. This is a Deed of Accession. Terms defined in the TLG Compromise Deed havethe same meaning when used in this Deed of Accession.
2. We [NEW TLG CREDITOR AND/OR CL FINANCE CREDITOR] of [ADDRESS/REGISTERED OFFICE] agree tobecome a TLG Creditor and/or CL Finance Creditor and to be bound by the terms of the TLG Compromise Deed as a TLGCreditor and/or CL Finance Creditor.
3. We confirm that on [DATE] we obtained by way of assignment from [ASSIGNOR] all of [ASSIGNOR] s interest inTLG s or CL Finance s Guarantor Obligations in relation to the TLG Finance Documents referred to below.
TLG FINANCE DOCUMENTS
[INSERT LIST OF TLG FINANCE DOCUMENTS IN RESPECT OF WHICH GUARANTOR OBLIGATIONS HAVEBEEN ASSIGNED (SEE SCHEDULE 2 TO THE TLG COMPROMISE DEED)]
4. Our address for notices for the purposes of the TLG Compromise Deed is [INSERT ADDRESS AND CONTACTDETAILS].
5. This Deed of Accession and any non-contractual obligations arising out of or in connection with it shall be governed by,and construed in accordance with, the laws of England and Wales. Any dispute arising out of or in connection with, orconcerning the carrying into effect of, this Deed of Accession and any non-contractual obligations arising out of or inconnection with it shall be subject to the exclusive jurisdiction of the Court, and the Parties hereby submit to the exclusivejurisdiction of the Court for these purposes.
This document has been executed as a deed and is delivered and takes effect on the date stated at the beginning of it.
Executed as a deed by [NEW TLG CREDITORS AND/OR CL FINANCE CREDITOR]
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
[Or other appropriate execution of the document as a deed in accordance with English law]
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SCHEDULE 7DISTRIBUTION PERIOD END DATES
This schedule of Distribution Period End Dates can be extended to include later Distribution Period End Dates with theconsent of the TLG Deed Administrators and with the agreement of the TLG and CL Finance Creditors Committee.
3 July 2011 27 May 2012 28 April 2013
31 July 2011 1 July 2012 26 May 2013
28 August 2011 29 July 2012 30 June 2013
2 October 2011 26 August 2012 28 July 2013
30 October 2011 30 September 2012 25 August 2013
27 November 2011 28 October 2012 29 September 2013
1 January 2012 25 November 2012 27 October 2013
29 January 2012 30 December 2012 24 November 2013
26 February 2012 27 January 2013 29 December 2013
1 April 2012 24 February 2013
29 April 2012 31 March 2013
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SCHEDULE 8
EXCLUDED INTERCOMPANY DEBTS
Intercompany Debts owed between CL Finance and TLG
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Signatures
Executed as a deed by C L FINANCE LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by CATTLES HOLDINGS LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by COMPASS CREDIT LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
253
Executed as a deed by DIAL4ALOAN LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by EWBANKS MAIL ORDER LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by LEWIS GROUP (HOLDINGS) LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
254
Executed as a deed by MONEYTOPIA BANK LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by MONEYTOPIA LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by PROGRESSIVE FINANCIAL SERVICES LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
255
Executed as a deed by RECORDPOINT LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by SHOPACHECK LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by STATUSCLAIM LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
256
Executed as a deed by SUPREMEACCESS LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by THE LEWIS GROUP LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by U.K. DEBT DEFAULTERS REGISTER LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
257
Executed as a deed by WELCOME INSURANCE SERVICES LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by WELCOME RETAIL SERVICES LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
Executed as a deed by WESTERNISSUE LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
258
GUARANTEED CREDITORS
Executed as a deed by EWBANKS MAIL ORDER LIMITED
acting by [NAME], a director, for and on behalf of THE TLG CREDITORSAND THE CL FINANCE CREDITORS as authorised under the terms ofthe Ewbanks Scheme in the presence of
NameDirector
Address
OccupationWitness
THE PENSION TRUSTEE
Executed as a deed by CATTLES STAFF PENSION FUND LIMITED
acting by [NAME], a director, in the presence of
NameDirector
Address
OccupationWitness
259
Part D TLG Bilateral Deed
260
2011
THE LEWIS GROUP LIMITED
CATTLES STAFF PENSION FUND LIMITED
DEED OF COMPROMISEOF THE NOTIONAL SECTION 75 DEBTRELATING TO THE CATTLES STAFF
PENSION FUND
261
DEED OF COMPROMISE made on this day of 2011BETWEEN
(1) THE LEWIS GROUP LIMITED (company number SC127043) whose registered office is at Rowan House, 70Buchanan Street, Glasgow, G1 3JF (TLG); and
(2) CATTLES STAFF PENSION FUND LIMITED (company number 3444694) whose registered office is at KingstonHouse, Centre 27 Business Park, Woodhead Road, Birstall, Batley, WF17 9TD (the Trustee).
WHEREAS
(A) The parties to this Deed (together the Parties, and each a Party), amongst others entered into a compromise deed dated19 November 2010 (as amended on [ ] December 2010 (the Compromise Deed) relating to the Cattles Staff Pension Fund(the Scheme) which was established by a trust deed dated 20 August 1952.
(B) This Deed is supplemental to the Compromise Deed.
(C) The Parties wish to compromise the TLG Claim (as defined in the Compromise Deed) as set out in this Deed, whichprovides for the Trustee to receive a lump sum payment from TLG (which has been agreed by TLG and the Trustee aspayment which will treat the Trustee pro rata to TLG s guarantee creditors).
(D) The Parties have agreed that this Deed shall be the TLG Compromise (as defined in and for the purposes of both theCompromise Deed and the WFSL Creditor Scheme (as defined in the Compromise Deed)).
IT IS AGREED THAT:1. DEFINITIONS AND INTERPRETATION
1.1 In this Deed, unless the context otherwise requires (and save to the extent otherwise defined herein) defined terms shallhave the same meaning as in the Compromise Deed.
1.2 Except where the context otherwise requires, any reference to an enactment or regulation is a reference to it as alreadyamended and includes a reference to any repealed enactment or regulation which it may re-enact or otherwise replace, with orwithout amendment, and to any future re-enactment, replacement and/or amendment of it.
1.3 Except where the context otherwise requires, the singular shall include the plural (and vice versa) and words importingthe masculine gender shall include the feminine gender.
1.4 The headings in this Deed shall not affect its interpretation.
2. EFFECT OF THIS DEED
The Parties hereby agree that upon its execution by or on behalf of all of the Parties this deed shall immediately be fully andeffectively binding upon all of them.
3. LUMP SUM PAYMENT
3.1 On or before the fifth Business Day after the due carrying out of the actions envisaged in clause 2 and sub-clause 3.1 ofthe Compromise Deed, TLG shall procure the payment of £220,000 to the Trustee by electronic funds transfer (for same dayvalue) to the credit of the Trustee Account.
3.2 The Trustee shall provide written acknowledgement of receipt of the payment in clause 3.1 to TLG as soon as reasonablypracticable.
4. FULL AND FINAL SETTLEMENT OF TLG CLAIM
4.1 The Trustee accepts the payment in clause 3.1 in full and final settlement of the TLG Claim and releases TLG absolutelyfrom all liabilities, claims and demands of any nature whatsoever, whether actual or contingent, whether in contemplation ornot, known or unknown, which it may have to the Trustee in relation to the TLG Claim. The settlement and release in thisclause shall take effect immediately upon receipt by the Trustee of the payment in clause 3.1.
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4.2 For the avoidance of doubt, clause 4.1 shall not apply to TLG s section 75 debt (as defined in Recital G of theCompromise Deed), which liability shall be compromised in accordance with the terms of the Compromise Deed.
5. ASSIGNMENT
No Party shall, or shall purport to:(a) assign, whether absolutely or by way of security, all or any part of its rights or benefits under this Deed to any third
party; or(b) assign, transfer, delegate or subcontract any of its duties, liabilities or obligations under this Deed to any third party,
save that the Trustee may assign all or any part of its rights to the Board of the Pensions Protection Fund (in accordance withthe Pensions Act 2004) or to a successor as trustee of the Scheme.
6. FURTHER ASSURANCES
Each Party shall, at the cost of the Party requiring such action (other than in respect of those actions specified in this Deed),take all such further actions and execute all such further documents as the other Parties may from time to time reasonablyrequire in order to give the requesting Party the full benefit of all of the provisions of this Deed.
7. NOTICES
Any notice or other communication to be made or given under this Deed shall be made or given in the same manner and withthe same effect as in the Compromise Deed.
8. WHOLE AGREEMENT
8.1 This Deed (together with the Compromise Deed) sets out the whole agreement between the Parties relating to the subjectmatter of this Deed and supersedes any prior agreement (whether oral or written) relating to the subject matter of this Deed.
8.2 It is agreed that:(a) no Party shall have any claim or remedy in respect of any statement, representation, warranty or undertaking, made by
or on behalf of any other Party in relation to the subject matter of this Deed which is not expressly set out in this Deed(and any document referred to in it). The Trustee acknowledges that neither TLG nor any person on its behalf(including any officer of either of them) is under any duty (save as set out in this Deed or any document, to be enteredinto in connection with this Deed) to disclose any fact, matter or future intention relating to TLG or any member of theGroup, their assets, liabilities, profits or losses; and
(b) except for any liability in respect of a breach of this Deed or any document referred to in it, no Party shall owe any dutyof care or have any liability in tort or otherwise to the other Party in relation to the subject matter of this Deed.
8.3 This clause 8 shall not exclude any liability for, or remedy in respect of, fraudulent misrepresentation.
9. WAIVERS, RIGHTS AND REMEDIES
No failure or delay by either Party in exercising any right or remedy provided by law or under this Deed (or any documentreferred to in it) shall impair such right or remedy or operate or be construed as a waiver or variation of it or preclude itsexercise at any subsequent time and no single or partial exercise of any such right or remedy shall preclude any furtherexercise of it or the exercise of any other remedy.
10. COUNTERPARTS
This Deed may be executed in any number of counterparts, and by each party on separate counterparts. Each counterpart is anoriginal, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this Deed bye-mail attachment or telecopy shall be an effective mode of delivery.
11. VARIATIONS
11.1 No variation of this Deed shall be valid unless it is in writing and signed by or on behalf of each of the parties to thisDeed. Such variation need not be executed as a deed.
11.2 The rights of the Parties to agree any variation under this Deed are not subject to the consent of any person that is not aparty to this Deed.
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12. INVALIDITY
Each of the provisions of this Deed is severable. If any such provision is held to be or becomes invalid or unenforceable inany respect under the law of any jurisdiction, it shall have no effect in that respect and the parties shall use all reasonableefforts to replace it in that respect with a valid and enforceable substitute provision the effect of which is as close to itsintended effect as possible.
13. NO THIRD PARTY ENFORCEMENT RIGHTS
This Deed is not intended to, nor shall it, create any rights, entitlements, claims or benefits enforceable by any person that isnot a party to it. No other person shall derive any benefit or have any rights, entitlement or claim in relation to this Deed byvirtue of the Contracts (Rights of Third Parties) Act 1999.
14. GENERAL
14.1 This Deed is delivered by each party when (and shall not have effect until) it is dated.
14.2 This Deed is governed by, and shall be interpreted according to, the laws of England. The English courts shall haveexclusive jurisdiction in relation to all disputes arising out of or in connection with this Deed, including disputes arising outof or in connection with: (i) the creation, validity, effect, interpretation, performance or non-performance of, or the legalrelationships established by, this Deed; and (ii) any non-contractual obligations arising out of or in connection with this Deed.For such purposes each party irrevocably submits to the jurisdiction of the English courts.
264
EXECUTED as a deed
EXECUTED as a deed by )THE LEWIS GROUP LIMITED )acting by )a director and its secretary )or two directors or a director )in the presence of a witness )
DirectorWitnessWitness full nameWitness address
EXECUTED as a deed by )CATTLES STAFF PENSION )FUND LIMITED acting by )a director and its secretary )or two directors )
DirectorDirector / Secretary
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SCHEDULE 10Confirmation from Trustee for purposes of clause 2.1(f)
[On Trustee headed notepaper]
To: Cattles plcWelcome Financial Services LimitedThe Lewis Group Limited
Dear Sirs
Compromise Deed dated [ ] 2010 (as amended) (the Compromise Deed) Confirmation of satisfaction of conditionprecedent at clause 2.1(f)Terms defined in the Compromise Deed shall have the same meaning when used in this letter.
We refer to the final forms of:1. the Cattles Scheme Document (document reference LON[ ]/[ ]);2. the WFSL Scheme Document (document reference LON[ ]/[ ]); and3. [the TLG Distribution Deed (document reference LON[ ]/[ ]),]
which have been provided to the Trustee.
For the purposes of the condition precedent at clause 2.1(f) of the Compromise Deed, the Trustee hereby confirms that (in theopinion of the Trustee) there has been no amendment made by the Company to the form of those documents (when comparedwith the versions attached to the Compromise Deed at Schedule 9) which would result in either:(a) the Trustee s rights under the Cattles Scheme Document, the WFSL Scheme Document [or the TLG Distribution Deed]
relating to how its claim is to be valued and ascertained being altered; and/or(b) the other rights of the Trustee (whether to receive payment or otherwise) under the Cattles Scheme Document, the
WFSL Scheme Document [or the TLG Distribution Deed] being materially different from the other Cattles SchemeCreditors, WFSL Scheme Creditors or TLG Creditors respectively,
[save with the agreement of the Trustee (with this letter constituting the written agreement of the Trustee for the purposes ofclause 2.1(f)).
Yours faithfully
[name]For and on behalf of Cattles Staff Pension Fund Limited
266
EXECUTED as a deed
EXECUTED as a deed by )CATTLES PLC )acting by )a director and its secretary )or two directors )
DirectorDirector / Secretary
EXECUTED as a deed by )WELCOME FINANCIAL SERVICES )LIMITED acting by )a director and its secretary )or two directors )
DirectorDirector / Secretary
EXECUTED as a deed by )THE LEWIS GROUP LIMITED )acting by )a director and its secretary )or two directors )
DirectorDirector / Secretary
EXECUTED as a deed by )CSP LEEDS LIMITED )acting by )its sole director )
DirectorWitnessWitness full nameWitness address
EXECUTED as a deed by )CATTLES STAFF PENSION )FUND LIMITED acting by )a director and its secretary )or two directors )
DirectorDirector / Secretary
267
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268
SCHEDULE 8 TO THE SCHEMEEXCLUDED TRADE CREDITORS
For the avoidance of doubt, nothing in this Scheme shall prevent any Excluded Trade Creditor from being a Scheme Creditorin respect of Scheme Liabilities.
ABERCORN COMMUNICATIONS LTDALAN MCWALTERALD AUTOMOTIVEALIXPARTNERS LTDALLEN & OVERY LLPAMERIAL LTDANLABY WINDOW CLEANING SERVICESAON LIMITEDARGYLLASHURST LLPAVIVA OCCUPATIONAL HEALTH UK LIMITEDBAKER TILLY RESTRUCTURING AND RECOVERY LLPBARCLAYS IN RESPECT OF ALL EQUIPMENT LEASE SCHEDULES UNDER THE BARCLAYS MASTEREQUIPMENT LEASE DATED 10 JANUARY 2003 BETWEEN BARCLAYS MERCANTILE BUSINESS FINANCE LTDAND CATTLES PLCBDO LLPBERWIN LEIGHTON PAISNERBLACKROCK ADVISORS (UK) LTDBLOOMBERG L.P.BRITISH CHEQUE CASHERS ASSOCIATIONBRITISH GAS TRADING LTDBRITISH RED CROSSBUCK CONSULTANTSBUPA WELLNESSBURSON MARSTELLERC H WOOD SECURITY (BFD) LTDCANADA LIFECHEQUERS LTDCHUBB EMERGENCY RESPONSECHUBB FIRE LTDCLIFFORD CHANCE LLPCOLENSO PROPERTY SERVICES LLPCOLLINSON GRANT LTDCOMPANIES HOUSECOMPUTERSHARE SERVICES PLCCONTROL RISKSDAVID HAXBY
DC ADVISORY PARTNERS LIMITED
269
DELOITTE LLPDENTON WILDE SAPTE LLPDIXON TURNER WALLCOVERINGSDUFF & PHELPSERNST & YOUNG LLPEVERSHEDSEXPERIANFARRER & CO LLPFINANCIAL DYNAMICS LIMITEDFINANCIAL SERVICES AUTHORITYFINANCIAL TIMES LTDFITCH RATING LTDFRANK DEEFRESHFIELDS BRUCKHAUS DERINGERFTI CONSULTING LTDGEMTEC LTDGEORGINA MILLSGRANT THORNTON UK LLPGREENSTAR LTDHALLIWELLSHEMSCOTT GROUP LTDHERBERT SMITH LLPINFORMATION COMMISSIONERS OFFICEKATIE WHARRAMKENNEDYSKINGSTON HOUSE COLENSO PROPERTY SERVICES LLPKINGSTON HOUSE HELMSLEY SECURITIES LTDKIRKLEES METROPOLITAN COUNCILKPMG LLDLAWRENCE GRAHAM LLPLAZARD & CO., LTDLEXICON PARNTERS LTDLEXISNEXIS UKLINKLATERS LLPLONDON STOCK EXCHANGELUCID ISSUER SERVICES LTDMACH ONE LOGISTICS LIMITEDMASTERLEASEMEETING ZONEMICROSOFT
NEOPOST LTDOLIVER MARKETING LTD
270
ONE OFF ACCOUNTOPAL TELECOMORANGE PERSONAL COMMUNICATIONSORBIS MONITORING SERVICES LTDOSMOND GROUP LTDOVERDRIVEOYEZSTRAKER OFFICE SUPPLIES LTDP H S GROUP LTDPAMELA ISAACPENSION & BENEFIT SERVICES LTDPINNACLE GRAPHIC DESIGN LTDPKF UK LLPPRACTICAL LAW COMPANYPRECISION IR LTDQUINN EMANUELREPUTATIONINC LIMITEDROYAL MAILSAFETY MEDIA LTDSOUTH DERBYSHIRE DISTRICT COUNCILSQUIRREL STORAGE LIMITEDSTRUCTURED FINANCIAL MANAGEMENT LTDT D TRAVEL GROUPTALBOT HUGHES MCKILLOPTNT UK LTDTOWERS WATSONVODAFONE LIMITEDWALKER MORRISWRIGLEYS SOLICITORS LLPZOLFO COOPER LLP
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SCHEDULE 9 TO THE SCHEMECOVENANTS
1. COVENANTS1.1 Negative pledge(a) Except as provided below, the Company must not create or allow to exist any Security Interest on any of its assets.
Paragraph (a) does not apply to any lien arising by operation of law and in the ordinary course of trading.(b) The Company must not:
(i) sell, transfer or otherwise dispose of any of its assets on terms where it is or may be leased or re-acquired oracquired by it or any of its related entities;
(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms;(iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-off
or made subject to a combination of accounts; or(iv) enter into any other preferential arrangement having a similar effect,
in circumstances where the transaction is entered into primarily as a method of raising Financial Indebtedness or of financingthe acquisition of an asset.
1.2 Financial Indebtedness
The Company must not, without the prior consent of the Creditors Committee, incur any Financial Indebtedness.
1.3 Mergers
The Company must not, without the prior consent of the Creditors Committee, enter into any amalgamation, demerger,merger or reconstruction.
1.4 Acquisitions
The Company must not, without the prior consent of the Creditors Committee, make any acquisition or investment.
1.5 Change of business
The Company must not, without the prior consent of the Creditors Committee:(a) carry on any business other than the business carried on the Effective Date; or(b) make any substantial change to the general nature of the business of the Company from that carried out on the Effective
Date.
1.6 Disposals
The Company must not, without the prior consent of the Creditors Committee, either in a single transaction or in a series oftransactions and whether related or not, dispose of all or any part of its assets.
1.7 Liabilities
The Company must not, without the prior consent of the Creditors Committee, incur any Liability (other than (i) to theextent that the new Liability replaces an existing Liability on the same terms or (ii) is in respect of the remuneration, costs,expenses and disbursements of the Scheme Supervisors) after the Effective Date if such Liability, when aggregated with allother Liabilities incurred by the Company in the previous 12 months, is greater than £1,000,000.
1.8 Operating Expenditure
The Company must not, without the prior consent of the Creditors Committee, incur operating expenditure not referred to inthe relevant Company s Forecast in an aggregate amount exceeding £1,000,000 in any 12 month period.
1.9 Excluded Liabilities
The Company must not, without the prior consent of the Creditors Committee, pay in excess of £1,000,000 in any 12 monthperiod in respect of Excluded Liabilities (although excluding from this amount any sums paid in respect of and in connection
273
with (i) the Outwards Claims Litigation and (ii) the remuneration, costs, expenses and disbursements of the SchemeSupervisors).
1.10 Properties
The Company must not, terminate a lease in respect of an Excluded Lease Liability or, dispose of a property, of which thecurrent tenant is a member of the Group.
1.11 Lending
The Company must not be the creditor in respect of any form of credit to any person.
1.12 No Dividend
The Company may not:(a) declare, make or pay any dividend (or interest on any unpaid dividend), charge, fee or other distribution (whether in
cash or in kind) on or in respect of its share capital (or any class of its share capital);(b) repay or distribute any dividend or share premium reserve; or(c) pay any management, advisory or other fee to or to the order of the shareholders of the Company.
274
SCHEDULE 10 TO THE SCHEMESCHEMED DIRECTORS
1. Adrian Cummings2. Ian Cummine3. James Corr4. John Blake5. Mark Collins6. Michael Belcher7. Peter Miller
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276
SCHEDULE 11 TO THE SCHEMESCHEMED LEASE LIABILITIES
Any Liability of the Company, including without limitation liability for rent (including sums becoming due as a result of thedetermination of rent review) service charges, insurance rents and other outgoings, liability for repairs and dilapidations, andwhether falling due for payment before, on or after the Record Date and whether payable by the Company as tenant,guarantor, former tenant, former guarantor or otherwise) in relation to any lease which falls into any one or more of thefollowing categories:(a) which has as at the Record Date terminated (whether by effluxion of time, surrender, forfeiture or otherwise);(b) of which the current tenant is not a member of the Group as at 31 October 2010;(c) which has been assigned by the tenant and the assignee is not a member of the Group;(d) of which the tenant has sub-let the whole of the demised premises and the sub-tenant is not a member of the Group; or(e) (whether or not falling into one of the above categories) Unit 1, Edinburgh Interchange, Edinburgh.
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278
PART 2 THE WFSL SCHEME
No 10072 of 2010IN THE HIGH COURT OF JUSTICECHANCERY DIVISIONCOMPANIES COURT
IN THE MATTER OF WELCOME FINANCIAL SERVICES LIMITED
and
IN THE MATTER OF THE COMPANIES ACT 2006
SCHEME OF ARRANGEMENT
(under Part 26 of the Companies Act 2006)
between
WELCOME FINANCIAL SERVICES LIMITED
and
THE SCHEME CREDITORS
(as defined herein)
279
SECTION 1PRELIMINARY
1.1 Definitions
In the Scheme, unless inconsistent with the subject or context, the following expressions have the following meanings:
Act means the Companies Act 2006;
Adjourned Meeting means a meeting of Scheme Creditors adjourned in accordance with clause 7.2.2(b);
Adjusted Claim means in respect of a Scheme Creditor s claims under or in connection with the Finance Documents a sumequal to (for the avoidance of doubt, only (b) below shall apply to any Scheme Creditor s claim in respect of the SettlementAgreement):(a) the difference (positive or negative) between the estimated maximum distribution from the Escrow Account to a
Scheme Creditor as set out in Schedule 11 and the actual distribution from the Escrow Account to that Scheme Creditor(provided that at a time when no such actual distribution has been made, the difference shall be deemed to be £0); plus
(b) any interest accrued whether or not due or payable up to the Effective Date in accordance with the relevant FinanceDocument; plus
(c) a sum (positive or negative) equal to the amount by which a Scheme Creditor s Ascertained Scheme Claim will have tobe adjusted to take account of movements in foreign exchange rates for the period between 31 October 2010 and theEffective Date (where relevant); plus
(d) a sum (positive or negative) equal to the amount by which a Scheme Creditor s Ascertained Scheme Claim will have tobe adjusted to take account of the movement in make whole under clause 12.1 of the Note Agreements for the periodbetween 31 October 2010 and the Effective Date; plus
(e) any other contractual amount owed by the Company to the Scheme Creditor pursuant to a Finance Document incurredor falling due between 31 October 2010 and the Effective Date;
Affiliate means a subsidiary or a holding company of a person or any other subsidiary of that holding company;
Agency Arrangement means an arrangement whereby any of the Scheme Creditors referred to in clause 3.7.2 appoint anagent (being formerly an agent under a Finance Document) to act as agent for such Scheme Creditors and such arrangementis made between the agent and the relevant Scheme Creditors and may also be made with the Company and/or the SchemeSupervisors;
Alternate means any other senior executive, senior employee or professional adviser appointed by a Committee Member orNominated Representative pursuant to clause 10.1.11;
Ascertained Scheme Claim means (i) a Submitted Scheme Claim which has been agreed by the Scheme Supervisors inaccordance with clause 3.7.6 or 3.8.6 or the Court, in accordance with clause 3.8.2 or (ii) has been ascertained in accordancewith clause 3.7.2 and Schedule 11 or (iii) the claim of the Pension Creditor which has been ascertained in accordance withclause 4.5.1;
Bar Date means the first Business Day falling three months after the Effective Date;
Base Rate means the Bank of England base rate from time to time;
Board means the board of directors of the Company, from time to time;
Bovess means Bovess Limited, a company incorporated and registered in England and Wales with company number07366975 whose registered office is at 35 Great St. Helen s, London EC3A 6AP;
Bovess Holding means Bovess Holding Limited, a company incorporated in England and Wales with company number07366959 whose registered office is at 35 Great St. Helen s, London EC3A 6AP;
Business Day means a day (other than a Saturday or a Sunday) on which banks are open for general business in London;
CDDA means the Company Directors Disqualification Act 1986;
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Catch-up Payment means a payment made in accordance with clause 7.4.1;
Cattles means Cattles plc, a company incorporated under the laws of England and Wales, with registered number 00543610whose registered office is at Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, West Yorkshire,England, WF17 9TD;
Cattles Administrator Agreement means an agreement to be entered into under Plan B between Cattles, its administratorsappointed to Cattles under Plan B and the Company, governing inter alia Cattles s support for the Scheme and the payment ofthe Cattles Plan B Payment;
Cattles Plan A Payment means a sum totalling £49 million to be paid by the Company to Cattles towards repayment of theprincipal of the inter-company debt owed by the Company to Cattles in accordance with the terms of the Scheme;
Cattles Plan B Payment means the payment(s) to be paid by the Company to Cattles towards repayment of the principal ofthe inter-company debt owed by the Company to Cattles in accordance with the Cattles Administrator Agreement or thebalance of such sum, if any payment has previously been made by the Company since the date of that agreement inaccordance with the terms of the Scheme or under the Cattles Administrator Agreement;
Cattles Shareholder Scheme means the scheme of arrangement proposed between Cattles and its members, the provisions ofwhich include the acquisition of the entire issued share capital of Cattles by Bovess;
Cattles Trustee means Cattles Trustee Limited, a company incorporated in England and Wales with company number02998215 whose registered office is at Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, WestYorkshire WF17 9TD;
Claim Form means the claim form in substantially the same form as the example in Schedule 5, to be completed by SchemeCreditors (or their duly authorised agents) detailing Submitted Scheme Claims against the Company;
Claims Handling Agreement means the agreement between the FSCS and the Company for the handling of Protected PPILiabilities and the determination and compensation in respect of such Protected PPI Liabilities;
Committee Confidential Information means:(a) all information and documents provided to each Committee Member, the Pension Creditor and the FSCS as members
of the Creditors Committee or as observers of the Creditors Committee (as the case may be); and(b) all discussions at and proceedings of the meetings of the Creditors Committee,
save to the extent (i) such matters are already in the public domain or (ii) in relation to information known by such person(other than as a result of a breach of clause 10.1.6);
Committee Member means a member from time to time of the Creditors Committee;
Company means Welcome Financial Services Limited, a company incorporated in England and Wales with company number00133540 whose registered office is at Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, WestYorkshire, England, WF17 9TD;
Compass means Compass Credit Limited, a company incorporated in England and Wales with company number 00235117whose registered office is at Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, West YorkshireWF17 9TD;
COMP means the compensation rules and guidance applicable to the FSCS as made by the FSA and as contained in thecompensation section of the FSA Handbook, as replaced, amended, varied or supplemented from time to time;
Completion means the earlier of the completion of the acquisition of (i) the shares in Cattles pursuant to the CattlesShareholder Scheme under Plan A; and (ii) one ordinary share of one pound in Cattles Trustee, 5,138,350 ordinary shares offive pence each in Compass, 100,000,000 ordinary shares of one pound each in Holdings and one ordinary share of onepound in Welcome, pursuant to a share sale and purchase agreement between Bovess, Cattles and the administratorsappointed to Cattles under Plan B;
Co-ordinating Committee means a committee comprising The Royal Bank of Scotland plc, HSBC Bank plc and Lloyds TSBBank plc appointed pursuant to the co-ordination committee appointment letter dated 31 July 2009, to act as joint-co-ordinators of the lenders under the Facilities Agreements;
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Court means the High Court of Justice of England and Wales;
Covenants means the covenants set out in Schedule 6 and referred to in clause 7.1;
Credit Support Agreement means the agreement to be entered into under Plan B between, inter alios, Cattles, theadministrators appointed to Cattles under Plan B and the Company whereby the Company provides credit support to Cattlesin certain circumstances;
Creditors Committee means the committee of Scheme Creditors constituted in accordance with Section 10 of the Scheme;
Creditors Resolution means any resolution passed by the Scheme Creditors at a meeting of Scheme Creditors convened andat which business is transacted;
Cumulative Net Free Cash means an amount equal to the cumulative Net Free Cash from the Effective Date to a DistributionPeriod End Date calculated in accordance with clause 6.1.1;
Deed of Release means the deed of release to be executed by any Scheme Supervisor on behalf of Scheme Creditors, in theform of Schedule 4 (subject to minor technical and administrative changes);
Disputed Scheme Claim means a Submitted Scheme Claim to which clause 3.7.8 applies;
Distribution Date means:(a) the first Distribution Date specified in Schedule 2 which falls later than one calendar month after the Bar Date (and
no earlier date); and(b) each subsequent Distribution Date specified in Schedule 2 until the earliest of:
(i) Scheme Reversion;(ii) Scheme Completion; and(iii) all Ascertained Scheme Claims have been paid in full and the aggregate value of Unascertained Scheme Claims
is nil;
Distribution Period End Date means each of the Distribution Period End Dates specified in Schedule 2;
Effective Date means the date on which the Scheme becomes effective, in accordance with clause 1.5.1;
Employee Retention Fund means an employee retention fund, established by the Company to secure the payment ofspecified employee benefits that the Company is contractually obliged to pay to its employees. Pursuant to the terms of theEmployee Retention Fund, the amount to be held in the Employee Retention Fund will be reviewed on a quarterly basis toreflect the amount of employee benefits required to be collateralised, subject to a maximum cap of £18,000,000;
End Date means the date upon which all the Liabilities of the Company (other than its subordinated liabilities to Cattles andother Group companies, if any), including without limitation, those in respect of Ascertained Scheme Claims (together withany amounts payable pursuant to clause 2.5.4), have been paid in full);
Escrow Account means the trust account in the name of the Company which is held on trust for certain of the SchemeCreditors set up under the SEA;
Excluded Liability means each of those liabilities set out in Schedule 3;
Excluded Trade Creditors means those persons listed at Schedule 9;
Explanatory Statement means the statement explaining the effect of the Scheme to Scheme Creditors in compliance withSection 897 of the Act;
Facilities Agreement means(a) the £800 million syndicated credit facility dated 10 July 2006 between, amongst others, Cattles as borrower, the
Company as a guarantor and The Royal Bank of Scotland plc as facility agent and the lenders from time to time;(b) the £500 million syndicated credit facility dated 14 July 2004 between, amongst others, Cattles as borrower, the
Company as a guarantor and The Royal Bank of Scotland plc as facility agent and the lenders from time to time;(c) the £215 million syndicated credit facility dated 17 April 2008 between, amongst others, Cattles as borrower, the
Company as a guarantor and The Royal Bank of Scotland plc as facility agent and the lenders from time to time;
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(d) the £135 million bilateral credit facility dated 30 June 2008 between, amongst others, Cattles as borrower, theCompany as a guarantor and The Royal Bank of Scotland plc as lender and facility agent; and
(e) the £75 million bilateral credit facility dated 12 August 2004 between, amongst others, Cattles as borrower, theCompany as a guarantor and The Royal Bank of Scotland plc as lender;
each as amended and/or supplemented prior to 31 October 2010;
Final Court Order means the order of the Court sanctioning the Scheme under section 899 of the Companies Act;
Finance Document means (a) one of the Facilities Agreements or (b) a Note Agreement or (c) a Guaranteed HedgeAgreements or the Settlement Agreement;
FSA means the Financial Services Authority;
FSA Handbook means the FSA s handbook of rules and guidance made under powers given to the FSA by FSMA;
FSCS means the body corporate established under section 212 of FSMA being Financial Services Compensation SchemeLimited, incorporated under the laws of England and Wales, with registered number 03943048;
FSMA means the Financial Services and Markets Act 2000;
Group means Cattles and all of its subsidiaries (within the meaning of section 1159 of the Act);
Guaranteed Hedge Agreements means each of the agreements listed at Schedule 14, each as amended, supplemented and/orreplaced prior to 31 October 2010;
Holdings means Cattles Holdings Limited, a company incorporated in England and Wales with company number 05976786whose registered office is at Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, West YorkshireWF17 9TD;
Insolvency Act means the Insolvency Act 1986;
Insolvency Event means each of:(a) the taking of any formal step being preparatory to and/or the occurrence of (i) a winding up of the Company (by the
presentation of a winding up petition to the court or a resolution of the directors or members of the Company), (ii) itsdissolution or (iii) its administration pursuant to Schedule B1 of the Insolvency Act;
(b) the appointment of a receiver, compulsory manager or other similar officer over the Company or any of its significantassets; and
(c) any event which is analogous to those above;
but shall not include:(d) any winding-up petition, administration application or application for the appointment of a receiver, compulsory
manager or other similar officer which is frivolous, vexatious or contested in good faith and is discharged, permanentlystayed or dismissed within 14 days of presentation; or
(e) the Scheme Certified Liquidation;
Insolvency Rules means the Insolvency Rules 1986 (SI 1986/1925);
ISDA Master Agreement means a 1987 ISDA Master Agreement, a 1992 ISDA Master Agreement or a 2002 ISDA MasterAgreement;
Liability means any liability of a person, whether it is present, future, prospective or contingent, whether its amount is fixedor undetermined, whether or not it involves the payment of money or performance of any act or obligation and whether itarises at common law, in equity or by statute, in England or in any other jurisdiction, or in any other manner whatsoever,including, without limitation, claims in respect of breach of contract, tort, restitution, breach of trust, financial indebtedness,guarantee or indemnity claims, claims arising by way of subrogation, contribution or counter-indemnity, claims formisrepresentation, negligence, wilful default or fraud, mis-selling claims, claims under FSMA, Consumer Credit Act 1974 orPensions Act 1995 or 2004 and any other claims which may arise ancillary to any such financial liability, but in all casesexcluding:(a) any liability which is barred by statute or is otherwise unenforceable; or
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(b) a liability under a contract that is void or, being voidable, has been avoided;
Multicurrency 2006 NPA means the multicurrency note purchase agreement dated 1 February 2006 (as amended from timeto time) between Cattles and the purchasers named therein in respect of:(a) the US$20,000,000 principal amount of 6.17% Series A Guaranteed Senior Unsecured Notes due on 1 February 2011;(b) the US$55,000,000 principal amount of 6.25% Series B Guaranteed Senior Unsecured Notes due 1 February 2013;(c) the 6,000,000 principal amount of 4.62% Series C Guaranteed Senior Unsecured Notes due 1 February 2013;(d) the £1,000,000 principal amount of 5.89% Series D Guaranteed Senior Unsecured Notes due 1 February 2013; and(e) the £20,000,000 principal amount of 5.94% Series E Guaranteed Senior Unsecured Notes due 1 February 2021,
in each case, issued by Cattles;
Net Free Cash means the amount of cash available for Scheme Payments, as determined from time to time in accordancewith the method prescribed in Schedule 1;
Nominated Representative means any senior executive, other senior employee or professional adviser appointed by aCommittee Member pursuant to clause 10.1.10;
Non-Payment Notice has the meaning given to it in the PPI Settlement Agreement;
Note Agreements means the US Dollar 2001 NPA, the Sterling 2001 NPA or the Multicurrency 2006 NPA;
Notional Section 75 Debt has the meaning ascribed to it in the Pension Compromise;
Official Rate means the official rate of interest (as defined in section 251 of the Insolvency Act);
Outwards Claims Litigation means any demand or claim made or brought by the Company against any party pursuant tocontract, tort or otherwise;
Outwards Claims Manager means the person appointed to conduct any Outwards Claims Litigation;
Outwards Claims Manager Agreement means any agreement between the Company and any Outwards Claims Managerregarding the Outwards Claims Manager s engagement by the Company to conduct the Outwards Claims Litigation;
Payment Percentage means the percentage, from time to time, of the aggregate value of Ascertained Scheme Claims (takinginto account clause 6.1.3) that can be paid from Cumulative Net Free Cash calculated in accordance with clause 6.1.2;
Pension Claim means the amount owed to the Pension Creditor by the Company as the Notional Section 75 Debt under theterms of the Pension Compromise;
Pension Compromise means the compromise deed between the Pension Creditor, the Company and other certain Groupcompanies dated 19 November 2010 as amended by the Deed of Variation in the form set out at Schedule 12;
Pension Creditor means Cattles Staff Pension Fund Limited, as trustee of the Cattles Staff Pension Fund, established by atrust deed dated 20 August 1952 or its successors as trustee thereof or the Board of the Pension Protection Fund as itssuccessor pursuant to the Pensions Act 2004;
Plan A means the solvent restructuring of Cattles, the Company and other members of the Group as described in more detailin the Explanatory Statement;
Plan B means the administration of Cattles and the solvent restructuring of the Company and certain other members of theGroup as described in more detail in the Explanatory Statement;
Plan B Agreements means the Cattles Administrator Agreement, the Plan B SPA, the Transitional Services Agreement andthe Credit Support Agreement;
Plan B SPA means a sale and purchase agreement to be entered into under Plan B between Bovess, Cattles and theadministrators appointed to Cattles under Plan B pursuant to which Bovess will acquire one ordinary share of one pound inCattles Trustee, 5,138,350 ordinary shares of five pence each in Compass, 100,000,000 ordinary shares of one pound each inHoldings and one ordinary share of one pound in Welcome;
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Post means delivery by pre-paid first class post or airmail;
Pre-Effective Date Insolvency Event means the occurrence of any of the following in relation to the Company:(a) winding-up, dissolution or administration (whether out of court or otherwise);(b) the appointment of a liquidator, receiver, administrator or similar officer (in each case, whether out of court or
otherwise);(c) a resolution of the Company or its directors being passed to petition or apply for the Company s winding-up or
administration (whether out of court or otherwise); or(d) any person presenting a petition or an application for its winding-up or administration (whether out of court or
otherwise) which has not been dismissed or struck out within 14 days.
PPI Liability means a Protected PPI Liability or an Unprotected PPI Liability;
PPI Settlement Agreement means the agreement between the FSCS and the Company regarding the funding of Protected PPILiabilities;
Proceedings means any process, action, step, or other legal (or quasi legal) or judicial (or quasi judicial) proceeding(including, without limitation, any demand, arbitration, alternative dispute resolution, expert determination process, judicialreview, adjudication, execution, seizure, distraint, lien, enforcement of judgment, or enforcement of any security interest orright of set-off or any proceeding for the purpose of placing the Company into administration, liquidation or any insolvency,reconstruction, bankruptcy or analogous proceeding in any jurisdiction;
Protected PPI Liability means any Liability (i) to a retail customer of the Company (who, in addition, is an eligible claimantunder COMP and satisfies all other relevant requirements of COMP) which is a protected claim, within the meaning ofCOMP 5.2 of the FSA Handbook (as may be replaced, varied, amended or supplemented from time to time) or (ii) to theFSCS, as an assignee of any such protected claim, under the PPI Settlement Agreement;
Record Date means the Effective Date;
Representative means a person determined to be a representative in accordance with clause 2.7;
Ruddington means Cattles Properties (Ruddington) Limited, a company incorporated under the laws of England and Waleswith company number 04681891;
Scheme means this scheme of arrangement in its present form or with any modifications thereof or additions theretoapproved or imposed by the Court in accordance with clause 13.2;
Scheme Certified Liquidation means any voluntary liquidation of the Company where the Board has certified to the SchemeSupervisors no more than 25 Business Days before the passing of the member s resolution to wind-up that they have made afull enquiry into the Company s affairs and that, having done so, they have formed the opinion that the Company will be ableto pay any debts reasonably likely to be admitted to proof in the liquidation in full, together with interest at the Official Rate,within 12 months of the date of the commencement of the liquidation;
Scheme Completion shall have the meaning given to it in clause 12.2;
Scheme Creditor means(a) the Pension Creditor; and(b) any person who is, or claims to be, a creditor of the Company in respect of a Scheme Liability, at the Record Date;
Schemed Directors means those individuals listed in Schedule 7;
Schemed Lease means a lease described in Schedule 8(a)-(d) (inclusive) or of a property listed in Schedule 8(e);
Scheme Lease Liability means any liabilities specified in Schedule 8;
Scheme Liability means:(a) any Liability of the Company (before the application of any set-off, as applicable), other than an Excluded Liability,
which either:(i) has arisen on or prior to the Record Date; or
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(ii) may (subject to clause 2.5.1) arise after the Record Date as a result of an obligation incurred or as a result of anevent occurring or act done on or before the Record Date; or
(b) the potential claims of the Pension Creditor against the Company under sections 75 or 75A of the Pensions Act 1995(as applicable) or, to the extent these claims are compromised under the Pension Compromise, the Pension Claim;
Scheme Payment means any payment made to a Scheme Creditor in accordance with section 6;
Scheme Publications means The Financial Times (International Edition), The Daily Telegraph and the Daily Mail;
Scheme Reversion Decision Event means any of the events specified in clause 7.2.1;
Scheme Reversion means the occurrence of a Scheme Reversion Decision Event followed by either (i) a resolution of theScheme Creditors pursuant to clause 7.2.2 or (ii) the happening of the events set out in clause 7.2.3;
Scheme Supervisor means any of the persons appointed under section 8;
Scheme Supervisors Agreement means the agreement to be entered into or on or prior to the Effective Date between theScheme Supervisors and the Company;
Scheme Supervisors Report means a written report delivered by the Scheme Supervisors to the Creditors Committeepursuant to clause 8.3.3(b);
Scheme Website means the world wide web page or pages linked to universal resource locatorhttp://www.cattles.co.uk/schemes;
SEA means the standstill and equalisation agreement dated 25 November 2009 between, amongst others, Cattles, theCompany and The Royal Bank of Scotland plc;
Settlement Agreement means the agreement between the Noteholders and the Company, Cattles and other member of theGroup as detailed in the letter from Clifford Chance LLP to Freshfields Bruckhaus Deringer LLP dated 3 December 2010;
Shareholder means a current or former holder of shares in Cattles;
Shareholder Observer means the observer permitted to attend meetings of the Creditors Committee pursuant to clause10.1.3(g);
Stage Three Trigger Event Report means the report produced in accordance with clause 6 of Schedule 6;
Sterling 2001 NPA means the Sterling note purchase agreement dated 12 December 2001 (as amended from time to time)between Cattles and the purchasers named therein in respect of:(a) the £30,000,000 principal amount of 7.64% Series C Guaranteed Senior Unsecured Notes due 12 December 2011; and(b) the £40,000,000 principal amount of 7.80% Series D Guaranteed Senior unsecured notes due 12 December 2016,
in each case, issued by Cattles;
Submitted Scheme Claim means any purported Scheme Liability in respect of which a Scheme Creditor has submitted aClaim Form in accordance with clause 3.5.3 and 3.5.4;
Submitted Scheme Claimant means a person who has submitted a Submitted Scheme Claim, unless his Submitted SchemeClaim has been finally rejected in accordance with clause 3.8.2 or 3.8.3;
Subsidiary Deed of Release means any deed executed by any Scheme Supervisor on behalf of Cattles in respect of amountsowed to it by certain members of the Group, in the form set out in Schedule 10 (subject to minor administrative or technicalchanges);
TLG means the The Lewis Group Limited, a company incorporated in the UK with company number SC127043;
TLG Compromise means the agreement to be executed by TLG pursuant to which the Pension Creditor will receivepayments from TLG pro rata to its guarantee creditors;
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Transitional Services Agreement means the agreement to be entered into under Plan B between Cattles, the Company, TLG,Ruddington, CL Finance Limited and the administrators appointed to Cattles to govern the provision of services between,inter alios, Cattles and the Company under Plan B;
Unascertained Payments Trust Fund means the trust fund established and maintained by the Company under clause 6.3.1;
Unascertained Scheme Claim means (i) a Submitted Scheme Claim which has not become an Ascertained Scheme Claimnor been rejected in accordance with clause 3.8.2 or 3.8.3 and includes a prudent provision by the Scheme Supervisors forpotential adverse cost awards which the Company may incur in determining such Submitted Scheme Claim or (ii), in relationto the Pension Creditor, the sum estimated in accordance with Clause 4.5.2;
Unprotected PPI Liability means any Liability to a retail customer of the Company arising from the sale by the Company ofa payment protection insurance policy, before 14 January 2005;
US Dollar 2001 NPA means the US dollar note purchase agreements dated 12 December 2001 (as amended from time totime) between Cattles and the purchasers named therein in respect of:(a) the US$40,000,000 principal amount of 7.15% Series A Guaranteed Senior Unsecured Notes due 12 December 2008;
and(b) the US$70,000,000 principal amount of 7.53% Series B Guaranteed Senior Unsecured Notes due 12 December 2011,
in each case, issued by Cattles; and
Welcome means Welcome Finance Group Limited, a company incorporated in England and Wales with company number06327124 whose registered office is at Kingston House, Centre 27 Business Park, Woodhead Road, Birstall, Batley, WestYorkshire WF17 9TD.
1.2 References
In the Scheme, unless the context otherwise requires or otherwise expressly provides for:(a) references to parts, clauses, subclauses and schedules are references to parts, clauses, subclauses and schedules of the
Scheme;(b) references to a person include references to an individual, firm, partnership, company, corporation, unincorporated
body of persons or any state or state agency;(c) references to a statute, statutory provision or regulatory rule or guidance include references to the same as subsequently
modified, amended or re-enacted from time to time;(d) the singular includes the plural and vice versa and words importing one gender shall include all genders;(e) headings to parts, clauses and schedules are for ease of reference only and shall not affect the interpretation of the
Scheme;(f) references to a period of days shall include Saturdays, Sundays and public holidays. Where the date which is the final
day of a period of days is not a Business Day, that date will be adjusted so that it is the first following day that is aBusiness Day;
(g) references to Sterling or to £ are references to the lawful currency of the United Kingdom of Great Britain andNorthern Ireland from time to time; and
(h) references to time shall be to London time (Greenwich Mean Time or British Summer Time as appropriate).
1.3 The Company
1.3.1 The Company was incorporated on 23 January 1914 in England and Wales as a private limited company with the nameRefuge Supply Company Limited. On 27 October 1987, its name was changed to Teleplan Rentals Limited and on23 December 2002, its name was changed to Progressive Financial Services Limited. Its name was changed to its currentname on 1 December 2006. The authorised share capital of the Company is £101,855,000, of which £101,139,767.02 isissued, made up of:(a) 100,000,000 ordinary shares of £1 held by Holdings;(b) 499,499 ordinary shares of £0.01 held by Holdings;(c) 1 ordinary share of £0.01 held by Cattles Provident Trust Limited;
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(d) 10,000,000 A preference shares of £0.01 held by Progressive Insurance Co Limited;(e) 25,000,000 B preference shares of £0.01 held by Progressive Insurance Co Limited; and(f) 78,477,202 irredeemable preference shares of £0.01 held by Compass.
1.3.2 The Company (trading as Welcome Finance and Shopacheck) operates the Group s principal lending business,providing secured and unsecured personal loans to individuals who may not have access to mainstream facilities, usually dueto shortcomings in their employment, residency or credit histories. Its interest rates are priced to reflect the credit riskexposure. The businesses serve approximately 600,000 customers in the United Kingdom.
1.4 The Purpose of the Scheme
The purpose of the Scheme is to enable the Company to continue to collect amounts outstanding under its loan portfolio on asolvent basis, to preserve the Shopacheck business of the company as a going concern, to restructure the Group indebtednessand to maximise recoveries for the Scheme Creditors while meeting the Company s Liabilities to its other creditors in full inthe ordinary course of business (subject to the terms of the Scheme, including its application following Scheme Reversion).
1.5 Effective Date
1.5.1 The Scheme shall become effective on the date on which an office copy of the Final Court Order is delivered to theRegistrar of Companies of England and Wales for registration in accordance with clause 1.5.2.
1.5.2 The Company shall not deliver an office copy of the Final Court Order to the Registrar of Companies of England andWales for registration until the satisfaction of the following conditions:(a) the satisfaction of all the conditions precedent to the Pension Compromise (save the conditions in that agreement that
the Scheme becomes effective and the TLG Compromise become effective);(b) the satisfaction of all the conditions precedent to the PPI Settlement Agreement (save the condition that the Scheme
becomes effective);(c) the only reason for the TLG Compromise not becoming effective is its execution by the Pension Creditor;(d) (i) under Plan A, the making by the Court of orders sanctioning the Cattles Shareholder Scheme and confirming the
proposed capital reduction and the directors of Cattles having confirmed that, subject to no insolvency event (asdefined in the Cattles Shareholder Scheme) having occurred in relation to Cattles, such Court orders will be deliveredto the Registrar of Companies of England and Wales for registration immediately upon the Scheme becoming effectiveor (ii) under Plan B, the satisfaction of all the conditions precedent to the Plan B SPA; and
(e) the FSA notifies in writing its approval under section 189(4) of FSMA of Bovess (and any other person who wouldacquire control as a result of Completion) acquiring control over the Company (in each case in respect of the level ofcontrol that would result from Completion), such approval being either unconditional in all respects (save as to theperiod within which the change in control must occur) or subject to conditions reasonably satisfactory to the parties(acting reasonably and in good faith) or the FSA being treated as having approved the acquisition of control by eachsuch person in accordance with section 189(6) of FSMA;
provided that if:(a) the conditions in 1.5.2(a) to 1.5.2(d) have not been satisfied; or(b) a Pre-Effective Date Insolvency Event has occurred in relation to the Company;
on or before 31 May 2011, the Company shall not deliver, or procure delivery of, the office copy of the Final Court Order tothe Registrar of Companies of England and Wales and the Scheme shall not be made effective.
1.5.3 If an Insolvency Event occurs in relation to the Company before the Bar Date then save for the provisions in clauses1.1, 1.5.3, 2.9, 8.6, 8.7, 9.4, 9.5, 10.7, 10.8, 10.9, 10.10, 13.1, 13.6 and 5.3 (to the extent only that a payment to the FSCS hasoccurred prior to the Insolvency Event) all provisions under the Scheme shall cease to apply.
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SECTION 2THE SCHEME
2.1 Application of the SchemeThe Scheme shall apply to all Scheme Liabilities and bind all Scheme Creditors and includes the releases given in Section 4of the Scheme. The Scheme shall not affect the rights of creditors of the Company in respect of any Excluded Liabilities.
2.2 Stay of Proceedings2.2.1 Subject to the provisions of clauses 2.2.2 and 2.2.4, no Scheme Creditor shall be permitted to commence or continueany Proceedings against the Company, in any jurisdiction.
2.2.2 A Scheme Creditor shall only be permitted to commence Proceedings against the Company:(a) in accordance with the provisions of clauses 2.2.3 and 3.8.1;(b) following Scheme Reversion;(c) with the consent of the Scheme Supervisors;(d) in relation to Cattles only, upon or after the End Date; or(e) in response (by way of claim or counterclaim) to Proceedings commenced or continued by the Company against the
Scheme Creditor and where the subject matter of the Proceedings commenced by the Scheme Creditor is the sametransaction or occurrence as the subject of the Proceedings commenced or continued by the Company.
2.2.3 A Scheme Creditor in respect of a Scheme Lease Liability shall, subject to the terms of the relevant Scheme Lease(and/or any associated documents), be permitted to bring a claim for forfeiture, re-entry or other action or legal proceedingsbrought solely with the purpose of determining such Scheme Lease.
2.2.4 No order, judgment, decision or award obtained by a Scheme Creditor in breach of clause 2.2.2 shall give rise to anAscertained Scheme Claim. The Scheme Creditor shall not be entitled to rely on such an order, judgment, decision or awardto evidence a Submitted Scheme Claim and shall have no right to enforce the order, judgment, decision or award or to seek toplace the Company into administration, liquidation or any insolvency, reconstruction, bankruptcy or analogous proceeding inany jurisdiction in reliance upon such an order.
2.3 Enforcement of Scheme LiabilitiesScheme Creditors are not permitted to commence any Proceedings against the Company, any Scheme Supervisor, the Boardor any member of the Board, any officer of the Company or any other person, in any jurisdiction, to enforce payment of anAscertained Scheme Claim, Scheme Payment or any other Scheme Liability or any part of it, unless the Company or theScheme Supervisors have acted or failed to act in either case in breach of the Scheme or any of them is reasonably anticipatedto be about to act or fail to act in breach of a provision of the Scheme that is not minor or technical in nature. The moratoriumdescribed in the previous sentence shall cease to apply after a Scheme Reversion. For the avoidance of doubt, the moratoriumin this clause shall not prevent any Scheme Creditor commencing any Proceedings against any current or former member ofthe Board or officer of the Company or any other person to enforce payment of any Liability which is not a Liability of theCompany in respect of an Ascertained Scheme Claim, Scheme Payment or Scheme Liability.
2.4 Effect of Proceedings prohibited by clauses 2.2 and 2.32.4.1 If a Scheme Creditor obtains any money, benefit, property or advantage at the expense of the Company in breach ofclauses 2.2 or 2.3, he shall be treated as having received, on account of his entitlement to a Scheme Payment, an advancepayment equal to the amount or gross value of such money, benefit, property or advantage, and the extent, if any, to which heis entitled to a Scheme Payment shall be reduced accordingly.
2.4.2 For the purpose of clause 2.4.1, the value of any amount obtained shall be the gross value as conclusively determinedby the Scheme Supervisor, acting in good faith, and may include, without limitation, such amount as it considers appropriateby way of interest; or costs, charges or expenses incurred by the Company as a consequence of the Proceedings.
2.4.3 To the extent that the gross value exceeds the value of the Scheme Payment to which the Scheme Creditor wouldotherwise be entitled, the Scheme Creditor shall hold the excess on trust for the Company and shall immediately pay it to theCompany without set-off, deduction, retention, abatement or counterclaim. Interest will accrue on the excess, from the dateon which the value is obtained by the Scheme Creditor, at a rate of 2 per cent. above Base Rate.
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2.4.4 The Company shall have the right to seek injunctive or other relief or remedy:(a) in respect of the breach or anticipated breach of clause 2.2 or 2.3; and(b) in respect of any loss which the Company may suffer as a result of the breach of clause 2.2 or 2.3.
2.5 Interest2.5.1 Scheme Creditors shall be entitled to claim interest on Scheme Liabilities, only to the extent that interest is a SchemeLiability. Subject to clause 2.5.4, Scheme Liabilities shall not accrue interest following the Record Date, (except that witheffect from Scheme Reversion, interest may be claimed on Ascertained Scheme Claims as though it had accrued from theRecord Date at the Official Rate). For the avoidance of doubt, Scheme Creditors release all claims they would have had inrespect of interest, but for the provisions of this clause.
2.5.2 To the maximum extent possible, all Scheme Payments shall be repayments of principal amounts owed in respect ofScheme Liabilities, rather than interest.
2.5.3 For the purposes of a Scheme Liability comprising interest, all necessary apportionments will be made to enable a claimin respect of such interest to be made for a period up to the Record Date.
2.5.4 If there is any surplus remaining under the Scheme after having paid all Ascertained Scheme Claims in full, suchsurplus shall be applied in paying interest at the Official Rate on those Ascertained Scheme Claims in respect of the periodsduring which, owing to the effect of clause 2.5.1, they have been outstanding since the Record Date.
2.6 Valuation of claims and set-offAll Scheme Liabilities (other than those in respect of the Pension Claim) shall be valued in accordance with Rules 2.85 to2.89 of the Insolvency Rules, as though the Company had entered administration on the Record Date and the administratorhad given notice under Rule 2.95 of the Insolvency Rules on that date that he intended to make a distribution to unsecuredcreditors.
2.7 Representatives2.7.1 To the extent a Scheme Creditor does not take part in the Scheme on his own behalf, the Scheme Supervisors may, intheir absolute discretion, determine any person purporting to represent that Scheme Creditor to be his Representative.
2.7.2 Unless notified to the contrary by the Scheme Creditor, the Scheme Supervisors may, in their absolute discretion, treat aRepresentative as fully authorised to represent the Scheme Creditor concerned for all purposes in connection with theScheme.
2.7.3 The Company shall accept from the Representative any payment owed to the Company by the principal(s) of theRepresentative and may make any payment owed to the principal(s) under the Scheme to the Representative. Such paymentsby the Company shall discharge the Company from any further obligation in respect of the Scheme Liability as though it hadbeen paid to the Scheme Creditor. Neither the Scheme Supervisors nor the Company shall have any liability to a SchemeCreditor arising from the operation of this clause.
2.7.4 Any action required to be taken under this Scheme by a Scheme Creditor may and shall be taken by any Representativeof a Scheme Creditor, unless taken by the Scheme Creditor directly.
2.8 Scheme releasesNothing in this Scheme, other than the releases set out at clauses 2.5, 2.9, and 4.1, shall be construed as resulting in anyrelease, extinguishment, modification, compromise or waiver of any Liability owed by the Company until the earlier of:(a) Scheme Reversion, pursuant to section 7; and(b) Scheme Completion, pursuant to clause 12.2.
2.9 Deed of releaseEach of the Scheme Creditors hereby irrevocably authorises any of the Scheme Supervisors from the Effective Date to enterinto, execute and deliver as a deed the Deed of Release, on behalf of each of the Company, each Scheme Creditor and anyperson to whom a Scheme Creditor has transferred or assigned or purported to transfer or assign a Scheme Liability.
2.10 No admission of liabilitySave as expressly set out in this Scheme or in the Explanatory Statement, nothing in the Scheme or the ExplanatoryStatement or the circulation thereof to any person evidences or constitutes any admission by the Company or the Scheme
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Supervisors that the person is a Scheme Creditor or that a Liability is owed to any person in respect of any claim or right. Theagreement by the Company or the Scheme Supervisors of a Submitted Scheme Claim is purely for the purposes of theScheme and does not constitute any admission of Liability for any other purpose.
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SECTION 3DETERMINATION OF SUBMITTED SCHEME CLAIMS
3.1 Cattles and the Pension Creditor s Scheme LiabilitiesThe provisions of this Section 3 shall not apply to Scheme Liabilities owed to Cattles and the Pension Creditor. Clauses 4.1to 4.4 (inclusive) apply to the Scheme Liabilities owed to Cattles. Clause 4.5 applies to the Scheme Liabilities owed to thePension Creditor.
3.2 Record DateAll Submitted Scheme Claims shall be valued as at the Record Date, except that Scheme Creditors and the SchemeSupervisors shall take into account:(a) any information which has come to light since the Record Date that assists with the valuation of the Scheme Liability;
and(b) the termination of any contract or arrangement since the Record Date.
3.3 Assignment3.3.1 Subject to clauses 3.3.2 to 3.3.5, the Scheme Supervisors shall be under no obligation to recognise any assignment ortransfer (or purported assignment or transfer) of the whole or part of a Scheme Liability or Ascertained Scheme Claim (or thebenefit thereof) after the Record Date for the purposes of determining entitlements under this Scheme and the Company shallhave no obligations hereunder to any person other than a Scheme Creditor.
3.3.2 Where the Scheme Supervisors have received from the relevant parties notice in writing, in the form of Schedule 13duly completed, of an assignment or transfer, of the whole or part of a Scheme Creditor s Scheme Liability or AscertainedScheme Claim, the Scheme Supervisors shall agree to recognise such assignment or transfer, for the purposes of theCompany making Scheme Payments under this Scheme.
3.3.3 Such assignment or transfer shall only take effect for the purposes of the Scheme when the Scheme Supervisors givenotice to the Scheme Creditor and the assignee or transferee that they have recognised the assignment or transfer. Such anotice shall be given promptly by the Scheme Supervisors in the case of an assignment or transfer falling within clause 3.3.2.
3.3.4 Any assignee or transferee of a Scheme Liability or Ascertained Scheme Claim so recognised by the SchemeSupervisors shall be bound by the terms of the Scheme and shall be considered a Scheme Creditor for the purposes of theScheme, in place of the assignor or transferor.
3.3.5 Recognition of the assignment or transfer of a Scheme Liability by the Scheme Supervisors does not constituteacceptance by the Scheme Supervisors of the validity or amount of any Scheme Liability and shall have no such consequenceunder the Scheme.
3.3.6 Scheme Creditors may disclose to any of their officers, directors, employees, professional advisers, auditors andAffiliates and their Affiliates may disclose to any of their officers, directors, employees, professional advisers and auditorsany information which that Scheme Creditor has acquired under or in connection with the Scheme or otherwise in relation tothe Company as such Scheme Creditor considers appropriate if any person to whom such information is given undertakes tokeep such information confidential and agrees not to disclose to anyone (except that there shall be no requirement to obtainsuch undertaking if the recipient is subject to professional obligations to maintain the confidentiality of the information).
3.3.7 Scheme Creditors may disclose to (or through) any person with whom it may enter or has entered into, any kind oftransfer, assignment, participation or other agreement relating to a Scheme Liability or Ascertained Scheme Claim anyinformation which that Scheme Creditor has acquired under or in connection with the Scheme or otherwise in relation to theCompany provided such person to whom the information is to be given undertakes to keep such information confidential andagrees not to disclose it to anyone except to the extent such disclosure is:(a) to such professional advisers as the Scheme Creditor considers appropriate and who (save in the case of legal advisers
and auditors provided that it is made clear to them that such matters are confidential) have agreed to be bound byclause 3.3.7;
(b) to HM Revenue & Customs or any other governmental, public or official body for taxation purposes;(c) required to be disclosed by law, regulation or any court, governmental or competent regulatory authority;(d) in relation to matters that are already in the public domain; or
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(e) in relation to information known by such person (other than as a result of a breach of this provision).
3.4 Notice of Effective DateNot more than two weeks after the Effective Date, the Company shall give notice that the Scheme has become effective andof the Bar Date, in the following ways:(a) by an appropriate posting on the Scheme Website;(b) by notice to each person who the Company believes may be a Scheme Creditor or, if they have previously been sent a
letter by the Company inviting them to do so, has registered with the Company to receive correspondence inconnection with the Scheme; and
(c) by notice in the Scheme Publications, including an invitation to Scheme Creditors to request a Claim Form.
3.5 Claim Forms3.5.1 The Company shall make blank Claim Forms available for download from the Scheme Website and shall send a blankClaim Form to:(a) the persons referred to in clause 3.4(b) (other than the Pension Creditor), within two weeks of the Effective Date; and(b) each person responding to the invitation referred to in clause 3.4(c), as soon as is reasonably practicable after receipt of
the response.
3.5.2 Each person notified shall be invited to complete a Claim Form with details of Scheme Liabilities.
3.5.3 Claim Forms must be sent to the Scheme Supervisors to arrive on or before the Bar Date.
3.5.4 The Claim Form should be completed in accordance with the instructions incorporated in it and should include:(a) the identity of the Submitted Scheme Claimant;(b) a description of the nature of each Submitted Scheme Claim and how it arose;(c) the value of the Submitted Scheme Claim;(d) the legal basis of the Liability of the Company; and(e) any other facts which would assist the Scheme Supervisors in considering the Submitted Scheme Claim.
3.5.5 Without prejudice to the power of the Scheme Supervisors to request further information, Scheme Creditors shallprovide to the Scheme Supervisors such supporting evidence as they consider sufficient to justify their Submitted SchemeClaim.
3.5.6 Submitted Scheme Claimants shall also submit to the Scheme Supervisors on request such additional information as isreasonably required for the Company to make claims against third parties.
3.5.7 Submitted Scheme Claimants may submit to the Scheme Supervisors a revised Claim Form and/or revised informationin respect of a Submitted Scheme Claim, together with any relevant supporting documentation, at any time up to andincluding the Bar Date.
3.5.8 Subject to clause 3.7.4, after the Bar Date, Scheme Creditors are not entitled to make or revise a Submitted SchemeClaim or provide further information (unless required to do so in accordance with the Scheme).
3.6 Requirement to submit Claim FormSubject to clause 3.7.2, in order to be entitled to any Scheme Payment, Scheme Creditors must, on or prior to the Bar Date,submit a Claim Form. No payments will be made in respect of Scheme Liabilities that are not submitted as SubmittedScheme Claims.
3.7 Determination of Submitted Scheme Claims3.7.1 The Scheme Supervisors shall examine each Claim Form returned to them in accordance with clause 3.5. Suchexamination shall include (without limitation) consideration of whether:(a) details of Scheme Liabilities are adequately supported by any documentation submitted with the Claim Form;(b) details of the quantum of the Scheme Liabilities are sufficient, and the basis of calculation is reasonable and has been
accurately applied; and(c) there is any set-off to which clause 2.6 does or may apply.
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3.7.2 Notwithstanding the other provisions of clause 3, with respect to Scheme Liabilities arising out of or in connection witha Finance Document, the amounts set out in Schedule 11 (if there is any amount set out against a Scheme Creditor s name)shall, as at the Effective Date, automatically comprise the relevant Scheme Creditors Ascertained Scheme Claim. By no laterthan 25 Business Days after the Effective Date, the Scheme Supervisors shall advise each of the relevant Scheme Creditors(or any agent appointed by the relevant Scheme Creditor whether appointed pursuant to an Agency Arrangement orotherwise) of their proposed Adjusted Claim. On receipt of the proposed Adjusted Claim, the relevant Scheme Creditor (orsuch agent) shall have 25 Business Days to agree the value of the Adjusted Claim with the Scheme Supervisors. If noagreement can be reached within that 25 Business Day period, the part of the Adjusted Claim that is not agreed shall bedeemed to be a Disputed Scheme Claim to be resolved in accordance with clause 3.8. On determination of an Adjusted Claimby agreement pursuant to this clause 3.7.2 and/or resolution pursuant to clause 3.8, such Adjusted Claim (as agreed orresolved as applicable) shall be added to the relevant Scheme Creditor s Ascertained Scheme Claim. Subject to theSettlement Agreement, nothing in this Scheme, in particular in this clause or Schedule 11, shall (i) prevent the relevantScheme Creditors making any other Submitted Scheme Claims arising out of or in connection with either the FacilitiesAgreements, the Note Agreements, the Guaranteed Hedge Agreements or otherwise or (ii) constitute an admission as to thebasis upon which an Ascertained Scheme Claim or any other claim has been or should be calculated.
3.7.3 Up to the Bar Date, the Scheme Supervisors may give notice to a Submitted Scheme Claimant specifying furtherinformation or evidence they reasonably require to assist them in agreeing its Submitted Scheme Claim.
3.7.4 After the Bar Date, if the Scheme Supervisors do not agree with the Submitted Scheme Claim, or do not consider thesupporting information to be adequate, they shall notify the Submitted Scheme Claimant of that fact and the reasons, as soonas reasonably practicable (taking into account the volume of Submitted Scheme Claims received), and shall request anyfurther information or evidence that would assist them in deciding upon the Submitted Scheme Claim.
3.7.5 The Submitted Scheme Claimant shall respond within such reasonable time limit as the Scheme Supervisors mayspecify and shall similarly respond to any subsequent requests for information from the Scheme Supervisors.
3.7.6 If the Scheme Supervisors agree with the Submitted Scheme Claim, or agree with the Scheme Creditor a value forwhich the Submitted Scheme Claim should be admitted as an Ascertained Scheme Claim, clause 3.7.7 shall apply. If theScheme Supervisors do not agree with the Submitted Scheme Claim, clause 3.7.8 shall apply.
3.7.7 If the Scheme Supervisors agree with the Submitted Scheme Claim, they shall notify the Submitted Scheme Claimantof their agreement, in writing, as soon as reasonably practicable following that determination. The Submitted Scheme Claim,will become an Ascertained Scheme Claim on the date the notice is sent.
3.7.8 If the Submitted Scheme Claim is not agreed by the Scheme Supervisors within six months of the Bar Date, (or at suchearlier time as the Scheme Supervisors shall determine or such later time to which the Scheme Supervisors and the SubmittedScheme Claimant shall both agree or acquiesce) such part (if any) of the Submitted Scheme Claim as is not agreed shallbecome a Disputed Scheme Claim. The part (if any) of the Submitted Scheme Claim that is agreed shall be added to thatScheme Creditor s Ascertained Scheme Claim if that Scheme Creditor already has such a claim otherwise it will constitutethat Scheme Creditor s Ascertained Scheme Claim (without prejudice to the outcome of the dispute regarding the disputedportion).
3.7.9 Where a Submitted Scheme Claim (or part thereof) becomes a Disputed Scheme Claim, the Scheme Supervisors shallforthwith notify the Submitted Scheme Claimant, in writing, that the whole or part of its Submitted Scheme Claim hasbecome a Disputed Scheme Claim including brief reasons as to why they have not agreed the whole or part of the SubmittedScheme Claimant s Submitted Scheme Claim.
3.8 Resolution of Disputed Scheme Claims3.8.1 A Submitted Scheme Claimant who receives notice that the whole or part of his Submitted Scheme Claim has become aDisputed Scheme Claim, shall be entitled within 21 days of receipt of such notice to give notice to the Scheme Supervisorsthat it is appealing the rejection of its Disputed Scheme Claim and seek resolution of the existence or proper value of itsDisputed Scheme Claim by means of proceedings issued in the Companies Court of the Chancery Division of the Court as ifthe Disputed Scheme Claim were an appeal of an administrator s decision under rule 2.78 of the Insolvency Rules.
3.8.2 If a final judgment is given against the Company in proceedings begun under clause 3.8.1 then, on the date suchjudgment becomes incapable of further appeal, the Disputed Scheme Claim will become an Ascertained Scheme Claim forthe amount of the judgment.
3.8.3 If a final judgment is given against the Submitted Scheme Claimant in proceedings begun under clause 3.8.1 then, onthe date such judgment becomes incapable of further appeal, (i) the Disputed Scheme Claim will become an Ascertained
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Scheme Claim at the value determined by the final judgment and shall be added to that Scheme Creditor s AscertainedScheme Claim if that Scheme Creditor already has such a claim otherwise it will constitute the Scheme Creditor sAscertained Scheme Claim, or (ii) in the case of a judgment which values the Disputed Scheme Claim at zero, shall give noentitlement to a Scheme Payment under the Scheme in respect of the Disputed Scheme Claim.
3.8.4 If any legal or other costs are awarded against the Company in respect of proceedings begun under clause 3.8.1, suchamounts shall be payable by the Company to the relevant Scheme Creditor in full. If any legal or other costs are awarded inthe Company s favour in respect of proceedings begun under clause 3.8.1, such amounts shall be payable to the Company infull.
3.8.5 If the Submitted Scheme Creditor does not give notice under clause 3.8.1 and begin such proceedings within 21 days ofreceipt of the Scheme Supervisors notice, then its Submitted Scheme Claim shall become an Ascertained Scheme Claim atthe value accepted by the Scheme Supervisor or, if rejected entirely by the Scheme Supervisors, shall give no entitlement to aScheme Payment under the Scheme.
3.8.6 Nothing in this clause 3.8 shall prevent the Scheme Supervisor from agreeing in writing with the Scheme Creditor thevalue of the Scheme Liability to which its Unascertained Scheme Claim relates, in which case the Unascertained SchemeClaim shall become an Ascertained Scheme Claim for the amount agreed.
3.9 Variation of time limitsWhere the Scheme Supervisors are satisfied that, due to exceptional circumstances outside the control of a Submitted SchemeClaimant, that Submitted Scheme Claimant has failed to comply with any time limit, other than the Bar Date, the SchemeSupervisors may, in their absolute discretion, extend that time limit for that Submitted Scheme Claimant by notice to theSubmitted Scheme Claimant.
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SECTION 4CATTLES COMPROMISE, PAYMENT AND THE PENSION CREDITOR
4.1 Compromise of Cattles claims4.1.1 From the Effective Date, and apart from the Cattles Plan A Payment or the Cattles Plan B Payment, the recourse ofCattles to the Company in respect of any Liabilities of the Company to Cattles shall be limited to the amount of the netrealisable value of the residual assets of the Company in a liquidation after all expenses of the liquidation and all other debtsadmitted to proof in the liquidation have been paid in full with statutory interest and all Scheme Liabilities owed to otherScheme Creditors have been paid in full or released, in accordance with the terms of the Scheme.
4.1.2 Cattles hereby irrevocably authorises any of the Scheme Supervisors from the Effective Date to enter into, execute anddeliver as a deed on its behalf a Subsidiary Deed of Release in respect of each member of the Group, apart from Cattles, theCompany and Ruddington, that owes Liabilities to Cattles, to release that Group member s Liabilities to Cattles. The SchemeSupervisors shall enter into, execute and deliver such Subsidiary Deed of Release promptly after the Effective Date.
4.2 Cattles Plan A PaymentUpon the Cattles Shareholder Scheme becoming effective and provided no Insolvency Event has occurred in respect ofCattles or the Company, the Company shall make the Cattles Plan A Payment.
4.3 Cattles Plan B Payment and the Plan B AgreementsIf at the Effective Date Cattles has been placed into administration pursuant to the Insolvency Act and the administratorsappointed to Cattles have signed the Plan B Agreements, then the Company shall:(a) enter into and comply with the terms of Plan B Agreements (unless the Company has already entered into any one or
more of the Plan B Agreements, in which case it shall continue to comply with those Plan B Agreements); and(b) make the Cattles Plan B Payment.
4.4 Payments to be made by the Company to enable the acquisition of the shares in CattlesThe payment by the Company of:(a) up to £2,000,000 in respect of the fees, costs and expenses incurred or to be incurred by Structured Finance
Management Limited and/or Bovess in connection with the acquisition of shares in the capital of Cattles under Plan Aor shares in the capital of certain of its subsidiaries under Plan B that have been agreed to be paid by the Companypursuant to an engagement letter dated 6 September 2010 between Structured Finance Management Limited and theCompany (as subsequently amended);
(b) up to £5,300,000 in aggregate in respect of the amounts to be paid to the shareholders of Cattles pursuant to the CattlesShareholder Scheme and, if applicable, participants in Cattles share incentive schemes in connection with the CattlesShareholder Scheme; and
(c) up to £2,500,200 to Bovess pursuant to a corporate services deed dated 29 November 2010 between Bovess, BovessHolding, Structured Finance Management Limited, SFM Corporate Services Limited, Holdings, Compass, CattlesTrustee, Welcome and the Company
is hereby authorised and approved and the consequent reduction in the sums available for distribution to Scheme Creditors ishereby authorised and approved.
4.5 Pension Creditor s Scheme Liabilities4.5.1 The Pension Creditor s Scheme Liabilities shall be determined in accordance with the terms of the PensionCompromise. On the final determination of the Pension Creditor s Scheme Liabilities in accordance with the terms of thePension Compromise, the amount so determined shall be the Pension Creditor s Ascertained Scheme Claim.
4.5.2 Until the Pension Creditor s Scheme Liabilities become an Ascertained Scheme Claim in accordance with clause 4.5.1,such Pension Creditor s Scheme Liabilities shall be estimated by the Scheme Supervisors as if they were the PensionCreditor s Unascertained Scheme Claim and such estimated amount shall be deemed to be the Pension Creditor sUnascertained Scheme Claim.
4.5.3 The Scheme Supervisors shall exercise any powers they have under the Pension Compromise in consultation with theCreditors Committee.
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SECTION 5SCHEME ASSETS
5.1 Continuation of operations5.1.1 Except insofar as specific functions are to be performed by the Scheme Supervisors and Outwards Claims Manager asset out in Section 8 and Section 9, the affairs, business and property of the Company shall continue to be managed by theBoard. The Company, acting through the Board consistent with its regulatory and fiduciary responsibilities, shall remainsolely responsible for the conduct of the future trading business of the Company.
5.1.2 Neither the Scheme Supervisors nor (for the avoidance of doubt) the members of the Creditors Committee shall haveany personal liability in respect of any ongoing trading activities by the Company or any debts incurred by the Company inrespect of such trading.
5.2 Assets available to pay Liabilities5.2.1 Subject to the terms of the Scheme, all assets of the Company shall be available to pay Scheme Liabilities.
5.2.2 Subject to the Scheme Reversion, the Company may use any of its assets to pay Excluded Liabilities in full.
5.2.3 Liabilities which are neither Scheme Liabilities nor Excluded Liabilities shall not be paid out of the assets of theCompany without the consent of the Scheme Supervisors.
5.3 Protected PPI Liabilities5.3.1 In respect of Protected PPI Liabilities, the Company shall make the payments to the FSCS that it is obliged to makeunder the PPI Settlement Agreement. The Company acknowledges that in making those payments, the Company is doing sofor the purpose of carrying on its business and that the payments to the FSCS will benefit the Company and its creditors as awhole in achieving a better outcome for all creditors than would be achievable in a liquidation or administration of theCompany.
5.3.2 Under the PPI Settlement Agreement, the Company is obliged to pay the Additional FSCS Payment (for the purposes ofthis clause 5.3.2 the Additional FSCS Payment shall be as defined in the PPI Settlement Agreement) to the FSCS prior to theBar Date. The Scheme Creditors acknowledge that for the period up to when the Additional FSCS Payment is made suchAdditional FSCS Payment shall be paid in priority to any payment made to Scheme Creditors under the Scheme butexcluding any payments to Scheme Creditors in respect of Excluded Liabilities. For the avoidance of doubt, the Company sobligation to pay the Additional FSCS Payment ranks equally with its obligations to pay all other Excluded Liabilities.
5.4 Unprotected PPI Liabilities5.4.1 On the Effective Date, the Company shall establish a trust out of the assets of the Company in the amount of£20 million, with the Company as trustee, for the purpose of meeting all claims in respect of Unprotected PPI Liabilities.
5.4.2 Following the Effective Date, the Company must not use any of its assets to pay Unprotected PPI Liabilities, whichshall be paid exclusively from the trust established under clause 5.4.1.
5.4.3 If at any time it appears to the Company that the trust established under 5.4.1 is likely to be insufficient to meet allclaims in respect of Unprotected PPI Liabilities it is established to satisfy, the Company may, with the consent of the SchemeSupervisors, make one further payment into the trust of up to £2.5 million from the assets of the Company, if it appears to theCompany and the Scheme Supervisor that such payment would be sufficient to enable it to pay all claims in respect ofUnprotected PPI Liabilities.
5.4.4 If the Scheme Supervisors refuse such consent or the assets in the trust would still not be sufficient to meet the relevantLiabilities, the Company may, with the consent of the Creditors Committee, pay such additional sums into the trust from theassets of the Company as it considers sufficient to meet the relevant Liabilities.
5.4.5 If the Creditors Committee does not give consent in accordance with clause 5.4.4 within ten Business Days of a writtenrequest from the Company, and does not convene a meeting of Scheme Creditors to consider the request, the SchemeSupervisors shall convene a meeting of Scheme Creditors, in accordance with clause 11.1.2, explaining in the noticeconvening the meeting the consequences of the proposed meeting. The meeting so convened shall be asked whether itconsents to the payment of additional sums referred to in clause 5.4.3 or to approve such other measures as the SchemeSupervisors may propose to enable Unprotected PPI Liabilities to be paid in full.
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5.4.6 Within a reasonable time of the occurrence of a Scheme Reversion, the Company shall estimate the amount required, inthe trust established under clause 5.4.1, to ensure that all remaining claims that are likely to be made in respect ofUnprotected PPI Liabilities can be paid an amount equal to what such claims would have received under the Scheme prior tothe Scheme Reversion had they been Ascertained Scheme Claims on the Effective Date. Any remaining sums shall bereleased from the trust to form part of the general assets of the Company.
5.4.7 On a Scheme Certified Liquidation, within a reasonable time of the passing of the applicable bar date in the liquidation,the liquidator appointed to the Company shall calculate the amount of funds in the trust created pursuant to clause 5.4.1 thatare required to pay in full all claims in respect of Unprotected PPI Liabilities that have been received by the liquidator up toand including the applicable bar date. At that point, those funds in the trust that are not required to meet such claims in fullshall be released from the trust to form part of the general assets of the Company.
5.4.8 If the circumstances described in clause 1.5.3 occur, the provisions of clause 5.4.6 shall apply as if Scheme Reversionhad occurred.
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SECTION 6DISTRIBUTIONS
6.1 Calculation of Payment Percentage6.1.1 By no later than five Business Days after each Distribution Period End Date the Company shall report to the SchemeSupervisors the Net Free Cash available for distribution at that Distribution Period End Date. The Scheme Supervisors shallaggregate the Net Free Cash available at the Distribution Period End Date with all amounts of Net Free Cash determinedpreviously but avoiding any double-counting. This aggregated amount shall be the Cumulative Net Free Cash as at the latestDistribution Period End Date.
6.1.2 Following notification of the Net Free Cash amount by the Company the Scheme Supervisors shall determine thePayment Percentage, being the percentage of the total of the aggregate value of Ascertained Scheme Claims (taking inaccount clause 6.1.3), that could be paid from Cumulative Net Free Cash subject to a maximum of 100%.
6.1.3 For the purpose of calculating the Payment Percentage only, the Scheme Supervisors shall treat all UnascertainedScheme Claims as though they were Ascertained Scheme Claims.
6.2 Scheme Payments6.2.1 The Scheme Supervisors are not obliged to determine a Payment Percentage following a Distribution Period End Datewhere the Net Free Cash reported by the Company to the Scheme Supervisors in accordance with clause 6.1.1 is an amountless than £1 million.
6.2.2 Subject to clause 6.2.1, following the calculation of the Payment Percentage, the Scheme Supervisors shall determinethe Scheme Payment for each Scheme Creditor with an Ascertained Scheme Claim. Each Scheme Creditor with anAscertained Scheme Claim shall be entitled to be paid a Scheme Payment (and the Company shall pay) an amount equal tothe value of that Scheme Payment, calculated as:
(A × B) (C + D)
where:(a) A is the value of that Scheme Creditor s Ascertained Scheme Claim;(b) B is the Payment Percentage;(c) C is (i) the amount deemed to have been paid in respect of Proceedings, in accordance with clause 2.4.1 and not already
paid directly to the Company by the Scheme Creditor outside of Scheme Payments and/or (ii) the amount of any legalor other costs awarded against the Scheme Creditor in respect of proceedings begun under clause 3.8.1 (to the extentthey remain unpaid by the Scheme Creditor); and
(d) D is the amount of any Scheme Payments previously paid to the Scheme Creditor.
6.2.3 Within ten Business Days of notification of the Net Free Cash amount by the Company, the Scheme Supervisors shallnotify the Company of the Scheme Payments required to be paid and the amounts required to be paid into the UnascertainedScheme Trust Fund under clause 6.3.
6.2.4 Where Scheme Payments are due, the Company shall make those Scheme Payments from Net Free Cash, within fiveBusiness Days following notification from the Scheme Supervisors. However, the Company shall not be obliged to make apayment to a Scheme Creditor of less than £100, unless and until there is, in the reasonable opinion of the SchemeSupervisors, no prospect of any future Scheme Payments. Any such amounts shall be added to the Unascertained PaymentsTrust Fund earmarked for such Scheme Creditor and shall be paid to such Scheme Creditor when it receives its next SchemePayment.
6.2.5 If there is an arithmetical error in respect of any Scheme Payment, such error may be taken into account and correctedby the Scheme Supervisors through the necessary reduction or increase in the amount of the relevant Scheme Creditor ssubsequent Scheme Payment(s).
6.2.6 If an incorrect amount is paid to a Scheme Creditor under this clause then:(a) if the amount paid is lower than the amount that the Scheme Creditor is properly entitled to have received, the Scheme
Supervisors shall direct the Company to pay the balance to the Scheme Creditor as soon as reasonably practicable afterthe error is noticed by the Company or the Company is notified of such error; or
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(b) if the amount paid is higher than the amount that the Scheme Creditor is properly entitled to have received, then theoverpayment shall be deducted from the next Scheme Payment (and, if necessary subsequent Scheme Payments) to bemade to that Scheme Creditor.
6.3 Reserving for Unascertained Scheme Claims6.3.1 Where, in calculating the Payment Percentage under clause 6.1.1, the Scheme Supervisors have taken account of thevalue of Unascertained Scheme Claims, the Company shall create the Unascertained Payments Trust Fund, of all amountswhich would have been paid as Scheme Payments in respect of such Unascertained Scheme Claims, if they had beenAscertained Scheme Claims on the Distribution Date.
6.3.2 The Unascertained Payment Trust Fund shall be held on trust by the Company for the benefit of Scheme Creditors inrespect of their Unascertained Scheme Claims.
6.3.3 If any Unascertained Scheme Claim subsequently becomes an Ascertained Scheme Claim, the Scheme Supervisorsshall, as soon as reasonably practicable, calculate as a Scheme Payment for the relevant Scheme Creditor, such amount as ifits Ascertained Scheme Claim had been an Ascertained Scheme Claim on the previous Distribution Period End Dates. TheScheme Supervisors shall notify the Company of the relevant Scheme Payment required to be paid to the Scheme Creditorfrom the Unascertained Payments Trust Fund. If the amount reserved in the Unascertained Payments Trust Fund in respect ofan Unascertained Scheme Claim exceeds the amount of the relevant Ascertained Scheme Claim, the surplus shall be releasedfrom the Unascertained Payments Trust Fund into the general assets of the Company.
6.3.4 If any Unascertained Scheme Claim is rejected under clause 3.7 and does not become a Disputed Scheme Claim, thenany amount reserved in the Unascertained Payments Trust Fund in respect of that Unascertained Scheme Claim (includingany amount reserved in respect of costs) shall be released from the Unascertained Payments Trust Fund into the generalassets of the Company.
6.4 Currency of PaymentIf the Company is requested by a Scheme Creditor to make a Scheme Payment in a currency other than Sterling, it may do so,but the exchange rate risk shall be borne by the Scheme Creditor. The exchange rate to be used for any such conversion shallbe at the Company s paying bank s spot rate. Any conversion fees shall be borne by the Company.
6.5 Method of Payment6.5.1 All Scheme Payments by the Company to a Scheme Creditor shall be made, at the option of the Company, either:(a) by cheque in favour of the Scheme Creditor, or such other person as the Scheme Creditor requests in writing, sent by
Post to that person;(b) where the Scheme Creditor has designated a bank account in writing, by electronic transfer to that bank account;(c) to the Scheme Creditor s Representative; or(d) by any other appropriate method determined by the Scheme Supervisors or the Company and agreed by the Scheme
Creditor.
6.5.2 The Scheme Creditor shall bear all risk of payment under clause 6.5.1 and, at the discretion of the Company, may berequired to bear any costs incurred. No Scheme Creditor shall be entitled to any interest on its Ascertained Scheme Claim dueto a delay in payment or technical difficulties with payment.
6.5.3 A Scheme Payment shall be deemed for all purposes to have been made on the date that the cheque is posted orelectronic transfer instruction given.
6.5.4 The Scheme Creditors acknowledge that the Scheme Supervisors and not the Board are responsible for determining thevalue of the Scheme Payments payable to Scheme Creditors in accordance with the terms of the Scheme.
6.6 Unclaimed PaymentsIf a cheque sent under clauses 6.5.1(a) or (c) has not been presented for payment within four months of the date of issue, theCompany shall notify the Scheme Supervisors and the Scheme Supervisors will make reasonable efforts to bring this to theattention of the Scheme Creditor, and may, at their discretion request that the Company cancel and reissue the cheque, butotherwise the Scheme Creditor will be deemed after six months from the date of issue to have been paid the amountrepresented by the un-presented cheque.
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6.7 Notice of PaymentThe Scheme Supervisors shall agree with the Creditors Committee the relevant form, terms and frequency of notificationrequired by Scheme Creditors of Scheme Payments and Payment Percentages.
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SECTION 7COVENANTS AND SCHEME REVERSION
7.1 CovenantsThe Company gives to the Scheme Creditors the covenants set out in Schedule 6.
7.2 Scheme Reversion Decision Event7.2.1 Each of the following shall be a Scheme Reversion Decision Event:(a) the Scheme Supervisors circulating to the Scheme Creditors a Stage Three Trigger Event Report;(b) any breach of the covenants set out at clauses 7 and 8 of Schedule 6 (apart from any breach of the covenants set out at
8.15(a) and 8.15(b));(c) a meeting of Scheme Creditors being convened under clause 5.4.5 and the resolution to approve the relevant payment
or measures being defeated;(d) the FSCS issuing a Non-Payment Notice to the Company pursuant to the PPI Settlement Agreement;(e) the circumstances set out in paragraphs (a) and (b) of clause 18.1 (Scheme Reversion) of the PPI Settlement Agreement
occur prior to the second anniversary of the Effective Date;(f) the circumstances set out in paragraphs (a) and (b) of clause 18.2 (Scheme Reversion) of the PPI Settlement Agreement
occur prior to the second anniversary of the Effective Date;(g) at any time, the aggregate amount of the Company s liability to the FSCS under the PPI Settlement Agreement and the
Claims Handling Agreement exceeds (1) the aggregate of the Initial FSCS Payment (as defined in the PPI SettlementAgreement), the Additional FSCS Payment (as defined in the PPI Settlement Agreement) and any BAU Payments (asdefined in the PPI Settlement Agreement) that the Company makes to the FSCS and (2) any Top-Up Payments (asdefined in the PPI Settlement Agreement) paid by the Company at that time; and
(h) an Insolvency Event occurring in respect of the Company on or after the Bar Date.
7.2.2 On the occurrence of a Scheme Reversion Decision Event, the Scheme Supervisors shall, except where a meeting ofScheme Creditors has already been convened or is underway in accordance with clause 5.4.5, forthwith convene a meeting ofScheme Creditors in accordance with clause 11.1.2. Such meeting or any adjournment of that meeting may then resolveeither:(a) to take no action in respect of the Scheme Reversion Decision Event;(b) to agree a proposal by the Company or recommend to the Company such measures as the meeting considers
appropriate for the Scheme Reversion Decision Event to be remedied and, if a recommendation is made, for themeeting to be adjourned for up to ten Business Days to allow the Company to decide whether to take the recommendedmeasures and the Company shall report its decision to the Adjourned Meeting; or
(c) that Scheme Reversion shall occur on the date of the resolution.
7.2.3 If at a meeting of Scheme Creditors convened in accordance with clause 7.2.2, a resolution in accordance with clauses7.2.2(a) or 7.2.2(b) is not passed in accordance with clause 11.3.2 and the meeting is not adjourned, a Scheme Reversionshall occur.
7.2.4 On a Scheme Reversion, the Company shall notify the FSCS of such Scheme Reversion forthwith.
7.3 Scheme ReversionWith effect from Scheme Reversion:(a) Scheme Liabilities shall be released, other than:
(i) Cattles s claim against the Company pursuant to clause 4.1; and(ii) Scheme Liabilities which have become Ascertained Scheme Claims or remain Unascertained Scheme Claims;
(b) the unpaid part of any Ascertained Scheme Claims shall become enforceable debts of the Company, free of therestrictions in clauses 2.2, 2.3 and 2.5;
(c) the Unascertained Payment Trust Fund shall remain available to pay Unascertained Scheme Claims in accordance withclause 7.4;
(d) the PPI Settlement Agreement shall continue unless terminated on its terms;
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(e) the trust created for Unprotected PPI Liabilities under clause 5.4 shall remain available to pay Unprotected PPILiabilities in accordance with clause 5.4.6; and
(f) save for the provisions in clauses 1.1, 2.9, 5.4, 7.3, 7.4, 8.6, 8.7, 9.4, 9.5, 10.7, 10.8, 10.9, 10.10, 13.1 and 13.6 all termsand conditions under the Scheme shall cease to apply.
7.4 Determination and payment of Unascertained Scheme Claims on Scheme Reversion7.4.1 With effect from Scheme Reversion, on the determination of the value of a Scheme Creditor s Unascertained SchemeClaim (the Determined Value) by judgment, agreement or otherwise, the Scheme Creditor shall (subject to any rights of setoff) be entitled to be paid a Catch-up Payment from the Unascertained Payment Trust Fund calculated in accordance withclause 7.4.2.
7.4.2 A Catch-Up Payment is an amount equal to the aggregate value of all Scheme Payments that a Scheme Creditor wouldhave been entitled to receive and would have received prior to the Scheme Reversion if it had had an Ascertained SchemeClaim of an amount equal to its Determined Value at each Distribution Period End Date prior to the Scheme Reversion.
7.4.3 A Scheme Creditor whose Unascertained Scheme Claim has been determined in accordance with clause 7.4.1 and hasreceived a Catch-Up Payment, shall have an enforceable debt of the Company in respect of the unpaid part of the DeterminedValue of its claim free from the restrictions in clauses 2.2, 2.3 and 2.5.
7.4.4 If the amount reserved in the Unascertained Payments Trust Fund in respect of an Unascertained Scheme Claimexceeds the Catch-Up Payment paid in respect of that Unascertained Scheme Claim in accordance with clause 7.4.2, thesurplus shall be released from the Unascertained Payments Trust Fund into the general assets of the Company.
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SECTION 8THE SCHEME SUPERVISORS
8.1 The Scheme Supervisors8.1.1 Any Scheme Supervisor must be a licensed insolvency practitioner within the meaning of section 390 of the InsolvencyAct and duly qualified in the reasonable opinion of the Company to discharge the function of a Scheme Supervisor under theScheme. Where more than one person has been appointed as a Scheme Supervisor, they may exercise and perform thepowers, rights, duties and functions of the Scheme Supervisors under the Scheme jointly or severally.
8.1.2 A Scheme Supervisor shall not take office until he or his firm has entered into the Scheme Supervisors Agreement,which shall include provisions as to his remuneration and expenses, and has contracted to be bound by the terms of theScheme to the extent that they apply to him as Scheme Supervisor. The Company acknowledges and agrees that the SchemeSupervisors are permitted to exercise all the powers given to them and rely upon all the provisions relevant to them under theScheme.
8.1.3 The Scheme Supervisors shall initially be Christine Mary Laverty, Richard Dixon Fleming and Edward George Boyleof KPMG LLP, 8 Salisbury Square, London, EC4Y 8BB. They have given, and not withdrawn their consent to the Companyto act as Scheme Supervisors from the Effective Date and have contracted with the Company pursuant to the SchemeSupervisors Agreement to be bound by the terms of the Scheme to the extent such terms apply to the Scheme Supervisors.The Company with the agreement of the Creditors Committee shall have the power to appoint any successors.
8.1.4 In exercising their powers and carrying out their duties under the Scheme, the Scheme Supervisors shall act as agents ofthe Company.
8.1.5 Any function or power conferred on the Company or its officers, whether by statute or by its memorandum or articles ofassociation, which could be exercised in such a way as to interfere with the exercise by the Scheme Supervisors of theirfunctions and powers in relation to the Company or the Scheme, shall not be so exercised except with the consent of theScheme Supervisors, which may be given either generally or in relation to particular cases. Any such consent given by theScheme Supervisors may be withdrawn. Provided that nothing in this clause shall relieve the Board from its duties inaccordance with the Companies Act or otherwise.
8.2 Vacation of officeA Scheme Supervisor shall vacate office if he:(a) becomes bankrupt;(b) is disqualified from acting as a director under CDDA;(c) is admitted to hospital because of mental disorder or is the subject of an order concerning his mental disorder made by
a court having jurisdiction in England or elsewhere in such matters;(d) is convicted of an indictable offence or be convicted of any offence by a court having jurisdiction in any other country
where that offence, if committed in England and Wales, would have been an indictable offence under English law;(e) resigns his office by giving 60 days notice in writing to the Company and the Creditors Committee or such shorter
period of notice as may be agreed by the Company and the Creditors Committee or resigns his office with immediateeffect by giving notice in writing to the Company and the Creditors Committee if he considers that he should forprofessional regulatory reasons or in the event of non-payment of his fees when due and such fees have been approvedby the Creditors Committee, a meeting of Scheme Creditors or pursuant to a final order of the Court in each casepursuant to clause 8.9; or
(f) is removed by the Creditors Committee in accordance with clause 10.4.4(b).
8.3 Role of the Scheme Supervisors8.3.1 The Scheme Supervisors shall discharge the duties and responsibilities imposed upon them by the Scheme.
8.3.2 The Scheme Supervisors shall act in good faith with reasonable skill and care in the interests of the Scheme Creditors asa whole and shall exercise their powers, duties and functions under the Scheme with a view to ensuring that the Scheme isimplemented in accordance with its terms.
8.3.3 Without prejudice to the generality of clause 8.3.1, the Scheme Supervisors shall in addition:(a) monitor on a basis agreed with the Creditors Committee the Company s compliance with the terms of the Scheme;
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(b) provide a Scheme Supervisors Report to the Creditors Committee on the conduct of the affairs of the Company inrelation to the Scheme and the operation of the Scheme at the end of each period of every three months from theEffective Date or as otherwise agreed with the Creditors Committee;
(c) attend meetings of the Creditors Committee and meetings of the Scheme Creditors convened in accordance with theScheme for any purpose in relation to the operation of the Scheme (and subject always to clauses 10.3.5 and 11.1.4);and
(d) so far as they are able, provide the Creditors Committee with such information as it may from time to time reasonablyrequire in relation to matters of relevance to the Creditors Committee.
8.4 Powers of the Scheme Supervisors8.4.1 The Scheme Supervisors shall have all of the powers necessary or desirable to enable them to discharge their duties andresponsibilities under the Scheme (although it is acknowledged that the Scheme Supervisors cannot exercise any power thatwould result in their assuming control of the Company s affairs so as to supplant the Board).
8.4.2 Without prejudice to the generality of clause 8.4, the Scheme Supervisors shall be entitled:(a) to have access to such Company information or personnel as they may from time to time require on the affairs of the
Company that relate to the operation of the Scheme;(b) to delegate to or employ any person as they see fit for the carrying out of their powers, rights, duties and functions
under the Scheme;(c) on behalf of the Company, to negotiate and/or compromise Submitted Scheme Claims, in accordance with the
provisions of the Scheme;(d) to do all acts and to execute in the name and on behalf of the Company any deed, receipt or other document necessary
for or incidental to their role under the Scheme;(e) to request the Company to make any payment that is necessary for or incidental to the performance of the Scheme
Supervisors or the Company s functions;(f) to apply to Court for directions in relation to any particular matter arising in the course of the Scheme;(g) to liaise with the Creditors Committee and to attend Creditors Committee meetings if invited;(h) to engage (or require the Company to engage) legal advisers (including counsel) and financial advisers from time to
time (provided that at any particular time, the Scheme Supervisors may only engage one legal adviser in anyjurisdiction and one financial adviser) as reasonably required in order to advise and assist the Scheme Supervisors inconnection with the conduct of their functions and powers under the Scheme;
(i) to receive Board papers, to attend meetings of the Board at their discretion and to address the Board (it is howeveracknowledged by the Company, the Creditors Committee and the Scheme Creditors that the Scheme Supervisors arenot expected to attend meetings of the Company s executive committee);
(j) to instruct the Company to make payments pursuant to the terms of the Scheme; and(k) to convene a meeting of Scheme Creditors in accordance with clause 11.1.2, if appropriate.
8.5 VacancyIf there is no Scheme Supervisor in office, the Company with the agreement of the Creditors Committee shall forthwith fillthe vacancy.
8.6 Liability of Scheme Supervisors8.6.1 Except to the extent required by law, no Scheme Creditor shall be entitled to challenge the validity of any act done oromitted to be done in good faith and with due care by the Scheme Supervisors in accordance with and to implement theprovisions of the Scheme or the exercise by the Scheme Supervisors in good faith and with due care of any power conferredupon them for the purposes of the Scheme if exercised in accordance with and to implement the provisions of the Scheme.
8.6.2 A Scheme Supervisor shall not be liable for any loss resulting from any act he does or omits to do, unless any such lossis attributable to his own negligence, breach of statutory duty, breach of trust, fraud or dishonesty.
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8.7 Indemnity8.7.1 The Scheme Supervisors shall be entitled to an indemnity out of the property of the Company against:(a) all Proceedings brought or made against them in respect of any act done or omitted to be done in relation to the
Company by them in good faith, without negligence, breach of duty, breach of trust, fraud or dishonesty in the courseof performing their duties and functions under the Scheme; and
(b) all costs, charges, expenses and liabilities properly incurred by each of them in the course of performing their dutiesand functions under the Scheme.
8.7.2 In addition to the general provisions of clause 8.7.1, the Scheme Supervisors shall be entitled to an indemnity out of theproperty of the Company:(a) against any liability incurred by them in defending any Proceedings, whether civil or criminal, in respect of any
negligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to the operation of the Scheme, where:(i) judgment is given in their favour; or(ii) where they are acquitted; and
(b) in connection with any application in any such Proceedings where relief is granted to them by a court from liability fornegligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to the operation of the Scheme.
8.8 InsuranceThe Company will, in consultation and as agreed with the Scheme Supervisors:(a) use its reasonable endeavours to purchase and maintain for the Scheme Supervisors insurance from the date of their
appointment against any liability for which the Company would be obliged to indemnify them in accordance withclause 8.7; and
(b) subject to clause 8.8(a) within seven Business Days of the first demand by the Scheme Supervisors, pay the costsincurred by a Scheme Supervisor in defending proceedings of the nature described in clause 8.7.1(a), provided thatsuch Scheme Supervisor gives the Company an undertaking to reimburse it (with interest) at the conclusion of thoseProceedings, where such Scheme Supervisor is not entitled to an indemnity under clause 8.7.
8.9 Remuneration and expenses of Scheme SupervisorsThe Scheme Supervisors shall be remunerated by the Company in respect of their role in the Scheme and all acts reasonablyincidental thereto and in accordance with the agreement referred to in clause 8.1.2. Such remuneration is to be approved bythe Creditors Committee and such approval shall not be unreasonably withheld. If approval cannot be obtained within areasonable period, the Scheme Supervisors may convene a meeting of the Scheme Creditors in accordance with clause 11.1.2to determine the level of the Scheme Supervisors costs, charges, expenses and liabilities. If approval cannot be obtained at ameeting of the Scheme Creditors, the Scheme Supervisors shall be permitted to apply, or cause the Company to apply, to theCourt for directions as if Rules 2.106 to 2.108 of the Insolvency Rules applied, mutatis mutandis, to the Scheme Supervisors.
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SECTION 9THE OUTWARDS CLAIMS MANAGER
9.1 The Outwards Claims Manager9.1.1 The initial Outwards Claims Manager shall be Michael Rollings of Rollings and Co LLP, 6 Snow Hill, London, EC1A2AY. He has given to the Company and not withdrawn his consent to act as Outwards Claims Manager from the EffectiveDate and has contracted with the Company pursuant to an Outwards Claims Manager Agreement. The Company, with theagreement of the Creditors Committee, shall have the power to appoint any successors of the initial Outwards ClaimsManager and any successors of any Outwards Claims Manager.
9.1.2 An Outwards Claims Manager shall not take office until he or his firm has entered into an Outwards Claims ManagerAgreement (the terms of which are to be agreed with the Creditors Committee and the Company), which shall includeprovisions as to his remuneration and expenses, and has contracted to be bound by the terms of the Scheme to the extent thatthey apply to him as Outwards Claims Manager. The Company acknowledges and agrees that the Outwards Claims Manageris permitted to exercise all the powers given to him and rely upon all the provisions relevant to him under the Scheme.
9.1.3 The Outwards Claims Manager will manage and as appropriate conduct the Outward Claims Litigation on behalf of theCompany, consulting with the Creditors Committee in such manner as the Creditors Committee shall reasonably requireand as shall not prejudice the Outwards Claims Litigation. The Outwards Claims Manager shall not incur any costs orexpenses in connection with the Outwards Claims Litigation without the prior consent of the Creditors Committee (not to beunreasonably withheld) provided that this consent arrangement may be replaced by a litigation protocol agreed between theOutwards Claims Manager and the Creditors Committee (in consultation with the Company).
9.1.4 In exercising his powers and carrying out his duties under the Scheme, the Outwards Claims Manager shall act as agentof the Company.
9.1.5 The Outwards Claims Manager shall act in good faith with reasonable skill and care in the interests of the SchemeCreditors as a whole and shall exercise his powers, duties and functions under the Scheme with a view to ensuring that theScheme is implemented in accordance with its terms.
9.2 Vacation of officeAn Outwards Claims Manager shall vacate office if he:(a) becomes bankrupt;(b) is disqualified from acting as a director under CDDA;(c) is incapacitated, such that he is, in the opinion of the Creditors Committee, unable to carry out his duties as Outwards
Claims Manager;(d) is convicted of an indictable offence or be convicted of any offence by a court having jurisdiction in any other country
where that offence, if committed in England and Wales, would have been an indictable offence under English law; or(e) resigns his office by giving 60 days notice in writing to the Company and the Creditors Committee or such shorter
period of notice as may be agreed by the Company and the Creditors Committee.
9.3 Powers of the Outwards Claims ManagerThe Outwards Claims Manager shall have all of the powers necessary or desirable to enable him to discharge his duties andresponsibilities under the Scheme subject to the provisions of the Scheme.
9.4 Liability of the Outwards Claims Manager9.4.1 Except to the extent required by law, no Scheme Creditor shall be entitled to challenge the validity of any act done oromitted to be done in good faith and with due care by the Outwards Claims Manager in accordance with and to implementthe provisions of the Scheme relating to this or the exercise by the Outwards Claims Manager in good faith and with due careof any power conferred upon him for the purposes of the Scheme if exercised in accordance with and to implement theprovisions of the Scheme.
9.4.2 The Outwards Claims Manager shall not be liable for any loss resulting from any act he does or omits to do, unless anysuch loss is attributable to his own negligence, breach of statutory duty, breach of trust, fraud or dishonesty.
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9.5 Indemnity9.5.1 The Outwards Claims Manager shall be entitled to an indemnity out of the property of the Company against:(a) all Proceedings brought or made against him in respect of any act done or omitted to be done in relation to the
Company by him in good faith, without negligence, breach of duty, breach of trust, fraud or dishonesty in the course ofperforming his duties and functions under the Scheme; and
(b) all costs, charges, expenses and liabilities properly incurred by him in the course of performing his duties and functionsunder the Scheme.
9.5.2 In addition to the general provisions of clause 9.5.1 the Outwards Claims Manager shall be entitled to an indemnity outof the property of the Company:(a) against any liability incurred by him in defending any Proceedings, whether civil or criminal, in respect of any
negligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to the operation of the Scheme, where:(i) judgment is given in his favour; or(ii) where he is acquitted; and
(b) in connection with any application in any such Proceedings where relief is granted to him by a court from liability fornegligence, breach of statutory duty, breach of trust, fraud or dishonesty relating to the operation of the Scheme.
9.5.3 The Company will, in consultation and agreed with the Outwards Claims Manager:(a) use its reasonable endeavours to purchase and maintain for the Outwards Claims Manager insurance against any
liability for which the Company would be obliged to indemnify him in accordance with clause 9.5; and(b) subject to clause 9.5.2(a), pay the costs incurred by the Outwards Claims Manager in defending proceedings of the
nature described in clause 9.5.2(a), provided that the Outwards Claims Manager gives the Company an undertaking toreimburse it (with interest) at the conclusion of those Proceedings, where the Outwards Claims Manager is not entitledto an indemnity under clause 9.5.
9.5.4 The Scheme Creditors acknowledge that the Outwards Claims Manager (in consultation with the Creditors Committee)and not the Board is responsible for the conduct of the Outwards Litigation Claim.
9.5.5 The Company and the Board shall cooperate fully with the Outwards Claims Manager.
9.6 Remuneration and expenses of Outwards Claims ManagerThe Outwards Claims Manager shall be remunerated in respect of his role in the Scheme and all acts reasonably incidentalthereto and in accordance with the agreement referred to in clause 9.1.1. Such remuneration is to be approved by theCreditors Committee and such approval shall not be unreasonably withheld. If approval cannot be obtained within areasonable period, the Outwards Claims Manager may convene a meeting of the Scheme Creditors in accordance with clause11.1.2 to determine the level of the Outwards Claims Manager s costs, charges, expenses and liabilities. If approval cannot beobtained at a meeting of the Scheme Creditors, the Outwards Claims Manager shall be permitted to apply, or cause theCompany to apply, to the Court for directions as if Rules 2.106 to 2.108 of the Insolvency Rules applied, mutatis mutandis, tothe Outwards Claims Manager.
9.7 No releaseNothing in this Scheme is intended to or shall have the effect of releasing any claims the Company may have in respect ofand in connection with the Outwards Claims Litigation.
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SECTION 10CREDITORS COMMITTEE
10.1 Constitution of the Creditors Committee10.1.1 There shall be a Creditors Committee under the Scheme.
10.1.2 The Creditors Committee shall consist of not less than three nor more than six persons unless the Scheme Supervisorsin consultation with the Creditors Committee agree otherwise (but in any event any change cannot reduce the minimumnumber below three or increase the upper limit beyond seven).
10.1.3 The following creditors shall be the initial Committee Members:(a) The Royal Bank of Scotland plc;(b) Lloyds TSB Bank plc;(c) a lender under a Facilities Agreement;(d) a lender under a Facilities Agreement;(e) a holder of a note issued under a Note Agreement; and(f) a Shareholder who is a Scheme Creditor. And in addition this Committee Member shall be entitled to be accompanied
to Creditors Committee meetings by another Shareholder who is a Scheme Creditor. Such person to attend CreditorsCommittee meetings as an observer.
10.1.4 The FSCS, the Pension Creditor and the Shareholder Observer are each appointed as a non-voting observer to theCreditors Committee for as long as each wishes to remain so and are entitled both to attend all meetings of the CreditorsCommittee and receive all papers produced for and by the Creditors Committee. The FSCS, the Pension Creditor and theShareholder Observer are each entitled to receive all information, documents and notices at the same time (and to the sameextent) as each Committee Member is entitled to receive such information, documents or notices.
10.1.5 Subject to clause 3.3.6 and 10.1.6, the Committee Members, the Pension Creditor, the Shareholder Observer and theFSCS each agrees to keep the Committee Confidential Information completely and absolutely confidential.
10.1.6 Each of the Committee Members, the Pension Creditor, the Shareholder Observer and the FSCS agrees that it will notdisclose or permit any of the Committee Confidential Information to be disclosed to any person except to the extent suchdisclosure is:(a) to any of their any officers, directors, employees, auditors and Affiliates and their Affiliates may disclose to any of
their officers, directors, employees and auditors as the Committee Member, the Pension Creditor, the ShareholderObserver or the FSCS, as the case may be, consider appropriate if any person to whom such information is given haveagreed to be bound by clauses 10.1.5 and 10.1.6;
(b) to such professional advisers as the Committee Member, the Pension Creditor, the Shareholder Observer or the FSCS,as the case may be, consider appropriate and who (save in the case of legal advisors and auditors provided that it ismade clear to them that such matters are confidential) have agreed to be bound by clauses 10.1.5 and 10.1.6;
(c) to HM Revenue & Customs or any other governmental, public or official body for taxation purposes; or(d) required to be disclosed by law, regulation or any court, governmental or competent regulatory authority.
10.1.7 Each of the Committee Members, the FSCS, the Shareholder Observer and the Pension Creditor may not disclose toany person (apart from their respective legal advisers) any document (in any form) provided to them by or on behalf of theOutwards Claims Manager or by any of his advisers which the Outwards Claims Manager or any of his advisers has markedor has stated in writing to be legally privileged, without the prior written consent of the Outwards Claims Manager.
10.1.8 If, from time to time, there is an even number of Committee Members on the Creditors Committee, the CreditorsCommittee may by majority vote choose a chairman or in the absence of a majority, the Scheme Supervisors shall choose achairman. That chairman shall have the deciding vote at any meeting of the Creditors Committee.
10.1.9 The following shall be eligible for subsequent appointment as Committee Members:(a) any Scheme Creditor who has an Ascertained Scheme Claim (whether an individual, a body corporate or a
partnership); and
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(b) any other person with the written consent of the Scheme Supervisors, which consent may be revoked by the SchemeSupervisors at any time, if it becomes clear that person is not a Scheme Creditor.
10.1.10 Each Committee Member which is a body corporate or a partnership may, by notice in writing to the CreditorsCommittee, appoint a senior executive, other senior employee or professional adviser as its Nominated Representative torepresent that Committee Member at any meeting of the Creditors Committee.
10.1.11 Any Committee Member or Nominated Representative who is an individual may, by notice in writing to theCreditors Committee, appoint a senior executive, other senior employee or professional adviser as an Alternate to attend andvote in his place at any meeting of the Creditors Committee.
10.1.12 Any Nominated Representative or Alternate shall have the same powers and shall be subject to the same duties andlimitations as the Committee Member whom the Nominated Representative or Alternate represents.
10.2 Membership of the Creditors Committee10.2.1 The Creditors Committee may at any time appoint any person who is eligible to be so appointed to be a CommitteeMember, whether to fill a vacancy or as an additional Committee Member, so that the total number of Committee Membersshall not exceed the maximum number specified in clause 10.1.2. In appointing additional Committee Members, theCreditors Committee shall endeavour to ensure that the composition of the Creditors Committee is such that:(a) on or prior to the Bar Date it represents a proper balance of the interests of Submitted Scheme Claimants (but excluding
for this purpose any Submitted Scheme Claimant s Disputed Scheme Claim) (and taking into account the SchemeSupervisors views on the likely success or failure and the likely quantum of such Scheme Creditors SubmittedScheme Claims) and the Scheme Creditors who have Ascertained Scheme Claims, but taking into account the quantumof different Scheme Creditors Ascertained Scheme Claims; or
(b) after the Bar Date it represents a proper balance of the interests of the Scheme Creditors who have Ascertained SchemeClaims, but taking into account the quantum of different Scheme Creditors Ascertained Scheme Claims
10.2.2 The Scheme Creditors may, by a Creditors Resolution passed at a meeting of Scheme Creditors convened, and atwhich business is transacted, pursuant to section 11 remove any Committee Member from office and without prejudice to theCreditors Committee s powers under clause 10.2.1 may by Creditors Resolution appoint any person who is eligible to beappointed under clause 10.1.9 to be a Committee Member either to fill a vacancy or in addition to the existing CommitteeMembers, but so that the total number of Committee Members shall not exceed the maximum number specified in clause10.1.2.
10.2.3 The office of a Committee Member shall be vacated if any of the situations set out in clauses 10.2.4 to 10.2.5 appliesor if that Committee Member:(a) resigns by notice in writing addressed to the Creditors Committee;(b) is removed from office by a Creditors Resolution;(c) if the Committee Member ceases to become a Scheme Creditor (or is found never to have been one); or(d) fails to attend three consecutive meetings of the Creditors Committee, unless the Creditors Committee (excluding that
Committee Member) resolves by a majority of two-thirds of the Committee Members present at a meeting of theCreditors Committee that he should continue as a Committee Member.
10.2.4 In the case of an individual, the office of a Committee Member shall be vacated if that individual:(a) transfers or assigns a Scheme Liability or Ascertained Scheme Claim in accordance with clause 3.3 such that he is no
longer a Scheme Creditor;(b) dies;(c) is admitted to hospital because of mental disorder or is the subject of an order concerning his mental disorder made by
a court having jurisdiction in England or elsewhere in such matters;(d) becomes bankrupt or is subject to an individual voluntary arrangement or analogous process under the law of any
jurisdiction to which he is subject;(e) becomes disqualified from acting as a director under the law of any jurisdiction to which he is subject; or(f) is convicted of an indictable offence, other than a road traffic offence.
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10.2.5 In the case of a body corporate or partnership, the office of a Committee Member shall be vacated if that bodycorporate or partnership is dissolved or has transferred or assigned its Scheme Liabilities or Ascertained Scheme Claims inaccordance with clause 3.3 such that the relevant body corporate or partnership is no longer a Scheme Creditor.
10.2.6 In the case of a person appointed with the consent of the Scheme Supervisors under clause 10.1.9(b), the office of thatCommittee Member shall be vacated if that person has his written consent under that clause revoked by the SchemeSupervisors.
10.2.7 Any person entitled to appoint a Nominated Representative or an Alternate may from time to time revoke thatappointment and appoint another Nominated Representative or Alternate by notice in writing to the Creditors Committee,the Scheme Supervisors and the Company.
10.2.8 The appointment of a Nominated Representative or an Alternate (as the case may be) shall terminate automatically if:(a) his appointment is revoked by his appointor; or(b) the person whom that Nominated Representative or Alternate represents ceases to be a Committee Member; or(c) the Nominated Representative or Alternate ceases to be a senior executive, senior employee or professional adviser of
the Committee Member whom he represents; or(d) the Nominated Representative or Alternate dies, becomes bankrupt or is disqualified from acting as a director in each
case under the law of any jurisdiction to which he is subject or is convicted of an indictable offence.
10.3 Proceedings of the Creditors Committee10.3.1 The Company may appoint a representative or representatives to attend any meeting of the Creditors Committee forthe purposes of observing the meeting only. The Creditors Committee may resolve to remove the Company representativefrom any meeting or part of any meeting, following which resolution, the representative shall withdraw, as resolved.
10.3.2 Where a majority of the Creditors Committee considers it appropriate, the meeting of the Creditors Committee maybe conducted and held in such a way that persons who are not present together at the same place may attend it. Where ameeting is conducted and held in this manner, a Committee Member attends the meeting if that Committee Member is able toexercise any rights which that Committee Member may have to speak and vote at the meeting. Such meetings shall beconducted in accordance with the regime set out in rule 12A.26 of the Insolvency Rules.
10.3.3 Save as otherwise specifically provided in the Scheme, the Creditors Committee may convene, adjourn and otherwiseregulate its meetings in such manner as it considers appropriate. The quorum at any meeting of the Creditors Committeeshall be at least 50% of the Committee Members, attending in person or by conference call, provided that if a quorum is notpresent within 15 minutes from the time appointed for a meeting, or if during a meeting such a quorum ceases to be present,the meeting shall stand adjourned to such time and place as may be determined by the majority of the Committee Memberspresent and the Committee Members present at any such meeting reconvened following an adjournment shall constitute aquorum. Each Committee Member shall have one vote and, except as otherwise provided in the Scheme, matters arising at ameeting shall be decided by a majority of votes cast at the meeting.
10.3.4 The Creditors Committee shall meet with the Scheme Supervisors as often as necessary and in any event and unlessotherwise agreed with the Creditors Committee at least once every three months for the purpose of receiving the SchemeSupervisors Report. The Creditors Committee shall hold such further meetings as it considers desirable for the purpose ofperforming its functions under the Scheme. A meeting of the Creditors Committee shall be called as soon as reasonablypracticable if so requested by at least two Committee Members or if the Scheme Supervisors otherwise consider itappropriate. Except with the consent of all Committee Members, no meeting of the Creditors Committee may be called onless than five Business Days notice and, except with the consent of all Committee Members, no business may be transactedat any such meeting other than that set out in the notice of that meeting.
10.3.5 Each Committee Member (including any Nominated Representative or Alternate) and the Scheme Supervisors (ortheir representatives) shall be entitled to attend and receive notice of all meetings of the Creditors Committee. The SchemeSupervisors shall be entitled to attend and speak, but not to vote, at all meetings of the Creditors Committee.Notwithstanding the previous provisions of this sub-clause 10.3.5, if so requested by the Creditors Committee, the SchemeSupervisors (or their representative(s)) shall absent themselves from all or such part of a meeting of the Creditors Committeeas the Creditors Committee may specify.
10.3.6 The Creditors Committee shall ensure that proper minutes shall be kept of all proceedings of the CreditorsCommittee and such minutes shall at all reasonable times be open to inspection by any Committee Member. Copies of suchminutes shall be sent as soon as practicable after each meeting to the Scheme Supervisors and each Committee Member. A
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resolution in writing agreed to by all Committee Members for the time being shall be valid and effective as if passed at ameeting of the Creditors Committee duly convened and held. Each Committee Members may signify his agreement to aproposed written resolution when the Creditors Committee receives from him a document identifying the resolution to whichit relates and indicating his agreement to the resolution. The document may be sent to the members of the CreditorsCommittee in hard copy form or in electronic form.
10.3.7 Apart from in consultation with and with the agreement of the Creditors Committee, the Outwards Claims Managerwill not share any information regarding the Outwards Claims Litigation with the Scheme Supervisors. The SchemeSupervisors shall not, without the express consent of the Creditors Committee, be permitted to attend those parts of anyCreditors Committee meetings that relate to the Outwards Claims Litigation. The Outwards Claims Manager shall attendmeetings of the Creditors Committee only if invited to do so by the Creditors Committee.
10.4 Powers10.4.1 The Creditors Committee shall have all the powers necessary or desirable to enable them to discharge their duties andresponsibilities under the Scheme including without limitation in connection with their taking decisions and/or exercisingdiscretion.
10.4.2 Before each regular three-monthly meeting of the Creditors Committee convened pursuant to clause 10.3.4 theScheme Supervisors shall submit to the Creditors Committee their Scheme Supervisors Report for the period since the lastsuch Scheme Supervisors Report was prepared (or, with the consent of the Creditors Committee in the case of the first suchmeeting, since the Effective Date) and, unless the Creditors Committee agrees otherwise, at least one of them shall attend (orwith the consent of the Creditors Committee appoint a representative to attend) at any meeting of the Creditors Committeeat which that Scheme Supervisors Report is considered for the purpose of giving such explanations and information as theCreditors Committee may require.
10.4.3 The Scheme Supervisors Report, incorporating such amendments and redactions (if any) as may be agreed by theScheme Supervisors and the Creditors Committee, shall be made available to the Scheme Creditors in accordance withclause 11.1.7.
10.4.4 The Creditors Committee shall be entitled:(a) to require at least one of the Scheme Supervisors to attend any meeting of the Creditors Committee;(b) by a resolution passed by at least three-fourths by number (rounded up to the nearest whole number) of all the
Committee Members to call upon a Scheme Supervisor or the Outwards Claims Manager to resign, provided that eachsuch Scheme Supervisor or Outwards Claims Manager and each Committee Member have been given at least 20Business Days notice of the proposed resolution and of the reasons why the resolution is to be put to the CreditorsCommittee and have been given a reasonable opportunity to make representations at the meeting at which theresolution is proposed. If the Scheme Supervisor or Outwards Claims Manager declines to resign within 5 BusinessDays of a resolution of the Creditors Committee calling for his resignation a resolution requiring his removal shall beput before the next meeting of the Scheme Creditors and, if passed, the Scheme Supervisor or Outwards ClaimsManager shall vacate their respective positions; and
(c) upon removal of a Scheme Supervisor or if a Scheme Supervisor ceases to hold office for any other reason, to appointany person qualified to act under clause 8.1.1 to be a Scheme Supervisor in their place (and a resolution requiringratification of such appointment shall be put before the next meeting of Scheme Creditors pending which the appointeeshall have full power to act as a Scheme Supervisor) save that if a resolution is passed at a meeting of SchemeCreditors requiring the removal of any of the Scheme Supervisors pursuant to clause 10.4.4(b) such appointment maybe made by the Scheme Creditors at such meeting.
10.4.5 The Creditors Committee shall be entitled to engage legal and financial advisers from time to time as reasonable inorder to assist them in carrying out their functions as the Creditors Committee. At any particular time, the CreditorsCommittee may only engage one legal adviser in any jurisdiction and one financial adviser. Reasonable costs of suchadvisers will be paid by the Company from the assets of the Company within 10 Business Days of demand.
10.4.6 The Creditors Committee and the Company shall use reasonable endeavours to ensure that there are at least two dulyqualified Scheme Supervisors in office at all times.
10.4.7 For the avoidance of doubt and subject to clauses 10.2.4(a) and 10.2.5, a Committee Member may transfer, assign orsub-participate the whole or part of a Scheme Liability and/or Ascertained Scheme Claim in accordance with clause 3.3.
10.5 Majority Scheme Creditors instructions
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10.5.1 The Creditors Committee shall, subject to clause 10.6.1, (i) be entitled to exercise or refrain from exercising any right,power, authority or discretion vested in it as the Creditors Committee as it thinks fit and in any event to act in accordancewith any instructions given to it by a majority of the Scheme Creditors and (ii) not be liable (nor shall any of its members) forany act (or omission) if it acts (or refrains from taking any action):(a) in accordance with an instruction of a majority of the Scheme Creditors; or(b) in good faith.
10.5.2 For the purposes of clause 10.5, a majority means a simple majority by value of (i) the Ascertained Scheme Claims, or(ii) if on or prior to the Bar Date the Ascertained Scheme Claims and Submitted Scheme Claims (but excluding for thispurpose any Disputed Scheme Claims) of the Scheme Creditors entitled to vote and voting at a meeting of Scheme Creditorsin accordance with sub-clause 11.1.5.
10.5.3 For the purposes of clause 10.5, the value for which a Submitted Scheme Creditor votes shall be such sum as theScheme Supervisor values in good faith such Submitted Scheme Claim (taking into account the Scheme Supervisors view onthe likely success or failure and the likely quantum of such Scheme Creditors Submitted Scheme Claims).
10.6 Duties10.6.1 Each Committee Member, each Nominated Representative, and each Alternate shall (and each Committee Membershall procure that any Nominated Representative or Alternate appointed by it or any Alternate appointed by its NominatedRepresentative shall), in performing their functions as such in relation to the Scheme, act bona fide in what such personconsiders to be the interests of the Scheme Creditors as a whole. For the avoidance of doubt (but without prejudice to itsspecific powers as set out by the Scheme) it shall not be the duty of the Creditors Committee to monitor the carrying out ofthe Scheme or the activities of the Scheme Supervisors.
10.6.2 It shall be the duty of each Committee Member who is in any way, whether directly or indirectly, interested in acontract or arrangement or proposed contract or arrangement with the Company (other than any which arises as a result of theprovisions of the Scheme) to declare (or procure that its Nominated Representative or Alternate or its NominatedRepresentative s Alternate shall declare) the nature of his or its interest at a meeting of the Creditors Committee where thatcontract or arrangement is under consideration. For this purpose a general notice given to the Creditors Committee to theeffect that a Committee Member is an associate (within the meaning of section 435 of the Insolvency Act) of a specifiedcompany or firm and is to be regarded as interested in any such contract or arrangement with that company or firm shall bedeemed a sufficient declaration of interest in relation to any such contract or arrangement. Such a Committee Member shallnot be counted in the quorum, shall not be entitled to vote in relation to any matter relating specifically to any such contract,shall retire from the meeting for so long as the matter is discussed and voted upon and shall not receive any information, norbe entitled to inspect any part of the minutes of a meeting or the Creditors Committee, relating thereto.
10.6.3 Each Nominated Representative or Alternate shall be entitled to report to the Committee Member appointing him onthe proceedings of the Creditors Committee and, so far as necessary for that purpose, to disclose confidential information ofthe Company to those officers, employees and professional advisers of that member or appointer who need to know it inconnection with (where a Nominated Representative or Alternate is disclosing information) the performance of his or itsresponsibilities as a Committee Member, provided that such information does not to his or its knowledge (after due enquiry)relate to any matter where any such appointer has an interest in conflict with the Company (other than a general conflictarising as the result of the status of Committee Member or the appointers of a Nominated Representative or Alternate asScheme Creditors). Each Committee Member shall, and shall procure that its Nominated Representative or Alternate or itsNominated Representative s Alternate and its officers, employees and professional advisers shall preserve the confidentialityof such information and shall use such information only for the purposes of their performing their responsibilities andfunctions (or their Nominated Representative s or Alternate s or their Nominated Representative Alternate s responsibilitiesand functions) in relation to the Creditors Committee.
10.7 Responsibility10.7.1 No Scheme Creditor, Scheme Supervisor, Outwards Claims Manager or the Company shall be entitled to challenge thevalidity of any act done or omitted to be done in good faith by any Committee Member (or Nominated Representative orAlternate) (aside in respect of the Scheme Supervisors pursuant to clause 8.9 and the Outwards Claims Manager pursuant toclause 9.6) in accordance with and to implement the provisions of the Scheme or the exercise by any such CommitteeMember (or Nominated Representative or Alternate) in good faith of any power conferred upon it or him by or for thepurposes of the Scheme if exercised in accordance with and to implement the provisions of the Scheme and no suchCommittee Member (or Nominated Representative or Alternate) shall be liable for any loss or damage unless such loss ordamage is attributable to its or his fraud.
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10.7.2 No Committee Member (or Nominated Representative or Alternate) will be liable for any action taken by it (or anyinaction) under or in connection with the Scheme, unless directly caused by its bad faith or wilful misconduct.
10.7.3 For the avoidance of doubt, the Creditors Committee will have no fiduciary duties and will owe no duty of care to theCompany or to any of the Scheme Creditors.
10.7.4 For the avoidance of doubt, none of the FSCS, the Shareholder Observer or the Pension Creditor shall owe anyfiduciary duty or duty of care towards any Scheme Creditor in their capacity as a non-voting observer to the CreditorsCommittee.
10.7.5 No Scheme Creditor, Scheme Supervisor, Outwards Claim Manager, the Company or Committee Member shall beentitled to challenge the validity of any observing act done or omitted to be done in good faith by the FSCS, the ShareholderObserver or the Pension Creditor as a non-voting observer to the Creditors Committee.
10.8 Validation of actsAll acts done by the Creditors Committee or any member of the Creditors Committee or any person acting as a CommitteeMember or as a Nominated Representative or Alternate shall, notwithstanding that it is afterwards discovered there was somedefect in the appointment of a Committee Member or person acting as aforesaid, or that any of them were disqualified, bevalid if every such person had been duly appointed and qualified.
10.9 FeesThe Company agrees to pay each Committee Member a fee of £5,000 plus VAT which shall be paid quarterly in arrears toeach Committee Member until the date of which the appointment of that Committee Member is terminated in accordancewith the terms of the Scheme. The first payment shall be due on the last Business Day of the first whole calendar monthfalling three months after the Effective Date. Each subsequent payment is due on the last Business Day of each calendarmonth at three monthly intervals. No part of any fee will be refunded if an appointment does not continue for the wholemonth concerned.
10.10 ExpensesEach member of the Creditors Committee, each Nominated Representative and each Alternate shall be entitled to bereimbursed by the Company from the assets of the Company upon written demand to the Company for their reasonable out ofpocket expenses incurred in attending meetings of the Creditors Committee, or otherwise engaged on Creditors Committeebusiness, provided that such meetings are held in London or in such other place as the Scheme Supervisors may from time totime agree. Where a Committee Member, its Nominated Representative or any Alternate appointed by the CommitteeMember, its Nominated Representative must travel to attend a Creditors Committee meeting in London (or such other placeas the Scheme Supervisors have agreed), that Committee Member, Nominated Representative or Alternate shall (any suchCommittee Member shall procure that such Nominated Representative or Alternate shall) use all reasonable endeavours toappoint as its Nominated Representative or Alternate (as the case may be) for that meeting an individual who is based in thelocality of the venue of that Creditors Committee meeting (although there is no obligation for a Shareholder who is aCommittee Member to reside in London). Where the cost of an air fare is so permitted, it shall be the cost of an economyclass fare only.
10.11 Creditors Committee Vacancies10.11.1 If at any time there are less than three members of the Creditors Committee or such lesser number as permitted byclause 10.1.2, the Creditors Committee may continue to exercise all its functions under the Scheme (other than thoseprovided for in clauses 10.4.4) for a period of 28 days, during which time the remaining Committee Members shallendeavour to fill the vacancies on the Creditors Committee.
10.11.2 If the Creditors Committee fails to fill vacancies on the Creditors Committee within such period of 28 days, theScheme Supervisors shall use all reasonable endeavours to appoint, within a further 14 days, such additional SchemeCreditors to the Creditors Committee as are required to fill such vacancies.
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SECTION 11MEETINGS OF SCHEME CREDITORS
11.1 Convening of Meetings11.1.1 Meetings of Scheme Creditors are to be convened as follows:(a) the Scheme Supervisors shall, unless the Scheme Supervisors and the Creditors Committee agree otherwise, convene a
meeting of the Scheme Creditors at least once every 12 months; and(b) the Creditors Committee may at any time require the Company to convene a meeting of the Scheme Creditors to
consider a resolution:(i) for the removal of a Scheme Supervisor pursuant to clause 10.4.4(b);(ii) for the appointment of a Scheme Supervisor pursuant to clause 10.4.4(c); or(iii) for such other purpose as it thinks fitand any such resolution shall be passed or rejected in accordance with the remainder of section 11.
11.1.2 The Scheme Supervisors may at any time convene a meeting of the Scheme Creditors for such purpose as they thinkfit. The Outwards Claims Manager (for the purposes of clause 9.6 only and with the assistance of the Scheme Supervisors)may at any time convene a meeting of the Scheme Creditors.
11.1.3 Any five or more Scheme Creditors who have Ascertained Scheme Claims of an aggregate value in excess of 15 percent of all Ascertained Scheme Claims or any 20 Scheme Creditors with Ascertained Scheme Claims may by notice inwriting to the Scheme Supervisors require them to convene a meeting of Scheme Creditors for such purpose as they think fit.The relevant Scheme Creditors must specify the purpose for which the meeting is required and it shall be the duty of theScheme Supervisors to summon a meeting of Scheme Creditors as soon as reasonably practicable for that purpose and to givesuch notice of the meeting as is necessary to enable such purpose to be carried out effectively in accordance with theprovisions of the Scheme. At least one of the Scheme Supervisors shall be required to attend such meetings.
11.1.4 A majority in excess of two-thirds in value of the Scheme Creditors attending a meeting of the Scheme Creditors mayresolve to remove the Scheme Supervisors from any meeting or part of any meeting, following which resolution the SchemeSupervisors shall withdraw, as resolved.
11.1.5 The following shall be entitled to attend a meeting of Scheme Creditors and to vote at that meeting:(a) on or before the Bar Date, any Submitted Scheme Claimant; and(b) at any time any Scheme Creditor with an Ascertained Scheme Claim.
11.1.6 The Company may appoint a representative or representatives to attend any meeting of Scheme Creditors for thepurposes of observing the meeting only. A majority of the Scheme Creditors by value attending such meeting may resolve toremove the Company representative from any meeting or part of any meeting, following which resolution any suchrepresentatives shall withdraw, as resolved.
11.1.7 The most recent Scheme Supervisors Report referred to in clause 10.4.3 (as amended and/or redacted in accordancewith clause 10.4.3) shall be laid before each meeting of Scheme Creditors convened pursuant to clause 11.1.1(a) or 11.1.1(b)as the Creditors Committee or the Scheme Supervisors (as the case may be) deem desirable or necessary and copies of allprevious Scheme Supervisors Reports shall be made available at such meeting. If the Scheme Supervisors or the CreditorsCommittee (as the case may be) agree that such a meeting is not required, the Scheme Supervisors shall make such SchemeSupervisors Report (as amended and/or redacted in accordance with clause 10.4.3) available to Scheme Creditors and send acopy of the Scheme Supervisors Report (as amended and/or redacted in accordance with clause 10.4.3) to any SchemeCreditors who requests a copy.
11.1.8 At least 10 Business Days notice shall be given of a meeting of Scheme Creditors to:(a) each Submitted Scheme Claimant;(b) where called by the Creditors Committee, to the Scheme Supervisors;(c) where called by the Scheme Supervisors, to each Committee Member, and(d) the Company.
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11.1.9 The accidental omission to give notice of a meeting of Scheme Creditors to, or the non-receipt of a notice of such ameeting by, any person entitled to receive notice (other than the Scheme Supervisors) shall not invalidate the proceedings atthat meeting.
11.2 ResolutionIf a meeting of Scheme Creditors is convened at a time when a resolution is to be put to remove a Scheme Supervisor which,if passed, would result in there being fewer than two Scheme Supervisors in office, the notice of meeting shall also include aresolution that a named person qualified to act under clause 8.1.1 and willing to be appointed, be appointed as a SchemeSupervisor in their place.
11.3 Voting11.3.1 Subject to clause 11.3.2, a resolution put to a meeting of Scheme Creditors shall be effective only if it is approved by amajority in value of the Ascertained Scheme Claims (or, if on or prior to the Bar Date, Ascertained Scheme Claims andSubmitted Scheme Claims (not being Disputed Scheme Claims)) of Scheme Creditors which are present and voting either inperson or by proxy at the meeting.
11.3.2 A resolution to consider the matters set out at clause 7.2.2 shall only be passed provided a majority in excess of two-thirds in value of the Scheme Creditors attending the meeting of the Scheme Creditors either in person or by proxy votes infavour of that resolution.
11.3.3 For the purposes of this section 11, Cattles shall be deemed not to be a Scheme Creditor.
11.3.4 Every Scheme Creditor entitled to vote shall have the right to appoint any person as his proxy to attend and voteinstead of him. The instrument appointing a proxy may be in any form which the Scheme Supervisors may approve and mustbe lodged at the place specified in the notice of the meeting for the lodging of proxies not less than 48 hours before themeeting (or adjourned meeting) at which it is to be used.
11.3.5 No business shall be transacted at any meeting of Scheme Creditors unless a quorum is present when the meetingproceeds to business, four Scheme Creditors present in person or by proxy and having the right to vote at the meeting shall bea quorum, unless the Scheme Supervisors and the Creditors Committee agree a smaller number. If a quorum is not presentwithin 15 minutes from the time appointed for a meeting, or if during a meeting such a quorum ceases to be present, themeeting shall stand adjourned to such time and place as may be determined by the majority of the Scheme Creditors presentand the Scheme Creditors present at any such meeting reconvened following an adjournment shall constitute a quorum. Allresolutions put to the vote of any meeting shall be decided on a poll (rather than on a show of hands).
11.3.6 One of the Scheme Supervisors shall preside (or shall nominate a representative to preside) at each meeting of theScheme Creditors (unless the Creditors Committee resolves otherwise and other than at a meeting at which a resolution toremove a Scheme Supervisor is proposed, when the Creditors Committee shall select the individual to preside over suchmeeting) but if the Scheme Supervisor (or his nominated representative) or, if relevant, the individual selected by theCreditors Committee, is not present within 15 minutes after the time appointed for opening the meeting or is unwilling topreside, the Scheme Creditors present in person or by proxy shall choose some member of the Creditors Committee or, if nosuch member is present or if all such members present decline to preside, one of themselves, to be chairman of the meeting.If no person is willing to preside as chairman of the meeting, the meeting shall be adjourned for seven days, and, if no personis willing to preside as chairman of such meeting reconvened following an adjournment, the meeting shall be dissolved.
11.3.7 On or prior to the Bar Date and for the purposes of clause 11.3, the value for which a Submitted Scheme Claimantvotes shall be such sum as the Scheme Supervisors value in good faith such Submitted Scheme Claim (but excluding for thispurpose any Submitted Scheme Claimant s Disputed Scheme Claim) and taking into account the Scheme Supervisors viewson the likely success or failure and the likely quantum of such Scheme Creditors Submitted Scheme Claims.
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SECTION 12LIQUIDATION AND COMPLETION OF THE SCHEME
12.1 Scheme Certified Liquidation12.1.1 Bovess and Bovess Holding each undertake not to commence any steps to wind-up the Company other than as part ofa Scheme Certified Liquidation nor seek to appoint an administrator to the Company pursuant to Schedule B1 of theInsolvency Act.
12.1.2 The Company, the Board, Bovess and Bovess Holding each agree that a Scheme Certified Liquidation shall not becommenced during the first seven years and three months from the Effective Date without the prior written consent of theCreditors Committee, acting reasonably. Thereafter, a Scheme Certified Liquidation may be commenced without the consentof the Creditors Committee.
12.1.3 Upon a Scheme Certified Liquidation, Scheme Creditors with Ascertained Scheme Claims and Unascertained SchemeClaims agree that any payments in respect of such Ascertained Scheme Claims and Unascertained Scheme Claims shall bepostponed until all other Liabilities of the Company including the expenses of any liquidation have been paid in full (apartfrom the Company s Liability to Cattles under clause 4.1.1).
12.1.4 Each Scheme Creditor agrees that any distributions it has or shall receive in the Scheme Certified Liquidation are infull satisfaction of what it is entitled to receive under the Scheme and under the Insolvency Act.
12.1.5 In a Scheme Certified Liquidation, Scheme Creditors agree that they shall be creditors in respect of their AscertainedScheme Claims only, and shall have the right to prove, claim or assert a right of recovery in the liquidation in respect of suchAscertained Scheme Claims.
12.1.6 In a Scheme Certified Liquidation, the provisions contained in clauses 6.1 and 6.2 shall cease to apply.
12.2 Scheme CompletionThe Scheme shall be completed on Scheme Completion, being the date, following the Bar Date when the aggregate of allUnascertained Scheme Claims shall be nil and either:(a) all Ascertained Scheme Claims have been paid in full; or(b) the Company is in a Scheme Certified Liquidation and the assets of the Company have been reduced to nil or a de
minimis amount.
12.3 Effective upon Scheme Completion:(a) the Scheme Supervisors shall give notice on the Scheme Website and to any Scheme Creditor with an Ascertained
Scheme Claim that Scheme Completion has occurred;(b) the Scheme Payments made to a Scheme Creditor (if any) shall be the Company s total and complete Liability to each
Scheme Creditor in respect of each Scheme Liability;(c) the Scheme Payments made to a Scheme Creditor shall be in full and final settlement of all and any Ascertained
Scheme Claims of that Scheme Creditor;(d) all claims between Cattles and the Company shall be netted and all Scheme Liabilities (including the net claim between
Cattles and the Company) shall be released;(e) save for the provisions of clauses 1.1, 2.9, 5.4, 8.6, 8.7, 9.4, 9.5, 10.7, 10.8, 10.9, 10.10, 12.1.4, 12.1.5, 12.3, 13.1, 13.3,
13.6 and any other provision relating to the compromise of Scheme Liabilities, all of which shall survive SchemeCompletion, the obligations and rights under the Scheme shall end.
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SECTION 13GENERAL SCHEME PROVISIONS
13.1 Effective DateThe Scheme shall become effective on the Effective Date.
13.2 Modification of the SchemeThe Company may at any court hearing to sanction the Scheme consent on behalf of the Scheme Creditors to anymodification of or addition to the Scheme or any terms or conditions that would not directly or indirectly have a materiallyadverse effect on the interests of any Scheme Creditor (whose consent is not obtained) under the Scheme (taking into accountfor this purpose only its interests as a Scheme Creditor).
13.3 Application of the SchemeThe provisions of this Scheme shall apply to each Scheme Creditor whether or not he participates in the Scheme in any wayand at any stage.
13.4 Notices13.4.1 Any notice or other written communication to be given under or in relation to the Scheme shall be given in writing andshall be deemed to have been duly given if it is delivered by hand or sent by pre-paid first class post or airmail:(a) in the case of the Company, to its registered address or to such other address as the Company may give notice of to
Scheme Creditors for this purpose, in any case marked for the attention of Robert East;(b) in the case of the Scheme Supervisors, to Christine Laverty, Richard Fleming and Edward Boyle of KPMG, 8 Salisbury
Square, London, EC4Y 8BB or to such other address as the Scheme Supervisors may give notice of to SchemeCreditors for this purpose; and
(c) in the case of a Scheme Creditor, to its last known address according to the Company.
13.4.2 Any notice or written communication given under the Scheme shall be deemed to have been delivered on the earliestof:(a) if delivered by hand, the first Business Day after it is delivered;(b) if sent by pre-paid first class post or airmail, the second Business Day after posting if the recipient is in the country of
dispatch, otherwise the seventh Business Day after posting;(c) if sent electronically, the first Business Day beginning after the expiration of 24 hours from the time it was sent; or(d) the Business Day on which the notice or communication is actually received by the recipient.
13.5 Electronic communicationsNotwithstanding anything to the contrary in the Scheme, any notice or communication required to be or which may be sentunder the Scheme may, at the option of the Company, the Creditors Committee, the Scheme Supervisors, the OutwardsClaims Manager, the relevant Scheme Creditor or Committee Member, be given or sent by the Company, the CommitteeMember, the Scheme Supervisors, the Outwards Claims Manager, the Creditors Committee or the relevant Scheme Creditorin electronic form (i.e. by email or fax) to the address or number specified for that purpose by that Scheme Creditor, theCreditors Committee, the Scheme Supervisors, the Outwards Claims Manager, the Committee Member or the Company.
13.6 Governing law and jurisdictionThe Scheme and any non-contractual obligations arising out of or in connection with the Scheme shall be governed by andconstrued in accordance with the laws of England and Wales. The Court shall have exclusive jurisdiction to hear anddetermine any suit, action or proceeding and to settle any dispute which may arise out of or in connection with theExplanatory Statement or any provision of the Scheme, or any act or omission under the Scheme or in any way in connectionwith its administration. For such purposes, the Scheme Creditors irrevocably submit to the jurisdiction of the Court.
Dated this 16th day of December 2010.
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SCHEDULE 1NET FREE CASH
Net Free Cash means the cash available for distribution on each Distribution Date in accordance with section 6, being theaggregate cash net of any and all overdrafts held by the Company on the preceding Distribution Period End Date, less thefollowing:(a) any cash held in bank accounts relating to the Shopacheck business of the Company, subject to a maximum amount of
£5,000,000;(b) the Scheme Working Capital Allowance;(c) the trust created for Unprotected PPI Liabilities under clause 5.4.1;(d) the Employee Retention Fund;(e) Unascertained Payments Trust Fund;(f) such amounts as are approved by the Creditors Committee;(g) any cash held in a client or trust account; and(h) any amounts payable to the FSCS as Top Up Payments (as defined in the PPI Settlement Agreement) under the PPI
Settlement Agreement to the extent such amounts are not already included in (a) to (g) above.
Scheme Working Capital Allowance means the cash amount required to be reserved by the Company to meet its forecastworking capital requirements for 60 days from the date of the calculation, taking into account:(a) forecast cash receipts by the Company;(b) all outstanding and forecast Excluded Liabilities;(c) any intra-month peak working capital requirements; and(d) a reasonable contingency for unforeseen Excluded Liabilities being no more than £5,000,000 in aggregate for the
period to 31 December 2012 subject to the sentence below relating to the increase of the Scheme Working CapitalAllowance. From 1 January 2013 onwards the limit of the contingency can be increased by a maximum of£2,000,000 per month, subject to the maximum contingency amount not exceeding £25,000,000.
The Scheme Working Capital Allowance can be increased at any Distribution Period End Date with the consent of theScheme Supervisors and the agreement of the Creditors Committee.
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SCHEDULE 2DISTRIBUTION PERIOD END DATES AND DISTRIBUTION DATES
This schedule of Distribution Period End Dates and Distribution Dates can be extended to include later Distribution PeriodEnd Dates and Distribution Dates with the consent of the Scheme Supervisors and with the agreement of the CreditorsCommittee.
Distribution Period End Date Distribution Date
3 July 2011 1 August 2011
31 July 2011 29 August 2011
28 August 2011 27 September 2011
2 October 2011 31 October 2011
30 October 2011 28 November 2011
27 November 2011 26 December 2011
1 January 2012 31 January 2012
29 January 2012 27 February 2012
26 February 2012 26 March 2012
1 April 2012 2 May 2012
29 April 2012 29 May 2012
27 May 2012 26 June 2012
1 July 2012 30 July 2012
29 July 2012 27 August 2012
26 August 2012 25 September 2012
30 September 2012 29 October 2012
28 October 2012 26 November 2012
25 November 2012 24 December 2012
30 December 2012 29 January 2013
27 January 2013 25 February 2013
24 February 2013 25 March 2013
31 March 2013 30 April 2013
28 April 2013 28 May 2013
26 May 2013 25 June 2013
30 June 2013 29 July 2013
28 July 2013 26 August 2013
25 August 2013 24 September 2013
29 September 2013 28 October 2013
27 October 2013 25 November 2013
24 November 2013 23 December 2013
29 December 2013 28 January 2014
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SCHEDULE 3EXCLUDED LIABILITIES
1. Any ordinary course business liability of the Company (i) properly incurred after the Record Date (including, withoutlimitation, but subject to clause 9.1.3, the funding of any Outwards Litigation Claims by the Company or with the prioragreement of the Creditors Committee similar claims by Cattles) or (ii) that may arise after the Record Date as a result of anobligation properly incurred by the Company before the Record Date and adopted by the Company after the Record Date asenvisaged by the Scheme (for the avoidance of doubt not including obligations where the Company has given notice toterminate such arrangements). For the avoidance of doubt, and without limitation, this does not include Schemed LeaseLiabilities or any costs associated with the winding up or dissolution of any members of the Group in excess of the cap of£150,000 pursuant to paragraph 11 of this Schedule 3;
2. All Liabilities of the Company to employees, directors or officers of the Company or other Group companies (but notincluding the Schemed Directors) in respect of their wages, bonuses, expenses, other remuneration, pension contributions,contractual indemnities, notice pay (including pay in lieu of benefits due during any notice period), redundancy pay, andpayments due under staff retention arrangements or performance incentive arrangements;
3. All Liabilities of the Company to self employed agents;
4. Any PPI Liability, including for the avoidance of doubt any fees payable to the Financial Ombudsman Service anyLiability of the Company to the FSCS under the PPI Settlement Agreement and the Claims Handling Agreement;
5. Any Company liability for a fine or criminal or regulatory penalty;
6. Any Company liability to Her Majesty s Revenue & Customs in respect of:(a) corporation tax (including corporation tax on chargeable gains) for the years ending 31 December 2008, 31 December
2009 or 31 December 2010;(b) value added tax;(c) PAYE and NIC (both employers and employees ) relating to the month in which the Effective Date occurs and the
preceding month; and(d) withholding tax due in respect of interest payments made by the Company within three months prior to the Effective
Date;
7. Any Liability of (i) the Company under a lease or hire purchase agreement, and (ii) of Moneytopia Limited, ProgressiveFinancial Services Limited, Shopacheck Financial Services Limited and Welcome Insurance Services Limited under a leasewhere the leased property has been or is occupied by the Company, other than a Schemed Lease Liability;
8. Provided the aggregate amount paid in respect of Liabilities of the Company covered by this paragraph 8 do not exceed£10,000,000 (excluding from this amount, Liabilities under any any other paragraph of this Schedule 3), any liability to acreditor of the Company as consideration for the provision of goods or services to the Company or another member of theGroup that remains unpaid as at the Record Date (specifically including such liabilities owed to the Excluded Trade Creditorsset out in Schedule 10);
9. Any payments of adverse costs awards pursuant to clause 3.8.4;
10. Any payments to the Scheme Supervisors or the Outwards Litigation Manager pursuant to the Scheme;
11. Any Liability of the Company to any local authority in respect of business rates;
12. Any payments made by the Company to satisfy any costs associated with the liquidation or dissolution of any members ofthe Group, subject to an aggregate maximum amount of £150,000;
13. Any Liability of the Company under the Deed of Indemnity entered into by the Company and CSP Leeds Limited dated5 August 2010 (save for any liability under clause 1 of that Deed of Indemnity), any liability of the Company under theEngagement Letter (as defined in the Pensions Compromise) and any liability under clauses 10.1, 10.2 and 11 of the PensionsCompromise;
14. Fees and expenses of all agents under the Facilities Agreements or under the Agency Arrangements;
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15. All monthly fees, costs and expenses (including adviser fees) of the Co-ordinating Committee under the Co-ordinatorsAppointment Letter dated 31 July 2009 and related Fee Letter between the Company, Cattles and the Co-ordinatingCommittee which have been incurred on or before the Effective Date; and
16. Any payments properly made by the Company pursuant to the Scheme (apart from any Scheme Payment or any paymentsin respect of an Ascertained Scheme Claim) including, but not limited to, clauses 3.8.4, 4.2, 4.3, 4.4, 6.4, 8.7, 8.8, 8.9, 9.5,9.6, 10.4.5, 10.9 and 10.10.
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SCHEDULE 4DEED OF RELEASE
THE SCHEME SUPERVISOR
in favour of
THE RELEASED PERSONS
THE ADVISERS
DEED OF RELEASE
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CONTENTS
CLAUSE PAGE
1.INTERPRETATION....................................................................................................................................... 326
2.APPLICATION OF DEED............................................................................................................................ 326
3.RELEASE AND DISCHARGE..................................................................................................................... 326
4.FURTHER ASSURANCE.............................................................................................................................. 327
5.GOVERNING LAW AND ENFORCEMENT ........................................................................................... 327
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THIS DEED OF RELEASE IS MADE ON 2011
BY:(1) of [ ] (the Scheme Supervisor),
IN FAVOUR OF:(2) THE RELEASED PERSONS (as defined below); and(3) THE ADVISERS (as defined below).
WHEREAS:(A) The Company has entered into the Scheme with its Scheme Creditors.(B) The Scheme Supervisor appointed under the Scheme is authorised, under the terms of the Scheme, to execute and deliverthis Deed on behalf of each of the Company and the Scheme Creditors.(C) It is intended that this document takes effect as a deed notwithstanding the fact that a party may only execute thisdocument under hand.
THIS DEED WITNESSES:1. INTERPRETATION
1.1 DefinitionsAdvisers means each of the advisers listed in Appendix 2 to this Deed.
Company means Welcome Financial Services Limited, a private limited company incorporated in England and Wales withcompany number 00133540S.
Released Persons means the persons listed at Appendix 1 to this Deed.
Restructuring means the restructuring of the Group pursuant to Plan A or, or if Plan A Fails, Plan B.
Scheme means the scheme of arrangement pursuant to Part 26 of the Companies Act 2006 between the Company and theScheme Creditors sanctioned by the High Court prior to the date of this Deed.
1.2 Incorporated definitionsWords and expressions defined in the Scheme have the same meanings when used in this Deed unless otherwise provided orthe context otherwise requires.
1.3 In this Deed, unless the context otherwise requires or otherwise expressly provides for:(a) references to clauses are references to clauses of this Deed;(b) references to a person include references to an individual, firm, partnership, company, corporation, unincorporated
body of persons or any state or state agency;(c) references to a statute or statutory provision include references to the same as subsequently modified, amended or re-
enacted from time to time;(d) the singular includes the plural and vice versa and words importing one gender shall include all genders; and(e) headings to clauses are for ease of reference only and shall not affect the interpretation of this deed.
2. APPLICATION OF DEED
The provisions of this Deed shall apply to each Scheme Creditor or any person to whom a Scheme Creditor has transferred orassigned or purported to transfer or assign a liability of the Company under the Scheme.
3. RELEASE AND DISCHARGE
3.1 With effect from (and including) the date of this Deed, the Scheme Supervisor (on behalf of the Company and theScheme Creditors), without prejudice to the provisions of the Scheme, hereby waives, releases, terminates and dischargesfully and absolutely any and all Liability of the Released Persons to each of the Company and the Scheme Creditors inrelation to or in connection with or in any way arising out of a Scheme Liability, a Submitted Scheme Claim, the
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implementation of the Scheme or the Restructuring. The waiver, release, termination and discharge in this clause applies tothe Released Persons in their capacity as members of the Co-ordinating Committee only and has no application to theReleased Persons in any other capacity.
3.2 The variation, waiver, release, termination and discharge in clause 3.1 shall not release any Liability of any person arisingfrom fraud on the part of that person.
3.3 With effect from (and including) the date of this Deed, the Scheme Supervisor (on behalf of the Company and theScheme Creditors), without prejudice to the provisions of the Scheme, hereby waives, releases, terminates and dischargesfully and absolutely any and all Liability of the Advisers to each of the Company and the Scheme Creditors in relation to orin connection with or in any way arising out of a Scheme Liability, an Ascertained Scheme Claim, a Submitted SchemeClaim, the implementation of the Scheme or the Restructuring.
3.4 The waiver, release, termination and discharge in clause 3.3 shall not release any Liability of any person arising fromfraud on the part of that person.
4. FURTHER ASSURANCE
The Scheme Supervisor (on behalf of each of the Company and the Scheme Creditors) agrees and undertakes to execute anddeliver to the Released Persons and the Advisers all such documents and do all such acts as shall be reasonably required toachieve the variation, waiver, release, termination and discharge referred to in Clause 3.1.
5. GOVERNING LAW AND ENFORCEMENT
This Deed and any non-contractual obligations arising out of or in relation to this Deed are governed by and shall beconstrued in accordance with, English law. Any dispute arising out of or in connection with, or concerning the carrying intoeffect of, this deed shall be subject to the exclusive jurisdiction of the High Court of Justice of England and Wales and theparties hereby submit to the exclusive jurisdiction of that court for these purposes.
THIS DEED has been executed and delivered as a deed on the date stated at the beginning of this Deed.
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The Scheme Supervisor (for and on behalf of each of the Company and the Scheme Creditors)
SIGNED as a DEED and )DELIVERED by )
)in the presence of: )Witness Signature:
Name:Address:
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APPENDIX 1THE RELEASED PERSONS
The Royal Bank of Scotland plc in its capacity as a member of the Co-ordinating Committee
HSBC Bank plc in its capacity as a member of the Co-ordinating Committee
Lloyds TSB Bank plc in its capacity as a member of the Co-ordinating Committee
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APPENDIX 2THE ADVISERS
Allen & Overy LLP
Ernst & Young LLP
Clifford Chance LLP
FTI Consulting Limited
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SCHEDULE 5SPECIMEN CLAIM FORM
PLEASE READ THE GENERAL INSTRUCTIONS AND GUIDANCE NOTES PRIOR TO COMPLETING THISFORM
WELCOME FINANCIAL SERVICES LIMITED
SCHEME OF ARRANGEMENT UNDER PART 26 OF THE COMPANIES ACT 2006
CLAIM FORM
General Instructions1. This is a Claim Form, as referred in the Welcome Financial Services Limited scheme of arrangement (the Scheme), whichcame into effect on [insert date]. This form is to be used by Scheme Creditors (as that term is defined in the Scheme) in orderto submit a claim in the Scheme.
2. Terms used in this document which are not defined in this document (e.g. Scheme Payment and Scheme Supervisors ,both referred to below) have the same meanings as are given to them in the Scheme.
3. As stated in the Scheme, in order to be entitled to any Scheme Payments under the Scheme, you must complete a ClaimForm and submit it to the Scheme Supervisors so that it arrives on or before the Bar Date, which is [insert date].
4. Before completing this Claim Form please read the guidance notes on page [ ].
5. If necessary, please use additional sheets of paper to provide further information. If you do use additional sheets of paper,please ensure that each one is securely fastened to your claim form, that each one is clearly marked with the name of theScheme Creditor and the words Claim Form additional information , and also that it is clear to which question(s) thatadditional information relates.
IN ADDITION TO COMPLETING THIS CLAIM FORM, PLEASE PROVIDE FULL DOCUMENTATION TOEVIDENCE THE NATURE, VALIDITY AND VALUE OF YOUR SUBMITTED SCHEME CLAIM(S).
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Part A General details
1. NAME OF SCHEME CREDITOR(i )
2. ADDRESS OF SCHEME CREDITOR(ii )
3. CONTACT NAME(iii)
4. CONTACT EMAIL ADDRESS
5. CONTACT TELEPHONE NUMBER(S)
6. CONTACT FAX NUMBER
To be signed below by the Scheme Creditor or a duly authorised individual on behalf of a Scheme Creditor. If you are a dulyauthorised representative, agent or attorney of a Scheme Creditor, please enter the capacity in which you have signed theform (for example director, partner or agent and/or attorney) below.
A signature on this form shall constitute the giving of a warranty that:(a) the signatory has been duly authorised by the relevant Scheme Creditor to the sign the form on its behalf; and(b) all of the information you have provided on this Claim Form, and any additional information you have provided
with it, is true and accurate to the best of your knowledge and belief.
PRINT NAME:
POSITION:
SIGNATURE: DATE:
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Part B Claim Details
1. PLEASE DESCRIBE THE NATURE OF EACH SUBMITTED SCHEME CLAIM AND HOW IT AROSE (EG THE CONTRACT /AGREEMENT UNDER WHICH IT ARISES):(IV)
2. DATE THAT THE SUBMITTED SCHEME CLAIM WAS INCURRED:
3. PLEASE STATE THE TOTAL VALUE OF YOUR SUBMITTED SCHEME CLAIM AS AT THE RECORD DATE, INCLUDING THESPLIT BETWEEN PRINCIPAL, INTEREST AND ANY OTHER CONSTITUENT AMOUNTS:(v)
CONSTITUENT PART(WHERE RELEVANT)
AMOUNT
PRINCIPAL
INTEREST
OTHER (PLEASE DESCRIBE)
4. PLEASE STATE THE LEGAL BASIS OF YOUR CLAIM AGAINST THE COMPANY:(VI)
5. IS ANY PARTY JOINTLY LIABLE FOR THE SUBMITTED SCHEME CLAIM? IF SO, PLEASE IDENTIFY THE PARTY(IES) INQUESTION AND SPECIFY THE NATURE OF THE CLAIM AGAINST EACH ONE:
6. PLEASE STATE ANY OTHER FACTS OF WHICH YOU ARE AWARE WHICH WOULD ASSIST THE SCHEME SUPERVISORS INCONSIDERING THE SUBMITTED SCHEME CLAIM:(VII)
HOW TO SUBMIT THIS CLAIM FORM
On completing this Claim Form, please send, together with any additional material you are providing with it, to theaddress below, TO ARRIVE ON OR BEFORE THE BAR DATE, BEING [INSERT DATE].
[Address][Address][Address][Address][Address]
For the attention of: [insert name(s)]
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Part C Guidance notes(i) The name of the Scheme Creditor should be the full legal name of the Scheme Creditor including (if relevant) its
company number.(ii) If the Scheme Creditor is a company then the address given should be its registered address or the place to which
correspondence should be directed. If the Scheme Creditor is an individual then the address given should be their homeaddress or the place to which correspondence should be directed.
(iii ) Please give the name of the person for whose attention correspondence relating to the Scheme Claim should bedirected.
(iv) The description of the nature of the Submitted Scheme Claim and how it arose should describe the circumstancesgiving rise to the Submitted Scheme Claim in sufficient detail for the Scheme Supervisors to determine the validity ofthe Submitted Scheme Claim and its amount.This should include, for example, the date on which any relevant agreement was signed and the date and location ofany relevant events. If the Submitted Scheme Claim derives from the Scheme Creditor having been a holder of, orbeing interested in, notes issued by the Company, then you should include details of the Scheme Creditor s holding orinterest, including the date on which and value at which it was bought and sold (if applicable).Scheme Supervisors may request further information from Scheme Creditors in relation to any Submitted SchemeClaims.
(v) Please explain the value given to the Submitted Scheme Claim.The value of the Submitted Scheme Claim should be expressed in Sterling unless the Submitted Scheme Claim arisesin another currency. If the Submitted Scheme Claim arises in another currency then you should explain why it does,and express the value of the claim in the relevant currency.If the Submitted Scheme Claim is the sum of a number of amounts (e.g. a principal amount, plus interest), then youshould state what those constituent amounts are and what they represent. Other amounts could include, for example,lease rental obligations, dilapidations claims, VAT etc.Where insufficient space has been provided to detail all the components of your claim, such as is likely to be the casefor complex leasehold liability claims, please provide your calculations and assumptions on additional sheets of papersecurely fastened to you Claim Form, clearly marked on each one with the name of the Scheme Creditor and the wordsClaim Form additional information , and make clear to which question this additional information relates.
(vi) When stating the legal basis of the Liability of the Company, you should explain the legal nature of the claim that theScheme Creditor is making, e.g. claim for a debt owed under a credit facility or claim for breach of contract .
(vii) In addition to stating any other facts of which you are aware which would assist the Scheme Supervisors in consideringthe Submitted Scheme Claim, you should provide any evidence you have which supports the Submitted Scheme Claim.
PLEASE PROVIDE FULL DOCUMENTATION IN SUPPORT OF THE SUBMITTED SCHEME CLAIM(S).
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SCHEDULE 6COVENANTS
1. DEFINITIONSIn this Schedule:
Actual Net Free Cash means, for any period, the actual Net Free Cash for that period.
Calculation Certificate means a certificate substantially in the form of Annex 1.
Calculation Date means the last Business Day in each of January, April, July and October provided that the first CalculationDate shall only occur following the first Quarter Date which occurs at least three months after the Effective Date.
Calculation Period means:(a) in respect of the first Calculation Date, the preceding Quarter; and(b) in respect of any other Calculation Date, the preceding two Quarters.
Cumulative Actual Net Free Cash means, in respect of any Calculation Date, all the Actual Net Free Cash generatedbetween:(a) the first day of the month following the month in which the Effective Date occurs; and(b) the Quarter Date immediately preceding that Calculation Date.
Cumulative Forecast Net Free Cash means, in respect of any Calculation Date, all the Forecast Net Free Cash forecast tobe generated between:(a) the first day of the month following the month in which the Effective Date occurs; and(b) the Quarter Date immediately preceding that Calculation Date.
Cumulative Net Free Cash Percentage means each percentage calculated for the purposes of paragraph (g) of Clause 4.1(Calculations).
Divergence Certificate means a certificate substantially in the form of Annex 2.
Financial Indebtedness means any indebtedness for or in respect of:(a) moneys borrowed;(b) any acceptance credit (including any dematerialised equivalent);(c) any bond, note, debenture, loan stock or other similar instrument;(d) any redeemable preference share;(e) any agreement treated as a finance or capital lease in accordance with generally accepted accounting principles in the
jurisdiction of incorporation of the Company;(f) receivables sold or discounted (otherwise than on a non-recourse basis);(g) the acquisition cost of any asset to the extent payable after its acquisition or possession by the party liable where the
deferred payment is arranged primarily as a method of raising finance or financing the acquisition of that asset;(h) any derivative transaction protecting against or benefitting from fluctuations in any rate or price (and, except for non-
payment of an amount, the then mark to market value of the derivative transaction will be used to calculate its amount);(i) any other transaction (including any forward sale or purchase agreement) which has the commercial effect of a
borrowing;(j) any counter-indemnity obligation in respect of any guarantee, indemnity, bond, letter of credit or any other instrument
issued by a bank or financial institution; or(k) any guarantee, indemnity or similar assurance against financial loss of any person in respect of any item referred to in
the above paragraphs.
Financial Model means the financial model used by the Company to prepare the Original Forecast as amended pursuant toClause 3.2 (Changes).
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Financial Year means each period beginning on 1st January and ending on the next 31 December.
Forecast means the Original Forecast and each Updated Forecast.
Forecast Net Free Cash means, for any period, the forecast Net Free Cash of the WFS for that period as set out in therelevant Forecast.
Net Free Cash means, in respect of any period, the amount shown as WFS net operating cash generation after adviser feesin the Financial Model adjusted by:(a) adding back:
(i) any Protected PPI Liability, any related operating costs and any other amount under the terms of the PPISettlement Agreement; and
(ii) any Unprotected PPI Liability and any related operating costs in each case due or forecast to be due (as applicable) from WFS in that period; and(b) deducting any payments made or forecast to be made (as applicable) by WFS in that period under a finance lease.
For the avoidance of doubt, Net Free Cash does not include:(i) intercompany amounts paid or received by WFS to or from another member of the Group; or(ii) amounts paid or received by WFS relating to Shopacheck; or(iii) amounts paid to or from the Company in relation to the Employee Retention Fund; or(iv) amounts paid to or from the Company in relation to (A) the trust established by the Company in respect of
Unprotected PPI Liabilities pursuant to clause 5.4.1 or (B) the FSCS.
Net Free Cash Percentage means each percentage calculated for the purposes of paragraph (f) of Clause 4.1 (Calculations).
Original Forecast means:(a) if Plan A is being pursued, the 2010 (6+6) Plan financial forecast for WFS prepared by the Company in respect of its
Financial Years 2011 to 2013; or(b) if Plan B is being pursued, the financial forecast for WFS prepared by the Company in respect of its Financial Years
2011 to 2013 prepared in accordance with Clause 8.16.
Permitted Disposal means a disposal of part of the WFS Loan Book which has been written down to a value of less than tenpercent of its face value in accordance with the Company s impairment and accounting policies as at the Effective Date.
Quarter means each period of three months ending on a Quarter Date.
Quarter Date means 31 March, 30 June, 30 September and 31 December in each year.
Quarterly Net Free Cash Percentage means each percentage calculated for the purposes of paragraph (e) of Clause 4.1(Calculations).
Security Interest means any mortgage, pledge, lien, charge, assignment, hypothecation or security interest or any otheragreement or arrangement having a similar effect.
Shopacheck means the Shopacheck business carried on by the Company.
Shopacheck Cash Flow means all cash inflows and outflows, including financing and intercompany transfers, accounted forby Shopacheck between the first day of the month following the month in which the Effective Date occurs and 31 December2013.
Shopacheck EBITDA means the net pre-taxation profits of Shopacheck for the relevant period as adjusted by:(a) adding back interest payable; and(b) adding back depreciation and amortisation.
Shopacheck Financial Model means the financial model used by the Company to prepare the Shopacheck Original Forecast.
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Shopacheck Gross Loan Book means all the loans and related receivables made by Shopacheck to its customers afteradjustments for deferred income but before adjustments for deferred costs, early settlement assets and loan loss provisions.
Shopacheck Original Forecast means the 2010 (6+6) Plan financial forecast for Shopacheck prepared by the Company inrespect of its Financial Years 2011 to 2013.
Shopacheck Percentage means, on any Calculation Date, the Shopacheck EBITDA for the previous two Calculation Periodsas a percentage of the Shopacheck Gross Loan Book on the last day of the second of those Calculation Periods.
Shopacheck Terminal Value means the terminal valuation of Shopacheck as at 31 December 2013 ascribed to Shopacheckby Lexicon Partners in September 2010.
Shopacheck Threshold means the Shopacheck Cash Flow in the Shopacheck Original Forecast plus the ShopacheckTerminal Value.
Shopacheck Updated Forecast means each forecast for Shopacheck prepared on the same basis as the Shopacheck OriginalForecast prepared by the Company and accepted by the Scheme Supervisors.
Shopacheck Updated Terminal Value means the terminal valuation of Shopacheck as at 31 December 2013 ascribed toShopacheck by an independent valuation expert and accepted by the Company and the Scheme Supervisors.
Short Settled Loan means a loan in the WFS Loan Book which has been compromised by the Company.
Total Net Free Cash Percentage means each percentage calculated for the purposes of Clause 2.4 (Divergence Certificate).
Three Month Review means the review conducted by the Company in accordance with clause 8.16.
Updated Forecast means each forecast for WFS accepted by the Scheme Supervisors in accordance with Clause 2(Forecast).
WFS means the business carried on by the Company excluding Shopacheck.
WFS Loan Book means all the loans and related receivables made by Welcome Financial Services Limited (excludingShopacheck) to its customers outstanding at the relevant time.
2. Forecast2.1 Delivery of Updated Forecasts(a) Subject to paragraph (b) below, on or before 31 October in each Financial Year and within fifteen Business Days of the
occurrence of any Stage Two Trigger Event, the Company must deliver to the Scheme Supervisors and the CreditorsCommittee a draft Updated Forecast in respect of:(i) in the case of a draft Updated Forecast not delivered as a result of the occurrence of a Stage Two Trigger Event,
the following three Financial Years; and
(ii) in the case of a draft Updated Forecast delivered as a result of the occurrence of a Stage Two Trigger Event, theremainder of the then current Financial Year and the two following Financial Years.
(b) The Company need not deliver to the Scheme Supervisors and the Creditors Committee a draft Updated Forecastpursuant to paragraph (a) above if it has delivered a draft Updated Forecast to the Scheme Supervisors and theCreditors Committee in accordance with paragraph (a) above within the previous two months.
2.2 Basis and FormEach draft Updated Forecast and Shopacheck Updated Forecast must be:(a) prepared using the Financial Model or the Shopacheck Financial Model (as applicable) and otherwise on the same basis
as the Original Forecast or the Shopacheck Original Forecast (as applicable); and(b) delivered to the Scheme Supervisors and the Creditors Committee in electronic format and hard copy.
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2.3 Acceptance of draft Updated Forecast or draft Shopacheck Updated Forecast(a) Within ten Business Days of receiving a draft Updated Forecast or draft Shopacheck Updated Forecast, the Scheme
Supervisors, in consultation with the Creditor s Committee must promptly notify the Company whether they acceptthat draft as being prepared in accordance with this Schedule.
(b) If a draft Updated Forecast or draft Shopacheck Updated Forecast is not accepted pursuant to paragraph (a) above, theScheme Supervisors, the Creditors Committee and the Company must consult, in good faith, and use all reasonableendeavours to agree changes to the draft such that it can be accepted pursuant to paragraph (a) above as soon aspracticable and, in any event, within five Business Days of the Scheme Supervisors notifying the Company that thedraft Updated Forecast or draft Shopacheck Updated Forecast is not accepted.
(c) The Company shall deliver a copy of each Updated Forecast and each Shopacheck Updated Forecast to the CreditorsCommittee within five Business Days of it being accepted pursuant to this Clause.
2.4 Divergence CertificateWithin two Business Days of an Updated Forecast being accepted pursuant to Clause 2.3), WFS must deliver to the SchemeSupervisors a Divergence Certificate setting out the aggregate Forecast Net Free Cash in that Updated Forecast to be receivedby WFS from the start date of the Updated Forecast to 31 December 2013 plus any Net Free Cash received by WFS by thedate of the relevant Updated Forecast in excess of the Original Forecast as a percentage of the aggregate Forecast Net FreeCash set out in the Original Forecast to be received by WFS from the start date of the Updated Forecast to 31 December 2013(the Total Net Free Cash Percentage).
3. FINANCIAL MODEL3.1 InconsistencyIf any term of this Schedule is inconsistent with the Financial Model or the Shopacheck Financial Model the Schedule willprevail.
3.2 Changes(a) Without imposing any verification obligation on the Scheme Supervisors, the Scheme Supervisors and the Company
may each make proposals for changes to the Financial Model or the Shopacheck Financial Model which it believes ingood faith are necessary for:(i) the accurate calculation of the percentages and amounts to be calculated under this Schedule; or(ii) the accurate projection of Forecast Net Free Cash.
Any proposal made under this subclause must be accompanied by reasons for that proposal.(b) If the Scheme Supervisors and the Company are unable to agree on any change referred to above within
fifteen Business Days from the date on which the change is proposed, the relevant change shall not be made.
4. QUARTERLY TESTING4.1 CalculationsOn each Calculation Date, the Company must deliver to the Scheme Supervisors a Calculation Certificate setting out:(a) the Forecast Net Free Cash for each Quarter in the relevant Calculation Period;(b) the Forecast Net Free Cash for the relevant Calculation Period;(c) the Actual Net Free Cash for each Quarter in the relevant Calculation Period;(d) the Actual Net Free Cash for the relevant Calculation Period;(e) the Actual Net Free Cash for each Quarter in the relevant Calculation Period as a percentage of the Forecast Net Free
Cash in that Quarter (the Quarterly Net Free Cash Percentage);(f) the Actual Net Free Cash for the relevant Calculation Period as a percentage of the Forecast Net Free Cash for the
relevant Calculation Period (the Net Free Cash Percentage);(g) the Cumulative Actual Net Free Cash as a percentage of Cumulative Forecast Net Free Cash (the Cumulative Net Free
Cash Percentage); and(h) the Shopacheck Percentage.
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4.2 Stage One Trigger Event(a) If, on any Calculation Date, the relevant Net Free Cash Percentage is less than 100 percent (a Stage One Trigger
Event), WFS must within five Business Days of that Calculation Date produce a remedial plan (each a RemedialPlan) for the Scheme Supervisors detailing how the relevant deficit in Actual Net Free Cash can be cured by the nextCalculation Date.
(b) Any deficit in Actual Net Free Cash which is the subject of a Remedial Plan shall be added to the aggregate ForecastNet Free Cash amount used to calculate the Net Free Cash Percentage at the next Calculation Date.
5. STAGE TWO TRIGGER EVENTIf:(a) the Company does not produce a Remedial Plan within five Business Days of a Stage One Trigger Event to the
satisfaction of the Scheme Supervisors; or(b) a Stage One Trigger Event occurs on two consecutive Calculation Dates; or(c) on any Calculation Date in:
(i) 2011 a Quarterly Net Free Cash Percentage is less than 90 percent; or(ii) 2012 a Quarterly Net Free Cash Percentage is less than 85 percent: or(iii) 2013 a Quarterly Net Free Cash Percentage is less than 80 percent,
(d) on any Calculation Date other than the first Calculation Date, the Cumulative Net Free Cash Percentage is less than 100percent
(each a Stage Two Trigger Event),
the Company must produce an Updated Forecast in accordance with Clause 2 (Forecast).
6. STAGE THREE TRIGGER EVENTIf:(a) any Total Net Free Cash Percentage is less than 100 percent; or(b) a draft Updated Forecast is not agreed in accordance with paragraph (b) of Clause 2.3 (Agreement of draft Updated
Forecast)
(each a Stage Three Trigger Event),
the Scheme Supervisors must within two months of the occurrence of the relevant Stage Three Trigger Event produce for theScheme Creditors an analysis of their forecast distributions based on the Updated Forecast which caused by Stage ThreeTrigger Event compared to the returns the Scheme Creditors would be likely to receive on an administration of the Company.
7. SHORT SETTLEMENTThe Company must comply with its policy guidelines relating to short settlements dated 30 June 2010 and not make anychange to those guidelines without the consent of the Creditors Committee.
8. OTHER COVENANTS8.1 Negative pledge(a) Except as provided below, the Company must not create or allow to exist any Security Interest on any of its assets.Paragraph (a) does not apply to:
(i) any lien arising by operation of law and in the ordinary course of trading; and(ii) any Security Interest entered into in respect of the Employee Retention Fund.
(b) The Company must not:(i) sell, transfer or otherwise dispose of any of its assets on terms where it is or may be leased to or re-acquired or
acquired by it or any of its related entities;(ii) sell, transfer or otherwise dispose of any of its receivables on recourse terms;
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(iii) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set-offor made subject to a combination of accounts; or
(iv) enter into any other preferential arrangement having a similar effect,in circumstances where the transaction is entered into primarily as a method of raising Financial Indebtedness or of financingthe acquisition of an asset.
8.2 Financial IndebtednessThe Company must not, without the prior consent of the Creditors Committee, incur any Financial Indebtedness.
8.3 MergersThe Company must not, without the prior consent of the Creditors Committee, enter into any amalgamation, demerger,merger or reconstruction.
8.4 AcquisitionsThe Company must not, without the prior consent of the Creditors Committee, make any acquisition or investment.
8.5 Change of businessThe Company must not, without the prior consent of the Creditors Committee:(a) carry on any business other than the business carried on the Effective Date; or(b) make any substantial change to the general nature of the business of the Company from that carried out on the Effective
Date.
8.6 Disposals(a) Except as set out in paragraph (b) below, the Company must not, without the prior consent of the Creditors
Committee, either in a single transaction or in a series of transactions and whether related or not, dispose of all or anypart of its assets.
(b) Subject to the terms of the PPI Settlement Agreement, paragraph 0 does not apply to any disposal:(i) of up to five percent of the gross amount of the WFS Loan Book as at the Effective Date; or(ii) which is a Permitted Disposal; or
(iii) which is not a disposal of Shopacheck and is made in the ordinary course of trading and, when aggregated withany disposal made under this sub-paragraph (iii) in the previous 12 months, does not constitute a disposal ofassets with a book value of more than £1,000,000.
8.7 LiabilitiesThe Company must not, without the prior consent of the Creditors Committee, incur any liability (other than to the extentthat the new liability replaces an existing liability on the same terms) after the Effective Date if such liability, whenaggregated with all other liabilities incurred by the Company in the previous 12 months, is greater than £1,000,000.
8.8 Operating expenditureThe Company may not, without the prior consent of the Creditors Committee, incur operating expenditure not referred to inthe relevant Forecast in an aggregate amount exceeding £1,000,000 in any 12 month period.
8.9 Excluded LiabilitiesThe Company may not, without the prior consent of the Creditors Committee, incur Excluded Liabilities in an aggregateamount greater than:(a) £130,000,000 in the 12 month period ending on 31 December 2011;(b) £85,000,000 in the 12 month period ending on 31 December 2012; and(c) £60,000,000 in each 12 month period ending on each 31 December thereafter.
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excluding any payments under the PPI Settlement Agreement and Claims Handling Agreement, any payments into the trustfund formed pursuant to clause 5.4.1 of the Scheme and any payments into the Employee Retention Fund.
8.10 LendingThe Company must not be the creditor in respect of any form of credit to any person other than in respect of the WFS LoanBook and the Shopacheck Gross Loan Book and other than in the ordinary course of trading of the Company.
8.11 No DividendThe Company may not:(a) declare, make or pay any dividend (or interest on any unpaid dividend), charge, fee or other distribution (whether in
cash or in kind) on or in respect of its share capital (or any class of its share capital);(b) repay or distribute any dividend or share premium reserve; or(c) pay any management, advisory or other fee to or to the order of the shareholders of the Company.
8.12 Unprotected PPI LiabilitiesThe Company may not after the Effective Date, without the prior consent of the Creditors Committee, pay any amount inrespect of Unprotected PPI Liabilities in excess of £22,500,000.
8.13 Instructing Bovess Limited or Bovess Holding LimitedThe Company may not instruct:(a) Bovess or Bovess Holding, including the giving of its consent pursuant to the articles of association of either of these
companies;(b) any share trustee that holds shares in Bovess Holding, including the giving of its consent pursuant to a share declaration
of trust between the Company and such share trustee; or(c) any corporate services provider engaged to provide services in relation to Bovess or Bovess Holding, including the
giving of its consent pursuant to a corporate services deed between, among others, the Company, Bovess, BovessHolding and such corporate services provider,
in each case in a way that would be adverse to the interests of any of the Scheme Creditors.
8.14 Wind-down(a) Subject to the terms of the Scheme (including without limitation covenants and undertakings of the Company in respect
of expenditures), the Company shall, unless otherwise agreed with the Creditors Committee, seek to developShopacheck with a view to its sale no later than three months after 31 December 2013. The Company shall consult withthe Creditors Committee in connection with such prospective development and sale and any proposed change instrategy.
(b) In light of the contraction of the WFS Loan Book over time, as its receivables are collected, the Company shall reduceand wind down or sell the outgoings of and other expenditure in connection with the WFS Loan Book in as economicaland efficient a manner as is reasonably possible.
8.15 Shopacheck Valuation(a) If requested by the Scheme Supervisors or on any Calculation Date (other than the first Calculation Date) in:
(i) 2011 the Shopacheck Percentage is less than 3 percent; or(ii) 2012 the Shopacheck Percentage is less than 4.5 percent; or(iii) 2013 or later the Shopacheck Percentage is less than 5 percent,
the Company must, within three Business Days of the relevant request or Calculation Date (as the case may be), engageand instruct a valuer and make reasonable endeavours to provide to the Creditors Committee a Shopacheck UpdatedTerminal Value and a Shopacheck Updated Forecast within fifteen Business Days of the date the valuer is engaged.
(b) If the Shopacheck Cash Flow in any Shopacheck Updated Forecast plus the related Shopacheck Updated TerminalValue is less than 100 percent but equal to or greater than 90 percent of the Shopacheck Threshold for the same period,the Company must, within four weeks of the relevant request or Calculation Date (as the case may be), prepare a report(to the satisfaction of the Scheme Supervisors) to the Creditors Committee setting out the reasons for the shortfall and
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the amended strategic proposals and forecasts for Shopacheck. The Creditors Committee may amend the strategicproposals, the covenants or require the Company to accept new strategic proposals for Shopacheck.
(c) If the Shopacheck Cash Flow in any Shopacheck Updated Forecast plus the related Shopacheck Updated TerminalValue is less than 90 percent of the Shopacheck Threshold for the same period, the Company must, within four weeksof the relevant request or Calculation Date (as the case may be), prepare a report (to the satisfaction of the SchemeSupervisors) to the Scheme Creditors setting out the reasons for the shortfall and the amended strategic proposals andforecasts for Shopacheck. The Scheme Creditors may amend the strategic proposals, the covenants or require theCompany to accept new strategic proposals for Shopacheck.
8.16 Plan B Original ForecastIf Plan B is being pursued,(a) WFS and Shopacheck shall, during the three months falling after the date of the appointment of an administrator or
liquidator to Cattles under the Insolvency Act, review the impact during that period on the generation of Actual NetFree Cash of such an appointment;
(b) by no later than two months after the end of the three month period referred to in paragraph (a) above, WFS andShopacheck shall each produce, taking into account the Three Month Review, a financial forecast for WFS andShopacheck (as the case may be) in respect of its Financial Years 2011 to 2013 applicable to Plan B in accordance withthe provisions of Clause 2.2 above as if such provisions applied, mutatis mutandis, to the forecast in this paragraph.Furthermore the acceptance process for such forecast shall be as set out in the provisions of Clause 2.3 as if suchprovisions applied, mutatis mutandis, to the forecast in this paragraph; and
(c) the testing of covenants under this Schedule shall only commence on the first Calculation Date following the later ofthe Effective Date and the completion of the acceptance process referred to in paragraph (b) above.
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ANNEX 1FORM OF CALCULATION CERTIFICATE
[On the letterhead of the Company]
To: The Scheme Supervisors
Dear Sirs,
Capitalised terms defined in the scheme of arrangement have, unless expressly defined in this certificate, the same meaningin this certificate.
This is the Calculation Certificate for the Calculation Date occurring on [ ]. It relates to the Calculation Period endingon [ ].
Relevant figures for the Calculation PeriodForecast Net Free Cash for each QuarterForecast Net Free CashActual Net Free Cash for each QuarterActual Net Free CashQuarterly Free Net Cash PercentageNet Cash Free PercentageCumulative Net Free Cash PercentageShopacheck Percentage
Attached to this certificate are details of our calculations of the above figures.
We hereby confirm that none of the short settlement and other covenants set out in Clause 7 and 8 in Schedule 6 have beenbreached in the Calculation Period.
Yours faithfully,
For the Company
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ANNEX 2FORM OF DIVERGENCE CERTIFICATE
[On the letterhead of the Company]
To: The Scheme Supervisors
Dear Sirs,
Capitalised terms defined in the scheme of arrangement have, unless expressly defined in this certificate, the same meaningin this certificate.
This is the Divergence Certificate in relation to the Updated Forecast dated [ ].
Relevant figures for the Calculation PeriodTotal Net Free Cash PercentageFinancial Year Net Free Cash Percentage
Attached to this certificate are details of our calculations of the above figures.
Yours faithfully,
For the Company
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SCHEDULE 7SCHEMED DIRECTORS
1. Adrian Cummings2. Ian Cummine3. James Corr4. John Blake5. Mark Collins6. Michael Belcher7. Peter Miller
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SCHEDULE 8SCHEMED LEASE LIABILITIES
Any Liability of the Company, including without limitation liability for rent (including sums becoming due as a result of thedetermination of rent review) service charges, insurance rents and other outgoings, liability for repairs and dilapidations, andwhether falling due for payment before, on or after the Record Date and whether payable by the Company as tenant,guarantor, former tenant, former guarantor or otherwise) in relation to any lease which falls into any one or more of thefollowing categories:(a) which has as at the Record Date terminated (whether by effluxion of time, surrender, forfeiture or otherwise);(b) of which the current tenant is not a member of the Group as at 31 October 2010;(c) which has been assigned by the tenant and the assignee is not a member of the Group;(d) of which the tenant has sub-let the whole of the demised premises and the sub-tenant is not a member of the Group; or(e) (whether or not also falling into one of the above categories) one of the following premises:
(i) Building 106, Longmead Road, Bristol;(ii) Part 2nd Floor, Argent Business Centre, Sunderland;(iii) 7-9 Market Buildings, High Road, Southampton;(iv) 18/20 Bridge Street, Musselburgh;(v) Unit C, Neptune Park, Dolphin Way, West Thurrock;(vi) First Floor Rear, 103 Cranbrook Road, Ilford;(vii) Unit 1, Edinburgh Interchange, Edinburgh;(viii) Unit 6, The Griffin Centre, Staines Road, Feltham;(ix) Unit 9B, Darwin Court, Blackpool;(x) Part 6th Floor, East Wing, Trigate, Birmingham;(xi) Suite 2, Arran House Business Centre, Arran Road, Perth;(xii) Unit 3, Blair Court, Clydebank;(xiii) Ground Floor Office, 3 Cecil Street, Margate;(xiv) Part 5th Floor, Davis House, Croydon;(xv) Unit 3, Ensign House, Plymouth; and(xvi) Suite 19, Block B, Brunts Business Centre, Mansfield.
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SCHEDULE 9EXCLUDED TRADE CREDITORS
For the avoidance of doubt, nothing in this Scheme shall prevent any Excluded Trade Creditor from being a Scheme Creditorin respect of Scheme Liabilities.
(VIRGIN) NTL: TELEWEST BUSINESS1ST CREDIT LIMITED2E2 UK LTDA & J PROPERTY MAINTENANCEA&J MINIBUSESA. E. THOMAS & CO.A.L. BOULTON AND SONS LIMITEDAAP3 LTDABBEY MILL BUSINESS CENTREABC CLEANING SERVICESABEL ALARM COMPANY LTDABLE ARROW CLEANING SERVICES LTDABLECLEAN LTDACE CLEANING SERVICESADAM SAMUEL TRADING & CONSULTING SERVICESADT FIRE AND SECURITY PLCADW INVESTMENTS LTDAGILE EDUCATION LTDAGS SECURITY SYSTEMS LTDALARMFAST SUPERVISION SECURITY SYSTEMS LIMITEDALD AUTOMOTIVE LIMITEDALDER KING LLPALIX PARTNERS LTDALL ASPECT WINDOW CLEANING SERVICESALL CLEAR WINDOW CLEANINGALLBRIGHT OFFICE & WINDOW CLEANINGALLEN & OVERY LLPALLEN VENDING SERVICES LTDALLIANCE ENVIRONMENTAL CLEANING SERVICES LTDALMONDALE INVESTMENTS (JERSEY) LTDALTERNATIVE NETWORKS PLCAMBER RETIREMENT BENEFITS SCHEMEAMPM SERVICES NI LTDANGLIA ASSET MANAGEMENT LTDANGLIAN WATER SERVICES LIMITEDANLABY CLEANING SUPPLIES LIMITEDAPPROVED SOLUTIONS LTDAPT SOLUTIONS LIMITED
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AQUITAIN LTDARCA BUSINESS CENTRES LTDARCHGATE CLEANING & SUPPORT SERVICES LTDARENA GROUP LTDARGENT BUSINESS & CONFERENCE CENTREARGOS BUSINESS SOLUTIONS LTDARMSTRONG RECOVERY LTDASHTENNE ASSET MANAGEMENT LTDASPECTIVE LTDASPIRE MONEY LIMITEDASSETWARE TECHNOLOGY LTDASSOCIATED CLEANING CONTRACTORSA-STAT OFFICE TECHNOLOGY LTDATLANTA TRUST LIMITEDATLANTIC GATE PROPERTY PARTNERSHIPATSMITH PROPERTIESATTENBOROUGH DOORS LTDAUDITWARE SYSTEMS LIMITEDAUTOBAR UK (NORTH) LTDAUTOBAR UK (SOUTH) LTDAVENANCE PLCAVOCENT SOFTWARE LTDAVON COMMERCIAL LTDB & L SERVICES LTDB&C WINDOW CLEANING SERVICESBARCLAY ANDERSON LIMITEDBARNET LONDON BOROUGHBARNSLEY METROPOLITAN BOROUGH COUNCILBARRON MCCANN TECHNOLOGY LIMITEDBARRY EVANSBASE SERVICES LIMITEDBATH ROAD NEWSBCSBEETLE BROW LTDBELFRY GRP LTDBELLA MARKETING & DESIGN LTDBEST CONTRACT CLEANING LTDBIDDLE PROPERTYBIG BITE CATERING COMPANYBIRKIN CLEANING SERVICES LTDBIRMINGHAM CITY COUNCILBISBANE HOUSE LTDBISHOPS CLEANING
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BISZSPACE LTDBLACKPOOL COUNCILBLENHEIM CLEANING SERVICESBLUE ARROW LTDBLUE CHIP CUSTOMER ENGINEERING LTDBLUEBELL PROPERTIES LIMITEDBMS CONTRACTS LIMITEDBNP PARIBAS REAL ESTATEBON APPETITBONDS MILL ESTATE LTDBOOKING SERVICES INTERNATIONAL LTDBOSTON BID LEVYBOTTOMLINE TECHNOLOGIES EURPOER LTDBOWESFIELD INVESTMENTS LTDBOYDEN INTERIM LTDBRICKMAN YALE LTDBRIGHT EURPOE LTDBRIGHTPOINT GREAT BRITAIN LTDBRILLIANT INDEPENDANT MEDIABRINSONS CHARTERED SURVEYORSBRISTOL WESSEX BILLING SERVICES LTDBRITANNIA PARKING LTDBRITISH GAS TRADING LIMITEDBRITISH TELECOM PLCBROOK STREET (UK) LTDBROWN & COBRUCE CLEANING SERVICES LTDBUPA OCCUPATIONAL HEALTH LTDBURNHILL BUSINESS CENTRE LTDBURTONS THE DECORATORSBUSINESS OBJECTS UK LTD(SAP UK LTD)BUSINESS STREAMBUSWORTH HARDCASTLE LTDC & C CLEANC H SHORE ESTATES LTDC H WOOD SECURITY (BFD) LTDCABLE & WIRELESS UKCALLCREDIT PLCCANNON HYGIENE LTDCANON UK LTDCAPITOL CLEANING MANAGEMENT LIMITEDCARDIFF EXECUTIVE CENTRES LTDCARLISLE CITY COUNCIL
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CARNELL MOTOR GROUP LTD PENSION SCHEMECARVE DESIGN AND MARKETING LLPCASTLEMAIN DEVELOPMENTS LTDCB RICHARD ELLIS LTDCERIDIAN CENTREFILE LTDCESTRIAN ESTATES LIMITEDCFH TOTAL DOCUMENT MANAGEMENT LIMITEDCHART PROPERTY PARTNERSHIP LTDCHARTIS INSURANCECHECKFREE SOLUTIONS LTDCHEQUERS TRANSPORT SERVICES LTDCHILDCARE VOUCHERS LTDCHRIS LYONSCHRISTIE PROPERTY CONSULTANTSCHUBB ELECTRONIC SECURITY LTDCHUBB FIRE LIMITEDCHUBB SECURITY PERSONNEL LTDCIFAS LTDCITY AND COUNTY OF SWANSEACITY CLEANING CONTRACTS LTDCITY HYGIENE SERVICES LIMITEDCITY NEWSCITY OF EDINBURGH COUNCIL EXCEPT IN THEIR CAPACITY AS LANDLORDS OF UNIT C, NEPTUNEBUSINESS PARK, DOLPHIN WAYCITY OF WAKEFIELD METROPOLITAIN DISTRICT COUNCILCITY PADS SERVICED APARTMENTS LTDCITY PARKING (GLASGOW) LLPCKD GALBRAITHCLASSIC CLEANING SERVICESCLAYCLIFFE OFFICE PARK MANAGEMENT LTDCLAYMORE RECOVERY LIMITEDCLEAN N CLEARCLEANALL ENTERPRISESCLEANSITE SERVICES LTDCLEANTECHCLEGGS SOLICITORSCLIFFORD CHANCE LLPCLIFTON CATERINGCLUTTONS LLPCNC PROPERTY MANAGEMENT LIMITEDCOMBINED PROPERTY CONTROLCOMMERCIAL DEVELOPMENT PROJECTS LTDCOMMERCIAL PROPERTY SOLUTIONS LTD
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COMPANIES HOUSECOMPLETE CLEANING SERVICESCOMPUTER SYSTEMS INTERGRATION LTDCONTRACT CLEANING SERVICES LTDCONTROL RISKS GROUP LTDCOOKE RUDLINGCO-OPERATIVE TRAVEL MANAGEMENTCOOPERS SANDWICH BARCORNER TO CORNERCORNICHE CLEANING SERVICES LTDCORPORATE DIRECT EUROPE LIMITEDCORY ENVIRONMENTAL MUNICIPAL SERVICES LTDCOSTAR UK LTDCOUNTRY ESTATES HAMPSHIRE LTDCOUNTRY HOME WINDOW CLEANINGCOUNTRYWIDE COMMERCIAL SERVICES LTDCOUNTRYWIDE PROPERTY MANGEMENTCOVENTRY CITY COUNCILCRAWLEY BOROUGH COUNCILCREST NICHOLSON REGENERATION LTDCROWN PAINTS LIMITEDCROYDON LONDON BOROUGH DISTRICT COUNCILCROYDON WINDOW CLEANING SERVICECRYSTAL CLEAN SERVICES LIMITEDCRYSTAL CLEANING SERVICESCUMBRIAN XPRESS LTDCUMMINGS INDUSTRIAL & COMMERCIAL WINDOW CLEANINGCYAN POWER LTDCYCLESCHEME LTDCYRIL LEONARDD & M CLEANING SERVICED M GARNHAMD SHAW WINDOW CLEANING SERVICESDAIRY CREST LTDDAIRY FRESH DAIRIES LTDDALKIA LIGHTING & ELECTRICAL SERVICES LTDDAWSONRENTALS TRUCK & TRAILER LTDDB CLEANINGDEBT MANAGEMENT SERVICES LTDDEEPCLEAN PROFESSIONAL CLEANING SERVICESDELI STREETDENPLAN LIMITEDDETAIL CLEAN LIMITED
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DEWSBURY BAPTIST CHURCHDEWSBURY WINDOW CLEANING COMPANY LTDDIAMOND DOMESTICSDICKY DONUTS LTDDIGITAL MUSE LTDDIRECT CLEANING SERVICES (LEEDS) LTDDIRECT GROUP LIMITEDDIRECT SALES ACCREDITATION LIMITEDDLA PIPER RUDNICK LLPDLA PIPER UK LLPDOMESTIC SUPPLIES & SERVICESDOMINO S PIZZA GROUP LIMITEDDONCASTER METROPOLITAN BOROUGH COUNCILDOOBA INVESTMENTS III LIMITEDDOREE BONNER INTERNATIONALDORSET DRYLININGDOVE ASSET MANAGEMENT LTDDP&L TRAVEL LTDDSICMM LTDDTZ DTL LTDDUBLCHECK CLEANING SERVICES LTDDUNDEE CITY COUNCILDWR CYMRU CYF LTDE W TAYLORE.ON ENERGY LIMITEDE.ON UK PLCEAST ARYSHIRE COUNCILEAST LOTHIAN COUNCILEAST RIDING OF YORKSHIRE COUNCILEDDISONS COMMERCIAL (PROPERTY MANAGEMENT) LTDEDEN SPRINGS UK LTDEDF ENERGYEDM GROUP LTDEDMUND KIRBY & SONS MANAGEMENT SERVICESELLISON MOTORS 1EM CLEANERSENTERPRISE LEARNING LTDENVOYEPOCH PROPERTY LIMITEDEPOCH PROPERTY LTD T/A MURPHY YOUNGEQUIFAX PLCEQUIGROUP LTDERNST & YOUNG LLP
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ESSEX & SUFFOLK WATEREUROPEAN COURIER & HI-TECH ORGANISATION LTDEUROPEAN SETTLED ESTATES PLCEVANS EASTSPACE LTDEVERSHEDS LLPEXETER CITY COUNCILEXPERIAN LIMITEDEXPERTO CREDITE LTDEXPRESS FINANCEF.P MAILING (NORTHWEST) LTDFAIRHURST PROPERTY SERVICES LTDFAST CORPORATE SERVICES LTDFDB INTERNATIONAL LTDFG BURNETT LTDFIFE COUNCILFINANCIAL OMBUDSMAN SERVICE LTDFINANCIAL SERVICES AUTHORITYFIS HOLDINGS LTDFISERV (EUROPE)LIMITEDFOCUS PROJECT MANAGEMENT (EUROPE) LTDFOUNDATION FOR CREDIT COUNSELLINGFPD SAVILLS COMMERCIAL LTDFREESTONE PARTNERSFRESH AIR CLEANING SERVICESFRESH AND CLEAN SERVICESFRESHFIELDS BRUCKHAUS DERINGERFRONTIER FINANCE LTDFTI CONSULTING LIMITEDFURMINGER ASSOCIATESG C PROPERTIESG J TREASURE CLEANING CONTRACTORSG4S CASH SOLUTIONS (UK) LTDGALA CLUBGATESHEAD COUNCILGATEWAY2FINANCEGB GROUP PLCGCC PROPERTY CARE LTDGE CAPITAL EQUIPMENT FINANCE LTDGEOPLAN SPATIAL INTELLIGENCE LTDGEMTEC LIMITEDGENIE CLEANING SERVICE LTDGEOGHEGAN BROS. LIMITEDGGR COMMUNICATIONS LTD
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GL HEARN LTDGLADMAN DEVELOPMENTS LTDGLASCOED PROPERTIESGLASGOW CITY COUNCILGLOBAL CLEANING CONTRACTS PLCGOLLEY SLATER LTDGOOD ENERGY GAS LTDGRAHAM & SIBBALDGRAHAMS CLEANERSGRANGE NEWSGREENSTAR ENVIRONMENT LTDGUARDHALL SECURITY SERVICES LIMITEDGVA GRIMLEY LTDHAIRCLOTH WEAVING & FINISHING COMPANY LTDHALLIWELLS LLPHALLS (WORCESTER) LLPHANDS (CLEANERS) LIMITEDHANDS ON CLEANINGHAP LTDHARDWICK NOMINEES LTDHARPER RECRUITMENT LTDHARVEY NASH PLCHARWOODS CLEANING CTRS. LTDHAWKSWORTH CLEANING SERVICESHAYES STAFF RECRUITMENT LIMITEDHAYS PHAMRA LTDHAZEL WINDOW CLEANERS LIMITEDHDAK COMMERCIAL PROPERTY CONSULTANTHEAD OFFICE CLEANING SERVICESHEWITT ASSOCIATES LTDHFGL LTDHIGH FORCE COMMERCIALHIGH STREET VOUCHERS LTDHIGHSHINE LTDHILLERSDEN SECURITIES LTDHILLSIDE SERVICES LIMITEDHMLAHOMETRACK DATA SYSTEMS LTDHOUNSLOW BOROUGH COUNCILHPI LIMITEDHTS ESTATES LTDHUNTSWOOD CTC LTDHUNTSWOOD RESOURCES LTD
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HXRUK (MIDLANDS) LIMITEDHXRUK 3 (EDINBURGH) LTDHYPERCLEANIBM UK FINANCIAL SERVICES LIMITEDICFL PROPERTY LTDIDM TRAINING LTDIGROX LIMITED (CONNAUGHT COMPLIANCE)IKON OFFICE SOLUTIONS PLCINCOMS SYSTEMS LTDINFOLINE LLR LTDINGLE BHATTI & CO.INITIAL WASHROOM SOLUTIONS (RENTOKIL INITIAL SERVICES LTD)INNES ENGLAND COMMERCIAL PROPERTY CONSULTANTSINSIGHT DIRECT (UK) LTDINSPACE PARTNERSHIPS REGENERATION & NEW HOMES LTDINTEGRALIS LTDINTEGRATED CLEANING MANAGEMENT LTDINTELECT RECRUITMENT PLCINTERCLEAN (DONCASTER) LTDINTERGRATED CLEANING MANAGEMENT LTDINTERNATIONAL COMPLIANCE TRAININGINTRUM JUSTITIA LTDINVENSYS TECHNOLOGY LTDIPORT4BUSINESS LTDIPSWICH BOROUGH COUNCILIRVINE TAYLOR LTDIRWIN MITCHELL SOLICITORSITC INFOTECH LTDJ & J WINDOW CLEANING SERVICESJ & R CLEANING SERVICESJAMES ANDREW RSW LTDJAMES BARR LTDJAMES PATRICKJAMODATJAYBEE CLEANING SPECIALISTS LTDJB CLEANING & MANAGEMENT SERVICES LTDJCW SEARCH LTDJEEVES COURIERS LTDJELSON LTDJLEC ELECTRICAL LIMITEDJOHN CHIVERS COMMERCIAL LTDJOHN MCKEE & SON SOLICITORSJOHN MOFFAT WINDOW CLEANING
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JOHN SAVOY & SONJOY FERGUSON AND ASSOCIATES LTDJST FINANCIAL SOLUTIONS LTDJUST KLEEN SERVICESK T PROPERTIESKALAMAZOO REYNOLDS LIMITEDKAPLAN FINANCIALKB CLEANING CONTRACTORSKDC LTD ( MINSTER LIVERPOOL)KDS DISTRIBUTION LTDKEN BATTY CHARTERED SURVEYORSKENMORE CLEANING SERVICESKENNEDYSKENT COMMERCIAL (THANET) LLPKETTERING OFFICE CLEANERSKING STURGE LLPKINGSTON COMMUNICATIONS PLCKINSLEY ALLEN INTERNATIONAL LTDKIRKLEES METROPOLITAN COUNCILKIRSOP & COMPANY LTDKNOWSLEY BOROUGH COUNCILKPMGKWB PROPERTY MANAGEMENT LTDL ROBINSONL&E DEBT RECOVERY LTDLAMBERT SMITH HAMPTONLAND REGISTRY COMMERCIAL SERVICESLAND SECURITIES PROPERTIES LTDLANDROUND MARKETING LTDLANSDOWNE FINANCIAL MANAGEMENT LTDLAWRENCE & WIGHTMANLAYBROOK INVESTMENTS LTDLCK ASSOCIATESLCP ESTATES LIMITEDLEBANON PROPERTY TRUSTLEE BARON GROUP LTDLEEDS CITY COUNCILLEES CLEANING CONTRACTORS LLPLEGAL RECOVERIES & COLLECTIONS LTDLEGAT OWEN LTDLEWIS & TUCKER MANAGEMENTLEWIS SILKIN LLPLEXISNEXIS UK
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LG MATON HOLDINGS LTDLISA REDMANLITIGATION & ENFORCEMENT LIMITEDLITTLE GEM LULU LTDLLEWELLYN & COMPANYLOMOND HILLS WATER POWWOWLONDON & ASSOCIATED PROPERTIES PLCLONDON BOROUGH OF ENFIELDLONDON BOROUGH OF REDBRIDGELONDON PARKING CONTROL LTDLOXTON DEVELOPMENTS LTDLRS RECOVERY SERVICESLUTON BOROUGH COUNCILLUXURY ESTATES LIMITEDLYNNE EDWARDSM HAIGHM.A.R. CONTRACT CLEANING & SUPPORT SERVICES LTDM.W.J. (HULL) LTDMACH ONE LOGISTICS LTDMACILDOWIE ASSOCIATES LIMITEDMAIL BOXES ETCMAK PROPERTY INVESTMENTSMALCOLM HOLLIS LLPMANAGED COMMUNICATIONS LTDMANHIEM AUCTIONS LTDMANHIEM AUCTIONS LTDMANSFIELD DISTRICT COUNCILMARCUS KING & COMARK ATKINS ASSOCIATESMARK WALKER LTDMARSHALL CLARK SERVICE CHARGE A/CMARSTON GROUPMASON PHILIPS LTDMASTERLEASE LTDMATHIAS PERRYMAYFAIR PROPERTY MANAGEMENT CO (DERBY) LTDMB LOCKING LOGISTICS GROUP LTDMCCONNELL MARTIN PROPERTY CONSULTANTSMEDWAY CONSULTING LTDMEETING ZONE LTDMERIDIAN SERVICES (TRACING)LIMITEDMERIT INVESTMENTS & PROPERTIES LTDMETERING SERVICES (E.ON UK ENERGY SERVICES LTD)
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MG WINDOW CLEANINGMICHAEL PAGE INTERNATIONAL RECRUITMENT LTDMICHAEL POLLARD LTDMICROSOFT IRELAND OPERATIONS LTDMIDLANDS DEBT RECOVERY LTDMILLER CLEANMILLFIELD ECO PROJECTSMILTON KEYNES COUNCILMINICO PROPERTIES LTDMINSTER CLEANING SERVICESMIRAGE CLEANING SERVICESMITIE CLEANING (NORTH) LIMITEDMJS CLEANING SERVICESMKDP LLP COLLECTIONS BUT NOT IN RESPECT OF ASSIGNMENT OF DEBT DATED 5 MARCH 2010 FROMWELCOME FINANCIAL SERVICES LTDMOLIVIER MANAGEMENT LTD T/A HALLMARMONISTONE LTDMORGAN WILLIAMS COMMERCIAL LLPMORNING NEWS DELIVERIES 2 UMORRIS VERMAPORT LTDMORTGAGE & PROPERTYMR & MRS SEESURRUNMR D J DENNISMSM HYGIENE LTDN I P CLEANING CONTRACTS LTDN WADENAMESCO LTDNATIONAL CAR PARKS LTDNCC SERVICES LTDNEEB HOLDINGS LIMITEDNELSON BAKEWELL LTD (184)NELSONS SOLICITORS LLPNEOPOST LIMITEDNET DIMENSIONS (UK) LTDNETNAMES LTDNETWORK VENTURES LIMITEDNEW COLLEGE DURHAMNEWCASTLE CITY COUNCILNEWLIFE CLEANING SYSTEMS LIMITEDNEWMAN STONE LTDNEWS EXTRANIE ENERGY LIMITEDNIMANS LIMITED
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NINEYARD LTDNOBLE HARRIS PROPERTY SERVICES LTDNORAM INTERNATIONAL INCNORTH ARYSHIRE COUNCILNORTH EAST LINCOLNSHIRE COUNCILNORTHERN ENERGYNORTHERN IRELAND ELECTRICITY PLCNORTHPORT DEVELOPMENTS LIMITEDNORTHUMBRIAN WATER LIMITEDNOTTINGHAM CITY COUNCILNOTTINGHAM INDUSTRIAL CLEANERS LTDNTL BUSINESS LIMITEDOBLONG CONSULTING LTDOCS GROUP UK LTDOFFICE DIAMONDSOFFICE TEAM LTDOLIVER MARKETING LTDOLYMPIA COMMERCIAL CLEANING SERVICEOPAL TELECOMOPP LIMITEDOPTIC ASSET MANAGEMENT LTDORACLE CORPORATION UK LIMITEDORANGE PERSONAL COMMUNICATIONS LTDORMERODS SOLICITORSOSNEY MEDIA LIMITEDOVERDRIVEOYEZ PROFESSIONAL SERVICES LTDOYEZ STRAKER OFFICE SUPPLIES LTDP & A RECEIVABLES PLCP M SOLUTIONSPAGE PERSONNEL (UK) LTDPARAGON (A DIVISION OF NATIONAL FLOORCOVERINGS LTD)PARASOL LIMITEDPARITY TRAINING LTDPARK DEVELOPMENTS (REGISTERED TRADING NAME SORREC LTD)PARK INNPAUL WOODPEARL & COUTTS LTDPERFORMING RIGHT SOCIETY LTDPERTH & KINROSS COUNCILPETER MADDOX AND ASSOCIATES LTDPHHR LTDPHILL COLLINS DAIRY LTD
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PHOENIX BEARD PROPERTY CONSULTANTSPHOENIX NATURAL GAS LTDPHONES ON FINANCE LTDPHONOGRAPHIC PERFORMANCE LIMITEDPHS GROUP PLCPICKERINGS EUROPE LIMITEDPICKERSGILL CONSULTANCY & PLANNING LTDPICTON JONES & CO (PROPERTY CONSULTANTS) LTDPINNACLE CLEANING SERVICES LTDPIONEER QUALITY SERVICESPLANT PLAN & COPLYMOUTH CITY COUNCILPOPPIES DURHAMPORTSMOUTH WATERPOSSIL RENEWAL LTDPOWERATIX LTDPPH COMMERCIAL LLPPRACTICAL LAW COMPANY LTDPREMIER CLEANING & SERVICE (NORTHERN)PRISTINE CLEAN SERVICES LTDPROACTIVITI LTDPROCARE CLEANING MANAGEMENTPROCURA GROUP LTDPRUPIM LTDPURE PROMOTER LTDPVA ANALYTICS LTDQA-IQ LTDQAS LIMITEDQUALITY COMMERCIAL PROPERTIESQUALITY PERSONNEL LTDQUALYS LTDQUANTICA TECHNOLOGY LIMITEDR H PROPERTY MANAGEMENT LIMITEDR J GILPINR TURNBULLRAC ENTERPRISES LTDRAC RISK MANAGMENTRAM RECOVERYRAPIDE COMMUNICATIONS LTDREACH CLEANING & WASTE MANAGEMENT LTDRECRUITACTIVE LTDRED LETTER DAYS LTDREED PROPERTY LTD
364
REEVE & PARTNERS LTDREGENCY (AYRSHIRE) LTDREGENT HOUSE PROPERTY MANAGEMENT COREGISTERS OF SCOTLANDREMPLOY LIMITEDRESOURCE (NI) LTDRESPOND GROUP LTDRF WARDLE LTDRH PROPERTY MANAGMENT LTDRICHARD HILSON RISK MANAGEMENT SERVICESRICHARD NELSONRICOH UK LTDRIVERSIDE INVERCLYDE (PROPERTY HOLDINGS) LTDRMS CONSULTING LTDRN CLEANING SERVICESRO REGIONAL PROPERTIES LTDROBERT HALF LTDROBERT MEATON & COROBERT T LEE & ASSOCIATES LTDROMEC SERVICES LTDROSS & LIDDELL LIMITEDROSS CLEANING SERVICESROYAL MAIL GROUP LTDRUSH I.T SERVICES LTDRUSHCLIFFE BOROUGH COUNCILRUTLEDGE INVESTMENTSRVB INVESTMENTS LIMITEDRWS LTDS PAGUDS.C.M WINDOW CLEANING SERVICESSAFETY MATTERSSAHEED PROPERTY MANAGEMENT SERVICES & INVESTMENTSSAINSBURYS SUPERMARKETS LTDSALANS LLPSANDERSON WEATHERALLSANDWELL METROPOLITAN BOROUGH COUNCILSAS SOFTWARE LTDSAVILLS (L&P) KTDSAVILLS COMMERCIAL LTDSCALA INTERNATIONAL LTDSCOREX (UK) LIMITEDSCOTIA RM LTDSCOTTISH POWER ENERGY RETAIL LTD
365
SCREWFIX DIRECT LTDSEBEL HOUSE (BOOTLE) LTDSEGRO PROPERTIES LTDSERVICEMASTERSETON LIMITEDSEVERN TRENT WATER LIMITEDSHINE TIMESHINERS CLEANING CONTRACTORS LTDSHRED-IT LIMITEDSIA GLOBAL COMPLIANCE LIMITEDSIAS FM LTDSIEMENS ENERGY SERVICES LTDSIEMENS FINANCIAL SERVICES LTDSIMON DEWHURST PHOTOGRAPHY LIMITEDSIMONS CLEANING SERVICESSIMPLY HEALTH GROUP (HSA)SIMPSON ASSOCIATES INFORMATION SERVICES LTDSIMTOR LIMITEDSITA UK LIMITEDSITEX ORBIS LTDSKILLS HOLIDAYS LTDSLFC SERVICES COMPANY (UK) LTDSMA LIMITEDSMC LTD T/A CHUBB EMERGANCY RESPONSE (SECURITY MONITORING CENTRES LTD)SMITH & SONS PROPERTY CONSULTANTSSOLO SERVICE GROUPSOLWAY WINDOW CLEANINGSOUTH DERBYSHIRE DISTRICT COUNCILSOUTH GLOUCESTERSHIRE COUNTY COUNCILSOUTH STAFFORDSHIRE WATER PLCSOUTH WEST WATER LTDSOUTHAMPTON CITY COUNCILSOUTHERN ELECTRICSOUTHERN WATERSOUTHSIDE CARSSPARKLES SCOTLAND LTDSPARKLY CLEANINGSPENCER BUSINESS PARKS LTDSPICK N SPAMSPOTLESS CLEAN LIMITEDSPOTLESS COMMERCIAL CLEANING LTDSPSS UK LTDSQUIRREL STORAGE LTD
366
SSP LTDSTANLEY WINDOW CLEANING CONTRACTORSSTEF PROPERTY MANAGEMENT LTDSTEPHEN DODDSSTILES HAROLD WILLIAMSSTORTEC SERVICES LTDSTRUTT & PARKERSUNDERLAND CITY COUNCILSUPERIOR CLEANING LIMITEDSWAEFAS LTDSWAN PARK LTDSWARBRICKSSYNECTICS SOLUTIONS LTDT A CATCHPOLET CURRIE WINDOW CLEANINGT V LICENSINGTAG ESTATES LTDTALKINGTECH UK LTDTAMAR COM LIMITEDTAYLOR AND EMMET LLPTAYLOR HARRISONTCS PROPERTY MANGEMENT LTDTD TRAVEL GROUPTDX GROUP LTDTELECOMS WORLD PLCTHAMES VALLEY CLEANINGTHAMES WATER UTILITIES LIMITEDTHANET DISTRICT COUNCILTHE DANWOOD GROUP LTDTHE HIGHLAND COUNCILTHE JDS GROUP LTDTHE KNOWLEDGE ACADEMY LTDTHE LEWIS GROUP LIMITEDTHE LUNCH BOXTHE MALL CORPORATION LTDTHE REAL SANDWICH COTHE ROYAL INSTITUTE OF CHARTERED SURVEYORSTHE TRAVEL COMPANY LTDTHE TRUSTEES OF SORREC LIMITEDTHREE 60 PROPERTY INVESTORS LIMITEDTHURROCK COUNCILTIER 1 ASSET MANAGEMENT LTDTMP LIMITED
367
TNT UK LTDTOMAHAWK HOTELS LTDTOWERS WATSONTRAFFORD PARK CLEANING CO LTDTRILLIUM PROPERTY SERVICES LTDTRINITY CONTRACT CLEANING SERVICES LTDTRUSTEES OF CHARLES CLOWES PENSION FUNDTURNER & BUDD CLEANING SERVICES LTDTURNER & CO LTDUK CHANGESUK MAIL LTDULTIMATE LAW LTDUNITED UTILITIES WATER PLCUNIVERSAL SERVICESVEOLIA WATER CENTRAL LTDVINE PROPERTY MANAGEMENTVISION EXPRESSVODAFONE LTDVOICESAGE GLOBAL HOLDINGS LTDVRANIC & HOWLEYW B W LUCASW MEMORYWADESON CLEANING SERVICESWADHAM & ISHERWOOD MANAGEMENT LTDWALKER MORRIS SOLICITORSWALKERSCLEAN LTDWATSON 24 HOUR BREAKDOWN RECOVERYWELCOME SOFTWARE PLCWEST DUNBARTONSHIRE COUNCILWEST LANCASHIRE DISTRICT COUNCILWEST LOTHIAN COUNCILWESTMINSTER BUILDING CO LTDWF DAVIDSONWHITTLE JONES GROUP LIMITEDWILLCLEAN INDUSTRIAL SERVICES LTDWILLMOTT DIXON LTDWILLOW MANAGEMENTWINDSOR CATERING PARTNERSWINDSOR CME LIMITEDWINDSOR RACING LTDWOOD STREET NEWSWOODHEAD INVESTMENTS & DEVELOPMENT SERVICES LTDWORKMAN & PARTNERS
368
WORKSPACE MANAGEMENT LTDWRIGHTWAY OFFICE CLEANING LTDX RAY CONSULTANCY LTDXEON FINANCIAL SERVICES LTDYES LOANS LTDYORKSHIRE WATERYOUNG & PEARCE SOLICITORS
369
SCHEDULE 10FORM OF SUBSIDIARY DEED OF RELEASE
Dated:
Between:
(1) CATTLES PLC
and
(2) THE RELEASED GROUP COMPANIES
(as defined herein)
SUBSIDIARY DEED OF RELEASE
370
This deed is dated
PARTIES:(1) Cattles plc, a company incorporated under the laws of England and Wales, with company number 00543610 (Cattles);
and(2) any of the companies listed in the schedule to this Deed (the Released Group Companies).
together, the Parties and each a Party.
BACKGROUND:(A) Cattles is a public limited company, whose securities are listed on the main market of the London Stock Exchange
(although they are currently suspended), which is the ultimate parent company of the Cattles Group whose business hasfocussed on providing secured and unsecured personal loans to individuals who may not have access to mainstreamfacilities, usually due to shortcomings in their employment, residency or credit histories.
(B) The Releasing Group Companies are all members of the Cattles Group. The Released Group Companies do not includeCattles, WFSL (as defined below) or Cattles Properties (Ruddington) Limited, which are also members of the CattlesGroup.
(C) The Cattles Group is in the process of effecting a financial restructuring, and as part of that restructuring it is proposedthat WFSL will enter into the WFSL Scheme.
(D) In the course of the operations of the Cattles Group certain liabilities are owed by the Released Group Companies toCattles.
(E) The proposed WFSL Scheme requires that Cattles s claims against the Released Group Companies in respect of theliabilities owed by the Released Group Companies to Cattles be released.
(F) Under the WFSL Scheme, the WFSL Scheme Supervisor is authorised to enter into this Deed on behalf of Cattles.
AGREED TERMS:1. DEFINITIONS AND INTERPRETATION
1.1 In this Deed, unless the context otherwise requires, the following words and expressions have the following meanings:
Cattles means Cattles plc, a company incorporated in England and Wales, with company number 00543610;
Cattles Group means the group of companies of which Cattles is the ultimate parent company;
Excluded Liabilities means any of the Liabilities due from TLG to Cattles under the terms of the TSA as at the EffectiveDate;
Parties means the parties to this Deed;
TSA means the transitional services agreement dated 3 July 2009 between, among others, Cattles and TLG;
WFSL means Welcome Financial Services Limited, a company incorporated in England and Wales, with company number00133540;
WFSL Scheme means the scheme of arrangement under Part 26 of the Companies Act 2006 between WFSL and the SchemeCreditors, sanctioned by the Court prior to the date of this Deed; and
WFSL Scheme Supervisor means any person appointed as scheme supervisor under the WFSL Scheme.
1.2 Terms and expressions defined in the Scheme shall have the same meanings when used in this Deed unless otherwiseprovided or the context otherwise requires.
1.3 In this Deed, unless the context otherwise requires or otherwise expressly provides for:(a) references to clauses are references to clauses of this Deed;(b) references to a person include references to an individual, firm, partnership, company, corporation, unincorporated
body of persons or any state or state agency;
371
(c) references to a statute or statutory provision include references to the same as subsequently modified, amended or re-enacted from time to time;
(d) the singular includes the plural and vice versa and words importing one gender shall include all genders; and(e) headings to clauses are for ease of reference only and shall not affect the interpretation of this deed.
2. EFFECT OF THIS DEED
The parties hereby agree that this Deed shall become fully and effectively binding upon them on date on which it is signed byeach of the Parties individually.
3. RELEASE
From the date that this Deed becomes effective in accordance with clause 2 above, Cattles releases, terminates and dischargesany and all of the Liabilities owed to it by each of the Released Group Companies (other than the Excluded Liabilities).
4. SEVERABILITY
If any provision of this Deed is found to be void or unenforceable, that provision shall be deemed to be deleted from this deedand the remaining provisions of this deed shall continue in full force and effect and the Parties shall use their respectivereasonable endeavours to procure that any such provision is replaced by a provision which is valid and enforceable, andwhich gives effect to the spirit and intent of this deed.
5. ENTIRE AGREEMENT
5.1 This Deed and the Scheme constitutes the entire understanding and agreement between the Parties in relation to itssubject matter.
5.2 Each Party acknowledges that it has not entered into this Deed in reliance wholly or partly on any representation orwarranty made by or on behalf of the other Party (whether orally or in writing) other than as expressly set out in this Deed.
6. GOVERNING LAW AND JURISDICTION
This Deed shall be governed by, and construed in accordance with, English law. Any dispute arising out of or in connectionwith, or concerning the carrying into effect of, this Deed shall be subject to the exclusive jurisdiction of the High Court ofJustice of England and Wales, and the Parties hereby submit to the exclusive jurisdiction of that court for these purposes.
7. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999The Parties agree that the terms of this Deed are not enforceable by any third party under the Contracts (Rights of ThirdParties) Act 1999.
8. FURTHER ASSURANCE
8.1 The Parties shall deliver or cause to be delivered such instruments and other documents at such times and places as arereasonably necessary or desirable, and shall take any other action reasonably requested by the other Party, for the purpose ofputting this Deed into effect.
8.2 Each of the Parties appoints a WFSL Scheme Supervisor as its attorney for the purpose of all actions required to beperformed by it in accordance with this Deed and authorises the WFSL Scheme Supervisor to complete all such actions as aredetermined by the WFSL Scheme Supervisor in its absolute discretion to be necessary for such purposes.
9. COUNTERPARTS
This Deed may be executed in counterparts, and by each Party on separate counterparts. Each counterpart is an original, butall counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this Deed by e-mailattachment or telecopy shall be an effective mode of delivery.
10. VARIATION
Any variation of this Deed shall be in writing and signed by or on behalf of each Party.
THIS DEED has been executed and delivered as a deed on the date stated at the beginning of this Deed.
372
SIGNATURES
EXECUTED as a DEED by )[THE SCHEME SUPERVISOR] )as attorney for [CATTLES] in the )presence of: )
Witness Signature:Name:Address:
EXECUTED as a DEED )by [Insert names of relevant Released )Group Companies] )acting by )
Witness Signature:Name:Address:
373
SCHEDULERELEASED GROUP COMPANIES
C L Finance Limited (company number 01108021)Cattles Holdings Limited (company number 05976786)Compass Credit Limited (company number 00235117)Dial4aloan Limited (company number 03958533)Ewbanks Mail Order Limited (company number 00457490)Lewis Group (Holdings) Limited (company number SC154199)Moneytopia bank Limited (company number 00215285)Moneytopia Limited (company number 00652955)Progressive Financial Services Limited (company number 01682540)Recordpoint Limited (company number 02906681)Shopacheck Limited (company number 00274611)Statusclaim Limited (company number 02903444)Supremeaccess Limited (company number 02913219)U.K. Debt Defaulters Register Ltd (company number SC170934)Welcome Insurance Services Limited (company number 02230654)Welcome Retail Services Limited (company number 00226015)Westernissue Limited (company number 02930977)
374
SCHEDULE 11AGREED CLAIMS IN ACCORDANCE WITH CLAUSE 3.7.2
1. The sums below show the agreed Liabilities (excluding any accrued interest) of the Scheme Creditors whose Liabilitiesarise under or in connection with (i) the Facilities Agreements, (ii) the Note Agreements, (iii) the Guaranteed HedgeAgreements and (iv) the Settlement Agreement as at 31 October 2010.
2. The sums below show the principal amount outstanding (for the avoidance of doubt the principal amount does not includeany compounding of interest) for each of the Scheme Creditors referred to in paragraph 1 above as at 31 October 2010 less anestimated maximum distribution to each of those Scheme Creditors from the Escrow Account.
3. At the time of the launch of this Scheme, the calculation methodology for distributions to each of the Scheme Creditorsreferred to in paragraph 1 above from the Escrow Account was still being determined in accordance with the terms of theSEA. The distribution amounts included in the table below reflect the estimated highest possible returns to each of theScheme Creditors referred to above under the range of methodologies currently being considered.
4. For the avoidance of doubt, the inclusion below of such amounts is without prejudice to the rights of each individualScheme Creditor and does not constitute an acknowledgement by any Scheme Creditor of the claims of any other SchemeCreditor in connection with the Escrow Account. Similarly, the figures included in the table below were not intended toaffect and shall not affect the final determination of the amounts to be distributed to each of the Scheme Creditors referred toin paragraph 1 above from the Escrow Account in accordance with the terms of the SEA.
5. Subject to the Settlement Agreement, nothing in this Scheme, in particular in clause 3.7.2 or this Schedule, shall (i) preventthe relevant Scheme Creditors making any other Submitted Scheme Claims arising out of or in connection with either theFacilities Agreements, the Note Agreements, the Guaranteed Hedge Agreements or otherwise or (ii) constitute an admissionas to the basis upon which an Ascertained Scheme Claim or any other claim has been or should be calculated.
375
£75m and£135m bilateral
Principal
as at31 October
2010
£500msyndicate
Principal
as at31 October
2010
£800msyndicate
Principal
as at31 October
2010
£215msyndicate
Principal
as at31 October
2010
GuaranteedHedge
Counterparty
Principal
as at31 October
2010
Total claims beforeSEA escrowadjustment
Principal
as at31 October
2010
Estimatedmaximum
possible returnfrom SEA
escrow
Total Claims
The Royal Bankof Scotland Plc 109,432,332.32 35,698,340.02 53,456,364.45 50,851,207.68 249,438,244.47 (17,798,631.82) 231,639,612.65Allied IrishBanks, Plc 17,849,170.01 28,510,061.04 46,359,231.06 (3,341,480.19) 43,017,750.87Banco Poplare Sc,London Branch 3,569,834.00 3,563,757.64 7,133,591.64 (514,358.41) 6,619,233.23The Governor andCompany of theBank of Ireland 17,818,788.15 17,818,788.15 (1,282,813.59) 16,535,974.56Bank of Scotlandplc 17,849,169.95 21,382,545.78 39,231,715.72 (2,828,354.75) 36,403,360.98Bank of Taiwan,London Branch 7,139,668.01 7,127,515.26 14,267,183.26 (1,028,716.81) 13,238,466.45Barclays Bank Plc 7,406,536.68 7,406,536.68 (533,212.80) 6,873,323.89BAWAG P.S.K.Bank für Arbeitund WirtschaftundÖsterreichischePostsparkasseAktiengesellschaft 17,849,170.01 17,849,170.01 (1,288,978.45) 16,560,191.56BayerischeLandesbank,London Branch 17,849,170.01 28,510,061.04 46,359,231.06 (3,341,480.19) 43,017,750.87Crédit AgricoleCorporate &Investment Bank 28,510,061.04 28,510,061.04 (2,052,501.74) 26,457,559.31Danske Bank A/S 14,279,336.01 42,765,091.57 57,044,427.58 (4,109,935.37) 52,934,492.21DZ Bank AG,London Branch 3,569,834.00 3,563,757.63 3,388,817.74 10,522,409.37 (756,418.03) 9,765,991.34Emirates BankInternationalPJSC 3,569,834.00 7,127,515.26 10,697,349.25 (770,921.12) 9,926,428.13
376
£75m and£135m bilateral
Principal
as at31 October
2010
£500msyndicate
Principal
as at31 October
2010
£800msyndicate
Principal
as at31 October
2010
£215msyndicate
Principal
as at31 October
2010
GuaranteedHedge
Counterparty
Principal
as at31 October
2010
Total claims beforeSEA escrowadjustment
Principal
as at31 October
2010
Estimatedmaximum
possible returnfrom SEA
escrow
Total Claims
First CommercialBank Ltd.,London Branch 7,139,668.01 7,139,668.01 (515,591.38) 6,624,076.63Fortis Bank, UKBranchHSBC Bank plc 28,558,672.02 42,765,091.57 33,888,177.35 4,683,502.12 109,895,443.06 (7,835,540.42) 102,059,902.64Hua NanCommercial BankLtd., London Branch 3,569,834.00 3,569,834.00 (257,795.69) 3,312,038.31Landesbank Baden-Württemberg 14,255,030.52 14,255,030.52 (1,026,250.87) 13,228,779.65Lloyds TSB Bank 35,698,340.02 42,765,091.57 78,463,431.58 (5,656,709.51) 72,806,722.07Malayan BankingBerhad, LondonBranch 7,127,515.26 7,127,515.26 (513,125.43) 6,614,389.82National AustraliaBank LimitedA.B.N. 12 004 044937 24,988,838.02 28,510,061.04 20,123,551.16 73,622,450.22 (5,294,475.30) 68,327,974.92National Bank ofEgypt (UK) Limited 7,127,515.26 7,127,515.26 (513,125.43) 6,614,389.82NM Rothschild &Sons Limited 5,354,751.01 5,354,751.01 (386,693.54) 4,968,057.48State Bank Of India,London Branch 3,569,834.00 7,127,515.26 10,697,349.25 (770,921.12) 9,926,428.13Sumitomo MitsuiBanking CorporationEurope Limited 14,255,030.52 14,255,030.52 (1,026,250.87) 13,228,779.65The Bank Of Tokyo-Mitsubishi Ufj, Ltd 3,569,834.00 5,156,663.17 8,726,497.17 (629,035.17) 8,097,462.01Morgan StanleyInternational Ltd 559,170.55 559,170.55 (40,255.91) 518,914.63
377
£75m and£135m bilateral
Principal
as at31 October
2010
£500msyndicate
Principal
as at31 October
2010
£800msyndicate
Principal
as at31 October
2010
£215msyndicate
Principal
as at31 October
2010
GuaranteedHedge
Counterparty
Principal
as at31 October
2010
Total claims beforeSEA escrowadjustment
Principal
as at31 October
2010
Estimatedmaximum
possible returnfrom SEA
escrow
Total Claims
Deutsche Bank AG 2,219,523.30 1,289,168.35 3,508,691.66 (253,093.01) 3,255,598.65Burlington LoanManagement Ltd 7,246,763.02 7,246,763.02 (523,325.25) 6,723,437.77York CapitalManagement LP 15,722,015.90 31,539,612.34 5,183,192.89 52,444,821.13 (3,776,201.63) 48,668,619.50JP Morgan ChaseBank, N.A 9,739,921.72 18,086,536.84 8,268,397.36 36,094,855.92 (2,596,060.97) 33,498,794.94J.P. MorganSecurities Limited 1,098,899.92 740,653.66 1,839,553.57 (132,678.38) 1,706,875.20MarathonLuxembourg Sarl 8,273,168.50 7,451,429.41 15,724,597.91 (1,133,891.88) 14,590,706.03Monarch MasterFunding LLC 741,916.51 741,916.51 (53,577.53) 688,338.98Canyon CapitalFinance Sarl 38,848,890.18 67,900,434.41 23,512,368.89 130,261,693.49 (9,373,238.34) 120,888,455.15Goldman SachsInternational 6,750,749.12 6,750,749.12 (486,001.21) 6,264,747.91BNP Paribas S.A.,London Branch 21,419,004.02 16,196,594.63 37,615,598.65 (2,712,802.46) 34,902,796.19ACMO S.a.r.l 142,550.31 142,550.31 (10,262.51) 132,287.80Saberasu JapanInvestments II B.V 712,751.52 712,751.52 (51,312.54) 661,438.98
109,432,332.32 356,983,400.16 570,201,220.85 145,215,713.06 4,683,502.12 1,186,516,168.51 (85,216,019.62) 1,101,300,148.89
Note: The estimated maximum return to the banks as a whole (excluding the Guaranteed Hedge Counterparty) from the SEA Escrow is split between each bank facilityusing the 9 March 2009 total claims of each bank facility. The total for each bank facility is split between the banks participating in the relevant facility pro-rata to thebanks 31 October 2010 claims in the relevant facility shown above
378
Holder Series Principal Make whole SettlementAmount
Total claims(excluding
accrued interest)before SEA
escrowadjustment
Estimatedmaximum possiblereturn from SEA
escrow
Total claims(excluding
accured interest)£
As at 31 October2010
As at 31 October2010
As at 31 October2010
As at 31 October2010
Anchorage Illiquid Opportunities OffshoreMaster, L.P. 12,465,376.94 1,354,601.23 1,877,149.01 15,697,127.18 (1,050,126.93) 14,647,000.25Aviva Annuity UK Limited 24,777,452.02 7,508,236.72 841,799.16 33,127,487.89 (1,906,563.10) 31,220,924.79Aviva Life & Pensions UK Limited 24,457,886.65 8,492,627.78 1,097,654.04 34,048,168.47 (1,997,457.37) 32,050,711.11Corporate Debt Opportunities Fund L.P. 1,521,640.72 214,298.30 209,832.84 1,945,771.87 (125,881.18) 1,819,890.69Gateway Recovery Trust 6,340,169.68 892,909.59 874,303.51 8,107,382.78 (524,504.93) 7,582,877.86GLG European Distressed Fund 1,521,640.72 214,298.30 209,832.84 1,945,771.87 (125,881.18) 1,819,890.69GLG Market Neutral Fund 3,043,281.45 428,596.60 419,665.69 3,891,543.74 (251,762.37) 3,639,781.37Hartford Life Insurance Company 1,150,059.58 99,598.09 183,198.72 1,432,856.39 (98,081.34) 1,334,775.05Marathon Credit Dislocation Fund LP 1,521,640.72 214,298.30 209,832.84 1,945,771.87 (125,881.18) 1,819,890.69Pacific Life Insurance Company 9,857,654.93 853,698.07 1,570,274.93 12,281,627.93 (840,697.32) 11,440,930.61Penteli Master Fund Ltd 507,213.57 71,432.77 69,944.28 648,590.62 (41,960.39) 606,630.23Prudential Retirement Insurance and AnnuityCompany 6,340,169.68 892,909.59 874,303.51 8,107,382.78 (524,504.93) 7,582,877.86State Street Nominees (Henderson) 4,097,411.77 339,151.49 237,560.29 4,674,123.55 (287,114.50) 4,387,009.04The Prudential Insurance Company ofAmerica 16,100,836.55 1,394,373.53 2,564,782.41 20,059,992.50 (1,373,138.97) 18,686,853.53UBS AG, London Branch 24,808,959.34 2,086,843.73 1,415,334.33 28,311,137.40 (1,733,972.20) 26,577,165.20UBS Limited 13,029,809.35 554,353.05 1,744,531.58 15,328,693.97 (1,004,258.35) 14,324,435.62Total 151,541,203.68 25,612,227.14 14,400,000.00 191,553,430.82 (12,011,786.26) 179,541,644.56
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SCHEDULE 12PENSION COMPROMISE
PLEASE SEE SCHEDULE 8 OF THECATTLES SCHEME
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382
SCHEDULE 13FORM OF NOTICE OF ASSIGNMENT OR TRANSFER
To: The Scheme Supervisors
From: [Insert the name of the Scheme Creditor] (Assignor)
We refer to the scheme of arrangement between Welcome Financial Services Limited and its Scheme Creditors, dated [�](the Scheme).1. Words and expressions defined in the Scheme have the same meanings when used in this Notice unless otherwise
provided or the context otherwise requires.2. On [Insert the date of the transfer or assignment] the Assignor confirms, by signing this Notice below, that it validly
assigned and/or transferred the [whole] [or part]1 of its Scheme Liability and/or Ascertained Scheme Claim to [Insertthe name of the Assignee] of [Insert address and other contact details of the Assignee] (the Assignee).
3. The Assignee, by signing this Notice below, hereby confirms that it agrees to be bound by the terms of the Scheme.
Assignor Assignee
Date
1 Delete as applicable. Where the assignment is of a part only, please set out how the right to the Scheme Liability/Ascertained Scheme Claim is split between theAssignor and the Assignee
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SCHEDULE 14HEDGE AGREEMENTS
1. ISDA Master Agreement and Schedule to the ISDA Master Agreement dated 26 January 1993 between Midland Bankplc and Cattles.
(a) Confirmation dated 14 June 2006 supplements, forms part of and is subject to the 26 January 1993 ISDA MasterAgreement and relating to a £10,000,000 interest rate swap (HSBC reference: SW4848065).
(b) Confirmation dated 4 December 2006 supplements, forms part of and is subject to the 26 January 1993 ISDA MasterAgreement and relating to a £20,000,000 interest rate swap (HSBC reference: ISWO63389903\SW518697ML).
(c) Confirmation dated 6 September 2007 supplements, forms part of and is subject to the 26 January 1993 ISDA MasterAgreement and relating to a £30,000,000 interest rate swap (HSBC reference: ISWO72509958\SW591916ML).
(d) Confirmation dated 30 November 2007 supplements, forms part of and is subject to the 26 January 1993 ISDA MasterAgreement and relating to a £20,000,000 interest rate swap (HSBC reference: ISWO73349849\SW606071ML).
(e) Confirmation dated 18 December 2007 supplements, forms part of and is subject to the 26 January 1993 ISDA MasterAgreement and relating to a £30,000,000 interest rate swap (HSBC reference: ISWO73529770\SW608849ML).
(f) Confirmation dated 30 June 2008 supplements, forms part of and is subject to the 26 January 1993 ISDA MasterAgreement and relating to a £30,000,000 interest rate swap (HSBC reference: ISWO81829849\SW644510ML).
2. Confirmation dated 12 October 2005 relating to a £10,000,000 interest rate swap (HSBC reference: SW 456194ML)subject to a deemed ISDA Master Agreement as described in the Confirmation.
3. Confirmation dated 9 October 2006 relating to a £10,000,000 interest rate swap (HSBC reference: IRC_499272ML)subject to a deemed ISDA Master Agreement as described in the Confirmation.
4. Interest Rate and Currency Exchange Agreement dated 2 June 1988 between Midland Bank plc and Cattles.
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