Document:

Exhibit 4.31

 

Dated 30 August 2011

 

	
THE ROYAL BANK OF SCOTLAND plc

 

and

 

NATIONAL WESTMINSTER BANK plc

 

and

 

NATIONAL WESTMINSTER HOME LOANS LIMITED

 

and

 

SANTANDER UK plc

 

 

	
AMENDED SALE AND PURCHASE AGREEMENT

 

relating to certain operations of the Business Sellers in England and Wales and in Scotland, comprising the Businesses

 

 

 

	
Linklaters

	
 

	  	
 

	 	 
	 	 
	
Linklaters LLP

One Silk Street

London EC2Y 8HQ

 

	  
	
Telephone (+44) 20 7456 2000

	  
	
Facsimile  (+44) 20 7456 2222

	  
	  	  
	
Ref: M Middleditch / S Branigan / M Honan

	  

  

1

  

 

Amended Sale and Purchase Agreement

 

This Agreement is made on 30 August 2011 between:

 

	
(1)  

	
THE ROYAL BANK OF SCOTLAND plc, a company incorporated in Scotland (registered no SC090312) whose registered office is at 36 St Andrew Square, Edinburgh, EH2 2YB (“RBS”);

 

	
(2)  

	
NATIONAL WESTMINSTER BANK plc, a company incorporated in England (registered no 929027) whose registered office is at 135 Bishopsgate, London, EC2M 3UR (“NatWest”);

 

	
(3)  

	
NATIONAL WESTMINSTER HOME LOANS LIMITED, a company incorporated in England (registered no 01449354) whose registered office is at 135 Bishopsgate, London, EC2M 3UR (“NWHL”); and

 

	
(4)  

	
SANTANDER UK plc, a company incorporated in England (registered no. 02294747) whose registered office is at 2 Triton Square, Regent's Place, London NW1 3AN (the “Purchaser”),

 

each being a “party” to this Agreement and together comprising the “parties” to this Agreement.

 

Whereas:

 

	
(A)  

	
The Business Sellers have agreed to sell the Businesses (as defined below) and to assume the obligations imposed on the Business Sellers under this Agreement.

 

	
(B)  

	
The Purchaser has agreed to purchase the Businesses and to assume the obligations imposed on the Purchaser under this Agreement.

 

	
(C)  

	
The Parties entered into a Sale and Purchase Agreement on 4 August 2010 relating to the sale and purchase of the Businesses (the “Original Agreement”). The Parties have agreed that the Original Agreement shall be amended to accommodate changes to the timetable for the sale of the Businesses and the process for and manner of Closing and certain other matters as set out herein.

 

	
(D)  

	
Accordingly, this agreement sets out the terms of the Original Agreement, as so amended, and represents the composite agreement between the parties relating to the sale and purchase of the Businesses.

 

It is agreed as follows:

 

	
1  

	
Interpretation

 

In this Agreement, unless the context otherwise requires, the provisions in this Clause 1 apply:

 

	
1.1  

	
Definitions

 

“Act” means the Financial Services and Markets Act 2000 (as amended);

 

“Additional Excluded Products” means those Excluded Products (a) described in sub-paragraphs (q), (r), (s), (t) and (u) of the definition of “Excluded Products” set out in this Clause 1.1, brief details of which as at the date of this Agreement are set out in Schedule

 

  

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26; (b) all Products (which, for the avoidance of doubt, does not include any Structured Products) held by Excluded Finance Customers (if any); and (c) any additional Products (other than any credit or charge cards) that are excluded from the transfer of the Businesses after the date of this Agreement in accordance with the provisions of Part B of Schedule 23 or held by Excluded Customers;

 

***

 

***

 

“Agreed Terms” means, (i) in relation to a document the terms of which are agreed between the Business Sellers and the Purchaser on or prior to the date of the Original Agreement, such document in the terms so agreed and initialled for identification by or on behalf of the Business Sellers and by or on behalf of the Purchaser with such alterations as may be agreed in writing between the Business Sellers and the Purchaser from time to time, (ii) in relation to a document the terms of which are agreed between the Business Sellers and the Purchaser since the date of the Original Agreement and prior to the date of this Agreement, such document in the terms so agreed and initialled for identification by or on behalf of the Business Sellers and by or on behalf of the Purchaser with such alterations as may be agreed in writing between the Business Sellers and the Purchaser from time to time, and (iii) in relation to any document, the terms of which are, in accordance with this Agreement, to be agreed between the Business Sellers and the Purchaser after the date of this Agreement such document in the terms as so agreed in due course;

 

“Allocated Employees” means employees allocated to a Business in accordance with the Allocation Principles;

 

“Allocation Principles” means allocation principles contained in the Data Room, document reference 2.7.3;

 

“ANTS” means Abbey National Treasury Services plc;

 

“Assumed Liabilities” means the liabilities of the Business Sellers or any member of the RBSG Group to be assumed by the Purchaser under or pursuant to Clause 2.2.3 and “Assumed Liability” means any one of them;

 

“Assumed Liability Claim” has the meaning given to it in Clause 12.1;

 

“Bancassurance Joint Venture” mean the agreements between RBS and Aviva plc or entities in their respective Groups relating to (i) the joint venture agreement dated 30 March 2006 relating to the operation of RBS Life Investment Limited and (ii) the joint venture agreement dated 31 July 2006 relating to the operation of RBS Collective Investments Limited, each as amended from time to time;

 

“Bank Charges Litigation” means litigation by Customers against the Business Sellers seeking refunds of unarranged overdraft charges on their accounts on the same basis as the claim considered by the English High Court in the test case brought by the Office of Fair Trading against RBS, Abbey National plc, Barclays Bank plc, Clydesdale Bank plc, HBOS plc, HSBC Bank plc, Lloyds TSB Bank plc and Nationwide Building Society which concluded in November 2009;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

3

  

 

“Bank of England’s Discount Window Facility” means the discount window facility as described in the Bank of England publication entitled “Documentation for the Bank of England’s operations under the Sterling monetary framework” dated 29 March 2010, as the same may be amended, varied or extended from time to time;

 

“Bank of England’s Special Liquidity Scheme” means the special liquidity scheme launched by the Bank of England on 21 April 2008 pursuant to which banks and building societies are permitted to use certain of their assets as collateral in order to borrow UK Treasury Bills;

 

“Best Branch” means a Retail Customer’s predominant branch based sort code designated as such using the test set out in document 20.1 in the Data Room, subject to such derogations therefrom as the parties may agree from time to time through the Joint Implementation Committee in accordance with Schedule 23;

 

“Bid Value” has the meaning given to it in Schedule 21;

 

“Books and Records” means, in the case of each Business, all notices, correspondence, orders, inquiries and other documents and all computer disks or tapes or other machine legible programs or other records (excluding information technology and software but including, without limitation, operational customer and client data and operational account data), in so far as such documents and records relate exclusively to the Business or are required to be held by or in the Businesses (or any of them or their respective owners or controllers) by reason of any Law and Regulations, save in each case for books, records and other documents which (i) the relevant Business Seller is required by Law and Regulations to retain; or (ii) relates to accounting, Tax, insurance or regulatory information; or (iii) the Business Seller is otherwise entitled to retain in accordance with Schedule 10, provided that in the case of any such document or record that relates in part to a Business and is capable of being separated, split or extracted, such part that exclusively relates to the Business shall be so separated, split or extracted and, accordingly, shall constitute Books and Records for the purposes of this Agreement;

 

“Business” means, in the case of each Business Seller:

 

	 	
(a)  

	
the Retail Business;

 

	 	
(b)  

	
the SME Business; and

 

	 	
(c)  

	
the Mid-Corporate Business,

 

in each case as carried on, as the case may be, by NatWest and NWHL at the NatWest Closing, by RBS at the RBS Wales Closing, and by RBS at the RBS England Closing and “Businesses” means all the Retail Business, the SME Business and the Mid-Corporate Business taken together;

 

“Business Assets” means, in relation to each Business Seller, all the property, rights and assets agreed to be sold by that Business Seller under Clause 2.2.1 of this Agreement but excluding the Excluded Assets;

 

“Business ATMs” means the automated teller machines located at the Business Properties as set out in Schedule 13;

 

“Business Data” means, in the case of each Business, all Books and Records which are held in electronic form on the systems of the relevant Business Seller;

 

  

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“Business Day” means a day which is not a Saturday, a Sunday or a public holiday in London;

 

“Business Intellectual Property” means, the NatWest Business Intellectual Property and the RBS Business Intellectual Property;

 

“Business Properties” means, in the case of each Business:

 

	 	
(a)  

	
the Owned Properties;

 

	 	
(b)  

	
the Leasehold Properties; and

 

	 	
(c)  

	
the Business Underletting Properties,

 

and “Business Property” means any one of them;

 

“Business Receivables” means, in the case of each Business, all book and other debts or sums receivable by, payable to or owed to the relevant Business Seller to the extent that such debts and sums arise in respect of the relevant Business and are outstanding at the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses or the RBS England Closing in respect of the RBS England Businesses whether or not yet immediately due or payable (including trade debts, deposits, prepayments, retrospective rebates and overpayments), and interest thereon, but excluding debts owed to the Business Sellers by any relevant Tax Authority or member of the RBSG Group in respect of Taxation relating to the Business attributable to periods ended on or before, or an Event occurring (or deemed to occur) on or before, the Relevant Closing (such debts in respect of Taxation including, for the avoidance of doubt, any bond or other security issued by any Tax Authority or other governmental agency representing any such debts);

 

“Business Seller” means, RBS, NatWest, or NWHL, as the context may require, and “Business Sellers” means RBS, NatWest and NWHL taken together;

 

“Business Sellers’ Lawyers” means Linklaters LLP of One Silk Street, London, EC2Y 8HQ;

 

”Business Underletting Properties” has the meaning given in paragraph 1 of Schedule 3;

 

“Capital Allowances Pool” has the meaning given to it in Clause 3.4;

 

“Capital Business Assets” has the meaning given to it in paragraph 5.1 of Schedule 10;

 

“Cash” means the aggregate amount of any cash in the Businesses, including but not limited to:

 

	 	
(a)  

	
cash located at any of the Business Properties, including cash in any till or safe or night safe or drop box;

 

	 	
(b)  

	
cash in any Business ATM or cash deposit machine located at a Business Property;

 

	 	
(c)  

	
any foreign currency or travellers cheques located at any of the Business Properties; and

 

	 	
(d)  

	
cash in transit to or from any Business Property or any Business ATM;

 

“Centralised Products” means all Products not assigned to a branch-based sort code of a Business Seller;

 

  

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“Channel Carve-Out” has the meaning given to it in Clause 6.9;

 

“Claims” means, in the case of each Business Seller, all rights and claims as at the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses of the relevant Business Seller under any warranties, undertakings, covenants, conditions, guarantees or indemnities, whether express or implied and arising under any contract, undertaking or agreement (including each Contract) to which any Business Seller is a party to the extent that such rights or claims relate to the Businesses or Business Assets (including under any acquisition agreement but excluding rights or claims under any policies of insurance (save as set out in Clause 14));

 

“Clean Team” means a restricted group of the Purchaser’s employees who do not have market-facing or strategic responsibilities within the Purchaser’s Group, who may, where the Purchaser provides a Clean Team Confirmation, receive information solely for the purpose of monitoring closely the Businesses and/or implementing the transactions contemplated by this Agreement (the “Clean Team Purpose”) but for no other purpose, and who shall, immediately following the RBS England Closing, return or destroy all originals and copies of documents to the extent containing information relating to the Excluded Business, and use reasonable endeavours to permanently erase from any computer or other device any document or data containing such information, and provide confirmation to the relevant Business Seller once this has been completed;

 

“Clean Team Confirmation” means a specific written confirmation that the Clean Team will:

 

	 	
(a)  

	
keep the commercially sensitive information confidential;

 

	 	
(b)  

	
only use the commercially sensitive information for the purpose for which it was provided by the relevant Business Seller;

 

	 	
(c)  

	
either:

 

	 	
(i)  

	
not disclose or discuss the commercially sensitive information with any employee of the Purchaser who has market-facing or strategic responsibilities within the Purchaser’s Group; or

 

	 	
(ii)  

	
ensure that any employee of the Purchaser who has market-facing or strategic responsibilities within the Purchaser’s Group and to whom the commercially sensitive information is to be disclosed provides a personal undertaking (x) not to use the information for any purpose other than the Clean Team Purpose or, following the signing of such personal undertaking and receipt of such signed personal undertaking by the Business Sellers, to discuss with the relevant Business Seller whether the information is of a nature that does not require a Clean Team; and (y) not to disclose the information to any person who is not a member of the Clean Team or who has not provided a personal undertaking in relation to that information as described in this paragraph (c)(ii); and

 

	 	
(d)  

	
act in accordance with any additional protections which the parties may agree from time to time;

 

  

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“Client Agreements” means, in the case of each Business, those contracts, commitments, engagements, undertakings, arrangements, mandates and agreements (including any loan agreements, facility agreements and other credit agreements), entered into or orders made by or on behalf of, or the benefit of which is held in trust for or has been assigned to, the relevant Business Seller with Customers in respect of the Products, any PPAs, Safe Custody Agreements, the GBM Client Agreements and the GTS Client Agreements in each case which were entered into in the course of such Business on or before the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, or the RBS England Closing in respect of the RBS England Businesses to the extent that, immediately before the Relevant Closing, the same remain to be completed or performed (in whole or in part) or remain in force but excluding all Loan Guarantees/Security (or any other agreements, deeds and other documents or instruments pursuant to which any relevant Business Seller is entitled to the benefit of any guarantee, indemnity, rental assignment, mortgage or security interest);

 

“Closing” means any of the NatWest Closing, the RBS Wales Closing or the RBS England Closing as the context may require; and “Closings” shall mean the NatWest Closing, the RBS Wales Closing and the RBS England Closing;

 

“Closing Date” means the NatWest Closing Date, the RBS Wales Closing Date or the RBS England Closing Date, as the context may require;

 

“Closing Statement Expert Accountants” means an internationally recognised firm of accountants (with a specialist forensics or dispute resolution department or group) to be agreed by the Business Sellers and the Purchaser within seven days of a notice by one to the other requiring such agreement or failing such agreement in such period to be nominated on the application of either of them by or on behalf of the President for the time being of the Institute of Chartered Accountants in England and Wales;

 

“Closing Statements” means the NatWest Closing Statement, the RBS Wales Closing Statement and the RBS England Closing Statement and “Closing Statement” shall mean the NatWest Closing Statement, the RBS Wales Closing Statement or the RBS England Closing Statement as the context may require;

 

“Complex SME Customers” means those SME Customers who, as at the NatWest Closing, use Bankline or such other products and services which the Purchaser does not have the information technology to support and the parties agree should migrate to the Purchaser on the Mid-Corporate and Complex SME Data Migration Dates (which as at the date of the Original Agreement were approximately 75,000 SME customers);

 

“Confidentiality Agreement” means the confidentiality agreement dated 22 February 2010 between RBSG and the Purchaser pursuant to which the RBSG Group made available to the Purchaser certain confidential information relating to the Businesses;

 

“Contracts” means, in the case of each Business:

 

	 	
(a)  

	
all contracts, undertakings, arrangements and agreements, whether written or otherwise, in each case entered into on or prior to the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses by or on behalf of, or the benefit of which is held in trust for or has

 

  

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been assigned to, any of the Business Sellers predominantly in the course of that Business, and to the extent that immediately prior to the Relevant Closing the same remain to be completed or performed (in whole or in part) or remain in force except Client Agreements and Loan Guarantees/Security (or any other agreements, deeds and other documents or instruments pursuant to which any relevant Business Seller is entitled to the benefit of any guarantee, indemnity, rental assignment, mortgage or security interest); and

 

	 	
(b)  

	
the Client Agreements (including the GTS Client Agreements and the GBM Client Agreements) related to that Business,

 

but excluding:

 

	 	
(i)  

	
employment and other agreements (excluding Client Agreements) with Relevant Employees;

 

	 	
(ii)  

	
contracts of insurance;

 

	 	
(iii)  

	
contracts, arrangements and agreements in respect of treasury hedging;

 

	 	
(iv)  

	
leases and any other related or similar agreements, undertakings and arrangements with respect to the Business Properties (to which the provisions set out in Schedule 3 shall apply); and

 

	 	
(v)  

	
all contracts, undertakings, agreements or binding arrangements which form part of or relate to the Excluded Assets and (other than in relation to Client Agreements) which do not predominantly relate to any Business,

 

and “Contract” means any of them;

 

“Court” means the High Court of England and Wales;

 

“Court Order” means the order of the Court sanctioning the Scheme pursuant to Section 111 of the Act and making provision pursuant to Section 112(1) of the Act to be agreed in accordance with Clause 4.4;

 

 “Current Employees” means those employees of the RBSG Group wholly or mainly assigned to a Business at the date of the Original Agreement and the Allocated Employees whose details are listed in Schedule 20;

 

“Customer Helpline” has the meaning given to it in Clause 6.10;

 

“Customer Records” means Books and Records of the Businesses which are in electronic format (including without limitation such paper records to the extent held in an image library) and which comprise or relate to Client Agreements (including without limitation account statements, correspondence with Customers, transaction histories and application documentation);

 

“Customers” means the Retail Customers, SME Customers and Mid-Corporate Customers (but excluding any Excluded Finance Customers and Excluded Customers);

 

“Data Migration” means, in relation to the SME Business (to the extent it does not relate to Complex SME Customers) and the Retail Business, the processes and procedures to be carried out by the relevant Business Seller and the Purchaser to migrate the Business Data in relation to the SME Business (to the extent it does not relate to Complex SME Customers) and the Retail Business from the systems of that Business Seller to the systems of the Purchaser at the NatWest Closing in respect of the NatWest Businesses,

 

  

8

  

 

the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses, in accordance with the Separation Plan;

 

“Data Room” has the meaning ascribed to it in paragraph 2 of the General Disclosures section of the Disclosure Letter;

 

“Disclosure Letter” means the letter dated the same date as the Original Agreement from the Business Sellers to the Purchaser disclosing certain information in relation to the Seller Warranties;

 

“Draft Closing Statements” has the meaning given to it in Clause 8.1;

 

“Effective Time” means the NatWest Effective Time, the RBS Wales Effective Time or the RBS England Effective Time, as the context may require;

 

“Employee Share Plans” means the 2007 UK Shareholder Plan, the 2010 Deferral Plan, the 2000 All Employee Share Ownership Plan and the 2010 Long Term Incentive Plan;

 

“Encumbrance” means any claim, charge, mortgage, lien, option, equity, power of sale, hypothecation, usufruct, retention of title, right of pre-emption, right of first refusal or other third party right or security interest of any kind or an agreement, arrangement or obligation to create any of the foregoing, other than repairer’s or similar liens or supplier’s retentions of title arising in the ordinary course of business but including any of the foregoing arising from the participation by any Business Seller or any member of the RBSG Group in the Government Asset Protection Scheme, the Bank of England’s Special Liquidity Scheme or any other scheme initiated or sponsored by the UK government, the Bank of England, the European Union, the European Central Bank, the European Investment Bank or any other Regulatory Authority and excluding in each case, for the avoidance of doubt, any right, agreement, arrangement or obligation that may have been created or entered into between a Customer and one or more persons who are not members of the RBSG Group;

 

“Estimated NatWest Tangible Net Asset Value” means the Business Sellers’ good faith estimate of the aggregate amount of the tangible net assets of the NatWest Businesses at the Natwest Closing Date, which estimate shall be notified by RBS to the Purchaser pursuant to Clause 7.4 and added to (in the case of a positive number) or deducted from (in the case of a negative number) the NatWest Bid Value for the purposes of Clauses 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.5;

 

“Estimated RBS England Tangible Net Asset Value” means the Business Sellers’ good faith estimate of the aggregate amount of the tangible net assets of the RBS England Businesses at the RBS England Closing Date, which estimate shall be notified by RBS to the Purchaser pursuant to Clause 7.4 and added to (in the case of a positive number) or deducted from (in the case of a negative number) the RBS England Bid Value for the purposes of Clauses 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.5;

 

“Estimated RBS Wales Tangible Net Asset Value” means the Business Sellers’ good faith estimate of the aggregate amount of the tangible net assets of the RBS Wales Businesses at the RBS Wales Closing Date, which estimate shall be notified by RBS to the Purchaser pursuant to Clause 7.4 and added to (in the case of a positive number) or deducted from (in the case of a negative number) the RBS Wales Bid Value for the purposes of Clauses 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.5;

 

  

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“Estimated Tangible Net Asset Value” means the aggregate of the Estimated RBS Wales Tangible Net Asset Value, the Estimated NatWest Tangible Net Asset Value and the Estimated RBS England Tangible Net Asset Value;

 

“Event” includes any transaction, action or omission, any change in the residence of any person for the purposes of any Tax, the death of any person or the dissolution of any company or partnership and a Relevant Closing;

 

“Excluded Assets” means the assets, properties and rights described in Clause 2.2.2 and “Excluded Asset” means any one of them;

 

“Excluded Business” means any business carried on by a member of the RBSG Group to the extent it relates to the sale or provision of Excluded Products or any business carried on by a member of the RBSG Group to the extent it relates to the sale or provision of Products to customers of the RBSG Group who are not Customers;

 

“Excluded Customers” means (a) those Customers who the Joint Implementation Committee agrees shall be excluded from the Businesses in accordance with Part B of Schedule 23 and (b) any Customers for whom the Best Branch is sort code 161926 (Farnborough branch including Holts);

 

“Excluded Finance Customers” means those customers (if any) who hold Structured Products and who would otherwise be Customers but for their exclusion from the Businesses pursuant to Clause 2.11;

 

“Excluded Liabilities” means the debts, liabilities and obligations described in Clause 2.2.4 and “Excluded Liability” means any one of them;

 

“Excluded Mortgages” means:

 

	 	
(a)  

	
any Securitised Mortgages;

 

	 	
(b)  

	
mortgages under the “One Account”, “First Active”, “Virgin One” or “NatWest One” name or brand, any lifetime mortgages, any RBS CAMs (current account mortgages);

 

	 	
(c)  

	
any mortgage or mortgage application excluded from the transfer of the Businesses in accordance with the provisions of paragraph 4.7 of Part B of Schedule 23; and

 

	 	
(d)  

	
the Relevant Mortgage Manager Platform Mortgages;

 

“Excluded Products” means all products and services sold or provided to customers of the RBSG Group by members of the RBSG Group other than the Products. The following are not Products and shall therefore be Excluded Products:

 

	 	
(a)  

	
Excluded Mortgages;

 

	 	
(b)  

	
products and services provided by or in connection with the Global Transaction Services businesses of the RBSG Group;

 

	 	
(c)  

	
all products offered, placed or provided by the Global Banking and Markets business of the RBSG Group (including deposits, money market deposits and structured product deposits) and any services provided by or in connection with the Global Banking and Markets business of the RBSG Group but excluding all products and/or transactions entered into pursuant to or governed by any GBM Client Agreement;

 

  

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(d)  

	
insurance products and services (including any payment protection insurance products or services);

 

	 	
(e)  

	
products and services provided by or in connection with any private banking or wealth management activity or business carried on under the “Coutts”, “RBS Coutts”, “Drummonds”, “Child & Co”, “Citizens” or “Adam & Company” name or brand;

 

	 	
(f)  

	
regulatory products (being income arising from the sale of wealth management products by people who are Approved Persons (as defined in the FSA Rules) and regulated investment products);

 

	 	
(g)  

	
financial planning products provided through the joint venture and any previous joint venture arrangements between the RBSG Group and Aviva;

 

	 	
(h)  

	
products and services provided by or in connection with any business (including asset finance business) carried on under the “Lombard” name or brand and in connection with any loans from Lombard Direct Loans;

 

	 	
(i)  

	
products and services provided by or in connection with the business carried on under the “Directline” brand or name and in connection with any loans from Directline;

 

	 	
(j)  

	
products and services provided by or in connection with any invoice finance business carried on under the “RBS Invoice Finance” name or brand;

 

	 	
(k)  

	
all products provided under the name “RBS Bank of China” and offered to Chinese nationals (including, in particular, all products offered to Chinese nationals pursuant to various referral agreements between the Business Sellers and Bank of China);

 

	 	
(l)  

	
all products previously provided under the name “Welcome” and offered to non-UK resident customers (including, in particular, “Welcome” current accounts offered to non-UK resident Polish customers and “Welcome” current accounts offered to non-UK resident Indian customers) and now provided to those customers via the “Step” account;

 

	 	
(m)  

	
any Products that have been written off by the Business Sellers in accordance with RBSG Group’s standard accounting policies and, following the date of the Original Agreement, in accordance with Clause 5;

 

	 	
(n)  

	
any Excluded Safe Custody Agreement and any safe custody items relating thereto;

 

	 	
(o)  

	
stockbroking products and services provided through the joint venture between RBS and Toronto-Dominion Bank;

 

	 	
(p)  

	
investment, protection and pension products and services distributed by Independent Financial Services Limited;

 

	 	
(q)  

	
products or services provided by or in connection with any banking activity or business carried out in connection with the “Holts” name or brand or branch situated in Farnborough (sort code 161926);

 

	 	
(r)  

	
any savings accelerator products and connected services;

 

  

11

  

 

	 	
(s)  

	
any commercial accounts in currencies with more than two decimal places (which, as at the date of this Agreement, were approximately 20 accounts in Middle Eastern currencies);

 

	 	
(t)  

	
any commercial accounts in low volume foreign currencies (which, as at the date of this Agreement, were approximately 18 accounts in 7 currencies - Hungarian Forint, Israeli Shekel, Indian Rupee, Saudi Riyal, Singaporean Dollar, Thai Bhat and New Turkish Lira);

 

	 	
(u)  

	
any Sharia-law governed loans or products;

 

	 	
(v)  

	
any products in which a member of the RBSG Group is the customer; and

 

	 	
(w)  

	
any other product which the Joint Implementation Committee agrees shall be an Excluded Product in accordance with Part B of Schedule 23;

 

“Excluded Safe Custody Agreement” has the meaning given to it in Clause 2.9;

 

“Excluded SME Customer” means:

 

	 	
(a)  

	
in respect of each Business Seller, a Relationship Managed SME Customer (other than a customer of the Business Sellers’ “Direct” banking business) who has Products with that Business Seller on both a Transferring Sort Code and a Retained Sort Code and the relationship manager for such customer is located in Scotland (in the case of a Relationship Managed SME Customer of RBS) or in England or Wales (in the case of a Relationship Managed SME Customer of NatWest); and

 

	 	
(b)  

	
for the avoidance of doubt, those SME Customers listed in Schedule 19;

 

“Expert Accountants” means the forensics department or group of an internationally recognised firm of accountants (with a specialist forensics or dispute resolution department or group) to be agreed by the Business Sellers and the Purchaser or failing such agreement to be nominated on the application of either of them by or on behalf of the President for the time being of the Institute of Chartered Accountants in England and Wales;

 

“Final Bid Value” has the meaning given to it in Schedule 21;

 

***

 

“Friends and Family Assets” means the Business Assets owned by the relevant Business Seller in respect of the Friends and Family Customers;

 

“Friends and Family Customers” means those Customers to be transferred to the Purchaser pursuant to the Friends and Family Transfer as agreed by the Joint Implementation Committee in accordance with Part B of Schedule 23;

 

“Friends and Family Transfer” has the meaning given to it in paragraph 3.1 of Part B of Schedule 23;

 

“Friends and Family Transfer Date” means any date on which a Friends and Family Transfer takes place;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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“FSA” means the Financial Services Authority of the United Kingdom (or any successor authority or authorities carrying out banking and/or insurance regulatory functions in the United Kingdom from time to time);

 

“FSA Handbook” means the handbook of rules and guidance issued by the FSA from time to time;

 

“FSA Rules” means the rules and guidance made by the FSA from time to time under the FSMA which are currently set out in the FSA Handbook;

 

“FSMA” means the Financial Services and Markets Act 2000 (as amended or replaced);

 

“Further Allocated Employees” means employees allocated to a Business between the date of the Original Agreement and the NatWest Closing (in respect of the NatWest Businesses), the RBS Wales Closing (in respect of the RBS Wales Businesses) and the RBS England Closing (in respect of the RBS England Businesses) in accordance with the Allocation Principles;

 

“GBM Client Agreement” means those contracts, commitments, engagements, undertakings, arrangements, mandates and agreements entered into or orders made by or on behalf of, or the benefit of which is held on trust for or has been assigned to, the relevant Business Seller with a Customer relating to any complex LIBOR loans, LIBOR loans, base rate loans, currency deposits, spot FX, FX forward positions, FX options, commodity derivative transactions, interest rate hedging transactions and other derivative hedge positions, other than spot FX, FX forward positions, FX options, commodity derivative transactions, interest rate hedging transactions and other derivative hedge positions with an RBSG Group GBM Customer;

 

 “Good Industry Practice” means practices, methods and procedures (or one of a range of practices, methods and procedures) which would at the relevant time be adopted by a financial services business in the United Kingdom with the objective of complying with Law and Regulations and which would reasonably be expected to be adopted by a financial services business similar to that carried on by the Business Sellers;

 

“Goodwill” means, in the case of each Business, the goodwill of each relevant Business Seller to the extent that it relates to that Business as at the Relevant Closing with the exclusive right to carry on that Business in succession to the relevant Business Seller, including goodwill which relates to the trade marks, service marks or trade names set out in Part 1 of Schedule 4 but excluding goodwill which relates to any other trade marks, service marks or trade names which are used both (i) in relation to one or more of the Businesses; and also (ii) used by one or more other businesses or operations of any member of the RBSG Group which are not the Businesses;

 

“Government Asset Protection Scheme” means the asset protection scheme entered into between RBS and the UK government on 26 November 2009 (as such scheme may be amended or varied from time to time);

 

“Group” in relation to any person, means any holding company, subsidiary or subsidiary undertaking of such person or any subsidiary or subsidiary undertaking of any such holding company;

 

“Group Retirement Benefit Arrangement” has the meaning given to it in paragraph 6.5 of Schedule 14;

 

  

13

  

 

“GTS Client Agreements” means those contracts, commitments, engagements, undertakings, arrangements, mandates and agreements entered into or orders made by or on behalf of, or the benefit of which is held on trust for or has been assigned to, the relevant Business Seller with a Customer under, pursuant or in relation to which any GTS Instrument is or may be issued, in each case (i) entered into prior to the NatWest Closing, in respect of the NatWest Businesses, the RBS Wales Closing, in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses, by a Business Seller with a GTS Customer and (ii) if and to the extent that immediately prior to the Relevant Closing the same remains to be completed or performed (in whole or in part) by that Business Seller or remains in force;

 

“GTS Customers” means those Customers who are party to a GTS Client Agreement at (i) the NatWest Closing, in respect of the NatWest Businesses; (ii) the RBS Wales Closing, in respect of the RBS Wales Businesses; and (iii) the RBS England Closing, in respect of the RBS England Businesses;

 

“GTS Instruments” means each import or documentary letter of credit, bond, bank guarantee or standby letter of credit issued prior to the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, or the RBS England Closing in respect of the RBS England Businesses, pursuant or in relation to a GTS Client Agreement by a Business Seller to a third party beneficiary (for the avoidance of doubt, other than a Customer or GTS Customer), in each case if and to the extent that immediately prior to the Relevant Closing the same remains to be completed or performed (in whole or in part) by that Business Seller or remains in force, uncancelled and unreleased;

 

“Hedged Contracts” means the NatWest Hedged Contracts, the RBS England Hedged Contracts and the RBS Wales Hedged Contracts, and “Hedged Contract” means any one of them;

 

“Hedging ISDA” means the new ISDA Master Agreement and Schedule thereto to be entered into between RBS and ANTS prior to the NatWest Effective Time in accordance with the provisions of Clause 9.11 of this Agreement, which shall be based on the ISDA Master Agreement dated as of 28 April 1997 between RBS and ANTS but shall not have any Credit Support Annex thereto;

 

“HMRC Clearance” has the meaning given to it in paragraph 2.1 of Schedule 10;

 

“HM Treasury” means Her Majesty’s Treasury:

 

“IFRS” means the International Financial Reporting Standards as issued by the International Accounting Standards Board (“IASB”) and the official interpretations issued by the International Financial Reporting Interpretations Committee of the IASB as adopted by the European Union;

 

“Indemnified GTS Collateral” has the meaning given to such term in Clause 9.12 (Obligation in respect of GTS Instruments);

 

“In-Flight Products” has the meaning given to it in paragraph 12.1 of Part B of Schedule 23;

 

“Information Memorandum” means the information memorandum concerning the Businesses provided to the Purchaser by or on behalf of RBSG on or about 23 February 2010;

 

  

14

  

 

***

 

“Insurance Claim” means a claim relating to an Insured Event made, or to be made, by the relevant Business Seller or, as the case may be, by the relevant member of the RBSG Group, to its insurers pursuant to any relevant insurance policy;

 

“Insured Event” means any event or omission which occurs to the extent that it relates to any of the Businesses and which is an event which is covered by any insurance policy held by any Business Seller or any member of the RBSG Group;

 

“Intellectual Property” means trade marks, service marks, trade names, domain names, get-up, logos, patents, inventions, registered and unregistered design rights, copyrights (including rights in software), database rights, trade secrets, know-how, rights in information and all other similar rights in any part of the world, whether or not such rights are registered, and including any applications and rights to apply for such registrations;

 

“Joint Implementation Committee” has the meaning given to it in Clause 6.2.1;

 

“Law and Regulations” means any applicable law, regulation or ordinance or any direction, instruction, pronouncement, requirement, decision of or contractual obligation owed to an applicable Regulatory Authority (including any relevant antitrust laws);

 

“Leaseback Properties” has the meaning given to it in paragraph 1 of Schedule 3;

 

“Leasehold Properties” has the meaning given to it in paragraph 1 of Schedule 3;

 

“Leases” has the meaning given to it in paragraph 1 of Schedule 3;

 

“Liability” means, with respect to any person, any indebtedness, liability or obligation of such person of any kind, character or description whether known or unknown, absolute or contingent, accrued or unaccrued, disputed or undisputed, liquidated or unliquidated, secured or unsecured, joint or several, due or to become due, vested or unvested, executory, determined, determinable or otherwise, and whether or not the same is required by IFRS to be accrued in the financial statements of such person;

 

“LIBOR” means the British Bankers’ Association Interest Settlement Rate for deposits in £ (Pounds Sterling) for a period of three months which appears on the relevant Reuters Screen rounded upwards to four decimal places at approximately 11.00 am (London Time) on the day specified for the determination of an interest rate (or, if such day is not a Business Day, such rate from the immediately preceding Business Day) and, if no such screen rate is available, a replacement rate or service agreed between RBS and the Purchaser (such agreement not to be unreasonably withheld or delayed) or, in the absence of such agreement, the arithmetic mean of the rates quoted by the principal London offices of each member of the British Bankers Association LIBOR Contributor Panel for Pounds Sterling to leading banks in the London interbank market;

 

“Loan Guarantees/Security” means all agreements, deeds and other documents or instruments pursuant to which any relevant Business Seller is entitled to the benefit of any guarantee, indemnity, rental assignment, mortgage or security interest guaranteeing and/or securing any liability resulting from or in connection with any of the Client Agreements and any subordination document granted in connection with any of the Client Agreements (in each case excluding any Retain Retail Mortgage) in each case which was entered into in the course of any of the Businesses on or before the Friends and Family Transfer Date in

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

15

  

 

respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses to the extent that, immediately before the Relevant Closing, the same remained to be completed or performed (in whole or in part) or remain in force; and “Loan Guarantee/Security” means any one of them;

 

“Loan Impairment Amount” has the meaning given to it in paragraph 3.1.2 of Part 3 of Schedule 12;

 

“Long Life Assets” has the meaning given to it in paragraph 6.1 of Schedule 10;

 

“Long Stop Date” means (subject to Clause 4.2.3) *** (unless otherwise agreed by the Business Sellers and the Purchaser in writing);

 

“Losses” means all losses, liabilities, damages, costs (including legal costs and expenses, experts’ and consultants’ fees, expenses and costs and expenses of investigation and enforcement), charges, expenses, actions, proceedings, claims (including compensation claims), damages, interest, fines, penalties, awards, judgments, settlements and demands;

 

***

 

“Mid-Corporate and Complex SME Data Migration” means, in relation to the Mid-Corporate Business and the SME Business (to the extent it relates to the Complex SME Customers), the processes and procedures to be carried out by the relevant Business Seller and the Purchaser to migrate the Business Data in relation to the Mid-Corporate Business and the SME Business (to the extent it relates to the Complex SME Customers) from the systems of that Business Seller to the systems of the Purchaser in accordance with Clause 6.5.3 and in accordance with the Separation Plan;

 

“Mid-Corporate and Complex SME Data Migration Dates” means the dates on which the parties agree that the Mid-Corporate and Complex SME Data Migration shall occur;

 

“Mid-Corporate Business” means, in the case of each Business Seller, the banking business carried on by that Business Seller at the NatWest Closing in respect of the NatWest Businesses, at the RBS Wales Closing in respect of the RBS Wales Businesses, and at the RBS England Closing in respect of the RBS England Businesses to the extent it involves the sale or provision of any and all Products (including all Centralised Products and Products on Retained Sort Codes and Transferring Sort Codes) to the Mid-Corporate Customers but in all cases excluding any Excluded Business, the SME Business and the Retail Business;

 

“Mid-Corporate Customers” means, subject to Clause 2.8, those customers of the Business Sellers whose customer identification numbers are set out in Schedule 17 (excluding any Excluded Finance Customers and any Excluded Customers). For the avoidance of doubt, Mid-Corporate Customers shall not include any persons with a customer identification number set out in Schedule 22;

 

“Model Office Transfers” has the meaning given to it in paragraph 2.1 of Part B of Schedule 23;

 

“Monitoring Trustee” means the Monitoring Trustee appointed by RBSG by way of the Monitoring Trustee Mandate pursuant to the commitments in case State aid No N 422/2009

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

16

  

 

and N 621/2009 dated 20 May 2010 and approved by the European Commission on 17 May 2010;

 

 “Moveable and Immovable Assets” means in the case of each Business where a Business Property is being acquired, the plant and machinery, vehicles and other equipment (including information technology, telephony infrastructure, furniture, fixtures and fittings) owned by any of the Business Sellers or any member of the RBSG Group and used predominantly by any Business Seller for the purposes of that Business or (other than in respect of information technology) situate (or normally situate) at such a Business Property subject to the terms and conditions of the relevant lease in each case at the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses;

 

“NatWest Bid Value” means that part of the Final Bid Value to be allocated to the NatWest Businesses in accordance with Schedule 9, such amount to be allocated between NatWest and NWHL;

 

“NatWest Business Assets” means the Business Assets owned by NatWest and NWHL;

 

“NatWest Businesses” means the Businesses to the extent they are carried on by NatWest or NWHL;

 

“NatWest Business Intellectual Property” means all ownership rights held by any member of the RBSG Group in Intellectual Property (excluding (a) any trade marks other than those listed in paragraph 1.5 of Part 1 of Schedule 4 and (b) information technology and software other than that comprising, installed on or incorporated in any Moveable Asset) which was used exclusively in the course of the NatWest Business at or immediately before the NatWest Closing;

 

“NatWest Closing” means the completion of the sale of the NatWest Businesses pursuant to Clause 7 of this Agreement;

 

“NatWest Closing Date” means the date on which the NatWest Closing takes place;

 

“NatWest Closing Statement” means a statement setting out the aggregate amount of the tangible net assets of the NatWest Businesses as at the NatWest Closing, to be prepared by the Business Sellers in accordance with Clause 8 and Parts 1 and 2 of Schedule 12, as agreed or determined pursuant to paragraph 3 of Part 1 of Schedule 12;

 

“NatWest Effective Time” means the date and time on which the NatWest Businesses (excluding any Non-Scheme Assets) transfer under the Scheme according to its terms, which, as set out in the Separation Plan as at the date of this Agreement, is expected to be ***

 

“NatWest Hedged Contract” means each derivative transaction governed by, subject to or embedded within a Client Agreement, the benefit and burden of which transfers to the Purchaser at NatWest Closing in accordance with the terms of this Agreement, and in respect of which (a) a member of the RBSG Group has entered into a related hedge position on or prior to NatWest Closing in respect of the NatWest Businesses and (b) in relation to a derivative transaction embedded within a Client Agreement, the terms of that derivative transaction are replicated in one or more specific internal hedge position(s) between the Corporate Banking Division of the RBSG Group and the Global Banking and

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

17

  

 

Markets Division of the RBSG Group entered in the books and records of the RBSG Group;

 

“NatWest Portfolio Swap(s)” means the business to business portfolio derivative transaction(s) relating to the NatWest Hedged Contracts described in, and to be finalised in accordance with, Clause 9.11 of this Agreement to be entered into by RBS and ANTS at NatWest Closing and each evidenced by a Confirmation to the Hedging ISDA;

 

“NatWest Purchase Price” has the meaning given to it in Clause 3.1;

 

“NatWest Relevant Employees” means those Relevant Employees wholly or mainly assigned to the NatWest Businesses at the NatWest Closing Date (as determined by the Business Sellers);

 

“NatWest Tangible Net Asset Value” means the aggregate amount of the tangible net assets of the NatWest Businesses at the NatWest Closing, as shown in the NatWest Closing Statement (which amount may be a positive or negative number);

 

“NatWest Trade Marks” has the meaning given to it in paragraph 1.3 of Part 3 of Schedule 4;

 

“NatWest Transitional Trade Mark Licence” means the non-exclusive, royalty free transitional trade mark licence to be entered into at the NatWest Closing in respect of the NatWest Trade Marks in accordance with the terms of Part 2 of Schedule 4;

 

“Non Relationship Managed SME Customers” means business customers who at the relevant time on or prior to the Relevant Closing have a Product held on a Transferring Sort Code, other than Relationship Managed SME Customers, Excluded SME Customers, Excluded Customers and Excluded Finance Customers;

 

“Non-Scheme Assets” has the meaning given to it in Clause 4.5.1;

 

“Notice” has the meaning given to it in Clause 16.13;

 

“Order” means The Value Added Tax (Special Provisions) Order 1995, SI 1995/1268, as variously amended;

 

“Other Business Assets” means, in the case of each Business, such assets, properties and rights as are owned by the relevant Business Seller or any other member of the RBSG Group and used and/or held exclusively for the purposes of that Business at the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses (including Cash at the Relevant Closing but excluding the Excluded Assets and any other assets falling within Clause 2.2.1(i)-(x));

 

“Owned Properties” has the meaning given to it in paragraph 1 of Schedule 3;

 

“Part 8 Claim Form” means the claim form to be agreed in accordance with Clause 4.4 between the Purchaser and the Business Sellers to be presented to the Court in respect of the Scheme;

 

“Payment Date” means the date falling five Business Days after the date on which the process described in paragraph 3 of Part 1 of Schedule 12 for the preparation and determination of the Closing Statements is complete;

 

“Payments Co-Existence Agreement” has the meaning given to it in paragraph 9.1 of Part B of Schedule 23;

 

  

18

  

 

“Permits” has the meaning given to it in paragraph 7.1 of Schedule 14;

 

“Physical Data Room” has the meaning ascribed to it in paragraph 2 of the General Disclosures Section of the Disclosure Letter;

 

“Portfolio Swaps” means the NatWest Portfolio Swap(s), the RBS England Portfolio Swap(s) and the RBS Wales Portfolio Swap(s);

 

“PPA” means an agreement between either:

 

	 	
(i)  

	
West Register (Investments) Limited, a Business Seller and a Customer or guarantor; or

 

	 	
(ii)  

	
a Business Seller and a Customer or guarantor,

 

pursuant to which the Customer or guarantor agrees to pay, at a particular point in time or upon the occurrence of a particular event and subject to certain conditions, a fee to West Register (Investments) Limited or the Business Seller based on the value of a specific real estate asset owned by the Customer and the Customer or guarantor’s liability under such agreement is secured by a legal charge over the real estate asset referenced in such agreement and any deed of priority or fee agreement second charge relating thereto;

 

“Pre-Closing Taxation” means Taxation arising in relation to any period for Taxation purposes ending on or before the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses or, in relation to any period which begins before the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses and ends after the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses, that part of such period that ended on the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses and (in the case of any Taxes which are not computed by reference to periods) any Taxation arising by reference to an Event which occurred on or before the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses, in each case where such Taxation (a) arises in respect of a Business or (b) is Taxation for which any Business Seller is primarily liable, but excluding

 

	 	
(a)

	
any such Taxation which is attributable to receipts, income, profits or gains earned or received by or accruing to any member of the Purchaser’s Group, or any purchaser, assignee or other transferee therefrom (not being a Business Seller or a member of a Business Seller’s Group), after the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales

 

  

19

  

 

Businesses, and the RBS England Closing in respect of the RBS England Businesses; or

 

	
  

	
(b)

	
any such Taxation which would not have arisen but for a voluntary Event caused or carried out by the Purchaser or any other member of the Purchaser’s Group after the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses; or

 

	
  

	
(c)

	
any VAT or Transaction Taxes or stamp duty in respect of which any of Clauses 3.5, 16.10, 16.11, and 16.12 and Schedule 10 apply;

 

***

 

***

 

***

 

***

 

“Procedures and Policies” has the meaning given to it in paragraph 5.5 of Schedule 14;

 

“Product Name” means any unregistered trade mark, service mark or trade name or other form of words owned by any member of the RBSG Group and used as the product name of any of the Products, excluding any part of such product name to the extent that it reproduces or includes any RBS Trade Marks or NatWest Trade Marks;

 

“Products” means, in the case of each Business, all products sold or provided to customers of the Business Sellers by the Business Sellers which fall within the categories set out below:

 

	 	
(a)  

	
savings accounts;

 

	 	
(b)  

	
current accounts;

 

	 	
(c)  

	
mortgages (other than Excluded Mortgages);

 

	 	
(d)  

	
in the case of the Retail Business, personal loans;

 

	 	
(e)  

	
in the case of the SME Business and Mid-Corporate Business, commercial loans;

 

	 	
(f)  

	
in the case of the SME Business and Mid-Corporate Business, commercial deposits (including base rate and money market deposits) and other products sold or provided to Customers pursuant to a GBM Client Agreement;

 

	 	
(g)  

	
overdrafts;

 

	 	
(h)  

	
credit and charge cards (other than any co-branded credit cards and charge cards and, for the purposes of this Agreement, any reference to “credit cards” and/or “charge cards” shall be interpreted to exclude any co-branded credit cards and charge cards); and

 

	 	
(i)  

	
any structured finance and leveraged finance products held by SME Customers and Mid-Corporate Customers which the Purchaser has elected to include in the Businesses in accordance with Clause 2.11 (but only in respect of those Customers who have been reviewed as part of the due diligence conducted by or

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

20

  

 

on behalf of the Purchaser as described in Clause 2.11 and in respect of which any such election relates),

 

including, but not limited to, the Products listed in Schedule 16;

 

“Pro Forma Financial Information” means the financial information for the Businesses for the twelve month period ended on the Pro Forma Financial Information Date, set out in document A.25 of the Data Room;

 

“Pro Forma Financial Information Date” means 31 December 2009;

 

“Property Third Party Consents” has the meaning given to it in Schedule 3;

 

“Purchase Price” has the meaning given to it in Clause 3.1;

 

***

 

***

 

“Purchaser’s Group” means the Purchaser and the members of its Group from time to time;

 

“Rainbow Data” means information regarding Customers retrievable from a database maintained by any member of the RBSG Group (including any such database to which any member of the RBSG Group has access following the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses or the RBS England Closing in respect of the RBS England Businesses);

 

“RBS Businesses” means the RBS Wales Businesses and the RBS England Businesses;

 

“RBS Business Intellectual Property” means all ownership rights held by any member of the RBSG Group in Intellectual Property (excluding (a) any trade marks other than those listed in paragraph 1.5 of Part 1 of Schedule 4 and (b) information technology and software other than that comprising, installed on or incorporated in any Moveable Asset) which was used exclusively in the course of the RBS Businesses at or immediately before the RBS Wales Closing;

 

“RBS England Bid Value” means that part of the Final Bid Value to be allocated to RBS in respect of the RBS England Businesses in accordance with Schedule 9;

 

“RBS England Business Assets” means the Business Assets in respect of the RBS England Businesses;

 

“RBS England Businesses” means the Businesses to the extent they are carried on by RBS in England;

 

“RBS England Closing” means the completion of the sale of the RBS England Businesses pursuant to Clause 7 of this Agreement;

 

“RBS England Closing Date” means the date on which the RBS England Closing takes place;

 

“RBS England Closing Statement” means a statement setting out the aggregate amount of the tangible net assets of the RBS England Businesses as at the RBS England Closing

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

21

  

 

to be prepared by the Business Sellers in accordance with Clause 8 and Parts 1 and 2 of Schedule 12 as agreed or determined pursuant to paragraph 3 of Part 1 of Schedule 12;

 

“RBS England Effective Time” means the date and time on which the RBS England Businesses (excluding any Non-Scheme Assets) transfer under the Scheme according to its terms, which as set out in the Separation Plan as at the date of this Agreement is expected to be ***

 

“RBS England Hedged Contracts” means each derivative transaction governed by, subject to or embedded within a Client Agreement, the benefit and burden of which transfers to the Purchaser at the RBS England Closing in accordance with the terms of this Agreement, and in respect of which (a) a member of the RBSG Group has entered into a related hedge position on or prior to RBS England Closing in respect of the RBS England Businesses and (b) in relation to a derivative transaction embedded within a Client Agreement, the terms of that derivative transaction are replicated in one or more specific internal hedge position(s) between the Corporate Banking Division of the RBSG Group and the Global Banking and Markets Division of the RBSG Group entered in the books and records of the RBSG Group;

 

“RBS England Portfolio Swap(s)” means the business to business portfolio derivative transaction(s) relating to the RBS England Hedged Contracts described in, and to be finalised in accordance with, Clause 9.11 of this Agreement to be entered into by RBS and ANTS at the RBS England Closing and each evidenced by a Confirmation to the Hedging ISDA;

 

“RBS England Purchase Price” has the meaning given to it in Clause 3.1;

 

“RBS England Tangible Net Asset Value” means the aggregate amount of the tangible net assets of the RBS England Businesses at the RBS England Closing, as shown in the RBS England Closing Statement (which amount may be a positive or a negative number);

 

“RBSG” means The Royal Bank of Scotland Group plc;

 

“RBSG Group” means RBSG and its subsidiaries and subsidiary undertakings from time to time;

 

“RBSG Group GBM Customer” means those Customers listed in Schedule 25;

 

***

 

“RBS Hedged Contracts” means a GBM Client Agreement, the benefit and burden of which transfers to the Purchaser at the RBS Wales Closing in respect of the RBS Wales Businesses, or the RBS England Closing in respect of the RBS England Businesses, in accordance with the terms of this Agreement, and in respect of which a member of the RBSG Group has entered into a related hedge position on or prior to RBS Wales Closing or RBS England Closing (as the case may be) in respect of the RBS Businesses;

 

“RBS Portfolio Swap(s)” means the business to business portfolio swap agreement(s) relating to the RBS Hedged Contracts described in, and to be finalised in accordance with, Clause 9.11 of this Agreement to be entered into by RBS and ANTS at the RBS Wales Closing in respect of the RBS Wales Businesses, and at the RBS England Closing in

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

22

  

 

respect of the RBS England Businesses, and each evidenced by a Confirmation to the Hedging ISDA;

 

“RBS Trade Marks” has the meaning given in paragraph 1.3 of Part 4 of Schedule 4;

 

“RBS Transitional Trade Mark Licence” means the non-exclusive, royalty free transitional trade mark licence to be entered into at the RBS Wales Closing in respect of the RBS Trade Marks in accordance with the terms of Part 2 of Schedule 4;

 

“RBS Wales Bid Value” means that part of the Final Bid Value to be allocated to RBS in respect of the RBS Wales Businesses in accordance with Schedule 9;

 

“RBS Wales Business Assets” means the Business Assets in respect of the RBS Wales Businesses;

 

“RBS Wales Businesses” means the Businesses to the extent they are carried on by RBS in Wales;

 

“RBS Wales Closing” means the completion of the sale of the RBS Wales Businesses pursuant to Clause 7 of this Agreement;

 

“RBS Wales Closing Date” means the date on which the RBS Wales Closing takes place;

 

“RBS Wales Closing Statement” means a statement setting out the aggregate amount of the tangible net assets of the RBS Wales Businesses as at the RBS Wales Closing to be prepared by the Business Sellers in accordance with Clause 8 and Parts 1 and 2 of Schedule 12 as agreed or determined pursuant to paragraph 3 of Part 1 of Schedule 12;

 

“RBS Wales Effective Time” means the date and time on which the RBS Wales Businesses (excluding any Non-Scheme Assets) transfer under the Scheme according to its terms, which, as set out in the Separation Plan as at the date of this Agreement, is expected to be ***

 

“RBS Wales Hedged Contracts” means each derivative transaction governed by, subject to or embedded within a Client Agreement, the benefit and burden of which transfers to the Purchaser at the RBS Wales Closing in accordance with the terms of this Agreement, and in respect of which (a) a member of the RBSG Group has entered into a related hedge position on or prior to RBS Wales Closing in respect of the RBS Wales Businesses and (b) in relation to a derivative transaction embedded within a Client Agreement, the terms of that derivative transaction are replicated in one or more specific internal hedge position(s) between the Corporate Banking Division of the RBSG Group and the Global Banking and Markets Division of the RBSG Group entered in the books and records of the RBSG Group;

 

“RBS Wales Portfolio Swap(s)” means the business to business portfolio derivative transaction(s) relating to the RBS Wales Hedged Contracts described in, and to be finalised in accordance with, Clause 9.11 of this Agreement to be entered into by RBS and ANTS at the RBS Wales Closing and each evidenced by a Confirmation to the Hedging ISDA

 

“RBS Wales Purchase Price” has the meaning given to it in Clause 3.1;

 

“RBS Wales Relevant Employees” means those Relevant Employees allocated to the RBS Wales Businesses (as determined by the Business Sellers);

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

23

  

 

“RBS Wales Tangible Net Asset Value” means the aggregate amount of the tangible net assets of the RBS Wales Businesses at the RBS Wales Closing, as shown in the RBS Wales Closing Statement (which amount may be a positive or a negative number);

 

“Regulatory Authority” means (i) any government department or governmental, quasi-governmental, supranational, statutory, regulatory or investigative body, authority, agency, bureau, board, commission, court, department, tribunal or instrumentality thereof or (ii) any banking or financial services or other regulatory authority which regulates or supervises any part of the Businesses;

 

“Relationship Managed SME Customers” means business customers who at the relevant time on or prior to the Relevant Closing have a Product held on a Transferring Sort Code and:

 

	 	
(a)  

	
who have a designated non branch-based relationship manager;

 

	 	
(b)  

	
who have a relationship manager with specialist credit-focused relationship management expertise; or

 

	 	
(c)  

	
who are customers of the Business Sellers’ “Direct” banking business,

 

other than Excluded SME Customers, Excluded Customers and Excluded Finance Customers;

 

“Relevant Capacity” means directly or indirectly for its own account or for that of any person, firm or company (other than, in the case of the Business Sellers, the Purchaser), including through the medium of any person, firm or company controlled by it, or in conjunction with any other person;

 

***

 

“Relevant Employees” means the Current Employees together with (i) any employees hired to work in the Business in accordance with Clause 5.1.2(xvi); and (ii) the Further Allocated Employees; but excluding (a) anyone whose employment terminates after the date of the Original Agreement; (b) anyone specifically excluded by written agreement with the Purchaser; and (c) any employees providing Transitional Services under the Transitional Services Agreement;

 

"Relevant Mortgage Manager Platform Mortgages" means those limited number of mortgages contained on the mortgage platform of the Business Sellers called "Mortgage Manager" as have been discussed by the parties immediately prior to the execution of this Agreement and in respect of which the provisions of paragraph 13 of Part B of Schedule 23 relate;

 

“Relief” includes any relief, loss, allowance, exemption, set-off, deduction or credit in computing or against profits or Taxation;

 

“Reporting Accountants” means Deloitte LLP or, if that firm is unable or unwilling to act in any matter referred to them under this Agreement, an internationally recognised firm of accountants (with a specialist forensics or dispute resolution department or group) to be agreed by the Business Sellers and the Purchaser;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

24

  

 

***

 

“Retail Business” means:

 

	 	
(a)  

	
in the case of NatWest and NWHL, the banking business carried on by NatWest and NWHL at the NatWest Closing;

 

	 	
(b)  

	
in the case of RBS, the banking business carried on by RBS at the RBS Wales Closing Date (in respect of the RBS Wales Businesses) and the RBS England Closing Date (in respect of the RBS England Businesses)

 

to the extent it involves the sale or provision of Retail Products to Retail Customers, but excluding any Excluded Business, the Mid-Corporate Business and the SME Business;

 

“Retail Customers” means retail banking customers of the Business Sellers who have Products held on Transferring Sort Codes at the relevant time on or prior to the Relevant Closing other than SME Customers, Mid-Corporate Customers, Excluded Customers and employees of the RBSG Group who are not Relevant Employees;

 

“Retail Products” means, in respect of a Retail Customer of a Business Seller, all Products held on any Transferring Sort Code, subject to such amendments as the parties may agree from time to time through the Joint Implementation Committee in accordance with Part B of Schedule 23, and:

 

	 	
(a)  

	
if the Retail Customer has a Product on a Transferring Sort Code and does not have any Products held on a Retained Sort Code all other Centralised Products held by such Retail Customer with that Business Seller; or

 

	 	
(b)  

	
if the Retail Customer has Products held on both a Transferring Sort Code and a Retained Sort Code, to the extent that the Retail Customer’s Best Branch is a Transferring Sort Code, all other Centralised Products held by such Retail Customer with that Business Seller;

 

"Retained Business Receivable" means a payment received by the Purchaser's Group in respect of the Excluded Business including in respect of a customer of the Business Sellers who is not a Customer;

 

“Retained Sort Code” means a sort code of a Business Seller which is not a Transferring Sort Code;

 

“Safe Custody Items” has the meaning given to it in Clause 2.9;

 

“Safe Custody Agreements” means those contracts or bailment arrangements entered into by the Business Sellers with Customers in respect of the deposit of an item at a Business Property which is a branch for safe custody which were entered into in the course of such Business on or before the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses and in respect of which the Business Sellers provide the information as set out in Clause 2.9.1 by the dates specified therein to the extent that, immediately before the Relevant Closing, the same remain to be completed or performed (in whole or in part) or remain in force;

 

“Scheme” means the scheme of arrangement in respect of the Businesses (excluding any Non-Scheme Assets) to be proposed in accordance with Part VII of the Act to be agreed in 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

25

  

 

accordance with Clause 4.4 and as such scheme may be amended by agreement between the Business Sellers and the Purchaser;

 

“Scheme Documents” means the Scheme, the Part 8 Claim Form, newspaper notices, order on initial application, the Court Order, witness statements and all other documents required by the Court in order to sanction the Scheme;

 

“Scheme Posting Date” means the date on which formal notification of the Scheme is first sent to Customers which, as set out in the Separation Plan as at the date of this Agreement, is expected to be ***

 

“SDLT” means stamp duty land tax together with any interest, fines and penalties in relation thereto;

 

“SDRT” means stamp duty reserve tax together with any interest, fines and penalties in relation thereto;

 

“Securitised Mortgage” means a mortgage which (i) was at the date of the Original Agreement; or (ii) is at the NatWest Closing Date in respect of the NatWest Businesses, the RBS Wales Closing Date in respect of the RBS Wales Businesses or the RBS England Closing Date in respect of the RBS England Businesses, securitised by, or subject to a covered bond programme of, the relevant Business Seller or any member of the RBSG Group, other than in each case those mortgages which are subject to the Bank of England’s Special Liquidity Scheme or the Bank of England’s Discount Window Facility;

 

“Segregation” means the actions to be taken by the Business Sellers or any member of the RBSG Group for the segregation of the Businesses and Customers within the RBSG Group for the purpose of the sale of the Businesses, including:

 

	 	
(a)  

	
the segregation of those persons who are employees of the RBSG Group but are not Relevant Employees from the other customers of the Retail Business;

 

	 	
(b)  

	
the segregation of the Relevant Employees from other employees of the RBSG Group;

 

	 	
(c)  

	
Property Segregation (as defined in Schedule 3);

 

	 	
(d)  

	
the segregation of the operational reporting procedures of the Businesses from the operational reporting procedures of the RBSG Group;

 

	 	
(e)  

	
Sort Code Allocations and the segregation of Customers pursuant to such Sort Code Allocations; and

 

	 	
(f)  

	
the reallocation of non-customer products transferring with the Businesses on sort codes for internal business operations and financial accounting purposes onto new sort codes (which will transfer with the Businesses) or Transferring Sort Codes,

 

but excluding the Data Migration and the Mid-Corporate and Complex SME Data Migration;

 

***

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

26

  

 

“Seller Warranties” means the representations, warranties and undertakings given by the Business Sellers pursuant to Clause 10 and Schedule 14 and “Seller Warranty” means any one of them;

 

***

 

“Separation” means the separation of the Businesses from the other businesses and operations of the RBSG Group, including, for the avoidance of doubt, activities relating to the same undertaken by the parties following Closing in accordance with this Agreement, the Transitional Services Agreement and the Separation Plan;

 

“Separation Plan” has the meaning given to it in Clause 6;

 

“SME Business” means:

 

	 	
(a)  

	
in the case of NatWest and NWHL, the banking business carried on by NatWest and NWHL at the NatWest Closing;

 

	 	
(b)  

	
in the case of RBS, the banking business carried on by RBS at the RBS Wales Closing Date (in respect of the RBS Wales Business) and the RBS England Closing Date (in respect of the RBS England Business);

 

subject to such amendments as the parties may agree from time to time through the Joint Implementation Committee in accordance with Part B of Schedule 23, to the extent it involves the sale or provision of:

 

	 	
(a)  

	
in relation to a Relationship Managed SME Customer:

 

	 	
(i)  

	
all Products of that Business Seller on a Transferring Sort Code or a Retained Sort Code held by that Relationship Managed SME Customer; and

 

	 	
(ii)  

	
all Centralised Products of that Business Seller held by that Relationship Managed SME Customer; and

 

	 	
(b)  

	
in relation to Non Relationship Managed SME Customer:

 

	 	
(i)  

	
all Products of that Business Seller held on a Transferring Sort Code by that Non Relationship Managed SME Customer; and

 

	 	
(ii)  

	
all Centralised Products of that Business Seller held by that Non Relationship Managed SME Customer,

 

in each case excluding the Excluded Business, the Mid-Corporate Business and the Retail Business;

 

“SME Customer List” means the list of customer identification numbers in relation to the SME Customers dated 30 June 2010 as set out in document A.31 of the Data Room;

 

“SME Customers” means the Relationship Managed SME Customers and the Non Relationship Managed SME Customers (details of such customers existing as at 30 June 2010 being set out in the SME Customer List);

 

“SME Relationship Manager” means an employee of a Business Seller who holds the position of relationship manager and the majority of whose clients are SME Customers;

 

“Sort Code Allocation” means:

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

27

  

 

	 	
(a) 

	
***

 

	 	
(b)  

	
the allocation or reallocation of Products which are transferring with the Businesses on Retained Sort Codes onto new sort codes (which will transfer with the Businesses); and

 

	 	
(c)  

	
the allocation or reallocation of Centralised Products transferring with the Businesses onto new sort codes (which will transfer with the Businesses);

 

“Standard Form Client Agreement” means the standard form Client Agreements and the standard form Loan Guarantees/Security documents used by the Businesses in connection with the offering to Customers of any Products;

 

“State Aid Commitments” means the commitments offered by RBSG pursuant to the case State aid No N 422/2009 and N 621/2009 and laid down in the Term Sheet for UK State Aid Commitments in respect of the RBSG Group;

 

“State Aid Letter” means the letter dated 14 December 2009 from the European Commission to the Secretary of State for Foreign Affairs (with the subject State aid No N422/2009 and N621/2009 – United Kingdom – Restructuring of Royal Bank of Scotland by the State and its participation in the Asset Protection Scheme) (as amended or supplemented from time to time);

 

“Structured Products” has the meaning given to it in Clause 2.11;

 

“Tangible Net Asset Value” means the aggregate of the NatWest Tangible Net Asset Value, the RBS Wales Tangible Net Asset Value and the RBS England Tangible Net Asset Value (which amount may be a positive or a negative number);

 

“Taxation” or “Tax” includes all forms of taxation whether direct or indirect and whether levied by reference to income, profits, gains, net wealth, asset values, turnover, added value or other reference and statutory, governmental, state, provincial, local governmental or municipal impositions, duties, contributions, rates and levies (including without limitation social security contributions and any other payroll taxes), whenever and wherever imposed (whether imposed by way of a withholding or deduction for or on account of tax or otherwise) and in respect of any person (whether primarily or secondarily liable) and all penalties, charges, costs and interest relating to any of the foregoing;

 

“Tax Authority” means any taxing or other authority competent to impose any liability in respect of Taxation or responsible for the administration and/or collection of Taxation or enforcement of any law in relation to Taxation;

 

“Tax Litigation” means any claim, legal action, proceeding, suit, litigation, prosecution, investigation, arbitration or other dispute resolution process, or administrative or criminal proceedings, or regulatory agency action (or any judgment, decree, injunction, order or decision relating to any of the foregoing) relating to Tax;

 

“Tax Warranties” means the Seller Warranties set out in paragraphs 14 to 17 (inclusive) of Schedule 14;

 

“Third Party Claim” has the meaning given to it in Clause 12.4;

 

“Third Party Consents” means all consents, licences, approvals, permits, authorisations or waivers required from third parties for the assignment, transfer or novation in favour of

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

28

  

 

the Purchaser of any of the Contracts or the Loan Guarantees/Security, as the case may be, and “Third Party Consent” means any one of them;

 

“Third Party Rights Clauses” has the meaning given to it in Clause 16.5.1;

 

“Total Customer Liabilities” means the aggregate liabilities represented by Customers’ savings deposits, money market deposits, current account deposits and personal account deposits as calculated in accordance with the accounting policies and principles that were used by the Business Sellers in the preparation of the Pro-Forma Financial Information;

 

“Trade Mark Assignments” means the trade mark assignments in substantially the form set out in Part 5 of Schedule 4 to be entered into at the NatWest Closing in accordance with the terms of paragraph 1.5 of Part 1 of Schedule 4;

 

“Transaction Documents” means the Original Agreement, this Agreement, the Scheme Documents, the Transitional Trade Mark Licences, the Trade Mark Assignments, the Portfolio Swaps and the TSA and any other agreements, documents or instruments entered into between any of the Business Sellers on the one hand and the Purchaser on the other hand pursuant to or in connection with this Agreement;

 

“Transaction Taxes” means all notarial fees and all registration, stamp and transfer taxes, fees and duties or their equivalents which are payable in any jurisdiction in respect of this Agreement or the transactions contemplated by this Agreement, including, without limitation, stamp duty, SDLT and SDRT payable in the United Kingdom;

 

“Transferring Sort Codes” means the sort codes of the Business Sellers set out in Schedule 2 to be transferred to the Purchaser (subject to any amendments pursuant to the Sort Code Allocation) as such Schedule may be amended from time to time by agreement of the parties through the Joint Implementation Committee in accordance with Part B of Schedule 23;

 

“Transitional Services” means the services provided under the Transitional Services Agreement;

 

“Transitional Services Agreement” or “TSA” means the transitional services agreement in the Agreed Terms and on such further terms, if any, as are agreed pursuant to Schedule 8, relating to the provision of certain services by the Business Sellers and/or other members of the RBSG Group to the Purchaser after Closing;

 

“Transitional Trade Mark Licences” means the NatWest Transitional Trade Mark Licence and the RBS Transitional Trade Mark Licence;

 

“UKFI” means UK Financial Investments Limited;

 

“VAT” means United Kingdom Value Added Tax;

 

“VATA 1994” means the Value Added Tax Act 1994; and

 

“West Register Business Assets” means any PPA with a Customer in respect of which West Register (Investments) Limited is a counter-party.

 

	
1.2  

	
Rights and Liabilities of the Business Sellers

 

Each Business Seller shall have rights and liabilities (including in relation to payment) under or in relation to a breach of any Transaction Document on a joint and several basis and references to “Business Seller” shall be construed accordingly.

 

  

29

  

 

	
1.3  

	
Singular, plural, gender

 

References to one gender include all genders and references to the singular include the plural and vice versa.

 

 

	
1.4  

	
References to persons and companies

 

References to:

 

	
1.4.1 

	
a person include any individual, firm, company, corporation, body corporate, government, state or agency of a state, local or municipal authority or government body or any joint venture, partnership or unincorporated association (whether or not having separate legal personality); and

 

	
1.4.2  

	
a company include any company, corporation or any body corporate, wherever and however incorporated or established.

 

	
1.5  

	
Subsidiaries and holding companies

 

The words “holding company”, “subsidiary” and “subsidiary undertaking” shall have the same meanings in this Agreement as their respective definitions in the Companies Act 2006 (United Kingdom).

 

	
1.6  

	
Schedules etc.

 

References to this Agreement shall include any Recitals and Schedules to it and references to Clauses and Schedules are to Clauses of, and Schedules to, this Agreement. References to paragraphs and Parts are to paragraphs and Parts of the Schedules.

 

	
1.7  

	
References to agreements etc.

 

References to any agreement, instrument or deed shall be to such agreement, instrument or deed as amended, varied, modified, supplemented, extended, novated, renewed or replaced from time to time.

 

	
1.8  

	
Legal Terms and Statutes

 

	
1.8.1  

	
References to any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official, or any legal concept or thing shall, in respect of any jurisdiction other than England, be construed as references to the term or concept which most nearly corresponds to it in that jurisdiction and, unless otherwise provided, expressions defined in the UK Companies Act 2006 have the meanings there given to them.

 

	
1.8.2  

	
A reference to any statute or statutory provision shall be construed as a reference to the same as it may have been, or may from time to time be, amended, modified or re-enacted.

 

	
1.9  

	
Non-limiting effect of words

 

The words “including”, “include”, “in particular” and words of similar effect shall not be deemed to limit the general effect of the words that precede them.

 

  

30

  

 

	
1.10  

	
Headings

 

All headings and titles are inserted for convenience only. They are to be ignored in the interpretation of this Agreement.

 

	
1.11  

	
References to “after-Tax basis”

 

Where this Agreement refers to an indemnity being provided or a payment being made on an “after-Tax basis” such references shall be construed as meaning that:

 

	
1.11.1  

	
the amount payable shall be determined having regard to, or after taking into account, the extent to which any Tax would be payable by the recipient which is referable to the matter giving rise to the payment and the extent to which the recipient will be entitled to any Relief which is referable to the matter giving rise to the payment; and

 

	
1.11.2  

	
to the extent that the payment is subject to Tax in the hands of the recipient or by way of withholding or deduction, it shall be increased to the extent required to ensure that the benefit of the indemnity or payment is equivalent to the benefit that would have been received if there was no Tax referable to, or payable in respect of, the payment.

 

	
1.12  

	
References to “Relevant Closing”

 

References in this Agreement to “Relevant Closing” (including in the phrase “Relevant Closing Date”) shall mean (i) in respect of the NatWest Businesses and the NatWest Business Assets, the NatWest Closing; (ii) in respect of the RBS Wales Businesses and the RBS Wales Business Assets, the RBS Wales Closing; and (iii) in respect of the RBS England Businesses and the RBS England Business Assets, the RBS England Closing.

 

	
2  

	
Agreement to Sell the Businesses

 

	
2.1  

	
Sale and Purchase

 

On and subject to the terms of this Agreement:

 

	
2.1.1  

	
the Business Sellers will sell;

 

	
2.1.2  

	
the Purchaser will purchase,

 

the Businesses as a going concern, in each case with effect from the RBS Wales Effective Time in respect of the RBS Wales Businesses, the RBS England Effective Time in respect of the RBS England Businesses, and the NatWest Effective Time in respect of the NatWest Businesses; and

 

	
2.1.3  

	
the Business Sellers will transfer the Friends and Family Assets to the Purchaser with effect from the relevant Friends and Family Transfer Date.

 

	
2.2  

	
Sale of the Businesses

 

	
2.2.1  

	
Subject to Clause 2.2.2, the sale of each Business to be sold under this Agreement shall comprise:

 

	 	
(i)  

	
the Business Properties (subject to and on the terms set out in Schedule 3);

 

  

31

  

 

	 	
(ii)  

	
the Business Intellectual Property (subject to and on the terms set out in Schedule 4);

 

	 	
(iii)  

	
the Goodwill;

 

	 	
(iv)  

	
the Moveable and Immovable Assets;

 

	 	
(v)  

	
the Business ATMs;

 

	 	
(vi)  

	
the rights and benefits (subject to the burden) of the relevant Business Seller or a member of the RBSG Group arising under the Contracts (subject to and on the terms set out in the Scheme and/or Schedule 5);

 

	 	
(vii)  

	
the rights and benefits of the relevant Business Seller or a member of the RBSG Group arising under the Loan Guarantees/Security (subject to and on the terms set out in the Scheme and/or Schedule 5);

 

	 	
(viii)  

	
the benefit (so far as the same can lawfully be assigned or transferred to the Purchaser) of the Claims;

 

	 	
(ix)  

	
all rights, title and interest of the relevant Business Seller in the Books and Records;

 

	 	
(x)  

	
the Business Receivables; and

 

	 	
(xi)  

	
the Other Business Assets.

 

The Business Assets shall be sold free from Encumbrances and together with all rights attaching to them as at the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses. Without prejudice to Clause 2.2.3, risk in the Friends and Family Assets shall pass with effect from the Friends and Family Transfer Date, risk in the NatWest Business Assets shall pass with effect from the NatWest Closing, risk in the RBS Wales Business Assets shall pass with effect from the RBS Wales Closing and risk in the RBS England Business Assets shall pass with effect from the RBS England Closing, save that where a Business Asset is not transferred to the Purchaser on the relevant Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Business Assets, the RBS Wales Closing in respect of the RBS Wales Business Assets or the RBS England Closing in respect of the RBS England Business Assets, risk in that Business Asset shall not pass to the Purchaser on the Relevant Closing but shall pass with effect from the time at which such Business Asset is transferred to the Purchaser (unless such Business Asset is a Contract or Loan Guarantee/Security and the benefit of such Contract or Loan Guarantee/Security passes to the Purchaser in accordance with Schedule 5 in which case the risk shall pass at the time the benefit passes in accordance with the provisions of Schedule 5).

 

If any asset which the parties intend to form part of the sale and purchase pursuant to this Agreement but which does not fall within the definition of "Business Asset" is held by a member of the RBSG Group other than one of the Business Sellers, the Business Sellers shall procure that such asset is transferred to the Purchaser at the Friends and Family Transfer Date (if such asset is, or is intended to be, part of the Friends and Family Transfer), the NatWest Closing (if such asset is, or is

 

  

32

  

 

intended to be, part of the NatWest Businesses), the RBS Wales Closing (if such asset is, or is intended to be, part of the RBS Wales Businesses) or the RBS England Closing (if such asset is, or is intended to be, part of the RBS England Businesses) and such asset shall, for the purposes of this Agreement, be treated as a Business Asset.

 

	
2.2.2  

	
There shall be excluded from the sale of the Businesses under this Agreement:

 

	 	
(i)  

	
any asset, contract, undertaking, arrangement or agreement not referred to in Clause 2.2.1;

 

	 	
(ii)  

	
any information technology platforms and channels;

 

	 	
(iii)  

	
any insurance policy or insurance claim (without prejudice to the provisions of Clause 14);

 

	 	
(iv)  

	
the Excluded Business;

 

	 	
(v)  

	
the Bancassurance Joint Venture and any rights or obligations thereunder or relating thereto;

 

	 	
(vi)  

	
any Client Agreements or Loan Guarantees/Security between the Business Sellers and another member of the RBSG Group (in the capacity as customer);

 

	 	
(vii)  

	
any Products, Client Agreements or Loan Guarantees/Security that have been written off by the Business Sellers in accordance with RBSG’s standard accounting policies;

 

	 	
(viii)  

	
amounts due from any relevant Tax Authority or member of the RBSG Group in respect of Taxation or any Relief in respect of Taxation;

 

	 	
(ix)  

	
any rights of any member of the RBSG Group (including rights of set off or counterclaim) to the extent that such rights relate predominantly to assets referred to in this Clause 2.2.2 or Excluded Liabilities;

 

	 	
(x)  

	
any safe custody items at the Business Properties which are not Safe Custody Items,

 

(together, the “Excluded Assets”). For the avoidance of doubt, the Excluded Assets shall include any asset, contract, undertaking, arrangement and agreement whether written or otherwise in respect of the products and services provided by or in connection with (a) any business (including the asset finance business) carried on under the “Lombard” name or brand and in connection with any loans from Lombard Direct Loans; or (b) products and services provided by or in connection with any invoice finance business carried on under the “RBS Invoice Finance” name or brands.

 

	
2.2.3 

	
***

 

	
2.2.4  

	
***

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

33

  

 

	
2.3  

	
Business Properties and Leaseback Properties

 

The provisions of Schedule 3 shall apply in respect of the Business Properties and the Leaseback Properties.

 

	
2.4  

	
Intellectual Property

 

The provisions of Schedule 4 shall apply in respect of the Business Intellectual Property.

 

	
2.5  

	
Contracts, Retain Retail Mortgages and Lombard Shared Security

 

The provisions of Schedule 5 shall apply in respect of the Contracts, Loan Guarantees/Security, the Retain Retail Mortgages and Lombard Shared Security.

 

	
2.6  

	
Relevant Employees and Group Retirement Benefit Arrangements

 

	
2.6.1  

	
The provisions of Schedule 6 shall apply in respect of the Relevant Employees.

 

	
2.6.2  

	
The provisions of Schedule 7 shall apply in respect of the Group Retirement Benefit Arrangements.

 

	
2.7  

	
Transitional Services Agreement

 

The Agreed Terms of the Transitional Services Agreement shall, subject to the provisions of Schedule 8, apply in respect of the Transitional Services.

 

	
2.8  

	
***

 

	
2.9  

	
Safe Custody Items

 

	
2.9.1  

	
The parties agree that the items which are the subject of any Safe Custody Agreement and which the Business Sellers provide an inventory on NatWest Closing (in respect of the NatWest Business), on RBS Wales Closing (in respect of the RBS Wales Businesses), or on RBS England Closing (in respect of the RBS England Businesses) specifying, in respect of each such safe custody item (i) the item number and bar code number of the safe custody item, (ii) the customer account number to which the safe custody items relate, and (iii) where available, a brief description of the safe custody item (the “Safe Custody Items”) shall remain in the relevant Business Properties at the NatWest Closing (in respect of the NatWest Businesses), the RBS Wales Closing (in respect of the RBS Wales Businesses) and the RBS England Closing (in respect of the RBS England Businesses) and the Purchaser (or such other relevant custodian) shall take possession of the Safe Custody Items upon transfer of the Safe Custody Agreements to the Purchaser at the Relevant Closing.

 

	
2.9.2  

	
In respect of any other safe custody items at the Business Properties which are not Safe Custody Items, the Business Sellers agree that on or before the NatWest Closing (in respect of the NatWest Businesses), on the RBS Wales Closing (in respect of the RBS Wales Businesses) and on the RBS England Closing (in respect of the RBS England Businesses), they shall remove such safe custody items from the Business Properties.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

34

  

 

	
2.9.3  

	
The parties agree that any safe custody arrangements which do not relate to a Customer or are not Safe Custody Items (an “Excluded Safe Custody Agreement”) shall not transfer to the Purchaser and shall constitute an Excluded Asset for the purposes of this Agreement.

 

	
2.9.4  

	
***

 

	
2.10  

	
Credit and Charge Cards

 

	
2.10.1  

	
The parties agree that Client Agreements in respect of credit and charge cards to be transferred by each Business Seller to the Purchaser shall be the Client Agreements in respect of those credit and charge cards held by the Customers of that Business Seller at the Relevant Closing, which if Closing was at the date of this Agreement would be approximately *** credit and charge cards (*** with respect to Retail Customers and *** with respect to SME Customers) with an aggregate balance sheet value of approximately £*** (£*** Retail Customers and £*** SME Customers).

 

	
2.10.2  

	
The parties agree that the Business Sellers shall bear any costs payable by the Business Sellers to Total System Services in connection with the transfer of the credit and charge cards of Customers to the Purchaser under the terms of this Agreement.

 

	
2.10.3  

	
The parties agree that the provisions of Clauses 5 and 13 shall apply to credit and charge cards with effect from the date of this Agreement.  However, the Purchaser acknowledges and agrees that the Business Sellers shall not be in breach of Clause 5.1 in the event that the Business Sellers (or any of them), in each case acting reasonably and in good faith, and otherwise in the ordinary course of business (a) enter into a new Client Agreement with a Customer in respect of the Customer’s credit and/or charge card substantially in the form of the relevant Standard Form Client Agreement and on substantially the same terms as the credit and charge card portfolio of the Excluded Business, (b) change the credit limit of a Customer in respect of the Customer’s credit and/or charge card in a manner consistent with the methods and practices used by the Business Sellers in respect of the credit and charge card portfolio of the Excluded Business, and (c) *** or documents which are required to be issued by Law and Regulation in respect of a Customer’s credit card and/or charge card, in each case in order to *** the Business Sellers to the Purchaser after the Relevant Closing which may reasonably be expected to arise as a result (directly or indirectly) of *** the Customer that the Client Agreement or Loan Guarantee/Security in respect of the Customer’s Credit Card is *** and/or the Customer’s balance shall have been ***.

 

	
2.10.4  

	
The Business Sellers shall use reasonable endeavours prior to the Relevant Closing to *** (including by taking such actions as are referred to in, and permitted by, Clause 2.10.3) any Client Agreements in respect of credit or charge card Products held by Customers *** with the terms of the *** where *** thereof ***, provided that no such steps that could result in the creation of a new GAP shall be taken after 31 December 2011 without the prior approval of the JIC.

 

	
2.10.5  

	
Prior to the Relevant Closing, the Business Sellers shall provide monthly updates to the Joint Business Committee in respect of the actions taken in accordance with Clause 2.10.4 (including without limitation the *** to the date of such report, in each case split by the number of Retail, SME and Mid-Corporate Customers and the outstanding balances under

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

35

  

 

such agreements).  The parties acknowledge that the Business Sellers do not possess this information at the date of the Agreement and will need to undertake a review of the Client Agreements in order to establish the information in respect of the ***. in accordance with Clause 2.10.4.

 

	
2.10.6  

	
The Business Sellers may, on or before the Relevant Closing, provide the Purchaser with a *** Products held by Customers in respect of which there are *** (which have not been ***).

 

	
2.10.7  

	
If the Business Sellers provide a list of *** pursuant to Clause 2.10.6 (the “List”), then, from the Relevant Closing, the Purchaser shall act reasonably and in a manner (including as to the taking of steps to mitigate losses arising therefrom) which is consistent, in all material respects, with the manner in which the Purchaser (or, as the case may be, the relevant member of the Purchaser’s Group) would, at the relevant time, act in the case of similar facts or circumstances arising with respect to any customer of the Purchaser’s Group in relation to the Purchaser Group’s business in the United Kingdom other than the Businesses, in respect of managing the *** included on the List.

 

	
2.10.8  

	
The Business Sellers shall, and shall procure that each member of the RBSG Group shall, use reasonable endeavours to provide any information (to the extent such information is in the possession or under the control of the Business Sellers or any other member of the RBSG Group) and/or assistance reasonably requested by the Purchaser in connection with the undertaking in Clause 2.10.7.

 

	
2.10.9  

	
For the avoidance of doubt, the provisions of Clauses 2.10.4 to 2.10.8 do not affect in any way, or constitute a waiver of, any of the rights of the Purchaser under the terms of this Agreement.

 

	
2.10.10  

	
For the avoidance of doubt, the parties agree that:

 

	
  

	
(a)

	
the credit and charge cards included in the Businesses pursuant to this Agreement will be *** for the purpose of *** and in the measurement of the number of ***

 

	
  

	
(b)

	
assets (excluding *** amounts but including *** amounts from ***), *** as a result of credit balances *** credit or charge card account and provisions relating to the credit and charge cards included in the Businesses pursuant to this Agreement will be included in the *** as set out in Schedule 12.

 

 

	
2.11  

	
Excluded Financial Products

 

	
2.11.1  

	
A data room was opened on 11 August 2011 at the offices of Linklaters LLP at One Silk Street, London EC2Y 8HQ in order for the Purchaser to review information in relation to Customers who hold certain leveraged finance and structured finance products which are Excluded Products as at the date of this Agreement (the “Structured Products”).

 

	
2.11.2  

	
Following completion of the review of the information referred to in Clause 2.11.1 by the Purchaser, the Purchaser shall have the right to include some or all of the Structured Products under this Agreement and / or to exclude some or all of the Customers in respect of whom information was provided in the data room from the Businesses. Without prejudice to the foregoing, the Purchaser shall notify the Business Sellers in writing of any Structured Products it wishes to include under this Agreement and any Customers it wishes to exclude pursuant to this Clause 2.11 on or before 1 October 2011.

 

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36

 

  

	
2.11.3  

	
For the purposes of the *** of the tests in the definition of ***, the *** (including the *** provisions in paragraph 3 of Schedule 12) and the *** in Part A of Schedule 21, any *** included under this Agreement pursuant to Clause 2.11.2 shall be treated in the same way as ***.

 

	
2.11.4  

	
For the purposes of the *** of the tests in the definition of ***, the accounting for *** in paragraph 3 of Schedule 12 (***), the *** in Part A of Schedule 21, the first sentence of Clause 5.1 and the provision of information pursuant to Clause 5.5.5(v), Customers *** pursuant to Clause 2.11.2 (and any Products held by them) shall be treated in the same way as ***.

 

	
2.12  

	
***

 

Subject to the requirements of Law and Regulations, the Business Sellers and the Purchaser shall use reasonable endeavours to provide any information (to the extent such information is in the possession or under the control of that party or any other member of that party’s Group) and/or assistance reasonably requested by the other party and which is required by that party in order to seek *** for which that party is liable pursuant to the terms of this Agreement from the relevant ***. Without prejudice to the foregoing, the Purchaser agrees that the Purchaser shall, or shall procure that the relevant member of the Purchaser’s Group shall, seek to obtain *** from the relevant *** in respect of a Relevant *** in a manner which is consistent with the manner in which the Purchaser (or, as the case may be, the relevant member of the Purchaser’s Group) would pursue any such similar *** arising in respect of the Purchaser Group’s business other than the Businesses.  The parties further agree that the *** (if any) of such *** actually received by the Purchaser from the relevant merchant or merchant acquiror in respect of a *** shall *** the amount of the *** arising in respect of such *** or, if the Business Sellers shall have already paid the amount of such *** to the Purchaser by the time of such *** to the Purchaser, then the Purchaser shall account to the Business Sellers for such amount as is equal to the lesser of (a) the *** of such *** received by the Purchaser from the relevant *** and (b) the amount so paid by the Business Sellers to the Purchaser in respect of that ***.

 

	
3  

	
Consideration

 

	
3.1  

	
Amount

 

The consideration for the purchase of the Businesses under this Agreement (the “Purchase Price”) shall be an amount in cash equal to the aggregate of:

 

	
3.1.1  

	
the NatWest Bid Value plus the NatWest Tangible Net Asset Value (which amount may be a positive or a negative number) (the “NatWest Purchase Price”);

 

	
3.1.2  

	
the RBS Wales Bid Value plus the RBS Wales Tangible Net Asset Value (which amount may be a positive or a negative number) (the “RBS Wales Purchase Price”), and

 

	
3.1.3  

	
the RBS England Bid Value plus the RBS England Tangible Net Asset Value (which may be a positive or negative number) (the “RBS England Purchase Price”).

 

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37

  

 

as adjusted in accordance with Clause 3.2 and provided that the aggregate Purchase Price in respect of the Businesses will not exceed ***.

 

	
3.2  

	
Adjustments to Purchase Price

 

The Initial Bid Value, the RBS Wales Bid Value, the RBS England Bid Value, the NatWest Bid Value, the NatWest Purchase Price, the RBS Wales Purchase Price and the RBS England Purchase Price shall each be subject to the provisions of Schedule 9 and Schedule 21.

 

	
3.3  

	
Allocation of Purchase Price

 

The Purchase Price shall be allocated in accordance with Schedule 9 and the Business Sellers and the Purchaser shall adopt that allocation for all relevant purposes (including Tax) subject to Clause 3.4.

 

	
3.4  

	
Fixed Plant and Machinery Apportionment

 

The parties agree that on each Closing the relevant Business Seller and the Purchaser shall jointly enter into a statutory election or elections (as applicable) pursuant to Section 198 of the Capital Allowances Act 2001 in relation to the fixed plant and machinery forming part of the Business Assets. Such election or elections shall be made by reference to the qualifying expenditure incurred in respect of each relevant Business Property as such expenditure is allocated to separate pools (each a “Capital Allowances Pool”) comprising expenditure incurred on (a) fixtures (as that term is defined in Section 173(1) of the Capital Allowances Act 2001) excluding any integral features (as that term is defined in Section 33A of the Capital Allowances Act 2001) and (b) integral features. The amount fixed by each such election to each Capital Allowances Pool shall be the aggregate net book value of the Business Assets. After each Closing each party shall deliver its election notice to an officer of HM Revenue & Customs as soon as reasonably practicable and in any event within the time prescribed by Section 201 of the Capital Allowances Act 2001.

 

	
3.5  

	
VAT

 

Schedule 10 makes provision about VAT and certain other Tax matters.

 

	
3.6  

	
Reduction of the Purchase Price

 

	
3.6.1  

	
If any payment is made by any Business Seller to the Purchaser in respect of any claim for any breach of any Transaction Document or pursuant to a Seller Warranty or an indemnity or guarantee under a Transaction Document or under the adjustments to the Purchase Price under Clauses 3.2, 8.2 and 8.3, the payment shall, to the extent possible, be made by way of adjustment of the consideration paid by the Purchaser for the particular category of Business Asset (if any) to which the payment and/or claim relates under the relevant Transaction Document and the Purchase Price shall be deemed to be reduced by the amount of such payment.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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3.6.2  

	
If:

 

	 	
(i)  

	
the payment and/or claim relates to more than one category of Business Asset, it shall be allocated in a manner which reflects the impact of the matter to which the payment and/or claim relates, failing which it shall be allocated rateably to the relevant Business Assets by reference to the proportions in which the Purchase Price is allocated in accordance with Schedule 9; or

 

	 	
(ii)  

	
the payment and/or claim relates to no particular category of Business Asset, it shall be allocated rateably to all Business Assets by reference to the proportions in which the Purchase Price is allocated in accordance with Schedule 9,

 

and in each case the Purchase Price shall be deemed to have been reduced by the amount of such payment.

 

	
4  

	
Conditions

 

	
4.1  

	
Conditions Precedent

 

	
4.1.1  

	
The agreement to buy and sell the Businesses is conditional on:

 

	 	
(i)  

	
the Court granting the Court Order;

 

	 	
(ii)  

	
the FSA having given the certificates required by section 111(2) and Part II of Schedule 12 of the Act in relation to the transfer of the relevant Businesses pursuant to this Agreement;

 

	 	
(iii)  

	
(a) in so far as required, the European Commission having issued a decision under Article 6(1)(b) or Article 6(2) of Council Regulation (EC) 139/2004 (the “Merger Regulation”) (or being deemed to have done so under Article 10(6) of the Merger Regulation) on terms reasonably satisfactory to the Purchaser declaring the purchase of the Business by the Purchaser compatible with the internal market; and/or (b) if any aspect of the acquisition is referred to the Office of Fair Trading in the United Kingdom under Article 9 of the Merger Regulation, the Office of Fair Trading or the appropriate Minister having issued a decision on terms reasonably satisfactory to the Purchaser declaring that the Office of Fair Trading or the appropriate Minister does not intend to refer the purchase of the Business by the Purchaser to the Competition Commission and that decision not having been successfully appealed to the Competition Appeal Tribunal, provided that, if the decision has been successfully appealed to the Competition Appeal Tribunal, the condition contained in this Clause 4.1.1(iii) shall nevertheless be satisfied if the Competition Appeal Tribunal has referred the case back to the Office of Fair Trading or the appropriate Minister and the Office of Fair Trading or the appropriate Minister has subsequently issued a decision on terms reasonably satisfactory to the Purchaser that it does not intend to refer the purchase of the Business by the Purchaser to the Competition Commission;

 

  

39

  

 

	 	
(iv)  

	
the Monitoring Trustee having submitted a reasoned opinion confirming that the Purchaser meets the requirements set out in clauses 3.12(A) to (E) of the State Aid Commitments;

 

	 	
(v)  

	
***

 

	 	
(vi)  

	
HMRC Clearance having been obtained pursuant to the provisions of paragraph 2.1 of Schedule 10 (and not having been withdrawn or being or becoming ineffective before the NatWest Closing).

 

	
4.1.2  

	
The Business Sellers shall use reasonable endeavours to secure satisfaction of the conditions referred to in Clause 4.1.1(i), (ii), (iv) and (vi) as soon as possible and in any event no later than the Long Stop Date.

 

	
4.1.3  

	
The Purchaser shall use reasonable endeavours to secure satisfaction of the conditions referred to in Clause 4.1.1(i), (ii) and (iv) as soon as possible and in any event no later than the Long Stop Date.

 

	
4.1.4  

	
The Purchaser agrees to submit a full and complete filing as soon as possible following the date of the Original Agreement and to take all steps reasonably necessary (in the mutual contemplation of the parties) to secure the satisfaction of the condition referred to in Clause 4.1.1(iii) by the end of the relevant authority’s initial period of review (i.e. without the need for a second phase of investigation).

 

	
4.1.5  

	
The Purchaser shall promptly provide the Business Sellers with copies of all material relevant correspondence, documents or other communications received from or sent to any Regulatory Authority relating to the condition set out in Clause 4.1.1(iii). The Purchaser shall also promptly inform the Business Sellers of the content of any meeting or material conversation which takes place between any Regulatory Authorities and the Purchaser or any of its employees, directors, officers, or advisers in relation to the condition set out in Clause 4.1.1(iii) and shall, if requested by the Business Sellers, provide a written summary thereof.

 

	
4.1.6  

	
Without prejudice to Clauses 4.1.2 to 4.1.5, the parties agree that all requests and enquiries from any Regulatory Authority arising out of or in connection with the transactions contemplated by this Agreement shall, subject to Clause 4.1.8, be dealt with by the Business Sellers (to the extent that such requests and enquiries relate to their respective Businesses) and the Purchaser in consultation with each other and the relevant Business Seller and the Purchaser shall promptly co-operate with and provide all necessary information and assistance reasonably required by such Regulatory Authority upon being requested to do so by the other.

 

	
4.1.7  

	
The Business Sellers and the Purchaser undertake to keep each other informed as to the progress towards satisfaction of the conditions in Clause 4.1.1 and, in particular, to disclose anything of which it is aware which will or may prevent any of those conditions from being satisfied before the Long Stop Date promptly upon it coming to its notice.

 

	
4.1.8  

	
Nothing in Clauses 4.1.5, 4.1.6 or 4.1.7 shall require the Business Sellers or the Purchaser to disclose to each other any information concerning any businesses or assets other than the Businesses and Business Assets which any such party (acting in good faith) regards as confidential and commercially sensitive.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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4.1.9  

	
The party responsible for satisfaction of each condition in Clause 4.1.1 shall give notice to the other party of the satisfaction of the relevant condition within two Business Days of becoming aware of the same.

 

	
4.1.10  

	
The Purchaser shall have the right to waive the condition set out in clause 4.1.1(v).

 

	
4.1.11  

	
***

 

	
4.1.12  

	
The Purchaser agrees to submit a full and complete filing as soon as possible following the date of this Agreement and to take all steps reasonably necessary (in the mutual contemplation of the parties as at the date of the Original Agreement) to secure the satisfaction of the condition referred to in Clause 4.1.1(iii) by the end of the relevant authority’s initial period of review (i.e. without the need for a second phase of investigation). The Business Sellers and the Purchaser acknowledge and agree that the Purchaser will engage in and complete pre-notification discussions with the relevant Regulatory Authorities prior to submitting a full and complete filing and further acknowledge that those discussions have not been initiated at the date of this Agreement.

 

	
4.1.13  

	
The provisions of Clauses 4.1.5 to 4.1.9 shall apply mutatis mutandis to the process relating to the satisfaction of the condition referred to in clause 4.1.1(iii) in respect of the transaction which is the subject of this Agreement pursuant to Clause 4.1.12 above.

 

	
4.2  

	
Termination(s)

 

	
4.2.1  

	
If on or before the Long Stop Date, one or more of the conditions referred to in Clause 4.1.1 (i), (ii), (iii), (iv) or (vi): (a) is/are not satisfied; or (b) becomes incapable of satisfaction and, in each case, is not waived (where capable of waiver) then:

 

	 	
(i)  

	
the Businesses shall not be sold pursuant to this Agreement and all terms of this Agreement (including Clause 5) and any Transaction Document relating to such sale shall forthwith cease to apply (other than Clauses 1, 4, 15 and 16.2 to 16.18 (inclusive)) (with the date on which such terms cease to apply being the “Termination Date”); and

 

	 	
(ii)  

	
no party shall have a claim against any other party under this Agreement or any Transaction Document, save for any claim arising from breach of any obligation under this Agreement or any Transaction Document (including Clause 4 of this Agreement) on or before the Termination Date.

 

	
4.2.2  

	
If, at any time prior to *** the condition referred to in Clause 4.1.1(v), is not satisfied, then, upon the Purchaser notifying the Business Sellers in writing of the same:

 

	 	
(i)  

	
the Businesses shall not be sold pursuant to this Agreement and all terms of this Agreement (including Clause 5) and any Transaction Document relating to such sale shall forthwith cease to apply (other than Clauses 1, 4.2, 15 and 16.2 to 16.17 (inclusive)) (with the date upon which such terms cease to apply being the “Purchaser Termination Date”); and

 

	 	
(ii)  

	
no party shall have a claim against any other party under this Agreement or any Transaction Document, save for any claim arising from a breach of

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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any obligation (including Clause 4 of this Agreement) on or before the Purchaser Termination Date.

 

	
4.2.3  

	
If as a result of the time taken to agree or determine the *** in accordance with Part B of Schedule 21, it is reasonably likely that the Court Order shall not be granted before the Long Stop Date, the parties shall consider and discuss (each acting reasonably and in good faith) an extension to the Long Stop Date. ***

 

	
4.3  

	
The Parties’ Obligations in Relation to the Scheme

 

	
4.3.1  

	
The parties will each use all reasonable endeavours to ensure that:

 

	 	
(i)  

	
the Scheme is implemented by the target dates of *** or such other dates as may be agreed by the parties acting reasonably;

 

	 	
(ii)  

	
the Scheme proceeds on the basis set out in this Agreement (including as to the assets and liabilities of the Businesses which are to be transferred to the Purchaser) and the Scheme Documents (as agreed in accordance with Clause 4.4) save that, notwithstanding any submissions or arguments made by the Business Sellers and the Purchaser to the contrary, where the FSA, the Court or any other Regulatory Authority requires any Excluded Asset to be transferred pursuant to the Scheme (or the same is required by any Law and Regulation) such Excluded Asset shall be transferred pursuant to the Scheme and, to the extent permitted by Law and Regulation, Clause 9.6 shall apply to such Excluded Asset, failing which, such Excluded Asset shall for the purposes of this Agreement be treated as a Business Asset;

 

	 	
(iii)  

	
the period between the Scheme Posting Date and the RBS England Effective Time is no longer than such period as is set out in the Separation Plan as at the date of this Agreement (being approximately four (4) months) (including, where appropriate, by delaying the Scheme Posting Date if that would otherwise not be expected to be the case);

 

	 	
(iv)  

	
the RBS England Effective Time shall be a date falling less than five calendar months after the Price Adjustment Reference Date;

 

	 	
(v)  

	
the RBS Wales Effective Time shall be a date falling not more than 1 calendar month after the NatWest Effective Time and the RBS England Effective Time shall be a date falling not more than 2 calendar months after the NatWest Effective Time;

 

	 	
(vi)  

	
each Business Seller (in the case of the Purchaser) and the Purchaser (in the case of each Business Seller) (a) is given reasonable notice of any meeting or other discussion which the relevant party is proposing to hold with, or submission which it is proposing to make to, the FSA or the Court concerning the Scheme and/or the transactions related thereto and (b) is permitted to participate in such meeting or discussion and to review and comment on such submission; and

 

	 	
(vii)  

	
all matters relating to the implementation of the Scheme (including the preparation of the Scheme Documents, all requests and enquiries from the

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

42

  

 

FSA or the Court relating to the Scheme) shall be dealt with by the Business Sellers and the Purchaser in consultation with each other and the Business Sellers and the Purchaser shall co-operate with each other and provide to each other all information and assistance as may be reasonably necessary in connection with the implementation of the Scheme and no party shall, in relation to the Scheme, provide any undertaking to, or agree any matter with, or submit any document to, the FSA or the Court without the prior written consent of such parties.

 

	
4.3.2  

	
The Business Sellers shall procure that the West Register Business Assets shall be transferred to RBS or NatWest as soon as reasonably practicable following the date of the Original Agreement and, in any event, by such date as will ensure that such Business Assets will be transferred to the Purchaser pursuant to the Scheme. The Business Sellers shall consult with the Purchaser in relation to the transfer of such Business Assets, shall provide the Purchaser with drafts of all documentation relating to such transfer, shall provide the Purchaser with reasonable time to review and comment on such documentation and shall incorporate all comments on such drafts as may be reasonably made by the Purchaser.

 

	
4.3.3  

	
The parties shall consult with each other with a view to agreeing the method by which the Business Assets (together with any related Assumed Liabilities) that relate to Businesses (or the relevant part(s) thereof) carried on by NWHL (the "NWHL Business") are to be transferred to the Purchaser and, in particular, whether such transfer is to take effect pursuant to the Scheme or pursuant to some other mechanism as agreed between the parties. In the absence of any such agreement, Clause 4.5 shall apply to the transfer of such Business Assets. In any case, the parties agree that the NWHL Business shall be transferred to the Purchaser at the same time as the other NatWest Businesses.

 

	
4.4  

	
The Scheme Documents

 

	
4.4.1  

	
The Business Sellers and the Purchaser each undertakes to offer and afford all reasonable co-operation, information and assistance as may be requested by the other party in respect of the preparation of any Scheme Document in a timely manner in order that the Scheme can be implemented in accordance with Clause 4.3.

 

	
4.4.2  

	
Subject to the proviso set out in Clause 4.3.2, the Business Sellers and the Purchaser each agrees that the Scheme Documents shall (unless otherwise agreed by the parties) be consistent with the terms set out in this Agreement.

 

	
4.4.3  

	
The parties agree that the Business Sellers shall prepare the Scheme Documents and shall consult with the Purchaser in relation to the preparation thereof. The Business Sellers agree to submit drafts and revised drafts of the Scheme Documents to the Purchaser and provide the Purchaser with sufficient time to review and comment on such drafts. The Business Sellers shall incorporate all comments on such drafts as may reasonably be made by the Purchaser and, where necessary, discuss any comments with the Purchaser for the purposes of preparing revised drafts. The Business Sellers and the Purchaser acknowledge that the Scheme Documents are subject to review and comment by third parties, including but not limited to, the FSA and Counsel who will be appointed to represent any or all of the parties at Court and the Business Sellers shall consult with the Purchaser with a view to agreeing any amendments proposed by any

 

  

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such third parties. For the purposes of complying with the obligations set out above, the Business Sellers (and/or the Business Sellers' Lawyers) shall meet with the Purchaser (and/or the Purchaser's lawyers, Slaughter and May) on a reasonably regular basis to discuss the Scheme Documents and the timetable for implementing the Scheme.

 

	
4.4.4  

	
The parties shall consult with each other and shall use reasonable endeavours to agree Counsel to be appointed to represent any or all of the parties at Court in relation to the Scheme.

 

	
4.4.5  

	
The Scheme Documents and all communications and notifications relating to the Scheme shall be consistent in all material respects with the Scheme.

 

	
4.4.6  

	
The parties agree that no Scheme Document shall be finalised or published without the prior approval of the Business Sellers and the Purchaser (such consent not to be unreasonably withheld or delayed).

 

	
4.4.7  

	
The Scheme Documents shall include any addition or amendment to the Scheme required to correct a manifest error or omission.

 

	
4.4.8 

	
The parties agree that prior to the NatWest Closing (in respect of the NatWest Businesses), prior to the RBS Wales Closing (in respect of the RBS Wales Businesses) and prior to the RBS England Closing (in respect of the RBS England Businesses) the Business Sellers shall have responsibility for preparing, publishing and issuing all communications and notifications to Customers relating to the sale and purchase of the Businesses contemplated by this Agreement, including, without limitation but subject to Part B of Schedule 23, in relation to the launch of the Channel Carve-Out and in relation to the Friends and Family Transfer. The parties shall consult with each other as to the content of all such communications and notifications, shall provide to each other all information and assistance as may be reasonably necessary in connection therewith and shall incorporate all comments as may be reasonably made by the other. Subject to Clause 4.4.10, no communication or notification to any Customer relating to the sale and purchase of the Businesses contemplated by this Agreement shall be published or issued by the Business Sellers (or any of them) without the prior consent of the Purchaser (such consent not to be unreasonably withheld or delayed).

 

	
4.4.9 

	
Prior to the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses, the Purchaser shall not publish or issue any communication or notification to Customers relating to the sale and purchase of the Businesses without the prior consent of the Business Sellers, other than any communication which is sent to any customer or employee of any member of the Purchaser’s Group or which is published or issued by the Purchaser pursuant to general marketing activities.

 

	
4.4.10  

	
Where any communication or notification (or part of a communication or notification) to Customers relating to the sale and purchase of the Businesses contemplated by this Agreement, other than a Scheme Document, is required by Law and Regulation to be published by the Business Sellers, to the extent reasonably practicable, the Purchaser shall be afforded reasonable time to consider and comment on the contents of such communication or notification and the Business Sellers shall reasonably consider any such comments as may be made by the Purchaser in connection with such communication or notification.

 

  

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4.5  

	
Non-Scheme Assets and Central Assets

 

	
4.5.1  

	
Where any Business Asset (a “Non-Scheme Asset”) is not capable of being transferred to the Purchaser pursuant to the Scheme, then save for any Contract and/or Loan Guarantee/Security in respect of which Schedule 5 applies, the following shall apply:

 

	 	
(i)  

	
the relevant Business Seller shall transfer any Non-Scheme Asset to the Purchaser on the NatWest Closing (in the case of a Non-Scheme Asset which relates to the NatWest Businesses), on the RBS Wales Closing (in the case of a Non-Scheme Asset which relates to the RBS Wales Businesses) or on the RBS England Closing (in the case of a Non-Scheme Asset which relates to the RBS England Businesses), in each case in accordance with Clause 7 and Schedule 11 and in compliance with all applicable Law and Regulations; and

 

	 	
(ii)  

	
the relevant Business Seller and the Purchaser shall prepare, execute, publish and release any agreements, communications, notices, documents or other instruments (the “Non-Scheme Documents”) that may be required by Law and Regulation or any Regulatory Authority in connection with the transfer of any Non-Scheme Assets to the Purchaser, or which may be reasonably necessary or desirable in connection with the transfer of any Non-Scheme Asset to the Purchaser.

 

	
4.5.2  

	
Where:

 

	 	
(i)  

	
any Business Asset relates both to the NatWest Businesses and to the RBS Wales Businesses or to the RBS England Businesses, the parties agree that such asset shall be transferred to the Purchaser on the RBS Wales Closing or on the RBS England Closing (as the case may be);

 

	 	
(ii)  

	
any Business Asset relates to the NatWest Businesses, RBS Wales Businesses and RBS England Businesses, the parties agree that such asset shall be transferred to the Purchaser on the RBS England Closing,

 

save where applicable Law and Regulation or the Scheme requires the relevant asset to be transferred to the Purchaser on a different Closing Date.

 

	
4.6  

	
SFL, EFG and EIB Loans

 

	
4.6.1  

	
In respect of any Client Agreement (a “CFE Client Agreement”) which relates to a loan Product that is part of the Small Firms Loan Guarantee Scheme or the Enterprise Finance Guarantee Scheme, in each case as such scheme is operated by Capital for Enterprise Limited (“CFE”) the parties shall, as soon as reasonably practicable following the date of the Original Agreement, jointly approach CFE in order to discuss and agree with CFE any actions which are reasonably required to be taken either by the Business Sellers or the Purchaser in order to effect the transfer of any CFE Client Agreements to the Purchaser in accordance with the terms of this Agreement.

 

	
4.6.2  

	
In relation to any Client Agreement (an “EIB Client Agreement”) which relates to a loan Product that is part of the European Investment Bank’s small to medium sized enterprise funding scheme, the parties shall, as soon as reasonably practicable following the date of the Original Agreement, jointly approach the EIB to discuss and agree with the EIB any actions which are reasonably required to be taken by either the Business Sellers or the

 

  

45

  

 

Purchaser in order to effect the transfer of the EIB Client Agreements to the Purchaser in accordance with the terms of this Agreement.

 

	
5  

	
Pre-Closing

 

	
5.1  

	
The Business Sellers’ Obligations in Relation to the Conduct of Business

 

Subject to Law and Regulations and Clauses 5.2 and 5.3, each of the Business Sellers undertakes (in each case in relation to each Business (including, for the purpose of this first sentence of Clause 5.1, the Additional Excluded Products) being transferred by it), between the date of the Original Agreement and the relevant Friends and Family Transfer (in respect of the Friends and Family Customers), the NatWest Closing (in respect of the NatWest Businesses), the RBS Wales Closing (in respect of the RBS Wales Businesses) and the RBS England Closing (in respect of the RBS England Businesses), that it shall carry on the relevant Business (including, for the purpose of this first sentence of Clause 5.1, the Additional Excluded Products) as a going concern and in the ordinary and usual course as carried on as at the date of the Original Agreement. In particular, subject as aforesaid, each of the Business Sellers undertakes (in each case in relation to each Business being transferred by it) between the date of the Original Agreement and the Friends and Family Transfer (in respect of the Friends and Family Customers), the NatWest Closing (in respect of the NatWest Businesses), the RBS Wales Closing (in respect of the RBS Wales Businesses) and the RBS England Closing (in respect of the RBS England Businesses) that:

 

	
5.1.1  

	
it shall, or shall procure that the relevant members of the RBSG Group shall, maintain in force all existing insurance policies for the benefit of the Business Sellers (in relation to the Businesses) and shall not knowingly do anything to make any such policy of insurance void or voidable. For the avoidance of doubt, nothing in this Clause 5.1.1 shall prevent or restrict any of the Business Sellers replacing existing insurance policies (in relation to the Businesses) in the ordinary course of business with new insurance policies with materially equivalent cover provided that a summary of the material terms of any such new insurance policy shall be provided to the Purchaser as soon as reasonably practicable following the date on which such new policy is entered into;

 

	
5.1.2  

	
it shall not, without the prior written consent of the Purchaser, such consent not to be unreasonably withheld or delayed:

 

	 	
(i)  

	
enter into any Contract involving any capital expenditure in respect of Business Assets in excess of *** and ***, in each case exclusive of VAT (or the equivalent);

 

	 	
(ii)  

	
enter into any agreement, which would constitute a Contract or a Loan Guarantee/Security or a GTS Instrument; and:

 

	 	
(a)  

	
which contains any unusual or abnormal terms which are material in the context of the Businesses unless (in the case of Client Agreements, Loan Guarantees/Security or GTS Instruments) such

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

46

  

 

terms are consistent with the terms applied by either Business Seller in relation to its relevant banking business generally;

 

	 	
(b)  

	
which is with any member of the RBSG Group, other than on arm’s length terms (other than deeds of priority executed in connection with any PPA or GTS Instruments);

 

	 	
(c)  

	
(other than a Client Agreement, a Loan Guarantee/Security, a GTS Instrument, a lease or any other related or similar agreement, undertaking and arrangement with respect to a Business Property and subject to the provisions of Schedule 3) which is not capable of being terminated without compensation at any time with *** notice or less;

 

	 	
(d)  

	
which is an agreement, undertaking or commitment which would neither constitute a Client Agreement, a Loan Guarantee/Security, a GTS Instrument nor involve capital expenditure and which involves or may involve total annual expenditure  ***; or

 

	 	
(e)  

	
which is with any third party provider relating to the distribution of ***, in each case excluding GTS Instruments;

 

	 	
(iii)  

	
(except for any amendment or variation reasonably necessary to facilitate any transfer or assignment of any Contract or other transaction contemplated by the Transaction Documents) other than in the ordinary course of business amend or vary any Contract (other than any Client Agreement or Loan Guarantee/Security) save for any minor amendment or variation or any amendment or variation required by Law and Regulations;

 

	 	
(iv)  

	
other than in the ordinary course of business, dispose of or agree to dispose of any Business Asset having *** or any interest in that Business Asset;

 

	 	
(v)  

	
other than in the ordinary course of business or in connection with Segregation acquire, or enter into any agreement to acquire any asset or assets having *** and which, if acquired, would constitute Business Assets;

 

	 	
(vi)  

	
subject to the provisions of Schedule 3 or as a result of the closure or relocation of a Business Property following the expiry or termination of a Lease, close, sell, consolidate or relocate any existing branch, sub-branch or business unit which is a Business Property or (other than as a result of a relocation carried out in accordance with the terms of Schedule 3) open any new branch, sub-branch, business unit or representative office which would become a Business Property;

 

	 	
(vii)  

	
***

 

	 	
(viii)  

	
create, grant or issue any Encumbrance over any of the Business Assets other than in relation to any capital raising by the RBSG Group or posting collateral in the ordinary course of business;

 

	 	
(ix)  

	
transfer or seek to transfer any material asset which is a Business Asset to another member of the RBSG Group, or allow another member of the 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

47

  

 

RBSG Group to use such asset, in each case so that such asset no longer constitutes a Business Asset;

 

	 	
(x)  

	
other than in the ordinary course of business, waive or forgive any amount owed to the relevant Business which, either singly or in aggregate, is in excess of ***;

 

	 	
(xi)  

	
initiate, settle or abandon any claim, litigation, arbitration or other proceedings relating predominantly to a Business where any such claim, litigation, arbitration or proceedings, or series of related claims arising from substantially similar facts or circumstances, might reasonably be expected to result in a liability of ***, in each case other than any claim, litigation, arbitration or other proceedings where the outcome may result in series of claims against the RBSG Group in respect of the same or similar issue;

 

	 	
(xii)  

	
make any loan (other than (a) pursuant to Client Agreements; (b) in the ordinary course of business; or (c) loans given or facilitated by any member of the RBSG Group to Relevant Employees as part of the terms of employment referred to in paragraph 4 of Schedule 6) to any person and in the case of a Relevant Employee only on substantially the same terms as those disclosed in the Data Room as being the standard terms applicable to that grade or category of employee;

 

	 	
(xiii)  

	
grant any guarantee or indemnity for the obligations of any person or incur any indebtedness, in each case except in the ordinary course of business;

 

	 	
(xiv)  

	
***

 

	 	
(xv)  

	
***

 

	 	
(xvi)  

	
***

 

	 	
(xvii)  

	
take any steps to terminate or suspend (or give notice of the termination or suspension of) the employment of any Relevant Employee, other than for cause;

 

	 	
(xviii)  

	
assign, license, charge, abandon, cease to prosecute or otherwise dispose of, or fail to maintain or diligently pursue applications for, any of the Business Intellectual Property or enter into any licence, sub-licence, assignment or other similar agreement in respect of or affecting any licences of Business Intellectual Property;

 

	 	
(xix)  

	
enter into any tenancy, lease or licence agreement in respect of or affecting any of the Business Properties save and except for the renewal of the relevant tenancy lease or licence in accordance with the provisions in Schedule 3;

 

	 	
(xx)  

	
dispose of, or agree to dispose of, or grant or agree to grant any option in respect of any Business Property or interest therein;

 

	 	
(xxi)  

	
grant, or agree to grant any rights over or create any restriction, covenant or Encumbrance affecting any Business Property;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

48

  

 

	 	
(xxii)  

	
surrender, agree to surrender, serve any break notice or terminate for any other reason whatsoever any Letting Documents (as defined in Schedule 3) affecting the Business Properties; or

 

	 	
(xxiii)  

	
enter into any agreement (conditional or otherwise) to do any of the foregoing.

 

	
5.1.3  

	
it shall not, without giving notice in writing to the Purchaser at least 5 Business Days prior to the relevant act or matter being taken or effected:

 

	 	
(i)  

	
enter into any agreement (not being a Contract) involving any capital expenditure in respect of Business Assets *** (or the equivalent);

 

	 	
(ii)  

	
alter or amend any of the material accounting policies or material accounting principles applied by the Business Sellers in respect of any of the Businesses;

 

	 	
(iii)  

	
***

 

	 	
(iv)  

	
enter into any Client Agreement or Loan Guarantee/Security otherwise than on the terms of the relevant Standard Form Client Agreement (where applicable) (as such terms may be amended or varied in accordance with the relevant Procedures and Policies) or amend any existing Client Agreement or Loan Guarantee/Security otherwise than in accordance with the relevant Procedures and Policies or, in each case, if no Policies and Procedures apply to such Standard Form Agreement, otherwise than in the ordinary course of business;

 

	 	
(v)  

	
enter into any agreement (conditional or otherwise) to do any of the foregoing; or

 

	 	
(vi)  

	
give or make, or permit to be given or made, to any group of Relevant Employees from time to time, any centrally disseminated written communication (or centrally disseminated electronic communication) which concerns the sale and purchase of the Businesses or which may concern or affect their employment after the Relevant Closing (including its terms), without giving the Purchaser the opportunity to provide its comments in relation thereto, and the parties will work together in good faith with a view to  agreeing such communications.

 

	
5.1.4  

	
it shall not, without giving notice in writing to the Purchaser at or within 5 Business Days after the time at which the relevant act or matter is taken or effected:

 

	 	
(i)  

	
materially alter any of the *** applicable to the Business or materially alter *** from the criteria operated by the Business Sellers at the date of the Original Agreement in each case where such alteration could reasonably be considered to increase the credit exposure or risk profile of the Business;

 

	 	
(ii)  

	
materially alter or amend any of the Procedures and Policies, *** adopted by the Businesses as at the date of the Original Agreement or *** less than cost which in each case would be material in the context of the Businesses except where, in the case of SME Customers and Mid-

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

49

  

 

Corporate Customers, to give such notice would require the Business Sellers to disclose information which could reasonably be considered to be commercially sensitive;

 

	 	
(iii)  

	
(except for any amendment or variation reasonably necessary to facilitate any transfer or assignment of any Client Agreement or Loan Guarantee/Security or other transaction contemplated by the Transaction Documents) amend or vary any Standard Form Client Agreement, save for any amendment or variation which is not material in the context of the Businesses taken as a whole or any amendment or variation required by Law and Regulations;

 

	 	
(iv)  

	
alter or amend in a manner which is not material any of the accounting policies or accounting principles applied by the Business Sellers in respect of any of the Businesses;

 

	 	
(v)  

	
sell or provide any product to Customers which is not currently sold or provided by the Business Sellers and which, if so sold or provided, would constitute a Product;

 

	 	
(vi)  

	
make any amendment to any *** which relates to the Businesses and which would be material in the context of the Businesses;

 

	 	
(vii)  

	
enter into, or agree to enter into, any EIB Client Agreement (as defined in Clause 4.6.2) which would result in the Business Seller’s aggregate unfunded commitments under all EIB Client Agreements exceeding ***;

 

	 	
(viii)  

	
enter into any agreement (conditional or otherwise) to do any of the foregoing.

 

	
5.2  

	
The obligations in Clause 5.1 shall not apply to any act or matter which:

 

	
5.2.1  

	
is agreed in writing by the Purchaser;

 

	
5.2.2  

	
is required by Law and Regulations (including compliance with the FSA’s Treating Customers Fairly programme) or any government lending commitments by which the Business Sellers are bound or commit to in accordance with Good Industry Practice provided that where any action is to be taken as a result of this clause 5.2.2, the relevant Business Seller shall, so far as reasonably practicable and so long as it does not prevent the relevant Business Seller dealing with Customers in the ordinary course of business and in so far as the relevant Business Seller is permitted to do so by Law and Regulations:

 

	 	
(i)  

	
in the case of an act or matter referred to in Clause 5.1.2 notify the Purchaser in writing prior to such action being taken and, to the extent reasonably practicable, consult with the Purchaser as to the action which is to be taken (and where the relevant Business Seller does not in accordance with this clause 5.2.2, notify the Purchaser in advance of any action which is taken, it shall notify the Purchaser in writing of such action as soon as reasonably practicable after such action has been taken);

 

	 	
(ii)  

	
in the case of an act or matter referred to in Clause 5.1.3 notify the Purchaser in writing prior to such action being taken (and where the

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

50

  

 

relevant Business Seller does not in accordance with this clause 5.2.2, notify the Purchaser in advance of any action which is taken, it shall notify the Purchaser in writing of such action as soon as reasonably practicable after such action has been taken); and

 

	 	
(iii)  

	
in the case of an act or matter referred to in Clause 5.1.4, notify the Purchaser in writing at the time that such action is being taken (and where the relevant Business Seller does not in accordance with this clause 5.2.2, notify the Purchaser at the time that such is taken, it shall notify the Purchaser in writing of such action as soon as reasonably practicable after such action has been taken);

 

	
5.2.3  

	
would result in the Business Sellers breaching any duty of confidentiality which is owed to any third party; or

 

	
5.2.4  

	
is required in order to transfer the West Register Business Assets to the Business Sellers in accordance with Clause 4.3.2.

 

	
5.3  

	
Without prejudice to the obligations in Clause 5.1, the Business Sellers shall not and shall procure that no member of the RBSG Group shall, take or omit to take any action outside the ordinary course of business which may affect the amount of Cash which is in, or held by, the Businesses at the NatWest Closing (in respect of the NatWest Businesses), the RBS Wales Closing (in respect of the RBS Wales Businesses) or the RBS England Closing (in respect of the RBS England Businesses).

 

	
5.4  

	
Access

 

	
5.4.1  

	
Subject to Law and Regulations, as from the date of the Original Agreement, in relation to each Business, until the earlier of the RBS England Closing or the Long Stop Date, the Business Sellers shall upon reasonable notice of the timing, purposes and scope of such access, and during normal business hours, procure that a reasonable number of persons representing the Purchaser are given reasonable access to:

 

	 	
(i)  

	
the Business Properties and any other premises from which the Businesses are operated or where their Books and Records are kept;

 

	 	
(ii)  

	
all the Books and Records provided that copies shall not be taken;

 

	 	
(iii)  

	
the Senior Employees; and

 

	 	
(iv)  

	
such other information and/or employees of the RBSG Group as the Purchaser reasonably requires,

 

in each case to the extent such access is reasonably necessary for planning Separation, Data Migration, Mid-Corporate and Complex SME Data Migration, the Scheme, the integration of the Businesses with the Purchaser’s businesses following the Closings and/or the implementation of the transactions contemplated by this Agreement under Clause 6, provided that the Business Sellers shall, pursuant to this Clause 5.4.1, be required to disclose information which relates only to the Businesses (the “Business Information”) and shall not be required to disclose any information to the Purchaser which relates to any Excluded Business or any other information which could reasonably be considered to be confidential or commercially sensitive (together, the “Non-Business Information”), provided that

 

  

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where any document or record contains both Business Information and Non-Business Information, the Business Sellers shall extract the Business Information from such document or record and provide the same to the Purchaser, or persons representing the Purchaser, in accordance with this Clause 5.4.1.

 

	
5.4.2  

	
Without prejudice to Clause 5.4.1, and subject to Law and Regulations, the Business Sellers shall, in relation to each Business and upon reasonable prior notice from the Purchaser or, if applicable, in accordance with the timing agreed in the Separation Plan, procure that a reasonable number of persons representing the Purchaser are given reasonable access to the Business Properties prior to the Closings for the purposes of planning and implementing certain re-branding, security and other works as may be reasonably necessary in connection with Separation and the transfer of the relevant Business to the Purchaser. The details of the access to premises to be granted, works to be undertaken, extent of re-branding, security and other works and related risk-protection mechanisms which may be required by both parties will be discussed and agreed by the Joint Implementation Committee and an appropriate agreement entered into by the parties, it being acknowledged that such access shall not cause any material interruption to the operation of the Businesses. In the event that the Relevant Closing does not take place in accordance with the terms of this Agreement, the Purchaser shall be responsible for, and bear the costs of, reversing the re-branding, security or other works undertaken by the Purchaser under this Clause 5.4.2.

 

	
5.4.3  

	
The Business Sellers shall, following 5.00 p.m. on the NatWest Closing Date, 5.00 p.m. on the RBS Wales Closing Date and 5.00 p.m. on the RBS England Closing Date, provide the Purchaser, or the Purchaser’s representatives, with access to the relevant Business Properties so as to allow the Purchaser to undertake such further re-branding or other operational activities as may be reasonably necessary or desirable in connection with the transfer and transition of the relevant Business to the Purchaser on the Relevant Closing.

 

	
5.5  

	
Reporting

 

	
5.5.1  

	
Subject to any Law and Regulations and Clauses 5.5.2 and 5.5.3, for the period from the date of the Original Agreement until the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses or, if earlier, the Long Stop Date, the Business Sellers shall provide to the Purchaser on a monthly basis (in accordance with Clause 5.5.4) the information set out in Part A of Schedule 18 in relation to each Business in the form and prepared in a manner which is consistent with internal reporting practices immediately prior to the date of the Original Agreement.

 

	
5.5.2  

	
The Business Sellers shall ensure that, as soon as reasonably practicable following the date of the Original Agreement, and in any event in respect of the month ended 31 October 2010 (with the results available in December 2010), the information set out in Part A of Schedule 18 which is colour coded amber is capable of being provided to the Purchaser on a monthly basis and, thereafter, subject to any Law and Regulations the Business Sellers shall provide such information to the Purchaser on a monthly basis (in accordance with Clause 5.5.4) for the period until the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses or, if earlier, the Long Stop Date with the exception of any item that is reasonably considered to be impossible or excessively costly to extract from the RBSG Group’s systems or is not available.

 

  

52

  

 

	
5.5.3  

	
The Business Sellers shall use all reasonable endeavours to ensure that information set out in Part A of Schedule 18 which is colour coded red is capable of being made available as early as possible in 2011 on a monthly basis and, thereafter, subject to any Law and Regulations the Business Sellers shall provide such information to the Purchaser on a monthly basis (in accordance with Clause 5.5.4) for the period until the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses or, if earlier, the Long Stop Date with the exception of any item that is reasonably considered to be impossible or excessively costly to extract from the RBSG Group’s systems or is not available.

 

	
5.5.4  

	
The information to be provided by the Business Sellers pursuant to Clauses 5.5.1 to 5.5.3 shall, for the period to 31 December 2010, be provided not more than 35 Business Days following the end of the relevant calendar month, excluding the information set out in the section of Part A of Schedule 18 entitled “Risk Metrics” (the “Risk Metrics Information”) which is to be provided not more than 40 Business Days following the end of the relevant calendar month (with the first monthly information to be provided in respect of August 2010 on or before 17 October 2010, except for the information relating to the Risk Metrics Information which is to be provided on or before 31 October 2010). For the period from 1 January 2011 until the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses or, if earlier, the Long Stop Date such information shall be provided not more than 30 Business Days following the end of the relevant calendar month, excluding the Risk Metrics Information which is to be provided not more than 40 Business Days following the end of the relevant calendar month (with the first monthly information for 2011 to be provided in respect of January 2011 on or before 27 February 2011).

 

	
5.5.5  

	
In addition, the Business Sellers shall provide to the Purchaser:

 

	 	
(i)  

	
as soon as reasonably practicable following the Original Agreement, internal management accounts for the months ending 30 June 2010 and 31 July 2010 prepared in a manner which is consistent with internal reporting practices immediately prior to the date of the Original Agreement;

 

	 	
(ii)  

	
on or before 15 October 2010, historical trend information in relation to the profit and loss account, balance sheet and product level data of the Businesses for the period from 1 January 2010 to 30 June 2010. Such information shall be accompanied by an appropriate glossary of definitions and commentaries on performance trends;

 

	 	
(iii)  

	
on or before 15 November 2010, an update to the financial forecast information in relation to the Businesses for the financial year ending 31 December 2011;

 

	 	
(iv)  

	
on or before 15 November 2011, an update to the financial forecast information in relation to the Businesses for the financial year ending 31 December 2012; and

 

	 	
(v)  

	
upon the reasonable request of the Purchaser, the information set out in Part A of Schedule 18 in relation to the Additional Excluded Products in respect of the period up to the Price Adjustment Reference Date and, in

 

  

53

  

 

respect of such information that relates to the loan impairment provisions relating to the Additional Excluded Products, the Relevant Closing Date.

 

	
5.5.6  

	
Subject to Clause 5.5.11, with effect from the date of this Agreement for the period until each Relevant Closing or, if earlier, the Long Stop Date, the Business Sellers shall provide to the Purchaser the information set out in Part B of Schedule 18 in relation to each Business on the basis and in the form set out in Part B of Schedule 18.

 

	
5.5.7  

	
Subject to Clause 5.5.11, with effect from the date of this Agreement, the Business Sellers shall use all reasonable endeavours to ensure that the information set out in Part C of Schedule 18 is capable of being made available to the Purchaser (or, where necessary, only to members of the Clean Team), as soon as practicable after the date of this Agreement and by the dates set out against each such piece of information in Part C of Schedule 18 at the latest, for the period until each Relevant Closing or, if earlier, the Long Stop Date.

 

	
5.5.8  

	
Subject to Clause 5.5.11, with effect from the date of this Agreement, the Business Sellers shall make available the information set out in Part D of Schedule 18 to the Purchaser (or, where necessary, only to members of the Clean Team) by 31 December 2011 at the latest, for the period until each Relevant Closing or, if earlier, the Long Stop Date, and without prejudice to the foregoing, shall use all reasonable endeavours to ensure that such information is capable of being so made available as soon as practicable after the date of this Agreement .

 

	
5.5.9  

	
Subject to Clause 5.5.11, the parties agree that in respect of the Rainbow Credit Risk Pack (Business Banking, Commercial Banking and Mid-Corporate), a specimen template of which is included in Part E of Schedule 18, the Business Sellers will, on a monthly basis from the date of this Agreement until each Relevant Closing or, if earlier, the Long Stop Date, provide a redacted (in respect of names and commentary) copy of such report and underlying data to the Purchaser, provided that the Business Sellers retain the right to alter such report to meet any changes in the Business Sellers’ business needs but will in any case continue to provide the underlying data referred to in the specimen template included in Part E of Schedule 18.

 

	
5.5.10  

	
Subject to Clause 5.5.11, the parties agree that in respect of the Retail Credit Risk Report, a specimen template of which is included in Part F of Schedule 18, the Business Sellers will, on a monthly basis from the date of this Agreement until each Relevant Closing or, if earlier, the Long Stop Date, provide a redacted (in respect of names and commentary) copy of such report and underlying data to the Purchaser, provided that the Business Sellers retain the right to alter such report to meet any changes in the Business Sellers’ business needs but will continue in any case to provide the underlying data referred to in the specimen template included in Part F of Schedule 18.

 

	
5.5.11  

	
The information to be provided by the Business Sellers:

 

	 	
(i)  

	
pursuant to Clause 5.5.6 in respect of all information designated Corporate Risk or Retail Risk shall be provided as soon as possible, and in any case not more than 40 Business Days, following the end of the relevant calendar month, with the first monthly information to be provided in respect of the month ending 30 September 2011 on or before 25 November 2011;

 

	 	
(ii)  

	
pursuant to Clause 5.5.6 in respect of all information not covered by (i) above, shall be provided as soon as possible, and in any case not more than 30 Business Days, following the end of the relevant calendar month,

 

  

54

  

 

save that the monthly information to be provided in respect of the month ending 31 October 2011 shall be provided on or before 31 December 2011;

 

	 	
(iii)  

	
pursuant to Clause 5.5.7 shall, once capable of being made available, be provided as soon as possible, and in any case not more than 30 Business Days, following the end of the relevant calendar month;

 

	 	
(iv)  

	
pursuant to Clause 5.5.8 shall be provided as soon as possible, and in any case not more than 40 Business Days, following the end of the relevant calendar month; and

 

	 	
(v)  

	
pursuant to Clauses 5.5.9 and 5.5.10 shall be provided as soon as possible, and in any case not more than 40 Business Days, following the end of the relevant calendar month, with the first monthly information to be provided in respect of the month ending 30 September 2011 on or before 25 November 2011.

 

	
5.5.12  

	
For the avoidance of doubt, where reference is made in this Clause 5.5 to the provision of information for the period up to the Long Stop Date, such information shall continue to be provided notwithstanding the occurrence of the Long Stop Date if this Agreement has not terminated as at (or prior to) the Long Stop Date, any of the Relevant Closings has not yet taken place by the Long Stop Date and the parties are continuing to proceed to the Relevant Closing(s) in accordance with this Agreement, in which case such information shall continue to be provided in accordance with the terms of this Clause 5.5 for such period as the parties are continuing to proceed to the Relevant Closings in accordance with this Agreement.

 

	
5.5.13  

	
The Business Sellers shall consider, in good faith, any amendments or additions to the form and/or content of the information to be provided pursuant to this Clause 5.5 as may be reasonably requested by the Purchaser and shall consult with the Purchaser with a view to agreeing any such amendments or additions. In particular, the Business Sellers shall consult with the Purchaser as to the feasibility of the Business Sellers producing a monthly interest statement based on customer rates.

 

	
5.5.14  

	
Whilst the parties shall work together to find solutions in respect of the provision of information in accordance with paragraph 2.3 of Schedule 24, for the avoidance of doubt, the Business Sellers shall not be required to disclose any information to the Purchaser in accordance with a request for additional information under Clause 5.5.13 which (a) is not practically available information, or cannot be reasonably constructed using available information, or (b) would contravene the requirements of any Law and Regulations.

 

	
5.5.15  

	
At the Relevant Closing, the Business Sellers shall provide to the Purchaser, in respect of each Complex SME and Mid-Corporate Customer transferring to the Purchaser at the Relevant Closing, output from the Business Sellers’ *** model which applied to such Customer immediately prior to the Relevant Closing. *** will be provided to the Purchaser on a non-reliance basis such that (save where the loss arises as a result of any fraud or wilful misconduct of a Business Seller or any of its employees) the Purchaser shall have no recourse to the Business Sellers in connection with the Purchaser’s use of such information.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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5.6  

	
Joint Business Committee

 

	
5.6.1  

	
As soon as practicable after the date of this Agreement, the parties shall constitute a joint business committee (the “Joint Business Committee”) in order to discuss the financial and operating performance of the Businesses between the date of the Original Agreement and the Friends and Family Transfer (in respect of the Friends and Family Customers), the NatWest Closing (in the case of the NatWest Businesses), the RBS Wales Closing (in the case of the RBS Wales Businesses) and the RBS England Closing (in the case of the RBS England Businesses).

 

	
5.6.2  

	
For the avoidance of doubt the Business Sellers shall not be required to disclose any information to the Purchaser at a Joint Business Committee meeting which (a) is Non-Business Information or (b) subject to the provisions of Schedule 24 would contravene the requirements of any Law and Regulations.

 

	
5.6.3  

	
The Business Sellers (acting together) and the Purchaser shall have the right to appoint an equal number of persons to the Joint Business Committee.

 

	
5.6.4  

	
Without prejudice to any other provision of this Clause 5.6, the parties acknowledge and agree that the Joint Business Committee shall have the delegated authority, and operate in accordance with the provisions set out in Schedule 24.

 

	
5.7  

	
Approved Persons

 

	
5.7.1  

	
At least 3 months prior to the NatWest Closing Date, the Business Sellers shall provide to the Purchaser a list of Relevant Employees who are Approved Persons (as defined in the FSA Rules) of any Business Seller and shall notify the Purchaser of any changes to such list at the end of each calendar month between the date on which such list is provided and the Relevant Closing (with the persons on such list, as so amended, being the “Transferring Approved Persons”).

 

	
5.7.2  

	
The Business Sellers shall provide the Purchaser with such information as it reasonably requests and which is reasonably required for the Transferring Approved Employees to acquire the status of an Approved Person (as defined in the FSA Rules) of the Purchaser and, if reasonably required by the Purchaser, that the Business Sellers shall use reasonable endeavours to arrange for any relevant documentation to be completed and executed.

 

	
5.8  

	
The Business Sellers Obligations in relation to Relevant Employees

 

	
5.8.1  

	
Nothing in clause 5.1 will restrict the Business Sellers’ ability in relation to the Relevant Employees to put in place (at the Business Sellers’ cost) such *** as it reasonably believes are appropriate in the circumstances provided the Business Sellers bear the costs of *** in accordance with paragraph 7 of Schedule 6.

 

	
5.9  

	
Credit Approvals

 

	
5.9.1  

	
During the period from the date of the Original Agreement to the Friends and Family Transfer Date (in respect of the Friends and Family Customers), the NatWest Closing Date (in respect of the NatWest Businesses), the RBS Wales Closing Date (in respect of the

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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RBS Wales Businesses) and the RBS England Closing (in respect of the RBS England Businesses):

 

	 	
(i)  

	
where any Business Seller is proposing to enter into any agreement which, if entered into, would constitute a Client Agreement, or where any Business Seller is proposing to renew or restructure an existing Client Agreement; and

 

	 	
(ii)  

	
the entering into, renewal or restructuring of such agreement (a “Material Agreement”) would result in the credit exposure of the Businesses increasing by *** or more relative to the position prior to the entering into, renewal or restructuring of the relevant agreement,

 

then the relevant Business Seller shall not enter into, renew or restructure such agreement without the prior written consent of the Purchaser, save where the relevant Business Seller reasonably considers that the seeking of such consent from the Purchaser would contravene any Law and Regulation.

 

	
5.9.2  

	
In the event that the Purchaser does not consent to the entering into, renewal or restructuring of a Material Agreement (including in cases where the relevant Business Seller has not sought such consent in accordance with clause 5.9.1), then the relevant Business Seller may, nevertheless, enter into, renew or restructure such Material Agreement and, in such an event, the relevant agreement shall not be transferred to the Purchaser pursuant to the terms of this Agreement but shall be deemed for the purposes of this Agreement to form part of the Excluded Business.

 

	
5.10  

	
Secondees

 

	
5.10.1  

	
Following the date of the Original Agreement, the Business Sellers and the Purchaser shall meet to discuss and explore any ways in which, without contravention of any Law and Regulations, the Purchaser may be able to appoint any persons (up to a maximum of ten) as secondees (the “Secondees”) to work in the Businesses from any date following the date of the Original Agreement until the NatWest Closing (in respect of the NatWest Businesses), the RBS Wales Closing (in respect of the RBS Wales Businesses) and the RBS England Closing (in respect of the RBS England Businesses).  If the Business Sellers, acting reasonably, consider that the appointment of any such Secondees would contravene any Law and Regulations, no such Secondees shall be so appointed.

 

	
5.10.2 

	
If any Secondees are appointed in accordance with Clause 5.10.1, the Purchaser shall have absolute discretion as to the identity of those who are so appointed, provided that no Secondee shall form part of the Businesses’ executive management team. In addition, during the period in which any Secondee is working in the Businesses, save where required by Law and Regulations, such Secondee shall not be permitted to have any contact whatsoever with the Purchaser and the Purchaser shall not contact any Secondee.  Any Secondees so appointed shall be seconded to the Businesses on fixed term contracts and on the basis of the Business Sellers’ standard terms and conditions of employment (subject to any enhanced confidentiality undertakings as the Business Sellers may request).

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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5.11  

	
***

 

	
5.12  

	
The Business Sellers shall use best endeavours to deliver to the Purchaser as soon as practicable after the date of the Original Agreement the following information in relation to those Mid-Corporate Customers whose customer identification numbers are set out in Part A of Schedule 17 (the “Additional Mid-Corporate Customers”):

 

	 	
(i)  

	
assets and liabilities as at 30 June 2010;

 

	 	
(ii)  

	
impairment provisions as at 30 June 2010;

 

	 	
(iii)  

	
Master Grade Score;

 

	 	
(iv)  

	
SIC classification; and

 

	 	
(v)  

	
Confirmation of any undrawn and any other off balance sheet commitments.

 

	
6  

	
Implementation and Separation planning

 

	
6.1  

	
Cooperation

 

	
6.1.1  

	
The parties agree and acknowledge that the objective of the parties in relation to Separation is the timely and effective separation of the Businesses from the RBSG Group, moving from one “steady state” to an equivalent steady state in terms of capability, competency and functionality in the operation and management of the Businesses by the Purchaser.

 

	
6.1.2  

	
The parties shall work together collaboratively and in good faith from the date of the Original Agreement until Separation is complete, to plan for the implementation of the transactions contemplated by this Agreement, including Separation and Data Migration.

 

	
6.2  

	
Committee

 

	
6.2.1  

	
As soon as practicable after the date of this Agreement, the parties shall constitute a joint implementation committee to oversee and manage the separation and planning referred to in Clause 6.1.1 (the “Joint Implementation Committee”) consisting of an equal number of appropriate nominees (as notified to the other party from time to time) from the Business Sellers (acting together) and the Purchaser. Any decision by the Joint Implementation Committee shall require the approval of at least one nominee of the Purchaser and one nominee of the Business Sellers (acting together).

 

	
6.2.2  

	
Without prejudice to any other provision of this Clause 6, the parties acknowledge and agree that the Joint Implementation Committee shall have the delegated authority, and operate in accordance with the provisions set out in Part A of Schedule 23.

 

	
6.3  

	
Separation Plan

 

	
6.3.1  

	
The parties have agreed a written plan (which comprises a high level plan and a number of sub-plans, together the “Separation Plan”) to achieve Separation by the Mid-Corporate and Complex SME Data Migration Dates and to address Separation issues that may arise both before and following Data Migration.  The current version of the Separation Plan (version ‘Rainbow Separation WRC High Level Plan v1.13 Baselined’) is in the Agreed Terms. The Separation Plan may be amended from time to time by agreement by the Joint

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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Implementation Committee, in accordance with the provisions set out in Part A of Schedule 23, and the plan as so amended from time to time shall from the time of such agreement constitute the Separation Plan.

 

	
6.3.2  

	
The Separation Plan includes a plan and timetable for Separation, including (without limitation):

 

	 	
(i)  

	
a complete plan for the migration and redirection of Retail Customers, SME Customers and Mid-Corporate Customers from the Business Sellers to the Purchaser’s Group;

 

	 	
(ii)  

	
a complete plan for the replacement by the Purchaser of any service provided by or on behalf of the RBSG Group to the Businesses (or any one of them);

 

	 	
(iii)  

	
details and timing of any activities and responsibilities of the parties in carrying out the Separation Plan, including milestones and associated criteria for “go/no go” decisions, which shall be made by the Joint Implementation Committee in accordance with Part A of Schedule 23;

 

	 	
(iv)  

	
identification of any agreements between a member of the RBSG Group and a third party for the provision of services to the Businesses (or any one of them), including any consents required under such agreements in order to provide services under the Transitional Services Agreement (“TSA Consents”), and any expiry, renewal or similar event under any such agreement which falls within the period covered by the Separation Plan;

 

	 	
(v)  

	
any other activities required to enable Separation to occur;

 

	 	
(vi)  

	
safeguards to ensure minimal disruption to the Businesses and to both parties’ ongoing businesses until Separation is complete; and

 

	 	
(vii)  

	
appropriate levels of core and dedicated resources required to support Separation.

 

The parties have further agreed certain matters in respect of Separation as set out in Part B of Schedule 23 (Certain Separation Matters).

 

	
6.3.3  

	
Subject to the last sentence of Clause 5.4.2, Clause 6.3.5 and Clause 6.11, the Business Sellers (acting together) and the Purchaser shall each bear their own costs of developing the Separation Plan.

 

	
6.3.4  

	
The set-up costs reasonably and actually incurred by the RBSG Group to be able to provide the Transitional Services shall be dealt with in accordance with the provisions of paragraph 3.1 of Part B of Schedule 8.

 

	
6.3.5  

	
To the extent that the Purchaser requests additional assistance from the Business Sellers in respect of putting in place the replacement services contemplated by Clause 6.3.2(ii), *** providing such assistance

 

For the avoidance of doubt, any steps required to be taken by any member of the RBSG Group to wind down or exit existing services provided to the Businesses shall not constitute additional assistance for the purposes of this Clause 6.3.5.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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6.4  

	
Planning and implementation

 

	
6.4.1  

	
The parties acknowledge and agree that the Joint Implementation Committee will meet at least once every week and will be the primary forum through which the Business Sellers and the Purchaser will work together to plan and implement the proposed transactions contemplated by this Agreement, including as further set out in Clause 6.2.2 and Schedule 23.

 

	
6.4.2  

	
Without prejudice to the provisions of Schedule 23, from the date of this Agreement, the Business Sellers and the Purchaser shall each use their respective reasonable endeavours to ensure that the Joint Implementation Committee seeks, in good faith, to agree:

 

	 	
(i)  

	
the steps each party will take in order to secure the necessary regulatory approvals and support for the transfers and transactions contemplated by the Transaction Documents;

 

	 	
(ii)  

	
the steps each party will take to notify Customers of the proposed sale and to give effect to the Scheme, the transfer of the Contracts and the Loan Guarantees/Security in accordance with Part 1 of Schedule 5 and any transfers pursuant to Clause 4.3.2, Clause 4.3.3 and (as necessary) Clause 4.5;

 

	 	
(iii)  

	
the steps each party will take in accordance with Schedule 5 to seek all necessary Third Party Consents and to implement the other arrangements contemplated by Schedule 5;

 

	 	
(iv)  

	
the steps each party will take in accordance with Schedule 6 in respect of Relevant Employees;

 

	 	
(v)  

	
the steps each party will take in accordance with Schedule 3 to seek all necessary Property Third Party Consents;

 

	 	
(vi)  

	
the steps each party will take to ensure that re-branding and training of Rainbow employees occurs in accordance with the terms of the Transaction Documents; and

 

	 	
(vii)  

	
without prejudice to the remaining provisions of this Clause 6 and the provisions of Schedule 8 and the Transitional Services Agreement, the steps each party will take in relation to Separation and Data Migration,

 

so that, subject to this Agreement (including without limitation Clause 7.1.2), the Friends and Family Transfers are achieved at the Friends and Family Transfer Dates and the Closing Dates are achieved at the NatWest Effective Time (in respect of the NatWest Businesses), the RBS Wales Effective Time (in respect of the RBS Wales Businesses), or the RBS England Effective Time (in respect of the RBS England Businesses) and in any event no later than the Long Stop Date.

 

	
6.4.3  

	
Without limiting the foregoing or the provisions of Schedule 23, the Business Sellers and the Purchaser shall each use their respective reasonable endeavours to ensure that the Joint Implementation Committee seeks, in good faith, to plan for:

 

	 	
(i)  

	
the Closings;

 

	 	
(ii)  

	
the provision of services under the TSA by the RBSG Group; and

 

	 	
(iii)  

	
Data Migration.

 

  

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6.4.4  

	
The Business Sellers and the Purchaser shall each use all reasonable endeavours to comply with the Separation Plan both before and after Data Migration.

 

	
6.5  

	
Data Migration

 

	
6.5.1  

	
The parties shall each use their best endeavours to ensure that Data Migration is able to take place by *** in respect of the NatWest Businesses, by *** in respect of the RBS Wales Businesses and by *** in respect of the RBS England Businesses or such other dates as may be set out in the Separation Plan from time to time.

 

	
6.5.2  

	
The Business Sellers and the Purchaser shall take all such steps as may be necessary to ensure that Data Migration is able to take place by the Long Stop Dates in respect of the NatWest Businesses, the RBS Wales Businesses and the RBS England Businesses.

 

	
6.5.3  

	
The Business Sellers and Purchaser shall each use their best endeavours to ensure that the Mid-Corporate and Complex SME Data Migration is able to take place as soon as reasonably practicable following the NatWest Closing in respect of the NatWest Businesses, as soon as reasonably practicable following the RBS Wales Closing in respect of the RBS Wales Businesses and as soon as reasonably practicable following the RBS England Closing in respect of the RBS England Businesses.

 

	
6.5.4  

	
Each of the Business Sellers and the Purchaser shall provide to each other such information as the other party may reasonably require to enable it to satisfy its obligations in Clause 6.5.1, 6.5.2 and 6.5.3, including the Business Sellers’ provision of:

 

	 	
(i)  

	
in each case, all data definition files relating to the Business Data;

 

	 	
(ii)  

	
in each case, all rules relating to the Business Data;

 

	 	
(iii)  

	
in each case, a break down of the Business Data by Customer, Product and channel; and

 

	 	
(iv)  

	
in the case of Clause 6.5.3, information relating to:

 

	 	
(a)  

	
the retail internet channel XML shell;

 

	 	
(b)  

	
the process by which Customers are identified, routed and granted access to their account details and services;

 

	 	
(c)  

	
the Customer experience with respect to each channel relating to the SME Business and Mid-Corporate Business; and

 

	 	
(d)  

	
which processes relating to the SME Business and Mid-Corporate Business are automated and which are undertaken manually.

 

	
6.5.5  

	
Without prejudice to the provisions of Clause 6.5.2 and 6.5.3, the Business Sellers shall provide the Business Data to the Purchaser:

 

	 	
(i)  

	
in relation to the Retail Business and SME Business (other than in respect of Complex SME Customers) at the Relevant Closing; and

 

	 	
(ii)  

	
in relation to the SME Business (in respect of the Complex SME Customers) and Mid-Corporate Business at the Mid-Corporate and Complex SME Data Migration Dates,

 

in each case, in such format as the parties (acting reasonably) agree.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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6.6  

	
Post Closing

 

Without limiting the remaining provisions of this Clause 6, each of the Business Sellers and the Purchaser shall use reasonable endeavours to ensure that, following the NatWest Closing Date, the Joint Implementation Committee meets at least once a week to:

 

	
6.6.1  

	
identify any property, right or asset forming part of the Business Assets to be transferred to the Purchaser that has not been transferred and seek to effect that transfer to the Purchaser in accordance with Clause 9.6;

 

	
6.6.2  

	
identify any property, right or asset that has been transferred to the Purchaser which did not form part of the Business Assets to be transferred and seek to effect the re-transfer to the relevant Business Seller in accordance with Clause 9.7;

 

	
6.6.3  

	
review the status of the transfer and separation of the Businesses and to determine how any issues arising therefrom are to be dealt with; and

 

	
6.6.4  

	
monitor the continued compliance of the parties with the relevant parts of the Separation Plan that relate to the period after the Relevant Closing,

 

with such meetings to continue until such time as the Joint Implementation Committee considers that it is appropriate to meet less frequently or that no further meetings of the Joint Implementation Committee are necessary.

 

	
6.7  

	
Dispute resolution

 

	
6.7.1  

	
If a dispute or difference of opinion arises in relation to any of the matters referred to in Clause 6.4.2 or otherwise dealt with by the Joint Implementation Committee and the members of the Joint Implementation Committee are unable to resolve that dispute within a reasonable period, then each of the Business Sellers or the Purchaser may issue a notice requiring that the dispute be referred, in the case of the Business Sellers, to such person as shall be notified by the Business Sellers to the Purchaser for such purpose as soon as reasonably practicable after the date of this Agreement and, in the case of the Purchaser, to such person as shall be notified by the Purchaser to the Business Sellers for such purpose as soon as reasonably practicable after the date of this Agreement.

 

	
6.7.2  

	
If a dispute or difference of opinion is referred under Clause 6.7.1 the Purchaser and the Business Sellers shall each procure that its representative negotiates in good faith to resolve the dispute or difference of opinion for a period of up to 20 Business Days.

 

 

	
6.8  

	
Law and Regulations

 

The operation of the Joint Implementation Committee shall be consistent with Law and Regulations.

 

	
6.9  

	
Channel Carve-Out

 

As set out in, and in accordance with, the Separation Plan the parties shall launch an internet banking portal for Customers, which is separate to that used by customers of the Excluded Business, on or around *** and in any event no later than 28 days before the Scheme Posting Date (the “Channel Carve-Out”).  The parties will consult with each other as to the launch of such portal in accordance with the Separation Plan.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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6.10  

	
Customer Helpline

 

The parties shall launch a telephone helpline for Customers in respect of the sale of the Businesses, which is separate to any helpline used by customers of the Excluded Business (the “Customer Helpline”) which shall be operated by the Business Sellers and shall transfer to the Purchaser in accordance with the Separation Plan. The parties shall consult with each other as to the launch of the Customer Helpline and the content of all such procedures and scripts relating to the Customer Helpline, shall provide to each other all information and assistance as may be reasonably necessary in connection therewith and shall incorporate all comments as may be reasonably made by the other.  The costs in relation to the Customer Helpline shall be split equally between the Business Sellers and the Purchaser.

 

	
6.11  

	
ATM Costs

 

In the event that the relevant Closing does not take place in accordance with the terms of this Agreement, the Purchaser shall be responsible for, and bear the costs of, reversing any changes made to the Business ATMs by the Purchaser under Paragraph 6 of Part B of Schedule 23.

 

	
6.12  

	
Training Costs

 

Subject to the Business Sellers providing the Purchaser with reasonable advance notice of the  costs of the RBSG Group in connection with the employee training to be undertaken in accordance with Paragraph 7 of Part B of Schedule 23, the Purchaser shall bear its own costs and the costs of the RBSG Group incurred in connection with such training.

 

	
7  

	
Closing

 

	
7.1  

	
Date and Place

 

	
7.1.1  

	
Subject to Clauses 4 and 7.1.2, and unless otherwise specified by a relevant Regulatory Authority:

 

	 	
(i)  

	
the NatWest Closing shall take place immediately following the NatWest Effective Time at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ or at such other place as may be agreed between the Purchaser and the Business Sellers;

 

	 	
(ii)  

	
the RBS Wales Closing shall take place immediately following the RBS Wales Effective Time at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ  or at such other place as may be agreed between the Purchaser and the Business Sellers; and

 

	 	
(iii)  

	
the RBS England Closing shall take place immediately following the RBS England Effective Time at the offices of Linklaters LLP, One Silk Street, London EC2Y 8HQ  or at such other place as may be agreed between the Purchaser and the Business Sellers.

 

	
7.1.2  

	
Without prejudice to Clause 6.5.2, the parties shall take all such steps as may be necessary to procure that the Effective Times and Closings shall be delayed until the parties are satisfied that the Data Migration is able to take place and the Business Seller

 

  

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are able to provide the relevant information technology services under the TSA in respect of the Complex SME Customers and the Mid-Corporate Customers.

 

	
7.2  

	
Closing Events

 

At the Closings, the parties shall comply with their respective obligations specified in Schedule 11 in relation to the Businesses. The Business Sellers may waive some or all of the obligations of the Purchaser as set out in Schedule 11 and the Purchaser may waive some or all of the obligations of the Business Sellers or any Business Seller as set out in Schedule 11.

 

	
7.3  

	
Payment on Closings and initial allocation of the Purchase Price

 

	
7.3.1  

	
At the NatWest Closing the Purchaser shall pay in cash to NatWest on its own behalf and on behalf of NWHL an amount in aggregate expressed in Pounds Sterling which shall be equal to:

 

	 	
(i)  

	
the NatWest Bid Value;

 

plus

 

	 	
(ii)  

	
the Estimated NatWest Tangible Net Asset Value,

 

it being acknowledged that the resulting amount may be a ***

 

	
7.3.2  

	
At the RBS Wales Closing the Purchaser shall pay in cash to RBS an amount expressed in Pounds Sterling which shall be equal to:

 

	 	
(i)  

	
the RBS Wales Bid Value;

 

plus

 

	 	
(ii)  

	
the Estimated RBS Wales Tangible Net Asset Value,

 

it being acknowledged that the resulting amount may be ***

 

	
7.3.3  

	
At the RBS England Closing the Purchaser shall pay in cash to RBS an amount expressed in Pounds Sterling which shall be equal to:

 

	 	
(i)  

	
the RBS England Bid Value;

 

plus

 

	 	
(ii)  

	
the Estimated RBS England Tangible Net Asset Value,

 

it being acknowledged that the resulting amount may be a ***.

 

	
7.3.4  

	
***

 

	
7.3.5  

	
***

 

	
7.3.6  

	
Amounts payable under Clauses 7.3.1, 7.3.2, 7.3.3, 7.3.4 and 7.3.5 above shall be allocated in accordance with Schedule 9.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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7.4  

	
Notification of Estimated Tangible Net Asset Value Amount

 

Not less than ten Business Days prior to the Relevant Closing, the Business Sellers shall notify the Purchaser of the following:

 

	
7.4.1  

	
the Estimated NatWest Tangible Net Asset Value (in respect of the NatWest Closing), the Estimated RBS Wales Tangible Net Asset Value (in respect of the RBS Wales Closing) and the Estimated RBS England Tangible Net Asset Value (in respect of the RBS England Closing) and, in each case, shall include a breakdown of the constituent elements of the relevant Estimated Tangible Net Asset Value as set out in Part 2 of Schedule 12; and

 

	
7.4.2  

	
if any Business Assets comprising a material part of the Businesses taken as a whole (being such Business Assets that would represent at least 25% of the customer liabilities or the gross customer assets of the Businesses as at the Relevant Closing Date) are not expected to transfer pursuant to the Scheme or otherwise to the Purchaser as at the Relevant Closing.  If there are any such material Business Assets, the Business Sellers and the Purchaser shall meet to discuss, and agree, acting reasonably, the appropriate proportion of the Bid Value which shall be held back by the Purchaser and not paid to the Business Sellers at the Relevant Closing, such amount to be paid by the Purchaser to the relevant Business Seller immediately upon the subsequent transfer of such Business Assets or substantially all of them.

 

	
7.5  

	
Breach of Closing Obligations

 

	
7.5.1  

	
Subject to the terms of the Scheme and the Court Order, if any party fails to comply with any obligation in Clauses 7.2, 7.3 or 7.4 or Schedule 11 in relation to any Closing, the Purchaser, in the case of non-compliance by any of the Business Sellers (in relation to the obligations relating to their respective Businesses only), or the Business Sellers, in the case of non-compliance by the Purchaser, shall be entitled (in addition to and without prejudice to all other rights or remedies available, including the right to claim damages) by written notice to the Business Sellers or the Purchaser, as the case may be:

 

	 	
(i)  

	
to effect the Relevant Closing so far as practicable having regard to the defaults which have occurred; or

 

	 	
(ii)  

	
to the extent permitted by the FSA, the Court or any other Regulatory Authority or Law and Regulation, to fix a new date for the Relevant Closing being a Friday on or around the middle of a calendar month (not being more than 25 Business Days after the previously agreed date for the Relevant Closing) in which case:

 

	 	
(a)  

	
if the new date relates to the NatWest Closing, to also fix new dates for the RBS Wales Closing being a Friday on or around the middle of a calendar month not more than two calendar months after the deferred NatWest Closing, and for the RBS England Closing being the last day of a calendar month not more than two calendar months after the deferred RBS Wales Closing;

 

	 	
(b)  

	
if the new date relates to the RBS Wales Closing, to also fix a new date for the RBS England Closing being a Friday on or around the middle of a calendar month not more than two calendar months after the deferred RBS Wales Closing; and

 

  

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(c)  

	
the provisions of Schedule 11 shall apply to such Closing as so deferred but provided such deferral may only be effected once by each of the Business Sellers and the Purchaser.

 

	
8  

	
Post-Closing Adjustments

 

	
8.1  

	
Closing Statement

 

The Business Sellers shall procure that as soon as practicable (and in any event within 45 Business Days) following the RBS England Closing there shall be drawn up the draft Closing Statements (the “Draft Closing Statements”) in accordance with Part 1 of Schedule 12 at Closing.

 

	
8.2  

	
Determination of Closing Statements

 

	
8.2.1  

	
The Draft Closing Statements shall be prepared in accordance with those accounting principles, policies, procedures, practices and techniques set out in paragraph 2 of Part 1 of Schedule 12 and, as agreed or determined pursuant to paragraph 3 of Part 1 of Schedule 12:

 

	 	
(i)  

	
shall constitute the Closing Statements in relation to the Business to which it relates for the purposes of this Agreement ; and

 

	 	
(ii)  

	
shall be final and binding on the parties.

 

	
8.2.2  

	
The Tangible Net Asset Value in respect of the Businesses shall be as reflected in the Closing Statements agreed or determined in relation to the Businesses in accordance with Schedule 12.

 

	
8.3  

	
Adjustments to Purchase Price

 

	
8.3.1  

	
Tangible Net Asset Value

 

If the Tangible Net Asset Value attributable to the Businesses is different from the Estimated Tangible Net Asset Value in respect of the Businesses then the Business Sellers shall pay to the Purchaser or (as the case may be) the Purchaser shall pay to the relevant Business Seller such amount as will ensure that the aggregate of the payments made under Clause 7.3 and this Clause 8.3.1 equals the consideration due under Clause 3.1.

 

Such payment shall be made on or before the Payment Date and such amount shall be allocated between the Business Sellers or the Purchaser, as the case may be, by reference to the deficiency or excess attributed to the Businesses in the Relevant Closing Statements.

 

	
8.3.2  

	
Interest

 

Any payment to be made in accordance with Clause 8.3.1 shall be made together with an amount equal to interest thereon calculated from and including the Relevant Closing Date to the date of payment at a rate per annum of 1 per cent. above LIBOR from time to time, accruing from day to day calculated on the basis of the actual number of days elapsed and a year of 360 days.

 

  

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8.3.3  

	
Payment and allocation

 

Where any payment is required to be made pursuant to this Clause 8.3:

 

	 	
(i)  

	
the payment made on account of the Purchase Price shall be reduced or increased accordingly; and

 

	 	
(ii)  

	
the allocation of the Purchase Price shall be adjusted in accordance with paragraph 3 of Schedule 9.

 

	
9  

	
Post-Closing Obligations

 

	
9.1  

	
Indemnity by the Purchaser against Assumed Liabilities

 

Notwithstanding any Law and Regulations which require the Business Sellers, in relation to their respective Businesses, to assume, discharge, perform or honour any Assumed Liability, the Purchaser shall indemnify and keep indemnified the Business Sellers and each member of the RBSG Group (each a “Seller Indemnified Person”) on an after-Tax basis from and against:

 

	
9.1.1  

	
any Liability or Losses suffered or incurred by a Seller Indemnified Person to the extent they arise from any Assumed Liabilities assumed, discharged, performed or honoured by any Seller Indemnified Person; and

 

	
9.1.2  

	
any third party professional or other out of pocket costs and expenses directly arising out of or in connection with any Seller Indemnified Person being required to assume, discharge, perform or honour any Assumed Liability or taking any reasonable action to investigate, avoid, resist or defend itself against any matter, Liability or Loss referred to in Clause 9.1.1.

 

	
9.2  

	
Indemnity by the Business Sellers against Excluded Liabilities

 

Notwithstanding any Law and Regulations which requires the Purchaser or any member of the Purchaser’s Group to assume, discharge, perform or honour any Excluded Liability, each Business Seller, in relation to its respective Businesses only, shall indemnify and keep indemnified the Purchaser and each member of the Purchaser’s Group (each a “Purchaser Indemnified Person”) on an after-Tax basis from and against:

 

	
9.2.1  

	
any Liability or Losses suffered or incurred by a Purchaser Indemnified Person to the extent they arise from any Excluded Liabilities assumed, discharged, performed or honoured by any Purchaser Indemnified Person; and

 

	
9.2.2  

	
any third party professional or other out of pocket costs and expenses directly arising out of or in connection with any Purchaser Indemnified Person being required to assume, discharge, perform or honour any Excluded Liability or taking any reasonable action to investigate, avoid, resist or defend itself against any matter, Liability or Loss referred to in Clause 9.2.1.

 

	
9.3  

	
Indemnity by the Business Sellers against certain Liabilities

 

Each Business Seller, in relation to its respective Business only, shall indemnify and keep indemnified each Purchaser Indemnified Person on an after-Tax basis from and against any Liabilities or Losses (including any third party professional or other out of pocket costs

 

  

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and expenses directly arising out of or in connection with any Purchaser Indemnified Person taking any reasonable action to investigate, avoid, resist or defend itself against any matter, Liability or Loss referred to in paragraphs (i), (ii) or (iii) of this Clause 9.3) suffered or incurred by any Purchaser Indemnified Person in connection with:

 

	 	
(i)  

	
any fraud by any person in respect of *** held by *** which occurs prior to *** and any fraud in respect of a *** held by a ***, whether such fraud occurs prior to or after the Relevant Closing, where such fraud arises as a result of any action or omission *** prior to the Relevant Closing or as a result of action taken prior to the Relevant Closing by *** or their agent;

 

	 	
(ii)  

	
any failure by or on behalf of a Business Seller to maintain and/or retain any Client Agreement in accordance with Law and Regulation; and

 

	 	
(iii)  

	
***, save to the extent that any such claim, or any such Liabilities or Losses, arise from any Event (including any act or omission of a member of the Purchaser’s Group or any of their employees or agents) that occurs at any time ***

 

	
9.4  

	
Release of Guarantees

 

	
9.4.1  

	
The Purchaser and the Business Sellers shall use their respective reasonable endeavours to procure by the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses or, to the extent not done by the Relevant Closing, as soon as reasonably practicable thereafter, the release with effect from the Relevant Closing of the Business Sellers or any member of the RBSG Group from those security arrangements, guarantees or indemnities given by or binding upon the Business Sellers or any member of the RBSG Group in respect of any obligations of the Business Sellers or any member of the RBSG Group in respect of the Business Assets to the extent that such obligations are the Assumed Liabilities. Pending such release, the Purchaser shall indemnify and keep indemnified (on an after-Tax basis) the Business Sellers and any member of the RBSG Group against all amounts required to be paid by any of them pursuant to any such security, guarantees or indemnities and any Losses arising out of or in connection with them, in each case to the extent that such amounts or Losses relate to events occurring or acts or omissions after the Relevant Closing.

 

	
9.4.2  

	
For the purposes of Clause 9.4.1 in using “reasonable endeavours” the Purchaser shall not be required to assume any Liability more onerous than being a substitute guarantor or counterparty, as applicable.

 

	
9.4.3  

	
For the purposes of this Clause 9.4 the parties acknowledge and agree that:

 

	 	
(i)  

	
one or more of the relevant securities, guarantees or indemnities may become known to the Business Sellers or the Purchaser (as the case may be) on or after the Relevant Closing; and

 

	 	
(ii)  

	
upon becoming so aware of such a security, guarantee or indemnity (as the case may be) the relevant party shall notify the other parties in writing

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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as soon as practicable of its existence, and the obligations under Clause 9.4.1 shall apply.

 

	
9.4.4  

	
The provisions of this Clause 9.4 shall not apply in relation to any GTS Instruments or Indemnified GTS Instruments (or, for the avoidance of doubt, any GTS Client Agreements), to which the provisions of Clause 9.12 shall apply.

 

	
9.5  

	
The Business Receivables or Retained Business Receivables

 

	
9.5.1  

	
Any monies received by any member of the RBSG Group in respect of Business Receivables shall be held on trust for the Purchaser (but may be held in a co-mingled account) and the Business Sellers shall, in relation to their respective Businesses, pay to the Purchaser the amount recovered free from any withholding, deduction or other right of set off, except where such withholding or deduction is required by law (in which case the relevant Business Seller shall be permitted to make such withholding or deduction from the amount payable to the Purchaser at the rate applicable by law but it shall increase any payment or make any additional payment to the Purchaser as a result of such withholding or deduction) and together with an amount equal to interest thereon calculated from and including the date on which the relevant monies were received by the RBSG Group to the date of payment at a rate per annum equal to LIBOR. Such payments shall be aggregated and made on a weekly basis in respect of all such receipts received during such day.

 

	
9.5.2  

	
Any monies received by any member of the Purchaser's Group in respect of Retained Business Receivables shall be held on trust for the Business Sellers (but may be held in a co-mingled account) and the Purchaser shall pay to the Business Sellers in relation to their respective Businesses the amount recovered free from any withholding, deduction or other right of set off, except where such withholding or deduction is required by law (in which case the Purchaser shall be permitted to make such withholding or deduction from the amount payable to the Business Sellers at the rate applicable by law but it shall increase any payment or make any additional payment to the Business Sellers as a result of such withholding or deduction) and together with an amount equal to interest thereon calculated from and including the date on which the relevant monies were received by the Purchaser's Group to the date of payment at a rate per annum equal to LIBOR. Such payments shall be aggregated and made on a weekly basis in respect of all such receipts received during such day.

 

	
9.6  

	
The Business Sellers’ Continuing Transfer Obligations

 

	
9.6.1  

	
Notwithstanding Closing and, except as provided in Schedules 3, 4, 5 and 6, if any property, right or asset which is agreed to form part of the Business Assets to be transferred to the Purchaser under this Agreement has not been transferred to the Purchaser on the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses or the RBS England Closing in respect of the RBS England Businesses, the relevant Business Seller shall transfer such property, right or asset (and any related liability which is an Assumed Liability) as soon as practicable (and at its own cost, subject to Clause 16.10) to the Purchaser.

 

	
9.6.2  

	
The value of such property, right or asset shall to the extent appropriate be included in the Tangible Net Asset Value and if, and to the extent that, the post-Closing adjustments referred to in Clause 8 have been effected without such value having been taken into

 

  

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account, the Purchaser shall, to that extent, pay the relevant Business Seller an amount in cash equal to the amount (if any) by which the Tangible Net Asset Value would have increased had the full value of the relevant property, right or asset been included in the Relevant Closing Statement after taking account of any related liability which is an Assumed Liability to the extent the same was taken into account in the calculation of the Tangible Net Asset Value. If the Tangible Net Asset Value was a deduction from the Purchase Price, the Purchaser shall pay to the relevant Business Seller an amount in cash equal to any amount by which such deduction would have been reduced had the full value of the relevant property, rights or assets been included in the Relevant Closing Statement after taking account of any related liability which is an Assumed Liability to the extent that the same was taken into account in the calculation of Tangible Net Asset Value. The relevant Business Seller shall pay to the Purchaser an amount in cash equal to the amount (if any) by which the Tangible Net Asset Value would have decreased had the value of the relevant property, right or asset been included in the Relevant Closing Statement after taking account of any related liability which is an Assumed Liability and to the extent the same was taken into account in the calculation of the Tangible Net Asset Value. If the Tangible Net Asset Value was a deduction from the Purchase Price, the relevant Business Seller shall pay to the Purchaser an amount in cash equal to any amount by which such deduction would have been increased had the value of the relevant property, rights or assets been included in the Relevant Closing Statement after taking account of any related liability which is an Assumed Liability to the extent that the same was taken into account in the calculation of Tangible Net Asset Value.

 

	
9.7  

	
The Purchaser’s Continuing Transfer Obligations

 

	
9.7.1  

	
If, following the relevant Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses or the RBS England Closing in respect of the RBS England Businesses, any Excluded Asset or any property, right or asset, not forming part of the Business Assets to be transferred to the Purchaser under this Agreement, is found to have been transferred to the Purchaser on the Relevant Closing in error, the Purchaser shall transfer such property, right or asset (and any related liability which is an Excluded Liability) as soon as practicable to the relevant Business Seller or another member of the RBSG Group agreed between the Purchaser and the Business Sellers.

 

	
9.7.2  

	
The value of such property, right or asset shall to the extent appropriate be excluded from the Tangible Net Asset Value and if, and to the extent, the post Closing adjustments referred to in Clause 8 have been effected with such value having been taken into account, the Business Sellers shall, to that extent, pay the Purchaser an amount in cash equal to the amount (if any) by which the Tangible Net Asset Value would have reduced had the full value of the relevant property, right or assets not been included in the Relevant Closing Statement after taking into account any related liability which is an Excluded Liability to the extent that the same was taken into account in the calculation of the Tangible Net Asset Value. If the relevant Tangible Net Asset Value was a deduction from the Purchase Price, the relevant Business Seller shall pay the Purchaser an amount equal to the amount by which such deduction would have been increased had the full value of the relevant property, right or assets not been included in the Relevant Closing Statement after taking into account any related liability which is an Excluded Liability to the extent that the same was taken into account in the calculation of the Tangible Net Asset Value. The Purchaser

 

  

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shall pay to the relevant Business Seller an amount in cash equal to the amount (if any) by which the Tangible Net Asset Value would have increased had the value of the relevant property, right or asset been excluded from the Closing Statement after taking into account any related liability which is an Excluded Liability to the extent that the same was taken into account in the calculation of the Tangible Net Asset Value. If the Tangible Net Asset Value was a deduction from the Purchase Price, the Purchaser shall pay to the relevant Business Seller an amount in cash equal to any amount by which such deduction would have been decreased had the value of the relevant property, rights or assets not been included in the Closing Statement after taking into account any related liability which is an Excluded Liability to the extent that the same was taken into account in the calculation of the Tangible Net Asset Value.

 

	
9.8  

	
Information and communications

 

	
9.8.1  

	
After the Friends and Family Transfer Date in respect of the Friends and Family Customers, the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses and the RBS England Closing in respect of the RBS England Businesses (and without limiting any of the Seller Warranties), if the Business Sellers become aware (whether by notice from the Purchaser or otherwise) that any Books and Records are not in the possession of the Purchaser but is or are in the possession or under the control of or available to the Business Sellers or any other member of the RBSG Group, the Business Sellers shall notify the Purchaser and procure that such Books and Records are delivered (at the Business Sellers’ cost) to the Purchaser as soon as reasonably practicable on request (having regard to any time periods in which the Purchaser might require such Books and Records to be transferred in order to comply with Law and Regulation) and/or Good Industry Practice and the Business Sellers shall take such other actions (including alternative actions) as may be agreed by the parties in writing.

 

	
9.8.2  

	
Where any part of (but not the whole of) any document or record constitutes Books and Records, then the Business Sellers shall use all reasonable endeavours to separate such part or parts of the relevant document or record from the remainder and shall deliver such part or parts to the Purchaser in accordance with the terms of this Agreement and the Business Sellers shall take such other actions (including alternative actions) as may be agreed by the parties in writing.

 

	
9.8.3  

	
In the case of any document that would constitute Books and Records but for the fact that the relevant Business Seller is required by Law and Regulation to retain such document, the relevant Business Seller shall allow the Purchaser and its respective officers, directors, employees, auditors, professional advisers and agents reasonable access, on reasonable notice and during business hours, together with the facility (at the cost of the Business Sellers) to take copies of such books and records provided that if the Purchaser requires further rights in relation to such document beyond those set out in this Clause 9.8.3 in order to comply with any Law and Regulation and/or with Good Industry Practice, then the Purchaser and the relevant Business Seller shall consult with each other and the Business Sellers shall use all reasonable endeavours to provide the Purchaser which such rights as may be necessary in order for the Purchaser to comply with such Law and Regulation and/or with Good Industry Practice (subject to the RBSG Group also complying with any relevant Law and Regulations applicable to it).

 

  

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9.8.4  

	
Each Business Seller shall use reasonable endeavours to procure that all notices, correspondence, orders or inquiries relating to the Businesses or the Business Assets which are received by the Business Sellers or any other member of the RBSG Group (including from customers and clients) on or after the Relevant Closing shall be passed to the Purchaser as soon as is reasonably practicable.

 

	
9.9  

	
Post-Closing access for the Purchaser

 

Notwithstanding Closing, the Business Sellers shall retain for a period of 7 years from the relevant Friends and Family Transfer Date in respect of a Friends and Family Transfer, a period of 7 years from the NatWest Closing in respect of the NatWest Businesses, a period of 7 years from the RBS Wales Closing in respect of the RBS Wales Businesses, and a period of 7 years from the RBS England Closing in respect of the RBS England Businesses the books, records and documents of the Businesses (including records in relation to VAT, subject to the provisions of Schedule 10) to the extent they relate to the period of time prior to the Relevant Closing and are not delivered to the Purchaser on or after the Relevant Closing and shall (subject to compliance with Law and Regulations and after redaction of any information which does not relate to the Businesses) allow the Purchaser and its respective officers, directors, employees, auditors, professional advisers and agents reasonable access, on reasonable notice and during business hours, together with the facility (at the cost of the Purchaser) to take copies of such books, records and documents.

 

	
9.10  

	
Post-Closing access for Business Sellers

 

The Purchaser shall retain for a period of 7 years from the relevant Friends and Family Transfer Date in respect of a Friends and Family Transfer, a period of 7 years from the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses, the books, records and documents which relate to the Businesses (including, without limitation, the Books and Records and, subject to the provisions of Schedule 10, records in relation to VAT,) and which are delivered to the Purchaser on or after the Relevant Closing to the extent they relate to the period of time prior to the Relevant Closing and shall (subject to compliance with Law and Regulations and after redaction of any information relating to periods after the Relevant Closing) allow the Business Sellers and their respective officers, directors, employees, auditors, professional advisers and agents reasonable access, on reasonable notice and during business hours, together with the facility (at the cost of the Business Sellers) to take copies of such books, records and documents.

 

	
9.11  

	
Obligation in respect of Customer Derivative Contracts

 

	
9.11.1  

	
The Business Sellers and the Purchaser agree that:

 

	 	
(i)  

	
the NatWest Portfolio Swap(s) will be entered into at NatWest Closing (in respect of the NatWest Businesses);

 

	 	
(ii)  

	
the RBS Wales Portfolio Swap(s) will be entered into at RBS Wales Closing (in respect of the RBS Wales Businesses);

 

	 	
(iii)  

	
the RBS England Portfolio Swap(s) will be entered into at RBS England Closing (in respect of the RBS England Businesses); and

 

  

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(iv)  

	
each Portfolio Swap shall constitute a Transaction for the purposes of (and as defined in) the Hedging ISDA.

 

	
9.11.2  

	
The Business Sellers and the Purchaser agree to attend meetings with each other prior to the NatWest Closing Date, at such intervals and of such duration as may be reasonably necessary for the purposes of agreeing, and (each acting reasonably and using all reasonable endeavours and subject to the provisions of Clauses 9.11.3) shall seek to agree:

 

	 	
(i)  

	
as soon as reasonably practicable and in any event prior to close of business on the last Business Day of the sixth month immediately preceding the month in which the NatWest Closing Date is expected to occur:

 

	 	
(a)  

	
the information and data on the Hedged Contracts to be provided by the Business Sellers to the Purchaser or ANTS for the purposes of this Clause 9.11 and/or the transfer of the Hedged Contracts to the Purchaser, the format in which such information and data shall be provided and the timetable for its provision; and

 

	 	
(b)  

	
the identification of the principal inputs into the calculation of the CVA Adjustment Amount and which of such principal inputs is to be provided to Santander pursuant to Clause 9.11.6; and

 

	 	
(ii)  

	
as soon as reasonably practicable and in any event prior to close of business on the last Business Day immediately preceding the NatWest Closing Date:

 

	 	
(a)  

	
the terms of the Hedging ISDA; and

 

	 	
(b)  

	
the commercial terms of, and the form of the Confirmation (as such term is defined in the Hedging ISDA) to be executed in relation to, each Portfolio Swap.

 

	
9.11.3  

	
The commercial terms of the Portfolio Swaps shall be agreed by the Business Sellers and the Purchaser, each acting reasonably and using all reasonable endeavours, in accordance with the following parameters:

 

	 	
(i)  

	
the NatWest Portfolio Swap(s) shall provide that:

 

	 	
(a)  

	
ANTS will be obliged to pay to RBS amounts equivalent to any and all scheduled payments due to be received by the Purchaser after the NatWest Closing Date; and

 

	 	
(b)  

	
RBS will be obliged to pay to ANTS amounts equivalent to any and all scheduled payments due to be paid by the Purchaser after the NatWest Closing Date,

 

in each case under the relevant NatWest Hedged Contracts, regardless of whether or not any such due scheduled payments are actually received or, as the case may be, paid by the Purchaser under the relevant NatWest Hedged Contracts;

 

	 	
(ii)  

	
the RBS Wales Portfolio Swap(s) shall provide that:

 

  

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(a)  

	
ANTS will be obliged to pay to RBS amounts equivalent to any and all scheduled payments due to be received by the Purchaser after the RBS Wales Closing Date; and

 

	 	
(b)  

	
RBS will be obliged to pay to ANTS amounts equivalent to any and all scheduled payments due to be paid by the Purchaser after the RBS Wales Closing Date,

 

in each case under the RBS Wales Hedged Contracts, regardless of whether or not any such scheduled payments are actually received or, as the case may be, paid by the Purchaser under the relevant RBS Wales Hedged Contracts;

 

	 	
(iii)  

	
the RBS England Portfolio Swap(s) shall provide that:

 

	 	
(a)  

	
ANTS will be obliged to pay to RBS amounts equivalent to any and all scheduled payments due to be received by the Purchaser after the RBS England Closing Date; and

 

	 	
(b)  

	
RBS will be obliged to pay to ANTS amounts equivalent to any and all scheduled payments due to be paid by the Purchaser after the RBS England Closing Date,

 

in each case under the RBS England Hedged Contracts, regardless of whether or not any such scheduled payments are actually received or, as the case may be, paid by the Purchaser under the relevant RBS England Hedged Contracts.

 

	
9.11.4  

	
RBS shall pay the CVA Adjustment Amount to ANTS on the third Business Day following the RBS England Closing Date.

 

	
9.11.5  

	
“CVA Adjustment Amount” means an amount payable in GBP by RBS to ANTS to reflect the net transfer of credit risk between RBS and ANTS and will be calculated by RBS on the Business Day immediately preceding the RBS England Closing Date in accordance with the following formula:

 

CVA Adjustment Amount = Max ((CVAANTS - CVARC - CVARBS), 0)

 

where:

 

CVARC is the aggregate total of all the credit valuation adjustments which would be taken by RBS or NatWest against Customers in relation to the Hedged Contracts calculated on a Customer by Customer basis and on the basis that (i) each such Hedged Contract was in place between such Customer and RBS, (ii) the calculation in relation to Hedged Contracts with a Customer that are subject to an ISDA Master Agreement or any other agreement containing a multiple transaction close-out netting provision is made on a net basis and otherwise on a gross basis and (iii) the amount of such credit valuation adjustment and the marked-to-market value of the positions under such Hedged Contracts are to be determined using the same systems and methodologies used by RBS in the calculation of the reported profits of the RBSG Group in the last reporting period prior to the RBS England Closing Date in respect of which consolidated audited accounts of the RBSG Group have been published and using the inputs

 

  

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into such systems and methodologies customarily used by the Global Banking and Markets business of the RBSG Group;

 

CVAANTS is the aggregate credit valuation adjustment which would be taken by RBS against ANTS in relation to the Portfolio Swaps assuming that (i) each of the Portfolio Swaps is in place between RBS and ANTS, (ii) the probability of default and loss given default in relation to ANTS shall be determined by reference to the then prevailing credit default swap curve of the Purchaser and (iii) the amount of such credit valuation adjustment and the marked-to-market value of the Portfolio Swaps are to be determined using the same systems and methodologies used by RBS in the calculation of the reported profits of the RBSG Group in the last reporting period prior to the RBS England Closing Date in respect of which consolidated audited accounts of the RBSG Group have been published and using the inputs into such systems and methodologies customarily used by the Global Banking and Markets business of the RBSG Group; and

 

CVARBS is the aggregate credit valuation adjustment which would be taken by ANTS against RBS in relation to the Portfolio Swaps assuming that (i) each of the Portfolio Swaps is in place between RBS and ANTS, (ii) the probability of default and loss given default in relation to RBS shall be determined by reference to the then prevailing credit default swap curve of RBS and (iii) the amount of such credit valuation adjustment and the marked-to-market value of the Portfolio Swaps are to be determined using the same systems and methodologies used by RBS in the calculation of the reported profits of the RBSG Group in the last reporting period prior to the RBS England Closing Date in respect of which consolidated audited accounts of the RBSG Group have been published and using the inputs into such systems and methodologies customarily used by the Global Banking and Markets business of the RBSG Group.

 

The intention behind this payment is that RBS will pay to ANTS an amount in GBP equal to the credit valuation adjustment incurred by ANTS in respect of both its exposure to Customers and to RBS minus the credit value adjustment incurred by RBS for its exposure to ANTS.  These amounts will be paid net with any amounts due from ANTS to RBS subject to a cap of zero. The convention is that CVARBS, CVAANTS, and CVARC are negative amounts.

 

	
9.11.6  

	
RBS shall provide ANTS with details (including the agreed principal inputs) of what the CVA Adjustment Amount and each of CVARC, CVAANTS and CVARBS would have been had such amounts come to be calculated on the last Business Day of each of the six months immediately preceding the month in which the RBS England Closing Date is expected to occur as soon as reasonably practicable following each of such dates.

 

	
9.11.7  

	
If requested by the Purchaser, RBS shall procure a certification from the external auditors of RBS, in form and substance reasonably satisfactory to the Purchaser (acting in good faith and in a commercially reasonable manner),  that confirms that the CVARC, CVAANTS and CVARBS used to determine the CVA Adjustment Amount has been determined by RBS using the same systems and methodologies used by RBS in the calculation of the reported profits of the RBS Group in the last reporting period prior to the RBS England Closing Date in respect of which consolidated audited accounts of the RBSG Group have been

 

  

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published and using the inputs into such systems and methodologies customarily used by the Global Banking and Markets business of the RBSG Group.

 

	
9.12  

	
Obligation in respect of GTS Instruments

 

	
9.12.1  

	
The Business Sellers and the Purchaser agree that following the date of the Original Agreement:

 

	 	
(i)  

	
the Business Sellers shall at reasonable intervals prior to the NatWest Closing Date (in respect of the NatWest Businesses), the RBS Wales Closing Date (in respect of the RBS Wales Businesses) and the RBS England Closing Date (in respect of the RBS England Businesses), at the reasonable request of the Purchaser provide a schedule of all GTS Instruments, setting out (or as applicable attaching), in respect of each such GTS Instrument as at such time:

 

	 	
(a)  

	
the maximum aggregate contingent liability of the relevant Business Seller thereunder;

 

	 	
(b)  

	
the expiry date of the GTS Instrument; and

 

	 	
(c)  

	
such additional information available to the Business Sellers as the Purchaser may reasonably require in order to prepare for the transfer of GTS Client Agreements at the Relevant Closing Date (which may include details of the unutilised commitments of the relevant Business Seller under all GTS Client Agreements as at such time and the provision of copies of GTS Instruments) or as the parties may otherwise agree; and

 

	 	
(ii)  

	
the Business Sellers and the Purchaser shall, no later than the NatWest Closing Date (in respect of the NatWest Businesses), the RBS Wales Closing Date (in respect of the RBS Wales Businesses) and the RBS England Closing Date (in respect of the RBS England Businesses), each acting reasonably, agree a schedule of all GTS Instruments (as at immediately prior to the Relevant Closing) to which the provisions of this Clause 9.12 shall apply following the NatWest Closing, the RBS Wales Closing and the RBS England Closing, as applicable (the “Indemnified GTS Instruments”).  Such schedules (each, an “Indemnified GTS Schedule”) shall set out (or as applicable attach) in respect of each such GTS Instrument:

 

	 	
(a)  

	
the name and contact details of the relevant GTS Customer and third party beneficiary;

 

	 	
(b)  

	
the maximum aggregate contingent liability of the relevant Business Seller thereunder;

 

	 	
(c)  

	
the expiry date of the Indemnified GTS Instrument;

 

	 	
(d)  

	
a description of the GTS Client Agreement to which the Indemnified GTS Instrument relates reasonably sufficient to enable the relevant Indemnified GTS Instrument to be matched thereto;

 

	 	
(e)  

	
the amount of cash collateral (if any) held by the Business Sellers (or any member of the RBSG Group) in respect of such Indemnified

 

  

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GTS Instruments and which will not transfer to the Purchaser at the Relevant Closing (the “Indemnified GTS Collateral”); and

 

	 	
(f)  

	
such additional information as the Purchaser may reasonably require in order to prepare for the transfer of GTS Client Agreements at the Relevant Closing (which may include details of the unutilised commitments of the relevant Business Seller under all GTS Client Agreements as at such time and the provision of copies of Indemnified GTS Instruments) or as the parties may otherwise agree.

 

	
9.12.2  

	
With respect to those Indemnified GTS Instruments which have an expiry date falling more than 6 months after the NatWest Closing Date, the RBS Wales Closing Date, or the RBS England Closing Date, as applicable, the Purchaser shall use its reasonable endeavours (and the Business Sellers shall provide all co-operation and assistance as the Purchaser may reasonably require) to procure the full and irrevocable release of the relevant Business Seller from its obligations under such Indemnified GTS Instrument by offering to issue (or procure the issue by an affiliate of the Purchaser of) a replacement instrument (each, a “Replacement Instrument”) on substantially similar, but no more onerous, terms to the Indemnified GTS Instrument, and which shall by its terms become effective upon cancellation of the GTS Instrument to which it relates and the full and irrevocable release of the relevant Business Seller from its obligations thereunder.  The Purchaser shall use its reasonable endeavours to procure confirmation from the third party beneficiary of the release of the relevant Business Seller from its obligations under such Indemnified GTS Instrument (which may include return of such instrument, which shall constitute such confirmation).

 

	
9.12.3  

	
In relation to all fees and other charges or expenses payable by or on behalf of any GTS Customer in respect of the credit risk associated with Indemnified GTS Instruments (whether under the terms of a related GTS Client Agreement or otherwise) but excluding, for the avoidance of doubt, arrangement and similar fees payable on reviews or extensions of GTS Client Agreements and related arrangements which accrue on or after the NatWest Closing Date, the RBS Wales Closing Date or the RBS England Closing Date, as applicable:

 

	 	
(i)  

	
if such Indemnified GTS Instrument has an expiry date falling 6 months or less after the NatWest Closing Date, the RBS Wales Closing Date or the RBS England Closing Date, as applicable, the Purchaser shall be entitled to retain all such amounts for its own account;

 

	 	
(ii)  

	
if such Indemnified GTS Instrument has an expiry date falling more than 6 months after the NatWest Closing Date, the RBS Wales Closing Date or the RBS England Closing Date, as applicable:

 

	 	
(a)  

	
the relevant Business Seller shall be entitled to such proportion of such amounts as is reasonably necessary to reflect the credit risk associated with the Purchaser, which proportion shall not exceed 20% of such amounts; and

 

	 	
(b)  

	
the Purchaser shall be entitled to the remaining proportion thereof;

 

and the parties shall enter into such further arrangements (if any) as may be reasonably necessary in order to ensure that the parties receive such amounts,

 

  

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provided that the Business Sellers shall not be entitled to any such amounts accruing on or prior to the date falling 6 months after the NatWest Closing Date, the RBS Wales Closing Date or the RBS England Closing Date, as applicable.  The Purchaser shall be entitled to retain for its own account all other fees and other charges or expenses payable by or on behalf of any GTS Customer in respect of Indemnified GTS Instruments which accrue on or after the NatWest Closing Date, the RBS Wales Closing Date or the RBS England Closing Date, as applicable.

 

	
9.12.4  

	
After the NatWest Closing in respect of the Indemnified GTS Instruments relating to the NatWest Businesses, the RBS Wales Closing Date in respect of the Indemnified GTS Instruments relating to the RBS Wales Businesses, and the RBS England Closing in respect of the Indemnified GTS Instruments relating to the RBS England Businesses:

 

	 	
(i)  

	
each of the Business Sellers shall not, and shall procure that no other person (excluding the Purchaser or any member of the Purchaser’s Group) shall, amend, waive, vary, supplement or replace any Indemnified GTS Instrument (other than with a Replacement Instrument) without the prior written consent of the Purchaser;

 

	 	
(ii)  

	
the Purchaser shall not amend, waive or vary any Indemnified GTS Instrument without the prior written consent of the relevant issuing Business Seller; and

 

	 	
(iii)  

	
the Business Sellers shall not, and shall procure that no other person (excluding  the Purchaser or any member of the Purchaser’s Group) shall, call for or receive any additional cash or other collateral in respect of any Indemnified GTS Instrument whether or not the same is provided for under any term of, or other provision applying to, such Indemnified GTS Instrument, or increase or (subject to Clauses 9.12.8 and 9.12.9) release or otherwise vary the amount of any Indemnified GTS Collateral.

 

	
9.12.5  

	
The Business Sellers shall, upon the date of issuance of each Replacement Instrument (or, if later, upon the effective date of such Replacement Instrument), transfer an amount equal to the amount of all Indemnified GTS Collateral (if any) in respect of the Indemnified GTS Instrument replaced thereby to such account of the relevant GTS Customer as the Purchaser shall specify for such purpose.

 

	
9.12.6  

	
If at any time following the NatWest Closing Date, the RBS Wales Closing Date or the RBS England Closing Date, as applicable, a Business Seller:

 

	 	
(i)  

	
receives notice of a claim or demand by a third party beneficiary under an Indemnified GTS Instrument (other than an import letter of credit) or a settlement is made by the relevant Business Seller under a GTS Instrument which is an import letter of credit in accordance with the terms thereof and (if and to the extent applicable) of the GTS Client Agreement under, pursuant or in relation to which it was issued (a “GTS Demand”); or

 

	 	
(ii)  

	
receives notice or otherwise becomes aware of any potential or intended claim or demand by a third party beneficiary under an Indemnified GTS Instrument (a “Potential GTS Demand”),

 

it shall as soon as reasonably practicable thereafter give written notice thereof to the Purchaser.  Such notice shall set out (a) the amount of the GTS Demand (which shall not exceed the maximum aggregate contingent liability of the relevant

 

  

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Business Seller in relation to such GTS Instrument as set out in the relevant Indemnified GTS Schedule, plus reasonable processing and correspondent bank fees and charges payable in relation thereto in accordance with the terms of the Indemnified GTS Instrument and related GTS Client Agreement) or Potential GTS Demand (as applicable) and (b) such reasonable details concerning the legal and factual basis of the GTS Demand or Potential GTS Demand (as applicable) as are available to the Business Sellers (including the GTS Instrument to which the GTS Demand or Potential GTS Demand (as applicable) relates, and a copy of the GTS Demand received or Potential GTS Demand received or of which it has otherwise become aware, and of the Indemnified GTS Instrument(s) to which it relates).

 

	
9.12.7  

	
To the extent that a Business Seller (or any member of the RBSG Group) is involved directly in the relevant GTS Demand the Business Sellers shall, or shall procure that the relevant member of the RBSG Group shall, conduct such demand in accordance with the terms of the relevant GTS Client Agreement and Indemnified GTS Instrument and in any event in a manner which is consistent, in all material respects, with the manner in which the Business Sellers (or, as the case may be, the relevant member of the RBSG Group) would, at the relevant time, conduct any claim or demand by a third party beneficiary under an import or documentary letter of credit, bond, bank guarantee or standby letter of credit or settlement of an import letter of credit (which in each case is based on similar facts or circumstances and is of a similar nature or type to the GTS Demand) in the ordinary course of business in relation to its global transaction services business in the United Kingdom.  In addition, the provisions of Clause 12 will apply mutatis mutandis to any claim in respect of a GTS Demand.

 

	
9.12.8  

	
Subject to the foregoing provisions of this Clause 9.12 (and without prejudice to the other terms of this Agreement), the Purchaser shall indemnify and keep indemnified the Business Sellers on an after-Tax basis from and against the amount of each GTS Demand (not exceeding the maximum aggregate contingent liability of the relevant Business Seller in relation to the GTS Instrument to which such GTS Demand relates as set out in the relevant Indemnified GTS Schedule, plus reasonable processing and correspondent bank fees and charges payable in relation thereto in accordance with the terms of the Indemnified GTS Instrument and related GTS Client Agreement) notified in accordance with Clause 9.12.6 above and which is paid by or on behalf of the Business Sellers (or any other member of the RBSG Group), less an amount equal to the amount of Indemnified GTS Collateral (if any) stated in the Indemnified GTS Schedule to be held in relation to the Indemnified GTS Instrument to which the GTS Demand pertains.  The Business Sellers shall, together with any request for indemnification under this Clause 9.12, provide written evidence reasonably satisfactory to the Purchaser of such payment of GTS Demand and (if and to the extent applicable) of such payment of reasonable processing and correspondent bank fees and charges payable (if any) in relation thereto in accordance with the terms of the Indemnified GTS Instrument and related GTS Client Agreement, and of its or their amount (as applicable).

 

	
9.12.9  

	
If, following payment by or on behalf of a Business Seller or any other member of the RBSG Group of a GTS Demand (for the avoidance of doubt, not including any payment under the indemnity provided for in this Clause 9.12), no further claim or demand may be made by the third party beneficiary under the terms of the Indemnified GTS Instrument to which such GTS Demand relates the relevant Business Seller shall as soon as reasonably practicable transfer to such account as the Purchaser shall specify for such purpose an amount equal to the amount of all Indemnified GTS Collateral (if any) in respect of such

 

  

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Indemnified GTS Instrument, less the amount of such Indemnified GTS Collateral (if any) which has been applied by the Business Seller in respect of payment by it of the relevant GTS Demand (and the relevant Business Seller shall provide written evidence reasonably satisfactory to the Purchaser of such application in payment and its amount).

 

	
9.12.10  

	
The indemnity in this Clause 9.12 shall cease to apply, in respect of any Indemnified GTS Instrument, upon the date of its expiry in accordance with the terms of such Indemnified GTS Instrument and of the GTS Client Agreement under, pursuant or in relation to which it was issued.

 

	
9.13  

	
Uncleared Items

 

The parties agree that they shall co-operate in good faith and act reasonably in order to account for and settle any uncleared items and items in the course of collection from, or transmission to other banks as at the Relevant Closing.

 

	
10  

	
Warranties

 

	
10.1  

	
The Seller Warranties

 

	
10.1.1  

	
Each of the Business Sellers, in respect only of the Businesses that it owns, represents and warrants to the Purchaser that each of the Seller Warranties set out in Schedule 14 is true and accurate as of the date of the Original Agreement.

 

	
10.1.2  

	
Each of the Seller Warranties shall be construed as being separate and independent and shall not be limited by reference to, or inference from, any other Seller Warranty or any other term of this Agreement or any other Transaction Document.

 

	
10.1.3  

	
Each of the Business Sellers undertakes, if any claim is made against it in connection with the sale of the Businesses to the Purchaser, not to make any claim against any director or employee of the Businesses on whom any of them may have relied before agreeing to any terms of this Agreement or any other Transaction Document or authorising any statement in the Disclosure Letter.

 

	
10.1.4  

	
All Seller Warranties, indemnities, covenants and other undertakings contained in or entered into in accordance with this Agreement or any other Transaction Document shall remain in full force and effect notwithstanding Closing.

 

	
10.1.5  

	
Any Seller Warranty qualified by the expression “so far as the Business Sellers are aware” or any similar expression shall, unless otherwise stated, be deemed only to refer to the actual knowledge on the date such Seller Warranty is made of those persons listed in Schedule 1 or to the knowledge which such persons would reasonably be expected to have, if they had made reasonable enquiries.

 

	
10.1.6  

	
For the avoidance of doubt, the parties agree that the Seller Warranties given at the date of the Original Agreement pursuant to Clause 10.1.1 were not and shall not be regarded as having been given in respect of credit cards or charge cards.

 

	
10.2  

	
Seller Disclosures

 

The Seller Warranties are subject to the matters fairly disclosed in the Disclosure Letter.

 

  

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10.3  

	
Seller Warranties to Closing

 

	
10.3.1  

	
Subject to Clause 10.2, each Business Seller, in respect only of the Businesses that it owns, further represents and warrants to the Purchaser that the Seller Warranties in paragraphs 1.1, 1.2, 1.3, 1.4, 2.1.2, 2.5.3, 2.7.1, 2.7.2, 3.1.1 and 3.1.3, 3.3.1, 3.3.2, 3.4.4, 5.8, 6.1.2 and 6.1.8, 12.1, 12.2, 12.3, 12.4, 12.5, 13.1, 13.2, 13.3, 13.4 of Schedule 14 will be true and accurate at the Friends and Family Transfer Date in respect of the Friends and Family Transfer, at the NatWest Closing in respect of the NatWest Businesses, at the RBS Wales Closing in respect of the RBS Wales Businesses and at the RBS England Closing in respect of the RBS England Businesses as if they had been repeated at such Closing in each case by reference to the facts and circumstances subsisting at the Relevant Closing Date.

 

	
10.3.2  

	
No right to damages or compensation shall arise in favour of the Purchaser under Clause 10.3.1 in consequence of an event or matter which results or may result in the Seller Warranty set out in paragraph 5.8 of Schedule 14 being untrue or inaccurate, as the case may be, if the event or matter could not reasonably have been avoided or prevented by any Business Seller or by their respective directors, officers, employees or agents operating the relevant Businesses in the ordinary course in the manner in which it had been conducted prior to the date of the Original Agreement.

 

	
10.3.3  

	
For the avoidance of doubt, the parties agree that the Seller Warranties given pursuant to Clause 10.3.1 shall be given in respect of the Businesses including (without limitation) credit cards and charge cards (other than the Seller Warranty in paragraph 1.2 of Schedule 14, which shall be given only in respect of the Businesses excluding credit cards and charge cards).

 

	
10.4  

	
The Purchasers’ Warranties

 

	
10.4.1  

	
The Purchaser represents and warrants to the Business Sellers that the statements set out in Schedule 15 are true and accurate as of the date of the Original Agreement.

 

	
10.4.2  

	
The Purchaser further represents and warrants to the Business Sellers that the statements set out in Schedule 15 will be true and accurate at each Closing as if they had been repeated at each Closing, in each case by reference to the facts and circumstances subsisting at each Closing Date and on the basis that any reference, whether express or implied, in such statements to the date of the Original Agreement is substituted by a reference to the Relevant Closing Date.

 

	
10.4.3  

	
The parties acknowledge that, prior to the date of the Original Agreement, the Business Sellers provided to the Purchaser an extract of the Term Sheet for UK State Aid Commitments in respect of the RBSG Group (the "Term Sheet") and confirmed to the Purchaser that such extract accurately set out the eligibility requirements required to be met by the Purchaser under the Term Sheet in relation to the transactions contemplated by this Agreement. The Business Sellers acknowledge and agree that the Purchaser has agreed to provide the representations and warranties to the Business Sellers set out in paragraphs 1.2 and 3.3 of Schedule 15, to the extent such warranties refer to Clause 4.1.1, on the basis of the foregoing sentence.

 

  

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11  

	
Limitation of Liability

 

	
11.1  

	
Time Limitation for Claims

 

The Business Sellers shall not be liable under the Seller Warranties (other than Warranties 18.1, 18.2 and 18.3) or Clause 5 in respect of any claim unless a notice of the claim is given in writing by the Purchaser to the Business Sellers:

 

	
11.1.1  

	
within *** following the RBS England Closing; or

 

	
11.1.2  

	
in respect of any claims under the Seller Warranties set out in paragraph 5 of Schedule 14 within *** following the RBS England Closing; or

 

	
11.1.3  

	
in respect of any claims under the Tax Warranties, within *** following the RBS England Closing.

 

	
11.2  

	
Minimum Claims

 

	
11.2.1  

	
Subject to Clause 11.2.2, the Business Sellers shall not be liable in respect of a claim under the Seller Warranties (other than Warranties 18.1, 18.2 and 18.3) unless the liability agreed or determined (disregarding the provisions of this Clause 11.2) in respect of such claim (or a series of claims arising from substantially similar facts or circumstances or arising from substantially similar acts or omissions of the Business Sellers) exceeds ***.

 

	
11.2.2  

	
The Business Sellers shall not be liable in respect of a claim under the Seller Warranties set out in paragraph 5.8 of Schedule 14 unless the liability agreed or determined (disregarding the provisions of this Clause 11.2) in respect of any such claim (or a series of claims arising from substantially similar facts or circumstances or arising from substantially similar acts or omissions of the Business Sellers, including any systemic policy, process or procedural matters or issues) exceeds:

 

	 	
(i)  

	
***

 

	 	
(ii)  

	
***

 

	 	
(iii)  

	
***

 

	
11.2.3  

	
Where the Business Sellers' liability agreed or determined in respect of any such claim or series of claims exceeds the financial threshold set out in Clause 11.2.1 or, as the case may be, 11.2.2 subject as provided elsewhere in this Clause 11, the Business Sellers shall be liable for the full amount of the claim or series of claims as agreed or determined, and not just the excess.

 

	
11.3  

	
Aggregate Minimum Claims

 

	
11.3.1  

	
The Business Sellers shall not be liable under the Seller Warranties (other than Warranties 18.1, 18.2 and 18.3) or Clause 5 in respect of any claim unless the aggregate amount of all claims for which the Business Sellers would otherwise together be liable (disregarding the provisions of this Clause 11.3) exceeds ***.

 

	
11.3.2  

	
Where the Business Sellers’ liability agreed or determined in respect of all claims exceeds ***, subject as provided elsewhere in this Clause 11, the Business Sellers shall be liable for the aggregate amount of all claims as agreed or determined, and not just the excess.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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11.4  

	
Maximum Liability

 

The aggregate liability of the Business Sellers in respect of all claims under the Seller Warranties (other than Warranties 18.1, 18.2 and 18.3) and breaches of Clause 5 shall not exceed ***.

 

	
11.5  

	
Contingent Liabilities

 

Neither the Purchaser nor the Business Sellers shall be obliged to make payment under this Agreement in respect of any liability which is contingent unless and until such contingent liability becomes an actual liability. Nothing in this Clause 11.5 shall preclude the giving of notice of a claim which is contingent within the time limit set out in Clause 11.1.

 

	
11.6  

	
Provisions

 

No liability shall attach to the Business Sellers in respect of a claim under the Seller Warranties if and to the extent that a specified and quantified allowance, provision or reserve is made in the Closing Statements.

 

	
11.7  

	
Voluntary Matters Arising

 

	
11.7.1  

	
Agreed matters

 

No liability shall attach to the Business Sellers or the Purchaser in respect of a breach of this Agreement in respect of any matter or thing done or omitted to be done pursuant to and in compliance with any Transaction Documents or otherwise at the written request of or with the written approval of the Purchaser (in the case of the Business Sellers) or the Business Sellers (in the case of the Purchaser); or

 

	
11.7.2  

	
Acts of the Purchaser

 

No liability shall attach to the Business Sellers in respect of any claim under the Seller Warranties to the extent the same is attributable to any voluntary act, omission or transaction of the Purchaser or any member of the Purchaser’s Group or their respective directors, officers, employees, agents or successors in title, which is outside the ordinary and usual course of the relevant Business and which occurs after the relevant Friends and Family Transfer Date, in the case of a claim relating to the Friends and Family Customers, NatWest Closing, in the case of a claim relating to the NatWest Business, or the RBS Wales Closing, in the case of a claim relating to the RBS Wales Businesses or the RBS England Closing, in the case of a claim relating to the RBS England Businesses.

 

	
11.8  

	
Matters arising after the date of the Original Agreement

 

No liability shall attach to the Business Sellers or the Purchaser in respect of any claim under this Agreement to the extent that the same is attributable to:

 

	
11.8.1  

	
Changes in legislation

 

	 	
(i)  

	
the passing of, or the coming into effect of any change in, after the Friends and Family Transfer Date, in the case of a claim relating to the Friends

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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and Family Customers, or the NatWest Closing, in the case of a claim relating to the NatWest Businesses, or the RBS Wales Closing, in the case of a claim relating to the RBS Wales Businesses or the RBS England Closing, in the case of a claim relating to the RBS England Businesses, any law, rule, regulation or administrative practice of any government, governmental department, agency or regulatory body but excluding (without prejudice to the generality of the foregoing) any increase in the rates of Taxation or any imposition of Taxation or any withdrawal of Relief from Taxation (together “Taxation Change”) not actually (or prospectively) in effect at the date of the Original Agreement to the extent that such Taxation Change affects any liabilities in respect of Pre-Closing Taxation; or

 

	 	
(ii)  

	
any change after the Friends and Family Transfer Date, in the case of a claim relating to the Friends and Family Customers, or the NatWest Closing, in the case of a claim relating to the NatWest Businesses, or the RBS Wales Closing, in the case of a claim relating to the RBS Wales Businesses or the RBS England Closing, in the case of a claim relating to the RBS England Businesses, of any official interpretation or official application of any legislation; or

 

	
11.8.2  

	
Accounting and Taxation Policies of the Purchaser and the Business Sellers

 

	 	
(i)  

	
in the case of a claim made by the Purchaser, any change in accounting or Taxation policy, bases or practice of the Purchaser introduced or having effect after the Friends and Family Transfer Date, in the case of a claim relating to the Friends and Family Customers, or the NatWest Closing, in the case of a claim relating to the NatWest Businesses, or the RBS Wales Closing, in the case of a claim relating to the RBS Wales Businesses or the RBS England Closing, in the case of a claim relating to the RBS England Businesses;

 

	 	
(ii)  

	
in the case of a claim made by a Business Seller, any change in accounting or Taxation policy, bases or practice of a Business Seller introduced or having effect after the Friends and Family Transfer Date, in the case of a claim relating to the Friends and Family Customers, or the NatWest Closing, in the case of a claim relating to the NatWest Businesses, or the RBS Wales Closing, in the case of a claim relating to the RBS Wales Businesses or the RBS England Closing, in the case of a claim relating to the RBS England Businesses.

 

	
11.9  

	
Insurance

 

	
11.9.1  

	
Without prejudice to the Purchaser’s rights under Clause 14, the Business Sellers shall not be liable under this Agreement in respect of any claim to the extent that the Losses in respect of which such claim is made are covered by a policy of insurance and the Purchaser actually recovers under that policy. The Purchaser shall use reasonable endeavours to seek to recover amounts under policies of insurance held by it.

 

	
11.9.2  

	
The Purchaser shall not be liable under this Agreement in respect of any claim to the extent that the Losses in respect of which such claim is made are covered by a policy of insurance and a Business Seller actually recovers under that policy. Each Business Seller

 

  

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shall use reasonable endeavours to seek to recover amounts under policies of insurance held by it.

 

	
11.10  

	
Net Financial Benefit

 

The Business Sellers shall not be liable under the Seller Warranties in respect of any Losses suffered by the Purchaser or any member of the Purchaser’s Group to the extent of any corresponding savings by or quantifiable net financial benefit to the Purchaser or any member of the Purchaser’s Group arising from such Losses or the facts giving rise to such Losses (for example, where the amount (if any) by which any Taxation for which the Purchaser or any other member of the Purchaser’s Group would otherwise have been accountable or liable to be assessed is reduced or extinguished as a consequence of any saving, benefit or Relief in respect of Taxation (“Tax Relief”) arising as a result of the matter giving rise to such liability, provided that any such Tax Relief shall be deemed to be utilised in priority to any other saving, benefit or Relief in respect of Taxation available to the Purchaser or any other member of the Purchaser’s Group, save to the extent that the legal rules and restrictions governing the utilisation of Tax Reliefs would require other Tax Reliefs to be utilised in priority).

 

	
11.11  

	
Mitigation of Losses

 

The Purchaser and the Business Sellers shall procure that all reasonable steps are taken and all reasonable assistance is given to avoid or to mitigate any Losses which might give rise to a liability in respect of any claim by any of them under this Agreement.

 

	
11.12  

	
Business Sellers’ and Purchaser’s Right to Recover

 

	
11.12.1  

	
Recovery for Actual Liabilities

 

Neither the Purchaser nor any Business Seller shall be liable to pay any amount in discharge of a claim under this Agreement unless and until the liability in respect of which the claim is made has become due and payable.

 

	
11.12.2  

	
Prior to Recovery from the Business Sellers

 

If, before any Business Seller pays an amount in discharge of any liability in respect of a claim under this Agreement, the Purchaser or any member of the Purchaser’s Group recovers or is entitled to recover (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser or any member of the Purchaser’s Group (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, then, save where in the reasonable opinion of the Purchaser (i) to do so would result in a material adverse effect on the Purchaser’s Group’s business in the United Kingdom taken as a whole, or (ii) there is no reasonable prospect of making a successful recovery from the relevant third party, the Purchaser shall procure that reasonable steps are taken to enforce recovery against the third party and any actual recovery (less any reasonable costs incurred in obtaining such recovery) shall reduce or satisfy, as the case may be, such claim to the extent of such recovery.

 

  

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11.12.3  

	
Following Recovery from the Business Sellers

 

If any Business Seller has paid an amount in discharge of any liability in respect of a claim under this Agreement and the Purchaser or any member of the Purchaser’s Group is entitled to recover (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates the Purchaser or any member of the Purchaser’s Group (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, then save where in the reasonable opinion of the Purchaser (i) to do so would result in a material adverse effect on the Purchaser’s Group’s business in the United Kingdom taken as a whole or (ii) there is no reasonable prospect of making a successful recovery from the relevant third party, the Purchaser shall procure that reasonable steps are taken to enforce such recovery and shall, or shall procure that the relevant member of the Purchaser’s Group shall, pay to the Business Seller as soon as practicable after receipt an amount equal to (i) any sum recovered from the third party less any costs and expenses incurred in obtaining such recovery or if less (ii) the amount previously paid by the Purchaser to the Business Seller to the Purchaser.

 

	
11.12.4  

	
Prior to Recovery from the Purchaser

 

If, before the Purchaser pays an amount in discharge of any liability in respect of a claim under this Agreement, any Business Seller recovers or is entitled to recover (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates any Business Seller (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, then, save where in the reasonable opinion of any Business Seller (i) to do so would result in a material adverse effect on the RBSG Group’s business in the United Kingdom taken as a whole, or (ii) there is no reasonable prospect of making a successful recovery from the relevant third party, the Business Sellers shall procure that reasonable steps are taken to enforce recovery against the third party and any actual recovery (less any reasonable costs incurred in obtaining such recovery) shall reduce or satisfy, as the case may be, such claim to the extent of such recovery.

 

	
11.12.5  

	
Following Recovery from the Purchaser

 

If the Purchaser has paid an amount in discharge of any liability in respect of a claim under this Agreement and any Business Seller is entitled to recover (whether by payment, discount, credit, relief, insurance or otherwise) from a third party a sum which indemnifies or compensates any Business Seller (in whole or in part) in respect of the loss or liability which is the subject matter of the claim, then save where in the reasonable opinion of any Business Seller (i) to do so would result in a material adverse effect on the RBSG Group’s business in the United Kingdom taken as a whole or (ii) there is no reasonable prospect of making a successful recovery from the relevant third party, the Business Sellers shall procure that reasonable steps are taken to enforce such recovery and shall pay to the Purchaser as soon as practicable after receipt an amount equal to (i) any sum recovered from the third party less any costs and expenses incurred in obtaining such recovery or if less (ii) the amount previously paid by the Purchaser to the Business Seller.

 

  

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11.13  

	
Double Claims

 

The Purchaser shall not be entitled to recover from the Business Sellers under any Transaction Document more than once in respect of the same Losses suffered and the Business Sellers shall not be entitled to recover from the Purchaser under any Transaction Document more than once in respect of the same Losses suffered.

 

	
12  

	
Claims

 

	
12.1  

	
Assumed Liabilities

 

	
12.1.1  

	
If any Business Seller receives notice of any claim by a third party in respect of an Assumed Liability, it shall give notice of such claim to the Purchaser as soon as reasonably practicable.

 

	
12.1.2  

	
Subject to Clause 12.1.4, to the extent that a Business Seller (or any member of the RBSG Group) is involved directly in the relevant claim the Business Sellers shall, or shall procure that the relevant member of the RBSG Group shall, conduct such claim in a manner which is consistent, in all material respects, with the manner in which the Business Sellers (or, as the case may be, the relevant member of the RBSG Group) would, at the relevant time, conduct any claim (a “RBSG Third Party Claim”) made by any other third party (including for the avoidance of doubt a customer of the RBSG Group) in relation to the RBSG Group’s business in the United Kingdom and which is based on similar facts or circumstances or is of a similar nature or type to the claim made by the third party.

 

	
12.1.3  

	
Subject to Clause 12.1.4, the Business Sellers shall, to the extent permitted by any Law and Regulations, take such action as the Purchaser may reasonably request to avoid, dispute, resist, appeal, compromise, settle, defend or mitigate any claim by a third party which constitutes or may constitute an Assumed Liability (an “Assumed Liability Claim”) subject to the Business Sellers being indemnified on an after-Tax basis by the Purchaser against all Losses which may thereby be incurred and, provided that the Business Sellers shall not be required to take any action which is not consistent in any material respect with the manner in which the Business Sellers (or, as the case may be, the relevant member of the RBSG Group) would, at the relevant time, conduct any RBSG Third Party Claim. Without limitation to the foregoing (and subject to applicable Law and Regulations):

 

	 	
(i)  

	
each Business Seller shall provide the Purchaser and its/their financial, accounting, tax or legal advisers reasonable access to enable them to investigate the facts, matter or circumstance alleged to (or which may) give rise to such Assumed Liability Claim and whether and to what extent any amount is or may be payable in respect of such claim;

 

	 	
(ii)  

	
the Business Sellers shall, and shall procure that any other relevant members of the RBSG Group shall, disclose to the Purchaser all material of which it/they are aware which relates to such Assumed Liability Claim and shall, subject to their being paid all reasonable out of pocket costs and expenses, give all such information and assistance, including:

 

	 	
(a)  

	
access to premises and personnel;

 

	 	
(b)  

	
making such personnel available for factual interviews, preparation for testimony, giving evidence, producing affidavits and other similar activities; and

 

  

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(c)  

	
the right to examine and copy or photograph any assets, accounts, correspondence, documents and records,

 

as the Purchaser or its financial, accounting or legal advisers may reasonably request; and

 

	 	
(iii)  

	
each Business Seller shall, and shall procure any other members of the RBSG Group shall, at all times take all reasonable steps to maintain any legal privilege that exists in relation to any information referred to in this Clause 12.1 (including books of account, records and correspondence) relevant to the Assumed Liability Claim.

 

	
12.1.4  

	
In relation to any claim by a third party relating to an Assumed Liability the Purchaser shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Business Sellers to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise, settle or contest the relevant claim (including making counterclaims or other claims against third parties and including instructing such professional and legal or tax advisers as the Purchaser may nominate to act on behalf of the relevant Business Seller or member of the RBSG Group) in the name of and on behalf of the relevant Business Seller or member of the RBSG Group concerned and to have the conduct of any related proceedings, negotiations or appeals except that the Purchaser shall, conduct such claim in a manner which is consistent, in all material respects, with the manner in which the Purchaser (or, as the case may be, the relevant member of the Purchaser’s Group) would, at the relevant time, conduct any claim (a “Purchaser Third Party Claim”) made by any other third party (including for the avoidance of doubt a customer of the Purchaser’s Group) in relation to the Purchaser Group’s business in the United Kingdom other than the Businesses and which is based on similar facts or circumstances or is of a similar nature or type to the claim made by the third party.

 

Nothing in this Clause 12.1 shall entitle the Purchaser or its advisers to have access to any information which relates to legal advice in respect of any claim for breach of the Transaction Documents.

 

	
12.2  

	
Notification of Claims

 

	
12.2.1  

	
Notices of any claim by the Purchaser under the Seller Warranties or Clause 5 shall be given by the Purchaser to the Business Sellers within the time limits specified in Clause 11.1.

 

	
12.2.2  

	
Any notice given under Clause 12.1.1, 12.2.1 or 12.3.1 shall, to the extent then within the knowledge of the Purchaser or, as the case may be, the relevant Business Seller, set out in reasonable detail information concerning the legal and factual basis of the claim or potential claim and set out the Purchaser’s estimate of the amount of Losses which are, or are to be, the subject of the claim (including any Losses which are contingent on the occurrence of any future event).

 

	
12.3  

	
Excluded Liabilities

 

	
12.3.1  

	
If the Purchaser receives notice of any claim by a third party in respect of any Excluded Liability (an “Excluded liability Claim”) it shall give notice of such claim to the Business Sellers as soon as reasonably practicable.

 

  

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12.3.2  

	
Subject to Clause 12.3.4, to the extent that the Purchaser (or any member of the Purchaser’s Group) is involved directly in the relevant claim, the Purchaser shall, or shall procure that the relevant member of the Purchaser’s Group shall, conduct such claim in a manner which is consistent, in all material respects, with the manner in which the Purchaser (or, as the case may be, the relevant member of the Purchaser’s Group) would, at the relevant time, conduct any Purchaser Third Party Claims.

 

	
12.3.3  

	
Subject to Clause 12.3.4, the Purchaser shall, to the extent permitted by any Law and Regulations, take such action as the Business Sellers may reasonably request to avoid, dispute, resist, appeal, compromise, settle, defend or mitigate any Excluded Liability Claim subject to the Purchaser being indemnified on an after-Tax basis by the Business Sellers against all Losses which may thereby be incurred and provided that the Purchaser shall not be required to take any action which is not consistent in any material respect with the manner in which the Purchaser (or, as the case may be, the relevant member of the Purchaser’s Group) would, at the relevant time, conduct any Purchaser Third Party Claim. Without limitation to the foregoing (and subject to applicable Law and Regulations):

 

	 	
(i)  

	
the Purchaser shall, and shall procure that any other relevant members of the Purchaser’s Group shall, allow the Business Sellers and their financial, accounting, tax or legal advisers reasonable access to allow them to investigate the fact, matter or circumstance alleged to (or which may) give rise to such Excluded Liability Claim and whether and to what extent any amount is or may be payable in respect of such claim;

 

	 	
(ii)  

	
the Purchaser shall, and shall procure that any other relevant members of the Purchaser’s Group shall, disclose to the Business Sellers all material of which it/they are aware which relates to such Excluded Liability Claim and shall, subject to their being paid all reasonable out of pocket costs and expenses, give all such information and assistance, including:

 

	 	
(a)  

	
access to premises and personnel (including any Relevant Employee with knowledge relating to the relevant facts, matters or circumstances or who can otherwise reasonably assist the Business Sellers);

 

	 	
(b)  

	
making such personnel available for factual interviews, preparation for testimony, giving evidence, producing affidavits and other similar activities; and

 

	 	
(c)  

	
the right to examine and copy or photograph any assets, accounts, correspondence, documents and records,

 

as the Business Sellers or their financial, accounting or legal advisers may reasonably request; and

 

	 	
(iii)  

	
the Purchaser shall, and shall procure that any other members of the Purchaser’s Group shall, at all times take all reasonable steps to maintain any legal privilege that exists in relation to any information referred to in this Clause 12.3 (including books of account, records and correspondence) relevant to the Excluded Liability Claim.

 

Nothing in this Clause 12.3 shall entitle any Business Seller or its advisers to have access to any information which relates to legal advice in respect of any claim for breach of the Transaction Documents.

 

  

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12.3.4  

	
In relation to any claim by a third party relating to an Excluded Liability the Business Sellers shall be entitled at its own expense and in its absolute discretion, by notice in writing to the Purchaser to take such action as it shall deem necessary to avoid, dispute, deny, defend, resist, appeal, compromise, settle or contest the relevant claim (including making counterclaims or other claims against third parties and including instructing such professional and legal or tax advisers as the Business Sellers may nominate to act on behalf of the relevant Purchaser or member of the Purchaser’s Group) in the name of and on behalf of the Purchaser or member of the Purchaser’s Group concerned and to have the conduct of any related proceedings, negotiations or appeals except that the Business Sellers shall, conduct such claim in a manner which is consistent, in all material respects, with the manner in which the Business Sellers (or, as the case may be, the relevant member of the RBSG Group) would, at the relevant time, conduct any RBSG Third Party Claim.

 

	
12.4  

	
Conduct of Third Party Claims

 

	
12.4.1  

	
If the fact, matter or circumstance that may give rise to a claim under the Seller Warranties or Clause 5 is a result of or in connection with a claim by a third party (including any regulator, government or governmental authority or Tax Authority) (a “Third Party Claim”) then to the extent that the Purchaser or any member of the Purchaser’s Group is involved directly in such Third Party Claim:

 

	
12.4.2  

	
the Purchaser shall consult with the relevant Business Seller as regards the conduct of any proceedings arising out of such third party claim, taking into consideration any reasonable request of the Seller in connection with the claim;

 

	
12.4.3  

	
the Purchaser shall, or shall procure that the relevant member of the Purchaser’s Group shall, conduct such claim in a manner which is consistent, in all material respects, with the manner in which the Purchaser (or, as the case may be, the relevant member of the Purchaser’s Group) would, at the relevant time, conduct any Purchaser Third Party Claim; and

 

	
12.4.4  

	
the Purchaser shall, to the extent permitted by any Law and Regulations, take such action as the Business Sellers may reasonably request to avoid, dispute, resist, appeal, compromise, settle, defend or mitigate any Third Party Claim subject to the Purchaser being indemnified on an after-Tax basis by the Business Sellers against all Losses which may thereby be incurred and provided that the Purchaser shall not be required to take any action which is not consistent in any material respect with the manner in which the Purchaser (or, as the case may be, the relevant member of the Purchaser’s Group) would, at the relevant time, conduct any Purchaser Third Party Claim. Without limitation to the foregoing (and subject to applicable Law and Regulations):

 

	 	
(i)  

	
the Purchaser shall, and shall procure that any other relevant members of the Purchaser’s Group shall, allow the Business Sellers and their financial, accounting, tax or legal advisers reasonable access to allow them to investigate the fact, matter or circumstance alleged to (or which may) give rise to such Third Party Claim and whether and to what extent any amount is or may be payable in respect of such claim;

 

	 	
(ii)  

	
the Purchaser shall, and shall procure that any other relevant members of the Purchaser’s Group shall, disclose to the Business Sellers all material of which it/they are aware which relates to such Third Party Claim and

 

  

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shall, subject to their being paid all reasonable out of pocket costs and expenses, give all such information and assistance, including:

 

	 	
(a)  

	
access to premises and personnel (including any Relevant Employee with knowledge relating to the relevant facts, matters or circumstances or who can otherwise reasonably assist the Business Sellers);

 

	 	
(b)  

	
making such personnel available for factual interviews, preparation for testimony, giving evidence, producing affidavits and other similar activities; and

 

	 	
(c)  

	
the right to examine and copy or photograph any assets, accounts, correspondence, documents and records,

 

as the Business Sellers or their financial, accounting or legal advisers may reasonably request; and

 

	 	
(iii)  

	
the Purchaser shall, and shall procure that any other members of the Purchaser’s Group shall, at all times take all reasonable steps to maintain any legal privilege that exists in relation to any information referred to in this Clause 12.4.4 (including books of account, records and correspondence) relevant to the Third Party Claim.

 

Nothing in this Clause 12.4.4 shall entitle any Business Seller or its advisers to have access to any information which relates to legal advice in respect of any claim for breach of the Transaction Documents.

 

	
12.5  

	
Commencement of Proceedings by the Purchaser

 

Any claim under the Seller Warranties or Clause 5 notified by or on behalf of the Purchaser shall (if it has not been previously satisfied, settled or withdrawn) be deemed to be irrevocably withdrawn nine months after notice is given under Clause 12.2, unless at such time legal proceedings in respect of the relevant claim have been commenced by being both issued and served, provided that:

 

	
12.5.1  

	
where Clause 11.5 applies, the nine-month period shall commence on the date that the relevant contingent liability becomes an actual liability; or

 

	
12.5.2  

	
where Clause 11.12 applies and the relevant member of the Purchaser’s Group determines to make a claim against a third party, including any insurer,  before proceeding with the claim under the Seller Warranties (it being acknowledged that the Purchaser is under no obligation to do so) the nine-month period shall commence on the date that the corresponding claim is finally settled or finally determined; or

 

	
12.5.3  

	
where Clause 12.4 applies, the nine-month period shall commence on the date the relevant Third Party Claim has been finally settled or finally determined.

 

	
12.6  

	
Confidentiality

 

	
12.6.1  

	
Any documents or information made available to a party in accordance with this Clause 12 shall, subject to Clause 15.2, be kept confidential by the recipient and shall be used by the recipient only for the purposes referred to or contemplated in this Clause 12.

 

  

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12.6.2  

	
Nothing in this Clause 12 shall require the provision of any documents or information where such provision would contravene any Law and Regulations, breach any duty of confidentiality (subject to the relevant party using reasonable endeavours to seek any relevant third party consent in respect of such duty of confidentiality) or prejudice any right of privilege.

 

	
12.7  

	
Legal or Regulatory Constraints

 

Where any Law and Regulations require the consent of any third party (including any Regulatory Authority) to be obtained before any aspect of this Clause 12 can be operated in accordance with applicable Law and Regulations, the relevant party which requires to obtain any such consent before it can comply with its obligations under this Clause 12 in accordance with Law and Regulations shall use all reasonable endeavours to obtain such consent on a timely basis.

 

	
13  

	
Restrictions on business activities

 

	
13.1  

	
Restrictions on the RBSG Group

 

Subject to Clause 13.3, the Business Sellers shall procure that no member of the RBSG Group will, in any Relevant Capacity, from the date of the Original Agreement up to the RBS England Closing (save for any action taken in order to carry on the Businesses until the RBS England Closing) or during the Restricted Period:

 

	
13.1.1  

	
***

 

	
13.1.2  

	
use any Rainbow Data for the purpose of the marketing of any products sold or provided by any member of the RBSG Group that is targeted specifically at Customers, being marketing that is directed (i) solely at Retail Customers or (ii) at a group of persons the majority of whom are Customers and the sole reason for such marketing activity is to specifically target those Customers with the intention of re-establishing a primary banking relationship between such Customer and the Business Sellers.  For the avoidance of doubt, this Clause 13.1.2 shall not prevent any member of the RBSG Group from undertaking any activity that is permitted under Clause 13.1.1 above; or

 

	
13.1.3  

	
solicit or entice away from employment any Relevant Employee, whether or not such employee would thereby commit a breach of his contract of service, provided that this Clause 13.1.3 shall not, subject to any applicable restrictions set out in the relevant termination arrangements, apply after the termination of employment of any Relevant Employee by the Purchaser, or to any Relevant Employee who independently approaches the Business Sellers or a member of the RBSG Group with a view to prospective employment without any prior inducement from any of the Business Sellers or a member of the RBSG Group. The placing in good faith and in a manner not intended to target a Relevant Employee of an advertisement of a post available to a member of the public generally and the recruitment of a person through an employment agency or head hunter shall not constitute a breach of this Clause 13.1.3, provided that no member of the RBSG Group encourages, advises or instructs such agency or head hunter to approach any Relevant Employee; or

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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13.1.4  

	
establish or operate any new or existing banking branches or sub-branches (other than corporate offices), in each case:

 

	 	
(i)  

	
in Scotland, under, by reference to, or otherwise in connection with, the NatWest Trade Marks, or any other trade mark, service mark, trade name or brand which is substantially similar thereto or confusing therewith; or

 

	 	
(ii)  

	
in England and Wales, under, by reference to, or otherwise in connection with, the RBS Trade Marks, or any other trade mark, service mark, trade name or brand which is substantially similar thereto or confusing therewith; or

 

	 	
(iii)  

	
anywhere in the world, under, by reference to, or otherwise in connection with, the Williams & Glyn’s Trade Marks or any other trade mark, service mark, trade name or brand which is substantially similar thereto or confusing therewith,

 

other than in relation to (a) the business and operation of, including products and services provided by, the Holts branch in Farnborough (with sort code 161926) and (b) products and services provided by or in connection with the "Drummonds" or "Child & Co" name or brand, in each case in a manner which is consistent with the operation of such brand and/or branch, or the provision of such products and services, prior to the date of this Agreement and subject, in the case of the Holts branch in Farnborough, to the provisions of clause 13.1.5.

 

	
13.1.5  

	
The Business Sellers agree that prior to the RBS England Closing Date the external and internal branch fascia and signage at the Farnborough branch (sort code 161926) shall be rebranded so that it (i) does not look confusingly similar to the branches of the Businesses in England and Wales as they are prior to the Relevant Closing and/or to RBS-branded branches in Scotland after the RBS England Closing; and (ii) does not exclusively include or refer to RBS Trademarks (as defined in Part 4 of Schedule 4)).

 

	
13.2  

	
***

 

	
13.3  

	
Reasonableness of Restrictions

 

	
13.3.1  

	
The Business Sellers agree that the restrictions contained in Clause 13.1 are no greater than are reasonable and necessary for the protection of the interests of the Purchaser, but if any such restriction shall be held to be void but would be valid if deleted in part or reduced in application, such restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.

 

	
13.3.2  

	
The Purchaser agrees that the restrictions contained in Clause 13.2 are no greater than are reasonable and necessary for the protection of the interests of the Business Sellers, but if any such restriction shall be held to be void but would be valid if deleted in part or reduced in application, such restriction shall apply with such deletion or modification as may be necessary to make it valid and enforceable.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

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14  

	
Insurance

 

	
  

	
Where any Insured Event occurs prior to the Friends and Family Transfer Date (in respect of the Friends and Family Customers), the NatWest Closing (in respect of the NatWest Businesses), the RBS Wales Closing (in respect of the RBS Wales Businesses) and the RBS England Closing (in respect of the RBS England Businesses) in respect of which either (a) an Insurance Claim has been made prior to the Relevant Closing, but is not settled or otherwise resolved prior to the Relevant Closing or (b) an Insurance Claim is capable of being made and the Purchaser requests in writing that the relevant Business Seller make an Insurance Claim within twelve months following the Relevant Closing, the relevant Business Seller shall:

 

	 	
(i)  

	
continue to manage and pursue (in the case of (a) above) and make, manage and pursue (in the case of (b) above) such Insurance Claim with all reasonable care and diligence and in accordance with the past practice of the Businesses and shall keep its insurers properly informed in respect of, and shall provide its insurers with all information which they may request in relation to, such Insurance Claim;

 

	 	
(ii)  

	
keep the Purchaser regularly informed as to the progress of such Insurance Claim (both before and after the Relevant Closing) and provide the Purchaser with all information, and take such action, as the Purchaser may reasonably request regarding such Insurance Claim; and

 

	 	
(iii)  

	
pay to the Purchaser an amount equal to the value of any settlement paid to the relevant Business Seller in respect of such Insurance Claim by the relevant Business Seller’s insurers less the amount of any reasonable costs and expenses incurred by the relevant Business Seller in making, managing or pursuing such Insurance Claim, with such payment to be treated, for the purposes of this Agreement, as a reduction to the Purchase Price in respect of the particular category of Business Asset in respect of which the relevant Insurance Claim was made.

 

	
15  

	
Confidentiality and Announcements

 

	
15.1  

	
Announcements

 

No announcement or circular in connection with the existence or the subject matter of any Transaction Document shall be made or issued by or on behalf of any member of the RBSG Group or the Purchaser’s Group without the prior written approval of the Business Sellers and the Purchaser (such approval not to be unreasonably withheld or delayed). This shall not affect any announcement or circular required by applicable law or any Regulatory Authority or the rules of any recognised stock exchange on which any equity or debt securities of either RBSG or any member of the Purchaser’s Group are, or are to be, listed (regardless of whether or not such rules have the force of law) but the party with an obligation to make an announcement or issue a circular shall consult with the other parties insofar as is reasonably practicable before complying with such an obligation and shall only announce such information as required by the relevant law, Regulatory Authority or rules.

 

  

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15.2  

	
Confidentiality

 

	
15.2.1  

	
The parties hereby agree that the provisions of this Clause 15 shall supersede and replace the Confidentiality Agreement in its entirety and that, with effect from the execution of the Original Agreement, the Confidentiality Agreement shall terminate and cease to be of any further effect.

 

	
15.2.2  

	
Subject to Clause 15.1 and Clause 15.2.3:

 

	 	
(i)  

	
each of the parties shall treat as strictly confidential and not disclose or use any information received or obtained as a result of entering into or performing any Transaction Document which relates to:

 

	 	
(a)  

	
the provisions of any Transaction Document; or

 

	 	
(b)  

	
the negotiations relating to any Transaction Document;

 

	 	
(ii)  

	
the Business Sellers shall, and shall procure that all members of the RBSG Group shall treat as strictly confidential and not disclose or use for any purpose any information proprietary to the NatWest Businesses following the NatWest Closing and the RBS Businesses following the RBS Wales Closing and the RBS England Closing respectively and any other information relating to the business, financial or other affairs (including future plans and targets) of any member of the Purchaser’s Group of which any Business Seller has become aware through the negotiations leading to, or the implementation of, this Agreement; and

 

	 	
(iii)  

	
the Purchaser shall treat as strictly confidential and not disclose or use any information relating to the business, financial or other affairs (including future plans and targets) of any member of the RBSG Group including the NatWest Businesses prior to the NatWest Closing and the RBS Businesses prior to the RBS Wales Closing and the RBS England Closing respectively  to the extent that the Purchaser has become aware of such information through the negotiations leading to, or the implementation of, this Agreement.

 

	
15.2.3  

	
Clause 15.2.2 shall not prohibit disclosure or use of any information if and to the extent:

 

	 	
(i)  

	
the disclosure or use is required by any Regulatory Authority, HM Treasury or the Monitoring Trustee in the context of, and consistent with, the approval granted by the European Commission to the Commissioners of HM Treasury on 14 December 2009 in respect of certain state aid granted to the RBSG Group by HM Treasury;

 

	 	
(ii)  

	
the disclosure is required by, and made to, HM Treasury, UKFI or the FSA;

 

	 	
(iii)  

	
the disclosure or use is required by law, any Regulatory Authority or the rules of any recognised stock exchange on which any equity or debt securities of RBSG or any member of the Purchaser’s Group are, or are to be, listed (regardless of whether or not such rules have the force of law);

 

	 	
(iv)  

	
the disclosure or use is required by any accounting standards in accordance with which the published accounts of any party are to be drawn up or the disclosure is made to a Tax Authority in connection with the Tax affairs of the disclosing party or the disclosure is made to any relevant Regulatory Authority;

 

  

95

  

 

	 	
(v)  

	
the disclosure or use is required to vest the full benefit of any Transaction Document in any party;

 

	 	
(vi)  

	
the disclosure or use is required for the purpose of any proceedings arising out of any Transaction Document;

 

	 	
(vii)  

	
the disclosure is made to professional advisers or actual or potential financiers of any party on a need to know basis and on terms that the relevant party procures that such professional advisers or actual or potential financiers comply with the provisions of Clause 15.2.2 in respect of such information as if they were a party to this Agreement;

 

	 	
(viii)  

	
the information is or becomes publicly available (other than by breach of the Confidentiality Agreement or of this Agreement by the disclosing party); or

 

	 	
(ix)  

	
the other party has given prior written approval to the disclosure or use,

 

provided that prior to disclosure or use of any information pursuant to Clause 15.2.3(iii), the party concerned shall to the extent reasonably practicable and unless prohibited by law from doing so or unless required not to do so by any relevant court or Regulatory Authority promptly notify the other parties of such requirement with a view to agreeing the timing and content of such disclosure or use.

 

	
16  

	
Other Provisions

 

	
16.1  

	
Further Assurances

 

Each of the parties shall, at its own cost, from time to time execute, or to the extent within its power procure the execution of, such documents in a form reasonably satisfactory to the other party and perform, or to the extent within its power procure the performance of, such acts and things as any other party may reasonably require to give full effect to any Transaction Document and to secure to the other party the full benefit of the rights, powers and remedies conferred upon it in any Transaction Document.

 

	
16.2  

	
Whole Agreement

 

	
16.2.1  

	
The Transaction Documents contain the whole and only agreement between the parties relating to the subject matter of the Transaction Documents at the date hereof to the exclusion of any terms implied by law which may be excluded by contract and the Transaction Documents supersede any previous written or oral agreement between the parties in relation to the matters dealt with in the Transaction Documents.

 

	
16.2.2  

	
Each party acknowledges that, in entering into the Transaction Documents to which it is a party, it is not relying upon any pre-contractual statement which is not expressly set out in the relevant Transaction Documents and, in particular, that, except to the extent expressly set out in Clause 10 and Schedule 14, no representation or warranty is given in relation to the Information Memorandum, the Disclosure Letter or the contents of the Data Room.

 

  

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16.2.3  

	
So far as is permitted by law and except in the case of fraud, each of the parties agrees and acknowledges that it shall have no right of action against any other party to any of the Transaction Documents arising out of or in connection with any pre-contractual statement except to the extent that it is expressly repeated in the relevant Transaction Document. No party shall have any right to terminate or rescind any Transaction Document except as expressly set out therein.

 

	
16.2.4  

	
For the purposes of this Clause 16.2, “pre-contractual statement” means any draft, agreement, undertaking, representation (whether negligent or innocent), warranty, promise, assurance or arrangement of any nature whatsoever, whether or not in writing, relating to the subject matter of any of the Transaction Documents made or given by any person at any time prior to the relevant Transaction Document becoming legally binding.

 

	
16.3  

	
Reasonableness and Specific Performance

 

	
16.3.1  

	
Each of the parties confirms that it has received independent legal advice relating to all the matters provided for in the Transaction Documents, including the terms of Clause 13 and Clause 16.2.

 

	
16.3.2  

	
The parties agree that if the provisions of Clause 13 and Clause 15.2 were not performed in accordance with their specific terms or were otherwise breached, irreparable damage might occur, no adequate remedy at law would exist and damages would be difficult to determine, and that the parties shall be entitled to seek the remedies of specific performance of the terms of this Agreement or injunctive relief, in addition to any other remedy at law or equity.

 

	
16.4  

	
No Assignment

 

Except as otherwise expressly provided in this Agreement:

 

	
16.4.1  

	
no party may without the prior written consent of the other parties, assign, grant any security interest over, hold on trust or otherwise transfer the benefit of, or its rights or benefits under, the whole or any part of this Agreement; and

 

	
16.4.2  

	
a party may, without the consent of the other parties, assign to a subsidiary, a subsidiary undertaking or another member of that party’s Group the benefit of the whole or any part of this Agreement, provided that such assignment shall be expressed to have effect only for so long as the assignee remains a subsidiary, a subsidiary undertaking or a member of the Group of the party concerned.

 

	
16.5  

	
Third Party Rights

 

	
16.5.1  

	
Each of Clauses 9 and 10.1.3 (the “Third Party Rights Clauses”) confers a benefit on persons referred to in such clauses who are not a party to this Agreement and, subject to the remaining provisions of this Clause 16.5, is intended to be enforceable by each such person by virtue of the Contracts (Rights of Third Parties) Act 1999.

 

	
16.5.2  

	
The parties to this Agreement do not intend that any term of this Agreement, apart from the Third Party Rights Clauses, should be enforceable, by virtue of the Contracts (Rights of Third Parties) Act 1999, by any person who is not a party to this Agreement.

 

	
16.5.3  

	
Notwithstanding Clause 16.5.1:

 

  

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(i)  

	
this Agreement may be varied in any way and at any time by the parties to this Agreement without the consent of any person who is not a party to this Agreement; and

 

	 	
(ii)  

	
no person who is not a party to this Agreement may enforce, or take any step to enforce, any of the Third Party Rights Clauses without the prior written consent of the Purchaser, which may, if given, be given on and subject to such terms as the Purchaser may determine.

 

	
16.6  

	
Variation

 

No variation of this Agreement shall be effective unless in writing and signed by or on behalf of each of the parties (except that RBS may sign a variation on behalf of the Business Sellers).

 

	
16.7  

	
Method of Payment

 

Wherever in this Agreement provision is made for a payment to be made or procured, any such payments shall be effected by crediting for same day value the account or accounts in accordance with Law and Regulations notified by the relevant party to the relevant other party or parties reasonably in advance and in sufficient detail to enable payment by telegraphic or other electronic means to be effected on or before the due date for payment.

 

	
16.8  

	
Costs

 

	
16.8.1  

	
The Business Sellers shall bear all costs incurred by the Business Sellers in connection with the preparation, negotiation and execution of the Transaction Documents and the sale of the Businesses.

 

	
16.8.2  

	
The Purchaser shall bear all such costs incurred by them in connection with the preparation, negotiation and execution of the Transaction Documents and the purchase of the Businesses.

 

	
16.8.3  

	
This Clause 16.8 is subject to Clause 16.10 and Schedule 10.

 

	
16.9  

	
Interest

 

If any party defaults in the payment when due of any sum payable under any Transaction Document, the liability of that party shall be increased to include an amount equal to interest on such sum from and including the date when such payment is due until the date of actual payment (after as well as before judgment) at a rate per annum of 1 per cent. above LIBOR from time to time, accruing from day to day calculated on the basis of the actual number of days elapsed and a year of 360 days.

 

	
16.10  

	
Transaction Taxes

 

Provided that they do not arise as a result of any breach by a Business Seller of any provision of the Original Agreement or this Agreement or as a result of any Seller Warranty not being true, the Purchaser shall bear the cost of all stamp duty, SDRT, SDLT, any notarial fees and all registration and transfer taxes, fees and duties or their equivalents in all jurisdictions where such fees, taxes and duties are payable in respect of the Original Agreement or this Agreement or as a result of the transactions contemplated by the

 

  

98

  

 

Original Agreement or this Agreement. The Purchaser shall be responsible for arranging the payment of such stamp duty, SDRT, SDLT, notarial fees and all other such fees, taxes and duties, including fulfilling any administrative or reporting obligation imposed by the jurisdiction in question in connection with the payment of such fees, taxes and duties. 

 

	
16.11  

	
VAT

 

	
16.11.1  

	
Where under the terms of this Agreement one party is liable to indemnify and keep indemnified or reimburse another party in respect of any costs, charges or expenses, the payment shall not include an amount equal to any VAT thereon which is recoverable by the other party, and that party shall use reasonable endeavours to recover such amount of VAT as may be practicable.

 

	
16.11.2  

	
Subject to Schedule 10, if any payment under this Agreement constitutes the consideration for a taxable supply for VAT purposes, then in addition to that payment the payer shall pay any VAT due on production of a valid VAT invoice.

 

 

	
16.12  

	
Stamp Duty

 

Notwithstanding anything in Clause 2.2.4, but subject always to Clause 11 and Clause 16.10, if in relation to any Business Asset any document (other than the Original Agreement, this Agreement or any document entered into pursuant to this Agreement) is actually required to be stamped in order to (a) comply with the requirement, order or direction of any regulatory, governmental or statutory body (including any court or Tax Authority); or (b) assert or defend any title, right or claim to that Business Asset in the carrying out or disposal of any of the Businesses (or any part thereof), then the Business Sellers shall be liable to reimburse the Purchaser in the amount of any Tax incurred in relation to such stamping. 

 

	
16.13  

	
Notices

 

	
16.13.1  

	
Any notice or other communication in connection with this Agreement (each, a “Notice”) shall be:

 

	 	
(i)  

	
in writing in English; and

 

	 	
(ii)  

	
delivered by hand, fax, registered post or by courier using an internationally recognised courier company.

 

	
16.13.2  

	
A Notice to any Business Seller shall be sent to such party at the following address, or such other person or address as the Business Sellers may notify to the Purchaser from time to time:

 

	 	
Address: 

	
The Royal Bank of Scotland Group plc

House G

RBS Gogarburn

Edinburgh

EH12 1HQ

 

	 	
Fax No.: 

	
+44 131 626 2997

 

	 	
Attention: 

	
Group General Counsel

 

  

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16.13.3  

	
A Notice to the Purchaser shall be sent to the Purchaser at the following address, or such other person or address as the Purchaser may notify to the Business Sellers from time to time:

 

	 	
Address: 

	2 Triton Square,

Regent’s Place,

London

NW1 3AN

 

	 	
Fax No.: 

	+44 (0)20 7756 5650

 

	 	
Attention: 

	Company Secretary

                    

	
16.13.4  

	
A Notice shall be effective upon receipt and shall be deemed to have been received:

 

	 	
(i)  

	
at the time of delivery, if delivered by hand, registered post or courier; and

 

	 	
(ii)  

	
at the time of transmission in legible form, if delivered by fax.

 

	
16.14  

	
Invalidity

 

	
16.14.1  

	
If any provision in this Agreement shall be held to be illegal, invalid or unenforceable, in whole or in part, under the law of any jurisdiction:

 

	 	
(i)  

	
the provision shall apply with whatever deletion or modification is necessary so that the provision is legal, valid and enforceable and gives effect to the commercial intention of the parties; and

 

	 	
(ii)  

	
the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement shall not be affected or impaired,

 

provided that the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.

 

	
16.14.2  

	
To the extent it is not possible to delete or modify the provision, in whole or in part, under Clause 16.14.1(i), then such provision or part of it shall, to the extent that it is illegal, invalid or unenforceable, be deemed not to form part of this Agreement and the legality, validity and enforceability of the remainder of this Agreement shall, subject to any deletion or modification made under Clause 16.14.1(i), not be affected.

 

	
16.15  

	
Remedies and Waivers

 

	
16.15.1  

	
No delay or omission by any party to any Transaction Document in exercising any right, power or remedy provided by law or under any such Transaction Document shall:

 

	 	
(i)  

	
affect such right, power or remedy; or

 

	 	
(ii)  

	
operate as a waiver of it.

 

	
16.15.2  

	
The single or partial exercise of any right, power or remedy provided by law or under any Transaction Document shall not preclude any other or further exercise of it or the exercise of any other right, power or remedy.

 

	
16.15.3  

	
The rights, powers and remedies provided in the Transaction Documents are cumulative and not exclusive of any rights, powers and remedies provided by law.

 

  

100

  

 

	
16.16  

	
Claims

 

	
16.16.1  

	
Without *** by any party, with effect from and *** having occurred pursuant to this Agreement, each party agrees that it shall *** (and it shall procure that *** shall) ***, and each party *** (and it shall procure that ***), any and all *** (irrespective of whether they have been identified as at the date of this Agreement or not) relating, directly or indirectly, in any way to the *** of the parties or any other party to *** (as each of those italicised terms was defined in the Original Agreement).

 

	
16.16.2  

	
For the avoidance of doubt, prior to the Closings having occurred pursuant to this Agreement, neither the entry into of this Agreement nor anything in this Agreement shall prevent, restrict or otherwise hinder any party from *** of the type referred to in Clause 16.16.1 or in any way modify, reduce or otherwise affect:

 

	 	
(a)  

	
*** of any party arising from *** of any obligation under the Original Agreement, which *** related, directly or indirectly, in any way to the *** of the parties or any party to *** (as each of those italicised terms was defined in the Original Agreement); or

 

	 	
(b)  

	
the *** (including the amount of any ***) to which that party is entitled to seek in respect of any *** of the type referred to in Clause 16.16.1,

 

save that each party agrees that it shall *** (and it shall procure that *** of the type referred to in Clause 16.16.1 *** or, if all the *** referred to in Clause 4.1.1 have been *** (where capable of ***) by the ***, prior to the date falling *** immediately after the ***.

 

	
16.17  

	
Counterparts

 

This Agreement may be entered into in any number of counterparts, all of which taken together shall constitute one and the same instrument. Any party may enter into this Agreement by executing any such counterpart but this Agreement shall not be effective until each party has executed at least one counterpart.

 

	
16.18  

	
Governing Law and Submission to Jurisdiction

 

	
16.18.1  

	
The Transaction Documents, save as expressly provided otherwise therein, and any non-contractual obligations arising out of or in connection with such Transaction Documents shall be governed by and construed in accordance with English law.

 

	
16.18.2  

	
Each of the parties irrevocably agrees that the courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non-contractual, which may arise out of or in connection with the Transaction Documents (save as expressly provided otherwise therein) and that accordingly any proceedings arising out of or in connection with such Transaction Documents shall be brought only in such courts. Each of the parties irrevocably submits and agrees to submit to the jurisdiction of such courts and waives (and agrees not to raise) any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum or on any other ground.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

101

  

 

In witness whereof this Agreement has been duly executed.

 

 

	
SIGNED by ......................

on behalf of The Royal Bank of

Scotland plc:

	}	  	  

 

	
SIGNED by  ......................

on behalf of National

Westminster Bank Plc:

	}	  	  

	
SIGNED by  ......................

on behalf of National

Westminster Home Loans Limited:

	}	  	  

 

 

	
SIGNED by ......................

on behalf of SANTANDER UK plc

(as Purchaser):

	}	  	  

  

102

  

 

Table of Contents

 

	
Contents

	  	
Page

	
1

	
Interpretation

	
2

	
2

	
Agreement to Sell the Businesses

	
31

	
3

	
Consideration

	
37

	
4

	
Conditions

	
39

	
5

	
Pre-Closing

	
46

	
6

	
Implementation and Separation planning

	
58

	
7

	
Closing

	
63

	
8

	
Post-Closing Adjustments

	
66

	
9

	
Post-Closing Obligations

	
67

	
10

	
Warranties

	
80

	
11

	
Limitation of Liability

	
82

	
12

	
Claims

	
87

	
13

	
Restrictions on business activities

	
92

	
14

	
Insurance

	
94

	
15

	
Confidentiality and Announcements

	
94

	
16

	
Other Provisions

	
96

 

 

  

103

  

Schedule 1

 

***

 

 

  

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

1

  

 

Schedule 2

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

2

  

 

Schedule 3

 

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

3

  

 

Schedule 4

Intellectual Property

Part 1

 

	
1  

	
Transfer of Business Intellectual Property

 

	
1.1  

	
Clause 2.2.1 of this Agreement shall operate as an immediate assignment to the Purchaser, on the NatWest Closing, of all NatWest Business Intellectual Property which is not the subject of a registration or application for registration.

 

	
1.2  

	
RBS hereby grants, and shall procure the grant by each relevant member of the RBSG Group, to the Purchaser with effect from the RBS Wales Closing, a non-exclusive, non-assignable, royalty-free, perpetual licence to use the RBS Business Intellectual Property in Wales, for the purpose of the RBS Wales Businesses.

 

	
1.3  

	
Clause 2.2.1 of this Agreement shall operate as an immediate assignment to the Purchaser, on the RBS England Closing, of all RBS Business Intellectual Property which is not the subject of a registration or application for registration.

 

	
1.4  

	
Any Business Intellectual Property (other than any domain name) which is registered or which is the subject of an application for registration shall be transferred to the Purchaser pursuant to a written assignment (including pursuant to paragraph 1.5 below).

 

	
1.5  

	
RBS shall procure that the registered trade marks identified below shall be transferred to the Purchaser at the NatWest Closing by means of Trade Mark Assignments in substantially the form set out in Part 5 of this Schedule 4.

 

	
Trade Mark

	
Description

	
Country

	
Owner

	
Application/ Registration No.

	
Status

	
Classes

	
W&G

	
Word

	
UK

	
RBSG

	
2525739

	
Registered

	
9, 16, 36

	
WILLIAMS & GLYN’S

	
Word

	
UK

	
RBSG

	
2525717

	
Registered

	
9, 16, 36

	
WILLIAMS & GLYN’S

	
Word

	
CTM

	
RBSG

	
8486871

	
Registered

	
9, 16, 36

 

	
1.6  

	
RBS shall procure that all domain names forming part of the Business Intellectual Property including those identified below shall be transferred to the Purchaser or its nominee at the NatWest Closing.

 

	
Domain Name

	
Registrant

	
williamsandglyn.co.uk

	
RBSG

	
williamsandglyn.com

	
RBSG

 

	
1.7  

	
Each party shall bear its own costs in relation to notarial, or legalisation, fees in respect of the transfer of any Business Intellectual Property.

 

  

4

  

 

Schedule 4

Intellectual Property

Part 2

Other IP Provisions

 

	
1  

	
With effect from the NatWest Closing in respect of the NatWest Businesses, the RBS Wales Closing in respect of the RBS Wales Businesses, and the RBS England Closing in respect of the RBS England Businesses, the Purchaser shall cause each Business (as appropriate) to cease holding itself out, and procure that no member of the Purchaser’s Group holds itself out, as having any current affiliation with RBSG or any member of the RBSG Group, provided that the use by the Purchaser (or its permitted sub-licensees and assignees) of any of the RBS Trade Marks or NatWest Trade Marks in accordance with the Transitional Trade Mark Licences or any Product Name that remains subject to paragraph 5 of this Part 2 of Schedule 4 shall not, in itself, constitute a breach of this provision.

 

	
2  

	
At the NatWest Closing, RBS shall grant, or shall procure the grant of, the NatWest Transitional Trade Mark Licence to the Purchaser in the form set out in Part 3 of this Schedule 4. At the RBS Wales Closing, RBS shall grant, or shall procure the grant of, the RBS Transitional Trade Mark Licence to the Purchaser in the form set out in Part 4 of this Schedule 4.

 

	
3  

	
The Business Sellers hereby grant, and shall procure the grant by each relevant member of the RBSG Group (with effect from the NatWest Closing in respect of Intellectual Property relating to the NatWest Businesses, the RBS Wales Closing in respect of Intellectual Property relating to the RBS Wales Businesses and the RBS England Closing in respect of Intellectual Property relating to the RBS England Businesses) to the Purchaser a non-exclusive, non-assignable, royalty-free licence for so long as is reasonably required of any Intellectual Property (excluding: (a) any trade marks, service marks or trade names whether registered or unregistered; and (b) any information technology or software except to the extent that such information technology or software is used exclusively in relation to the Businesses) which is owned by the Business Sellers, or any other member of the RBSG Group, and used in the Businesses at or immediately prior to (a) the NatWest Closing in respect of Intellectual Property relating to the NatWest Businesses; (b) the RBS Wales Closing in respect of Intellectual Property relating to the RBS Wales Businesses; or (c) the RBS England Closing in respect of Intellectual Property relating to the RBS England Businesses, solely for the purpose of operating the retail, small medium enterprise and/or mid-corporate banking business (as applicable) of the Businesses. Save as provided in paragraph 4 of this Part 2 of Schedule 4, the Purchaser shall not otherwise sub-license any of the rights granted under this clause without the prior written consent of RBSG.

 

	
4  

	
The Purchaser may sub-license the rights granted under paragraph 3 of this Part 2 of Schedule 4 to members of the Purchaser’s Group for so long as they remain members of the Purchaser’s Group, subject to ensuring that:

 

	
4.1  

	
any sub-licensee shall be bound by and comply with all of the obligations and restrictions to which the Purchaser is subject under paragraph 3 of this Part 2 of Schedule 4 (except that the permitted sub-licensees shall not have the right to sub-license or assign their rights under the sub-licence to any third party); and

 

  

5

  

 

	
4.2  

	
the Purchaser shall inform the sub-licensee that RBSG as third party beneficiary of those obligations shall have the right to take enforcement action against the sub-licensee under the Contracts (Rights of Third Parties) Act 1999.

 

The Purchaser shall be responsible to RBSG for the acts and omissions of any permitted sub-licensees as if they were those of the Purchaser itself and shall at all times and at its own cost enforce compliance by such sub-licensees with the terms of this licence and any permitted sub-licence.

 

	
5  

	
The Business Sellers shall procure that no member of the RBSG Group shall, in any Relevant Capacity, for a period of two (2) years immediately following: (a) the NatWest Closing in respect of the NatWest Businesses; (b) the RBS Wales Closing in respect of the RBS Wales Businesses, or (c) the RBS England Closing in respect of the RBS England Businesses, in each case, object to or take any step or proceeding or make or assert any claim (whether by way of litigation or otherwise) in connection with or in relation to (either directly or indirectly) the use by the Purchaser, or any entity to which it grants a sub-licence under paragraph 4 of this Part 2 of Schedule 4, of any Product Name, including use of any such Product Name in conjunction with any rights granted to the Purchaser pursuant to the Transitional Trade Mark Licences, in each case provided that such use is in accordance with the terms and limited to the duration of the Transitional Trade Mark Licences.  Nothing in this paragraph 5 will affect the rights or obligations of the parties under either paragraphs 1, 3 or 4 of this Part 2 of Schedule 4 or the Transitional Trade Mark Licences.

 

 

Schedule 4

 

Part 3

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

6

  

 

Schedule 1

NatWest Trade Marks

 

 

	
NATWEST

 

NATIONAL WESTMINSTER BANK

 

NATWEST HELPFUL BANKING

 

ANOTHER WAY

 

NATWEST ADAPT

 

ADAPT

 

NATWEST STEP ACCOUNT

 

ADVANTAGE BLUE

 

ADVANTAGE GOLD

 

ADVANTAGE PRIVATE

 

NATWEST WELCOME ACCOUNT

 

NATWEST NRI WELCOME

	
NATWEST FIRST RESERVE

 

NATWEST SPECIAL RESERVE

 

NATWEST REWARD RESERVE

 

PRIVATE NATWEST PRIVATE BANKING

 

NATWEST PRIVATE BANKING

 

ADVANTAGE RESERVE

 

ADVANTAGE PRIVATE

 

NATWEST DIAMOND RESERVE

 

NATWEST SAVINGS ACCELERATOR

NATWEST SAVINGS ACCELERATOR CARD

	 	 
	

	
NatWest DIAMOND RESERVE

 

  

7

  

Schedule 4

Part 4

***

Schedule 1

RBS Trade Marks

 

	
RBS

 

THE ROYAL BANK OF SCOTLAND

 

THE ROYAL BANK OF SCOTLAND GROUP

 

MAKE IT HAPPEN

 

RBS HERE FOR YOU

 

THE ROYAL BANK OF SCOTLAND ROYALTIES

 

THE ROYAL BANK OF SCOTLAND ROYALTIES GOLD

 

THE ROYAL BANK OF SCOTLAND ROYALTIES PREMIER

 

RBS ROYALTIES

 

RBS ROYALTIES GOLD

 

RBS ROYALTIES PREMIER

	
GRADUATE ROYALTIES

STUDENT ROYALTIES

CASH CLUB

ROUTE 15

RAINBOW

RBS YOURBANK

RBS REVOLVE

REVOLVE

ROYALTIES

ROYALTIES GOLD

ROYALTIES PREMIER

	 	 
	

	

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

8

  

 

	

	

 

Schedule 4

Intellectual Property

Part 5

Form of Trade Mark Assignment

 

This Deed of Assignment is made the [●] day of [●] between:

 

	
(1)  

	
[●] of [●] (“Assignor”); and

 

	
(2)  

	
[●] of [●] (“Assignee”).

 

Whereas:

 

	
(A)  

	
the Assignor is the [registered proprietor of the registered trade marks and] applicant for certain trade mark registrations described in the annex hereto (the “Trade Marks”); and

 

	
(B)  

	
the Assignor has agreed to assign the Trade Marks to the Assignee;

 

This Deed witnesses as follows.

 

	
1  

	
Assignment

 

The Assignor hereby assigns to the Assignee all right, title and interest in and to the Trade Marks together with all the goodwill represented by and associated with the Trade Marks, (but no other goodwill) including all rights, privileges and advantages thereto including, without limitation, the right to take proceedings and recover damages and obtain all other remedies in respect of past infringements thereof to hold unto the Assignee absolutely.

 

	
2  

	
Further Assurance

 

The Assignor agrees hereafter promptly to execute all such documents as the Assignee may reasonably request to give full effect to this Assignment and secure to the Assignee the full benefit of the rights assigned to the Assignee hereunder.

 

	
3  

	
Representations and warranties

 

The Assignor does not make, nor shall be deemed to have made to the Assignee, any express or implied representation or warranty with respect to any of the Trade Marks without prejudice to those set out in the amended and restated sale and purchase agreement entered into by, inter alia, (i) The Royal Bank of Scotland plc, (ii) National Westminster Bank plc; [(iii) the Assignor,] and (iv) the Assignee on [●] 2011.

 

  

9

  

 

	
4  

	
Law and Jurisdiction

 

	
4.1  

	
This Assignment and any non-contractual obligations arising out of it shall be governed by and construed in accordance with English law.

 

	
4.2  

	
Each of the parties irrevocably agrees that the courts of England are to have exclusive jurisdiction to settle any dispute, whether contractual or non-contractual, which may arise out of or in connection with this Assignment and that accordingly any proceedings arising out of or in connection with this Assignment shall be brought only in such courts. Each of the parties irrevocably submits and agrees to submit to the jurisdiction of such courts and waives (and agrees not to raise) any objection to proceedings in any such court on the ground of venue or on the ground that proceedings have been brought in an inconvenient forum or on any other ground.

 

 

In witness whereof this Agreement has been duly executed.

 

 

	
SIGNED by [●]

on behalf of [ASSIGNOR]

		  
	  	  	  
	  	  	  
	  	  	  
	
SIGNED by [●]

on behalf of [ASSIGNEE]

		  

 

 

 

 

 

 

 

  

10

  

 

Schedule 5

Contracts

 

Part 1

 

***

 

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

11

  

 

Schedule 5

Contracts

Part 2

Shared Collateral

 

	
1  

	
Retain Retail Mortgages and Unsecured Client Agreements

 

	
1.1  

	
The Business Sellers and the Purchaser agree that following the date of this Agreement and in any event prior to the RBS Wales Closing Date (in respect of the RBS Wales Businesses), the RBS England Closing Date (in respect of the RBS England Businesses) and the NatWest Closing Date (in respect of the NatWest Businesses) they shall, each acting reasonably, agree a schedule (each, a "Shared Security Schedule") of all mortgages (for the avoidance of doubt, in the sense of a security interest), granted in relation to, or which are otherwise capable of being applied in satisfaction of, liabilities owed by any Retail Customer or SME Customer both:

 

	 	
1.1.1  

	
under any Client Agreement(s); and

 

	 	
1.1.2  

	
in relation to any retail banking business of RBS or NatWest which is an Excluded Business in respect of a mortgage product (together, the “Retain Business”, and such liabilities, the “Retain Liabilities”),

 

(other than any such mortgage granted in respect of a Transferring Mortgage Product or a Relevant Excluded Mortgage) in each case as at immediately prior to RBS Wales Closing, RBS England Closing or NatWest Closing, as applicable (each such mortgage, a “Retain Retail Mortgage”).

 

For the avoidance of doubt, the rights identified in the Shared Security Schedule in respect of Securitised Mortgages and the indemnity from the Business Sellers in respect of Unsecured Client Agreements in relation to Securitised Mortgages under paragraph 2 shall be limited to those security rights (if any) that the relevant Business Seller has the benefit of under the Securitised Mortgages and the terms of the relevant securitisation or covered bond programme from time to time.

 

	
1.2  

	
For the purposes of paragraph 1.1:

 

“Relevant Excluded Mortgage” means any Excluded Mortgage other than a Securitised   Mortgage; and

 

“Transferring Mortgage Product” means any mortgage product held by a Customer which is a Product.

 

	
1.3  

	
The Business Sellers and the Purchaser agree that:

 

	 	
1.3.1  

	
the Retain Retail Mortgages shall not be transferred to the Purchaser at the RBS Wales Closing Date, RBS England Closing or the NatWest Closing Date (as applicable); and

 

	 	
1.3.2  

	
save as provided in this Part 2 of Schedule 5, with effect from RBS Wales Closing, RBS England Closing or NatWest Closing (as applicable), the Purchaser shall not be entitled to recourse to or the benefit of any Retain Retail Mortgage which has been identified and agreed in the relevant Shared Security Schedule in relation to a Client Agreement which has been, or is pursuant to the terms of this Agreement

 

  

12

  

 

and the Transaction Documents to be, transferred to the Purchaser (each, an “Unsecured Client Agreement").

 

	
1.4  

	
The Business Sellers agree that, from the date of the Original Agreement until the NatWest Closing Date (in respect of the NatWest Businesses), the RBS Wales Closing Date (in respect of the RBS Wales Businesses), and the RBS England Closing Date (in respect of the RBS England Businesses), they shall carry on the relevant Retain Business (or, as the case may be, shall procure that such Retain Business is carried on by the relevant member of the RBSG Group) with respect to each Retain Retail Mortgage, including but without limitation to any enforcement or proposed enforcement action, in a manner consistent in all material respects with policies and procedures applicable, at the relevant time, in relation to the relevant Business Seller’s (or, as the case may be, relevant member of the RBSG Group’s) in relation to its business in the United Kingdom (including the Retain Business) and based upon similar facts and circumstances and of a similar type or nature.

 

2.         ***

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

13

  

 

Schedule 5

Contracts

Part 3

 

	
1  

	
Lombard Transfer Security

 

	
1.1  

	
The Business Sellers and the Purchaser agree that following the date of the Original Agreement and in any event prior to the RBS Wales Closing Date (in respect of the RBS Wales Businesses), the RBS England Closing Date (in respect of the RBS England Businesses) and the NatWest Closing Date (in respect of the NatWest Businesses) they shall, each acting reasonably, agree a schedule (each, a "Lombard Security Schedule") of all Loan Guarantees/Security (other than Excluded Mortgages) which are capable of being applied in satisfaction of liabilities owed by any SME Customer or Mid-Corporate Customer both:

 

	 	
1.1.1  

	
under any Client Agreement(s) ; and

 

	 	
1.1.2  

	
otherwise, to any business of RBS or NatWest which is a business (including asset finance business) carried on under the "Lombard" name or brand (other than in connection with any loans from Lombard Direct Loans) (together, the "Lombard Business", and such liabilities, the "Lombard Liabilities"),

 

in each case as at immediately prior to RBS Wales Closing, RBS England Closing or NatWest Closing, as applicable, and setting out the documented principal amount and maturity of such Lombard Liabilities as at such time (each such Loan Guarantee/Security, a "Lombard Transfer Security", and such Lombard Liabilities, the "Relevant Lombard Liabilities").

 

	
1.2  

	
The Business Sellers and the Purchaser agree that:

 

	 	
1.2.1  

	
without prejudice to any other term of this Agreement or the Transaction Documents) the Lombard Transfer Security shall be transferred to the Purchaser at the RBS Wales Closing Date, RBS England Closing Date or the NatWest Closing Date (as applicable) in accordance with the terms of this Agreement and the Transaction Documents; and

 

	 	
1.2.2  

	
save as provided in this Part 3 of Schedule 5, with effect from RBS Wales Closing, RBS England Closing or NatWest Closing (as applicable), the Business Sellers shall not be entitled to recourse to or the benefit of any Lombard Transfer Security.

 

	
1.3  

	
The Business Sellers agree that, from the date of the Original Agreement until the NatWest Closing Date (in respect of the NatWest Businesses), RBS Wales Closing Date (in respect of the RBS Wales Businesses) and the RBS England Closing Date (in respect of the RBS England Businesses):

 

	 	
1.3.1  

	
they shall carry on the Lombard Business (or, as the case may be, shall procure that the Lombard Business is carried on by the relevant member of the RBSG Group) with respect to each Lombard Transfer Security and the Lombard Liabilities, including but without limitation to any enforcement or proposed enforcement action, in a manner consistent in all material respects with policies and procedures applicable, at the relevant time, in relation to the relevant Business

 

  

14

  

 

Seller’s (or, as the case may be, relevant member of the RBSG Group’s) business in the United Kingdom (including the Retain Business) and based upon similar facts and circumstances and of a similar type or nature; and

 

	 	
1.3.2  

	
they shall not, and shall procure that no other member of the RBSG Group shall, enter into any agreement or arrangement as a result of which Relevant Lombard Liabilities would be incurred and outstanding as at the Relevant Closing Date by any SME Customers or Mid-Corporate Customers, in each case in addition to those advised to the Purchaser by the Business Sellers for the purposes of this Part 3 of Schedule 5 in connection with the execution of this Agreement. For the avoidance of doubt (but subject to paragraph 1.3.1), this paragraph 1.3.2 shall not restrict the incurrence of Lombard Liabilities which would not constitute Relevant Lombard Liabilities.

 

	
2. 

	
***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

15

  

 

Schedule 6

Employees

 

	
1  

	
Transfer Provisions

 

	
1.1  

	
The parties acknowledge that the Transfer Provisions will apply in respect of the Relevant Employees as a result of the transfer of the Businesses and the Business Assets contemplated by this Agreement. Consequently, the employment of each Relevant Employee (except in relation to any provisions of any occupational pension scheme which relate to benefits for old age, invalidity or survivors in accordance with Regulation 10 of TUPE and the equivalent provisions of the Transfer Provisions) and any collective agreement relating to any such Relevant Employee shall have effect from the Relevant Closing Date as if originally entered into between the Purchaser and such Relevant Employee and/or any relevant trade union.

 

	
1.2  

	
For the purposes of this Schedule 6:

 

	 	
1.2.1  

	
reference to the Closing Date means the NatWest Closing Date in relation to the NatWest Relevant Employees, the RBS Wales Closing Date in relation to the RBS Wales Relevant Employees, and the RBS England Closing Date in relation to all other Relevant Employees; and

 

	 	
1.2.2  

	
references to Relevant Employees means the NatWest Relevant Employees in relation to the NatWest Closing Date, the RBS Wales Relevant Employees in relation to the RBS Wales Closing Date and the Relevant Employees excluding the NatWest Relevant Employees and the RBS Wales Relevant Employees in relation to the RBS England Closing Date.

 

The provisions of this Schedule 6 shall be interpreted accordingly.

 

	
1.3  

	
Subject to paragraphs 1.4, 2.7, 3 and 9 below, the Business Sellers shall be responsible for and will discharge all wages, salaries, bonuses, emoluments, and other outgoings (and Taxation thereon) in respect of the Relevant Employees which fall due to be paid prior to the Closing Date, or which relate to the period prior to, or on the Closing Date, and to the extent such liabilities have not been discharged prior to the Closing Date, the Business Sellers shall remain liable for such amounts (provided always that the Business Sellers’ liability in respect of bonuses other than the retention payment referred to in paragraph 7, shall not exceed the amount accrued in respect thereof in the Closing Statement to the Closing Date). The Purchaser shall be responsible for and will discharge all such obligations in respect of the Relevant Employees which fall due to be paid thereafter to the extent they relate to the period after Closing. All necessary apportionments shall be made to give effect to this paragraph 1.3.

 

	
1.4  

	
Notwithstanding any other provisions of this Schedule:

 

	 	
1.4.1  

	
subject to 1.4.2 below, the Purchaser shall be responsible for discharging any accrued holiday entitlement in respect of any Relevant Employee which has not been discharged prior to the Closing Date and will indemnify and keep indemnified (on an after-Tax basis) the Business Sellers and any relevant employer(s) of the Relevant Employees prior to the Closing Date against any Losses arising as a result thereof or in connection therewith;

 

	 	
1.4.2  

	
where any Relevant Employee has, at the Closing Date, in excess of 21 hours' accrued holiday under the RBS Holiday Banking Scheme the Business Sellers 

 

  

16

  

 

shall bear the cost of that excess accrued holiday (and any associated employer’s national insurance contributions) which shall be included in the Closing Statements as a liability. For this purpose, the Business Sellers' liability shall be calculated on the basis that for each employee an hour's pay is determined by dividing the employee's annual ValueAccount (less pension benefit funding) by the number of hours the employee is contracted to work per annum taking into account the extent to which the Purchaser secures Relief which is referable to such accrued holiday entitlement excluding for the avoidance of doubt any Relief arising from costs incurred by the Purchaser and not ultimately borne by the Business Sellers as described herein.

 

	
1.5  

	
In accordance with its obligations under the Transfer Provisions, the Purchaser shall provide the Business Sellers in writing with such information and at such time as will enable the relevant employer(s) of the Relevant Employees to carry out its/their information and consultation duties under the Transfer Provisions. The Purchaser shall provide such assistance as the Business Sellers may reasonably request from time to time.

 

	
1.6  

	
The parties acknowledge that for the purposes of regulation 12 of TUPE, regulation 11 of TUPE has been complied with by the Business Sellers (and any other relevant employer of the Relevant Employees prior to Closing) by the process of disclosure against the warranties in paragraph 6 of Schedule 14.

 

	
1.7  

	
The Purchaser acknowledges that its remedies for breach of the warranties in this Agreement provide adequate recourse in respect of any failure to provide Employee Liability Information (within the meaning of regulation 11 of TUPE) in all the circumstances and that it would not be just and equitable to pursue any future claim in respect of Employee Liability Information in the employment tribunal or in the Employment Appeal Tribunal and accordingly undertakes not to bring such a claim against any of the Business Sellers or against any relevant employer(s) of the Relevant Employees.

 

	
2  

	
***

 

	
3  

	
Deferred Awards

 

Following signing of the Original Agreement, RBS and the Purchaser will implement the principles set out in paragraphs 3.1 to 3.8 below. If the remuneration committee of the board of directors of RBSG or any third party refuses to give its approval to the implementation of these principles, RBS will be deemed not to be in breach of this paragraph 3, provided that it has used its reasonable endeavours to obtain such approval.

 

The parties recognise that the overall cost to RBS should not be materially more than would have been the cost to it of satisfying Awards under the Deferral Plans but for this paragraph 3.

 

If the proposals are not implemented, paragraph 3.9 will apply.

 

	
3.1  

	
Following Closing, the Business Sellers will pay to the Purchaser, by way of an adjustment to the Purchase Price, an amount, for each Award under the Deferral Plans granted to a 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

17

  

 

Relevant Employee whose employment has transferred to a member of the Purchaser’s Group and which has not been satisfied at Closing (a ‘Transferring Award’), equal to the total of:

 

	 	
3.1.1  

	
the Market Value at Closing of the number of RBSG Shares; and

 

	 	
3.1.2  

	
for Transferring Awards which include the right to receive a dividend equivalent, the amount of any dividends paid before Closing on the number of RBSG Shares;

 

	 	
3.1.3  

	
the face value of the number of RBSG Bonds plus any interest accrued to Closing;

 

in respect of which Transferring Awards have not Vested as at Closing (the “Transfer Value”) plus an amount equal to the percentage of the Transfer Value equal to the rate at which employer national insurance contributions are payable on Closing.

 

	
3.2  

	
RBS will amend the terms of each Transferring Award as follows, with effect from Closing:

 

	 	
3.2.1  

	
Where the Award is over RBSG Shares, the Participant will be entitled, on Vesting, to:

 

	 	
(i)  

	
that number of shares in Banco Santander S.A., or such member of its group as the Purchaser and the Business Sellers agree, which has a Market Value on Closing equal to that of the number of RBSG Shares subject to the Award, instead of RBSG Shares; and,

 

	 	
(ii)  

	
if the Transferring Award includes a right to receive dividend equivalents, an amount in cash or shares in the relevant member of the Purchaser’s Group linked to dividends paid before Closing on the relevant number of RBSG Shares and, after Closing, on the relevant number of  shares in the relevant member of the Purchaser’s Group.

 

	 	
3.2.2  

	
Where the Award is over RBS Bonds, the Participant will be entitled, on Vesting, to a cash amount equal to the face value of the RBS Bonds subject to the Award plus any notional interest accrued to the date of Vesting, instead of RBS Bonds.

 

	 	
3.2.3  

	
Any provisions on ceasing to be an employee will continue to apply but by reference to cessation of employment with the Purchaser or a member of its Group, rather than RBSG.

 

	 	
3.2.4  

	
The provisions on Competitive and Detrimental Activity under the RBS 2010 Deferral Plan will apply to any activity which is competitive with or detrimental to either party and any decision in relation to activity competitive or detrimental to a party will be made by that party and, once notified, binding on the other provided that these provisions will not apply to activities undertaken by the Relevant Employees in the course of their normal duties with the Purchaser.

 

	 	
3.2.5  

	
References to a competitor in the rules or any restrictive covenant will be treated as references to any competitor of RBS or the Purchaser (or any member of their Groups) but RBS shall be regarded as a competitor of the Purchaser.

 

	 	
3.2.6  

	
The provisions on review and reduction of Vesting of Deferred Awards in the Deferral Plans will continue to apply but either party may initiate and make decisions under such a review only in light of:

 

	 	
(i)  

	
performance of that party or any member of its Group or any of its business areas or teams; and

 

  

18

  

 

	 	
(ii)  

	
the conduct, capability or performance of the Participant while an employee of a member of the party’s Group.

 

	 	
(iii)  

	
The party initiating a review will notify the other of the outcome and the other will, where relevant, give effect to it.

 

	 	
3.2.7  

	
The amendment powers in the rules may be exercised, in relation to any Transferring Awards, by the Purchaser but, if the amendment would adversely affect the holder of the Transferring Award or any member of the RBSG Group, the amendment may only be made with the consent of RBS, such consent not to be unreasonably withheld. For these purposes, anything which reduces the scope of the provisions on review or reduction of Vesting or Deferred Awards or the provisions on Competitive or Detrimental Activity or the terms of any restrictive covenant as they relate to the RBSG Group will be treated as adversely affecting a member of the RBSG Group.

 

	 	
3.2.8  

	
Except as set out above, references to RBSG in the terms of the Transferring Awards will be treated as references to the Purchaser.

 

	 	
3.2.9  

	
The terms of the Award (e.g. as to the date of Vesting) shall otherwise remain the same.

 

	
3.3  

	
The Purchaser will satisfy all Transferring Awards as and when they fall due.

 

	
3.4  

	
To the extent that a Transferring Award lapses, the Purchaser will pay to RBS, by way of an adjustment to the Purchase Price, the amount determined under paragraph 3.1 in respect of the Transferring Award.

 

	
3.5  

	
The Purchaser will indemnify RBS and all members of its Group, on an after-Tax Basis, against any liability they may incur as a result of any claim by a participant or former participant in any of the Deferral Plans related to the changes to the terms of his participation contemplated by this paragraph 3.5. Any payments pursuant to such indemnity will be made by way of an adjustment to the Purchase Price, and such indemnity will cover the reasonable costs of defending any such claim and conduct of such claims shall be on such basis as the parties shall agree.

 

	
3.6  

	
Where a member of the RBS Group has made a loan to a Participant in connection with a Transferring Award and that loan is outstanding at Closing and RBS has notified the Purchaser in writing of the existence and terms of that loan before Closing, the Purchaser will, when the loan becomes repayable, pay to or to the order of RBS an amount equal to the lesser of the amount of the advance (including any outstanding interest) and the Market Value on that date of the  shares in the relevant member of the Purchaser’s Group in respect of which the Transferring Award Vests or the amount of cash payable on Vesting.  Such amount will be treated for tax purposes as a direct repayment of the loan previously made to a Participant.

 

	
3.7  

	
Any awards made after the date of the Original Agreement but before Closing under the Deferral Plans will include terms similar to those contemplated by this paragraph and, on and after Closing, payments will be made in respect of those awards on the basis described in this paragraph 3.7 and the Purchaser will satisfy such awards as and when they fall due.

 

	
3.8  

	
The parties will work together to optimise the tax and accounting treatment of the proposals and to determine the detailed terms of the amendments and indemnities.

 

  

19

  

 

	
3.9  

	
If the proposals described above have not been implemented on Closing, the Business Sellers shall discharge all obligations to deliver securities or cash in accordance with Transferring Awards as and when such obligations fall to be discharged in accordance with the rules of those plans (including any obligations which fall to be discharged after the Closing Date).

 

	
4  

	
Employee Loans

 

In the event that any Relevant Employee has a loan or other banking facility or arrangement which is a Product and which is on a Transferring Sort Code, that Product will be transferred to the Purchaser in accordance with the terms of this Agreement. Any other loans, facilities and arrangements made available to a Relevant Employee by a Business Seller or any relevant employer(s) of the Relevant Employees prior to the Closing Date will be subject to the Business Sellers' normal leaver terms for such loans, facilities and arrangements unless the parties to this Agreement determine otherwise before the Closing Date. The Business Sellers shall include details of any such loans on any P11Ds which it prepares in respect of the Relevant Employees for the tax year 2012/2013 save that, if the Business Sellers or relevant employer of the Relevant Employees prior to the Closing Date is not permitted by law to prepare P11D forms on behalf of the Relevant Employees after the Closing Date, it will provide such information (and at such time) as may reasonably be required by the Purchaser for the purposes of preparing the P11Ds.

 

	
5  

	
Assignment of Relevant Employees

 

The Business Sellers will use reasonable endeavours to ensure that all Relevant Employees are wholly or mainly assigned  to a Business by the Closing Date.

 

	
6  

	
Information on Employees

 

	
6.1  

	
The Business Sellers shall use reasonable endeavours to provide the Purchaser with any contracts of employment for Senior Employees which were not provided to the Purchaser prior to the date of the Original Agreement (or additional contractual documentation in relation to any contracts which were provided prior to the date of the Original Agreement), such contracts and additional documentation to be provided within two weeks of the date of the Original Agreement.

 

	
6.2  

	
Not less than four weeks from the date of the Original Agreement the Business Sellers shall provide the Purchaser with a list of employees seconded to the Businesses from any other member of the RBSG Grouping along with details of their location and job function.

 

	
6.3  

	
After the date of the Original Agreement the Purchaser may request a list of the Current Employees and such of the Further Allocated Employees who are identified at the date the list is prepared. The Business Sellers will use reasonable endeavours to provide the list within two weeks of such request provided always that the frequency of such requests is not regarded by the Business Sellers as being unreasonable.

 

	
6.4  

	
Not less than four weeks before the Closing Date the Business Sellers shall provide the Purchaser with:

 

	 	
6.4.1  

	
a list of the total number of Relevant Employees;

 

	 	
6.4.2  

	
the salary and ValueAccount funding, (or, if requested by the Purchaser, a breakdown of elections under RBSelect), period of continuous employment, location and grade of each Relevant Employee; and

 

  

20

  

 

	 	
6.4.3  

	
a schedule showing any outstanding loans made to Relevant Employees in relation to the 2009 Deferral Plan;

 

which list shall be further updated by the Business Sellers as near as practicable to the Closing Date.

 

	
7  

	
***

 

	
8  

	

***

 

	
9  

	

***

 

	
9.1  

	
***

 

	
9.2  

	

***

 

	
9.3  

	
After the date of this Agreement the parties will work together to establish the Purchaser’s staffing requirements in relation to the Wavertree Personnel and will negotiate in good faith to agree any consequent amendments to paragraph 9.2, provided always that any such amendments do not significantly increase the Business Sellers’ costs in providing Wavertree as a segregated site.

 

	
9.4  

	
Subject to paragraph 9.6 below, to the extent that the Business Sellers retain any of the *** the Business Sellers will bear the costs of retraining such employees. In addition, the Business Sellers will bear the costs of recruiting and retraining any replacements for the *** provided that the numbers of such employees or any replacement employees or workers shall not be required to exceed *** FTEs at the RBS England Closing Date. In addition to such retention and replacement of the ***, the Business Sellers will recruit such further employees, agency workers or contractors as, after normal course of business attrition, leave *** FTEs immediately prior to the RBS England Closing Date working as telephony advisors or agents at ***.  The Purchaser will indemnify the Business Sellers and keep each of them indemnified (on an after-Tax basis) for all reasonable costs and expenses incurred by any member of the RBSG Group in recruiting the ***. Any  recruitment referred to in this paragraph will be undertaken pursuant to a recruitment strategy to be agreed between the Parties acting reasonably and in good faith that, for the ***, balances: i) the Purchaser’s desire for all *** to be recruited, employed and adequately trained well in advance of the RBS England Closing Date; and ii) the practical limitations on the Business Sellers to actually recruit, employ and train such numbers of employees, contractors and agency workers in any particular time period.

 

	
9.5  

	
The Purchaser will indemnify the Business Sellers and keep each of them indemnified (on an after-Tax basis) in respect of the costs of training the *** to the standards and specifications reasonably required by the Purchaser.

 

	
9.6  

	
For the avoidance of doubt, any training of the Wavertree Personnel (including the Wavertree Employees and/or any replacements) in relation to the Purchaser’s systems, processes, policies and procedures will be in accordance with clause 6.12 of this Agreement and any associated provisions in paragraph 7, Part B of Schedule 23

 

	
9.7  

	
Notwithstanding the provisions of clause 5.1.2(xvii) of this Agreement, if the Purchaser (or any member of the Purchaser’s Group) requests or directs that the employment or

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

21

  

 

engagement of a *** is terminated (whether before or after the RBS England Closing Date), the Purchaser will indemnify the Business Sellers and keep each of them indemnified (on an after-Tax basis) in respect of any Losses or Liabilities incurred by the Business Sellers in connection with such termination provided it is carried out in all material respects in accordance with RBSG Group’s standard procedures and practices at the relevant time.

 

	
9.8  

	
The Purchaser will indemnify the Business Sellers and keep each of them indemnified (on an after-Tax basis) for all reasonable costs and expenses incurred by the Business Sellers in employing or engaging the *** from *** until the RBS England Closing Date. Such costs and expenses will include but not limited to all remuneration and benefits (including pensions benefits) and related social security contributions, fees paid to contractors (whether directly or indirectly and including any VAT thereon), agency fees and all other costs and expenses which are reasonably incidental to the employment or engagement of such *** but, subject to the procedural requirements of paragraph 9.7 above, will exclude any Losses or Liabilities incurred by the Business Sellers in connection with the employment or termination of employment of any ***as a result of any claims made against any member of the RBSG Group in connection with the fault of any such company..

 

	
9.9  

	
Clause 5.1.2 (xvi) will not apply to the Wavertree Personnel to the extent that it is inconsistent with the provisions of this paragraph 9.

 

	
9.10  

	
The Wavertree Personnel who are RBSG Group employees will (for the avoidance of doubt) be Relevant Employees for the purposes of this Agreement

 

	
9.11  

	
The contracts pursuant to which any Wavertree Personnel who are not Relevant Employees are engaged by any member of the RBSG Group shall be Contracts for the purposes of this Agreement.

 

	
10  

	
Definitions

 

In this Schedule 6:

 

“Transfer Provisions” means TUPE, together with the “Acquired Rights Directive”, Directive 2001/23/EC, as amended or replaced from time to time;

 

“TUPE” means the Transfer of Undertakings (Protection of Employment) Regulations 2006, as amended or replaced from time to time;

 

***

 

***

 

“Wavertree Personnel” means the employees of RBSG Group who are, immediately prior to the RBS England Closing Date, allocated to work at Wavertree and the contract or agency workers engaged by or on behalf of RBSG Group to work at Wavertree prior to the RBS England Closing Date being workers  who are employed or engaged in telephony advisor, agent and care roles along with associated supervision and management roles;“2009 Deferral Plan” means the RBSG Group Deferral Plan 2009 pursuant to which certain of the Relevant Employees were made bonus awards in respect of the year ending 31 December 2008; and

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

22

  

 

 

“2010 Deferral Plan” means the RBSG Group Deferral Plan 2010 pursuant to which certain of the Relevant Employees were made bonus awards in respect of the year ending 31 December 2009.

 

  

23

  

 

Schedule 7

Pensions

 

	
1  

	
The Business Sellers shall procure that the Relevant Employees shall cease to accrue benefits under the Group Retirement Benefit Arrangements on and from the NatWest Closing Date (in respect of the NatWest Businesses), the RBS Wales Closing Date (in respect of the RBS Wales Businesses) and the RBS England Closing Date (in respect of the RBS England Businesses) and the Business Sellers shall continue to be responsible to fund benefits accrued or contributions that become due prior to the Relevant Closing Date.

 

	
2  

	
The Purchaser shall procure that each Relevant Employee shall be provided with pension benefits (including death benefits) in respect of service on and from the NatWest Closing Date (in respect of the NatWest Businesses), the RBS Wales Closing Date (in respect of the RBS Wales Businesses) and the RBS England Closing Date (in respect of the RBS England Businesses) on a basis that complies with the requirements of the Pensions Act 2004 or any other applicable local law or regulation.

 

	
3  

	
Indemnity

 

	
3.1  

	
In this paragraph:

 

“Transferred Rights” mean any provision of the Group Retirement Benefit Arrangements which does not relate to old age, survivors or invalidity and which transfers to the Purchaser’s Group at the NatWest Closing Date (in respect of the NatWest Businesses), the RBS Wales Closing Date (in respect of the RBS Wales Businesses) or the RBS England Closing Date (in respect of the RBS England Businesses) as the case may be, pursuant to the requirements of the Acquired Rights Directive (77/187/EEC) and/or the Transfer of Undertaking (Protection of Employment) Regulations 2006.

 

	
3.2  

	
Subject to clause 11.11 (Mitigation of Losses) of this Agreement and paragraph 3.3 and 3.4 below, the Business Sellers shall indemnify the Purchaser’s Group for 50% of the Losses and Liabilities the Purchaser’s Group may incur or sustain arising out of or in connection with any claim or potential claim of a Relevant Employee in respect of Transferred Rights under the Group Retirement Benefit Arrangements.

 

	
3.3  

	
The indemnity in paragraph 3.2 shall apply where:

 

	 	
3.3.1  

	
any member of the Purchaser’s Group the Business Sellers of any claim or potential claim of a Relevant Employee in respect of Transferred Rights under the Group Retirement Benefit Arrangements within 10 years of the NatWest Closing Date (in respect of the NatWest Businesses), within 10 years of the RBS Wales Closing Date (in respect of the RBS Wales Businesses) or within 10 years of the RBS England Closing Date (in respect of the RBS England Businesses); and

 

	 	
3.3.2  

	
the Losses and Liabilities (i) arise by reason of a decision of a court or employment Tribunal of England and Wales in respect of a particular Relevant Employee(ii) would arise in the reasonable opinion of a senior counsel specialising in pensions law (jointly instructed by the Purchaser's Group and the Business Sellers) if such claim were to be decided by a court or employment tribunal of England and Wales, or (iii) arise otherwise as agreed between the Purchaser’s Group and the Business Sellers.

 

  

24

  

 

Schedule 8

Part A

Transitional Services

 

Capitalised terms used in this Schedule 8 which are not defined in the Agreement shall have the meanings given in the Transitional Services Agreement.

 

	
1  

	
The Business Sellers and the Purchaser agree that the Transitional Services Agreement shall be entered into at NatWest Closing in the Agreed Terms.

 

	
2  

	
The parties shall complete the schedules to the Transitional Services Agreement prior to NatWest Closing, which shall include undertaking the following steps:

 

	
2.1  

	
identifying services (whether such services are an addition to, or a refinement of, the services listed in the Agreed Terms of the Transitional Services Agreement), with a reasonably detailed description of such services, that were provided to the Businesses by the RBSG Group, or by a third party (either directly or indirectly via a contract with a member of the RBSG Group) at any time during the 12 month period prior to Closing and which are reasonably required by the Business after Closing, and which shall be provided under the Transitional Services Agreement. To the extent such services are not referred to in Annex 1 to Part B of this Schedule 8, the introduction of such services shall be subject to the principles set out in Part B of this Schedule 8;

 

	
2.2  

	
documenting the standard, scope and manner in which the Transitional Services shall be provided in accordance with any principles for provision of Transitional Services under the Transitional Services Agreement and Part B of this Schedule 8;

 

	
2.3  

	
agreeing, in conjunction with developing the Separation Plan, the period of which each Transitional Service will be provided, provided that the parties agree that the Service Term for a Transitional Service shall not exceed 15 months in each case from the RBS England Closing;

 

	
2.4  

	
agreeing the charges for providing each Transitional Service in accordance with the principles set out in Part B of this Schedule 8; and

 

	
2.5  

	
documenting the details of the dependencies of the Provider in order to provide the Transitional Services in accordance with the Transitional Services Agreement.

 

	
3  

	
The parties agree that the provisions of clauses 3.1 and 3.2 (Third Party Consents) of the Transitional Services Agreement shall take effect from the date of the Original Agreement.

 

	
4  

	
At the NatWest Closing, the parties shall enter into a data processing agreement to address the processing of Purchaser data (including Mid-Corporate and Complex SME Customer data) by the Business Sellers during the term of the TSA.

 

	
5  

	
The parties agree that during the term of, and pursuant to the terms of, the Transitional Services Agreement, the Business Sellers shall provide to the Purchaser output from the Business Sellers’ "probability of default" Mid Market Model (including updated output whenever such model is revised for new credit information in accordance with the terms of the Transitional Services Agreement) in respect of the Complex SME and Mid-Corporate Customers  (but shall not provide direct use of or access to the model itself).  Such output will be provided to the Purchaser on a non-reliance basis such that (save where the loss arises as a result of any fraud or wilful misconduct of a Business Seller or any of its

 

  

25

  

 

employees) the Purchaser shall have no recourse to the Business Sellers in connection with the Purchaser’s use of such information.

  

26

  

 

Schedule 8

Part B

Non-TSA Principles / Additional TSA Principles

 

Any term used in this Part B of Schedule 8 but not defined in Clause 1.1 of this Agreement shall have the meaning given to it in the Agreed Terms TSA.

 

	
1  

	
Non-TSA Services - principles and charges

 

	
1.1  

	
Any services relating to the products set out in Annex 2 to this Part B of Schedule 8 (“Excluded TSA Products”) will not form part of the TSA Services.  Those services  will fall into two groups:

 

	 	
1.1.1  

	
services to be provided by the Purchaser in-house; and

 

	 	
1.1.2  

	
services to be provided by RBS under a separate commercial agreement with the Purchaser (“Non-TSA Services”) which follows the principles set out below.

 

Annex 2 clearly identifies the services which fall into category (a) and (b) above, respectively.

 

	
1.2  

	
Service principles for Non-TSA Services:

 

	 	
1.2.1  

	
The Customer service experience shall remain consistent with the Customer experience immediately prior to a Relevant Closing;

 

	 	
1.2.2  

	
The information provided to Customers and the channels used by Customers today shall remain unchanged unless agreed to by the relevant Customer;

 

	 	
1.2.3  

	
There shall be a service level based upon existing standards of service for each of the commercial agreements which will formalise and demonstrate that today’s service standards are maintained and this will be managed and controlled as part of the agreed governance model. The service level should be benchmarked and matched with the market periodically where feasible and if currently benchmarked by the Business Sellers;

 

	 	
1.2.4  

	
The Purchaser will provide indemnity protection to RBS in relation to (i) settlement risk and (b) breach of law or regulation (including AML and KYC regulations), committed by the Purchaser in connection with the provision of Non-TSA Services1. RBS will provide indemnity protection to the Purchaser in relation to  breach of law or regulation (including AML regulations) committed by RBS in connection with the provision of Non-TSA Services;

 

	 	
1.2.5  

	
***

 

	 	
1.2.6  

	
***

 

	
1.3  

	
An agreement for the Non-TSA Services will be signed at the same time as the TSA.

 

	
2  

	
Scope of TSA Services

 

 

1 The issues referenced are illustrative only. RBS and the Purchaser will need to discuss appropriate contractual protection in greater detail at the time  of documentation of the commercial agreements.

 

***

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

27

  

 

	
2.1  

	
TSA Service Scope

 

The TSA Services will consist of:

 

	 	
(a) 

	
all Services identified in Annex 1 to this Part B of Schedule 8; and

 

	 	
(b)

	
subject to paragraph 3.2 of this Part B of Schedule 8, any other services which, as at the date of this Agreement or between the date of this Agreement and a relevant Closing, were provided by RBS to all or some of the Businesses in respect of Wave 2 Customers and which are requested by Purchaser to be included in the TSA; and

 

	 	
(c)

	
subject to paragraph 3.2 of this Part B of Schedule 8, any services added following the Commencement Date in accordance with the provisions of Schedule 2 of the Agreed Terms TSA,

 

but excluding the services for Excluded TSA Products referred to in paragraph 1.1 above.

 

	
2.2  

	
General TSA principles

 

	 	
2.2.1  

	
Customers will have the services and business continuity without disruption in their activity.

 

	 	
2.2.2  

	
Services and Products for the Customers have been identified (refer to paragraph 2.1 above for scope of TSA Services).

 

	 	
2.2.3  

	
Products and services changes due to Customer transfers or any other business reason are assumed will be managed through harmonization.

 

	 	
2.2.4  

	
If any existing service not currently in scope is requested by a Rainbow customer, between now and completion of the TSA, both parties will review and consider a pragmatic and reasonable solution (manual, agency, etc.) to the specific request.

 

	 	
2.2.5  

	
The TSA will include a framework that covers all Services and Products (refer to paragraph 2.1 above for scope of TSA Services) to be managed with full detail down to the process level.

 

	 	
2.2.6  

	
The following points will be considered:

 

	 	
(i)  

	
Description of the scope of each one of the services (refer to paragraph 2.1 above for scope of TSA Services):

 

	 	
(a)  

	
the communication channels between the Purchaser and RBS for the provision of each one of these services;

 

	 	
(b)  

	
the service categories; and

 

	 	
(c)  

	
the service offering schedule.

 

	 	
(ii)  

	
Products to service Corporate & Commercial Customers; and

 

	 	
(iii)  

	
requirements for the different functional domains for the Purchaser under the TSA.

 

	
3  

	
TSA Pricing

 

	
3.1  

	
TSA Set-up Costs

 

  

28

  

 

The Purchaser will pay a fee of *** for services required to set up the TSA Services listed in Annex 1 to this Part B of Schedule 8. Additional set up costs will be incurred for:

 

	 	
3.1.1  

	
any TSA Services added to the TSA between the date of this Agreement and a Relevant Closing, save where such services were being provided to the Business at any time in the 12 months prior to the Relevant Closing; and

 

	 	
3.1.2  

	
any other TSA Services added to the TSA after a Relevant Closing pursuant to clause 2.1.2 of the Agreed Terms TSA, save where such services  were being provided to the Business in the 12 months prior to the Relevant Closing.

 

Any such subsequent set up costs shall be for the account of the Purchaser.

 

The set up costs (other than any costs associated with the addition of services pursuant to clause 2.1.2 of the Agreed Terms TSA) are payable on NatWest Closing upon receipt by the Purchaser of a valid and itemised invoice in respect thereof. For the avoidance of doubt, no additional set up costs will be payable by the Purchaser in the event that TSA Services are added to the TSA following the date of this Agreement which were being provided to the Business at any time in the 12 month period prior to the Relevant Closing.

 

	
3.2  

	
TSA Running Cost

 

The fees for all TSA Services shall be payable quarterly in arrears, will reflect the actual cost to RBSG Group of providing the TSA Services and be reduced pro rata as and when Customers migrate to the Purchaser. The fees do not include the direct cost of the Transferring Relevant Employees (see point 7 below).***

 

RBS is able to *** the annualised price for TSA running costs at *** based on the following assumptions: (i) relevant historical volumes; and (ii) the scope of Services identified in Annex 1 to this Part B of Schedule 8. For the avoidance of doubt, notwithstanding the fact that the ***, Purchaser will only be charged for the TSA Services it requires.  If the volume of TSA Services that the Purchaser requires reduces, and this results in a reduction in the actual costs to RBS of providing those services, then that reduction will be passed on to the Purchaser on a pro-rata basis.

 

However, if (i) Service volumes under the TSA increase by more than 10% above the assumptions used to calculate such ***, or (ii) the Purchaser requests additional services not identified in Annex 1 to this Part B of Schedule 8 (save where such services were being provided to the Business at any time in the 12 months prior to the Relevant Closing), then RBS will have the ability to charge the Purchaser for the extra Services at cost.

 

Notwithstanding the above, and unless the Joint Implementation Committee determines that RBS has not acted in good faith, the TSA running costs shall be increased in accordance with the provisions of clause 4.1.4 - 4.1.6 of the Agreed Terms TSA, as applicable.

 

The fees are estimated based on the actual TSA design for the TSA Services outlined in paragraph 2.1 and on the principles contained in this Part B of Schedule 8. Any change that materially impacts the charges is to be agreed by the parties (refer to paragraph 5.2 below).

 

 

***

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

29

  

 

	
4  

	
Service Levels

 

The following principles shall apply in addition/clarification to those set out in clause 2.2.1 and footnote 3 of the TSA in the Agreed Terms:

 

	 	
4.1.1  

	
Where a service level exists in documentary form, it will continue across the TSA period.

 

	 	
4.1.2  

	
The level of Customer service will be maintained across the TSA period at a level comparable to the pre-TSA customer service level

 

	 	
4.1.3  

	
If no service level exists for any of the critical services set out in Annex 1, a KPI will be identified and agreed and measured between the date of this Agreement and the Relevant Closing to determine a suitable target.

 

	 	
4.1.4  

	
For non critical services, where appropriate, the parties will work on the basis of identifying KPI as service metrics.

 

	 	
4.1.5  

	
Two possible ways of measuring Service metrics for KPIs over the period from identification of the relevant KPI to the Relevant Closing are as follows:

 

	 	
(i)  

	
Current performance of current Rainbow portfolio previous to carveout of Service Centres;

 

	 	
(ii)  

	
Current performance or the whole RBS portfolio, in comparable terms, regardless the carveout period.

 

	
5  

	
TSA Service Management

 

	
5.1  

	
TSA Forum

 

There will be a TSA Forum that will comprise senior business and operations executives from RBS and the Purchaser. Its mandate will be to manage and control the execution of the TSA Services and ensure that they are provided in accordance with the TSA, agreed services levels and KPIs, with capability in the areas set out below only:

 

	 	
5.1.1  

	
Organisational and governance structure to support the review of the TSA progress and performance (escalation processes, periodic performance dashboards, review meetings etc.);

 

	 	
5.1.2  

	
Billing processes and conditions;

 

	 	
5.1.3  

	
Data access and security controls to the extent necessary for the provision of TSA Services, and subject to applicable law and regulation;

 

	 	
5.1.4  

	
Incident and escalation management;

 

	 	
5.1.5  

	
Service Continuity Plan;

 

	 	
5.1.6  

	
Service Stability; and

 

	 	
5.1.7  

	
Change Management.

 

	
5.2  

	
Change Control

 

The TSA Forum will be responsible for managing and controlling the execution of the TSA Services and will ensure that they are provided in accordance with the TSA and the agreed services levels.  In relation to the Change in Circumstances procedure set out in clause 10 and Schedule 2 of the Agreed Terms TSA, the TSA Forum (acting strictly in accordance

 

  

30

  

 

with the provisions of Schedule 2 of the Agreed Terms TSA) shall be the relevant forum for the discussion and progression of any Change.  For the avoidance of doubt, neither the TSA Forum nor the Joint Implementation Committee shall have any ability to agree any contractual changes to the TSA or this Agreement, other than in respect of the Services in accordance with the provisions of Schedule 2 of the Agreed Terms TSA.

 

	
5.3  

	
Reporting

 

The TSA Forum will report to the Joint Implementation Committee under this Agreement.  The Relationship Managers of both parties will report to the TSA Forum which will meet weekly.

 

	
6  

	
Control Framework for TSA Services

 

The Joint Implementation Committee shall apply a control framework in relation to the provision of Services under the TSA based on the following guiding principles:

 

	 	
6.1.1  

	
the control framework provides assurance to the Purchaser of the execution of TSA Services to the quality required in order for it to satisfy its legal, financial and regulatory obligations, as well as ensuring the current level of customer service is maintained. It is assumed that RBS already executes these services to their quality standards and meets its external obligations. Therefore the framework should use, wherever possible, the “as-is” controls within RBS. However, further controls may be required for the TSA where appropriate, in order for the Purchaser to meet any obligations which materially differ from obligations to which RBS is subject and which are specified in detail in Annex 3 (the “Agreed Requirements”). Where these obligations are not set out in the Agreed Requirements, and this requires an amendment to the TSA or the TSA Services, this will be effectedin accordance with the Change in Circumstances procedure set out in Schedule 2 of the Agreed Terms TSA;

 

	 	
6.1.2  

	
RBS will assist the Purchaser in the development of the framework by initially identifying the “as-is” controls which it believes will provide the necessary level of assurance;

 

	 	
6.1.3  

	
the framework will then be agreed and baselined into a control database;

 

	 	
6.1.4  

	
the framework will focus on key areas of the TSAs that present risk to the business or that involve regular, critical operational activity;

 

	 	
6.1.5  

	
RBS will be responsible for ensuring compliance with the controls and producing the agreed evidence as specified in detail in the Agreed Requirements;

 

	 	
6.1.6  

	
the Purchaser will regularly monitor the evidence and controls as part of the agreed governance arrangements;

 

	 	
6.1.7  

	
in certain cases, it may be preferable for a mutually-agreed, independent assurance to be conducted to evidence that controls are in place rather than for regular reporting to occur;

 

	 	
6.1.8  

	
the delivery of operational and accounting MI specified in the Agreed Requirements is required in order to ensure that Santander UK remains in control of the Business and is able to manage the outsourced activity under the TSA;

 

	 	
6.1.9  

	
the Control Framework will include the provision of control metrics to ensure the operational and regulatory integrity of the Business and TSA; and

 

  

31

  

 

	 	
6.1.10  

	
the main objectives for the Control Framework are the following:

 

	 	
(i)  

	
Regulatory requirements are met;

 

	 	
(ii)  

	
Management of the business – End to end;

 

	 	
(iii)  

	
Customer service is maintained; and

 

	 	
(iv)  

	
Operational and accounting data: level and frequency of data as requested.

 

	
7  

	
Transferring Relevant Employees

 

In addition to the TSA set up and running costs, the Purchaser will pay the costs of the Transferring Relevant Employees (as defined in the Agreed Form TSA) with effect from start of the TSA.  To this effect, Transferring Relevant Employees should transfer to the Purchaser on the start of the TSA.  ***

 

	
8  

	
Licence to Occupy

 

Licence to Occupy for RBS at 5-10 Great Tower Street, London/42 High Street, Sheffield will become a schedule to the TSA, to the extent required.

 

	
9  

	
General

 

In the event that the Agreed Terms TSA does not fully reflect any principle contained in this Part B of Schedule 8, the parties shall agree such minimum amendments to the Agreed Terms TSA between the signing of this Agreement and the NatWest Effective Date as are necessary to reflect such principles.

 

 

 *** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

32

  

 

Schedule 8

Part B

Annex 1

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

33

  

 

Schedule 8

Part B

Annex 2

***

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

34

  

 

Schedule 8

Part B

Annex 3

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

35

  

 

Schedule 9

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

36

  

 

Schedule 10

VAT and Other Tax Matters

 

 

	
1  

	
VAT - General

 

	
1.1  

	
The parties intend that the Businesses shall be sold as a going concern for VAT purposes and accordingly:

 

	 	
1.1.1  

	
the Business Sellers and the Purchaser shall (where and when required to do so) give notice of such sale to HM Revenue & Customs pursuant to VATA 1994 or paragraph 6 of the Value Added Tax Regulations 1995 or as otherwise required by law; and

 

	 	
1.1.2  

	
the Business Sellers shall retain all records relating to the Businesses referred to in paragraph 6 of Schedule 11 of VATA 1994 and the Business Sellers undertake to preserve those records in such a manner and for such periods as may be required by law and to give to the Purchaser as from the Relevant Closing reasonable access during normal business hours to such records (and shall permit the Purchaser to take copies thereof at the cost of the Purchaser).

 

	
2  

	
VAT - Going Concern

 

	
2.1  

	
The Business Sellers and the Purchaser intend and shall use all reasonable endeavours to secure that the sale of the Businesses shall be treated under Article 5 of the Order as neither a supply of goods nor a supply of services. The parties acknowledge that advance clearance has been obtained from HM Revenue & Customs indicating that the sale will be so treated on the basis of the draft documentation provided to HM Revenue & Customs. The Business Sellers shall use best endeavours to obtain as soon as reasonably practicable after the date of the Original Agreement and, in any event, prior to the NatWest Closing a confirmation from HM Revenue & Customs that such clearance remains valid on the basis of the executed version of the Original Agreement (“HMRC Clearance”). To the extent reasonably necessary in order to obtain HMRC Clearance, the Purchaser shall co-operate and shall use best endeavours to assist the Business Sellers in obtaining such HMRC Clearance.

 

	
2.2  

	
If subsequent to the Relevant Closing HM Revenue & Customs (but subject to paragraph 4.1 below) determines in writing that VAT is payable on the sale, then to the extent that such determination is due:

 

	 	
2.2.1  

	
to the Purchaser failing to comply with its obligations under any of paragraphs 2, 3 or 4 of this Schedule 10, the Purchaser shall, in addition to any amounts expressed in this Agreement to be payable by the Purchaser, pay to the relevant Business Seller the amount of such VAT together with any penalty or interest incurred by that Business Seller for late payment thereof; or

 

	 	
2.2.2  

	
a Business Seller failing to comply with its obligations under any of paragraphs 2, 3 or 4 of this Schedule 10, the Purchase Price (or the relevant part thereof) shall be deemed to include VAT and the Purchaser shall not be liable to pay any additional amount in respect of it; or

 

  

37

  

 

	 	
2.2.3  

	
neither to such failure of the Purchaser or a Business Seller, the Purchaser shall, in addition to any amounts expressed in this Agreement to be payable by the Purchaser, pay to the relevant Business Seller an additional amount which, when aggregated with any other amounts expressed in this Agreement to be payable by the Purchaser would result in the Purchaser bearing the economic cost of one-half of such VAT chargeable and one-half of any penalty or interest incurred by that Business Seller for late payment of such VAT,

 

such payments by the Purchaser to be made against evidence satisfactory to the Purchaser that the due date for payment of such VAT has fallen due or will fall due within seven days or if later against delivery by the Business Sellers to the Purchaser of the appropriate VAT invoice; and the Purchaser have no further liability to pay any amount in respect of such VAT.

 

	
2.3  

	
Nothing in this paragraph 2 shall require the Business Sellers to make any appeal to any tribunal or court against or otherwise challenge any determination of HM Revenue & Customs that the sale does not fall to be treated as the transfer of a going concern.

 

	
3  

	
VAT - Continuity of Business

 

After each Relevant Closing the Purchaser shall as required by the Order use the Business Assets in carrying on the same kind of business, whether or not as part of any existing business of the Purchaser, as that carried on by the Business Sellers and authorises the Business Sellers to make such obligation known to HM Revenue & Customs in any application seeking confirmation that Article 5 of the Order shall apply to the sale of the Businesses.

 

	
4  

	
Business Properties and VAT

 

	
4.1  

	
Where in relation to any Business Property a Business Seller has as soon as reasonably practicable after the date of the Original Agreement and, in any event, at least 20 Business Days prior to the Relevant Closing:

 

	 	
4.1.1  

	
notified the Purchaser in writing that the transfer of that Business Property under this Agreement would, but for the application of Article 5 of the Order, fall within paragraph (a) of Item 1 of Group 1 of Schedule 9 of VATA 1994; or

 

	 	
4.1.2  

	
notified the Purchaser in writing that the Business Seller or a relevant associate of the Business Seller (as defined in paragraph 3 of Schedule 10 of VATA 1994), has exercised an option to tax that Business Property under Schedule 10 of VATA 1994, which has not been revoked and has delivered to the Purchaser a certified copy of that option (where such copy is available and provided that, if such copy identifies properties other than Business Properties, any text identifying such properties may be redacted) together with evidence of notification of that option to HM Revenue & Customs and (where such is required by Schedule 10 of VATA 1994, is available and relates exclusively to the relevant Business Property) a certified copy of the written permission given by HM Revenue & Customs to exercise that option where such written permission is required by Schedule 10 of VATA 1994,

 

the Purchaser shall exercise an option to tax that Business Property under Schedule 10 of VATA 1994 with effect on or prior to the earliest date on which the Business Property

 

  

38

  

 

concerned is to be transferred and shall give written notification to HM Revenue & Customs as required by paragraph 20 of Schedule 10 of VATA 1994 no later than that date and shall not seek revocation of that option prior to the transfer of the Business Property. The Purchaser shall deliver to the Business Seller certified copies of such option stamped by HM Revenue & Customs showing receipt thereof following the Purchaser’s receipt of the same. If the Purchaser fails to exercise an option to tax in accordance with the foregoing, it shall in addition to any amounts expressed in this Agreement to be payable by it in respect of the said Business Property pay to the Seller (against delivery by the Seller of an appropriate VAT invoice) an amount in respect of VAT thereon.

 

	
4.2  

	
Save as a Business Seller shall have notified otherwise to the Purchaser in writing in accordance with sub-paragraph 4.1 above, neither that Business Seller nor any relevant associate (as defined in paragraph 3 of Schedule 10 of the VATA 1994) of that Business Seller has made or will prior to the Relevant Closing make an option under Schedule 10 of VATA 1994 in relation to any Business Property to be transferred under this Agreement, and no transfer of a Business Property under this Agreement would, but for the application of Article 5 of the Order, fall within paragraph (a) of Item 1 of Group 1 of Schedule 9 of VATA 1994. Notwithstanding any provision in paragraph 2 above no sum shall be payable by the Purchaser in respect of VAT which arises on the sale of such Business Property under this Agreement by reason of the facts being otherwise than as stated in this sub-paragraph 4.2.

 

	
4.3  

	
The Purchaser hereby confirms to the Business Sellers that paragraph 2B of Article 5 of the Order does not apply to it.

 

	
5  

	
Capital Goods Scheme

 

	
5.1  

	
Where applicable, a Business Seller shall provide to the Purchaser prior to the Relevant Closing details of each material item relating to the Businesses which that Business Seller uses in the course or furtherance of its business and for the purposes of that business, otherwise than solely for the purpose of selling the item, being items to which Part XV of the Value Added Tax Regulations 1995 applies and in respect of which the period of adjustment will not have expired by the Relevant Closing (“Capital Business Assets”). In particular, the relevant Business Seller shall provide:

 

	 	
5.1.1  

	
the identity (including in the case of leasehold property, the term of years), date of acquisition and cost of such Capital Business Assets; and

 

	 	
5.1.2  

	
the proportion of the VAT input tax for which credit has been claimed (either provisionally or finally in a tax year and stating which) in respect of such Capital Business Assets.

 

	
6  

	
Capital Allowances; Long life assets

 

	
6.1  

	
The Business Sellers confirm that as at the date of the Original Agreement there are no Business Assets which constitute long life assets as defined by Section 91(1) of the Capital Allowances Act 2001 to which Part 2, Chapter 10 of that Act (Long Life Assets) applies (“Long Life Assets”). In the event that any Business Assets which constitute Long Life Assets are acquired by a Business Seller between the date of the Original Agreement and the Relevant Closing, such Business Seller shall provide to the Purchaser prior to that Relevant Closing details thereof.

 

  

39

  

 

	
7  

	
Insurance premium tax

 

Where applicable, a Business Seller shall provide to the Purchaser prior to the Relevant Closing details of any Contracts in respect of which premiums are received which are liable to tax at the higher rate within the meaning of section 51A and Schedule 6A to the Finance Act 1994.

 

	
8  

	
VAT: Supplies to groups

 

	
8.1  

	
Where applicable, a Business Seller shall, at the request of the Purchaser, use best endeavours to provide to the Purchaser prior to the Relevant Closing, or as soon as reasonably practicable thereafter, details of any Business Assets (other than Goodwill and those the supply of which is exempt from VAT) that have been acquired by such Business Seller less than three years prior to the Relevant Closing.

 

	
9  

	
SDLT

 

	
9.1  

	
In respect of each Business Asset which constitutes or includes a lease (as defined in paragraph 1 of Schedule 17A to the Finance Act 2003), a Business Seller shall provide to the Purchaser prior to the Relevant Closing details of any:

 

	 	
9.1.1  

	
grant of a lease which was exempt from charge by virtue of any of the provisions set out in paragraph 11(3) of Schedule 17A to the Finance Act 2003 and which was treated as vested in the grantor; and

 

	 	
9.1.2  

	
lease in respect of which rent or other consideration payable was, is or has ceased to be contingent, uncertain or unascertained.

 

	
10  

	
Tax returns, disputes, records and claims

 

	
10.1  

	
Where applicable, a Business Seller shall use reasonable endeavours to provide to the Purchaser prior to the Relevant Closing or as reasonably practicable thereafter details of any matters arising between the date of this Agreement and the Relevant Closing which would if they had occurred prior to the date of this Agreement have constituted a breach of any Seller Warranty in paragraph 15 of Schedule 14 (Tax returns, disputes, records and claims etc.).

 

  

40

  

 

Schedule 11

Closing Obligations

 

	
1  

	
General Obligations

 

	
1.1  

	
The Business Sellers’ Obligations

 

	 	
1.1.1  

	
On the NatWest Closing, the Business Sellers shall deliver to the Purchaser the following:

 

	 	
(i)  

	
evidence of the due fulfilment of the relevant conditions set out in Clause 4.1.1 of this Agreement for which the Business Sellers are responsible;

 

	 	
(ii)  

	
all relevant Transaction Documents in the Agreed Terms duly executed by each relevant Business Seller and/or other member of the RBSG Group; and

 

	 	
(iii)  

	
evidence that the Business Sellers are authorised to execute each of the Transaction Documents to which it is a party (including, where relevant, any notarial deeds referred to in this Schedule).

 

	 	
1.1.2  

	
On the RBS Wales Closing, the Business Sellers shall deliver to the Purchaser the following:

 

	 	
(i)  

	
all relevant Transaction Documents (if any) duly executed by each relevant Business Seller and/or other member of the RBSG Group; and

 

	 	
(ii)  

	
evidence that the Business Sellers are authorised to execute each of the Transaction Documents (if any) to which it is a party (including, where relevant, any notarial deeds referred to in this Schedule).

 

	 	
1.1.3  

	
On the RBS England Closing, the Business Sellers shall deliver to the Purchaser the following:

 

	 	
(i)  

	
all relevant Transaction Documents (if any) duly executed by each relevant Business Seller and/or other member of the RBSG Group;

 

	 	
(ii)  

	
evidence that the Business Sellers are authorised to execute each of the Transaction Documents (if any) to which it is a party (including, where relevant, any notarial deeds referred to in this Schedule); and

 

	 	
(iii)  

	
copies of all the documents relating to the Businesses contained in the Physical Data Room.

 

	 	
1.1.4  

	
On the Relevant Closing, the Business Sellers shall use their reasonable endeavours, in relation to their respective Businesses, to deliver or make available to the Purchaser the relevant Customer Records in the possession or custody of, or under the control of, the relevant Business Seller including the following Customer Records which subject to the foregoing shall be provided or made available in the following manner, subject to any alternative arrangements as may be agreed by parties in writing following discussion by the Joint Implementation Committee:

 

  

41

  

 

	 	
(i)  

	
by way of electronic data transfer, relevant Customer transaction history information for such period to each Closing as the Parties agree, acting reasonably;

 

	 	
(ii)  

	
by way of data extraction, relevant Customer correspondence, product applications and other paper records, including know your customer paperwork, to the extent held in an image library.

 

	 	
1.1.5  

	
On the Relevant Closing, the Business Sellers shall, in relation to their respective Businesses, deliver or make available to the Purchaser the relevant Books and Records (other than the Customer Records) held in electronic format in the possession or custody of, or under the control of, the relevant Business Seller  including Books and Records relating to the Transferring Employees, accounting and financial affairs of the Businesses and Business processes which shall be provided or made available by way of electronic data transfer or data extraction, subject to any alternative arrangements as may be agreed by the parties in writing following discussion by the Joint Implementation Committee.

 

	 	
1.1.6  

	
On the Relevant Closing, the Business Sellers shall, in relation to their respective Businesses, deliver or make available to the Purchaser the relevant Books and Records (other than Books and Records in electronic format) in the possession or custody of, or under the control of, the relevant Business Seller including the following Books and Records which shall be provided or made available in the following manner, subject to any alternative arrangements as may be agreed by parties in writing following discussion by the Joint Implementation Committee

 

	 	
(i)  

	
to the extent held in hard copy, the Client Agreements and Loan Guarantees/Security (other than Loan Guarantees/Security relating to Shared Collateral) in a secure manner, labelled, indexed and, where appropriate, detailing customer names and customer identification numbers; and

 

	 	
(ii)  

	
to the extent not delivered in accordance with paragraph 1.1.3(iii) above, any other paper records held in secure storage (the “Storage Items”) (including such paper records held with reputable third party suppliers, at the Business Sellers’ discretion) in accordance with the Business Sellers’ standard document retention policies shall be retained by the Business Sellers in secure storage,

 

provided that (in the case of paragraphs 1.1.4 to 1.1.6 (inclusive))  the Business Sellers shall be entitled to retain until the Mid-Corporate and Complex SME Data Migration has taken place any Books and Records that they require in order to provide the relevant services under the TSA.

 

For the avoidance of doubt, the Business Sellers shall not be obliged to provide original or paper copies of any Books and Records that have already been delivered or made available to the Purchaser in electronic form and shall not be obliged to provide any information in respect of customers who are not Customers at the Relevant Closing.

 

	
1.2  

	
The Purchaser’s Obligations

 

	 	
1.2.1  

	
On the NatWest Closing, the Purchaser shall deliver to the Business Sellers:

 

  

42

  

 

	 	
(i)  

	
evidence of the due fulfilment of the conditions set out in Clause 4.1.1 of this Agreement for which the Purchaser is responsible;

 

	 	
(ii)  

	
all relevant Transaction Documents in the Agreed Terms duly executed by the Purchaser or other member of the Purchaser’s Group; and

 

	 	
(iii)  

	
evidence that the Purchaser is authorised to execute each of the Transaction Documents to which it is a party (including, where relevant, any notarial deeds referred to in this Schedule).

 

	 	
1.2.2  

	
On the RBS Wales Closing, the Purchaser shall deliver to the Business Sellers:

 

	 	
(i)  

	
all relevant Transaction Documents (if any) duly executed by the Purchaser or other member of the Purchaser’s Group; and

 

	 	
(ii)  

	
evidence that the Purchaser is authorised to execute each of the Transaction Documents (if any) to which it is a party (including, where relevant, any notarial deeds referred to in this Schedule).

 

	 	
1.2.3  

	
On the RBS England Closing, the Purchaser shall deliver to the Business Sellers:

 

	 	
(i)  

	
all relevant Transaction Documents (if any) duly executed by the Purchaser or other member of the Purchaser’s Group; and

 

	 	
(ii)  

	
evidence that the Purchaser is authorised to execute each of the Transaction Documents (if any) to which it is a party (including, where relevant, any notarial deeds referred to in this Schedule).

 

	
2  

	
Further Obligations in Addition to Transfer

 

	
2.1  

	
General Obligations

 

At each Closing, the Business Sellers shall, in relation to their respective Businesses, deliver or make available to the Purchaser, at such address as shall be notified to the Business Sellers by the Purchaser five Business Days prior to the Relevant Closing, the following:

 

	 	
2.1.1  

	
any releases which the parties have obtained under Clause 9.3 of this Agreement;

 

	 	
2.1.2  

	
all the relevant Business Assets which are capable of transfer by delivery with the intent that legal and beneficial title to such Business Assets shall pass by and upon delivery;

 

	 	
2.1.3  

	
all title deeds relating to the relevant Business Properties which are in the Business Sellers’ possession as more particularly described in the Properties Exhibit attached to Schedule 3;

 

	 	
2.1.4  

	
subject to Schedule 5 and the Scheme, duly executed agreements in the Agreed Terms for the assignment, novation or transfer of the benefit of the Contracts and the Loan Guarantees/Security; and

 

	 	
2.1.5  

	
duly executed Transitional Trade Mark Licence(s)) and the duly executed Trade Mark Assignment in the form of Parts 2 and 4 of Schedule 4.

 

  

43

  

 

Schedule 12

 

***

 

 

  

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

44

  

 

Schedule 13

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

45

  

 

Schedule 14

 

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

46

  

 

Schedule 15

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

47

  

Schedule 16

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

48

  

 

Schedule 17

 

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

49

  

 

Schedule 18

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

50

  

 

Schedule 19

 

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

51

  

 

Schedule 20

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

52

  

 

Schedule 21

 

***

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

53

  

 

Schedule 22

 

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

54

  

 

Schedule 23

Part A

Joint Implementation Committee Governance

 

  

55

  

 

	

--------------------------------------------------------------------------------
RBS                                                                  Santander
--------------------------------------------------------------------------------

Schedule 23, Part A

JIC Governance

Version 3

                                                   Restricted and Confidential 1

	

	 

 

 

 

 

 

	

Document Control
================================================================================

-------------------------------------------------------------------------------------------------------------
Version &          Modified by  Comments
-------------------------------------------------------------------------------------------------------------
                                First governance proposal presented to JIC. W1 organisation included only and
v1.8    21/03/2011 Santander    proposal on Meetings and Committees
v1.9    28/03/2011 Joint        Inclusion of W2 organisation
v1.10   04/04/2011 Joint        Updated W2 organisation. This is the version reviewed and signed-off at JIC.
v2.1    06/07/2011 RBS -- Legal
v2.2    11/07/2011 SAN -- Legal
v3      13/07/2011

                                                   Restricted and Confidential 2

	

	 

 

 

 

 

 

	

Introduction
================================================================================

The parties have agreed that there is a need to evolve the JIC management
system that has proved very effective for the planning phase to a governance
for the execution phase, so as to continue achieving the plan milestones
(transfer of the Businesses) with the expected customer impact and operational
risk.

The parties have therefore agreed to confirm:
[] Delegated authority for the JIC;
[] Implementation governance;
[] Escalation mechanism; and
[] Communication to the external stakeholders (FSA, BoE, EC, etc.),

as set out in this Part A of Schedule 23.

                                                   Restricted and Confidential 3

	

	 

 

 

 

 

 

	

JIC Governance of Separation Plan: Delegated Authority
JIC Terms of Reference for Separation Plan Governance
================================================================================

JIC will act under delegated authority to manage execution of the Separation
Plan in accordance with the terms of this Agreement, specifically:

[]   Approval of changes to the Separation Plan and reprioritization of
     activities, except for the final migration date.

[]   Assignment of resource in both organizations so the project is executed
     according to the Separation Plan.

[]   Agreement regarding the completion of key milestones and readiness to
     proceed to the next stage, based on the agreed criteria approved by JIC.

[]   Monitoring the progress of execution.

[]   Assignment of actions to address issues or problems.

[]   Authority to modify the governance of the project and replace the project
     leaders as required.

[]   Authority to engage with any third party (consulting, integration company,
     etc.) to solve quickly any technical problem or discrepancy arising in the
     course of the project. Each of these engagements will require the consent
     of the parties through the JIC and the cost will be shared between the two
     organizations. The parties acknowledge and agree that the intention is not
     to re-allocate costs relating to Separation, or to revise the regime for
     the allocation of TSA costs, which shall remain as per this Agreement and
     the TSA respectively.

[]   Representation of the Separation Plan and progress to the FSA/BoE and other
     external bodies Control mechanisms (described in subsequent pages) will
     support JIC execution of these tasks.

The Wave 2 TSA will have to develop its own governace, however while this is
not established all the issues related to the TSA will be discussed and managed
at the JIC.

                                                   Restricted and Confidential 4

	

	 

 

 

 

 

 

	

JIC Governance of Separation Plan: Delegated Authority
JIC Proposed Terms of Reference for Plan Governance
================================================================================

Each party is responsible for:

[]   Completing tasks as described in the plan to the criteria set (separately
     or jointly)

[]   Managing internal approval processes

[]   Completing internal control processes

[]   Communication/explanation of JIC decisions to relevant stakeholders

[]   Communicating to the JIC any potential internal decision (new product
     launch, change in T & C of a product, etc..) that may impact the successful
     execution of the migration of the Businesses in accordance with the terms
     set out in this Agreement.

[]   Bank specific discussions with FSA regarding the project (eg impact of
     current plan)

                                                   Restricted and Confidential 5

	

	 

 

 

 

 

 

 

	

JIC Control Mechanisms
================================================================================

                               [GRAPHIC OMITTED]

Weekly progress reporting Formal JIC agreement      'Spotlight' reviews     Periodic review of
by workstream             that criteria have been   requested by JIC of     project risk register:
                          met                       workstreams or key      -Completeness
RAG for milestones within                           deliverables            -Severity
review window             Signoff that deliverables                         -Mitigation actions.
                          complete                  Independent QA of
Dependency management                               workstream, deliverable
                          Sanction that             or critical milestone
Change process for plan   programme can proceed
dates and approaches      to next step              Formal quarterly review
                                                    around key steps

                                                   Restricted and Confidential 6

	

	 

 

 

 

 

 

	

Progress Tracking
================================================================================

JIC will track key business and key IT milestones, supported by QA review of
completion for key steps.
WRC will track "Level 1" milestones and escalate to JIC if appropriate

------------------------------------------------------------------------------------------------------------------------------------
Control Element                   Approach                                           JIC Responsibilities
------------------------------------------------------------------------------------------------------------------------------------
Progress reporting against JIC    [] Weekly review of JIC critical milestone and     [] Provide required programme status updates to
critical milestones and             dependencies                                       respective board level stakeholders
dependencies and review of
workstream level plans            [] Weekly high level status review of each
                                    workstream including: plan progress, issues and
                                    decisions for executive attention
------------------------------------------------------------------------------------------------------------------------------------
Change process for plan dates and [] Changes to the baseline critical milestones and [] Provide change governance and control oversight
approaches                          /or approach which impact the critical path to   [] Approve any changes to the plan which impact the
                                    be taken to JIC for review and approval            critical path
------------------------------------------------------------------------------------------------------------------------------------

Supervised by PMO
                                                   Restricted and Confidential 7

	

	 

 

 

 

 

 

	

Key Decision Points / Milestone Acceptance
================================================================================

------------------------------------------------------------------------------------------------------------------------------------
Control Element                 Approach                                                  JIC Responsibilities
------------------------------------------------------------------------------------------------------------------------------------
Formal JIC agreement that       [] JIC critical milestones closing within review window   [] Approve critical milestone 'closed' status
criteria have been met and sign    (8 week) to be presented at JIC with acceptance
off that deliverables complete     criteria
                                [] Workstreams to provide supporting documentation
                                   (deliverables, etc.) on request by JIC to validate that
                                   acceptance criteria has been met
                                [] Independent review can be requested by JIC
------------------------------------------------------------------------------------------------------------------------------------
Sanction that programme can     [] Master Milestones acceptance criteria to be            [] Review Master Milestone entry and exit criteria and
proceed to next phase              presented to JIC along with any necessary                 provide formal approval for the Programme to
                                   supporting evidence prior to the programme                move to the next phase
                                   moving to the next phase
                                [] Independent review can be requested by JIC
------------------------------------------------------------------------------------------------------------------------------------

Supervised by PMO
                                                   Restricted and Confidential 8

	

	 

 

 

 

 

 

	

Quality Assurance
================================================================================

------------------------------------------------------------------------------------------------------------------------------------
Control Element                Approach                                              JIC Responsibilities
------------------------------------------------------------------------------------------------------------------------------------
Workstream, Deliverable or     [] Ad hoc request by JIC for 'Spotlight' review on    [] Provision of active guidance, support and direction
Critical Milestone 'Spotlight'    either a specific workstream or deliverable           to workstream leads
Review                         [] 'Spotlight' review to be discussed and agreed at   [] Resolve escalated risks and issues
                                  JIC and communicated to the workstream /           [] Provide executive decision and approval
                                  deliverable owner by COB Tues (to allow sufficient
                                  time for inclusion within agenda/pack)
                               [] Project leads from RBSG and the Purchaser must
                                  both be represented when work streams are
                                  requested to attend JIC
------------------------------------------------------------------------------------------------------------------------------------
Independent QA of              [] Ad hoc request by JIC to commission an             [] Review output of Independent Review
Workstream, Deliverable of        independent review of a specific workstream,
Critical Milestone                deliverable of critical milestone
------------------------------------------------------------------------------------------------------------------------------------

Supervised by PMO
                                                   Restricted and Confidential 9

	

	 

 

 

 

 

 

	

Risk Management
================================================================================

------------------------------------------------------------------------------------------------------------------------------------
Element                         Approach                                        JIC Responsibilities
------------------------------------------------------------------------------------------------------------------------------------
Periodic review of project risk []  Monthly programme and escalated workstream  [] Review the totality of risks (internal and external)
register                            level risk assessment to be reviewed at JIC    and the adequacy and effectiveness of the
                                    including:                                     mitigating controls
                                o   Completeness                                [] Ensure appropriate ownership and accountability
                                o   Severity                                       for mitigating specific risks
                                o   Mitigation actions                          [] Review and update the priority and severity given
------------------------------------------------------------------------------------------------------------------------------------

Supervised by PMO
                                                  Restricted and Confidential 10

	

	 

 

 

 

  

 

  

 

Schedule 23

Part B

Certain Separation Matters

 

	
1  

	
General

 

	
1.1  

	
The parties acknowledge that in order for the Separation Plan to be implemented in accordance with the parties’ obligations under this Agreement, certain required steps and/or processes have been identified prior to the date of this Agreement.  Accordingly the parties have agreed to the matters set out in this Schedule 23.

 

	
1.2  

	
The parties further agree that the following principles in relation to the Separation of the Businesses are to be applied by the Joint Implementation Committee in planning for Separation and implementing the Separation Plan.

 

	
1.3  

	
For the avoidance of doubt, the matters set out in this Part B of Schedule 23 are not an exhaustive list and, accordingly, any further matters relating to the Separation and the Separation Plan shall be dealt with by the Joint Implementation Committee in accordance with Clause 6.2.2 of the Agreement and Part A of this Schedule 23.

 

	
2  

	
Model Office

 

	
2.1  

	
The parties agree that, prior to the Closings, the Business Sellers and the Purchaser shall collaborate to generate artificial production customer data, the transfer of which to the Purchaser may be tested by the Purchaser on one or more occasions prior to the Closings (the “Model Office Transfers”), with the aim of minimising Customer disruption and detriment on and following the Closings, all as reflected in the Separation Plan.

 

	
2.2  

	
All matters relating to the Model Office Transfers (including any required requests, enquiries and approvals from the FSA relating to the Model Office Transfers) shall be dealt with by the Business Sellers and the Purchaser in consultation with each other through the Joint Implementation Committee and the Business Sellers and the Purchaser shall co-operate with each other and provide to each other all information and assistance as may be reasonably necessary in connection with the implementation of the Model Office Transfers.

 

	
3  

	
Friends and Family Transfer

 

	
3.1  

	
In accordance with the selection and other criteria to be agreed by the Joint Implementation Committee, the parties agree that the Products related to such number of Customers as may be agreed by the JIC (expected to be approximately 200 and no more than 250 as at the date of this Agreement) shall be transferred by the relevant Business Seller to the Purchaser in one or more separate transfers and shall therefore not form part of the Scheme (each a “Friends and Family Transfer”).

 

	
3.2  

	
The Purchaser and the relevant Business Seller shall work collaboratively together and shall each use all reasonable endeavours to determine the details and timing of the Friends and Family Transfers as set out in Separation Plan and to undertake any requirements, including the obtaining of necessary customer consents, to complete such assignment and/or transfer pursuant to the Friends and Family Transfers including, without limitation, executing all relevant transfer documentation, notifying all relevant third parties of such assignment and/or transfer and circulating or publishing any necessary

 

  

56

  

 

documentation pursuant to the terms of the relevant Contracts or otherwise.    The parties agree and acknowledge that Friends and Family Customers will not include Customers with Safe Custody Items and that it is the parties’ intention that the customer assets and liabilities to be transferred to the Purchaser pursuant to the Friends and Family Transfer shall not be material in the context of the Business to which they relate.

 

	
3.3  

	
Without prejudice to paragraph 3.2, the Purchaser shall be responsible for complying with any registration requirements of the relevant authorities in respect of relevant Contracts to be transferred or assigned pursuant to the Friends and Family Transfer, save where, as a matter of Law and Regulations, such registration requirements are the responsibility of the relevant Business Seller.

 

	
3.4  

	
The parties acknowledge that where the Friends and Family Transfer includes a customer opening a new Product, this will be subject to compliance with all new client procedures of the relevant Business Seller including, without limitation, anti-money laundering regulations.

 

	
3.5  

	
All matters relating to the Friends and Family Transfer (including all requests, enquiries and approvals from the FSA relating to the Friends and Family Transfer) shall be dealt with by the Business Sellers and the Purchaser in consultation with each other through the Joint Implementation Committee and the Business Sellers and the Purchaser shall co-operate with each other and provide to each other all information and assistance as may be reasonably necessary in connection with the implementation of the Friends and Family Transfer.

 

	
3.6  

	
The parties agree that, prior to the Friends and Family Transfer, the Business Sellers and the Purchaser shall determine through the Joint Implementation Committee which party shall have responsibility for preparing, publishing and issuing communications and notifications to Customers and proposed Customers relating to the Friends and Family Transfer contemplated by this Agreement. The parties shall consult with each other as to the content of all such communications and notifications, shall provide to each other all information and assistance as may be reasonably necessary in connection therewith and shall incorporate all comments as may be reasonably made by the other. Subject to Clause 4.4.10, no communication or notification to any Customer relating to the Friends and Family Transfer contemplated by this Agreement shall be published or issued by the Business Sellers (or any of them) without the prior consent of the Purchaser or by the Purchaser without the prior consent of the Business Sellers, (in each case such consent not to be unreasonably withheld or delayed).

 

	
4  

	
***

 

	
5  

	
Additional Excluded Products

 

	
5.1  

	
The Business Sellers and the Purchaser wish to limit the impact, and therefore the number, of instances where *** impact on the timely and smooth execution of the Separation Plan.

 

	
5.2  

	
Subject to paragraph 5.3, the parties may, therefore, agree, through the Joint Implementation Committee, that certain Products should be ***.

 

	
5.3  

	
Either party may from time (after the date of this Agreement (it being acknowledged by the parties that no such proposal is expected to be made at any time after the date on which

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

57

  

 

the *** are to be finalised as set out in the Separation Plan) to time submit a written proposal to the other in relation to any Product which it wishes to ***. The Joint Implementation Committee will discuss the proposal and recommend a solution for the exclusion of the relevant Product if such solution would remove an obstacle or potential obstacle to, or risk or potential source of delay in, the execution of the Separation Plan or the Joint Implementation Committee otherwise deems such action appropriate. For the avoidance of doubt, in respect of any proposal delivered after finalisation of the ***, the Joint Implementation Committee may (without limitation) consider any reputational and operational implications for the parties arising in respect of such proposal.  Any solution recommended by the Joint Implementation Committee will be in the best interests of the transaction and will, so far as possible, be implemented in such a manner that the impact on both parties is *** (as further set out in paragraph 4.4.1 above). To the extent that an *** solution cannot be provided, the parties shall, through the Joint Implementation Committee, seek, in good faith, a solution which is agreeable to both parties.

 

	
5.4  

	
The recommendation of the Joint Implementation Committee in relation to the matters set out in this paragraph 5 will be subject to the final approval of both parties, provided that the parties shall act in accordance with the recommendation of the Joint Implementation Committee unless it is not reasonable to do so.

 

	
6  

	
Pre-Closing servicing of Business ATMs

 

	
6.1  

	
The parties agree and acknowledge that there is a requirement for the Purchaser to assume the servicing of the Business ATMs for a period prior to the Relevant Closing, and including, in certain circumstances, the replacement of certain Business ATMs, to ensure the smooth transition of the Business ATMs and related services to the Purchaser’s systems at  each Relevant Closing. It is currently envisaged at the date of this Agreement that the period of such servicing will commence approximately six to eight weeks prior to the NatWest Closing.

 

	
6.2  

	
Notwithstanding the terms agreed by the Joint Implementation Committee in respect of ATMs pursuant to paragraph 6.1, legal ownership of the Business ATMs will only transfer at the Relevant Closing in accordance with the terms of this Agreement.

 

	
6.3  

	
Appropriate amendments to the Closing Statements will be made to reflect any servicing, including cash management by the Purchaser, prior to the Relevant Closing, such that the outcome of the servicing arrangement is economically neutral between the parties.

 

	
7  

	
Pre-Closing Training

 

	
7.1  

	
The parties agree and acknowledge that the Purchaser will need to have reasonable access to the Relevant Employees (and to the extent reasonably necessary, employees who will be providing Transitional Services under the Transitional Services Agreement) in the period prior to the Relevant Closing in order to allow those employees to undertake training in relation to the Purchaser’s systems, processes, policies and procedures.

 

	
7.2  

	
The Joint Implementation Committee shall discuss and agree an appropriate training schedule (including estimated costs to be incurred by the RBSG Group in connection with such training) for such purposes in accordance with the Separation Plan, it being

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

58

  

 

acknowledged that such access shall not cause any material interruption to the operation of the Businesses.

 

	
8  

	
Payments and other Coexistence Arrangements

 

Payment Co-existence Agreement

 

	
8.1  

	
The parties agree and acknowledge that on and from the first Model Office Transfer there will be a requirement for payments co-existence arrangements to be put in place between the Business Sellers and the Purchaser and that the parties shall enter into an agreement governing these arrangements prior to the first Model Office Transfer (the “Payments Co-Existence Agreement”).

 

	
8.2  

	
The terms of the Payments Co-Existence Agreement shall be agreed by the parties acting reasonably, in good faith, and shall include appropriate matching cross-indemnities addressing (i) any failure by a member of the Purchaser Group to reimburse a payment properly made by a Business Seller or made in accordance with the instructions of the Purchaser or any member of the Purchaser’s Group pursuant to the Payments Co-Existence Agreement; and (ii) a failure by a member of the RBSG Group to make any payment required under the Payments Co-Existence Agreement  (for the avoidance of doubt, such indemnities will not apply where the loss arises as a result of, or in connection with, any fraud, wilful misconduct, negligence by the party that would otherwise have the benefit of such indemnity).

 

Other co-existence arrangements

 

	
8.3  

	
Without prejudice to any other provisions of this Agreement but subject to paragraph 8.7 below, the Business Sellers and the Purchaser agree that, with effect from each Relevant Closing, at the reasonable request of the Purchaser, the Business Sellers shall provide to the Purchaser such historic data or documents relating to Customers as is reasonably required by the Purchaser for the operation of the Business in the ordinary course of business (including account or interest statements requested by a Customer that relate to a period prior to the Relevant Closing), provided that such data is under the control of, or otherwise obtainable by, the Business Sellers and either (a) has not been made available or provided by the Business Sellers to the Purchaser prior to the date of such request; or (b) has been so made available or provided by the Business Sellers to the Purchaser but not in a form that can be used by the Purchaser for the purpose in question (for example, historic account or interest statements requested by a Customer that need to be recalculated or reconstituted before they can be provided to a Customer).

 

	
8.4  

	
The parties further agree and acknowledge that, on and from each Relevant Closing, there will be a requirement for certain other mutual co-existence arrangements between the Business Sellers and the Purchaser relating to certain customer matters and arising in the ordinary course of business, which may include arrangements such as dealing with questions and queries from customers arising in the ordinary course of business in respect of the following: closed accounts, dormant accounts, customer complaints, the FSCS, historical paper records, electronic data, uncashed cheques, DDI indemnities, historical credit, charge and debit card disputes, the unclaimed assets fund and certificates of interest.

 

	
8.5  

	
Subject to paragraph 8.6, the co-existence services referred to in paragraphs 8.3 and 8.4 above shall be provided at no charge to the recipient thereof for a period of seven years from the date of the Relevant Closing, and thereafter at the provider’s reasonable internal

 

  

59

  

 

cost (including any necessary direct third party costs incurred), without mark-up, of the production of such data or the provision of such service.

 

	
8.6  

	
If the Purchaser requests that the Business Sellers provide any historic data or documents in relation to a Customer pursuant to paragraph 8.3 or 8.4 which has already been made available or provided to the Purchaser prior to the date of such request in a form that can be used (without amendment, recalculation or reconstitution) by the Purchaser for the purpose in question (or has been offered to be made so available and such offer has been declined by the Purchaser), such data or documents shall be provided by the Business Sellers to the Purchaser at a cost to be determined prior to the NatWest Closing by the parties (through the Joint Implementation Committee), each acting reasonably and in good faith.

 

	
8.7  

	
Prior to each Relevant Closing, the Business Sellers shall provide to the Purchaser details of a telephone number and an address to which a Customer may be directed after the Relevant Closing in the event that a Customer requests any copies of historic Customer Records which include a Business Seller’s branding.  Following each Relevant Closing, the Purchaser shall direct Customers to the relevant Business Seller in accordance therewith and such Business Seller shall provide such copies direct to the Customer in accordance with the relevant Business Seller’s service levels applicable to the Excluded Business and subject to the Customer paying to the relevant Business Seller such charges (if any) in respect thereof which are consistent with the charges applicable to the Excluded Business of such Business Seller from time to time, provided that such charges are in any case no greater than the charges applied by the relevant Business Seller to analogous requests immediately prior to the Relevant Closing.

 

	
8.8  

	
The parties agree to provide such co-existence arrangements as are referred to in paragraphs 8.3 and 8.4 above to each other with effect from each Relevant Closing in a manner consistent with existing service levels of the relevant provider’s group as at the date of this Agreement in respect of the provision of analogous data to customers and shall, acting reasonably and in good faith, discuss the detail of and enter into an appropriate agreement governing, such arrangements prior to the NatWest Closing.

 

	
8.9  

	
For the avoidance of doubt:

 

	 	
8.9.1  

	
no party shall be required pursuant to paragraph 8.5 to provide to the other without charge any:

 

	 	
(i)  

	
document in paper form which has previously been made available or provided to the requesting party in the form of an electronic facsimile image file (or has been offered to be made so available and such offer has been declined by the requesting party); or

 

	 	
(ii)  

	
document in electronic form which has previously been made available or provided to the requesting party in paper form (or has been offered to be made so available and such offer has been declined by the requesting party); and

 

	 	
8.9.2  

	
the party providing any information reasonably requested by the other pursuant to the co-existence arrangements referred to in paragraphs 8.3 and 8.4 need not provide without charge more than one copy of the same, identical document,

 

  

60

  

 

in each case provided that the recipient thereof is equally able to print from such electronic facsimile image file or produce a photocopy of the same and such print-out or photocopy (as the case may be) is satisfactory for the purposes for which that document is required.

 

	
8.10  

	
If the parties shall, following the date of this Agreement, identify and agree any other co-existence services arrangements not related to those referred to in paragraphs 8.3 and 8.4 above, then as part of discussing such arrangements as set out in paragraph 8.8 above, the parties shall also, acting reasonably and in good faith, discuss whether any charges are to be payable in respect of such arrangements and, if so, the quantum of such charges.

 

	
9  

	
Closing arrangements and goodbye/welcome statements

 

	
9.1  

	
The parties acknowledge that, depending on the Relevant Closing Date, there may be a period following Data Migration during which the final interest on Products is calculated by the relevant Business Seller.

 

	
9.2  

	
The parties agree that, if the final interest on Customer Products is paid by a Business Seller where such payment is an Assumed Liability (and vice versa), there shall be a balancing payment made between the parties with the aim of ensuring that the financial impact of the payment of any such interest by the relevant party is economically neutral for the parties.

 

	
9.3  

	
The Joint Implementation Committee will agree the details of such closing arrangements, interest and balancing payments and agree the details of any necessary communications to Customers.

 

	
10  

	
Product / Business ***

 

	
10.1  

	
The parties agree and acknowledge that *** to Products (including the ***), IT Systems and functionality and other processes relevant to the Businesses in the period prior to the Closings *** on the *** of the Separation Plan and that it is therefore in the interests of both parties and the transaction contemplated by this Agreement to ***.

 

	
10.2  

	
Without limiting Clause 5, the Business Sellers agree that, subject to Law and Regulation, they shall (i) use all reasonable endeavours *** or in respect of the Businesses in the *** period immediately prior to the NatWest Closing Date until the RBS England Closing Date; and (ii) where any *** is required by Law and Regulation, seek to implement such *** in a way that minimises the impact of that change on the Separation Plan.

 

	
10.3  

	
If *** of the Business Sellers prior to the Closings in respect of the *** which will affect or otherwise impact, in each case materially and adversely (or otherwise as agreed by the JIC), on the Separation Plan, then the relevant Business Seller shall, subject always to Law and Regulation, use all reasonable endeavours to notify the Purchaser through the Clean Team as soon as reasonably practicable prior to implementing such action. As soon as reasonably practicable following notification by the relevant Business Seller to the Purchaser of the proposed action, members of the Joint Implementation Committee shall discuss the proposed action and its impact on the Separation Plan in accordance with the Clean Team procedure, and shall propose a solution that is in the best interests of the parties to this Agreement which may include recommending that the action proposed by

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

61

  

 

the relevant Business Seller, to the extent reasonably practicable and ***, be implemented in respect of the *** only and not to the Businesses or any one of them, subject always to Law and Regulations and to any requirements or recommendations of the Monitoring Trustee.

 

	
11  

	
In-Flight Products

 

	
11.1  

	
The parties acknowledge that there may be instances where a Product has been offered to a Customer prior to the Relevant Closing, but is only finalised following the Relevant Closing (“In-Flight Products”).

 

	
11.2  

	
The parties acknowledge that In-Flight Products may not be able to transfer onto the Purchaser’s systems and therefore agree that the Joint Implementation Committee will discuss and agree an appropriate mechanism for the transfer of such In-Flight Products.

 

	
11.3  

	
The Business Sellers will, in the 3 months prior to the Relevant Closing, operate the Businesses such as to seek to minimise the incidences of In-Flight Products at Closing to the fullest extent possible.

 

	
12  

	
Employee Journey

 

	
12.1  

	
The parties agree and acknowledge that the “employee journey” for the Relevant Employees is an important part of the transaction that is the subject of this Agreement.  Accordingly, the parties have agreed the following in respect of the “employee journey”.

 

***

 

	
13  

	
Mortgage Manager Platform

 

The Business Sellers shall, as soon as reasonably practicable following the date of this Agreement, provide to the Joint Implementation Committee details of the Relevant Mortgage Manager Platform Mortgages.  The Joint Implementation Committee shall, as soon as reasonably practicable thereafter, consider the Relevant Mortgage Manager Platform Mortgages and determine whether such mortgages should be included in the transaction contemplated by this Agreement, all in a manner, and applying the principles, consistent with those set out in paragraph 4.3 above.  For the avoidance of doubt, any such Relevant Mortgage Manager Platform Mortgages that are so included in the scope of the transaction contemplated by this Agreement as a result of such determination by the Joint Implementation Committee shall be treated in the same way as credit cards and charge cards as described in paragraph 4.4.2 above.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

62

  

 

Schedule 24

Joint Business Committee

 

It is the intention of the parties that the Business Committee be rejuvenated as a Joint Business Committee (“JBC”) with a new delegated governance scheme.

 

Accordingly, the parties have agreed to confirm:

	 	
1.  

	
A delegated authority for the JBC and JBC governance;

 

	 	
2.  

	
The information to be provided to the JBC; and

 

	 	
3.  

	
The actions to be implemented in terms of up-grading the JBC.

 

	
1  

	
JBC Proposed Terms of Reference for Execution Phase

 

	 	
·  

	
Joint approval of the business elements of Separation to be delivered (the “Business Separation Deliverables”).

 

	 	
·  

	
The Business Separation Deliverables will entail: (i) monitoring the financial and operating performance of the Businesses via the information provided in accordance with paragraph 2 below; (ii) ensuring a smooth transition of the Businesses to the Purchaser in accordance with the terms of this Agreement; and (iii) overseeing the business elements of the transaction required for the Scheme.

 

	 	
·  

	
Assignment of the resources required in both organisations so that the JBC mandate for the Business Separation Deliverables is executed.

 

	 	
·  

	
Monitoring the progress of execution of the Business Separation Deliverables.

 

	 	
·  

	
Assignment of actions to address issues or problems in relation to achieving the Business Separation Deliverables.

 

	 	
·  

	
Save in respect of approaches to third parties in connection with the Transitional Services Agreement and which are addressed in Schedule 8, authority to engage with any third party to resolve quickly any implementation issues or discrepancies that may arise in the course of the key business elements of the Separation Plan. Any of these engagements will be jointly agreed and the cost shared between the two organisations.

 

	 	
·  

	
Each party to be responsible for: (a) completing the tasks ascribed to it in terms of the Business Separation Deliverables, (b) managing its own internal approval processes, (c) completing its own internal control processes, (d) the communication/explanation of JBC decisions to JIC and relevant stakeholders, (e) the communication to JBC of any potential internal decisions that may impact the successful execution of migration of the Businesses from a business and change management point of view.

 

The parties acknowledge that the Business Separation Deliverables complement and support the Separation Plan and that any amendments proposed to be made to the Separation Plan following the consideration and agreement of the JBC, should be referred to the JIC for the JIC’s approval.

 

  

63

  

 

	
2  

	
Information to be provided to the JBC

 

	
2.1  

	
The Business Sellers will continue to provide to the JBC the information provided at the date of this Agreement to the Business Committee under Part A of Schedule 18 and in accordance with the provisions of Clause 5.5 of the SPA.  Without limiting the foregoing, from the date of this Agreement, they will provide information in accordance with paragraph 2.2 and act in accordance with paragraph 2.3.

 

	
2.2  

	
In order to monitor closely the Businesses and to familiarise the JBC with the Businesses from a change management perspective, the Business Sellers shall provide the JBC with a monthly business review of each of the key segments of the Businesses for SME/Mid-Corporate and Retail, including performance, trends and key risk and people metrics. The Business Sellers and the Purchaser will work together to develop the relevant KPIs taking into account the Separation Plan. It is agreed that from the date of this Agreement the Purchaser will provide the JBC with the information specified in Parts B to F of Schedule 18 in accordance with Clause 5.5.

 

	
2.3  

	
In order to enable the Purchaser to monitor the Businesses the Purchaser may, from time to time, request such additional information relating to the Businesses as is reasonable in the circumstances, in accordance with Clause 5.5.7, it being acknowledged by the parties that the provision of such information shall be subject always to Clause 5.5.8.

 

The parties shall actively work together to find solutions that may be required in respect of the provision of such information, with the principle aim of both parties being to ensure that the JBC can operate effectively, in line with this new delegated governance scheme, joint process and working environment.

 

To the extent that any information requested by the Purchaser in accordance with Clause 5.5.7 is considered by the Business Sellers in good faith to constitute commercially sensitive information, then to the extent such information is provided to the Purchaser, the parties agree to collaborate closely to ensure that such information is not provided to the JBC, but instead is provided to the Clean Team solely for the purpose of monitoring the Businesses, but for no other purpose, subject to the provision of a Clean Team Confirmation by the Purchaser.

 

	
2.4  

	
The Purchaser acknowledges and agrees that, immediately following the RBS England Closing, it shall return or destroy all originals and copies of documents to the extent of any information relating to the business to be retained by the RBSG Group, and use reasonable endeavours to permanently erase from any computer or other device any document or data containing such information, and provide confirmation to the Business Sellers once this has been completed.

 

	
3  

	
Actions to be implemented in terms of up-grading the JBC

 

It is proposed that the JBC upgrade its current working dynamics by jointly:

 

	 	
·  

	
Defining a new JBC agenda that allows a closer weekly and monthly business review by segments to include performance, trends and key risk and people metrics, in accordance with the principles set out in paragraph 2 of this Schedule 24.

 

  

64

  

 

	 	
·  

	
Working together to ensure a monthly review of the Business Separation Deliverables and taking the appropriate business actions to ensure a successful migration.

 

	 	
·  

	
In accordance with the provisions of Clauses 4.4 and 5.1.3(vi) of this Agreement, consulting closely on employee and Customer communications linked to the migration and in line with the Separation Plan.

 

	 	
·  

	
Analysing and implementing the business elements needed for the Scheme.

 

	 	
·  

	
In accordance with the principles set out in paragraph 2 of this Schedule 24, working together to ensure the provision of information referred to in paragraph 2.

 

	 	
·  

	
Subject to the requirements of Law and Regulations, implementing close consultation on such management approaches within the Businesses as will ensure a smooth transition of the Businesses to the Purchaser.  By way of illustration only, some examples of management approaches are: objectives and incentives systems, sales systematic methodologies, Monitoring of Early Warning Cases in terms of risk management, Human Resources processes, Channel Control/Governance frameworks, etc.

 

	 	
·  

	
Consulting closely in terms of key people/management changes ahead of migration.

 

  

65

  

 

Schedule 25

 

***

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

66

  

 

Schedule 26

 

***

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

67

  

 

Table of Contents

 

	
Contents

	
Page

	
Schedule 1 ***

	
1

	
Schedule 2 ***

	
2

	
Schedule 3 ***

	
3

	
Schedule 4 Intellectual Property Part 1

	
4

	
Schedule 4 Intellectual Property Part 2 Other IP Provisions

	
5

	
Schedule 4 Part 3 ***

	
6

	
Schedule 1 NatWest Trade Marks

	
7

	
Schedule 4 Part 4 ***

	
8

	
Schedule 5 Contracts Part 1 ***

	
11

	
Schedule 5 Contracts Part 2 Shared Collateral

	
12

	
Schedule 5 Contracts Part 3

	
14

	
Schedule 6 Employees

	
16

	
Schedule 7 Pensions

	
24

	
Schedule 8 Part A Transitional Services

	
25

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

68

 

  

	
Schedule 8 Part B Non-TSA Principles / Additional TSA Principles

	
27

	
Schedule 8 Part B Annex 1:***

	
33

	
Schedule 8 Part B Annex 2:***

	
34

	
Schedule 8 Part B Annex 3 ***

	
35

	
Schedule 9 ***

	
36

	
Schedule 10 VAT and Other Tax Matters

	
37

	
Schedule 11 Closing Obligations

	
41

	
Schedule 12 ***

	
44

	
Schedule 13 ***

	
45

	
Schedule 14 ***

	
46

	
Schedule 15 ***

	
47

	
Schedule 16 ***

	
48

	
Schedule 17 ***

	
49

	
Schedule 18 ***

	
50

	
Schedule 19 ***

	
51

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

69

  

 

	
Schedule 20 ***

	
52

	
Schedule 21 ***

	
53

	
Schedule 22 ***

	
54

	
Schedule 23 Part A Joint Implementation Committee Governance

	
55

	
Schedule 23 Part B Certain Separation Matters

	
56

	
Schedule 24 Joint Business Committee

	
63

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

70EXHIBIT 4.32

	

	
 

 

 

CLIFFORD CHANCE LLP

	
 

THE ROYAL BANK OF SCOTLAND PLC

AND

SUMITOMO MITSUI BANKING CORPORATION

 

	  	
 

AGREEMENT FOR THE SALE AND PURCHASE OF

 

RBS AEROSPACE LIMITED

RBS AEROSPACE (UK) LIMITED

AND

RBS AUSTRALIA LEASING PTY LIMITED

 

	  

 

  

  

  

 

CONTENTS

 

	
Clause

	  	
Page

	
1

	
Interpretation

	
1

	
2

	
Sale and Purchase

	
29

	
3

	
Conditions

	
31

	
4

	
Completion

	
35

	
5

	
The RBS Warranties and Pre Completion Conduct

	
40

	
6

	
Indemnities

	
42

	
7

	
Termination

	
43

	
8

	
The Buyer's Warranties and Undertakings

	
45

	
9

	
Restrictive Covenants

	
47

	
10

	
Tax Provisions

	
50

	
11

	
Insurance

	
50

	
12

	
Confidential Information

	
51

	
13

	
Employees and Transaction Costs

	
52

	
14

	
Pensions

	
54

	
15

	
Payments

	
54

	
16

	
Announcements

	
55

	
17

	
Further Assurances

	
57

	
18

	
Costs

	
57

	
19

	
Separation Issues

	
57

	
20

	
Records and Assistance Post-Completion

	
60

	
21

	
General

	
61

	
22

	
Entire Agreement

	
62

	
23

	
Assignment

	
64

	
24

	
Notices

	
65

	
25

	
Governing Law and Jurisdiction

	
66

	
26

	
Counterparts

	
66

	
Schedule 1 Shares and Price

	
67

	
Schedule 2 Information about the Companies and the Subsidiary Undertakings

	
68

	
Part A The Companies

	
68

	
Part B The Subsidiary Undertakings

	
70

	
Schedule 3 Completion Requirements

	
73

	
Schedule 4 RBS Warranties

	
76

	
Schedule 5 Limitations on the Liability of RBS

	
94

	
Schedule 6 Tax Provisions

	
107

 

 

  

  

  

	
Schedule 7 Action Pending Completion

	
109

	
Schedule 8 Property

	
115

	
Schedule 9 Pension Arrangements

	
116

	
Schedule 10 Repayment of RBS Debt

	
118

	
Part A Repayment of Estimated RBS Debt at Completion

	
118

	
Part B Adjustments to Estimated RBS Debt after Completion

	
118

	
Schedule 11 Completion Statement

	
120

	
Part A Preliminary

	
120

	
Part B Specific Policies

	
121

	
Part C Draft Completion Statement

	
123

	
Part D Form of Completion Statement

	
127

	
Schedule 12 Pre-Completion Obligations

	
128

 

  

  

  

 

Agreed Form Documents

	
1

	
Irrevocable power of attorney

	
2

	
Transitional Services Agreement

	
3

	
Reverse Transitional Services Agreement

	
4

	
Letters of resignation of directors

	
5

	
RBS Announcement

	
6

	
Buyer's Announcement

	
7

	
Transitional Trademark Licence

	
8

	
Intellectual Property Deed

	
9

	
Lombard Aircraft Transfer Agreements

	
10

	
Data Room Index

	
11

	
Receivables Reassignment Agreement

	
Exhibits

	
1

	
Exhibit 1: List of Aircraft, Lessors and Lessees

	
2

	
Exhibit 2: List of Third Party Assurances

	
3

	
Exhibit 3: Accounts

	
4

	
Exhibit 4: Interim Balance Sheet

	
5

	
Exhibit 5: List of Disclosed Employees

	
6

	
Exhibit 6: List of Offer Employees

	
7

	
Exhibit 7: ***

	
8

	
Exhibit 8: Clean Team Terms

	
9

	
Exhibit 9: Report Information

	
10

	
Exhibit 10: Pro Forma Completion Statement

	
11

	
Exhibit 11: Draft Lombard Head Lease

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

  

  

 

THIS AGREEMENT is made in London at           on 16 January 2012

 

BETWEEN:

 

	
(1)

	
THE ROYAL BANK OF SCOTLAND PLC, a company incorporated in Scotland (registered no. SC090312), whose registered office is at 36 St Andrew Square, Edinburgh, EH2 2YB ("RBS"); and

 

	
(2)

	
SUMITOMO MITSUI BANKING CORPORATION, a company incorporated in Japan, with offices at 1-2, Marunouchi 1-chome, Chiyoda-ku Tokyo 100-0005 (the "Buyer").

 

THE PARTIES AGREE as follows:

 

	
1.

	
INTERPRETATION

 

	
1.1

	
In this Agreement:

 

"Accounts" means the audited balance sheet, profit and loss account, cash flow statement and the notes thereto of each Company as at and for the period ended on the Last Accounting Date, and as set out in Exhibit 3;

 

"Acquired Rights Directive" means the Acquired Rights Directive 77/187 EC, as amended by the Acquired Rights Directive (90/50/EC) and consolidated by the Acquired Rights Directive 2001/23/EC (as it may be further amended, re-enacted or extended or consolidated from time to time);

 

"Act" means the Companies Act 2006;

 

"Additional Debt Amount" has the meaning given in clause ‎4.10.1;

 

"Affiliate" means, in relation to either party, any subsidiary undertaking or parent undertaking of that party and any subsidiary undertaking of any such parent undertaking, in each case from time to time but excluding in the case of RBS:

 

	
  

	
(a)

	
the United Kingdom government or any member or instrumentality thereof, including Her Majesty's Treasury and UK Financial Investments Limited (or any directors, officers, employees or entities thereof); and

 

	
  

	
(b)

	
any persons or entities controlled by or under common control with the United Kingdom government or any member or instrumentality thereof (including Her Majesty's Treasury and UK Financial Investments Limited) other than The Royal Bank of Scotland Group plc and each of its subsidiaries or subsidiary undertakings;

 

"Affiliate Transaction" has the meaning given in clause ‎19.11;

 

"Affiliate Transaction Indemnity" means the indemnity provided by RBS in the terms set out in clause ‎6.2 in respect of matters set out in sub-clause ‎6.2.2 of clause ‎6.2;

 

  

- 1 -

  

 

"Affiliate Transaction Indemnity Claim" means a Relevant Claim under the terms of the Affiliate Transaction Indemnity;

 

"Agreed Rate" means *** per cent. above the base rate from time to time of RBS;

 

"Aircraft" means each of the aircraft set out in Part A of Exhibit 1 and an "Aircraft" means any of them;

 

"Aircraft Leasing" means to the extent consistent in all material respects with Business Practices (i) the leasing of any aircraft, engine or component part; (ii) the procurement of any maintenance, storage or insurance; (iii) the sale or purchase of any engine or component part; provided that in the case of (ii) and (iii) such activity relates to the redelivery of an aircraft under a lease or transition from one lease to another lease;

 

"Airspeed Servicing Agreement" means the Servicing Agreement dated as of 27 June 2007 between RBS Aerospace Limited, as servicer, Airspeed Limited, Ambac Assurance Corporation, Assured Guaranty Corp, and the parties named in the Annex to such agreement;

 

"Anti-Bribery Laws" means, to the extent applicable to the Group Companies from time to time, the US Foreign Corrupt Practices Act 1977, as amended, and any rules and regulations thereunder and the Bribery Act 2010;

 

"Assignor" has the meaning given in clause ‎23.2;

 

"Australia" means the Commonwealth of Australia;

 

***

 

"Business" means the business of providing commercial passenger jet aircraft operating leases (including the trading and lease management of commercial passenger jet aircraft and/or engines as a part of such commercial passenger jet operating lease business) carried on by the Group Companies as at the date of this Agreement and, in respect only of the Lombard Aircraft, by Lombard, as at the date of this Agreement;

 

"Business Day" means a day other than:

 

	
  

	
(a)

	
a Saturday or Sunday; or

 

	
  

	
(b)

	
a public holiday in England and Wales, New York City, Ireland or Tokyo; or

 

	
  

	
(c)

	
in relation to time limits relevant for a Filing Date any public holiday in the relevant jurisdiction where such merger filing or any other government filing has to be made; or

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 2 -

  

 

	
  

	
(d)

	
in relation to any date for payment or purchase of EUR, any day that is not a TARGET Day;

 

"Business Deterioration" has the meaning given in paragraph ‎4.2 of ‎Schedule 4;

 

"Business Practices" means the practice, processes and procedures applied by the Group in conducting its business in the ordinary course, having regard to previous practice in the 12 months prior to the date of this Agreement;

 

"Buyer's Account" means the Buyer's bank account that the Buyer notifies to RBS not less than 5 Business Days in advance of any relevant payment into such account;

 

"Buyer's Announcement" means the announcement in the agreed form to be made by or on behalf of the Buyer as soon as practicable following the signing of this Agreement;

 

"Buyer's Breach" has the meaning given in clause ‎7.6;

 

"Buyer's Conditions" means the conditions set out in clause ‎3.1 other than clause ‎3.1.10 and "Buyer's Condition" means any one of them;

 

"Buyer's Group Undertaking" means the Buyer or an undertaking which is, from time to time, a subsidiary undertaking or a parent undertaking of the Buyer or a subsidiary undertaking of any such parent undertaking and includes, for the avoidance of doubt each Group Company after Completion;

 

"Buyer Relief" means:

 

	
  

	
(a)

	
any Relief to the extent taken into account as an asset in the Completion Statement or taken into account in computing (and so reducing or eliminating) any allowance, provision or reserve in the Completion Statement (including deferred tax) and thereby increasing, in each case, the Final Share Price from what it would otherwise have been; and

 

	
  

	
(b)

	
any Relief which is not available before Completion that arises to a Group Company as a consequence of, or by reference to an Event occurring, or deemed, for the purpose of any Taxation, to occur, after Completion;

 

"Buyer's Warranties" means the statements contained in clause ‎8.1;

 

"Cash" means the lesser of:

 

	
  

	
(a)

	
the aggregate of each Group Company's cash equivalents and cash (whether in hand or credited to any account of any banking, financial, acceptance credit, lending or other similar institution or organisation, including amounts relating to (i) maintenance contributions received from lessees including, for the avoidance of doubt, *** (ii) security deposits received from lessees (iii) receivables collected by a Group Company the benefit of which had been

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 3 -

  

 

previously sold to a third party under any Receivables Financing and (iv) security deposits made by any Group Company in connection with the Exim Financing but excluding in each case any RBS Deposits) as at the Completion Time and expressed in US Dollars; and

 

	
  

	
(b)

	
US$***

 

in either case to be set out in the Completion Statement;

 

"Cash Free Debt Free Price" means:

 

	
  

	
(a)

	
US$7,208,000,000, less

 

	
  

	
(b)

	
the aggregate of:

 

	
  

	
(i)

	
(if *** have not been obtained prior to Completion) US$***;

 

	
  

	
(ii)

	
(if at Completion *** has not been obtained in relation to ***) an amount equal to *** payable by a Group Company as a result of *** (but for the avoidance of doubt, not including ***) in accordance with the terms of the applicable ***; and

 

	
  

	
(iii)

	
(if at Completion *** have not been obtained in relation to ***) an amount equal to *** payable by a Group Company as a result of *** (but for the avoidance of doubt, not including ***) in accordance with the terms of the applicable ***,

 

in aggregate and apportioned between the Shares as set out in ‎Schedule 1; 

 

"*** Scheme" means the defined contribution pension scheme operated by RBS Aerospace Limited in respect of ***;

 

"CFC" means the Mexican Federal Antitrust Commission (Comision Federal de Competencia);

 

"Clean Team" has the meaning given in paragraph ‎4.1 of ‎Schedule 7;

 

"Commission" has the meaning given in clause ‎3.1.1(a);

 

"Companies" means:

 

	
  

	
(a)

	
RBS Aerospace Limited;

 

	
  

	
(b)

	
RBS Aerospace UK; and

 

	
  

	
(c)

	
RBS Australia Leasing,

 

and a "Company" means any one of them;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 4 -

  

 

"Company Key Employee" means each of ***;

 

"Competition Authority" has the meaning given to it in paragraph ‎18.1 of ‎Schedule 4;

 

"Competition Law" has the meaning given to it in paragraph ‎18.1 of ‎Schedule 4;

 

"Completion" means completion of the sale and purchase of the Shares in accordance with this Agreement;

 

"Completion Date" has the meaning given in clause ‎4.1, subject always to clause ‎4.2;

 

"Completion Statement" means the completion statement prepared in accordance with clause ‎2.9 and ‎Schedule 11;

 

"Completion Time" means 23:59 on the last day of the calendar month immediately prior to the Completion Date;

 

"Conditions" means the Buyer's Conditions and the RBS Condition and "Condition" means any one of such Conditions;

 

"Confidentiality Agreement" means the agreement between RBS and the Buyer dated 11 August 2011 relating to the provision of the Information;

 

"Constitutional Documents" means the constitutional documents of each Group Company, as set out in sub-folder 'Phase 1 Data Room > C. Corporate Documentation > 3. Corporate documents' of the Data Room;

 

"Contingent Liability Policy" means collectively the following insurance policies, and any replacement or renewal thereof prior to the Completion Date procured by RBS Aerospace Limited (from Aon Limited Aviation as broker) specifically to insure against contingent liabilities in respect of aircraft, engines and parts:

 

	
  

	
(a)

	
Policy Number AG1157091 (in respect of Aviation Hull and Spare Engine Deductible Cover);

 

	
  

	
(b)

	
Policy Number AG1157092 (in respect of Hull and Spares War and Allied Perils Cover);

 

	
  

	
(c)

	
Policy Number AG1157093 (in respect of Hull and Spares All Risks and Liability Cover); and

 

	
  

	
(d)

	
Policy Number AG1157094 (in respect of Aviation War, Hi-Jacking and Other Perils Excess Cover);

 

"Corporate Jet" has the meaning given in paragraph ‎5 of ‎Schedule 12;

 

"Corporate Jet Sale" has the meaning given in paragraph ‎5 of ‎Schedule 12;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 5 -

  

 

"Corporations Act 2001" means the Corporations Act 2001, an act of Australia;

 

"CTA 2010" means the Corporation Tax Act 2010;

 

"Current Employer" has the meaning given in clause ‎13.5;

 

"Data Room" means each of the documents and other information relating to the Transaction made available by RBS, as listed on the Data Room Index;

 

"Data Room Index" means the index of the Data Room in the agreed form attached to the Disclosure Letter;

 

"Delivery" means delivery to the relevant Lessee under the relevant Lease Documents;

 

"Delivery Date" means the date on which an Aircraft is delivered to the relevant Lessee under the relevant Lease Documents;

 

"Disability Schemes" means the Lombard Ireland Income Protection Plan and the disability arrangements under the insured element of the RBS Group Ireland Retirement Savings Plan;

 

"Disclosed Employee" means each individual who is employed by a Group Company or who works in the Business (whether employed by a Group Company or by a RBS Group Undertaking) as at the date of this Agreement as listed in Exhibit 5;

 

Disclosed Schemes" means the Disability Schemes, the Irish Schemes, the Shanghai Supplementary Pension Plan, the RBS plc Pension Plan (employees based in China), The Royal Bank of Scotland plc (Hong Kong Branch) Retirement Plan, the Central Provident Fund (Singapore), the Retirement Benefit Plan (Japan), the 401(k) Plan (US), the RBS Americas Pension Plan and "Disclosed Scheme" means any one of them

 

"Disclosure Letter" means the letter from RBS to the Buyer in relation to the Warranties having the same date as this Agreement the receipt of which has been acknowledged by the Buyer;

 

"Dispute" has the meaning given in clause ‎25.2;

 

"Draft Completion Statement" has the meaning given in paragraph ‎1 of ‎Part C of ‎Schedule 11;

 

"ECA/Ex-Im Financings" has the meaning given in paragraph ‎1.7 of ‎Schedule 7;

 

"ECA Financings" means:

 

	
  

	
(a)

	
the financing arrangements for certain Group Companies entered into in June 2009 in relation to 11 Aircraft, set out in sub-folder 'Phase 3 – Data Room > C. Funding and Liquidity > 1. ECA Facility (2009)' of the Data Room; and

 

	
  

	
(b)

	
the financing arrangements for certain Group Companies entered into in February 2011 in relation to 2 Aircraft set out in sub-folder 'Phase 3 – Data Room > C. Funding and Liquidity > 3. ECA Facility (2010)' of the Data Room,

 

  

- 6 -

  

 

in each case, supported by guarantees from Compagnie Française d'Assurance pour le Commerce Exterieur and The Secretary of State of Her Britannic Majesty's Government acting by the Export Credits Guarantee Department;

 

"ECA Financings Amount" means all amounts outstanding in connection with the ECA Financings on the Completion Date (including amounts of principal and any accrued and unpaid interest);

 

"Employee Transfer Legislation" means (a) in relation to the United Kingdom the Transfer Regulations; (b) in relation to any other EU member states any national legislation implementing the Acquired Rights Directive; and (c) in relation to any non-EU member state, any national or local legislation that is broadly similar in effect to the provisions of the Acquired Rights Directive;

 

"Employing Entity" means the entity which currently employs the relevant Offer Employee;

 

"Encumbrance" means a Security Interest or right exercisable by a third party having similar effect;

 

"Engine" means each of the engines installed on an Aircraft at Delivery and any permanent replacement thereof in accordance with the terms of the relevant Lease Documents;

 

"Environment" means all or any of the following media, namely air (including air inside buildings and other natural and man-made structures above or below ground), water, land (including natural and man-made structures) and all living organisms (including humans);

 

"Environmental Law" means any European Union, national or local law concerning the pollution or protection of the Environment, except in relation to town and country planning or zoning, in force at the date of this Agreement;

 

"Estimated Cash" means, the lesser of:

 

	
  

	
(a)

	
the aggregate of each Group Company's cash equivalents and cash (whether in hand or credited to any account of any banking, financial, acceptance credit, lending or other similar institution or organisation, including amounts  relating to (i) maintenance contributions received from lessees including, for the avoidance of doubt, *** (ii) security deposits received from lessees (iii) receivables collected by a Group Company the benefit of which had been previously sold to a third party under any Receivables Financing and (iv) security deposits made by any Group Company in connection with the Exim Financing but excluding in each case any RBS Deposits) as at the Completion Time and expressed in US Dollars as estimated in good faith by RBS (but without liability for such estimate); and

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 7 -

  

 

	
  

	
(b)

	
US$***;

 

"Estimated Operating Lease Assets" means the amount of Operating Lease Assets as estimated in good faith by RBS (but without liability for such estimate);

 

"Estimated RBS Debt" means the amount of RBS Debt as estimated in good faith by RBS (but without liability for such estimate);

 

"Estimated RBS Deposits" means the amount of RBS Deposits as estimated in good faith by RBS (but without liability for such estimate);

 

"Estimated UK Lessor Tax Adjustment" means the amount of the UK Lessor Tax Adjustment as estimated in good faith by RBS (but without liability for such estimate);

 

"Estimated Working Capital" means the amount of Working Capital estimated in good faith by RBS (but without liability for such estimate);

 

"EU" means the European Union;

 

"EU Merger Regulation" has the meaning given in clause ‎3.1.1(a);

 

"Event" means an event, act, transaction or omission;

 

"Exchange Rate" means for a particular currency for a particular day, the rate for the conversion of that currency into US Dollars which appears on Reuters page “FX Fix Summary” showing as having been fixed at 15:30, London time, for the required currency pair (noting that the displayed rate may require inverting for inclusion in a conversion calculation); or if no such rate exists, the arithmetic average of the rates on this same page having been fixed at 15:00 and 16:00; or if no such rate exists, the rate published on Bloomberg page “BFIX” showing as having been fixed at 15.30, London time for the required currency pair, with respect to a particular currency for a particular day;

 

"Excluded Transactions" means:

 

	
  

	
(a)

	
the Ulster Bank Sub-lease;

 

	
  

	
(b)

	
the documents entered into to effect the Pro Forma Transactions;

 

	
  

	
(c)

	
the *** entered into in relation to each of ***;

 

	
  

	
(d)

	
the MOU Termination Agreement;

 

	
  

	
(e)

	
the head lease agreements between Lombard and RBS Aerospace Limited in relation to one or more of the Lombard Aircraft substantially in the form set out in Exhibit 11;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 8 -

  

 

	
  

	
(f)

	
the reassignment agreement between RBS Aerospace Limited and RBS in relation to the Receivables Purchase Agreement dated 21 June 2006 in the agreed form; and

 

	
  

	
(g)

	
arrangements relating to bank accounts held by any RBS Group Undertaking in the name of any Group Company;

 

"Exhibits" shall mean the Exhibits to this Agreement, and "Exhibit" means any one of them;

 

"Exim Financing" means the financing arrangements for RBS Aerospace Limited entered into in December 2009 in relation to 15 Aircraft, supported by a guarantee from Export-Import Bank of the United States of America, set out in sub-folder 'Phase 3 – Data Room > C. Funding and Liquidity > 2. Exim Facility (2009)' of the Data Room;

 

"Exim Financing Amount" means all amounts outstanding in connection with the Exim Financing on the Completion Date (including amounts of principal and any accrued and unpaid interest);

 

"Extended Completion Date" has the meaning given in clause ‎4.6.2;

 

"Extended Longstop Date" has the meaning given in clause ‎3.10;

 

"FATA" has the meaning given in clause ‎3.1.7;

 

"Filing" has the meaning given in clause ‎3.2;

 

"Filing Date" means the date which is 20 Business Days after the date of this Agreement;

 

"Final Share Price" has the meaning given in clause ‎2.2;

 

"Financed Aircraft" means the Aircraft numbered 3, 4, 7, 8, 13, 41, 53, 57, 58, 65, 78, 79, 80, 89, 90, 112, 117, 118, 124-135 (inclusive), 171, 172, 177, 182, 202 and 203 in Part A of Exhibit 1;

 

"Financial Debt" means borrowings and indebtedness in the nature of borrowing (including by way of acceptance credits, discounting or similar facilities, loan stock, bonds, debentures, notes, overdrafts or any other similar arrangements the purpose of which is to raise money and interest thereon but not the receipt of trade credit in the ordinary course of business);

 

"Financing Document" means any of the documents in sub-folder 'Phase 3 – Data Room > C. Funding and Liquidity' of the Data Room;

 

"Firm" has the meaning given in paragraph ‎6 of ‎Part C of ‎Schedule 11;

 

"Fundamental Warranties" means those warranties set out in paragraphs ‎1.1.2 (capacity to sell), ‎1.2 (binding agreements), ‎2.1.1 (ownership of Shares), ‎2.1.2 (Shares comprise entire share capital), ‎2.1.3 (no Encumbrance over Shares), ‎2.1.4 (no agreement to allot), ‎2.2.2, ‎2.2.5, ‎2.2.6 and ‎2.2.7 (ownership of Subsidiary 

 

  

- 9 -

  

 

 

Undertakings), and ‎6.2 (ownership of Aircraft and Engines) of ‎Schedule 4 and "Fundamental Warranty" means any one of the Fundamental Warranties;

 

"Fundamental Warranty Claim" means a claim by the Buyer or any Buyer's Group Undertaking pursuant to clause ‎5.1 in respect of any Fundamental Warranty;

 

"Gate Quay Joint Venture" means the 50:50 joint venture entered into between Rolls Royce plc and Royal Bank Leasing Limited which is managed by Rolls Royce plc and conducts a commercial aircraft engine leasing business through Gate Leasing Limited, an English company, registered number 5000724;

 

"Governmental Agency" has the meaning given to it in clause ‎3.3.2;

 

"Group" means the Companies and the Subsidiary Undertakings;

 

"Group Business Information" means:

 

	
  

	
(a)

	
all information owned or held by or relating exclusively to the Business (which for the avoidance of doubt shall exclude any information relating to the arranging or providing of any form of finance in relation to aircraft other than the Financing Documents) (in whatever form held) including all:

 

	
  

	
(i)

	
designs, specifications, drawings, know-how, manuals and instructions;

 

	
  

	
(ii)

	
customer lists and data, sales, renewals, marketing and promotional information;

 

	
  

	
(iii)

	
business plans and forecasts;

 

	
  

	
(iv)

	
technical or other expertise; and

 

	
  

	
(v)

	
accounting and tax records, correspondence, orders and enquiries; and

 

	
  

	
(b)

	
all information relating to the Lombard Aircraft,

 

but in each such case excluding any information which is RBS Business Information (in whatever form);

 

"Group Company" means a Company or a Subsidiary Undertaking;

 

"Group Relief Letters" means the letter agreements relating to surrenders of group relief entered into between (i) RBS and RBS Aerospace Limited and (ii) RBS and RBS Aerospace UK, in each case dated the same date as this Agreement;

 

"Guarantee Continuation Period" has the meaning given in paragraph ‎1.3.5 of ‎Schedule 12;

 

"HSR Act" has the meaning given in clause ‎3.1.2;

 

"IASB" means the International Accounting Standards Board;

 

"IFRS" means the body of pronouncements issued by the IASB, including International Financial Reporting Standards and associated interpretations issued by 

 

  

- 10 -

  

 

the IASB and International Accounting Standards and associated interpretations as adopted for use in the European Union;

 

"Information" has the meaning given in the Confidentiality Agreement;

 

"Information Technology" means computer hardware, software, systems and networks;

 

"Initial Consideration" means an amount equal to:

 

	
  

	
(a)

	
the Cash Free Debt Free Price; minus

 

	
  

	
(b)

	
Third Party Debt; minus

 

	
  

	
(c)

	
Estimated RBS Debt; plus

 

	
  

	
(d)

	
Estimated Cash; plus

 

	
  

	
(e)

	
Estimated Operating Lease Assets; minus

 

	
  

	
(f)

	
Target Operating Lease Assets; plus

 

	
  

	
(g)

	
Estimated Working Capital; minus

 

	
  

	
(h)

	
Target Working Capital; and minus

 

	
  

	
(i)

	
Estimated UK Lessor Tax Adjustment;

 

"Intellectual Property" means patents, registered and unregistered designs, copyright, database rights, trade marks and trading names, internet domain names, and other rights of the same or similar effect as any of the foregoing anywhere in the world, in each case whether registered or not, including pending applications for registration of such rights;

 

"Intellectual Property Deed" means the intellectual property deed in the agreed form to be entered into between RBS and RBS Aerospace Limited at Completion in relation to the assignment of certain intellectual property rights;

 

"Interim Balance Sheet" means the combined, unaudited balance sheet for the Group as at 30 September 2011, and prepared as if the Pro Forma Transactions and the transfer to a Group Company of the Lombard Aircraft set out in Part A of Exhibit 1 and the payment of a dividend of US$215,000 by RBS Aerospace Ireland Leasing 2 Limited had each taken place prior to 30 September 2011, in the form set out in Exhibit 4;

 

"Interim Customer Deposits" means:

 

	
  

	
(a)

	
the principal amount of security deposits received by any Group Company from lessees in cash and deposits received by any Group Company in cash under letters of intent relating to aircraft sales in each case as at 30 September 2011 to the extent that such deposits are repayable to any third party, together with, in each case accrued interest thereon at the prevailing rate of interest

 

 

  

- 11 -

  

 

relating to the relevant deposit or the contractually stipulated rate, to the extent that such interest is repayable to any third party; and

 

	
  

	
(b)

	
maintenance contributions received by any Group Company in cash as at 30 September 2011, together with accrued interest thereon at the prevailing rate of interest relating to the relevant deposit or the contractually stipulated rate, to the extent that such interest is repayable to any third party, and stated net of amounts not expected to be either: (i) repaid to the lessee; or (ii) used in the connection with the maintenance of Aircraft or Engines,

 

in each case applying the principles, policies, treatments, practices and categorisations adopted in calculating "Customer Deposits" in the Accounts of RBS Aerospace Limited;

 

"Interim Operating Lease Assets" means those assets of the Group Companies as at 30 September 2011, determined by applying the principles applied in calculating "Assets for hire under operating leases" in the Accounts of RBS Aerospace Limited, and shall include capitalised interest and other capitalised amounts;

 

"Interim RBS Debt" means the aggregate amount owed as at 30 September 2011 by each Group Company to any RBS Group Undertaking (other than another Group Company) expressed in US Dollars, whether arising as a result of:

 

	
  

	
(a)

	
the repayment of any Financial Debt owed as at that date by each Group Company to any RBS Group Undertaking (other than another Group Company) including amounts of principal, accrued and unpaid interest and costs and expenses, but excluding breakage costs and prepayment fees (if any) relating thereto or to any related hedging arrangements; or

 

	
  

	
(b)

	
goods or services provided by a RBS Group Undertaking (other than another Group Company) to a Group Company; or

 

	
  

	
(c)

	
any recharge made by a RBS Group Undertaking (other than a Group Company) to a Group Company of the relevant part of any cost or expense incurred by any RBS Group Undertaking (other than a Group Company) in respect of any service provided for the benefit of a Group Company; less

 

	
  

	
(d)

	
the aggregate amount of Financial Debt owed as at 30 September 2011 by each RBS Group Undertaking (other than a Group Company) to any Group Company expressed in US Dollars, including cash arising from the receipt of maintenance contributions and security deposits from Lessees or from the proceeds of sale of aircraft in the ordinary course of business by any Group Company which has been deposited by any Group Company with any RBS Group Undertaking (other than another Group Company), whether or not the benefit of such Financial Debt has been charged, or otherwise made subject to a Security Interest, by a Group Company in favour of any Lessee (excluding, for the avoidance of doubt, ***);

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 12 -

  

 

"Interim Third Party Debt" means the aggregate of:

 

	
  

	
(a)

	
all amounts outstanding in connection with the ECA Financings as at 30 September 2011 (including amounts of principal and any accrued and unpaid interest);

 

	
  

	
(b)

	
all amounts outstanding in connection with the Exim Financing as at 30 September 2011 (including amounts of principal and any accrued and unpaid interest); and

 

	
  

	
(c)

	
the aggregate of the outstanding balances of the Receivables Financings as at 30 September 2011, including any amounts due and payable and unpaid on that date pursuant to the terms of the Receivables Financings;

 

"Investee Entity" has the meaning given in clause ‎9.2.2;

 

"Ireland" means the island of Ireland excluding Northern Ireland;

 

"Irish Schemes" means Lombard Ireland Ltd Non-Contributory Pension & Death Benefits Plan, The Ulster Bank Pension Scheme (Republic of Ireland), The RBS Group Ireland Retirement Savings Plan and the *** Scheme;

 

"ITAR Helicopters" means:

 

	
  

	
(a)

	
the three (3) Sikorsky S92A helicopters with manufacturer's serial numbers 920034, 920051 and 920052; and

 

	
  

	
(b)

	
the one (1) AgustaWestland AW-139 helicopter with manufacturer's serial number 31209,

 

including, in each case, all engines, rotors and other parts installed thereon;

 

"Japan" means the territory of the state of Japan;

 

"JFSA" has the meaning given in clause ‎3.1.9;

 

"Last Accounting Date" means 31 December 2010;

 

"Lease Documents" means the lease and any other document entered into between a Lessee and a Lessor in respect of the leasing of an Aircraft in sub-folders 'Phase 3 – Data Room > B. Aircraft Leasing > 2. Asset Level Data', 'Phase 3 – Data Room > B. Aircraft Leasing > 5. Insurance', 'Phase 3 – Data Room > B. Aircraft Leasing > 6. Letters of Credit', 'Project Tess – OEMs > Commitment Letters' and 'Phase 4 – Data Room > Responses to Final Due Diligence > SMBC and Sumitomo Corporation > Miscellaneous Documents' ("Asset Level Data") of the Data Room;

 

"Lessee" means, in respect of an Aircraft, the party set out in Column 4 of Part A of Exhibit 1;

 

"Lessor" means, in respect of an Aircraft, the party set out in Column 3 of Part A of Exhibit 1;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 13 -

  

 

"Local Authority" means (in the case of building regulation) the relevant Building Control Authority in accordance with Section 2(1) of the Building Control Act 1990 and (in the case of planning) the relevant Planning Authority as defined in Section 2(1) of the Planning and Development Act 2000;

 

"Lombard" means Lombard Global Finance Company, a company incorporated in Ireland (registered number 265008), whose registered office is at Third Floor, Ulster Bank Centre, George's Quay, Dublin 2, Ireland;

 

"Lombard Aircraft" means the 4 Aircraft for which Lombard is the Owner, numbered 122, 123, 156, 157 in Part A of Exhibit 1;

 

"Lombard Aircraft Transfer Agreements" means the documents to be entered into between Lombard and RBS Aerospace Limited on the date of this Agreement in relation to the transfer of the Lombard Aircraft in the agreed form;

 

"Longstop Date" means ***, or such later date as RBS and the Buyer may agree;

 

“Loss” means any loss, liability, cost or expense (including reasonable legal and other professional expenses);

 

"Major Damage" has, in respect of an Aircraft or Engines, the meaning given to the term "Major Damage", "Damage Notification Threshold" or any analogous term in the relevant Lease Documents, or if no such term is defined in the relevant Lease Documents, means any hard landing, tail strike or other material damage the cost of rectification of which is reasonably expected by the relevant Lessor to exceed US$750,000;

 

"Material Agreements" has the meaning given in paragraph ‎11.1 of ‎Schedule 4;

 

"MFLEC" means the Mexican Federal Law of Economic Competition (and regulations thereto);

 

"MOFCOM" has the meaning given in clause ‎3.1.3;

 

"Month Start Day" means the first Business Day of a calendar month;

 

"MOU Termination Agreement" means the agreement entitled "Termination of Memorandum of Understanding and Assignment of IFSC House Headlease" relating to the termination of the memorandum of understanding in relation to the Property to be entered into between Ulster Bank Group Treasury Limited, RBS Aerospace Limited, Ulster Bank Ireland Limited and the Royal Bank of Scotland plc set out in sub-folder 'Phase 3 – Data Room > H. Miscellaneous > 2. Property – Lease documentation relating to IFSC House of the Data Room;

 

"Name Changes" has the meaning given in clause ‎8.4;

 

"Netherlands" means the Kingdom of The Netherlands;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 14 -

  

 

 

"New Parent" has the meaning given in paragraph ‎2.2 of ‎Schedule 12;

 

"Notice" has the meaning given in clause ‎24.1;

 

"Notice Period" has the meaning given in clause ‎7.9;

 

"Objection Notice" has the meaning given in paragraph ‎3 of ‎Part C of ‎Schedule 11;

 

"OEM Amendments" means the following amendments to the OEM Contracts:

 

	
  

	
(a)

	
an amendment to the OEM Contract with Airbus replacing references in Clause 21.22 thereof and any other references therein to "Royal Bank of Scotland Plc" with the following: "Sumitomo Mitsui Financial Group and/or Sumitomo Corporation"; and

 

	
  

	
(b)

	
an amendment to the OEM Contract with Boeing deleting in its entirety from Clause 9.1.5 of the General Terms Agreement the definition of "affiliate" and replacing it with the following: "An "affiliate" of Customer is an entity controlled directly or indirectly by Sumitomo Mitsui Financial Group and/or Sumitomo Corporation";

 

"OEM Contract" means each of the documents set out in sub-folders 'Project Tess – OEMs > Airbus Purchase Agreements (CFM/IAE docs included)' and 'Project Tess – OEMs > Boeing Purchase Agreements (CFM docs included)' of the Data Room;

 

"Offer" has the meaning given in clause ‎13.5;

 

"Offer Employee" means each individual whose name and employer is listed in Exhibit 6;

 

"Operating Lease Assets" means the amount to be set out at item ‎5 of the Completion Statement;

 

"Ordered Aircraft" means those aircraft set out in Part B of Exhibit 1;

 

"Overprovision" has the meaning given in paragraph ‎14.1.1 of ‎Schedule 5;

 

"Owner" means in respect of any Aircraft the relevant owner or owners, as set out in Column 2 of Part A of Exhibit 1;

 

"Owner Trust Aircraft" means the Aircraft numbered 9, 11, 27, 30, 36, 45-52 (inclusive), 70, 71, 87, 88, 114, 166-170 (inclusive), 194, 199-201 (inclusive) in Part A of Exhibit 1;

 

"Part" means, whether or not for the time being installed on the relevant Aircraft:

 

	
  

	
(a)

	
any component, furnishing or equipment (other than a complete Engine) furnished with such Aircraft on the Delivery Date under the relevant Lease Documents; and

 

  

- 15 -

  

 

	
  

	
(b)

	
any other component, furnishing or equipment (other than a complete Engine) title to which has, or should have, passed to the Owner since Delivery under the relevant Lease Documents,

 

but excludes any such items title to which has, or should have, passed to the Lessee pursuant to the relevant Lease Documents;

 

"Payment Default" has the meaning given in paragraph ‎6.7.1 of ‎Schedule 4;

 

"Permitted Assignee" has the meaning given in clause ‎23.2;

 

"Permitted Security Interest" means:

 

	
  

	
(a)

	
any Security Interest in respect of any Taxes which are either not yet assessed or, if assessed, are not yet due and payable; and

 

	
  

	
(b)

	
any lien of an airport hangar-keeper, mechanic, material-man, carrier, employee or other similar Security Interest arising in the ordinary course of business by statute or by operation of law and which secures obligations that are either (i) not overdue; or (ii) being contested in good faith; and

 

	
  

	
(c)

	
any Security Interest created by, or which is expressly permitted under, the terms of any of the Lease Documents (other than any Security Interests created by or through the relevant Lessor); and

 

	
  

	
(d)

	
any Security Interest which arises over an Aircraft, any Engine or any Part in connection with (i) the actions, omissions, debts or liabilities of the relevant Lessee or other operator or possessor (other than a Group Company) of such Aircraft, Engine or Part or (ii) the operation (including storage, maintenance and parking) of the relevant Aircraft, Engine or Part or any other aircraft operated by a Lessee or other operator or possessor (other than a Group Company) of such Aircraft, Engine or Part, and in the case of each of (i) and (ii), which the applicable Lessee (or any prior lessee) is responsible for removing or for which the applicable Lessee (or any prior lessee) is to indemnify the Lessor under the terms of the applicable Lease Documents (or any prior documents governing the leasing of such Aircraft); and

 

	
  

	
(e)

	
in relation to the assets, properties or revenues of any Group Company other than Aircraft or Engines (or any lease thereof), any other Security Interest arising in the ordinary course of business or by operation of law (other than pursuant to a Financing Document) over such assets, properties or revenues where such Security Interest is not likely on the balance of probabilities to give rise to the sale, forfeiture or loss of the relevant assets, properties or revenues (or any interest therein) or any material impairment in the value thereof.

 

For the avoidance of doubt, each category of Permitted Security Interest is in addition to, and independent of, each other category of Permitted Security Interest;

 

"Plan Rules" means the Rules of the 2010 Long Term Incentive Plan, the 2010 Deferral Plan Rules and the 2009 Deferral Plan Rules as set out in sub-folder 'Phase 3 – Data Room > D. Human Resources > 2. Benefits > 2.5 Share option schemes plans 

 

  

- 16 -

  

 

and deferred consideration' of the Data Room as amended from time to time in accordance with their terms;

 

"Policies" has the meaning given in paragraph ‎9.1 of ‎Schedule 4;

 

"Proceedings" has the meaning given in clause ‎25.4;

 

"Pro Forma Transactions" means any one or more of the following events, and in each case shall include all actions taken (or omitted to be taken) by RBS or any RBS Group Undertaking (including the Group Companies) at any time prior to Completion (including, for the avoidance of doubt, prior to the date of this Agreement) with respect thereto:

 

	
  

	
(a)

	
all transfers, by RBS Aerospace Limited, to any one or more persons, of equity interests in RBS Aerospace Ireland Leasing 2 Limited; and

 

	
  

	
(b)

	
all transfers of ITAR Helicopters and/or corporate jets, by any Group Company to any one or more persons, after the Last Accounting Date;

 

"Prohibitive Order" has the meaning given in clause ‎7.9.2;

 

"Property" means the leasehold property, details of which are set out in ‎Schedule 8;

 

"Property Lease" means a lease or sub-lease in respect of the Property;

 

"Property Proceeding" means a civil, criminal, arbitration, administrative or other proceeding concerning the Property;

 

"Protected Asset" has the meaning given in clause ‎9.2.1;

 

"***" means the Third Party Assurances between *** and ***, as described in Part B of Exhibit 2;

 

"RBS Account" means the bank account at JPMorgan Chase Bank, N.A., 4 New York Plaza, Floor 15 New York, United States; account number ***; Swift address *** (and/or such other account as RBS may notify to the Buyer not less than 5 Business Days in advance of any relevant payment into such account);

 

"RBS Aerospace Limited" means RBS Aerospace Limited, a company incorporated in Ireland (registered number 270775), whose registered office is at IFSC House, IFSC, Dublin 1, Ireland;

 

"RBS Aerospace UK" means RBS Aerospace (UK) Limited a company incorporated in England and Wales (registered number 04985584), whose registered office is at The Quadrangle, The Promenade, Cheltenham GL50 1PX, United Kingdom;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 17 -

  

 

"RBS Announcement" means the announcement in the agreed form to be made by or on behalf of The Royal Bank of Scotland Group plc as soon as practicable following the signing of this Agreement;

 

"RBS Australia Leasing" means RBS Australia Leasing Pty Limited, a company incorporated in Australia (ACN 116 456 065) whose registered office is at Level 28 RBS Tower, 88 Phillip Street, Sydney, NSW 2000, Australia;

 

"RBS Breach" has the meaning given in clause ‎7.3;

 

"RBS Business Information" means

 

	
  

	
(a)

	
all information relating to a Group Company and Lombard and which does not relate exclusively to the Business (in whatever form held) including all:

 

	
  

	
(i)

	
designs, specifications, drawings, know-how, manuals and instructions;

 

	
  

	
(ii)

	
customer lists and data, sales, renewals, marketing and promotional information;

 

	
  

	
(iii)

	
business plans and forecasts;

 

	
  

	
(iv)

	
technical or other expertise;

 

	
  

	
(v)

	
accounting and tax records, correspondence, orders and enquiries; and

 

	
  

	
(vi)

	
information relating to the arranging or providing of any form of finance in relation to aircraft (other than the Financing Documents);

 

	
  

	
(b)

	
all information of a Group Company relating to corporate jets and helicopters; and

 

	
  

	
(c)

	
all information of a Group Company in respect of which RBS is under a contractual, legal or regulatory obligation to retain within its ownership, possession or control, including information relating to "know your customer" checks undertaken by any RBS Group Undertaking (including any Group Company) on any lessee;

 

"RBS Condition" means the condition set out in clause ‎3.1.10;

 

"RBS Debt" means:

 

	
  

	
(a)

	
the aggregate amount owed as at the Completion Time by each Group Company to any RBS Group Undertaking (other than another Group Company), whether arising as a result of:

 

	
  

	
(i)

	
the repayment of any Financial Debt owed as at the Completion Time by each Group Company to any RBS Group Undertaking (other than another Group Company) including amounts of principal, accrued and unpaid interest, costs and expenses and breakage costs and prepayment fees (if any) relating thereto or to any related hedging arrangements; or

 

  

- 18 -

  

 

	
  

	
(ii)

	
goods or services provided by a RBS Group Undertaking (other than another Group Company) to a Group Company; or

 

	
  

	
(iii)

	
any recharge made by a RBS Group Undertaking (other than a Group Company) to a Group Company of the relevant part of any cost or expense incurred by any RBS Group Undertaking (other than a Group Company) in respect of any service provided for the benefit of a Group Company,

 

in each case to be shown in the Completion Statement and expressed in US Dollars, other than any Additional Debt Amount which is to be discharged pursuant to clause ‎4.10.4; less

 

	
  

	
(b)

	
the aggregate amount of the RBS Deposits;

 

"RBS Deposits" means the aggregate amount of Financial Debt owed as at the Completion Time by each RBS Group Undertaking (other than a Group Company) to any Group Company and expressed in US Dollars, including cash arising from the receipt of maintenance contributions and security deposits from Lessees or from the proceeds of sale of aircraft in the ordinary course of business by any Group Company which has been deposited by any Group Company with any RBS Group Undertaking (other than another Group Company), whether or not the benefit of such Financial Debt has been charged, or otherwise made subject to a Security Interest, by a Group Company in favour of any Lessee (excluding, for the avoidance of doubt, ***);

 

***

 

***

 

"RBS Group Company (1)" means International Aviation Management (CI) Limited (a company incorporated in the Cayman Islands with company number 59055) whose registered office is at KPMG Peat Marwick, PO Box 493 GT, Genesis Building, 5th Floor, Grand Cayman, Cayman Islands;

 

"RBS Group Company (2)" means Royal Bank Leasing Limited (a company incorporated in Scotland with company number SC058013) whose registered office is at 24/25 St Andrew Square, Edinburgh EH2 1AF;

 

"RBS Group Undertaking" means RBS or an undertaking which is, from time to time, a subsidiary undertaking or parent undertaking of RBS or a subsidiary undertaking of any such parent undertaking but excluding:

 

	
  

	
(a)

	
any Group Company with effect from Completion;

 

	
  

	
(b)

	
the United Kingdom government or any member or instrumentality thereof, including Her Majesty's Treasury and UK Financial Investments Limited (or any directors, officers, employees or entities thereof); and

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 19 -

  

 

	
  

	
(c)

	
any persons or entities controlled by or under common control with the United Kingdom government or any member or instrumentality thereof (including Her Majesty's Treasury and UK Financial Investments Limited) other than The Royal Bank of Scotland Group plc and each of its subsidiaries or subsidiary undertakings;

 

"RBS's Solicitors" means Clifford Chance LLP of 10 Upper Bank Street, London E14 5JJ;

 

"Receivables Financings" means the lease receivables financings entered into by RBS Aerospace Limited in June 2006, April 2007, June 2007 and December 2007, set out in sub-folder 'Phase 3 – Data Room > C. Funding and Liquidity > 4. Receivables Financings' of the Data Room;

 

"Receivables Financing Amount" means the aggregate of the outstanding balances of the Receivables Financings on the Completion Date (including any amounts due and payable and unpaid pursuant to the terms of the Receivables Financings), plus any breakage, costs, premiums and prepayment fees payable by any Group Company in relation to the release and termination of any hedging and swap arrangements entered into in connection with a Receivables Financing which are unpaid on the Completion Date;

 

"Records" has the meaning given in clause ‎20.1;

 

***

 

"Registry Updates" has the meaning given in clause ‎8.4;

 

"Relevant Accounting Period" has the meaning given in paragraph ‎1.1 of ‎Schedule 6;

 

"Relevant Amount" has the meaning given in paragraph ‎14.2 of ‎Schedule 5;

 

"Relevant Claim" means a claim by the Buyer or a Buyer's Group Undertaking under or pursuant to the provisions of clause ‎5.1, clause ‎6 or any other provision of this Agreement or any other document entered into pursuant to this Agreement;

 

"Relevant Court" means (a) the High Court of Justice of England and Wales, the Court of Session in Scotland (including for the avoidance of doubt the Commercial Court), the Supreme Court of the United Kingdom or any equivalent court in Northern Ireland; (b) the relevant district court (Rechtbank) in the Netherlands; (c) the United States Federal Courts sitting in the District of Columbia and the United States Federal Courts sitting in, and the state courts of, any of the states of Texas, New York, California and Delaware in the United States; (d) the High Court of Ireland; (e) the Federal Court of Australia or the Supreme Court sitting in any state or territory of Australia; or (f) any of the District Courts, the High Courts and the Supreme Court in Japan;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 20 -

  

 

"Relevant Derivative Contracts" means any derivative contract or arrangement (including interest rate or currency swaps or forward contracts) with any RBS Group Undertaking (other than a Group Company) to which a Group Company is party;

 

***

 

"Relevant Insurance Claim" has the meaning given in paragraph ‎9.2 of ‎Schedule 4;

 

"Relevant Jurisdiction" means the United Kingdom, Ireland, the United States, Australia, Japan or the Netherlands;

 

"Relevant Law" means (i) any national or federal law, statute or legislation or rules or regulation having the force of law of any Relevant Jurisdiction (including, for the avoidance of doubt, the EU to extent such EU law, statute or legislation has direct effect in the United Kingdom, Ireland or the Netherlands but excluding, for the avoidance of doubt, in respect of the United States the laws of any other states of the United States) and (ii) the state laws of the states of Texas, New York, California and Delaware in the United States;

 

"Relevant Tax Percentage" means:

 

	
  

	
(a)

	
in relation to Group Companies that are resident for tax purposes in the United Kingdom, 75%;

 

	
  

	
(b)

	
in relation to Group Companies that are resident for tax purposes in Australia, 70%; and

 

	
  

	
(c)

	
in relation to Group Companies that are resident for tax purposes in Ireland, 87.5%;

 

"Relief" means any loss, relief, allowance, exemption, set-off, deduction, right to repayment or credit or other relief of a similar nature granted by or available in relation to Tax;

 

"Repayment" has the meaning given in paragraph ‎14.1.2 of ‎Schedule 5;

 

"***" has the meaning given in paragraph ‎3 of ‎Schedule 12;

 

"Replacement Guarantor" has the meaning given in paragraph ‎1.1.1 of ‎Schedule 12;

 

"Reporting Information" has the meaning given in paragraph ‎4.1 of ‎Schedule 7;

 

"Representation" has the meaning given in clause ‎22;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 21 -

  

 

"Representatives" means:

 

	
  

	
(a)

	
in the case of RBS, each RBS Group Undertaking and each RBS Group Undertaking's respective directors, officers, employees, agents, advisers and representatives; and

 

	
  

	
(b)

	
in the case of the Buyer, each Buyer's Group Undertaking and each Buyer's Group Undertaking's respective directors, officers, employees, agents, advisers and representatives;

 

"Resigning Officers" has the meaning given in paragraph ‎1.1.8 of ‎Schedule 3;

 

***

 

"Reverse Transitional Services Agreement" means the agreement in the agreed form under which the Group Companies will provide services to RBS Group Undertakings following Completion;

 

"Schemes" has the meaning given in paragraph ‎1.5 of ‎Schedule 9;

 

"Security Interest" means any mortgage, charge, pledge, lien, encumbrance, assignment, hypothecation or any other agreement or arrangement having the effect of conferring security;

 

"Sellers" means:

 

	
  

	
(a)

	
RBS;

 

	
  

	
(b)

	
RBS Group Company (1); and

 

	
  

	
(c)

	
RBS Group Company (2),

 

and a "Seller" means any one of them;

 

"Senior Manager" shall mean any person whose basic salary is or (if they were to be offered employment by any Group Company) would be in excess of EUR200,000 per annum;

 

"Sensitive Information" has the meaning given in paragraph ‎4.1 of ‎Schedule 7;

 

"Settlement Date" has the meaning given in clause ‎1.9;

 

"Shares" means:

 

	
  

	
(a)

	
500,002 fully-paid ordinary shares of US$1.00 each of RBS Aerospace Limited;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 22 -

  

 

	
  

	
(b)

	
100 fully-paid ordinary shares of US$1.00 each and 2 deferred shares of £1.00 each of RBS Aerospace UK; and

 

	
  

	
(c)

	
35,395,002 fully-paid ordinary shares of 1.00 Australian Dollars each of RBS Australia Leasing,

 

plus any additional shares issued in accordance with clause ‎4.10 and held by a RBS Group Undertaking other than a Group Company;

 

"Specific Policies" has the meaning given in paragraph ‎5.1.1 of ‎Part A of ‎Schedule 11;

 

"Straddle Period" has the meaning given in paragraph ‎1.6 of ‎Schedule 6;

 

"Subscription Amount" has the meaning given in clause ‎4.10.4;

 

"Subsidiary Undertaking" means a subsidiary undertaking of a Company listed in ‎Part B of ‎Schedule 2 and "Subsidiary Undertakings" means all those subsidiary undertakings;

 

"Sum Recovered" has the meaning given in paragraph ‎9.2 of ‎Schedule 5;

 

"Supplier" means any supplier of goods or (in the case of RBS) services to a Group Company or any other RBS Group Undertaking;

 

"Surviving Provisions" means clauses ‎1 (Interpretation), ‎12 (Confidential Information), ‎15 (Payments), ‎16 (Announcements), ‎18 (Costs), ‎21.1 (Variation), ‎21.2 and ‎21.3 (Waivers, Rights and Remedies), ‎21.6 (Invalidity), ‎21.8 (No Third Party Rights), ‎22 (Entire Agreement), ‎23 (Assignment), ‎24 (Notices) and ‎25 (Governing Law and Jurisdiction);

 

"TARGET2" means the Trans-European Automated Real-time Gross Settlement Express Transfer payment system which utilises a single shared platform and which was launched on 19 November 2007;

 

"TARGET Day" means any day on which TARGET2 is open for the settlement of payments in EUR;

 

"Target Operating Lease Assets" means US$***;

 

"Target Working Capital" means US$***;

 

"Tax" and "Taxation" mean any form of taxation and any levy, duty, charge, contribution, withholding or impost in the nature of taxation (including any related fine, penalty or interest);

 

"Tax Authority" means any government, state or municipality or any local, state, federal or other authority, body or official anywhere in the world exercising a fiscal, 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 23 -

  

 

revenue, customs or excise function (including HM Revenue and Customs, The Office of the Irish Revenue Commissioners and the Australian Taxation Office);

 

"Tax Expert" has the meaning given in paragraph ‎14.5 of ‎Schedule 5;

 

"Tax Saving" has the meaning given in paragraph ‎14.1.3 of ‎Schedule 5;

 

"Tax Warranty Claim" means a claim by the Buyer or a Buyer's Group Undertaking in respect of either of the Warranties set out in paragraphs ‎5.1 or ‎5.9 of ‎Schedule 4;

 

"TCA 1997" means the Irish Taxes Consolidation Act, 1997;

 

"Third Party Assurance" means guarantees, letters of credit, indemnities, counter-indemnities, sureties, letters of comfort or other financial support commitments or contingent liabilities of any nature;

 

"Third Party Debt" means the aggregate amount of:

 

	
  

	
(a)

	
the ECA Financings Amount;

 

	
  

	
(b)

	
the Exim Financing Amount; and

 

	
  

	
(c)

	
the Receivables Financing Amount;

 

"Third Party Employer" has the meaning given in clause ‎13.5;

 

"Total Loss" has in respect of an Aircraft or Engine, the meaning given to the term "Total Loss", "Event of Loss", "Casualty Event" or any analogous term in the relevant Lease Documents, or if an Aircraft or Engine is not at the relevant time subject to Lease Documents, means:

 

	
  

	
(a)

	
the actual, constructive, compromised, arranged or agreed total loss of the Aircraft or Engine (including any damage to the Aircraft or requisition for use or hire which results in an insurance settlement on the basis of a total loss); or

 

	
  

	
(b)

	
the Aircraft or Engine being destroyed, damaged beyond economic repair or permanently rendered unfit for normal use for any reason whatsoever; or

 

	
  

	
(c)

	
the requisition of title, confiscation, forfeiture or other compulsory acquisition of title (or similar event) of the Aircraft for any reason by the government of the Aircraft's state of registration or any other authority (whether de jure or de facto); or

 

	
  

	
(d)

	
the hi-jacking, theft, disappearance, seizure or requisition for use or hire of the Aircraft which deprives any person permitted to have possession and/or use of the Aircraft of its possession and/or use for more than sixty (60) consecutive days;

 

"Transaction" means the transaction contemplated by the Transactional Documents;

 

  

- 24 -

  

 

***

 

"Transactional Documents" has the meaning given to it in clause ‎22;

 

"Transfer Regulations" means the Transfer of Undertakings (Protection of Employment) Regulations 2006 as amended from time to time;

 

"Transitional Services Agreement" means the transitional services agreement in the agreed form to be entered into between RBS, RBS Aerospace Limited and the Buyer on the date of this Agreement under which RBS Group Undertakings will provide services to Group Companies;

 

"Transitional Trademark Licence" means the trademark licence agreement between The Royal Bank of Scotland Group plc and RBS Aerospace Limited in the agreed form;

 

"Treasurer" has the meaning given in clause ‎3.1.7;

 

"Turkish Act" has the meaning given in clause ‎3.1.6;

 

"UK Lessor Tax Adjustment" means the UK Lessor Tax Charge minus the UK Lessor Tax Allowance (whether such amount is a positive or negative number);

 

"UK Lessor Tax Charge" means the undischarged liability in respect of United Kingdom corporation tax as at Completion on the deemed income receipt by RBS Aerospace UK in accordance with section 383 CTA 2010 that arises as a result of a qualifying change of ownership occurring in connection with the sale of the Shares contemplated in this Agreement but disregarding any reduction in such liability arising from the reduction of such deemed income receipt by group relief surrender;

 

"UK Lessor Tax Allowance" means *** the liability in respect of United Kingdom corporation tax on the deemed income receipt by RBS Aerospace UK in accordance with section 383 CTA 2010 that arises as a result of a qualifying change of ownership occurring in connection with the sale of the Shares contemplated in this Agreement but disregarding any reduction in such liability arising from the payment of such tax or from the reduction of such deemed income receipt by expenses, losses, group relief surrender or any other Relief;

 

"UK Scheme" means the RBS Group Pension Fund;

 

"Ulster Bank Sub-lease" means the sub-lease of the Property dated 22 March 2011 and made between Ulster Bank Group Treasury Limited as landlord and RBS Aerospace Limited as tenant;

 

"Undisclosed Employee" has the meaning given in clause ‎13.4;

 

"United Kingdom" means the United Kingdom of Great Britain and Northern Ireland;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 25 -

  

 

"United States" means the United States of America, its territories and possessions, any state of the United States of America, the District of Columbia and all other areas subject to its jurisdiction;

 

"Updated Exhibit 1" means a document, in the form of Part A of Exhibit 1, showing only the aircraft owned or leased by a Group Company as at the Completion Date.  For the avoidance of doubt, Updated Exhibit 1 shall not include any Aircraft in respect of which a Total Loss has occurred prior to Completion, or any Aircraft or aircraft or Engine or engine disposed of as required or permitted by the terms of any Transactional Document or ‎Schedule 7 of this Agreement, but shall include any aircraft or engines acquired as required or permitted by the terms of any Transactional Document or ‎Schedule 7 of this Agreement;

 

"VAT" means value added tax as provided for in Directive 2006/112/EC (including, in relation to the United Kingdom, value added tax charged in accordance with the provisions of the Value Added Tax Act 1994 and, in relation to Ireland, value added tax charged in accordance with the Ireland Value Added Tax Consolidation Act 2010) and any other Tax of a similar nature, whether introduced in a member state of the European Union in substitution for or in addition to such Tax, or elsewhere (including in relation to Australia, goods and services tax (GST) charged in accordance with the A New Tax System (Goods and Services Tax) Act 1999);

 

***

 

"Warranty" means a statement contained in ‎Schedule 4 and "Warranties" means all those statements;

 

"Warranty Claim" means a claim by the Buyer or a Buyer's Group Undertaking under or pursuant to the provisions of clause ‎‎5.1; and

 

"Working Capital" means the amount set out at item ‎15 in the Completion Statement and determined by adding together items ‎9 and ‎10 in the Completion Statement and deducting from the result the aggregate of items ‎11 to ‎14 (inclusive) in the Completion Statement.

 

	
1.2

	
In this Agreement, a reference to:

 

	
  

	
1.2.1

	
(i) a "subsidiary" or "holding company" is to be construed in accordance with section 1159 (and Schedule 6) of the Act and for the purposes of this definition, a person shall be treated as a member of another person if any of that person's subsidiaries is a member of that other person, or if any shares in that other person are held by a person acting on behalf of it or any of its subsidiaries and (ii) a "subsidiary undertaking" or "parent undertaking" is to be construed in accordance with section 1162 (and Schedule 7) of the Act.  A subsidiary and a subsidiary undertaking shall include any person the shares or ownership interests in which are subject to security and where the legal title

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 26 -

  

 

to the shares or ownership interests so secured are registered in the name of the secured party or its nominee pursuant to such security;

 

	
  

	
1.2.2

	
liability under, pursuant to or arising out of (or any analogous expression) any agreement, contract, deed or other instrument includes a reference to contingent liability under, pursuant to or arising out of (or any analogous expression) that agreement, contract, deed or other instrument;

 

	
  

	
1.2.3

	
a party being liable to another party, or to liability, includes, but is not limited to, any liability in equity, contract or tort (including negligence) or under the Misrepresentation Act 1967;

 

	
  

	
1.2.4

	
a document in the "agreed form" is a reference to a document in a form approved and for the purposes of identification initialled by or on behalf of either party;

 

	
  

	
1.2.5

	
a statutory provision includes a reference to the statutory provision as modified or re-enacted or both from time to time before the date of this Agreement and any subordinate legislation made under the statutory provision (as so modified or re-enacted) before the date of this Agreement;

 

	
  

	
1.2.6

	
a "person" includes a reference to any individual, firm, company, corporation or other body corporate, government, state or agency of a state or any joint venture, association or partnership, works council or employee representative body (whether or not having separate legal personality);

 

	
  

	
1.2.7

	
a person includes a reference to that person's legal personal representatives, successors and permitted assigns;

 

	
  

	
1.2.8

	
a "party" includes a reference to that party's successors and permitted assigns;

 

	
  

	
1.2.9

	
a clause, paragraph or Schedule, unless the context otherwise requires, is a reference to a clause or paragraph of, or Schedule to, this Agreement;

 

	
  

	
1.2.10

	
the singular shall include the plural and vice versa; and reference to one gender include all genders;

 

	
  

	
1.2.11

	
other than for the purposes of ‎Schedule 11, "costs" and/or "expenses" incurred by a person shall not include any amount in respect of VAT comprised in such costs or expenses for which either that person or, if relevant, any other member of the VAT group to which that person belongs is entitled to credit or repayment as input tax;

 

	
  

	
1.2.12

	
any English legal term for any action, remedy, method of judicial proceeding, legal document, legal status, court, official or any legal concept or thing shall in respect of any jurisdiction other than England be deemed to include what most nearly approximates in that jurisdiction to the English legal term and to any English statute shall be construed so as to include equivalent or analogous laws of any other jurisdiction; and

 

	
  

	
1.2.13

	
times of the day is to London time.

 

  

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1.3

	
The ejusdem generis principle of construction shall not apply to this Agreement.  Accordingly, general words shall not be given a restrictive meaning by reason of their being preceded or followed by words indicating a particular class of acts, matters or things or by examples falling within the general words.  Any phrase introduced by the terms "other", "including", "include" and "in particular" or any similar expression shall be construed as illustrative and shall not limit the sense of the words preceding those terms.

 

	
1.4

	
The headings in this Agreement do not affect its interpretation.

 

	
1.5

	
References to US Dollars or US$ are references to the lawful currency from time to time of the United States.

 

	
1.6

	
References to EUR or € are references to the lawful currency from time to time of the European Union.

 

	
1.7

	
References to £ are references to the lawful currency from time to time of the United Kingdom.

 

	
1.8

	
Any monetary sum to be taken into account for the purposes of any Warranty where that sum is expressed in a currency other than US Dollars shall be translated into US Dollars at the Exchange Rate applicable to the balance of all such amounts as are expressed in a currency other than US Dollars on the day immediately preceding the date of this Agreement (or, if such day is not a Business Day, on the Business Day immediately preceding such day).

 

	
1.9

	
Where it is necessary to determine whether a monetary limit or threshold referred to in ‎Schedule 5 has been reached or exceeded and the value of the Relevant Claim is expressed in a currency other than US Dollars, the value of that Relevant Claim shall be translated into US Dollars at the Exchange Rate on the date of receipt by RBS of written notification from the Buyer in accordance with paragraph ‎2 of ‎Schedule 5 of the existence of such claim (or, if such day is not a Business Day, on the Business Day immediately preceding such day). The amount of any sum actually payable by RBS in discharge or settlement of any such Relevant Claim shall be converted into US Dollars (where such amount is expressed in a currency other than US Dollars) at the Exchange Rate on the date of such amount being agreed or finally determined (the "Settlement Date") provided always that such sum shall continue to be payable even if after conversion into US Dollars the relevant sum at the Settlement Date would be below the relevant monetary limit or threshold referred to in ‎Schedule 5 but if such amount would cause the figure set out in paragraph ‎1.4 or (as the case may be) paragraph ‎1.5 of ‎Schedule 5 to be exceeded, such amount shall be reduced pro tanto so as not to cause such figure to be exceeded.

 

	
1.10

	
For the purpose of calculating the Initial Consideration or the Final Share Price:

 

	
  

	
1.10.1

	
if any relevant amount recorded in the books of a Group Company is expressed in a currency other than US Dollars, it shall be converted into US Dollars at the Exchange Rate (i) in the case of the Initial Consideration, on the date falling 4 Business Days prior to the Completion Date and (ii) in the case of the Final Share Price, on the Completion Date; and

 

  

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1.10.2

	
where there is an obligation to add or deduct a negative amount, this shall produce the same arithmetic result as deducting or adding respectively the difference between such negative amount and zero.

 

	
1.11

	
A reference in ‎Schedule 4 to "so far as RBS is aware" (or other similar references to RBS's awareness) means the actual knowledge as at the date of this Agreement of each of *** and, in respect only of the Warranties contained in paragraph ‎13 (Employees) and paragraph ‎14 (Pensions and Other Benefits) of ‎Schedule 4, *** and RBS shall not be required to make any enquiry of any person nor shall RBS be deemed to have knowledge of any matter not within the actual knowledge of such persons.

 

	
1.12

	
Other than in relation to paragraph ‎4.1.1‎(c) of ‎Schedule 5, a reference in ‎this Agreement to "so far as the Buyer is aware" (or other similar references to the Buyer's awareness) means the actual knowledge of *** in each case as at the date of this Agreement.

 

	
2.

	
SALE AND PURCHASE

 

	
2.1

	
RBS agrees to sell (or procure that the relevant Seller sells) and the Buyer agrees to buy the Shares and each right attaching to the Shares at or after Completion, free of any Encumbrance.

 

	
2.2

	
The price payable by the Buyer for all of the Shares (the "Final Share Price") shall be set out in the Completion Statement and shall be an amount equal to:

 

	
  

	
2.2.1

	
the Cash Free Debt Free Price; minus

 

	
  

	
2.2.2

	
Third Party Debt; minus

 

	
  

	
2.2.3

	
RBS Debt; plus

 

	
  

	
2.2.4

	
Cash; plus

 

	
  

	
2.2.5

	
Operating Lease Assets; minus

 

	
  

	
2.2.6

	
Target Operating Lease Assets; plus

 

	
  

	
2.2.7

	
Working Capital; minus

 

	
  

	
2.2.8

	
Target Working Capital; and minus

 

	
  

	
2.2.9

	
UK Lessor Tax Adjustment.

 

	
2.3

	
If the Initial Consideration is greater than the Final Share Price, RBS shall pay the difference to the Buyer.  If the Initial Consideration is less than the Final Share Price, the Buyer shall pay the difference to RBS.  In either case the relevant payment shall be made within 5 Business Days of the determination of the Completion Statement

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 29 -

  

 

together with interest at the Agreed Rate for the period from the Completion Date to the date of actual payment.

 

	
2.4

	
Any payment made pursuant to this Agreement, save for those made pursuant to clauses *** and ***, shall (subject to clause ‎2.5) be made on the following basis:

 

	
  

	
2.4.1

	
if it is specifically referable to any particular Shares it shall so far as possible adjust the price paid for such Shares;

 

	
  

	
2.4.2

	
otherwise, it shall adjust the price for such other Shares as RBS and the Buyer agree to be appropriate in the circumstances; or in the absence of such agreement it shall adjust pro rata the price paid for the Shares.

 

	
2.5

	
If any payment made pursuant to this Agreement would reduce the price of the Shares of a particular Company to less than US$1, then such payment or adjustment shall be made on the following basis:

 

	
  

	
2.5.1

	
the price of those Shares shall be reduced to US$1; and

 

	
  

	
2.5.2

	
the balance shall adjust the price for the other Shares as RBS and the Buyer agree to be appropriate in the circumstances or, if they do not agree, it shall adjust pro rata the price paid for the other Shares, provided that in each case the price for such other Shares at the relevant time is not reduced to less than US$1.

 

	
2.6

	
RBS waives all rights of pre-emption and other restrictions on transfer over the Shares conferred on it and will procure that each of the Sellers waives all rights of pre-emption and other restrictions over the Shares conferred on them and that all such rights (if any) conferred on any other person are waived no later than Completion so as to permit the sale and purchase of the Shares.

 

	
2.7

	
RBS covenants with the Buyer that RBS has the right to procure the sale and transfer, and that the relevant Seller has the right to sell and transfer, to the Buyer the full legal and beneficial interest in the Shares listed in ‎Schedule 1 as being held by such Seller on the terms set out in this Agreement. For the avoidance of doubt, Part I of the Law of Property (Miscellaneous Provisions) Act 1994 shall not apply for the purposes of this clause ‎2.

 

	
2.8

	
The provisions of ‎Part B of ‎Schedule 10 shall apply in respect of the repayment of RBS Debt and the parties agree to comply with their respective obligations thereunder.

 

	
2.9

	
The provisions of ‎Schedule 11 shall apply in respect of the preparation and determination of the Completion Statement and the parties agree to comply with their respective obligations thereunder.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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3.

	
CONDITIONS

 

	
3.1

	
Completion is conditional on the following Conditions being satisfied in accordance with this Agreement:

 

	
  

	
3.1.1

	
the occurrence of one of the following events:

 

	
  

	
(a)

	
the European Commission (the "Commission") issuing a decision under Article 6(1)(a) of Council Regulation (EC) 139/2004 (the "EU Merger Regulation"), declaring that the Transaction falls outside the scope of the EU Merger Regulation;

 

	
  

	
(b)

	
the Commission issuing a decision under Article 6(1)(b), Article 8(1) or Article 8(2) of the EU Merger Regulation, or being deemed to have done so under Article 10(6) of the EU Merger Regulation, declaring the Transaction compatible with the internal market, and if any request has been made by an EU Member State under Article 9(2) of the EU Merger Regulation the Commission confirming that it will not refer the Transaction (or any part thereof) or any matter relating thereto, to a competent authority of such Member State under Article 9(1) of the EU Merger Regulation; or

 

	
  

	
(c)

	
after the referral or deemed referral by the Commission under Articles 9(1) or 9(5) of the EU Merger Regulation respectively of all or part of the Transaction to the competent authority of one or more EU Member States:

 

	
  

	
(i)

	
if all of the Transaction is so referred, the issuing by the said competent authority or authorities of a decision or decisions which satisfy (or together satisfy) clause ‎3.1.1(a) or clause ‎3.1.1(b) above (those clauses being interpreted mutatis mutandis); or

 

	
  

	
(ii)

	
if part of the Transaction is so referred the making by the said competent authority or authorities of a decision or decisions which in conjunction with a decision of the Commission, together satisfy clause ‎3.1.1(a) or clause ‎3.1.1(b) above (those clauses being interpreted mutatis mutandis);

 

	
  

	
3.1.2

	
any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and any regulations made thereunder ("HSR Act") relating to the Transaction has expired or been terminated;

 

	
  

	
3.1.3

	
the Chinese Ministry of Commerce ("MOFCOM") issuing a notice approving the Transaction; or the expiry of the statutory waiting period following the filing of the merger notification relating to the Transaction by the Buyer with MOFCOM;

 

	
  

	
3.1.4

	
the Competition Commission or the Competition Tribunal of South Africa approving the Transaction (or being deemed to have done so) under the applicable competition legislation;

  

- 31 -

  

 

	
  

	
3.1.5

	
the acceptance by the Korean Fair Trade Commission of the business combination report filed by the Buyer under the Monopoly Regulation and Fair Trade Act relating to the Transaction within the 30 days waiting period specified by the said Act (or any extension thereof), or the expiry of such period with no decision being issued by the said Commission;

 

	
  

	
3.1.6

	
the Turkish Competition Board issuing a decision pursuant to the Act on the Protection of Competition (Law No. 4054 dated 7 December 1994 as amended by Law No. 5388 dated 2 July 2005) (the "Turkish Act") and Communique No. 1997/1 on the Mergers and Acquisitions Calling for the Authorisation of the Competition Board (as amended), stating that the Transaction is not subject to notification or approving the Transaction after a preliminary or final investigation; or the statutory waiting period of 30 days specified in Article 10 of the Turkish Act (or any extension thereof) expiring without the Turkish Competition Board responding or taking any action in relation to the Transaction;

 

	
  

	
3.1.7

	
the Treasurer of the Commonwealth of Australia (the "Treasurer") becoming precluded under s.25 of the Foreign Acquisitions and Takeovers Act 1975 ("FATA") from being empowered to make an order under Part II of FATA in relation to the Transaction or any matter arising therefrom, or the issue by or on behalf of the Treasurer of a notice in writing under FATA indicating that the Treasurer has no objection to the Transaction;

 

	
  

	
3.1.8

	
the Transaction having been notified to the CFC for clearance under the MFLEC and the occurrence of one of the following events:

 

	
  

	
(a)

	
the CFC notifying RBS or the Buyer that it does not have jurisdiction to review the Transaction under the MFLEC;

 

	
  

	
(b)

	
the suspensory waiting period of 10 business days which is specified in the MFLEC, or any extension thereof, having expired, without the CFC having issued any resolution that the Transaction shall not complete until the CFC issues its final clearance decision; or

 

	
  

	
(c)

	
the CFC having issued its final clearance decision, the CFC having earlier issued a resolution that the Transaction shall not complete until the CFC issues its final clearance decision;

 

	
  

	
3.1.9

	
either

 

	
  

	
(a)

	
the Financial Services Agency of Japan (the "JFSA") has approved the Transaction as and to the extent required; or

 

	
  

	
(b)

	
if such approval is not required, each of the Buyer and Sumitomo Mitsui Financial Group, Inc has submitted notification of the Transaction to the JFSA and the JFSA has confirmed acceptance of the notification,

 

in each case in accordance with the Banking Act of Japan and applicable laws and regulations thereunder; and

 

  

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3.1.10

	
title to the ITAR Helicopters being transferred by RBS Aerospace Limited to any other person (other than a Group Company).

 

	
3.2

	
Each of RBS and the Buyer shall use all commercially reasonable efforts to achieve satisfaction of the Buyer's Conditions as soon as possible after the date of this Agreement and in any event not later than 5.00 pm on the Longstop Date (or, in the event of RBS or the Buyer serving notice on the other in accordance with clause ‎3.10, the Extended Longstop Date). The Buyer shall bear any fees and other costs incurred by it or its Representatives in relation to any merger control or JFSA notification, application and filing (each a "Filing") that is required in connection with the Buyer's Conditions.

 

	
3.3

	
Without prejudice to the foregoing, the Buyer agrees that its obligation pursuant to clause ‎3.2 above to use all commercially reasonable efforts to satisfy the Buyer's Conditions includes:

 

	
  

	
3.3.1

	
promptly complying with all obligations arising under, and acting in good faith in relation, to clauses ‎3.4 and ‎3.5;

 

	
  

	
3.3.2

	
promptly dealing with all requests and enquiries from any government, governmental, regulatory, supranational or trade agency, court, department or body ("Governmental Agency"), in consultation with RBS, and providing all information required by any Governmental Agency to such Governmental Agency; and

 

	
  

	
3.3.3

	
offering to take and taking all commercially reasonable steps, at its sole cost, to obtain any Governmental Agency consent, approval or action required in order to complete the Transaction.

 

	
3.4

	
RBS and the Buyer shall cooperate with each other in the timely preparation, submission and pursuit of all necessary Filings in connection with the satisfaction of the Buyer's Conditions, and in relation to any action taken by the Buyer pursuant to clause ‎3.3 including (so far as permitted under applicable law or regulations):

 

	
  

	
3.4.1

	
ensuring that all information reasonably necessary for making any Filings (including draft versions) made in respect of the Buyer's Conditions (or responding to any request for further information consequent upon such Filings) is supplied promptly to the Buyer who shall be primarily responsible for preparing and dealing with such Filings (other than any filing required to be made by RBS in connection with the HSR Act) and ensuring that they are made accurately and promptly and in any event by the Filing Date (and with regard to the EU, China and JFSA, this obligation shall be deemed to be satisfied if:

 

	
  

	
(a)

	
a draft filing is submitted by the Buyer to the relevant authority on or before the Filing Date; and

 

	
  

	
(b)

	
the formal filings are submitted to the relevant authority by the Buyer no later than the Business Day following the date on which the relevant authority confirms that the filing is ready for submission);

 

  

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3.4.2

	
promptly notifying the other, and providing copies, of any communications from any Governmental Agency which are not immaterial relating to the Buyer's Conditions and each of RBS and the Buyer shall give due consideration to any views expressed by or on behalf of the other in writing in relation to any such communication.

 

	
3.5

	
Without limiting clauses ‎3.3 or ‎3.4, throughout the period during which the Transaction is being considered by any Governmental Agency in respect of the Buyer's Conditions, each of RBS and the Buyer must:

 

	
  

	
3.5.1

	
(i) consult with the other, in advance, in relation to all material communications (whether written or oral, and whether direct or via agents, consultants and advisers) with any Governmental Agency in relation to the Transaction including providing draft copies of all submissions, Filings and other written communications which are not immaterial to any other Governmental Agency at such time as will allow the other and its advisers the opportunity to provide comments and for the party to take any comments into account before they are submitted or sent to any other Governmental Agency; and (ii) promptly provide the other and its advisers with copies of all submissions, Filings and other written communications which are not immaterial in the form submitted or sent;

 

	
  

	
3.5.2

	
as soon as reasonably practicable RBS and the Buyer shall notify the other of any material communication (whether written or oral) received from any Governmental Agency; and

 

	
  

	
3.5.3

	
in the event that any Governmental Agency requests a meeting in relation to the Transaction, together with their advisers, if reasonably practicable, consult fully in advance of such meeting, and, to the extent permitted by the relevant Governmental Agency, each of RBS and the Buyer shall allow persons nominated by the other to attend all meetings (including material scheduled telephone calls) with the Governmental Agency and, where appropriate, to make oral submissions at such meetings and, in the event that RBS or the Buyer elects not to attend any such meeting will provide the other with a summary report of such meeting in such form as may be reasonably requested by it,

 

provided however that nothing in clauses ‎3.4 and ‎3.5 shall oblige the Buyer or RBS to provide to the other any information which is commercially sensitive to its respective group without first redacting this element and simultaneously procuring that its advisers shall provide unredacted versions of the documentation to the other's solicitors.

 

	
3.6

	
RBS shall use all commercially reasonable efforts to achieve satisfaction of the RBS Condition as soon as possible after the date of this Agreement and in any event not later than 5.00 pm on the Longstop Date (or, in the event of RBS or the Buyer serving notice on the other in accordance with clause 3.10, the Extended Longstop Date). RBS shall bear any fees and other costs incurred by it or its Representatives in relation to the RBS Condition.  Without prejudice to the foregoing, RBS agrees that its obligation to use all commercially reasonable efforts to satisfy the RBS Condition includes (i) promptly dealing with all requests and enquiries from any Governmental

 

  

- 34 -

  

 

Agency and providing all information required by any Governmental Agency to such Governmental Agency; (ii) offering to take and taking all such commercially reasonable steps, at its sole cost, to obtain any Governmental Agency consent, approval or action required in order to complete the Transaction; (iii) promptly notifying the Buyer of any material developments in respect of the satisfaction of the RBS Condition.

 

	
3.7

	
Without prejudice to the generality of clause ‎3.2, RBS and the Buyer shall not enter into (and will procure that no RBS Group Undertaking or Buyer's Group Undertaking, respectively, enters into) any other agreement or arrangement which may delay, impede or prejudice the fulfilment of the Conditions.

 

	
3.8

	
If, at any time, either party becomes aware of a fact or circumstance that might prevent any limb of any Condition being satisfied, it shall inform the other party of the matter.

 

	
3.9

	
Subject to clause ‎‎3.10, and notwithstanding any notice served in accordance with clause ‎7, if any of the Conditions have not been satisfied by 5.00 pm on the Longstop Date this Agreement may be terminated by RBS or the Buyer giving notice to the other. In such event, this Agreement shall immediately terminate (other than the Surviving Provisions).

 

	
3.10

	
RBS or the Buyer may, by notice in writing to the other after the last day of the fifth month following the date of this Agreement but prior to 5.00 pm on the Longstop Date, elect that the Longstop Date be postponed to a date being not more than 30 Business Days after the Longstop Date (the longstop date, as so postponed, being the "Extended Longstop Date" and references to the Longstop Date shall be construed accordingly).

 

	
4.

	
COMPLETION

 

	
4.1

	
Subject always to clause ‎4.2, Completion shall take place at the offices of RBS's Solicitors on the next Month Start Day following the later of:

 

	
  

	
4.1.1

	
if no notice has been served pursuant to clauses ‎7.3, ‎7.6 or ‎7.9, the date on which the last of the Conditions is satisfied; or

 

	
  

	
4.1.2

	
if a notice has been served by the Buyer in accordance with clause ‎7.3 that there has been a RBS Breach or by RBS in accordance with clause ‎7.6 that there has been a Buyer's Breach, the later of:

 

	
  

	
(a)

	
the date on which the last of the Conditions is satisfied; and

 

	
  

	
(b)

	
the date on which the RBS Breach or (as the case may be) the Buyer's Breach is cured in accordance with, respectively, clause ‎7.4 or ‎7.7 and for the avoidance of doubt, neither party shall be required to proceed to Completion if a RBS Breach or a Buyer's Breach has not been cured following the service of any such notice;

 

	
  

	
4.1.3

	
if a notice has been served in accordance with clause ‎7.9 by either the Buyer or RBS, the later of:

 

 

  

- 35 -

  

 

	
  

	
(a)

	
the date on which the last of the Conditions is satisfied; and

 

	
  

	
(b)

	
the date on which such notice is withdrawn, whether voluntarily or by order of Court and, for the avoidance of doubt, neither party shall be required to proceed to Completion if any such notice has been served but not withdrawn (other than where there is an agreement or a Court order to do so),

 

(any of these being the "Completion Date").

 

	
4.2

	
If the Completion Date as determined in accordance with clause ‎4.1 would fall:

 

	
  

	
4.2.1

	
(if paragraph ‎1.6 of Schedule 12 applies) on a date prior to a date on which *** is permitted in accordance with the terms of *** were to be served on the first Business Day after the day on which it first becomes possible to determine the Completion Date pursuant to clause ‎4.1; or

 

	
  

	
4.2.2

	
(regardless of whether or not clause ‎4.2.1 applies) 5 Business Days or fewer prior to the Month Start Day of the next calendar month following the month in which the last of the Conditions was satisfied or the relevant notice ceased to be effective or was withdrawn as contemplated in clauses ‎4.1.1, ‎4.1.2 or ‎4.1.3 (as applicable), such period to exclude the actual Month Start Day,

 

then in either such case Completion shall occur on the Month Start Day of the calendar month following the month in which the Completion Date would otherwise have fallen and references to the Completion Date shall be construed accordingly.

 

	
4.3

	
RBS shall notify the Buyer of:

 

	
  

	
4.3.1

	
the Initial Consideration;

 

	
  

	
4.3.2

	
the ECA Financings Amount;

 

	
  

	
4.3.3

	
the Exim Financing Amount;

 

	
  

	
4.3.4

	
the Receivables Financing Amount;

 

	
  

	
4.3.5

	
the Estimated RBS Debt;

 

	
  

	
4.3.6

	
the Estimated Cash;

 

	
  

	
4.3.7

	
the Estimated RBS Deposits;

 

	
  

	
4.3.8

	
the Estimated Operating Lease Assets;

 

	
  

	
4.3.9

	
the Estimated Working Capital; and

 

	
  

	
4.3.10

	
the Estimated UK Lessor Tax Adjustment,

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 36 -

  

 

together with the initial allocation by RBS of the Initial Consideration between the Shares, in each case not less than 3 Business Days prior to the Completion Date.

 

	
4.4

	
At Completion:

 

	
  

	
4.4.1

	
the Buyer shall pay or procure the payment of the Initial Consideration to RBS (for itself and as agent for the Sellers) for the Shares on account of the Final Share Price;

 

	
  

	
4.4.2

	
if by that time any of the consents described in paragraph ‎1.1 of ‎Schedule 12 has been obtained, each of RBS and the Buyer shall use all commercially reasonable efforts to procure the irrevocable release and discharge of the Third Party Assurance set out in Part A of Exhibit 2 to which such consent relates;

 

	
  

	
4.4.3

	
if by that time any of the consents described in paragraph ‎1.1 of ‎Schedule 12 has not been obtained, then:

 

	
  

	
(a)

	
if RBS has made the election described in paragraph 1.3.6 of Schedule 12, or if paragraph 1.6 of Schedule 12 applies:

 

	
  

	
(i)

	
RBS shall (provided that *** have been entered into and any conditions precedent thereunder have been satisfied or waived) procure that the relevant RBS Group Undertaking *** on the Completion Date; and

 

	
  

	
(ii)

	
the Buyer shall pay (or procure the payment by the relevant Group Company or Group Companies of) all amounts payable (pursuant to the terms of ***) in connection with the prepayment in full of *** and/or *** in respect of which such consent has not been obtained on the Completion Date (including amounts of principal, accrued and unpaid interest, costs and expenses, breakage costs and prepayment fees (if any) in respect of each such financing and related third party hedging arrangements) to permit all of *** (including the relevant Third Party Assurances set out in Part A of Exhibit 2) to be released and discharged; and

 

	
  

	
4.4.4

	
RBS and the Buyer shall do all those things respectively required of them in ‎Schedule 3 and ‎Part A of ‎Schedule 10.

 

	
4.5

	
Neither RBS nor the Buyer is obliged to complete this Agreement unless:

 

	
  

	
4.5.1

	
the other complies with all its obligations under this clause ‎4, ‎Schedule 3 and ‎Part A of ‎Schedule 10; and

 

	
  

	
4.5.2

	
the sale and purchase of all the Shares is completed simultaneously.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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4.6

	
If Completion does not take place on the Completion Date because the Buyer or RBS fails to comply with any of its obligations under this clause ‎4, ‎Schedule 3 and ‎Part A of ‎Schedule 10 (whether such failure amounts to a repudiatory breach or not), the party not in default may by notice to the party in default:

 

	
  

	
4.6.1

	
proceed to Completion to the extent reasonably practicable (without limiting its rights under this Agreement); or

 

	
  

	
4.6.2

	
postpone Completion to a date which is not more than 20 Business Days after the Completion Date, any such date being the "Extended Completion Date".

 

	
4.7

	
If the Buyer or RBS postpones Completion to the Extended Completion Date in accordance with clause ‎4.6.2, the provisions of this Agreement apply to the Extended Completion Date as if it were the Completion Date.

 

	
4.8

	
If Completion does not take place on the Extended Completion Date because the Buyer or RBS fails to comply with any of its obligations under this clause ‎4, ‎‎Schedule 3 and ‎Part A of ‎Schedule 10 (whether such failure amounts to a repudiatory breach or not), the party not in default (and being either the Buyer or RBS) may by notice to the party in default:

 

	
  

	
4.8.1

	
proceed to Completion to the extent reasonably practicable (without limiting its rights under this Agreement); or

 

	
  

	
4.8.2

	
terminate this Agreement.

 

	
4.9

	
If this Agreement terminates pursuant to clause ‎3.9, ‎4.8.2, ‎7.2, ‎7.3, ‎7.6 or ‎7.9 each party's further rights and obligations cease immediately on termination (other than the Surviving Provisions). In such event, neither party (nor any of its respective Affiliates) shall have any claim under this Agreement of any nature whatsoever against the other party (nor any of its Affiliates) except in respect of any rights and liabilities which have accrued before termination or under any of the Surviving Provisions. Notwithstanding the foregoing no claim may be made by either party in respect of any Warranty or Buyer's Warranty in the event of termination of this Agreement in accordance with clauses ‎3.9, ‎4.8.2, ‎7.2, ‎7.3, ‎7.6 or ‎7.9 (whether or not such rights have accrued before termination).

 

	
4.10

	
At or not more than 5 Business Days prior to the Completion Time RBS shall procure that:

 

	
  

	
4.10.1

	
each Company that:

 

	
  

	
(a)

	
has borrowed *** that is then outstanding;

 

	
  

	
(b)

	
is the parent undertaking of a Group Company that has borrowed *** that is then outstanding;

 

	
  

	
(c)

	
is at that time a party to a Relevant Derivative Contract; or

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 38 -

  

 

	
  

	
(d)

	
is the parent undertaking of a Group Company that is at that time a party to a Relevant Derivative Contract

 

shall draw down an amount of debt at an appropriate floating rate of interest from the RBS Group Undertaking that holds a majority of that Company's share capital (in each case an "Additional Debt Amount") that is equal to the amount that would be required at that time:

 

	
  

	
(i)

	
to repay any outstanding *** it has borrowed (including any accrued and unpaid interest, costs and expenses and *** (if any));

 

	
  

	
(ii)

	
to repay any outstanding *** that has been borrowed by each Subsidiary Undertaking that is that Company's subsidiary undertaking (including any accrued and unpaid interest, costs and expenses and *** (if any));

 

	
  

	
(iii)

	
to pay *** in respect of the Relevant Derivative Contracts to which it is a party; and

 

	
  

	
(iv)

	
to pay *** in respect of the Relevant Derivative Contracts to which any of its Subsidiary Undertakings is a party;

 

	
  

	
4.10.2

	
simultaneously therewith, each Company shall lend to each of its relevant Subsidiary Undertakings the amount required by each such Subsidiary Undertaking at that time:

 

	
  

	
(a)

	
to repay the outstanding *** that such Subsidiary Undertaking has borrowed (including any accrued and unpaid interest, costs and expenses and *** (if any)); and

 

	
  

	
(b)

	
to pay *** in respect of the Relevant Derivative Contracts to which such Subsidiary Undertaking is a party;

 

	
  

	
4.10.3

	
immediately thereafter, each Company and each relevant Subsidiary Undertaking shall repay in full the *** then owed by it  (including any accrued and unpaid interest, costs and expenses and *** (if any)) and shall terminate all the Relevant Derivative Contracts to which it is a party and pay *** in full;

 

	
  

	
4.10.4

	
***

 

	
4.11

	
The parties agree and acknowledge that where this Agreement provides for an obligation to be performed or payment to be made by reference to a date which is expressed to fall a specified number of days prior to Completion, the Completion Time or the Completion Date (as applicable), neither the Buyer nor any Buyer's Group Undertaking shall be entitled to assert a claim against RBS or any RBS Group

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 39 -

  

 

Undertaking for breach of or failure to comply with the terms of this Agreement with respect to such obligation or payment if such obligation is performed or such payment is made by reference to Completion, the Completion Time or the Completion Date as determined in accordance with clause 4.1.1 above and on or following the date of such performance or payment the date which is to be Completion, the Completion Time or the Completion Date falls to be a later date as a result of the operation of clauses 4.1.2, 4.1.3 or ‎4.6, and such performance or payment in full shall be an effective discharge of the relevant obligation or payment.

 

	
5.

	
THE RBS WARRANTIES AND PRE-COMPLETION CONDUCT

 

	
5.1

	
Subject to clause ‎5.2, RBS:

 

	
  

	
5.1.1

	
warrants to the Buyer in the terms set out in ‎Schedule 4 at the date of this Agreement; and

 

	
  

	
5.1.2

	
in relation to the Fundamental Warranties only, warrants to the Buyer in the terms set out in paragraphs ‎1.1.2 (capacity to sell), ‎1.2 (binding agreements), ‎2.1.1 (ownership of Shares), ‎2.1.2 (Shares comprise entire share capital), ‎2.1.3 (no Encumbrance over Shares), ‎2.1.4 (no agreement to allot), ‎2.2.2, ‎2.2.5, ‎2.2.6 and ‎2.2.7 (ownership of Subsidiary Undertakings) and ‎6.2 (ownership of Aircraft and Engines) of ‎Schedule 4 by reference to the facts and circumstances as at Completion.  For this purpose only, where there is an express or implied reference in a Fundamental Warranty to the "date of this Agreement", that reference is to be construed as a reference to the Completion Date. The Warranty given at the Completion Date pursuant to this clause ‎5.1.2 in the terms set out in paragraph ‎6.2 (ownership of Aircraft) of ‎Schedule 4 shall apply as if such paragraph referred to Updated Exhibit 1 in place of Exhibit 1 (the definitions of "Aircraft" and "Engines" shall be read and construed accordingly). The Warranties given at Completion pursuant to this clause ‎5.1.2 in the terms set out in paragraphs ‎2.1.2 and ‎2.2.2 of ‎Schedule 4 shall be qualified by any shares issued in accordance with clause ‎4.10.

 

	
5.2

	
The liability of RBS for Relevant Claims shall be limited or excluded, as the case may be, as set out in ‎Schedule 5.

 

	
5.3

	
Save as expressly stated in ‎Schedule 4, the Buyer acknowledges and agrees that RBS gives no warranty, representation or undertaking as to the accuracy or completeness of any information (including any of the forecasts, estimates, projections, statements of intent or statements of opinion) provided to the Buyer or any of its advisers or agents (howsoever provided).

 

	
5.4

	
Between the execution of this Agreement and Completion:

 

	
  

	
5.4.1

	
RBS shall exercise all rights available to it to ensure that the Business is carried on in all material respects in the ordinary course and shall comply with the obligations set out in ‎Schedule 7 ***;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 40 -

  

 

	
  

	
5.4.2

	
RBS shall comply with its obligations set out in ‎Schedule 12;

 

	
  

	
5.4.3

	
RBS shall disclose to the Buyer any fact or circumstance which becomes known to RBS during such period which constitutes or which would, or might reasonably be expected to, constitute a breach of any of the Fundamental Warranties or a breach of clause ‎5.4.1. For these purposes "known to RBS" shall mean the actual knowledge of ***, and RBS shall not be deemed to have knowledge of any matter not within the actual knowledge of such persons;

 

	
  

	
5.4.4

	
RBS shall not be required to disclose to the Buyer any fact or circumstance which arises or becomes known to RBS during such period which constitutes or which would or might constitute a breach of any of the Warranties (other than as contemplated in clause ‎5.4.3 in respect of the Fundamental Warranties); and

 

	
  

	
5.4.5

	
for the purpose only of assisting the Buyer with its integration planning, RBS shall:

 

	
  

	
(a)

	
procure that the Buyer, its agents and representatives are given reasonable access to the senior employees, premises and to the books and records of the Group Companies during normal business hours on any Business Day and on reasonable notice to RBS;

 

	
  

	
(b)

	
provide such information regarding the business and affairs of the Group Companies (which does not constitute RBS Business Information) as the Buyer may reasonably require; and

 

	
  

	
(c)

	
for the period commencing 20 Business Days prior to the Completion Time (or if it is not reasonably practicable to determine the commencement date of such period, the period commencing as close as practical thereto and in any case no fewer than 5 Business Days prior to the Completion Time) until Completion, provide such information with regard to Relevant Derivative Contracts as may be reasonably required by the Buyer in developing a hedging and derivative strategy with respect to the Business,

 

provided always that nothing in this clause ‎5.4.5 shall limit the Buyer's rights to bring a Relevant Claim or to terminate this Agreement pursuant to clause ‎7 solely because such information is provided to the Buyer or shall require RBS or any Group Company to (i) do, or omit to do anything, to the extent this would, or would reasonably be likely to, result in a breach of applicable law or regulation, or a rule or order of a Governmental Agency with relevant powers, or loss of legal privilege if the relevant information or documentation were to be provided to the Buyer; (ii) disclose any competitively sensitive information (as determined in the reasonable opinion of RBS or its advisers) other than to the Clean Team on the terms set out in Exhibit 8; or (iii) take any action that would result in undue disruption to the business of any RBS Group 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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Undertaking, and in each such case, so far as permitted and practicable, RBS will consult with the Buyer in relation to any such restriction.

 

	
5.5

	
Subject to the limitations in ‎Schedule 5, the damages which the Buyer may claim for breach of the Warranty in paragraph ‎5.1 of ‎Schedule 4 shall, if Completion occurs, be measured as an amount equal to such proportion of the relevant liability to Tax of the Group Company as has not been:

 

	
  

	
5.5.1

	
discharged on or before Completion;

 

	
  

	
5.5.2

	
taken into account in computing the amount of an allowance, provision or reserve in the Completion Statement; or

 

	
  

	
5.5.3

	
taken into account in the UK Lessor Tax Adjustment.

 

A Group Company shall be treated as incurring a liability to Tax for the above purposes and for the purposes of paragraph ‎5.1 of ‎Schedule 4 to the extent it would have suffered that liability to Tax but for the setting off of a Buyer Relief.

 

	
5.6

	
Other than in accordance with:

 

	
  

	
5.6.1

	
the terms of the Plan Rules; or

 

	
  

	
5.6.2

	
***,

 

RBS undertakes to the Buyer, acting for itself and as agent and trustee for each person referred to in this clause ‎5.6, that neither RBS nor any of its Affiliates will, except in the case of fraud or fraudulent misrepresentation or wilful default, make any claim against, any employee, director, agent, officer or adviser of any member of the Group on whom it may have relied in agreeing to any term of, or entering into, this Agreement or any other agreement or document referred to herein in respect of any misrepresentation, inaccuracy or omission in or from information or advice provided by any such person in connection with the transactions contemplated herein or for the purpose of assisting RBS to give a Warranty, prepare the Disclosure Letter or agree to any term of any such agreement or document.

 

	
5.7

	
Subject to the limitations in ‎‎Schedule 5, the damages which the Buyer may claim for breach of the Warranty in paragraph ‎‎5.9 of ‎‎Schedule 4 shall, if Completion occurs, be measured as an amount equal to *** of the amount by which item ‎14 (Deferred Tax) in the Completion Statement would have been increased had the Relief from Irish Tax that actually arose from the payment of *** as mentioned in clause ‎4.10 been reflected therein, rather than the amount in respect of such Relief as was so reflected.

 

	
6.

	
INDEMNITIES

 

	
6.1

	
Without prejudice to the right of the Buyer to claim on any other basis or take advantage of any other remedies available to it (but not so as to enable any Buyer's Group Undertaking to claim twice in respect of the same breach), RBS agrees to

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 42 -

  

 

indemnify (and keep indemnified) the Buyer on an after Tax basis against any Loss suffered or incurred by the Buyer or any Group Company to the extent arising out of or relating to any Pro Forma Transaction or the operation of any asset subject to a Pro Forma Transaction prior to the effective date of such Pro Forma Transaction.

 

	
6.2

	
Subject to clause ‎19.11 and ‎Schedule 5, if and to the extent that after Completion a claim is brought:

 

	
  

	
6.2.1

	
by any RBS Group Undertaking against any Buyer's Group Undertaking in relation to an Affiliate Transaction; or

 

	
  

	
6.2.2

	
by any person (not being a Buyer's Group Undertaking) against any Buyer's Group Undertaking in relation to an Affiliate Transaction that involves a contractual obligation (other than any obligations in respect of any agreements or arrangements relating to services customarily provided between Group Companies and which have not been reflected in writing), asset transfers, financings, swaps or hedging arrangements, or guarantees, indemnities, comfort letters or similar transactions other than in each case as disclosed in the Data Room,

 

then in each such case, RBS agrees to indemnify (and keep indemnified) the Buyer on an after Tax basis against any Loss suffered or incurred by any Buyer's Group Undertaking to the extent arising out of or relating to such claim.

 

	
7.

	
TERMINATION

 

	
7.1

	
Save as expressly provided in this Agreement neither party shall be entitled to rescind or terminate this Agreement in any circumstances whatsoever (whether before or after Completion) and accordingly the Buyer waives all and any rights of rescission it may have (howsoever arising or deemed to arise).  This shall not exclude any liability for (or remedy in respect of) fraudulent misrepresentation.

 

	
7.2

	
This Agreement may be terminated by the written agreement of the Buyer and RBS.

 

	
7.3

	
If between the time of this Agreement and Completion, the Buyer becomes aware of any fact, matter or circumstance that constitutes a breach of any of the Fundamental Warranties (or which would constitute a breach of any of the Fundamental Warranties if it were repeated at Completion in accordance with clause ‎5.1.2) or that RBS has not in all material respects duly performed and complied with its obligations pursuant to clause ‎5.4.1 of this Agreement (each a "RBS Breach"), the Buyer shall promptly notify RBS of such breach. Subject to clauses ‎7.4 and ‎7.5, the Buyer may by further notice to RBS at any time prior to Completion terminate this Agreement on 20 Business Days notice to RBS.

 

	
7.4

	
The Buyer shall not be entitled to exercise its right to terminate this Agreement pursuant to clause ‎7.3 if the RBS Breach is capable of remedy and within 20 Business Days of receiving notice of the breach in accordance with clause ‎7.3, the breach is remedied by RBS so that the Buyer would not be entitled to serve a notice terminating this Agreement pursuant to clause ‎7.3 in light of the circumstances prevailing after such remedy.

 

  

- 43 -

  

 

	
7.5

	
The Buyer may not terminate this Agreement in accordance with clause ‎7.3 if at any time:

 

	
  

	
7.5.1

	
prior to service of notice to terminate in accordance with clause ‎7.3; or

 

	
  

	
7.5.2

	
between service of such notice and the expiry of 20 Business Days,

 

the Buyer is in material breach of its obligations under this Agreement and such breach has not been remedied by the Buyer.

 

	
7.6

	
If between the time of this Agreement and Completion, RBS becomes aware of any fact, matter or circumstance that constitutes a breach of any of the Buyer's Warranties (or which would constitute a breach of such Buyer's Warranties when repeated at Completion in accordance with clause ‎8.1) or any material obligation of the Buyer under this Agreement arising prior to the Completion Date (each a "Buyer's Breach") RBS shall promptly notify the Buyer of such breach. Subject to clauses ‎7.7 and ‎7.8, RBS may by further notice to the Buyer at any time prior to Completion terminate this Agreement on 20 Business Days notice.

 

	
7.7

	
RBS shall not be entitled to exercise its right to terminate pursuant to clause ‎7.6 if the Buyer's Breach is capable of remedy and within 20 Business Days of receiving notice of the breach in accordance with clause ‎7.6, the breach is remedied by the Buyer.

 

	
7.8

	
RBS may not terminate this Agreement in accordance with clause ‎7.6 if at any time:

 

	
  

	
7.8.1

	
prior to service of notice to terminate in accordance with clause ‎7.6; or

 

	
  

	
7.8.2

	
between service of such notice and the expiry of 20 Business Days,

 

RBS is in material breach of its obligations under this Agreement and such breach has not been remedied by RBS.

 

	
7.9

	
This Agreement may be terminated by the Buyer or RBS on 20 Business Days written notice (the "Notice Period") to the other if:

 

	
  

	
7.9.1

 

	
  

	
(a)

	
a Relevant Law has been enacted and come into effect after the date of this Agreement which is binding on RBS or the Buyer and which makes Completion unlawful and which Relevant Law remains in effect at the expiry of the Notice Period; and

 

	
  

	
(b)

	
the party serving such notice to terminate has received written advice from outside counsel recognised as experienced in such matters that the Relevant Law is binding on RBS or the Buyer, as the case may be, and makes Completion unlawful and provides a copy of such advice to the other at the same time as the termination notice; and

 

	
  

	
(c)

	
the Buyer and/or RBS, as the case may be, having used all commercially reasonable efforts is unable to comply with or avoid the

 

  

- 44 -

  

 

application of the requirement of Relevant Law which makes Completion unlawful; or

 

	
  

	
7.9.2

	
a judgement, injunction, order or decree of any Relevant Court prohibiting or rendering Completion unlawful (a "Prohibitive Order") having been issued against either or both of RBS or the Buyer following a hearing at which each of them shall have presented in reasonable detail either written or oral argument seeking to avoid the issue of a Prohibitive Order and such Prohibitive Order remains effective and undischarged 10 Business Days after its date of issue but excluding any Prohibitive Order relating to financial services or banking regulatory matters or anti-trust, foreign investment or other similar regimes.

 

	
8.

	
THE BUYER'S WARRANTIES AND UNDERTAKINGS

 

	
8.1

	
The Buyer warrants to RBS as at the date of this Agreement and as at Completion that:

 

	
  

	
8.1.1

	
the Buyer is validly incorporated, in existence and duly registered under the laws of its jurisdiction and has full power to conduct its business as conducted on the date of this Agreement;

 

	
  

	
8.1.2

	
the Buyer has the right, power and authority, and has taken all action necessary, to execute, deliver and exercise its rights and perform its obligations under this Agreement and each Transactional Document to which it is a party;

 

	
  

	
8.1.3

	
the Buyer's obligations under this Agreement and/or any other Transactional Document are, or when the relevant Transactional Document is executed will, constitute binding obligations in accordance with their respective terms;

 

	
  

	
8.1.4

	
the Buyer is not insolvent or bankrupt under the laws of its jurisdiction of incorporation, unable to pay its debts as they fall due nor has proposed or is liable to any arrangement (whether by court process or otherwise) under which its creditors (or any group of them) would receive less than the amounts due to them. There are no proceedings in relation to any compromise or arrangement with creditors or any winding up, bankruptcy or insolvency proceedings concerning the Buyer and no events have occurred which would justify such proceedings. No steps have been taken to enforce any security over any assets of the Buyer and no event has occurred to give the right to enforce such security;

 

	
  

	
8.1.5

	
the Buyer has available cash resources to pay the Initial Consideration and to meet its obligations under this Agreement;

 

	
  

	
8.1.6

	
the execution and delivery of, and the performance by the Buyer of its obligations under, this Agreement and/or any Transactional Document will not:

 

	
  

	
(a)

	
result in a breach of any provision of the memorandum or articles of association or by-laws or equivalent constitutional documents of the Buyer;

 

	
  

	
(b)

	
result in a breach of, or constitute a default under, any instrument to which the Buyer is a party or by which the Buyer is bound and which

 

  

- 45 -

  

 

is material in the context of the transactions contemplated by this Agreement;

 

	
  

	
(c)

	
result in a breach of any order, judgment or decree of any court or governmental authority to which the Buyer is a party or by which the Buyer is bound or submits;

 

	
  

	
(d)

	
save as referred to in clause ‎3.1 require the Buyer to obtain any consent or approval of, or give any notice to or make any registration with, any governmental or other authority which has not been obtained or made at the date hereof both on an unconditional basis and on a basis which cannot be revoked (save pursuant to any legal or regulatory entitlement to revoke the same other than by reason of any misrepresentation or misstatement); or

 

	
  

	
(e)

	
require the Buyer to obtain any consent or approval of any of its shareholders or any other person; and

 

	
  

	
8.1.7

	
so far as the Buyer is aware, neither the Buyer nor any Affiliate is subject to any order, judgement, direction, investigation or other proceeding by any governmental authority which will, or is reasonably likely to, prevent or delay the fulfilment of any of the Buyer's Conditions.

 

	
8.2

	
The Buyer undertakes to RBS, RBS acting for itself and as agent and trustee for each other RBS Group Undertaking, that, except in the case of fraud or fraudulent misrepresentation or wilful default, neither the Buyer nor any of its Affiliates:

 

	
  

	
8.2.1

	
has any rights against; and

 

	
  

	
8.2.2

	
may make any claim against,

 

any employee, director, agent, officer or adviser of a RBS Group Undertaking on whom it may have relied before agreeing to any term of, or entering into, this Agreement or any other agreement or document referred to herein.

 

	
8.3

	
The Buyer shall procure that:

 

	
  

	
8.3.1

	
as soon as reasonably practicable after the Completion Date and in any event within 20 Business Days afterwards, the name of any Group Company which consists of or incorporates the word "RBS" or the words "Royal Bank of Scotland" is changed to a name which does not include that word or words or any name which, in the reasonable opinion of RBS, is substantially similar or confusing;

 

	
  

	
8.3.2

	
(subject to clause ‎8.4) as soon as reasonably practicable after the Completion Date and in any event within 20 Business Days afterwards, the Group Companies shall cease to use or display any trade or service name or mark, business name, logo or domain name used or held by any RBS Group Undertaking or any mark, name or logo which, in the reasonable opinion of RBS, is substantially or confusingly similar to any of them;

 

  

- 46 -

  

 

	
  

	
8.3.3

	
between the execution of this Agreement and Completion, the Buyer shall comply with its obligations set out in ‎Schedule 12;

 

	
  

	
8.3.4

	
the Buyer's Group Undertakings shall comply with the terms of the Transitional Trademark Licence, the Transitional Services Agreement, the Reverse Transitional Services Agreement and with effect from Completion the Lombard Aircraft Transfer Agreements; and

 

	
  

	
8.3.5

	
following Completion each Group Company promptly pays any Tax for which it is primarily liable and which is not of a type which has arisen in breach of the Warranty in paragraph ‎5.1 of ‎Schedule 4 (including, in particular, any Tax liability arising under Division 45 of the Australian Income Tax Assessment Act 1997 in connection with the sale of Shares contemplated in this Agreement), and the Buyer covenants to pay to RBS (for itself or as agent for the relevant RBS Group Undertaking), on demand and on an after Tax basis an amount equal to any Tax assessed on RBS or on a RBS Group Undertaking to the extent that such Tax is primarily a liability of any Buyer's Group Undertaking and is not of a type which has arisen in breach of the Warranty in paragraph ‎5.1 of ‎Schedule 4 and to the extent that an amount in respect of such Tax has not already been recovered under this clause, any other provision of this Agreement or an applicable statutory provision.

 

	
8.4

	
The Buyer shall use all commercially reasonable efforts to procure that as soon as practicable after the Completion Date (i) the fireproof nameplates attached to each Aircraft and Engine owned or leased by a Group Company (and stating the name of the Owner and any Lessor of the relevant Aircraft or Engine) are replaced with nameplates that reflect the changes to the names of the Group Companies as contemplated by clause ‎‎8.3.1 (such changes, the "Name Changes") and (ii) such aircraft registry mortgage, Cape Town or other similar filings are made as are necessary to reflect the Name Changes (the "Registry Updates"), and in each case the provisions of clause ‎‎8.3.2 shall not apply in respect of such fireproof nameplates and Registry Updates pending such replacement or updating in accordance with this clause ‎8.4.

 

	
9.

	
RESTRICTIVE COVENANTS

 

	
9.1

	
Subject to clause ‎9.2, RBS undertakes to the Buyer that neither it nor any RBS Group Undertaking will for a period of *** years after the date of this Agreement provide commercial passenger jet aircraft operating leases or trade or provide lease management services in respect of commercial passenger jet aircraft as part of a commercial passenger jet aircraft operating lease business in competition with the Business. For the avoidance of doubt, the parties agree and acknowledge that the carrying on of the following activities directly or indirectly by any RBS Group Undertaking shall not constitute a breach of this clause ‎9.1:

 

	
  

	
9.1.1

	
any activity relating to the arranging or providing of any form of finance in relation to aircraft (other than through the provision of operating leases in

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 47 -

  

 

respect of commercial passenger jet aircraft or the trading or (except as provided in clause 9.1.4) lease management of commercial passenger jet aircraft as part of a commercial passenger jet aircraft operating lease business);

 

	
  

	
9.1.2

	
the carrying on by any RBS Group Undertaking in any way and anywhere in the world of any business relating to the leasing or sale and purchase of any asset (including corporate jets, helicopters, any aircraft with a maximum approved seating configuration ***, or other aircraft other than commercial passenger jet aircraft), provided that it does not involve the provision of operating leases in respect of commercial passenger jet aircraft or the trading of commercial passenger jet aircraft as part of a commercial passenger jet aircraft operating lease business;

 

	
  

	
9.1.3

	
any activity relating to the arranging or providing of any form of financing, hedging, banking service, financial advisory service or capital markets service to any person including any person involved in the leasing, operation, purchase or sale of aircraft, other than through the provision of operating leases in respect of commercial passenger jet aircraft; or

 

	
  

	
9.1.4

	
the exercise of rights and performance of obligations by any RBS Group Undertaking in connection with any of the roles conferred on it in relation to the securitisation to which the Airspeed Servicing Agreement relates.

 

	
9.2

	
Clause ‎9.1 shall not:

 

	
  

	
9.2.1

	
apply to the enforcement of any Security Interest granted to or for the benefit of any RBS Group Undertaking including but not limited to the enforcement of any Security Interest over aircraft or any interest in any business, firm, company, corporation, body corporate, partnership or other entity or undertaking which carries on, directly or indirectly and whether wholly or in part, the business of operating or leasing aircraft (each a "Protected Asset") and/or any activity undertaken in relation to any such Protected Asset in connection with the enforcement of any such Security Interest including but not limited to the ownership, operation or leasing of such aircraft following such enforcement;

 

	
  

	
9.2.2

	
apply to the holding of shares in a company, corporation, body corporate or partnership or other entity or undertaking (other than a fund) (an "Investee Entity") by or through any RBS Group Undertaking for investment purposes only where such RBS Group Undertaking does not exercise, directly or indirectly, any management function in the company concerned or any material influence in that company, which shall be taken to be the case if the shares do not confer more than 20 per cent. of the votes which could normally be cast at a general meeting of the Investee Entity;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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9.2.3

	
restrict any RBS Group Undertaking from holding or being interested in shares in a listed company which do not confer more than 10 per cent. of the votes which could normally be cast at a general meeting of that company;

 

	
  

	
9.2.4

	
apply to any business, Investee Entity or group of companies which is acquired by any RBS Group Undertaking and which carries on activities which compete with the Business where:

 

	
  

	
(a)

	
such activities are ancillary or incidental to its main business;

 

	
  

	
(b)

	
the acquisition is not made with the sole or main purpose of acquiring a business which so competes; and

 

	
  

	
(c)

	
following such acquisition no action is taken by a RBS Group Undertaking which results in a material increase in the number of commercial passenger jet aircraft under the ownership or management of the acquired business, entity or group;

 

	
  

	
9.2.5

	
apply to the carrying on of any business, Investee Entity or group of companies which competes with the Business after such time as any Buyer's Group Undertaking ceases to own all or a majority of the Business;

 

	
  

	
9.2.6

	
restrict any RBS Group Undertaking from being a limited partner or investor in any fund carrying on (or investing in a business or Investee Entity or fund which carries on) a business which competes with the Business or from acting as the general partner or manager of any such fund provided that the aggregate interest of the RBS Group Undertakings in any such fund as a limited partner or investor does not exceed 49 per cent. of the total interests of the limited partners or investors in that fund;

 

	
  

	
9.2.7

	
restrict any fund managed or advised by any RBS Group Undertaking from carrying on (or investing in a business or Investee Entity or fund which carries on) a business which competes with the Business provided that the aggregate interest of the RBS Group Undertakings in any such fund as a limited partner or investor does not exceed 49 per cent. of the total interests of limited partners or investors in that fund;

 

	
  

	
9.2.8

	
restrict any activity relating to the continued leasing by Lombard of any of the Lombard Aircraft pending transfer of title of the Lombard Aircraft to RBS Aerospace UK and the sale of the Lombard Aircraft by Lombard to RBS Aerospace UK, in each case in accordance with the Lombard Aircraft Transfer Agreements; or

 

	
  

	
9.2.9

	
restrict the aircraft engine leasing business carried out by the Gate Quay Joint Venture.

 

	
9.3

	
Subject to clause ‎9.5, the Buyer agrees with RBS that neither it nor any of its Affiliates will, from the date of this Agreement and for a period of 2 years thereafter, either directly or indirectly solicit for employment or employ any senior or key employee who is employed by any RBS Group Undertaking and with whom the

 

  

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Buyer or any Representative of the Buyer has had contact in relation to the Transaction.

 

	
9.4

	
Subject to clause ‎9.5, RBS agrees that neither it nor any of its Affiliates will, from the date of this Agreement and for a period of 2 years thereafter, either directly or indirectly solicit for employment or employ any senior or key employee of a Buyer's Group Undertaking with whom RBS or any Representative of RBS has had contact in relation to the Transaction.

 

	
9.5

	
Clauses ‎9.3 and ‎9.4 shall not prevent the employment of any person following an unsolicited approach by that person at his or her own instigation or in response to an advertisement placed in the national, local or trade press or other media but such restrictions shall apply to an approach made by a headhunter whether or not the person to be solicited for employment has first been identified to the headhunter by the party seeking to employ that person or by any of its Representatives.

 

	
9.6

	
RBS agrees that it will inform those senior or key employees who would or may be subject to the restrictions set out in clause ‎9.3 of the existence of them and provide them with a copy.

 

	
9.7

	
The Buyer agrees that it will inform those senior or key employees who would or may be subject to the restrictions set out in clause ‎9.4 of the existence of them and provide them with a copy.

 

	
10.

	
TAX PROVISIONS

 

The Buyer and RBS agree that the provisions set out in ‎Schedule 6 shall come into force and effect on Completion.

 

	
11.

	
INSURANCE

 

	
11.1

	
From the date of this Agreement until (and including) the Completion Date the RBS Group Undertakings and the Group Companies shall continue in force all policies of insurance maintained by them in respect of the Business as at the date of this Agreement or enter into policies giving equivalent cover in all material respects subject to such level of insurance cover being available on ordinary market terms.

 

	
11.2

	
Upon Completion, all insurance cover arranged in relation to the Business by any RBS Group Undertaking (whether under policies maintained with third party insurers or other RBS Group Undertakings) shall cease (other than in relation to insured events taking place before Completion) and no Buyer's Group Undertaking shall make any claim under any such policies in relation to insured events arising after Completion. Any RBS Group Undertaking shall be entitled to make arrangements with its insurers to reflect this clause.

 

	
11.3

	
From the Completion Date, for a period of not less than 2 years, the Buyer shall ensure that each RBS Group Undertaking and their respective directors, officers, employees and contractors are named as additional insured in the contingent aviation legal and third party liability policies (including, if applicable, war risks insurance policies) maintained by the Group Companies in relation to the Aircraft.

 

  

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11.4

	
From the Completion Date (or, if earlier, from the date on which the relevant Pro Forma Transaction occurs), for a period of not less than 2 years, RBS shall ensure that RBS Aerospace Limited and its Affiliates and their respective directors, officers, employees and contractors are named as additional insured in either:

 

	
  

	
11.4.1

	
the aviation legal and third party liability policies (including, if applicable, war risks insurance policies) maintained by the relevant operator; or

 

	
  

	
11.4.2

	
the contingent aviation legal and third party liability policies (including, if applicable, war risks insurance policies) maintained by any RBS Group Undertaking,

 

in relation to ITAR Helicopters or corporate jets transferred or to be transferred pursuant to the Pro Forma Transactions.

 

	
12.

	
CONFIDENTIAL INFORMATION

 

	
12.1

	
Subject to clause ‎12.2 and clause ‎16 (Announcements), each of RBS and the Buyer shall (and shall ensure that each of their respective Representatives shall) treat as confidential all information received or obtained which relates to:

 

	
  

	
12.1.1

	
the other party including, where that other party is RBS, each RBS Group Undertaking and where that other party is the Buyer, each Buyer's Group Undertaking;

 

	
  

	
12.1.2

	
any Group Company;

 

	
  

	
12.1.3

	
the provisions or the subject matter of this Agreement or any document referred to herein and any claim or potential claim thereunder; or

 

	
  

	
12.1.4

	
the negotiations relating to this Agreement or any documents referred to herein.

 

	
12.2

	
Clause ‎12.1 does not apply to disclosure of any such information as is referred to in clause ‎12.1:

 

	
  

	
12.2.1

	
which is required to be disclosed by law, by a rule of a listing authority or stock exchange to which either party or any of its respective Affiliates is subject or submits or by a Governmental Agency, Tax Authority or other authority with relevant powers to which either party or any of its respective Affiliates is subject or submits, whether or not the requirement has the force of law provided that the disclosure shall, so far as is practicable and lawful to do so, be made after consultation with the other party and after taking into account the other party's reasonable requirements as to its timing, content and manner of making or despatch;

 

	
  

	
12.2.2

	
prior to Completion, by RBS in the ordinary course of business of any RBS Group Undertaking (but not including such information as relates to the Buyer or any Buyer's Group Undertaking);

 

	
  

	
12.2.3

	
to an adviser for the purpose of advising in connection with the transactions contemplated by this Agreement provided that such disclosure is essential for these purposes and is on the basis that the adviser shall treat all such

 

  

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information as confidential in accordance with this clause ‎12 and will not disclose any such information except in accordance with this clause ‎12;

 

	
  

	
12.2.4

	
to a director, officer or employee of a Buyer's Group Undertaking or of a RBS Group Undertaking whose function requires him to have the relevant confidential information;

 

	
  

	
12.2.5

	
to the extent that the information has been made public through no fault of that party or by, or with the consent of, the other party;

 

	
  

	
12.2.6

	
in the case of any Buyer's Group Undertaking, following Completion, to the extent such information is Group Business Information;

 

	
  

	
12.2.7

	
in the case of any RBS Group Undertaking, following Completion, to the extent such information is RBS Business Information; or

 

	
  

	
12.2.8

	
which was in the other party's possession prior to such information being disclosed to it or obtained by it and which, in each case, was not obtained directly or indirectly from any RBS Group Undertaking (in the case of the Buyer) or any Buyer's Group Undertaking (in the case of RBS) nor from another source known to be in breach of a duty of confidentiality regarding that information to any RBS Group Undertaking (in the case of the Buyer) or any Buyer's Group Undertaking (in the case of the RBS) provided, however that this clause ‎12.2.8 shall not apply in relation to the disclosure of Group Business Information by any RBS Group Undertaking after Completion.

 

	
12.3

	
The restrictions contained in this clause ‎12 shall continue to apply after the termination of this Agreement without limit in time.

 

	
13.

	
EMPLOYEES AND TRANSACTION COSTS

 

	
13.1

	
***

 

	
13.2

	
***

 

	
13.3

	
RBS shall procure that any fees, expenses, costs or liabilities incurred and not paid by a Group Company prior to Completion in connection with the transactions contemplated by this Agreement or any other Transactional Document including, without limitation, attorney, accounting, investment banking and other professional fees and expenses, are paid prior to or simultaneously with Completion and, if not so paid, RBS shall pay such fees, expenses, costs or liabilities after Completion.

 

	
13.4

	
If any individual who is not a Disclosed Employee reasonably claims or is found by a court or tribunal of competent jurisdiction, (i) to be or have become an employee of any Group Company before or upon Completion by virtue of engagement through an agency or otherwise, or (ii) to be or have become an employee of a Group Company or any Buyer's Group Undertaking or subcontractor of any such company as a

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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consequence of the arrangements or termination of the arrangements contemplated by this Agreement by virtue of the Employee Transfer Legislation (the "Undisclosed Employee"), then the Buyer shall promptly notify RBS, and, if RBS does not wish to employ the Undisclosed Employee or the Undisclosed Employee does not wish to be employed by RBS, the relevant Buyer's Group Undertaking or subcontractor may terminate the employment of such individual within 30 days of the notification to RBS (taking into account any reasonable requests made by RBS in relation to the termination process to be adopted and the timing of such termination) and RBS shall indemnify and keep indemnified the Buyer, on its own behalf or as trustee for the relevant Buyer's Group Undertaking or subcontractor, against the costs of employing and terminating the employment of such individual and all losses, liabilities and reasonable cost arising out of or relating to any such claim or finding, save for any costs, losses or liabilities to the extent arising as a result of any act of unlawful discrimination (which for the avoidance of doubt shall not include solely the decision to terminate the employment of such Undisclosed Employee) by the Buyer, the Buyer's Group Undertaking or subcontractor as appropriate.

 

	
13.5

	
The Buyer shall or shall procure that the relevant Buyer's Group Undertaking shall offer to each Offer Employee as soon as possible after the date of this Agreement and in any event prior to Completion employment on terms and conditions which comply with the laws of the jurisdiction in which the Offer Employee is based and to take effect on the Completion Date which are no less favourable in the aggregate than those which the Offer Employee enjoyed at the time the offer is made (including an agreement by the Buyer to recognise all periods of employment with RBS Group Undertakings for the purposes of calculating length of service). The Buyer shall also state the amount of any severance payment that shall be due from the Buyer to the Offer Employee in the event that their employment is terminated after Completion. Such offer of employment, in each case shall be conditional upon Completion occurring and be made to each of the relevant Offer Employee by a person incorporated in the same country as such Offer Employee's current Employing Entity (the "Offer"). The Buyer shall provide full details of each Offer to RBS in advance of such Offer being made to the relevant Offer Employee at such time as will allow RBS and its advisers the opportunity to provide comments before the Offer is made to the relevant Offer Employee and the Buyer shall take into account any reasonable comments made by RBS. The Buyer and RBS agree that at the request of RBS, prior to the date of Completion, the Buyer and RBS shall facilitate a process whereby at the request of RBS, either: (a) each relevant Offer Employee identified by RBS enters into a termination agreement with his current employer within the RBS Group (the "Current Employer") or if the relevant Offer Employee is employed by a third party, with such third party (the "Third Party Employer") which (amongst other things) shall include a waiver of claims against the Current Employer, RBS Group Undertakings and a Third Party Employer (as relevant); or (b) in relation to each relevant Offer Employee identified by RBS, the Offer contains a waiver of claims by the relevant Offer Employee against the Current Employer or the Third Party Employer (as relevant) and the relevant RBS Group Undertaking and that such entities may be joined to the Offer solely for the purpose of agreeing that the Offer Employee's employment with the Current Employer or Third Party Employer has terminated and obtaining such a waiver of claims.

 

  

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13.6

	
RBS shall (or shall procure that any RBS Group Undertaking shall) waive any required notice period or post-termination restrictions applicable to each Offer Employee to the extent that they inhibit acceptance of the Offer.

 

	
13.7

	
Where the laws of the local jurisdiction require the offer of employment to be made by an employer within that jurisdiction, and no such relevant Buyer's Group Undertaking exists as at the date of this Agreement, the Buyer and RBS will co-operate to identify a solution to ensure that the services of the individual Offer Employee can be made available to the Buyer (at the Buyer's cost) until such a Buyer's Group Undertaking can be established (which the Buyer undertakes to do as soon as reasonably practicable following the date of this Agreement).

 

	
13.8

	
If the Offer is not made in accordance with clause ‎13.5 the Buyer shall indemnify RBS (RBS acting for itself or as agent for each RBS Group Undertaking) on an after Tax basis in respect of any salary or benefit payable to such Offer Employee after Completion and each loss, liability or reasonable cost arising out of the termination of employment of such Offer Employee save for any costs, losses or liabilities that arise as a result of any act of unlawful discrimination (which for the avoidance of doubt shall not include solely the decision to terminate the employment of such Offer Employee) by RBS, any RBS Group Undertaking or subcontractor as appropriate.

 

	
14.

	
PENSIONS

 

The Buyer and RBS agree that the provisions set out in ‎Schedule 9 shall come into force and effect on Completion, other than paragraphs ‎1.4 and ‎1.7 of ‎Schedule 9 which shall come into force and effect on the date of this Agreement.

 

	
15.

	
PAYMENTS

 

	
15.1

	
Any payment to be made pursuant to this Agreement by the Buyer shall be made to the RBS Account.

 

	
15.2

	
Any payment to be made pursuant to this Agreement by RBS shall be made to the Buyer's Account.

 

	
15.3

	
Payment under clauses ‎15.1 and ‎15.2 shall be made in immediately available funds in US Dollars by electronic transfer on the due date for payment. Receipt of the amount shall be an effective discharge of the relevant payment obligation.

 

	
15.4

	
All payments made by either party under this Agreement shall be made gross, free of any right of counterclaim or set-off (unless expressly stated otherwise) and without deduction or withholding of any kind other than any deduction or withholding required by law.

 

	
15.5

	
If either party makes a deduction or withholding required by law from a payment made under this Agreement (other than pursuant to clauses *** and ***), the sum due from such party shall be increased to the extent necessary to ensure that, after the

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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making of any deduction or withholding, the recipient receives a sum equal to the sum it would have received had no deduction or withholding been made.

 

	
15.6

	
To the extent that any additional amount paid under clause ‎15.5 results in the payee obtaining a Relief, the payee shall reimburse to the payer such part of such additional amount as the payee certifies to the payer will leave it (after reimbursement) in no better or worse position that it would have been had the payer not been required to make a deduction or withholding or, as the case may be, had the payee not incurred a liability to Taxation.

 

	
15.7

	
If either party fails to pay a sum due from it under this Agreement on the due date of payment in accordance with the provisions of this Agreement, that party shall pay interest on the overdue sum from the due date of payment until the date on which its obligation to pay the sum is discharged at the Agreed Rate (accrued daily and compounded monthly (whether before or after judgment)).

 

	
15.8

	
The Buyer may only procure payment by any person of the Initial Consideration pursuant to clause ‎4.4.1 if that other person has first satisfied RBS's customary KYC procedures established in accordance with applicable law.

 

	
16.

	
ANNOUNCEMENTS

 

	
16.1

	
Subject to clause ‎16.2 no RBS Group Undertaking or Buyer's Group Undertaking may, before, on or after Completion, make or issue a public announcement, communication or circular concerning the transactions referred to in this Agreement unless it has first obtained: (i) in the case of a RBS Group Undertaking, the Buyer's written consent; and (ii) in the case of a Buyer's Group Undertaking, RBS's written consent, which in either case may not be unreasonably withheld or delayed.

 

	
16.2

	
Clause ‎16.1 does not apply to:

 

	
  

	
16.2.1

	
the RBS Announcement;

 

	
  

	
16.2.2

	
the Buyer's Announcement;

 

	
  

	
16.2.3

	
the giving of any written or verbal notice by a RBS Group Undertaking to a Supplier or a Lessee:

 

	
  

	
(a)

	
required for any RBS Group Undertaking to comply with any legal or regulatory obligation (including any contractual obligation);

 

	
  

	
(b)

	
in connection with notifying a Supplier or a Lessee that RBS has sold the Shares and no longer carries on the Business; or

 

	
  

	
(c)

	
in connection with advising a Supplier of the effect of the Transaction on the future requirement of RBS Group Undertakings and the Group Companies for the goods or services supplied by such Supplier and the making of arrangements in connection with the same (including but not limited to the modification of any contract),

 

provided that such notice may not be provided by a RBS Group Undertaking to a Supplier or a Lessee unless the relevant RBS Group Undertaking has first 

 

  

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consulted with the Buyer and taken into account the Buyer's reasonable requirements as to its timing, content and manner of making or despatch and provided further that there shall be no such obligation to consult where the content of any such notice is consistent in all material respects with the information contained in the RBS Announcement or the Buyer's Announcement;

 

	
  

	
16.2.4

	
the giving of any written or verbal notice by a Buyer's Group Undertaking to a Supplier or a Lessee:

 

	
  

	
(a)

	
required for any Buyer's Group Undertaking to comply with any legal or regulatory obligation (including any contractual obligation);

 

	
  

	
(b)

	
in connection with notifying a Supplier or a Lessee that the Buyer has purchased the Shares and now carries on the Business; or

 

	
  

	
(c)

	
in connection with advising a Supplier of the effect of the Transaction on the future requirement of the Buyer's Group Undertakings for the goods or services supplied by such Supplier and the making of arrangements in connection with the same (including but not limited to the modification of any contract),

 

provided that such notice may not be provided by a Buyer's Group Undertaking to a Supplier or a Lessee unless the relevant Buyer's Group Undertaking has first consulted with RBS and taken into account RBS's reasonable requirements as to its timing, content and manner of making or despatch and provided further that there shall be no such obligation to consult where the content of any such notice is consistent in all material respects with the information contained in the RBS Announcement or the Buyer's Announcement; and

 

	
  

	
16.2.5

	
a public announcement, communication or circular:

 

	
  

	
(a)

	
required by law, by a rule of a listing authority or stock exchange to which either party is subject or submits or by a governmental authority (including for the avoidance of doubt any Tax Authority) or other authority with relevant powers to which any party is subject or submits, whether or not the requirement has the force of law provided that the public announcement, communication or circular shall, so far as is practicable, be made after consultation with the other party and after taking into account the reasonable requirements of the other party as to its timing, content and manner of making or despatch; or

 

	
  

	
(b)

	
which the other party has given its prior written approval to, such approval not to be unreasonably withheld or delayed.

 

	
16.3

	
The restrictions contained in this clause ‎16 shall continue to apply after the termination of this Agreement without limit in time.

 

  

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16.4

	
The Buyer shall ensure that each Buyer's Group Undertaking complies with this clause ‎16 and RBS shall ensure that each RBS Group Undertaking complies with this clause ‎16.

 

	
17.

	
FURTHER ASSURANCES

 

	
17.1

	
Each of RBS and the Buyer shall, for a period of 6 months from the Completion Date, execute (or procure the execution of) such further documents as may be required by law or be necessary to implement and give effect to the Transactional Documents.

 

	
17.2

	
Each of RBS and the Buyer shall procure that its Affiliates comply with all obligations under the Transactional Documents which are expressed to apply to such Affiliates.

 

	
18.

	
COSTS

 

	
18.1

	
Except where this Agreement provides otherwise, each party shall pay its own costs relating to the negotiation, preparation, execution and performance by it of this Agreement and of each document referred to in it.

 

	
18.2

	
The Buyer shall bear and pay the cost of all stamp duty, stamp duty reserve tax and any similar Taxes and all notarial or registration fees which may result in any jurisdiction from the execution and performance of this Agreement and the other Transactional Documents as well as the transactions contemplated thereby.

 

	
19.

	
SEPARATION ISSUES

 

	
19.1

	
The Buyer and RBS shall use all commercially reasonable efforts to procure that at Completion each RBS Group Undertaking is released and discharged in full from all Third Party Assurances listed in Part B of Exhibit 2 and in the event that the RBS Group Undertaking in respect of the *** cannot be released and discharged in full at Completion, the Buyer undertakes to keep RBS (RBS acting for itself and as agent for the relevant RBS Group Undertaking) fully indemnified on an after Tax basis against any liability incurred or arising under each *** solely as a result of any breach by RBS Aerospace Limited of the obligations referred to in paragraphs 2(a), 2(c) or 3 of such ***.

 

	
19.2

	
RBS shall use all commercially reasonable efforts to procure that as soon as reasonably practicable after becoming aware of any Third Party Assurance provided by a Group Company in respect of the obligations of a RBS Group Undertaking, each relevant Group Company is released and discharged in full from each such Third Party Assurance. Pending such release and discharge of each such Group Company, RBS undertakes (i) to keep the Buyer (the Buyer acting for itself and as agent for the relevant Group Company) fully indemnified on an after Tax basis against any liability incurred or arising under such Third Party Assurance; and (ii) not to enter into any agreement or amendment or variation of any agreement which may have the effect of varying any such Third Party Assurance (or any contractual terms underlying any

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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such assurance) without the prior written consent of the Buyer, such consent not be unreasonably withheld or delayed, provided that if such agreement, amendment or variation:

 

	
  

	
19.2.1

	
would increase the liability of a Buyer's Group Undertaking beyond the liability imposed on the RBS Group Undertaking under or pursuant to the relevant Third Party Assurance; or

 

	
  

	
19.2.2

	
imposes any additional obligation on a Buyer's Group Undertaking beyond the obligation of the relevant Buyer's Group Undertaking,

 

the withholding of consent on either of such grounds shall not be deemed to be unreasonable.

 

	
19.3

	
To the extent permitted by applicable law and regulation, following Completion:

 

	
  

	
19.3.1

	
Subject always to clause ‎20 (Records and assistance post-Completion) no RBS Group Undertaking shall have any right or interest in the Group Business Information and if any RBS Group Undertaking discovers that it has in its possession or control any Group Business Information it shall notify the Buyer and shall, at the Buyer's request, arrange for the transfer of such Group Business Information including rights of ownership to such person as the Buyer shall direct. Such transfer shall be for nil consideration although the Buyer shall pay to the relevant RBS Group Undertaking its reasonable expenses incurred in effecting the transfer.

 

	
  

	
19.3.2

	
Subject always to clause ‎20 (Records and assistance post-Completion) no Buyer's Group Undertaking shall have any right or interest in the RBS Business Information and if any Buyer's Group Undertaking discovers that it has in its possession or control any RBS Business Information it shall notify RBS and shall, at RBS's request, arrange for the transfer of such RBS Business information including rights of ownership to such person as RBS shall direct. Such transfer shall be for nil consideration although the RBS shall pay to the relevant Buyer's Group Undertaking its reasonable expenses incurred in effecting the transfer.

 

	
19.4

	
In the event that, following Completion, either party discovers that any Group Company owns any assets or Intellectual Property (or any rights therein) which in the year prior to the Completion Date was used exclusively or pre-dominantly in, or which related exclusively or pre-dominantly to, the business of a RBS Group Undertaking (other than a Group Company), the relevant party shall as soon as reasonably practicable inform the other party of that fact and thereafter, at the request of RBS, the Buyer shall execute or procure the execution of such documents as may be reasonably necessary to procure the transfer of any such assets or rights to a RBS Group Undertaking which RBS shall nominate. Such asset or right shall be transferred for nil consideration although the relevant RBS Group Undertaking shall pay to the Buyer its reasonable expenses incurred in effecting the transfer.

 

	
19.5

	
In the event that, following Completion, either party discovers that any RBS Group Undertaking (other than a Group Company) owns any assets or Intellectual Property (or any rights therein) which in the year prior to the Completion Date was used

 

  

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exclusively or pre-dominantly in, or which related exclusively or pre-dominantly to, the Business, the relevant party shall as soon as reasonably practicable inform the other party of that fact and thereafter, at the request of the Buyer, RBS shall execute or procure the execution of such documents as may be reasonably necessary to procure the transfer of any such assets or rights to a Group Company which the Buyer shall nominate.  Such asset or right shall be transferred for nil consideration although the Buyer shall pay to the relevant RBS Group Undertaking its reasonable expenses incurred in effecting the transfer.

 

	
19.6

	
RBS undertakes to the Buyer that after Completion it shall account to the Buyer for any monies or other receivables, or part thereof, received by any RBS Group Undertaking and which relate to the operation of the Business in the period following Completion.

 

	
19.7

	
In the event that, following Completion, either party discovers that a member of the Group is party to any contract which in the year prior to the Completion Date related exclusively to the business of a RBS Group Undertaking, the relevant party shall as soon as reasonably practicable inform the other party of that fact and thereafter, at the request of RBS and subject to clause ‎19.9 below, the Buyer shall execute or procure the execution of such documents as may be reasonably necessary to enable the benefit of such contract (subject to the burden) to be assigned to such RBS Group Undertaking as RBS shall nominate for nil consideration although the relevant RBS Group Undertaking shall pay to the Buyer its reasonable expenses incurred in effecting the assignment.

 

	
19.8

	
In the event that, following Completion, either party discovers that any RBS Group Undertaking is party to any contract which in the year prior to the Completion Date related exclusively to the Business, the relevant party shall as soon as reasonably practicable inform the other party of that fact and thereafter, at the request of the Buyer and subject to clause ‎19.9 below, RBS shall execute or procure the execution of such documents as may be reasonably necessary to enable the benefit of such contract (subject to the burden) to be assigned to a member of the Group as the Buyer shall nominate for nil consideration although the relevant Group Company shall pay to the relevant RBS Group Undertaking its reasonable expenses incurred in effecting the assignment.

 

	
19.9

	
Where any consent, approval or authorisation or waiver is required from any third party to the assignment of the benefit of any contract under clauses ‎19.7 or ‎19.8, the relevant transferee shall use all commercially reasonable efforts to obtain such consent, approval or authorisation or waiver.  Neither party shall have any further obligation pursuant to clauses ‎19.7 or ‎19.8 in respect of such contract unless and until such consent, approval or authorisation or waiver is obtained, provided that if either party is unable to procure such consent, it shall, to the extent permitted by applicable law and regulation, use reasonable efforts to provide for other arrangements so that the Group (or as the case may be, the relevant RBS Group Undertaking) shall have the commercial benefit of any such contract.

 

	
19.10

	
This clause ‎19 shall not apply to those assets, property, rights or contracts the use or benefit of which is provided by RBS Group Undertakings pursuant to the terms of the Transitional Services Agreement, the Reverse Transitional Services Agreement or the Transitional Trademark Licence.

 

  

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19.11

	
Subject always to clauses ‎19.1 and ‎19.2, and ‎Schedule 10, RBS and the Buyer each acknowledge and agree that at Completion any and all agreements and arrangements entered into prior to Completion solely between one or more RBS Group Undertakings (other than a Group Company) and one or more Group Companies (other than pursuant to the Group Relief Letters or any Transactional Document or in relation to the Excluded Transactions) (each an "Affiliate Transaction") shall be automatically terminated and shall be of no further effect and neither RBS (nor any other RBS Group Undertaking) nor the Buyer (nor any other Buyer's Group Undertaking) shall have any claim of any nature whatsoever (including in respect of any rights and liabilities which have accrued prior to such termination) thereunder against:

 

	
19.11.1

	
in the case of a RBS Group Undertaking, any Buyer's Group Undertaking; and

 

	
19.11.2

	
in the case of a Buyer's Group Undertaking, any RBS Group  Undertaking.

 

	
19.12

	
RBS agrees to procure that each RBS Group Undertaking shall observe and comply with the provisions of clause ‎19.11.

 

	
19.13

	
The Buyer agrees to procure that each Buyer's Group Undertaking (including each Group Company) shall observe and comply with the provisions of clause ‎19.11.

 

	
19.14

	
RBS shall procure that each RBS Group Undertaking shall comply with the terms of the Transitional Trademark Licence, the Transitional Services Agreement, the Reverse Transitional Services Agreement and the Lombard Aircraft Transfer Agreements.

 

	
20.

	
RECORDS AND ASSISTANCE POST-COMPLETION

 

	
20.1

	
To the extent permitted by applicable law and regulation, for 7 years following the Completion Date, each Buyer's Group Undertaking shall on request and after reasonable notice provide RBS (at RBS's cost) with reasonable access during normal business hours (to the extent such access does not unreasonably interfere with the business or operation of any Buyer's Group Undertaking) to (and the right to take copies of) the books, accounts, customer lists and all other records (together, the "Records") (or, if practicable, the relevant part of those Records) held by it after Completion to the extent that they relate to the Business or any Group Company in the period prior to Completion and to which RBS requires access in connection with a reasonable business purpose (including in relation to any legal or regulatory obligation, any investigation or proceeding, the preparation of annual returns and accounts, tax returns or in relation to a request or notice from any governmental authority, in each case whether relating to a Group Company or a RBS Group Undertaking). The Buyer shall procure that each Buyer's Group Undertaking shall provide reasonable access to their employees and advisers during normal business hours and upon being given reasonable prior notice to discuss and answer questions of RBS, any RBS Group Undertaking and any of their respective advisers concerning such Records. The rights and obligations under this clause ‎20.1 are subject to clause ‎12 (Confidential Information) provided always that notwithstanding anything in this Agreement to the contrary each RBS Group Undertaking shall be permitted to use or disclose any Records or other information obtained pursuant to this clause ‎20 in

 

  

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connection with any legal, Tax, governmental or regulatory report, return,  audit, investigation or proceeding.

 

	
20.2

	
To the extent permitted by applicable law and regulation, for 7 years following the Completion Date, each RBS Group Undertaking shall on request and after reasonable notice provide the Buyer (at the Buyer's cost) with reasonable access during normal business hours (to the extent such access does not unreasonably interfere with the business or operation of any RBS Group Undertaking) to (and the right to take copies of) the Records held by it after Completion to the extent that they relate to the Business or any Group Company in the period prior to Completion and to which the Buyer requires access in connection with a reasonable business purpose relating to a Group Company (including in relation to any legal or regulatory obligation, any investigation or proceeding, the preparation of annual returns and accounts, tax returns or in relation to a request or notice from any governmental authority, in each case relating to any Buyer's Group Undertaking). RBS shall procure that each RBS Group Undertaking shall provide reasonable access to their employed tax personnel during normal business hours and upon being given reasonable prior notice to discuss and answer questions of the Buyer pertaining to material tax issues to the extent that they relate to any Group Company in the period prior to Completion. The rights and obligations under this clause ‎20.2 are subject to clause ‎12 (Confidential Information) provided always that notwithstanding anything in this Agreement to the contrary each Buyer's Group Undertaking shall be permitted to use or disclose any Records or other information obtained pursuant to this clause ‎20 in connection with any legal, Tax, governmental or regulatory report, return, audit, investigation or proceeding.

 

	
20.3

	
For 7 years following the Completion Date (or for such longer period as may be required by applicable law), neither party shall dispose of or destroy any of the Records without first giving the other party at least 2 months' notice of its intention to do so (unless law or regulation requires disposal or destruction within a shorter time period, in which event the relevant party shall give the other party as much notice as is practicable in the circumstances) and, to the extent permitted by law or regulation, a reasonable opportunity to remove or retain any of them (at the expense of the party wishing to remove or retain such Records).

 

	
21.

	
GENERAL

 

	
21.1

	
A variation of this Agreement is valid only if it is in writing and signed by or on behalf of each party.

 

	
21.2

	
The failure to exercise or delay in exercising a right or remedy provided by this Agreement or by law does not impair or constitute a waiver of the right or remedy or an impairment of or a waiver of other rights or remedies.  No single or partial exercise of a right or remedy provided by this Agreement or by law prevents further exercise of the right or remedy or, save as referred to in clause ‎22, the exercise of another right or remedy.

 

	
21.3

	
The rights and remedies of RBS contained in this Agreement are cumulative and not exclusive of rights or remedies provided by law.

 

  

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21.4

	
Except to the extent that they have been performed and except where this Agreement provides otherwise, the obligations contained in this Agreement remain in force after Completion.

 

	
21.5

	
Save as otherwise provided herein, any payment to be made by either party under this Agreement shall be made in full without any set-off, restriction, condition or deduction for or on account of any counterclaim.

 

	
21.6

	
If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable under the laws of any jurisdiction, that shall not affect:

 

	
  

	
21.6.1

	
the legality, validity or enforceability in that jurisdiction of any other provision of this Agreement; or

 

	
  

	
21.6.2

	
the legality, validity or enforceability under the laws of any other jurisdiction of that or another provision of this Agreement.

 

	
21.7

	
If there is any conflict between the terms of this Agreement and any other agreement, this Agreement shall prevail unless:

 

	
  

	
21.7.1

	
such other agreement expressly states that it overrides this Agreement in the relevant respect; and

 

	
  

	
21.7.2

	
the Buyer and RBS are either also parties to that other agreement or otherwise expressly agree in writing that such other agreement shall override this Agreement in that respect.

 

	
21.8

	
Except as provided in clauses ‎5.6, ‎8.2, ‎22.5 and ‎22.6, a person who is not a party to this Agreement has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this Agreement, but this does not affect any right or remedy of a third party which exists or is available apart from that Act.

 

	
22.

	
ENTIRE AGREEMENT

 

In this clause ‎22, the following definitions apply:

 

"Representation" means an assurance, commitment, condition, covenant, guarantee, indemnity, representation, statement, undertaking or warranty of any sort whatsoever (whether contractual or otherwise, oral or in writing, or made negligently or otherwise); and

 

"Transactional Documents" means this Agreement, the Transitional Services Agreement, the Reverse Transitional Services Agreement, the Transitional Trademark Licence, the Lombard Aircraft Transfer Agreements, the Intellectual Property Deed and the Confidentiality Agreement.

 

	
22.1

	
Subject to the provisions of clauses ‎22.2 and ‎22.3, and save as otherwise expressly agreed in writing between RBS and the Buyer in any other document, the Transactional Documents constitute the entire agreement between the parties, supersede any previous agreements relating to the subject matter of the Transactional Documents, and set out the complete legal relationship of the parties arising from or connected with that subject matter.

 

  

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22.2

	
Accordingly, the Buyer:

 

	
  

	
22.2.1

	
represents and agrees that

 

	
  

	
(a)

	
no RBS Group Undertaking or adviser to RBS has made any Representation that the Buyer considers material which is not set out in the Transactional Documents, and

 

	
  

	
(b)

	
it has not entered into the Transactional Documents in reliance on any Representation except those set out in the Transactional Documents, and will not contend to the contrary; and

 

	
  

	
22.2.2

	
for the avoidance of doubt agrees that

 

	
  

	
(a)

	
no RBS Group Undertaking (except RBS) or adviser to RBS has any liability to the Buyer for any Representation,

 

	
  

	
(b)

	
RBS has no liability of any kind to the Buyer for any Representation except in respect of those set out in the Transactional Documents, and

 

	
  

	
(c)

	
its only rights and remedies in respect of any Representations are those rights and remedies set out in the Transactional Documents.

 

	
22.3

	
Save as otherwise expressly agreed in writing between RBS and the Buyer in any other document, RBS:

 

	
  

	
22.3.1

	
represents and agrees that

 

	
  

	
(a)

	
no Buyer's Group Undertaking or adviser to any Buyer's Group Undertaking has made any Representation that RBS considers material which is not set out in the Transactional Documents, and

 

	
  

	
(b)

	
it has not entered into the Transactional Documents in reliance on any Representation except those set out in the Transactional Documents, and will not contend to the contrary; and

 

	
  

	
22.3.2

	
for the avoidance of doubt agrees that

 

	
  

	
(a)

	
no Buyer's Group Undertaking (except the Buyer) or adviser to the Buyer has any liability to RBS for any Representation,

 

	
  

	
(b)

	
the Buyer has no liability of any kind to RBS for any Representation except in respect of those set out in the Transactional Documents, and

 

	
  

	
(c)

	
its only rights and remedies in respect of any Representations are those rights and remedies set out in the Transactional Documents.

 

	
22.4

	
Upon Completion, this Agreement shall supersede the Confidentiality Agreement.

 

	
22.5

	
RBS Group Undertakings (except RBS) and advisers to RBS may enforce the terms of this clause ‎22 subject to and in accordance with the provisions of the Contracts (Rights of Third Parties) Act 1999.

 

  

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22.6

	
Buyer's Group Undertakings (except the Buyer) and advisers to the Buyer may enforce the terms of this clause ‎‎22 subject to and in accordance with the provisions of the Contracts (Rights of Third Parties) Act 1999.

 

	
22.7

	
Nothing in this clause ‎22 shall have the effect of limiting any liability arising from fraud.

 

	
23.

	
ASSIGNMENT

 

	
23.1

	
Except as provided in this clause ‎23 or unless RBS and the Buyer specifically agree in writing, no person shall assign, transfer, charge or otherwise deal with all or any of its rights and/or benefits as under this Agreement nor grant, declare, create or dispose of any right or interest in it. Any purported assignment in contravention of this clause ‎23 shall be void.

 

	
23.2

	
RBS or the Buyer (the "Assignor") may, without the consent of the other party, assign all or any of its rights and/or benefits (including any causes of action in connection with any of them) under this Agreement to a Permitted Assignee, who may enforce the same, as if it were the Assignor under this Agreement, provided that, if the assignee ceases to be a Permitted Assignee, the Assignor must procure that the rights and/or benefits so assigned to the assignee are assigned to a Permitted Assignee.  Any Permitted Assignee to whom an assignment is made in accordance with the provisions of this clause ‎23.2 may itself make an assignment as if it were the Assignor under the provisions of this clause ‎23.2.  For the purposes of this clause ‎23.2, a "Permitted Assignee" means in the case of RBS, an RBS Group Undertaking and in the case of the Buyer, a Buyer's Group Undertaking. Notwithstanding any such assignment by the Buyer to a Permitted Assignee, the Buyer shall remain responsible for its obligations under this Agreement and shall procure that any such Permitted Assignee complies with the terms of this Agreement with regard to all or any of its rights and/or benefits and/or obligations (if any) under this Agreement as applicable.

 

	
23.3

	
Immediately after any assignment in accordance with this clause ‎‎23, the Buyer or, as the case may be, RBS shall give written notice of the assignment to the other party containing details of the assignment including the name of the Assignor and Permitted Assignee.

 

	
23.4

	
If an assignment is made in accordance with this clause ‎23, the liabilities owed to or by any RBS Group Undertaking or any Buyer's Group Undertaking under the terms of any Transactional Document shall not be increased thereby and shall be no greater than such liabilities would have been if the assignment had not occurred and loss had therefore been incurred by the Buyer.  RBS agrees that it shall not be entitled to contend in any proceedings under this Agreement that, subject to the foregoing, its liability to a Permitted Assignee of the Buyer is reduced or affected in any way by virtue of the fact that the Buyer has suffered no actual loss or a different loss to that of the Permitted Assignee in respect of any breach by the Seller under this Agreement.

 

 

  

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24.

	
NOTICES

 

	
24.1

	
A notice or other communication under or in connection with this Agreement (a "Notice") shall be:

 

	
  

	
24.1.1

	
in writing;

 

	
  

	
24.1.2

	
in the English language; and

 

	
  

	
24.1.3

	
delivered personally or sent by first class post pre-paid recorded delivery (and air mail if overseas) or by telex or by fax to the party due to receive the Notice to the address set out in clause ‎24.3 or to an alternative address, person, telex or fax number specified by that party by not less than 5 Business Days' written notice to the other party received before the Notice was despatched.

 

Any Notice sent to RBS shall be copied to *** at RBS Group, 135 Bishopsgate, London EC2M 3UR.

 

	
24.2

	
Unless there is evidence that it was received earlier, a Notice is deemed given if:

 

	
  

	
24.2.1

	
delivered personally, when left at the address referred to in clause ‎24.3;

 

	
  

	
24.2.2

	
sent by mail, except air mail, 2 Business Days after posting it;

 

	
  

	
24.2.3

	
sent by air mail, 6 Business Days after posting it; and

 

	
  

	
24.2.4

	
sent by fax, when confirmation of its transmission has been recorded by the sender's fax machine.

 

	
24.3

	
The address referred to in clause ‎24.1.3 is:

 

	

Name of party

	

Address

	

Fax No.

	

Marked for the attention of

	
RBS

	
RBS Group Legal

The Royal Bank of Scotland plc Gogarburn

Business House G

PO Box 1000

Edinburgh

EH12 1HQ

	
 +44 131 626 2997

	
Group General Counsel

	
The Buyer

	
1-2, Marunouchi 1-chome, Chiyoda-ku Tokyo 100-0005

	
+81 3 4333 9868

	
General Manager, Planning Department, International Banking Unit

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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25.

	
GOVERNING LAW AND JURISDICTION

 

	
25.1

	
This Agreement and any non-contractual obligations arising out of or in connection with this Agreement shall be governed by, and construed in accordance with, English law.

 

	
25.2

	
The courts of England have exclusive jurisdiction to settle any dispute arising from or connected with this Agreement (a "Dispute") including:

 

	
  

	
25.2.1

	
a dispute regarding the existence, validity or termination of this Agreement or the consequences of its nullity; and

 

	
  

	
25.2.2

	
any non-contractual obligations arising out of or in connection with this Agreement. For such purposes each party irrevocably submits to the jurisdiction of the English courts, waives any objections to the jurisdiction of those courts and irrevocably agrees that a judgement or order of the English courts in connection with this Agreement is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction.

 

	
25.3

	
The parties agree that the courts of England are the most appropriate and convenient courts to settle any Dispute and, accordingly, that they will not argue to the contrary.

 

	
25.4

	
The parties agree that the documents which start any proceedings relating to a Dispute ("Proceedings") and any other documents required to be served in relation to those Proceedings may be served on the Buyer in accordance with clause ‎25.5. These documents may, however, be served in any other manner allowed by law.

 

	
25.5

	
The Buyer shall at all times maintain an agent for service of process and any other documents in proceedings in England or any other proceedings in connection with this Agreement. Such agent shall be Legal & Compliance Group, Planning Department, Sumitomo Mitsui Banking Corporation Europe Limited of 99 Queen Victoria Street, London EC4V 4EH and any claim form, judgement or other notice of legal process shall be sufficiently served on the Buyer if delivered to such agent at its address for the time being. The Buyer irrevocably undertakes not to revoke the authority of this agent without appointing a similarly situated agent for service of process in England and if, for any reason, RBS requests the Buyer to do so it shall promptly appoint another such agent with an address in England and advise RBS of such appointment. If, following such a request, the Buyer fails to appoint another agent, RBS shall be entitled to appoint one on behalf of the Buyer at the Buyer's expense.

 

	
26.

	
COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, and by each party on separate counterparts. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this Agreement by e-mail attachment or telecopy shall be an effective mode of delivery.

 

  

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SCHEDULE 1

SHARES AND PRICE

 

	
(1)

Shares/Group Companies (other than the Subsidiary Undertakings)

	
(2)

Seller

	
(3)

Cash Free Debt Free Price

(US$)

	
RBS Aerospace Limited

	
RBS Group Company (1)

	
***

	
RBS Aerospace UK

	
RBS Group Company (2)

	
***

	
RBS Australia Leasing

	
RBS

	
***

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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SCHEDULE 2

INFORMATION ABOUT THE COMPANIES

AND THE SUBSIDIARY UNDERTAKINGS

 

PART A

THE COMPANIES

 

	
1.

	
Name: RBS Aerospace Limited

	  	
Registered number:

	
270775

	  	
Place of incorporation:

	
Ireland

	  	
Address of registered office:

	
IFSC House, IFSC, Dublin 1, Ireland

	  	
Type of company:

	
Private limited company

	  	
Issued share capital:

	
500,002 ordinary shares of US$1.00 each

	  	
Directors:

	
Peter Barrett

	  	  	
Peter Commons

	  	  	
Rory Cullinan

	  	  	
Catharine Ennis

	  	  	
Barry Flannery

	  	  	
Brian Harvey

	  	  	
Gavin Petken

	  	  	
David Swan

	  	
Secretary:

	
Catharine Ennis

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
Deloitte LLP

 

	
2.

	
Name: RBS Aerospace UK

	  	
Registered number:

	
04985584

	  	
Place of incorporation:

	
England and Wales

	  	
Address of registered office:

	
The Quadrangle, The Promenade, Cheltenham, GL50 1PX, United Kingdom

	  	
Type of company:

	
Private limited company

	  	
Issued share capital:

	
100 ordinary shares of US$1.00 each 2 deferred shares of £1.00 each

	  	
Directors:

	
Peter Barrett

	  	  	
Jonathan (Jef) Oliver

 

 

  

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Sharon Caterer

	  	  	
Graham Rolfe

	  	  	
Gavin Petken

	  	
Secretary:

	
Carolyn Whittaker

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
Deloitte LLP

 

	
3.

	
Name: RBS Australia Leasing

	  	
Registered number:

	
Australian Company Number: 116 456 065

	  	
Place of incorporation:

	
Victoria, Australia

	  	
Address of registered office:

	
Level 28 RBS Tower, 88 Phillip Street, Sydney NSW 2000, Australia

	  	
Type of company:

	
Proprietary Company Limited by Shares

	  	
Issued share capital:

	
35,395,002 ordinary shares of 1.00 Australian Dollars each

	  	
Directors:

	
Peter Barrett

	  	  	
Barry Flannery

	  	  	
Stephen Williams

	  	  	
Andrew Chick

	  	
Secretary:

	
Martin Conley

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
Deloitte Touche Tohmatsu

 

  

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PART B

THE SUBSIDIARY UNDERTAKINGS

 

	
1.

	
Name: GAL Holdings Limited

	  	
Registered number:

	
38623

	  	
Place of incorporation:

	
Bermuda

	  	
Address of registered office:

	
Canon's Court, 22 Victoria St, Hamilton

HM 12, Bermuda

	  	
Type of company:

	
Exempted

	  	
Issued share capital:

	
12,000 common shares of US$1.00 each

	  	
Directors:

	
Peter Barrett

	  	  	
Catharine Ennis

	  	  	
David Swan

	  	
Secretary:

	
Appleby Services (Bermuda) Limited

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
None

	
2.

	
Name: RBS Aerospace Ireland Leasing 1 Limited

	  	
Registered number:

	
439885

	  	
Place of incorporation:

	
Ireland

	  	
Address of registered office:

	
IFSC House, IFSC, Dublin 1

	  	
Type of company:

	
Limited company

	  	
Issued share capital:

	
1 ordinary share of €1.00

	  	
Directors:

	
Peter Barrett

	  	  	
Barry Flannery

	  	  	
David Swan

	  	  	
Catharine Ennis

	  	
Secretary:

	
Catharine Ennis

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
Deloitte

 

 

  

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3.

	
Name: RBS Aerospace Ireland Leasing 3 Limited

	  	
Registered number:

	
490274

	  	
Place of incorporation:

	
Ireland

	  	
Address of registered office:

	
IFSC House, IFSC, Dublin 1

	  	
Type of company:

	
Limited company

	  	
Issued share capital:

	
2 ordinary shares of €1.00 each

	  	
Directors:

	
Peter Barrett

	  	  	
Barry Flannery

	  	  	
David Swan

	  	  	
Catharine Ennis

	  	
Secretary:

	
Catharine Ennis

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
Deloitte

	
4.

	
Name: RBS Paris Leasing 1 Sarl

	  	
Registered number:

	
Numero d’identification: 522 659 200 R.C.S Paris

	  	  	
Numero de gestion: 2010 B 11128

	  	
Place of incorporation:

	
France

	  	
Address of registered office:

	
90 avenue des Champs-Elysées, 75008, Paris

	  	
Type of company:

	
Société à responsabilité Limitée

	  	
Issued share capital:

	
EUR 1

	  	
Directors:

	
Managers:

	  	  	
Peter Barrett

	  	  	
Catharine Ennis

	  	  	
Conor Burns

	  	  	
Shareholder Representative:

	  	  	
David Swan

	  	
Secretary:

	
None

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
None

 

  

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5.

	
Name: RBS Labuan Leasing 1 Limited

	  	
Registered number:

	
LL 06907

	  	
Place of incorporation:

	
Labuan, Malaysia

	  	
Address of registered office:

	
Unit Level 13 (A), Main Office Tower, Financial Park Labuan, Jalan Merdeka, 87000, Federal Territory of Labuan, Malaysia

	  	
Type of company:

	
Company limited by shares

	  	
Issued share capital:

	
100 ordinary shares of US$1.00 each

	  	
Directors:

	
Peter Barrett

	  	  	
Catharine Ennis

	  	  	
David Swan

	  	
Secretary:

	
Messers. Zaid Ibrahim Secretarial Services SDN. BHD (as Resident secretary)

	  	
Accounting reference date:

	
31 December

	  	
Auditors:

	
Deloitte

  

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SCHEDULE 3

COMPLETION REQUIREMENTS

 

	

1.

	 	
Obligations of RBS

 

	
1.1

	
At Completion RBS shall deliver to the Buyer:

 

	
  

	
1.1.1

	
evidence in a form reasonably satisfactory to the Buyer (by way of certificate of RBS or otherwise) of satisfaction of the RBS Condition;

 

	
  

	
1.1.2

	
transfers in respect of the Shares to the Buyer or its nominee(s) (subject to written notification to RBS not less than 5 Business Days before Completion), duly executed by the relevant Sellers, and the share certificates for the Shares (or an indemnity in lieu thereof);

 

	
  

	
1.1.3

	
(if the Buyer so requires) other than in respect of RBS Australia Leasing, irrevocable powers of attorney in the agreed form duly executed by the relevant Sellers in favour of the Buyer or its nominee(s) (subject to written notification to RBS not less than 5 Business Days before Completion) in respect of the Shares which enables the Buyer or its nominee(s) (pending registration of the relevant transfers) to attend and vote at general meetings of the Companies and exercise all other rights attaching to the Shares and to appoint proxies for this purpose;

 

	
  

	
1.1.4

	
(if the Buyer so requires) an irrevocable power of attorney in the agreed form for RBS Australia Leasing duly executed by RBS in favour of the Buyer (or its nominee) (subject to written notification to RBS not less than 5 Business Days before Completion) in respect of the Shares in RBS Australia Leasing which enables the Buyer (or its nominee) to appoint any person as sole proxy of RBS to attend members meetings and exercise the votes attached to such Shares transferred to the Buyer (or its nominee) pending registration of such transfer;

 

	
  

	
1.1.5

	
the common seal (if any), statutory books, certificates of incorporation and certificate(s) of incorporation on change of name for each Group Company (and for the purpose of this paragraph ‎1.1.5 delivery shall be deemed if such items are located at the registered office of any Group Company on the Completion Date);

 

	
  

	
1.1.6

	
share certificates for all issued shares in the capital of each Subsidiary Undertaking held by a Group Company;

 

	
  

	
1.1.7

	
to the extent applicable copies of a letter to each Group Company from its auditors resigning their offices with effect from Completion and in the case of Group Companies incorporated in:

 

	
  

	
(a)

	
England and Wales, containing the statement referred to in section 519 of the Act;

 

	
  

	
(b)

	
Ireland, incorporating a statement complying with section 185(2) of the Companies Act of Ireland 1990 that there are no circumstances connected with the resignation that the auditors consider should be 

 

  

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brought to the notice of the members or creditors of the relevant Group Companies, the originals of such letters having been deposited at the registered office of the relevant company;

 

	
  

	
1.1.8

	
resignations in the agreed form from each of Sharon Caterer, Peter Commons, Martin Conley, Rory Cullinan, Andrew Chick, Gavin Petken, Graham Rolfe, Carolyn Whittaker and Stephen Williams to the extent still in office at Completion (the "Resigning Officers") in respect of each of their positions as directors and/or secretary of Group Companies, expressed to take effect from the end of the meetings held pursuant to paragraphs ‎1.2 to ‎1.4 of this ‎Schedule 3;

 

	
  

	
1.1.9

	
the Reverse Transitional Services Agreement, duly executed by RBS;

 

	
  

	
1.1.10

	
the Transitional Trademark Licence, duly executed by The Royal Bank of Scotland Group plc;

 

	
  

	
1.1.11

	
as evidence of the authority of each person executing a document referred to in this ‎‎Schedule 3 on behalf of RBS, a certified copy of the power of attorney conferring such authority; and

 

	
  

	
1.1.12

	
Updated Exhibit 1.

 

	
1.2

	
RBS shall ensure that at Completion a meeting of the board of directors of RBS Aerospace Limited is held at which the directors:

 

	
  

	
1.2.1

	
vote in favour of the registration of the Buyer or its nominee(s) as member(s) of the Company in respect of the shares of RBS Aerospace Limited (subject to the production of properly stamped transfers);

 

	
  

	
1.2.2

	
appoint persons nominated by the Buyer as directors, secretary and auditors of RBS Aerospace Limited with effect from the end of the meeting; and

 

	
  

	
1.2.3

	
accept the resignations of the Resigning Officers of RBS Aerospace Limited so as to take effect from the end of the meeting.

 

	
1.3

	
RBS shall ensure that at Completion a meeting of the board of directors of RBS Aerospace UK is held at which the directors:

 

	
  

	
1.3.1

	
vote in favour of the registration of the Buyer or its nominee(s) as member(s) of the Company in respect of the shares of RBS Aerospace UK (subject to the production of properly stamped transfers);

 

	
  

	
1.3.2

	
appoint persons nominated by the Buyer as directors, secretary and auditors of RBS Aerospace UK with effect from the end of the meeting; and

 

	
  

	
1.3.3

	
accept the resignations of the Resigning Officers of RBS Aerospace UK so as to take effect from the end of the meeting.

 

  

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1.4

	
RBS shall ensure that at Completion a meeting of the board of directors of RBS Australia Leasing is held at which the directors:

 

	
  

	
1.4.1

	
vote in favour of the registration of the Buyer or its nominee(s) as member(s) of the Company in respect of the shares of RBS Australia Leasing (subject to the production of properly stamped transfers, to the extent required to be stamped under Australian law);

 

	
  

	
1.4.2

	
appoint persons nominated by the Buyer as directors, secretary and auditors of RBS Australia Leasing with effect from the end of the meeting (subject to each of such persons having given such Company a signed consent to act before such meeting); and

 

	
  

	
1.4.3

	
accept the resignations of the Resigning Officers of RBS Australia Leasing so as to take effect from the end of the meeting.

 

	
2.

	
Buyer's obligations

 

At Completion the Buyer shall deliver to RBS:

 

	
2.1

	
evidence in a form reasonably satisfactory to RBS (by way of certificate of the Buyer or otherwise) of satisfaction of the Buyer's Conditions;

 

	
2.2

	
the Reverse Transitional Services Agreement, duly executed by the Buyer;

 

	
2.3

	
the Transitional Trademark Licence, duly executed by the Buyer;

 

	
2.4

	
***, duly executed by the Buyer;

 

	
2.5

	
if obtained at or prior to Completion, evidence of the irrevocable release and discharge of all Third Party Assurances listed in Exhibit 2 and as contemplated in clause ‎4.4.2 or clause ‎4.4.3 (as applicable);

 

	
2.6

	
if obtained at or prior to Completion, evidence of the consents and waivers described in paragraph ‎2.3 of ‎Schedule 12;

 

	
2.7

	
as evidence of the authority of each person executing a document referred to in this ‎Schedule 3 on the Buyer's behalf:

 

	
  

	
2.7.1

	
a copy of the minutes of a duly held meeting of the directors of the Buyer (or a duly constituted committee thereof) authorising the execution by the Buyer of the document and, where such execution is authorised by a committee of the board of directors of the Buyer, a copy of the minutes of a duly held meeting of the directors constituting such committee or the relevant extract thereof; or

 

	
  

	
2.7.2

	
a copy of the power of attorney conferring the authority,

 

in each case certified to be a true copy by a director or the secretary of the Buyer.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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SCHEDULE 4

RBS WARRANTIES

 

Table of Contents

 

	

No.

	

Subject Matter

	
1.

	
Capacity and Authority

	
2.

	
Shares and Subsidiary Undertakings

	
3.

	
Accounts

	
4.

	
Financial Matters

	
5.

	
Tax

	
6.

	
Aircraft and Lease Documents

	
7.

	
Intellectual Property

	
8.

	
Information Technology

	
9.

	
Insurance

	
10.

	
Real Property

	
11.

	
Agreements

	
12.

	
Affiliate Transactions

	
13.

	
Employees

	
14.

	
Pensions and Other Benefits

	
15.

	
Guarantees and Indemnities

	
16.

	
Financial Indebtedness

	
17.

	
Insolvency, Winding up etc.

	
18.

	
Competition

	
19.

	
Regulatory Matters

	
20.

	
Litigation and Compliance with Law

	
21.

	
Powers of Attorney and Authorities

	
22.

	
Brokerage or Commissions

	
23.

	
Environmental

 

 

  

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1.

	
CAPACITY AND AUTHORITY

 

	
1.1

	
Right, power, authority and action

 

	
  

	
1.1.1

	
RBS and each Group Company is validly incorporated, in existence and duly registered and in good standing under the laws of its jurisdiction (where such concept is understood) and has full power to conduct its business as conducted on the date of this Agreement.

 

	
  

	
1.1.2

	
RBS has the right, power and authority, and has taken all action necessary, to execute, deliver and exercise its rights, and perform its obligations, under this Agreement and each Transactional Document to be executed by RBS at or before Completion.

 

	
  

	
1.1.3

	
Each Group Company has the right, power and authority to conduct its business as conducted at the date of this Agreement.

 

	
1.2

	
Binding agreements

 

The obligations of RBS or any other relevant RBS Group Undertaking under the Transactional Documents are, or when the relevant document is executed will constitute, binding obligations of such company in accordance with their respective terms.

 

	
1.3

	
No conflicts or default

 

The execution and delivery of, and the performance by RBS and each Group Company of their respective obligations under, this Agreement and/or any Transactional Document, and the consummation by RBS and the Group Companies of each of the Pro Forma Transactions, will not:

 

	
  

	
1.3.1

	
result in a breach of any provision of the memorandum or articles of association or by-laws or equivalent constitutional documents of RBS or any Group Company;

 

	
  

	
1.3.2

	
result in a breach of any order, judgment or decree of any court or governmental authority to which RBS or any Group Company is a party or by which RBS or any Group Company is bound or submits;

 

	
  

	
1.3.3

	
other than pursuant to the Financing Documents or the Airspeed Servicing Agreement, result in a breach of, or constitute a default under, any agreement or instrument to which RBS or any Group Company is a party or by which any Group Company is bound and which is material in the context of the transactions contemplated by this Agreement;

 

	
  

	
1.3.4

	
result in the creation or imposition of any Encumbrance on any of the Shares or any of the property or assets of any Company;

 

	
  

	
1.3.5

	
save as referred to in clause ‎3 of this Agreement, require RBS or any Group Company prior to Completion to obtain any consent or approval of, or give any notice to or make any registration with, any governmental or other authority which has not been obtained or made at the date hereof both on an

 

  

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unconditional basis and on a basis which cannot be revoked (save pursuant to any legal or regulatory entitlement to revoke the same other than by reason of any misrepresentation or misstatement) and which in the case of any Group Company is material in the context of the transactions contemplated by this Agreement; or

 

	
  

	
1.3.6

	
require RBS or any Group Company to obtain any consent or approval of any of its shareholders.

 

	
2.

	
SHARES AND SUBSIDIARY UNDERTAKINGS

 

	
2.1

	
The Shares

 

	
  

	
2.1.1

	
RBS, or wholly-owned subsidiaries of RBS, are the sole legal and beneficial owners of the Shares.

 

	
  

	
2.1.2

	
The Shares comprise the whole of the allotted and issued share capital of the Companies and are fully paid or credited as fully paid.

 

	
  

	
2.1.3

	
There is no Encumbrance, and there is no agreement, arrangement or obligation to create or give an Encumbrance, in relation to any of the Shares or unissued shares in the capital of any Company.

 

	
  

	
2.1.4

	
Other than this Agreement, there is no agreement, arrangement or obligation requiring the creation, allotment, issue, transfer, redemption or repayment of, or the grant to a person of the right (conditional or not) to require the allotment, issue, transfer, redemption or repayment of, a share in the capital of any Company (including an option or right of pre-emption or conversion).

 

	
2.2

	
Group Companies

 

	
  

	
2.2.1

	
The Companies do not have any subsidiary undertakings other than the Subsidiary Undertakings.

 

	
  

	
2.2.2

	
The particulars of the Group Companies set out in ‎Schedule 2 are true and accurate in all material respects.

 

	
  

	
2.2.3

	
The Constitutional Documents relating to each Group Company are complete and accurate in all material respects. No Group Company is in violation of any provision of its Constitutional Documents which is material in the context of the transactions contemplated by this Agreement.

 

	
  

	
2.2.4

	
No Group Company has an interest in, nor has agreed to acquire an interest in or merge or consolidate with, a corporate body or any other person other than the Subsidiary Undertakings.

 

	
  

	
2.2.5

	
Each allotted and issued share in the capital of each Subsidiary Undertaking is legally and beneficially owned by a Group Company alone and is fully paid or credited as fully paid.

 

  

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2.2.6

	
There is no Encumbrance, and there is no agreement, arrangement or obligation to create or give an Encumbrance, in relation to a share or unissued share in the capital of a Subsidiary Undertaking.

 

	
  

	
2.2.7

	
Other than this Agreement, there is no agreement, arrangement or obligation requiring the creation, allotment, issue, transfer, redemption or repayment of, or the grant to a person of the right (conditional or not) to require the allotment, issue, transfer, redemption or repayment of, a share in the capital of any Subsidiary Undertaking (including an option or right of pre-emption or conversion).

 

	
3.

	
ACCOUNTS

 

	
3.1

	
The Accounts of RBS Aerospace Limited give a true and fair view, in accordance with IFRS, of the state of affairs of the Company as at the Last Accounting Date and of the profit for the year then ended and have been properly prepared in accordance with the Irish Companies Acts 1963 to 2009.

 

	
3.2

	
The Accounts of RBS Aerospace UK give a true and fair view of the state of the Company's affairs as at the Last Accounting Date and of its profit for the year then ended and have been properly prepared in accordance with IFRS as adopted by the European Union and have been prepared in accordance with the requirements of the Companies Act 2006.

 

	
3.3

	
The Accounts of RBS Australia Leasing are in accordance with the Australian Corporations Act 2001 and give a true and fair view of the Company's financial position as at the Last Accounting Date and of its performance for the year ended on that date and comply with Australian Accounting Standards and the Corporations Regulations 2001.

 

	
3.4

	
No change in accounting policies has been made in preparing the accounts of any Company for each of the 3 financial years of the relevant Company ended on the Last Accounting Date, except as stated in the audited balance sheets, profit and loss accounts and cash flow statements or the notes thereto for those years.

 

	
3.5

	
The line items headed "Operating Lease Assets", "Customer Deposits", "RBS Debt" and "Third Party Debt" in the Interim Balance Sheet, each of which is circled and initialled on behalf of the parties by way of identification, was prepared consistently in all material respects with the accounting policies applied in the preparation of the balance sheet comprised in the Accounts of RBS Aerospace Limited.

 

	
3.6

	
The line item headed "Operating Lease Assets" in the Interim Balance Sheet provides a reasonable representation of the Interim Operating Lease Assets, the line item headed "Customer Deposits" in the Interim Balance Sheet provides a reasonable representation of the Interim Customer Deposits, the line item headed "RBS Debt" in the Interim Balance Sheet provides a reasonable representation of the Interim RBS Debt and the line item headed "Third Party Debt" in the Interim Balance Sheet provides a reasonable representation of the Interim Third Party Debt, in each case taking into account that the Interim Balance Sheet:

 

	
  

	
3.6.1

	
was neither audited nor prepared for the purposes of being audited; and

 

  

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3.6.2

	
reflects the Pro Forma Transactions and the transfer to a Group Company of the Lombard Aircraft as if each had taken place prior to 30 September 2011.

 

	
3.7

	
The figures in the column headed "30 September TB for Tess entities before adjustments" used in preparation of the Interim Balance Sheet and circled and initialled on behalf of the parties by way of identification, were extracted solely from and reflect all of the items contained in the financial records relating to the Group Companies, and also used for the purposes of preparing the consolidated accounts of The Royal Bank of Scotland Group plc as at and for the period ended 30 September 2011.

 

	
  

	
4.

	
FINANCIAL MATTERS

 

	
4.1

	
Since the Last Accounting Date:

 

	
  

	
4.1.1

	
the business of each Group Company has been carried on in the ordinary and usual course and so as to maintain it as a going concern;

 

	
  

	
4.1.2

	
no Group Company has acquired or disposed of any material asset including aircraft and engines, or assumed any material liability other than on arm's length terms and in the ordinary course of business;

 

	
  

	
4.1.3

	
there has been no Business Deterioration;

 

	
  

	
4.1.4

	
no Group Company has declared, paid or made a dividend or distribution (including a distribution within the meaning of the CTA 2010 or the TCA 1997) except as provided in the Accounts;

 

	
  

	
4.1.5

	
no Group Company has created, allotted, issued, acquired, repaid or redeemed share or loan capital or made an agreement or arrangement or undertaken an obligation to do any of those things; and

 

	
  

	
4.1.6

	
no Group Company has factored or sold any debts.

 

	
4.2

	
For the purposes of paragraph ‎4.1.3 above, "Business Deterioration" means a material deterioration in the turnover, trading performance or financial position of the Group taken as a whole; provided, however, that "Business Deterioration" shall not include the impact on the Group to the extent arising out of or attributable to:

 

	
  

	
(a)

	
changes that generally affect the industries in which the Group operates (including legal or regulatory changes);

 

	
  

	
(b)

	
changes in general economic or political conditions;

 

	
  

	
(c)

	
changes affecting capital market conditions,

 

including in each of sub-paragraphs ‎(a), ‎(b) and ‎(c) of this definition any changes resulting from an outbreak or escalation of hostilities, war, acts of terrorism, political instability or other national or international calamity, crisis, emergency, epidemic or natural disaster, or any governmental or other response to any of the foregoing;

 

  

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(d)

	
changes in laws or accounting standards (including IFRS);

 

	
  

	
(e)

	
the announcement of the execution of any Transactional Document, the transactions contemplated by any Transactional Document and the implementation of any transaction contemplated by any such agreement; or

 

	
  

	
(f)

	
matters arising from normal business fluctuations,

 

except to the extent that the matters in subparagraph ‎(a) to ‎(d) of this definition have an impact on the Group that is disproportionate to the effect on other companies operating in the industries in which the Group operates.

 

	
4.3

	
The statutory books and accounting records of each Group Company required to be kept in accordance with applicable laws in its jurisdiction of incorporation have been maintained in all material respects in accordance with such laws so far as RBS is aware and are in the possession or control of the relevant Group Company.

 

	
  

	
5.

	
TAX

 

	
5.1

	
Each liability to Tax of a Group Company (other than any liability to Tax arising from the application of Division 45 of the Australian Income Tax Assessment Act 1997 in connection with the sale of the Shares of RBS Australia Leasing pursuant to this Agreement), whether accountable on a primary or secondary basis, which arises:

 

	
  

	
5.1.1

	
in consequence of an Event occurring on or before Completion or in consequence of the event of Completion; or

 

	
  

	
5.1.2

	
in respect of or by reference to any income, profits or gains which were earned, accrued or received by a Group Company on or before the Completion Time or in respect of a period ending on or before the Completion Time,

 

will have been either:

 

	
  

	
5.1.3

	
discharged on or before Completion;

 

	
  

	
5.1.4

	
taken into account in computing the amount of an allowance, provision or reserve in the Completion Statement (including deferred tax and thereby reducing the Final Share Price from what it would otherwise have been); or

 

	
  

	
5.1.5

	
taken into account in the UK Lessor Tax Adjustment.

 

	
5.2

	
Each Group Company is and has at all times been resident only in its jurisdiction of incorporation for Tax purposes and does not carry on a business in any other jurisdiction through a permanent establishment.

 

	
5.3

	
Each Group Company has paid all Tax which has fallen due and payable and is not, and has not in the 6 years ending on the date of this Agreement been, liable to pay any material penalty, surcharge, fine or interest in connection with Tax.

 

	
5.4

	
Each Group Company has deducted or withheld all Tax which it has been obliged by law to deduct or withhold from amounts paid by it and has properly accounted to the relevant Tax Authority for all amounts of Tax so deducted or withheld, other than

 

  

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where the failure to deduct or withhold such Taxes would not result in a material liability.

 

	
5.5

	
So far as RBS is aware, each Group Company has within applicable time limits made all returns, provided all information and maintained all records in relation to Tax as it is required to make, provide or maintain and has fully complied on a timely basis with all notices served on it and any other requirements lawfully made of it by any Tax Authority.

 

	
5.6

	
No Group Company is involved in any material dispute in relation to Tax with any Tax Authority.

 

	
5.7

	
So far as RBS is aware, each Group Company has sufficient records relating to past events, including any elections made, to calculate the Tax liability or relief that would arise on any disposal or on the realisation of any asset owned by any Group Company at Completion.

 

	
5.8

	
Except as provided for in the Completion Statement, no Group Company is, or will be, obliged to make or be entitled to receive any payment for the intra-group transfer of Reliefs in respect of any period ending on or before Completion.

 

	
5.9

	
To the extent any Relief from Irish Tax arising from the payment by a Group Company subject to Irish Tax of *** as mentioned in clause ‎4.10 has been reflected in item ‎14 (Deferred Tax) in the Completion Statement, such Relief will be available as at the Completion Time.

 

	
6.

	
AIRCRAFT AND LEASE DOCUMENTS

 

If Lombard owns the Lombard Aircraft as at any date on which the Warranties set out in this paragraph ‎6 are made or repeated, Lombard will be treated as a "Group Company" for the purposes of such Warranties, to the extent that such Warranties relate to the Lombard Aircraft and any related Lease Documents.

 

	
6.1

	
So far as RBS is aware, no Total Loss with respect to an Aircraft or Engine has occurred and no Group Company has been notified in accordance with the terms of the relevant Lease Documents that:

 

	
  

	
6.1.1

	
any event has occurred which, with the passing of time or giving of notice, would constitute a Total Loss of an Aircraft or Engine;

 

	
  

	
6.1.2

	
an Aircraft has been involved in any incident which has caused Major Damage to an Aircraft or Engine; or

 

	
  

	
6.1.3

	
an Aircraft is the subject of any requisition for use.

 

	
6.2

	
All Aircraft owned or leased by a Group Company are set forth in Part A of Exhibit 1.  The relevant Owner (including, for each Owner Trust Aircraft, the owner of the legal title and the owner of the beneficial title listed in Column 2 of Part A of Exhibit 1,

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 82 -

  

 

collectively) has full legal and beneficial title in and to the Aircraft listed opposite its name in Column 5 of Part A of Exhibit 1 and such Owner owns such Aircraft free and clear of all Security Interests other than Permitted Security Interests (and, in relation to the Financed Aircraft, other than any Security Interest created pursuant to a Financing Document).  The relevant Owner (including, for each Owner Trust Aircraft, the owner of the legal title and the owner of the beneficial title, collectively) has full legal and beneficial title in and to each Engine (other than to the extent that (in a limited number of jurisdictions) title to such Engine has been automatically transferred by virtue of applicable law upon the removal of such Engine from the relevant Aircraft, in which case the Owner shall have title to the engine installed on the Aircraft, or the right to a replacement engine in accordance with the applicable terms of the relevant Lease Documents) and such Owner owns such Engine free and clear of all Security Interests other than Permitted Security Interests (and, in relation to the Financed Aircraft, other than any Security Interest created pursuant to a Financing Document). At Delivery, each Aircraft had installed Engines the number and model of which are generally accepted by the manufacturer of the Aircraft.

 

	
6.3

	
Lease Documents

 

	
  

	
6.3.1

	
The Lease Documents in respect of an Aircraft or Engine constitute the entire agreement (insofar as is material) between the relevant Lessor and the relevant Lessee with respect to the leasing of that Aircraft.

 

	
  

	
6.3.2

	
The Data Room contains true and accurate copies of all of the Lease Documents (insofar as is material) in relation to each Aircraft and Engine.

 

	
  

	
6.3.3

	
Other than the Lease Documents and the Financing Documents, there are no written or oral agreements or arrangements to which a Group Company is a party that are material to the leasing of any Aircraft or Engine.

 

	
6.4

	
The Financing Documents (together with any documents or agreements in respect of the RBS Debt) constitute all of the agreements (insofar as is material) relating to Financial Debt that remains outstanding in respect of any Aircraft or Engine.

 

	
6.5

	
The relevant Lessor has not assigned or transferred any of its rights or obligations under any Lease Document other than pursuant to the Financing Documents and has not consented to the relevant Lessee assigning any of its rights under the Lease Documents.

 

	
6.6

	
No written notice of the termination of the leasing of any Aircraft or Engine pursuant to any Lease Documents has been given by the relevant Lessee or received by the relevant Lessor from the relevant Lessee and has not been withdrawn.

 

	
6.7

	
Default

 

	
  

	
6.7.1

	
No Lessee is in default (after the expiry of any applicable grace period) as to its obligation to make scheduled payments under any relevant Lease Documents in respect of an Aircraft or Engine ("Payment Default").

 

  

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6.7.2

	
Other than a Payment Default, no Lessor has been notified in accordance with the terms of the relevant Lease Documents of the occurrence of any Event of Default (as defined in the relevant Lease Documents) that is continuing.

 

	
  

	
6.7.3

	
Other than a Payment Default, no Lessor has served a written notice to any Lessee stating that an Event of Default (as defined in the relevant Lease Documents) has occurred, where such Event of Default is continuing.

 

	
6.8

	
Except pursuant to the Lease Documents, the Financing Documents, in relation to the Ordered Aircraft, or as set forth in sub-folder Phase 4 – Data Room > Responses to Final Due Diligence > SMBC and Sumitomo Corporation > Third Party Sale Agreements' of the Data Room or Part C of Exhibit 1, no Group Company is party to any written contractual commitments (including the grant of any options) to sell or lease any aircraft or Aircraft or engine or Engine.

 

	
6.9

	
No Lessee has exercised a right under any written contractual commitments (including any option) to purchase, or extend the term of the leasing of, any Aircraft or Engine where such right has not taken effect at the date of this Agreement.

 

	
6.10

	
Except for the OEM Contracts or in relation to the Ordered Aircraft, no Group Company has any outstanding purchase orders or other written contractual commitments to or with manufacturers or any other person to purchase aircraft or engines. The Data Room contains complete and correct copies of all of the agreements (insofar as is material) between a Group Company and a manufacturer or any other person in respect of such purchase orders or other written contractual commitments.

 

	
6.11

	
There are no material outstanding claims that a Lessor is in breach of its obligations under the relevant Lease Documents asserted in writing by any Lessee (including such claims in relation to a contribution by the relevant Lessor, in accordance with the terms of the Lease Documents, towards the cost of compliance with any airworthiness directive with respect to any Aircraft).

 

	
6.12

	
The Group Companies are in compliance with all material obligations under the Lease Documents.

 

	
6.13

	
The document in sub-folder 'Phase 3 – Data Room > F. Financial Information > 1. Financials' of the Data Room entitled 'Aged Debtors Report at 300911' contains true and accurate information regarding overdue payments under any Lease Documents as at 30 September 2011.

 

	
7.

	
INTELLECTUAL PROPERTY

 

	
7.1

	
No Group Company infringes any third party rights in Intellectual Property.

 

	
7.2

	
So far as RBS is aware, there is no unauthorised use or infringement by any third party of any Intellectual Property owned by any Group Company.

 

	
8.

	
INFORMATION TECHNOLOGY

 

	
8.1

	
The Data Room contains complete and accurate copies of all current material Information Technology agreements and licences to which any Group Company is a

 

  

- 84 -

  

 

party under the terms of which expenditure of EUR100,000 or more has been incurred either:

 

	
  

	
8.1.1

	
during the 12 month period ended on the Last Accounting Date; or

 

	
  

	
8.1.2

	
between 1 January 2011 and 30 September 2011 (inclusive).

 

	
8.2

	
So far as RBS is aware, none of the Information Technology agreements contained in the Data Room has been the subject of any breach or default, or is liable to be terminated or otherwise adversely affected by Completion.

 

	
9.

	
INSURANCE

 

	
9.1

	
Policies

 

The Disclosure Letter contains a list of each current insurance and indemnity policy (other than any policies maintained by Lessees in respect of Aircraft or Engines) in respect of which any Group Company has an interest (together the "Policies").  Sub-folder 'Phase 3 – Data Room > H. Miscellaneous > 1. Fleet Insurance Contingency Policy' of the Data Room contains true and complete copies of the Contingent Liability Policy.

 

	
9.2

	
Claims

 

No claim relating to the Business is outstanding under any of the Policies where the amount claimed is in excess of US$1,000,000 (a "Relevant Insurance Claim") and RBS is not aware of any circumstances which are likely, on the balance of probabilities, to give rise to any such claim and which has not been reported to the insurers.  None of RBS, the Group Companies nor the person to whom such Policy has been issued has received notice in writing that any insurer under any Policy is denying liability, or defending itself under a reservation of rights clause, with respect to any Relevant Insurance Claim.  Neither RBS nor any Group Company has received notice in writing that any insurer under any insurance policy maintained by a Lessee in respect of any Aircraft or Engine is denying liability, or defending itself under a reservation of rights clause, with respect to any claim under such policy.

 

	
9.3

	
Premiums

 

All premiums which are due under the Policies have been paid.

 

	
10.

	
REAL PROPERTY

 

	
10.1

	
Extent of property

 

	
  

	
10.1.1

	
Copies of all relevant leases, tenancies, licences or rights of occupation granted to or by any Group Company in respect of the Property are contained in the Data Room.

 

	
  

	
10.1.2

	
The Property comprises all of the land and premises vested in, occupied or used by, or in the possession of, the Group Companies.

 

	
  

	
10.1.3

	
No part of the Property is sub-let.

 

  

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10.2

	
Property Proceedings

 

So far as RBS is aware:

 

	
  

	
10.2.1

	
there are no Property Proceedings and none are pending or threatened;

 

	
  

	
10.2.2

	
there is no outstanding notice, judgment, order, decree, arbitral award or decision of a court, tribunal, arbitrator or governmental authority affecting the Property.

 

	
10.3

	
Outstanding property liabilities

 

	
  

	
10.3.1

	
Except in relation to the Property, no Group Company has any liability arising out of a conveyance, transfer, lease, tenancy, licence, agreement or other document relating to land, premises or an interest in land or premises.

 

	
  

	
10.3.2

	
There is no subsisting material breach of a material term of any Property Lease.

 

	
11.

	
AGREEMENTS

 

	
11.1

	
The Data Room contains true and complete copies (or with respect to any such agreement that is not in writing, a summary of the material terms thereof) of each of the following types of agreements, together with all amendments and supplements thereto, to which any of the Group Companies is a party (collectively, the "Material Agreements"):

 

	
  

	
11.1.1

	
other than the Financing Documents and in relation to the RBS Debt, any agreement relating to Financial Debt in excess of US$750,000 owed by any of the Group Companies;

 

	
  

	
11.1.2

	
all agreements relating to any merger or other business combination;

 

	
  

	
11.1.3

	
any joint venture, consortium, partnership or association of which a Group Company is a member or a party (other than a bona fide trade association);

 

	
  

	
11.1.4

	
all agreements other than relating to aircraft and/or engines and/or component parts pursuant to which a Group Company has an obligation to expend in excess of US$750,000 per annum;

 

	
  

	
11.1.5

	
any distributorship, agency, franchise or management agreement or arrangement; or

 

	
  

	
11.1.6

	
other than relating to aircraft and/or engines and/or component parts, or employment contracts, any agreement to which any Group Company is a party:

 

	
  

	
(a)

	
under the terms of which any Group Company has paid or received aggregate consideration in excess of US$750,000 in the 12 months prior to the date of this Agreement; or

 

	
  

	
(b)

	
under the terms of which any Group Company is under an obligation to pay or has a contractual right to receive aggregate consideration in

 

  

- 86 -

  

 

excess of US$750,000 in the 12 months from the date of this Agreement; or

 

	
  

	
(c)

	
which cannot be terminated in accordance with its terms at no cost to a Group Company within 12 months of a Group Company serving notice to do so.

 

	
  

	
11.1.7

	
so far as RBS is aware any agreement (other than a Lease Document) containing a restrictive covenant which materially restricts the ability of any Group Company to carry on the Business in any jurisdiction.

 

	
11.2

	
So far as RBS is aware, no Group Company is a party to:

 

	
  

	
11.2.1

	
an agreement entered into other than in the usual course of its business;

 

	
  

	
11.2.2

	
an agreement, arrangement or obligation entered into other than by way of a bargain at arm's length (excluding any contracts with any RBS Group Undertaking).

 

	
11.3

	
Each Material Agreement constitutes a legal and binding agreement on the part of the relevant Group Company. Each Group Company has in all material respects performed all of the terms and conditions of those Material Agreements to which it is a party. None of the Group Companies has, so far as RBS is aware, served written notice on any counterparty to a Material Agreement that such counterparty is in material breach of such Material Agreement.

 

	
12.

	
AFFILIATE TRANSACTIONS

 

There are no agreements or arrangements between any of the Group Companies, on the one hand, and any RBS Group Undertaking (other than a Group Company) or any officer or director thereof, on the other and which are material to Group Companies or the operation of the Business other than in relation to RBS Debt or as to be provided under the Transitional Services Agreement.

 

	
13.

	
EMPLOYEES

 

	
13.1

	
General

 

Each employment contract between any Group Company and any of its employees can be terminated by the Group Company by giving 12 months' notice or less, without giving rise to a claim for damages or compensation for having failed to give sufficient notice (other than a statutory redundancy payment or statutory compensation for unfair dismissal).

 

	
13.2

	
Trade unions

 

	
  

	
13.2.1

	
No Group Company has an agreement or arrangement with, nor does it recognise a trade union, works council, staff association or other body representing any of its employees.

 

  

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13.2.2

	
No Group Company is involved in, and no fact or circumstance exists which might give rise to, a dispute with a trade union, works council, staff association or other body representing any of its employees.

 

	
13.3

	
Other matters

 

	
  

	
13.3.1

	
***, details are contained in the Data Room of:

 

	
  

	
(a)

	
the terms of all current contracts of employment of each Company Key Employee together with material details of all contractual benefits to which they are entitled;

 

	
  

	
(b)

	
all standard terms of employment for each category or grade of employee of each Group Company together with all written policies relating to the provision of material benefits applicable to each grade or category of employee;

 

	
  

	
(c)

	
employees of each Group Company showing their employing entity, date of commencement of employment, job title and basic salary per annum; and

 

	
  

	
(d)

	
any share option or share schemes in which any director, officer or employee of a Group Company participates.

 

	
  

	
13.3.2

	
No Group Company is obliged to increase or vary, nor has it made provision to increase or vary, the total annual remuneration payable to or benefits receivable by its directors, other officers and employees by more than 10 per cent. or to increase the rate of remuneration of a director, other officer or employee entitled to a basic salary of more than *** per annum.

 

	
  

	
13.3.3

	
There is no agreement or arrangement between any Group Company and an employee or former employee with respect to his employment, his ceasing to be employed or his retirement which is not included in the written terms of his employment or previous employment, or the governing documents of the Disclosed Schemes. No Group Company has provided, or agreed to provide, a gratuitous payment or gratuitous benefit to a director, officer or employee or to any of their dependants.

 

	
13.4

	
Compliance with law

 

So far as RBS is aware, each Group Company has complied in all material respects with each obligation imposed on it by, and each order and award made under, statute (including immigration laws), regulation and collective agreement relevant to the relations between it and its employees or a trade union or the terms of employment of its employees.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 88 -

  

 

	
13.5

	
Employment disputes

 

No Group Company is involved in any active or, so far as RBS is aware, pending or threatened court, tribunal or arbitration proceedings in respect of any employee or former employee of a Group Company.

 

	
14.

	
PENSIONS AND OTHER BENEFITS

 

	
14.1

	
Schemes in operation

 

Save for the Disclosed Schemes there is not in operation, and there is no proposal to enter into or establish, any agreement or arrangement for the payment by any Group Company of, or payment by any Group Company of a contribution towards, a pension, allowance or lump sum on retirement, death or disability for the benefit of an employee or former employee of any Group Company or any dependants of an employee or former employee of any Group Company.

 

	
14.2

	
Information

 

The Data Room contains a copy of the explanatory documentation (including where relevant the current trust deeds, rules and members' booklets) for each of the Disclosed Schemes, any subsequent announcements altering such documentation and a schedule indicating which of the employees of the Group Companies are members of which Disclosed Schemes. So far as RBS is aware, such documentation is accurate in all material respects.

 

	
14.3

	
Contributions to the Disclosed Schemes

 

All contributions and expenses due to the Disclosed Schemes up to the date of this Agreement have been duly and punctually paid by each Group Company and its employees.

 

	
14.4

	
Compliance

 

	
  

	
14.4.1

	
So far as RBS is aware, each of the Disclosed Schemes has in all material respects been administered in accordance with all applicable legal and regulatory requirements. So far as RBS is aware, each Group Company has complied with its obligations under the Disclosed Schemes in all material respects. No employee of any Group Company has a contractual entitlement to defined benefits, benefits at a particular level or to participate in a defined benefit pension scheme.

 

	
  

	
14.4.2

	
So far as RBS is aware, no actions, suits or claims (other than routine claims for benefits) have been made or threatened against the trustees or administrators of the Disclosed Schemes by or in respect of any employee or former employee of a Group Company and so far as RBS is aware there are no circumstances which might give rise to any such action, suit or claim. So far as RBS is aware, there is no claim in payment under any Disability Scheme in respect of any employee of a Group Company.

 

  

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15.

	
GUARANTEES AND INDEMNITIES

 

Other than those entered into in the ordinary course of its business or as set out in Exhibit 2 (Third Party Assurances), no Group Company is a party to nor is liable under a guarantee, indemnity or other agreement to secure or incur a financial or other obligation with respect to another person's obligation (other than any other Group Company).

 

	
16.

	
FINANCIAL INDEBTEDNESS

 

No Group Company owes any Financial Debt to any person other than a RBS Group Undertaking other than the Financial Debt owing pursuant to the Financing Documents.

 

	
17.

	
INSOLVENCY, WINDING UP ETC.

 

	
17.1

	
Winding up

 

No order has been made and, so far as RBS is aware, no petition has been presented or resolution passed for the winding up of any Group Company or for the appointment of a liquidator or provisional liquidator to any Group Company.

 

	
17.2

	
Administration or Examinership

 

No administrator, examiner or interim examiner has been appointed in relation to any Group Company.  No notice has been given or filed with the court of an intention to appoint an administrator, an examiner or an interim examiner.  No petition or application has been presented or order made for the appointment of an administrator, examiner or interim examiner in respect of any Group Company.

 

	
17.3

	
Receivership

 

No receiver or administrative receiver has been appointed, nor any notice given of the appointment of any such person, over the whole or part of any Group Company's business or assets.

 

	
17.4

	
Moratorium

 

No moratorium has been sought or has been granted or imposed under section 1A of the Insolvency Act 1986 in respect of RBS Aerospace UK, any equivalent or analogous legislation in Ireland in respect of any Group Company incorporated in Ireland and any equivalent or analogous legislation in Australia in respect of RBS Australia Leasing.

 

	
17.5

	
Voluntary arrangements

 

No voluntary arrangement has been proposed under section 1 of the Insolvency Act 1986 in respect of any Group Company.

 

  

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17.6

	
Scheme of arrangement

 

No compromise or arrangement has been proposed, agreed to or sanctioned under:

 

	
  

	
(a)

	
Part 26 (Arrangements and Reconstructions) of the Act in respect of RBS Aerospace UK;

 

	
  

	
(b)

	
section 201 of the Companies Act of Ireland 1963 in respect of any Group Company incorporated in Ireland; and

 

	
  

	
(c)

	
Part 5.1 (Arrangement and Reconstructions) of the Corporations Act 2001 in respect of RBS Australia Leasing,

 

nor has any application been made to, or filed with, the court for permission to convene a meeting to vote on a proposal for any such compromise or arrangement.

 

	
17.7

	
Inability to pay debts

 

	
  

	
17.7.1

	
No Group Company incorporated in:

 

	
  

	
(a)

	
England and Wales, is unable to pay its debts within the meaning of section 123 of the Insolvency Act 1986; or

 

	
  

	
(b)

	
Ireland, is unable or deemed to be unable to pay its debts within the meaning of section 214 of the Companies Act 1963 and/or Section 2(3) of the Companies (Amendment) Act 1990 in each case as amended; or

 

	
  

	
(c)

	
Australia, is unable to pay its debts as and when they become due and payable within the meaning of section 95A of the Corporations Act 2001.

 

	
17.8

	
Striking off

 

	
  

	
17.8.1

	
So far as RBS is aware, no action is being taken by, in the case of Group Companies incorporated in:

 

	
  

	
(a)

	
England and Wales, the Registrar of Companies to strike any such Group Company off the register under section 1000 of the Act;

 

	
  

	
(b)

	
Ireland, the Registrar of Companies to strike any such Group Company off the register under section 12 of the Companies (Amendment) Act of Ireland 1982;

 

	
  

	
(c)

	
Australia, the Australian Securities and Investments Commission to deregister any such Group Company under section 601AB of the Corporations Act 2001.

 

	
18.

	
COMPETITION

 

	
18.1

	
For the purposes of this paragraph ‎18 "Competition Law" means legislation (and the applicable rules and regulations thereunder) of any jurisdiction in which any Group Company carries on business governing the conduct of businesses or individuals in

 

  

- 91 -

  

 

relation to anticompetitive agreements or concerted practices, dominant or monopoly market positions and the control of mergers, acquisitions and joint ventures, and "Competition Authority" means any relevant government, governmental, national, supranational, competition or antitrust body or other authority which is responsible for applying Competition Law in such jurisdictions.

 

	
18.2

	
During the 12 months prior to the date of this Agreement none of the Sellers nor any Group Company has received written notification from any Competition Authority that any Group Company has any liability under, or is engaged in, any agreement, arrangement, concerted practice or conduct that infringes any Competition Law.

 

	
19.

	
REGULATORY MATTERS

 

	
19.1

	
All authorisations, licences, consents and approvals required by any Group Company for or in connection with carrying on the Business are in full force and effect, other than:

 

	
  

	
19.1.1

	
those the absence of which would not have a material adverse effect on the Group; and

 

	
  

	
19.1.2

	
those which the applicable Lessee (or any prior lessee of an Aircraft) is responsible for obtaining or procuring, or for which the applicable Lessee (or any prior lessee of an Aircraft) is required to indemnify the Lessor for failure to obtain or maintain, under the terms of the applicable Lease Documents (or any prior documents governing the leasing of an Aircraft).

 

	
19.2

	
No Group Company has received any written notice from a Governmental Agency in the 12 months prior to the date of this Agreement alleging that any Group Company has not obtained a material licence, permission, authorisation (public or private) or consent required for carrying on the Business effectively in the places and in the manner in which it is carried on at the date of this Agreement in accordance with applicable laws and regulations or that any such licence, permission, authorisation or consent will be revoked or terminated as a result of the execution or performance of this Agreement.

 

	
20.

	
LITIGATION AND COMPLIANCE WITH LAW

 

	
20.1

	
No Group Company is involved in a material civil, criminal, arbitration, administrative or other proceeding (other than in relation to the collection of debts arising in the ordinary course of business of any Group Company).  So far as RBS is aware, no material civil, criminal, arbitration, administrative or other proceeding which is likely on the balance of probabilities to have a material adverse effect on the business of any Group Company is pending or threatened by or against any Group Company. For this purpose:

 

	
  

	
(a)

	
material means proceeding which, if successful, are likely to result in a cost, benefit or value to the Business of US$1,000,000 or more; and

 

	
  

	
(b)

	
any proceedings for collection by a Group Company of debts arising in the ordinary course of business and any proceedings in respect of claims identified in the Disclosure Letter and/or the Data Room as insured claims are excluded.

 

  

- 92 -

  

 

	
20.2

	
There is no outstanding court or arbitral judgement or order against any Group Company.

 

	
20.3

	
No Group Company has received written notice in the 12 months prior to the date of this Agreement of any current or pending investigation by a Governmental Agency concerning any Group Company.

 

	
20.4

	
So far as RBS is aware, each Group Company has conducted its business in all material respects in accordance with all applicable legal requirements.

 

	
20.5

	
So far as RBS is aware no Group Company nor any director, officer or employee of any Group Company has at any time taken any action, directly or indirectly, in violation of Anti-Bribery Laws then applicable to it.

 

	
20.6

	
Each Group Company conducts and has at all times conducted its business in compliance with Anti-Bribery Laws, then applicable to it.

 

	
21.

	
POWERS OF ATTORNEY AND AUTHORITIES

 

No Group Company has given a power of attorney or other authority by which a person may enter into an agreement, arrangement or obligation on behalf of any Group Company (other than an authority for a director, other officer or employee to enter into an agreement in the usual course of that person's duties).

 

	
22.

	
BROKERAGE OR COMMISSIONS

 

No person is entitled to receive a finder's fee, brokerage or commission from any Group Company in connection with this Agreement.

 

	
23.

	
ENVIRONMENTAL

 

During the 12 months prior to this Agreement no Group Company has received any written notification from, or so far as RBS is aware, has been under investigation by, any Governmental Agency in relation to any alleged breach of Environmental Law.

 

  

- 93 -

  

 

SCHEDULE 5

LIMITATIONS ON THE LIABILITY OF RBS

 

	
1.

	
LIMITATION ON QUANTUM

 

	
1.1

	
RBS is not liable in respect of a Warranty Claim (other than a Fundamental Warranty Claim or a Tax Warranty Claim):

 

	
  

	
1.1.1

	
unless the amount that would otherwise be recoverable from RBS (but for this paragraph ‎1.1.1) in respect of that Warranty Claim exceeds (either on its own or when aggregated with one or more other Warranty Claims arising from the same subject matter and in relation to the same Warranty breach) ***; and

 

	
  

	
1.1.2

	
unless and until the amount that would otherwise be recoverable from RBS (but for this paragraph ‎1.1.2) in respect of that Warranty Claim, when aggregated with any other amount or amounts recoverable in respect of other Warranty Claims (other than Warranty Claims in respect of Fundamental Warranties or Tax Warranty Claims) (excluding any amounts in respect of a Warranty Claim for which RBS has no liability because of paragraph ‎1.1.1), exceeds *** and in the event that the aggregated amounts exceed *** RBS shall only be liable for the excess.

 

	
1.2

	
RBS is not liable in respect of a Tax Warranty Claim unless the amount that would otherwise be recoverable from RBS (but for this paragraph ‎1.2) in respect of that Tax Warranty Claim exceeds (either on its own or when aggregated with one or more other Tax Warranty Claims arising from the same subject matter and in relation to the same Warranty breach) ***.

 

	
1.3

	
RBS is not liable in respect of an Affiliate Transaction Indemnity Claim unless the amount that would otherwise be recoverable from RBS (but for this paragraph ‎1.3) in respect of such claim exceeds US$***.

 

	
1.4

	
The total aggregate liability of RBS in respect of all Warranty Claims (other than Fundamental Warranty Claims) and Affiliate Transaction Indemnity Claims is limited to ***.

 

	
1.5

	
The total aggregate liability of RBS in respect of all Relevant Claims is limited to an amount equal to the Cash Free Debt Free Price.

 

	
1.6

	
The Buyer shall not be entitled to claim for any punitive, indirect or consequential loss (including loss of profit) in respect of any Relevant Claim which it would not be entitled to recover at law (unless required to be paid to a third party); provided that this paragraph ‎1.6 shall not apply to fines, interest or penalties in respect of Tax Warranty Claims.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 94 -

  

 

	
2.

	
TIME LIMITS FOR BRINGING CLAIMS

 

RBS is not liable for a Relevant Claim in respect of:

 

	
2.1

	
a Warranty contained in paragraph ‎5 (Tax) of ‎Schedule 4 unless the Buyer has notified RBS of the Relevant Claim stating in reasonable detail the nature of the Relevant Claim and to the extent practicable the amount claimed no later than 23.59 on the date falling 3 months after the expiry of the period specified by statute during which an assessment of the relevant liability to Tax may be issued by the relevant Tax Authority or, if there is no such period (other than where fraud or, in relation to a Relevant Claim in respect of RBS Aerospace Limited arising in respect of a Warranty contained in paragraph ‎5 (Tax) of ‎Schedule 4, negligence (as that expression is used in section 956(1)(c) TCA 1997) has been reasonably alleged or proven, provided that the Buyer has obtained an opinion of Tax counsel of at least 5 years' standing that any such allegation is reasonable) or if such period ends more than 6 years from Completion, the date which is 6 years from Completion; and

 

	
2.2

	
any other Warranty unless the Buyer has notified RBS of the Relevant Claim stating in reasonable detail the nature of the Relevant Claim and the amount claimed (and to the extent practicable detailing the Buyer's calculation of the loss thereby alleged to have been suffered) on or before the date falling 12 months after the Completion Date.

 

	
2.3

	
any Affiliate Transaction Indemnity Claim unless the Buyer has notified RBS of the Affiliate Transaction Indemnity Claim stating in reasonable detail the nature of the Affiliate Transaction Indemnity Claim and the amount claimed (and to the extent practicable detailing the Buyer's calculation of the loss thereby alleged to have been suffered) on or before the date falling 24 months after the Completion Date.

 

	
3.

	
NOTICE OF CLAIMS

 

A Relevant Claim notified in accordance with paragraph ‎2 of this ‎Schedule 5 is unenforceable against RBS on the expiry of the period of 9 months starting on the day of notification of the Relevant Claim, unless proceedings in respect of the Relevant Claim have been issued and validly served on RBS, save in the case of a claim based upon a liability which is contingent or otherwise not capable of being quantified, in which case the 9 month period shall commence on the date that the contingent liability becomes an actual liability or the liability is capable of being quantified. For the avoidance of doubt, a Relevant Claim may be commenced during the pendency of the Buyer's actions in respect of mitigation or seeking recovery from a third party in accordance with this ‎Schedule 5. No new Relevant Claim may be made in respect of the same loss or losses giving rise to any such withdrawn Relevant Claim.

 

	
4.

	
SPECIFIC LIMITATIONS

 

RBS is not liable in respect of a Relevant Claim:

 

	
4.1

	
to the extent that the Relevant Claim arises from or the liability thereunder occurs or is increased directly or indirectly as a result of:

 

	
  

	
4.1.1

	
an Event after Completion (including, for the avoidance of doubt, any restructuring, reorganisation or Tax planning unless any of these shall be

 

  

- 95 -

  

 

pursuant to an agreement in writing between the Buyer and RBS) by or involving a Buyer's Group Undertaking or a director, employee or agent of a Buyer's Group Undertaking other than if the Event:

 

	
  

	
(a)

	
is required by applicable law in force as at the date of this Agreement;

 

	
  

	
(b)

	
is pursuant to a legally binding commitment that a Group Company incurred on or before Completion or that the Buyer incurred under this Agreement; or

 

	
  

	
(c)

	
arises in the ordinary course of the Group Company's business unless the Buyer or relevant Buyer's Group Undertaking was aware or ought (having taken all reasonable legal and/or tax advice) reasonably to have been aware that such Event could give rise to a liability to Tax;

 

	
  

	
4.1.2

	
any Event after Completion on the part of the Buyer or a Buyer's Group Undertaking which impacts the basis on which capital allowances under Part 9 TCA 1997 may be claimed in Ireland by RBS Aerospace Limited, whether or not in accordance with an agreement with the Irish Revenue Commissioners, and including an adjustment to a current market value basis for these purposes other than if the Event satisfies any of the conditions in ‎(a) to ‎(c) in paragraph ‎4.1.1 of this ‎Schedule 5;

 

	
  

	
4.1.3

	
the passing of, or a change in, a law, rule, regulation, interpretation of the law or administrative practice of a government, governmental department, agency or regulatory body after the date of this Agreement or an increase in the Tax rates or an imposition of Tax, in each case not actually or prospectively in force at the date of this Agreement; or

 

	
  

	
4.1.4

	
a change in any accounting policy or practice of any Group Company (including a change in the accounting reference date) after Completion other than a change which is necessary in order to comply with the law applicable to any Group Company as at the date of this Agreement;

 

	
4.2

	
(save to the extent that it is *** in accordance with clause ‎4.10) to the extent that the matter giving rise to the Relevant Claim arises wholly or partially from an Event before or after Completion at the written request of, or with the written consent by or on behalf of, a Buyer's Group Undertaking (which for these purposes includes a Group Company only after Completion);

 

	
4.3

	
to the extent that the matter giving rise to the Relevant Claim is an amount for which a Group Company actually recovers, or receives indemnity from, a person other than a RBS Group Undertaking, whether under a provision of applicable law, insurance policy or otherwise howsoever (or would have recovered or received had the relevant Group Company made commercially reasonable efforts to obtain such recovery or indemnity);

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 96 -

  

	
4.4

	
if a Buyer's Group Undertaking fails to act in accordance with the provisions of  this ‎Schedule 5 or ‎Schedule 6 in connection with the matter giving rise to the Relevant Claim unless and to the extent that in the absence of the failure the Buyer would still have had Losses under the Relevant Claim;

 

	
4.5

	
(other than in respect of a Tax Warranty Claim) to the extent that the matter giving rise to the Relevant Claim was taken into account in computing the amount of an allowance, provision or reserve or other amount on the face of the Completion Statement, or specifically noted in the Accounts or the Completion Statement or was specifically referred to in the Accounts or the Completion Statement (or, in each case, the notes thereto) or in accordance with generally accepted accounting principles has not been so taken account of or referred to;

 

	
4.6

	
(other than in respect of a Tax Warranty Claim) to the extent of the amount by which a liability (including a provision against liabilities) included in the Completion Statement is overstated;

 

	
4.7

	
to the extent that the matter giving rise to the Relevant Claim is a Tax liability of a Group Company arising because a Group Company's assets are more than, or its liabilities are less than, were taken into account in computing the provision for Tax in the Completion Statement;

 

	
4.8

	
to the extent that the matter giving rise to the Relevant Claim is a Tax liability which would not have arisen but for:

 

	
  

	
4.8.1

	
a claim, election, surrender or disclaimer made, or notice or consent given, or another thing done, after Completion (other than one the making, giving or doing of which was taken into account in computing a provision for Tax in the Accounts or the Completion Statement under, or in connection with, a provision of an enactment or regulation relating to Tax by a Buyer's Group Undertaking or one the making, giving or doing of which is required by applicable law in force as at the date of this Agreement or pursuant to a legally binding commitment that a Group Company incurred on or before Completion or that the Buyer incurred under this Agreement); or

 

	
  

	
4.8.2

	
a Group Company's failure or omission to make a claim, election, surrender or disclaimer, or give a notice, or consent or do another thing, under, or in connection with, a provision of an enactment or regulation relating to Tax after Completion, the anticipated making, giving or doing of which was taken into account in computing the provision for Tax in the Accounts or the Completion Statement and notified to the Buyer at least 5 Business Days before expiry of any time limit that is applicable thereto,

 

except, in each case, where the relevant act or omission results from RBS's conduct of the Group Companies' tax affairs for the Relevant Accounting Period under ‎Schedule 6;

 

	
4.9

	
to the extent that the matter giving rise to the Relevant Claim is a Tax liability which would have been set off by a Relief (other than a Buyer Relief) made available to a Group Company for no consideration but for a Group Company's failure after

 

  

- 97 -

  

 

Completion to make any claims and to take any action required of it by the Seller in accordance with ‎Schedule 6;

 

	
4.10

	
to the extent that the matter giving rise to the Relevant Claim is a Tax liability against which a Relief other than a Buyer Relief is available for set off where such Relief is available without payment to any RBS Group Undertaking;

 

	
4.11

	
to the extent that the matter giving rise to the Relevant Claim is a fine, penalty or interest which would not have arisen but for the unreasonable delay or default of the Buyer or a Group Company after Completion;

 

	
4.12

	
to the extent that the matter giving rise to the Relevant Claim is a liability which has been paid or discharged on or before Completion;

 

	
4.13

	
(save where the stamp duty or related interest or penalty is a compulsory tax under the relevant law and is thus a legal liability of the relevant Group Company) to the extent that the matter giving rise to the Relevant Claim is stamp duty or any interest or penalty relating thereto paid or payable by a Group Company in respect of an instrument executed before Completion unless it is necessary for the Group Company to pay the stamp duty, interest or penalty in order to effect registration in respect of the holding of an asset, to demonstrate title to an asset in connection with the disposal of that asset or to produce the relevant instrument as evidence in civil proceedings or in a hearing before an arbitrator or referee;

 

	
4.14

	
(other than in respect of a Tax Warranty Claim) if the Buyer was aware at the date of this Agreement of a fact, matter or circumstance resulting or which might reasonably be expected to result in a breach of Warranty, but only to the extent the Losses arising from or in connection with such breach arise from or in connection with such known fact, matter or circumstance;

 

	
4.15

	
subject always to paragraph ‎9 and ‎10 below, where RBS has made or is liable to make a payment to the Buyer in relation to any Relevant Claim and the Buyer or any Buyer's Group Undertaking is entitled to recover (whether by insurance, payment, discount, credit, relief or otherwise) from a third party a sum which indemnifies or compensates the Buyer or any Buyer's Group Undertaking (in whole or in part) in respect of the liability or loss which is subject to a Relevant Claim, the Buyer or relevant Buyer's Group Undertaking shall:

 

	
  

	
4.15.1

	
promptly notify RBS of the fact and provide such information as RBS may reasonably require;

 

	
  

	
4.15.2

	
take all such commercially reasonable steps or proceedings as RBS may require to enforce such right prior to taking action against RBS (other than to notify RBS of the potential Relevant Claim or commence proceedings within the period set forth in paragraph ‎3 above); and

 

	
  

	
4.15.3

	
in the event that the Buyer or a Buyer's Group Undertaking recovers from any such third party sums which are referable to the relevant matter giving rise to the Relevant Claim, apply such amount (net of Taxation and any reasonable costs of recovery) in reducing or extinguishing pro tanto the amount of any

 

  

- 98 -

  

 

such Relevant Claim and (other than in respect of a Tax Warranty Claim) shall rebate the net amount to RBS accordingly.

 

	
5.

	
RECOVERY ONLY ONCE

 

The Buyer and anyone deriving title from the Buyer on or after Completion is not entitled to recover to the extent there has previously been a recovery in respect of a particular Relevant Claim and, for the avoidance of doubt, no liability shall attach to RBS for any Relevant Claim to the extent the same loss occasioned to the Buyer or any Buyer's Group Undertaking or any other person deriving title from the Buyer or any such Buyer's Group Undertaking has been recovered pursuant to clause ‎2.3 and/or ‎Schedule 11.

 

	
6.

	
CLAIMS

 

	
6.1

	
The Buyer waives and relinquishes any right of set-off or counterclaim, deduction or retention which the Buyer might otherwise have in respect of any Relevant Claim against or out of any payments which the Buyer may be obliged to make (or procure to be made) to RBS pursuant to this Agreement or otherwise.

 

	
6.2

	
If a breach of the Warranties is capable of remedy, the Buyer shall only be entitled to compensation if it gives RBS written notice of the breach and the breach is not remedied to the Buyer's reasonable satisfaction within 25 Business Days after the date on which such notice is served on RBS. Without prejudice to its duty to mitigate any loss, the Buyer shall (or shall procure that any relevant Buyer's Group Undertaking shall) provide commercially reasonable assistance to RBS (at RBS's cost) to remedy any such breach.

 

	
7.

	
CONTINGENT LIABILITIES

 

To the extent that a Relevant Claim is based upon a liability of a Group Company which is a contingent liability, RBS shall not be liable to make a payment to the Buyer in respect thereof unless and until such time as the contingent liability becomes an actual liability of a Group Company to make a payment. This paragraph ‎7 is without prejudice to the obligation of the Buyer to notify RBS of the Relevant Claim and to issue and serve proceedings in respect thereof in accordance with paragraphs ‎2 and ‎3 of this ‎Schedule 5.

 

	
8.

	
CONDUCT OF RELEVANT CLAIMS

 

	
8.1

	
If the Buyer or any Buyer's Group Undertaking becomes aware of a matter which constitutes or which would or is reasonably likely to give rise to a Relevant Claim (that involves liability to a third party):

 

	
  

	
8.1.1

	
the Buyer shall with reasonable promptness give notice to RBS of the matter and shall consult with RBS with respect to the matter, provided that any delay will not limit the Buyer's right of recovery for a Relevant Claim to the extent RBS is not prejudiced by the delay;

 

	
  

	
8.1.2

	
the Buyer shall, and shall ensure that each Buyer's Group Undertaking will, provide to RBS and its advisers reasonable access to premises and personnel and to relevant assets, documents and records within the power or control of

 

  

- 99 -

  

 

each Buyer's Group Undertaking for the purposes of investigating the matter and enabling RBS to take the action referred to in paragraph ‎8.1.4(a) of this ‎Schedule 5;

 

	
  

	
8.1.3

	
RBS (at its cost) may take copies of the documents or records, and photograph the premises or assets, referred to in paragraph ‎8.1.2 of this ‎Schedule 5;

 

	
  

	
8.1.4

	
the Buyer shall, and shall ensure that each Buyer's Group Undertaking will:

 

	
  

	
(a)

	
take any action and institute any proceedings, and give any information and assistance, as RBS may reasonably request to:

 

	
  

	
(i)

	
avoid, dispute, resist, appeal, compromise, defend, remedy or mitigate the matter; or

 

	
  

	
(ii)

	
enforce against a person (other than a RBS Group Undertaking) the rights of a Buyer's Group Undertaking in relation to the matter; and

 

	
  

	
(b)

	
in connection with proceedings related to the matter (other than against a RBS Group Undertaking) use advisers nominated by RBS (and reasonably acceptable to the Buyer) and, if RBS requests, allow RBS the exclusive conduct of the proceedings,

 

and in each case on the basis that RBS shall indemnify the Buyer on demand against all reasonable costs and liabilities incurred as a result of a request or nomination by RBS;

 

	
  

	
8.1.5

	
allow RBS (if it elects to do so) to take over the conduct of all proceedings and/or negotiations arising in connection with a Relevant Claim (other than any proceeding or negotiation resulting from a claim by the Buyer against RBS);

 

	
  

	
8.1.6

	
the Buyer shall not, and shall ensure that no Buyer's Group Undertaking will, admit liability in respect of, or compromise or settle, the matter without the prior written consent of RBS, such consent not to be unreasonably withheld or delayed; and

 

	
  

	
8.1.7

	
if RBS determines to conduct any proceedings with respect to a Relevant Claim involving liability to a third party, RBS shall not be permitted to settle such proceedings unless it:

 

	
  

	
(a)

	
admits liability in full in respect of the Relevant Claim; or

 

	
  

	
(b)

	
obtains a full release in favour of the Buyer in respect of any liability relating to such Relevant Claim which the Buyer or a Buyer's Group Undertaking may have to such third party; or

 

	
  

	
(c)

	
obtains the written consent of the Buyer (such consent not to be unreasonably withheld or delayed).

 

  

- 100 -

  

 

	
8.2

	
If RBS determines to conduct any proceedings or negotiations with respect to a Relevant Claim, RBS shall not be permitted to dispute its liability to the Buyer in respect of such Relevant Claim, subject always to the other terms of this ‎Schedule 5 and to the terms of ‎Schedule 4.

 

	
8.3

	
Nothing in this paragraph ‎8 shall require any Buyer's Group Undertaking to take action which is materially prejudicial to the business of the Group provided that:

 

	
  

	
8.3.1

	
this paragraph ‎8.3 shall not derogate from the Buyer's general duty to mitigate; and

 

	
  

	
8.3.2

	
for these purposes any impact upon any relationships with any Tax Authority or (subject to RBS indemnifying the Buyer therefor in accordance with paragraph ‎8.1.4 of this ‎Schedule 5) an increase in the quantum of Tax payable by any Group Company after Completion or by any other Buyer's Group Undertaking at any time shall not be considered materially prejudicial to the business of the Group.

 

	
8.4

	
Nothing in this paragraph ‎8 shall require the Buyer to, or to procure that a Buyer's Group Undertaking shall, take any action that involves an appeal against a determination by the Tax Chamber of the First-tier Tribunal or a comparable first instance court or tribunal in another relevant jurisdiction, unless RBS has obtained an opinion of Tax counsel of at least 5 years' standing that there is a reasonable prospect that the appeal will succeed.

 

	
9.

	
RECOVERY FROM ANOTHER PERSON

 

	
9.1

	
If RBS pays to a Buyer's Group Undertaking an amount in respect of a Relevant Claim and a Buyer's Group Undertaking subsequently recovers from another person an amount which is referable to the matter giving rise to the Relevant Claim:

 

	
  

	
9.1.1

	
if the amount paid by RBS in respect of the Relevant Claim is more than the Sum Recovered, the Buyer shall immediately pay to RBS the Sum Recovered; and

 

	
  

	
9.1.2

	
if the amount paid by RBS in respect of the Relevant Claim is less than or equal to the Sum Recovered, the Buyer shall immediately pay to RBS an amount equal to the amount paid by RBS.

 

	
9.2

	
For the purposes of paragraph ‎9.1 of this ‎Schedule 5, "Sum Recovered" means an amount equal to the total of the amount recovered from the other person plus any interest in respect of the amount recovered from the person less any Tax computed by reference to the amount recovered from the person payable by a Buyer's Group Undertaking and less all reasonable costs incurred by a Buyer's Group Undertaking in recovering the amount from the person.

 

	
10.

	
MITIGATION

 

Nothing in this ‎Schedule 5 restricts or limits the Buyer's general obligation at law to mitigate any loss or damage which it may incur in consequence of a matter giving rise to a Relevant Claim.

 

  

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11.

	
PROVISION OF INFORMATION

 

If, at any time after the date of this Agreement, RBS wants to insure against its liabilities in respect of Relevant Claims, the Buyer shall provide (at RBS' sole cost) such information as a prospective insurer may reasonably require before effecting the insurance.

 

	
12.

	
PRESERVATION OF INFORMATION

 

Upon becoming aware of a matter which may give rise to a Relevant Claim, the Buyer shall, and shall ensure that each Group Company will, preserve all documents, records, correspondence, accounts and other information whatsoever relevant to such matter which may give rise to a Relevant Claim.

 

	
13.

	
DISCLOSURE

 

The Warranties, other than the Warranties contained in paragraphs ‎2.1.3, ‎5.1, ‎5.9 and ‎6.2 of ‎Schedule 4, are qualified by:

 

	
13.1

	
the facts and circumstances fairly disclosed in the Disclosure Letter or in any of the documents annexed to the Disclosure Letter;

 

	
13.2

	
all matters registered in respect of each Group Company:

 

	
  

	
13.2.1

	
incorporated other than in Ireland with any relevant company registry in such Group Company's jurisdiction of incorporation as of 13 January 2012;

 

	
  

	
13.2.2

	
incorporated in Ireland with any relevant company registry as of 9 January 2012;

 

	
13.3

	
all matters registered in respect of any Aircraft or Engine in the registry established pursuant to the Convention on International Interests in Mobile Equipment and its Protocol on Matters Specific to Aircraft Equipment, concluded in Cape Town on 16 November 2001 pursuant to searches conducted between 20 December 2011 and 23 December 2011;

 

	
13.4

	
all matters registered in respect of any Aircraft or Engine in:

 

	
  

	
13.4.1

	
the Aircraft Register of the Irish Aviation Authority as of 16 January 2012;

 

	
  

	
13.4.2

	
the UK Register of Aircraft Mortgages maintained by the Civil Aviation Authority of the United Kingdom as of 3 January 2012; or

 

	
  

	
13.4.3

	
the registers maintained by the Aircraft Registration Branch of the Federal Aviation Authority of the United States of America pursuant to searches conducted between 23 December 2011 and 28 December 2011;

 

	
13.5

	
all matters which have or would have been fairly disclosed to the Buyer or any Buyer's Group Undertaking or any of their agents or advisers as a result of conducting:

 

  

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13.5.1

	
on 13 January 2012, a winding-up search at the Central Index of Winding Up Petitions at the High Court of England and Wales in respect of each Group Company incorporated in the United Kingdom;

 

	
  

	
13.5.2

	
on 9 January 2012, a search in respect of each Group Company incorporated in Ireland in the High Court Central Office or Judgments Office in Ireland; and

 

	
  

	
13.5.3

	
searches or enquiries analogous to those listed at ‎13.5.1 and ‎13.5.2 above in respect of each Group Company in such Group Company's jurisdiction of incorporation;

 

	
13.6

	
all matters which have or would have been fairly disclosed to the Buyer or any Buyer's Group Undertaking or its agents or advisers as a result of conducting a search, on 9 January 2012, of:

 

	
  

	
13.6.1

	
the register of registered land maintained by the Property Registration Authority in Ireland against the folio number DN76902L and the register of unregistered land maintained by the Property Registration Authority in Ireland against the address of the Property and RBS Aerospace Limited covering the period from 22 March 2011 until the date hereof;

 

	
  

	
13.6.2

	
the public files in relation to planning and building regulation maintained by the Local Authority pursuant to the Planning and Development Acts 2000 to 2011 and the Building Control Acts 1990 and 2007 against the address of the Property;

 

	
  

	
13.6.3

	
the register of fieri facias orders maintained by the relevant Sheriff in Ireland against RBS Aerospace Limited;

 

	
13.7

	
all matters which have or would have been fairly disclosed to the Buyer or any Buyer's Group Undertaking or its agents or advisers as a result of undertaking searches on 13 January 2012 against the names of each of the Group Companies in the form of a proprietorship search undertaken against any of the separate Registers of Patents, Trade Marks and Designs maintained from time to time by the Irish Patents Office, the UK Intellectual Property Office, the Office of Harmonization for the Internal Market and the European Patent Office;

 

	
13.8

	
to the extent fairly disclosed in sub-folders 'Phase 1 Data Room > C. Corporate Documentation', 'Phase 3 – Data Room > A. Corporate Documentation' and 'Phase 4 – Data Room > Corporate Documentation' of the Data Room, all matters which have or ought reasonably to have been fairly disclosed by inspection of each register and minute book required to be kept (and which are so kept) by each Group Company under applicable law (as in force on the date of this Agreement);

 

	
13.9

	
all matters fairly disclosed, provided for or noted:

 

	
  

	
13.9.1

	
in the case of RBS Aerospace UK, in the Company's individual accounts (as that term is used in sections 394 and 395 of the Act);

 

	
  

	
13.9.2

	
in the case of RBS Aerospace Limited, in the Company's individual accounts (as that term is used in section 148 of the Companies Act of Ireland 1963);

 

  

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13.9.3

	
in the case of RBS Australia Leasing, in the Company's financial reports (as that term is used in Part 2M.3 of the Corporations Act 2001); and

 

	
  

	
13.9.4

	
for each of the accounts and financial statements referenced in paragraphs ‎13.9.1 to ‎13.9.3, in the auditors' report on those accounts, the directors' reports for those years and the notes to those accounts,

 

in each case for the 4 financial years ended on the Last Accounting Date and in each case as fairly disclosed in the Data Room;

 

	
13.10

	
all facts, matters and circumstances fairly disclosed, set out or referred to in the Transactional Documents (including the schedules and exhibits to each of those agreement);

 

	
13.11

	
all matters fairly disclosed in the documents made available in the Data Room together with those documents listed in the Data Room Index.  If any inconsistency exists between this Agreement and the Disclosure Letter, the Disclosure Letter prevails and is deemed to contain the relevant disclosure. If any inconsistency exists between the documents in the Data Room and the Disclosure Letter, the Disclosure Letter prevails and is deemed to contain the relevant disclosure.  RBS is not liable to the Buyer or any Buyer's Group Undertaking for any inconsistency between the two; and

 

	
13.12

	
all matters reasonably apparent from any document which is fairly disclosed (specifically or generally) in the Data Room and although reference may be made to a particular part of a document when disclosing a matter the disclosure shall be deemed to be of all of the document to the extent that all the document has been disclosed.

 

	
14.

	
OVERPROVISIONS, REPAYMENTS AND CORRESPONDING SAVINGS OF TAX

 

	
14.1

	
If the Buyer or a Buyer's Group Undertaking becomes aware (within 6 years of Completion) that:

 

	
  

	
14.1.1

	
any provision for Tax in the Completion Statement is likely to be an overprovision otherwise than as a result of a Buyer Relief or as a result of the passing of, or a change in, a law, rule, regulation, interpretation of the law or administrative practice of a government, governmental department, agency or regulatory body after the Completion Date or a change in the Tax rates or an imposition or repeal of Tax, in each case not actually or prospectively in force at the Completion Date (an "Overprovision"); or

 

	
  

	
14.1.2

	
a Group Company is entitled to any repayment of Tax overpaid by such Group Company (other than a repayment which has been shown as an asset in the Completion Statement or which otherwise qualifies as a Buyer Relief) and/or any interest attributable to such repayment in respect of any period before Completion (a "Repayment") and the Group Company receives that Repayment (or would have received that Repayment had the relevant Group Company made reasonable efforts to obtain such Repayment); or

 

  

- 104 -

  

 

	
  

	
14.1.3

	
any liability to Taxation of a Group Company has arisen that has resulted in a payment being made by RBS under this Agreement to the Buyer and that liability has given rise to a tax saving for a Group Company on or after Completion (which tax saving has not been taken into account in determining any liability of RBS under this Agreement) (a "Tax Saving"),

 

the Buyer shall as soon as reasonably practicable (but in any event no later than 10 Business Days from so becoming aware) give written details thereof to RBS and RBS may upon receiving such notice, or in the absence of such notice, at any time request the auditors for the time being of such Group Company to certify (at the expense of RBS) the amount of such Overprovision, Repayment or Tax Saving, and the amount so certified shall be dealt with in accordance with paragraph ‎14.2.

 

	
14.2

	
Where it is provided under paragraph ‎14.1 that any amount (the "Relevant Amount") is to be dealt with in accordance with this paragraph ‎14.2:

 

	
  

	
14.2.1

	
the Relevant Amount shall first be set off against any payment then due from RBS in respect of a Relevant Claim in respect of a Warranty contained in paragraph ‎5 (Tax) of ‎Schedule 4;

 

	
  

	
14.2.2

	
to the extent that there is an excess, a refund shall be made to RBS of any previous payment or payments made in respect of a Relevant Claim in respect of a Warranty contained in paragraph ‎5 (Tax) of ‎Schedule 4 and not previously refunded under this paragraph ‎14.2.2 up to the amount of such excess;

 

	
  

	
14.2.3

	
to the extent that the excess referred to in paragraph ‎14.2.2 is not exhausted under that paragraph, the remainder of that excess shall be carried forward and set off against any future payment or payments which become due from RBS in respect of a Relevant Claim in respect of a Warranty contained in paragraph ‎5 (Tax) of ‎Schedule 4.

 

	
14.3

	
Where any such certification as is mentioned in paragraph ‎14.1 above has been made, RBS or the Buyer or a Group Company may request the auditors of the Group Company for the time being at the expense of the party so making the request to review such certification in the light of all relevant circumstances, including any facts which have become known only since such certification and to certify whether such certification remains correct or whether in the light of those circumstances the amount that was the subject of such certification should be amended.

 

	
14.4

	
If the auditors certify under paragraph ‎14.3 above that an amount previously certified should be amended, that amended amount shall be substituted for the purposes of paragraph ‎14.2 as the Relevant Amount in respect of the certification in question in place of the amount originally certified and such adjusting payment (if any) as may be required by virtue of the aforementioned substitution shall be made as soon as practicable by RBS or (as the case may be) to RBS.

 

	
14.5

	
If any dispute arises under this paragraph ‎14 as to whether there is or has been any Overprovision or Repayment, such dispute shall be referred for determination to a firm of chartered accountants agreed between RBS and the Buyer and failing such agreement a firm of independent accountants shall be nominated by the President for

 

  

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the time being of the Institute of Chartered Accountants of England and Wales, or the Institute of Chartered Accountants in Ireland as appropriate, who in making such determination shall act as expert (the "Tax Expert") and not arbitrator and whose decision shall be final and binding on the parties thereto.  The Tax Expert may make such enquiries as he shall think fit in order to make such determination and shall also determine how the costs of obtaining his opinion should be paid and borne by the parties, taking into account the reasonableness of their respective arguments.

 

	
14.6

	
The Buyer undertakes to supply and undertakes to procure that a Group Company shall supply to RBS and subsequently to any firm of accountants nominated to deal with any such dispute in accordance with paragraph ‎14.5 (with copies to RBS) all documents, accounts, notices, papers and other necessary information as may be reasonably required for the purposes of making any such determination as to whether there is or has been any Overprovision or Repayment for the purposes of this paragraph ‎14.

 

	
15.

	
GENERAL LIMITATIONS

 

	
15.1

	
The only Warranties given:

 

	
  

	
15.1.1

	
in respect of Tax are those contained in paragraph ‎5 of ‎‎Schedule 4 and none of the other Warranties shall be deemed to be given whether directly or indirectly in relation to Tax; and

 

	
  

	
15.1.2

	
in respect of Aircraft and Lease Documents are those contained in paragraphs ‎4, ‎6, ‎19 and ‎20 of ‎‎Schedule 4 and none of the other Warranties shall be deemed to be given whether directly or indirectly in relation to Aircraft and Lease Documents.

 

	
16.

	
GENERAL

 

Nothing in this ‎Schedule 5 shall have the effect of limiting or restricting any liability of RBS in respect of a Relevant Claim arising as a result of any fraud.

 

  

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SCHEDULE 6

TAX PROVISIONS

 

	
1.

	
TAX COMPUTATIONS

 

	
1.1

	
RBS shall (at the cost of the Group Companies) have the conduct of preparing, submitting to, and agreeing with the relevant Tax Authorities, all Tax computations of the Group Companies for each Tax accounting period ending on or before Completion (the "Relevant Accounting Periods") and control of the way and order in which available Reliefs (whenever and howsoever arising) are used by the Group Companies in each Relevant Accounting Period.

 

	
1.2

	
RBS shall deliver to the Buyer all the Tax computations and all related documents and correspondence relating to the Relevant Accounting Periods which it intends to submit to the relevant Tax Authority before submission to the relevant Tax Authority.

 

	
1.3

	
If the Buyer does not comment on the Tax computations, documents or correspondence within 20 Business Days starting on the date of their receipt, it is deemed to have approved them.

 

	
1.4

	
RBS shall take account of all the Buyer's reasonable comments concerning the Tax computations, documents or correspondence relating to the Relevant Accounting Periods.

 

	
1.5

	
RBS shall deliver to the Buyer copies of all correspondence sent to, or received from, the relevant Tax Authority relating to the Tax computations for the Relevant Accounting Periods, delivery to be effected promptly on despatch or, as the case may be, receipt.

 

	
1.6

	
The Buyer shall have the conduct of preparing, submitting to, and agreeing with the relevant Tax Authorities, all Tax computations of the Group Companies for each Tax accounting period beginning on or before, but ending after, Completion (each such accounting period a "Straddle Period"), provided that where there is to be any correspondence, meeting or telephone call with any Tax Authority in relation to such Tax computations and that correspondence, meeting or call relates or is likely to relate, wholly or partly, to a matter which the Buyer knows or ought reasonably to have known may affect the liability or potential liability to Tax of RBS or any RBS Group Undertaking, or the liability or potential liability of RBS under a Relevant Claim:

 

	
  

	
1.6.1

	
the Buyer shall promptly send copies of all such correspondence received and copies of draft replies to RBS and shall take account of all reasonable comments of RBS thereon; and

 

	
  

	
1.6.2

	
the Buyer shall give reasonable advance notice of any such meeting or call to RBS and RBS shall be entitled to nominate an individual to attend and participate in such meeting or call.

 

	
1.7

	
The Buyer shall deliver to RBS all the Tax computations and all related documents and correspondence relating to the Straddle Periods which it intends to submit to the relevant Tax Authority before submission to the relevant Tax Authority.

 

  

- 107 -

  

 

	
1.8

	
If RBS does not comment on the Tax computations, documents or correspondence within 20 Business Days starting on the date of their receipt, it is deemed to have approved them.

 

	
1.9

	
The Buyer shall take account of all reasonable comments of RBS concerning the Tax computations, documents or correspondence relating to the Straddle Periods.

 

	
1.10

	
The Buyer shall deliver to RBS copies of all correspondence sent to, or received from, the relevant Tax Authority relating to the Tax computations for the Straddle Periods, delivery to be effected promptly on despatch or, as the case may be, receipt.

 

	
1.11

	
The Buyer shall procure that each Group Company shall make such claims, surrenders, disclaimers and elections and give such notice or consent and do such other things as (a) were taken into account in computing a provision for Tax in the Accounts or the Completion Statement in each case as previously notified to the Buyer or (b) are reasonably directed by RBS. It shall not be reasonable as regards (b), and without limitation, for RBS to direct something that would result in a Tax liability for a Group Company for which RBS is not required to compensate the Buyer under this Agreement.

 

	
1.12

	
RBS and the Buyer shall provide or ensure the provision to each other of information and assistance which may reasonably be required to prepare, submit and agree all Tax computations, documents or correspondence.

 

	
1.13

	
The Buyer shall procure that each Group Company subject to Irish Tax that has paid *** as mentioned in clause ‎4.10 in respect of which a Relief from Irish Tax has been reflected in item ‎14 (Deferred Tax) in the Completion Statement shall take every action (including, without prejudice to the generality of the foregoing, preparing and filing computations, returns and accounts, including the notes thereto) as may reasonably be necessary to ensure that the amount of such Relief so reflected is available and shall not take any action as might jeopardise the amount of such Relief so reflected being so available.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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SCHEDULE 7

ACTION PENDING COMPLETION

 

	
1.

	
Subject to paragraph ‎2 below, from the date of this Agreement until Completion RBS shall (unless approved in writing by the Buyer, such approval not to be unreasonably withheld or delayed) ensure that:

 

	
1.1

	
no Group Company declares or pays any dividend or other distribution (whether in cash, stock or in kind) other than to another Group Company or reduces its paid-up share capital or agrees to do any of the foregoing;

 

	
1.2

	
no Group Company shall create, allot, issue, acquire, repay or redeem any share capital (except to another Group Company) or agree to do any of the foregoing;

 

	
1.3

	
subject to clause ‎4.10, and without limiting the provisions of paragraphs ‎1.5.4 and ‎1.11 below:

 

	
  

	
1.3.1

	
all arrangements relating to RBS Debt and RBS Deposits (including related interest rate and currency swaps and hedging arrangements) between any Group Company and any RBS Group Undertaking shall be maintained until Completion in a manner consistent in all material respects with Business Practices, provided that in relation to any aircraft acquired pursuant to paragraph ‎1.11 below prior to Completion, a RBS Group Undertaking may provide match funding to a Group Company that is repayable at Completion; and

 

	
  

	
1.3.2

	
no Group Company shall enter into or amend in any material respect any agreement, arrangement or other transaction between any of the Group Companies, on the one hand, and any RBS Group Undertaking (other than a Group Company) or any officer or director thereof, on the other that would be material to the Group Companies or the operation of the Business other than in relation to RBS Debt or as to be provided under the Transitional Services Agreement;

 

	
1.4

	
no Group Company:

 

	
  

	
1.4.1

	
other than any Offer Employee, employs or agrees to employ any new persons on a full or part time basis as a Senior Manager in the Business, or agrees to do any of these things; or

 

	
  

	
1.4.2

	
makes any material changes (other than those required by law) in terms of employment (including pension fund commitments and other benefits) of the staff of the Business: (i) as respects any of the eleven Company Key Employees; and (ii) in relation to non-Company Key Employee staff of the Group Companies, other than: (A) the employment on a full time basis of any existing contractor on the date of this Agreement on market terms and conditions, (B) raises related to changes in the responsibilities of employees in the ordinary course of business; and (iii) other than *** directed by the Buyer

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 109 -

  

 

on Completion in accordance with clause ***, or agrees to do any of the foregoing;

 

	
1.5

	
no Group Company:

 

	
  

	
1.5.1

	
enters into, amends or terminates any agreement (other than in relation to the Aircraft Leasing consistent with Business Practices for which provision is made in paragraphs ‎1.5.3, ‎1.5.4, ‎1.6 and ‎1.11 below) which would be a Material Agreement, or agrees to do any of these things;

 

	
  

	
1.5.2

	
enters into, or agrees to enter into, any agreement (other than in relation to employment matters for which provision is made in paragraph ‎1.4 above, or in relation to Aircraft Leasing consistent in all material respects with Business Practices for which provision is made in paragraphs ‎1.5.3, ‎1.5.4, ‎1.6 and ‎1.11 below) which cannot be performed within its terms within 1 year after the date on which it is entered into;

 

	
  

	
1.5.3

	
enters into any ***, enters into any supplement to or replacement of any ***, or consents to any amendment or other modification of *** having the effect of (a) ***, (b) ***, (c) altering in any material respect *** other than in connection with the leasing of such aircraft in accordance with the provisions of an executed letter of intent, *** consistent with Business Practices or (d) ***; or

 

	
  

	
1.5.4

	
enters into, or consents to, any amendment, modification or waiver of the provisions of any lease other than consistent in all material respects with Business Practices (including to permit any subordinated sublease) and in no event having the effect of (a) *** (other than in connection with a restructuring thereof following an event of default thereunder) ***, (b) granting any new, additional or modified purchase option under any lease, (c) ***, (d) altering in any material respect the net-lease or currency provisions of any lease or (e) *** (other than in connection with the restructuring of such lease following the occurrence of an event of default thereunder).  Any consent requested under this paragraph ‎1.5.4 shall be deemed given if not responded to within 10 days after receipt of a written request therefor.

 

	
1.6

	
except ***, no Group Company enters into any agreement or agrees to enter into any agreement to make any capital expenditure for the purpose of effecting any optional improvement or modification of any aircraft or engine except for any capital expenditure improvement or modification (a) made in relation to Aircraft Leasing in connection with any re-lease of an Aircraft, (b) made in accordance with the provisions of any lease or (c) costing less than $*** per expenditure or $*** in aggregate;

 

	
1.7

	
***

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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1.8

	
except as otherwise provided in paragraphs ‎1.3 and ‎1.6 above, no Group Company incurs any indebtedness (including trade credits) or provides any form of debt finance to any party which is not a Group Company, other than consistent in all material respects with Business Practices and the aggregate outstanding balance of which does not exceed US$*** at any time, or agrees to do any of the foregoing;

 

	
1.9

	
no Group Company gives, or agrees to give, a guarantee, related indemnity or other agreement to secure, or incur financial or other obligations with respect to, another person's obligation other than in respect of another Group Company;

 

	
1.10

	
no Group Company creates, or agrees to create, any Encumbrance over the Shares or assets of any Group Company other than, in the case of any assets other than the Shares or any aircraft, engine, component part or any lease or interest in any thereof, consistent in all material respects with Business Practices and in the case of any aircraft, engine, component part, lease or interest therein, other than any Permitted Security Interest or otherwise in accordance with the terms of any ECA/Ex-Im Financing related thereto as in effect on the date of this Agreement;

 

	
1.11

	
*** Any consent requested under this paragraph ‎1.11 shall be deemed given if not responded to within 10 days after receipt of a written request therefor.

 

	
1.12

	
each Group Company performs in all material respects its obligations under its ECA/Ex-Im Financings as well as its leases and enforces its rights and remedies thereunder consistent in all material respects with Business Practices;

 

	
1.13

	
except as otherwise provided in paragraphs ‎1.11 and ‎1.5.4 above, no Group Company acquires or disposes of any asset (other than aircraft or engines or component parts) or any interest in any asset (other than aircraft or engines or component parts) for consideration in excess of US$***,or agrees to do any of the foregoing, other than (a) acquisitions or dispositions between Group Companies or (b) in the ordinary course of business consistent in all material respects with Business Practices;

 

	
1.14

	
no Group Company merges or consolidates with any other person or acquires a material amount of assets from any other person (other than as provided in paragraph ‎1.11 or ‎1.13 above);

 

	
1.15

	
no Group Company enters into or agrees to enter into any agreement, the entering into or performance of which would breach any term of any Transactional Document;

 

	
1.16

	
no Group Company institutes or settles, or agrees to settle, any litigation where that action is likely to result in a payment to or by a Group Company US$*** or more (except for (a) institution of proceedings in connection with enforcement by a Group Company of its rights under Lease Documents or any other Aircraft Leasing, (b) collection in the ordinary course of trading debts (other than in relation to Aircraft Leasing) none of which exceeds US$*** or (c) settlement of claims arising out of Aircraft Leasing none of which exceeds US$***);

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 111 -

  

 

	
1.17

	
no Group Company takes or agrees to take any action which is likely to void or invalidate the Contingent Liability Policy or any other Policy;

 

	
1.18

	
no Group Company changes its accounting policies, except:

 

	
  

	
1.18.1

	
to reflect any change after the date of this Agreement in the generally accepted accounting practice or law in the relevant jurisdiction or in the application or implementation thereof (provided that this Agreement shall continue to be interpreted on the basis of relevant accounting policies and practices in effect and as applied on and immediately prior to the date of this Agreement, except to the extent otherwise agreed by the parties); and

 

	
  

	
1.18.2

	
the adoption, by RBS Australia Leasing, with effect from 1 January 2011, of accounting policies relating to depreciation and maintenance consistent with those used by RBS Aerospace Limited and RBS Aerospace UK in their statutory accounts for the year ended 31 December 2010; and

 

	
1.19

	
no Group Company enters into or agrees to enter into any contract to provide to or receive from any other person services, Information Technology or Intellectual Property which are the subject of the Transitional Services Agreement or Reverse Transitional Services Agreement, including entering into or agreeing to enter into any services agreement, Intellectual Property license or equipment lease.

 

	
2.

	
No act, omission, matter or thing shall constitute a breach of clause ‎5.4.1 or this ‎Schedule 7 to the extent that:

 

	
2.1

	
it is required by the terms of any Transactional Document;

 

	
2.2

	
it is undertaken at the written request or with the written consent of the Buyer;

 

	
2.3

	
it is necessary in order to comply with (i) any commitment or arrangement to the extent fairly disclosed in the Data Room; (ii) any commitment or arrangement existing as at or before the date of this Agreement (which has been fairly disclosed in the Disclosure Letter); or (iii) any law or regulation or a rule or order of any Governmental Agency with relevant powers in force from time to time (and in respect of which the Buyer shall be consulted as far in advance as is practicable in the circumstances); or

 

	
2.4

	
it is a surrender or claim for group relief or payment or receipt of payment therefor in accordance with the Group Relief Letters.

 

	
3.

	
Nothing in this ‎Schedule 7 shall prohibit or restrict RBS from procuring that any amount of the Group Company's cash or cash equivalents is applied to reduce Third Party Debt or RBS Debt or to increase Working Capital.

 

	
  

	
4.

 

	
4.1

	
From the date of this Agreement until Completion, RBS shall (or cause the Group Companies to) (a) (i) provide to the Buyer a monthly report presenting in summary form the information set forth on Exhibit 9; (ii) on a weekly basis on a Business Day each week to be agreed, make available the Chief Executive Officer of RBS Aerospace Limited (or one of his direct reports) for an update teleconference with  the

 

  

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Buyer, all such calls to be attended by a  representative of RBS (the documents and their contents supplied under (i) and the information conveyed under (ii) together being the "Reporting Information"); and (b) at the request of the Buyer, provide information in addition to the Reporting Information as may be reasonably necessary for the purpose of ensuring compliance with, or the granting or withholding of consent in accordance with, this ‎‎Schedule 7 (the "Sensitive Information") to a named clean team who can receive the Sensitive Information in accordance with the Clean Team Rules (the "Clean Team") on the terms set out in sub-paragraph ‎‎‎4.2 below, provided always that nothing in this paragraph ‎4 shall require RBS or any Group Company to do, or omit to do anything, to the extent this would, or would reasonably be likely to, result in a breach of applicable law or regulation, or a rule or order of any Governmental Agency with relevant powers, or result in the loss of legal privilege if the relevant information or documentation were to be provided to the Buyer. So far as permitted and practicable, RBS will consult with the Buyer in relation to any such restriction.

 

	
4.2

	
The Sensitive Information will be made available for review by the Clean Team only, on the following terms:

 

	
  

	
4.2.1

	
access to the Sensitive Information will be restricted to named members of the Clean Team and will be conditional upon compliance with the terms contained in this paragraph ‎4 and the signing by each member of the Clean Team of a document in the form set out in Exhibit 8.  Under no circumstances will any member of the Clean Team make any copy of the Sensitive Information (including word by word written copy) or provide the Sensitive Information to any person outside of the Clean Team; and

 

	
  

	
4.2.2

	
the Clean Team will analyse the Sensitive Information solely for the purposes of ensuring compliance with, or the granting or withholding of consent in accordance with, this ‎‎Schedule 7 and convey their conclusions to the Buyer without disclosing the specific details of the Sensitive Information to the Buyer. Should the Clean Team find any incident of non-compliance with this ‎‎Schedule 7, it may, after prior consultation with RBS (it being agreed that RBS consent shall not be required), disclose to named individuals at the Buyer such information, including Sensitive Information, that is reasonably necessary for the sole purpose of assessing the nature and severity of each incident of non-compliance with this ‎‎Schedule 7, in particular the nature of the business conduct in question, the profit/loss resulting from it and any risk related to it.  For the avoidance of doubt, the information and conclusions may not be used for any other purpose or shared with any other person without RBS’s prior written consent and remains subject to the terms of clause ‎‎12.

 

	
5.

	
For all purposes of this ‎Schedule 7, the Lombard Aircraft and Lease Documents in relation thereto and the Aircraft owned by New Skye Leasing Limited, Whyte Skye Leasing Limited, AFEX Leasing Limited or any Owner Trust, and the Lease Documents in relation thereto shall be treated as if they were owned and leased by a Group Company.

 

	
6.

	
Any request for a consent from the Buyer under this ‎Schedule 7 shall be made to each of the following designated personnel of the Buyer:

 

  

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***

Global Business Strategy Department

1-2, Marunouchi 1-chome

Chiyoda-ku

Tokyo 100-0005

Fax No: +813 4333 9867;

 

or to such other designated personnel as the Buyer may have previously notified RBS in writing for purposes of receiving requests for consents under this ‎Schedule 7 with a copy to RBS marked for the attention of ***.

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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SCHEDULE 8

PROPERTY

 

	

Description (including title number and class of title)

	

Details of lease (date and parties)

	

Duration

	

Current annual rent

	

Existing use

	

Legal owner/Registered proprietor

	

Beneficial owner

	
1st Floor, South Block, IFSC House, Custom House Quay, Dublin

Leasehold title

Title number not applicable

	
Sub-Lease dated 22 March 2011 between Ulster Bank Group Treasury Limited as Landlord and RBS Aerospace Limited as Tenant

	
*** commencing on 1 January 2007 until ***

	
Current annual rent: EUR***

	
Office with car parking and ancillary storage

	
RBS Aerospace Limited

	
RBS Aerospace Limited

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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SCHEDULE 9

PENSION ARRANGEMENTS

 

	
1.

	
PENSIONS

 

	
1.1

	
RBS shall indemnify the Buyer (for itself or as agent for the relevant Group Company) on an after Tax basis in respect of any loss to the Buyer or any Group Company which arises out of:

 

	
  

	
1.1.1

	
any liability to make any payment to the UK Scheme, the Ulster Bank Pension Scheme (Republic of Ireland) or the Lombard Ireland Ltd Non-Contributory Pension and Death Benefits Plan on or after Completion; and/or

 

	
  

	
1.1.2

	
the provision of or failure to provide pension, death or disability benefits to current or former employees of a Group Company referable to service prior to Completion,

 

which was not provided for in or taken into account in the preparation of the Completion Statement.

 

	
1.2

	
The Buyer and any Group Company shall hold any payment received by it under paragraph ‎1.1 of this ‎Schedule 9 which arises out of any liability to make any payment to the UK Scheme, the Ulster Bank Pension Scheme (Republic of Ireland), or the Lombard Ireland Ltd Non-Contributory Pension and Death Benefits Plan on trust to pay to the trustees of the relevant pension scheme to the extent that the Buyer and the Group Companies have not already paid on or after Completion an amount equal to the amount being indemnified to those trustees.

 

	
1.3

	
If a Buyer's Group Undertaking either receives or is entitled to recover after Completion any amount from a Tax Authority or becomes entitled to any relief, in either such case arising in respect of, by reference to or in consequence of a payment or a liability to make a payment by a Buyer's Group Undertaking to the UK Scheme, the Ulster Bank Pension Scheme (Republic of Ireland) or the Lombard Ireland Ltd Non-Contributory Pension and Death Benefits Plan for which it has received payment from RBS under this ‎Schedule 9, then:

 

	
  

	
1.3.1

	
the Buyer shall notify RBS of that fact as soon as possible and shall or shall procure that the relevant Buyer's Group Undertaking shall enforce such recovery, obtain such payment or utilise to the maximum extent such relief (in priority to any other reliefs), keeping RBS fully informed of the progress of any action taken and providing it with copies of all relevant correspondence and documentation; and

 

	
  

	
1.3.2

	
if a Buyer's Group Undertaking has received or obtained such a payment or its Tax payable (or paid) has been reduced (or repaid) in consequence of a relief, then the Buyer shall, by way of refund of amounts paid under paragraph ‎1.1 of this ‎Schedule 9, pay to RBS the amount received or the amount by which its Tax payable has been reduced under paragraph ‎1.3. Any payment required to be made by the Buyer under this paragraph ‎1.3.2 shall be made:

 

  

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(a)

	
in a case where a Buyer's Group Undertaking receives a payment, within 5 Business Days of the receipt of that payment, and

 

	
  

	
(b)

	
in a case where a Buyer's Group Undertaking's Tax payable has been reduced, on or before the date on which Tax would otherwise have been payable to the appropriate Tax Authority.

 

	
  

	
1.3.3

	
For the purposes of this paragraph ‎1.3, "relief" includes, unless the context otherwise requires, any allowance, credit, deduction, exemption or set off in respect of any tax or relevant to the computation of any income, profits or gains for the purposes of any tax, or any right to repayment of or saving of tax.

 

	
1.4

	
In respect of its employees at the date of this Agreement until Completion, each Group Company shall continue to participate in the Irish Schemes as an associated employer (as defined in the Irish Schemes' governing documentation). Each Group Company shall pay contributions during such period of participation between the signing of this Agreement and Completion in relation to its employees at the date of this Agreement at the prevailing rate of contribution applicable to all employers under the relevant Irish Scheme as properly determined in accordance with the relevant Irish Scheme's provisions and actuarial advice from time to time.

 

	
1.5

	
RBS shall procure that each Group Company shall cease to participate in the Irish Schemes other than the *** Scheme (the "Schemes") with effect on and from Completion and shall have given the requisite notice to effect this in accordance with the trust deed and rules of the relevant Scheme. RBS shall use its commercially reasonable efforts to procure that the cessation of participation in the Schemes by, and the release and discharge from any liabilities relating to the Schemes of, each Group Company on and with effect from Completion shall be confirmed in deeds of cessation executed by each Group Company (in respect of the appropriate Schemes) and by the trustees and the principal employer of each of the relevant Schemes.

 

	
1.6

	
RBS shall use its commercially reasonable efforts to procure that each employee of any Group Company at Completion who is not entitled to automatic vesting of employer contributions to any pension in which any Group Company participates (or the benefits attributable to such employer contributions under such pension scheme) of which he is a member shall be entitled to benefits under such pension scheme (except where such employee elects to receive a refund of member contributions) as if they had satisfied the vesting requirements of the relevant scheme and shall use its commercially reasonable efforts to procure that each employee of any Group Company who is a member of one of the Schemes (as defined in paragraph ‎1.5 above) shall be treated as if they were deferred members under the leaving service rules of such Schemes.

 

	
1.7

	
All contributions and expenses due to the Disclosed Schemes between the date of this Agreement and Completion will be paid by each Group Company prior to Completion or will be accrued and provided for in the Completion Statement.

 

	
1.8

	
It is agreed that with effect on and from Completion each Group Company will cease to participate in the Disability Schemes.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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SCHEDULE 10

REPAYMENT OF RBS DEBT

 

PART A

REPAYMENT OF ESTIMATED RBS DEBT AT COMPLETION

 

	
1.

	
Subject to paragraph ‎‎3, the Buyer shall (as agent for the relevant Group Company) at Completion pay to RBS (for itself or as agent for the relevant RBS Group Undertaking to which such Estimated RBS Debt is owed) the amount of each Estimated RBS Debt (other than any RBS Deposit), regardless of whether it is then due and payable.

 

	
2.

	
Subject to paragraph ‎‎3, RBS shall (for itself or as agent for the relevant RBS Group Undertaking) at Completion repay to the Buyer (as agent for the Group Company to which such Estimated RBS Deposit is owed) the amount of each Estimated RBS Deposit, regardless of whether it is then repayable.

 

	
3.

	
The payments contemplated by paragraphs ‎1 and ‎2 shall be netted off against each other and, at Completion, the Buyer shall pay to RBS the net balance or RBS  shall pay to the Buyer the net balance (as the case may be).

 

PART B

ADJUSTMENTS TO ESTIMATED RBS DEBT AFTER COMPLETION

 

	
1.

	
If a RBS Debt (other than any RBS Deposit):

 

	
1.1

	
is greater than the corresponding Estimated RBS Debt, the Buyer shall (as agent for the relevant Group Company) repay to RBS (for itself or as agent for the RBS Group Undertaking to which the relevant amount is owed) an amount equal to the difference, together with an amount equivalent to interest thereon at the Agreed Rate (accrued daily) for the period from (and including) the Completion Date to (but excluding) the date of payment; or

 

	
1.2

	
is less than the corresponding Estimated RBS Debt, RBS shall (for itself or as agent for the relevant RBS Group Undertaking which owes the relevant amount) pay to the Buyer (as agent for the relevant Group Company) an amount equal to the difference, together with an amount equivalent to interest thereon at the Agreed Rate (accrued daily) for the period from (and including) the Completion Date to (but excluding) the date of payment.

 

	
2.

	
If a RBS Deposit:

 

	
2.1

	
is greater than the corresponding Estimated RBS Deposit, RBS shall (for itself or as agent for the relevant RBS Group Undertaking which owes the relevant amount) pay to the Buyer (as agent for the relevant Group Company) an amount equal to the difference, together with an amount equivalent to interest thereon at the Agreed Rate (accrued daily) for the period from (and including) the Completion Date to (but excluding) the date of payment; or

 

  

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2.2

	
is less than the corresponding Estimated RBS Deposit, the Buyer shall (as agent for the relevant Group Company) pay to RBS (for itself or as agent for the RBS Group Undertaking to which the relevant amount is owed) an amount equal to the difference, together with an amount equivalent to interest thereon at the Agreed Rate (accrued daily) for the period from (and including) the Completion Date to (but excluding) the date of payment.

 

	
3.

	
Any amounts payable pursuant to paragraphs ‎1 or ‎2 shall be:

 

	
3.1

	
paid at the same time and date as the payment due pursuant to clause ‎‎2.3 and to the fullest extent possible shall be netted off against one another and against any payment due pursuant to clause ‎‎2.3, with the intention that one payment be made at that time from RBS to the Buyer or from the Buyer to RBS pursuant to these paragraphs and pursuant to that clause; and

 

	
3.2

	
in full and final discharge of the RBS Debt or RBS Deposit, as the case may be, and the Buyer shall indemnify and hold harmless RBS (for itself or as agent for any RBS Group Undertaking) against any claim by a Group Company to the contrary and RBS shall indemnify and hold harmless the Buyer (for itself or as agent for any Group Company) against any claim by a RBS Group Undertaking to the contrary.

 

	
4.

	
If, in relation to any particular Estimated RBS Debt or Estimated RBS Deposit there is no corresponding RBS Debt or RBS Deposit (as the case may be), there shall be deemed to be a corresponding RBS Debt or RBS Deposit (as the case may be) of zero and if, in relation to any particular RBS Debt or RBS Deposit, there is no corresponding Estimated RBS Debt or Estimated RBS Deposit (as the case may be), there shall be deemed to be a corresponding Estimated RBS Debt or Estimated RBS  Deposit (as the case may be) of zero.

 

  

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SCHEDULE 11

COMPLETION STATEMENT

 

PART A

PRELIMINARY

 

	
1.

	
The Completion Statement shall be prepared in accordance with this ‎Schedule 11 and in the format set out in ‎Part D of this ‎Schedule 11. In addition, Exhibit 10 sets out a pro forma Completion Statement as if Completion had occurred on 30 September 2011 save as set out in Exhibit 10.

 

	
2.

	
The Completion Statement will comprise a single combined statement for all of the Group Companies that reflects the position of the Group Companies as at the Completion Time and will not take into account:

 

	
2.1

	
the effect of any post-Completion reorganisations or, in any way, the post-Completion intentions or obligations of the Buyer; or

 

	
2.2

	
the Lombard Aircraft or the Corporate Jet or any asset or liability relating to either of them that would otherwise be taken into account in determining the Completion Statement pursuant to this ‎Schedule 11.

 

	
3.

	
Subject to paragraphs ‎9(c) and ‎10 of ‎Part B of this ‎Schedule 11, the Completion Statement will also reflect Tax of a Group Company which arises in consequence of the event of Completion other than to the extent such Tax is or would otherwise have been reflected in the Completion Statement as deferred Tax.

 

	
  

	
4.

	
In preparing the Completion Statement:

 

	
4.1

	
all items and amounts shall be recorded in US Dollars and, where required, items and amounts recorded in a currency other than US Dollars shall be converted into US Dollars in accordance with clause ‎1.10.1; and

 

	
4.2

	
there shall be no minimum level of materiality.

 

	
5.

	
The Completion Statement shall be prepared in accordance with:

 

	
  

	
5.1.1

	
the specific policies set out in ‎Part B of this ‎Schedule 11 below (the "Specific Policies");

 

	
  

	
5.1.2

	
subject to paragraph ‎5.1.1, the accounting principles, policies, treatments, practices and categorisations adopted in the preparation of the Accounts of RBS Aerospace Limited;

 

	
  

	
5.1.3

	
subject to paragraphs ‎5.1.1 and ‎5.1.2, the accounting principles, policies, treatments, practices and categorisations adopted in the preparation of the audited accounts of The Royal Bank of Scotland Group plc for the period ended on the Last Accounting Date; and

 

	
  

	
5.1.4

	
subject to paragraphs ‎5.1.1, ‎5.1.2 and ‎5.1.3, IFRS in force and applicable at the Last Accounting Date.

 

  

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5.2

	
For the avoidance of doubt, paragraph ‎5.1.1 above shall take precedence over paragraph ‎5.1.2 above, paragraph ‎5.1.2 shall take precedence over paragraph ‎5.1.3 above and paragraph ‎5.1.3 shall take precedence over paragraph ‎5.1.4 above.

 

	
6.

	
No amounts in respect of liabilities (contingent or otherwise) for which RBS is obliged to indemnify the Buyer and/or any Buyer's Group Company under the terms of any Transactional Document shall be taken into account in determining any item included in the Completion Statement or in the determination of the Final Share Price.

 

	
7.

	
Information available up until the earlier of the date of delivery of an Objection Notice from the Buyer under paragraph ‎3 of ‎Part C of this ‎‎Schedule 11 and the date of agreement or determination of the Completion Statement shall be taken into account insofar as it provides evidence of the state of affairs of a Group Company at the Completion Time.

 

	
8.

	
The provisions of this ‎‎Schedule 11 and the items comprising the Completion Statement shall be interpreted so as to avoid double counting, whether as an asset or as a liability, any particular matter.

 

	
9.

	
The Completion Statement shall be prepared on the basis that it relates to the Group Companies as going concerns and the Completion Statement shall not re-appraise the value of any of the assets of the Group Companies as a result of the change in their ownership (or any changes in the business of the Group Companies since the Completion Time following such change in ownership) except only as specifically set out in this ‎‎‎‎Schedule 11.

 

PART B

SPECIFIC POLICIES

 

	
1.

	
The following Specific Policies shall apply in the preparation of the Completion Statement.

 

	
2.

	
Items ‎1, ‎2, ‎3, ‎4, ‎6, ‎7, ‎15 and ‎16 in the Completion Statement shall be determined by applying the relevant definition in clause ‎1 (subject, where applicable, to the provisions of ‎‎Part A and the other provisions of this ‎Part B of this ‎Schedule 11).

 

	
3.

	
Item ‎5 in the Completion Statement (Operating Lease Assets) shall be determined by applying the principles applied in calculating "Assets for hire under operating leases" in the Accounts of RBS Aerospace Limited, and shall include capitalised interest and other capitalised amounts, office equipment and fixtures and fittings.

 

	
4.

	
Item ‎8 in the Completion Statement shall be calculated by adding together the amount of items ‎1, ‎4 and ‎5 in the Completion Statement and deducting from the result the aggregate amount of items ‎2, ‎3, ‎6 and ‎7 in the Completion Statement.

 

	
5.

	
Item ‎9 in the Completion Statement (Trade Debtors) shall include:

 

	
  

	
(a)

	
receivables due to any Group Company from lessees in respect of amounts due under or in respect of operating leases, including rent and maintenance contributions; and

 

  

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(b)

	
bad debt provisions in respect of lessees.

 

	
6.

	
Item ‎10 in the Completion Statement (Other Debtors) shall include:

 

	
  

	
(a)

	
any sums paid by a Group Company prior to the Completion Time, to the extent that these relate to goods or services to be provided to a Group Company after the Completion Time;

 

	
  

	
(b)

	
any sums payable to a Group Company after the Completion Time, to the extent that these are operating lease rentals that relate to a period prior to the Completion Time, or they relate to goods or services provided by a Group Company prior to the Completion Time;

 

	
  

	
(c)

	
amounts expected to be received by any Group Company from a lessee during or at expiry of any lease as a cash contribution relating to the physical condition of the aircraft on redelivery;

 

	
  

	
(d)

	
servicing fees receivable by any Group Company; and

 

	
  

	
(e)

	
any recoverable VAT and any refund or repayment in respect of Tax.

 

	
7.

	
Item ‎11 in the Completion Statement (Customer Deposits) shall include:

 

	
  

	
(a)

	
the principal amount of security deposits received by any Group Company from lessees in cash and deposits received by any Group Company in cash under letters of intent relating to aircraft sales to the extent that such deposits are repayable to any third party, together with, in each case accrued interest thereon at the prevailing rate of interest relating to the relevant deposit or the contractually stipulated rate, to the extent that such interest is repayable to any third party; and

 

	
  

	
(b)

	
maintenance contributions received by any Group Company in cash (including for the avoidance of doubt ***) together with, in each case, accrued interest thereon at the prevailing rate of interest relating to the relevant deposit or the contractually stipulated rate, to the extent that such interest is repayable to any third party, and stated net of amounts not expected to be either (i) repaid to the lessee; or (ii)  used in connection with maintenance of Aircraft or Engines, applying the principles, policies, treatments, practices and categorisations adopted in calculating "Customer Deposits" in the Accounts of RBS Aerospace Limited.

 

	
8.

	
Item ‎12 in the Completion Statement (Accruals and Deferred Income) shall include  any sums paid to a Group Company prior to the Completion Time to the extent that these are operating lease rentals that relate to a period after the Completion Time, or to goods or services to be provided to a Group Company, after the Completion Time.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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9.

	
Item ‎13 in the Completion Statement (Other Creditors) shall include:

 

	
  

	
(a)

	
invoices received for goods or services provided to any Group Company but not paid as at the Completion Time;

 

	
  

	
(b)

	
without duplication of paragraph ‎9(a) above, any costs to be incurred by a Group Company after the Completion Time to the extent that these relate to goods or services provided to a Group Company prior to the Completion Time;

 

	
  

	
(c)

	
provisions in respect of VAT and in respect of any other Tax other than Tax arising as a result of (i) any income of RBS Aerospace UK deemed to arise under Chapter 3 Part 9 CTA 2010 or (ii) any amounts included in assessable income of RBS Australia Leasing as a result of the application of Division 45 of the Australian Income Tax Assessment Act 1997 in respect of Completion; and

 

	
  

	
(d)

	
an accrual for any other liability of a Group Company at the Completion Time which is of a type capable of being properly taken into account within the "Other Creditors" heading in Note 19 to the Accounts of RBS Aerospace Limited if it were a liability of RBS Aerospace Limited, other than any liability in respect of ***.

 

	
10.

	
Item ‎14 in the Completion Statement (Deferred Tax) shall be accounted for in accordance with the accounting principles, policies, treatments, practices and categorisations adopted in the preparation of the Accounts of the relevant Group Companies but disregarding any expense of RBS Aerospace UK deemed to arise under Chapter 3 Part 9 CTA 2010 in respect of Completion and disregarding the effect of Division 45 of the Australian Income Tax Assessment Act 1997 in respect of Completion and, for the avoidance of doubt, shall not include such amount of any Relief afforded to RBS Aerospace UK arising from the payment of *** as mentioned in clause ‎4.10 as is taken into account in calculating the UK Lessor Tax Adjustment.

 

	
11.

	
Item ‎17 in the Completion Statement (Final Share Price) shall be calculated by adding together the amounts of items ‎8 and ‎15 in the Completion Statement and deducting from the sum the amount of item ‎16 in the Completion Statement.

 

PART C

DRAFT COMPLETION STATEMENT

 

	
1.

	
RBS shall, or shall procure that the RBS's accountants shall, after Completion prepare in good faith a draft statement (the "Draft Completion Statement") in the format set out in ‎Part D and showing the line items indicated there. RBS shall deliver the Draft Completion Statement to the Buyer within 45 Business Days after the Completion Date.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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2.

	
Unless the parties agree otherwise, no adjustment shall be made to the Draft Completion Statement as a result of the objection process described in this ‎‎Part C, unless and until the aggregate amount of all individual adjustments exceeds US$***, in which case an adjustment shall be made for the full amount of such adjustments as agreed or determined in accordance with this ‎Part C.

 

	
3.

	
The Buyer shall notify RBS in writing (an "Objection Notice") within 15 Business Days after receipt whether or not it accepts the Draft Completion Statement for the purposes of this Agreement.  An Objection Notice shall set out in detail the items of the Draft Completion Statement which are in dispute, the Buyer's reasons for such non-acceptance and specify the adjustments which, in the Buyer's opinion, should be made to the Draft Completion Statement in order for it to comply with the requirements of this Agreement.  Except for the matters specifically set out in the Objection Notice, the Buyer shall be deemed to have agreed the Draft Completion Statement in full and no adjustment may be made by the parties or the Firm to any item or items which are not the subject of the Objection Notice.

 

	
4.

	
If the Buyer serves an Objection Notice in accordance with paragraph ‎3 of this ‎Part C, RBS and the Buyer shall use all reasonable efforts to meet and discuss the objections of the Buyer and to agree the adjustments (if any) required to be made to the Draft Completion Statement, in each case within 10 Business Days after receipt by RBS of the Objection Notice.

 

	
5.

	
If the Buyer is satisfied with the Draft Completion Statement (either as originally submitted or after adjustments agreed between RBS and the Buyer pursuant to paragraph ‎4 of this ‎Part C) or if the Buyer fails to give a valid Objection Notice within the 15 Business Day period referred to in paragraph ‎3 of this ‎Part C, then the Draft Completion Statement (incorporating any agreed adjustments) shall constitute the Completion Statement for the purposes of this Agreement.

 

	
6.

	
If RBS and the Buyer do not reach agreement within 10 Business Days of receipt by RBS of the Objection Notice, then the matter in dispute may be referred (on the application of either RBS or the Buyer) for determination by Ernst & Young or, if that firm is unable or unwilling to act, by such other independent firm of chartered accountants of international standing as RBS and the Buyer shall agree or, failing agreement, appointed by the President for the time being of the Institute of Chartered Accountants in England and Wales (the "Firm").  The Firm shall be requested to make its decision within 25 Business Days (or such later date as RBS, the Buyer and the Firm agree in writing) of confirmation and acknowledgement by the Firm of its appointment.  The following provisions shall apply once the Firm has been appointed:

 

	
6.1

	
RBS and Buyer shall each prepare a written statement within 10 Business Days of the Firm's appointment on the matters in dispute which (together with the relevant supporting documents) shall be submitted to the Firm for determination and copied at the same time to the other;

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

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6.2

	
following delivery of their respective submissions, the Buyer and RBS shall each have the opportunity to comment once only on the other's submission by written comment delivered to the Firm not later than 5 Business Days after receipt of the other's submission and, thereafter, neither RBS nor the Buyer shall be entitled to make further statements or submissions except insofar as the Firm so requests (in which case it shall, on each occasion, give the other party, unless otherwise directed, 5 Business Days to respond to any statements or submission so made);

 

	
6.3

	
in giving its determination, the Firm shall state what adjustments (if any) are necessary, solely for the purposes of this Agreement, to the Draft Completion Statement in respect of the matters in dispute in order to comply with the requirements of this Agreement and to determine finally the Completion Statement;

 

	
6.4

	
the Firm shall act as an expert (and not as an arbitrator) in making its determination which shall, in the absence of manifest error, be final and binding on the parties and, without prejudice to any other rights which they may respectively have under this Agreement, the parties expressly waive, to the extent permitted by law, any rights of recourse they may otherwise have to challenge it.

 

	
7.

	
RBS and the Buyer shall each be responsible for their own costs in connection with the preparation, review and agreement or determination of the Completion Statement.  The fees and expenses of the Firm shall be borne equally between RBS  and the Buyer or in such other proportions as the Firm shall determine.

 

	
8.

	
To enable RBS to meet its obligations under this ‎‎‎Schedule 11, the Buyer shall provide to RBS and RBS's accountants reasonable access to the books and records, employees and premises of the Group Companies and, where relevant, of the Buyer for the period from the Completion Date to the date that the Completion Statement is agreed or determined. In order to review the Draft Completion Statement, RBS shall provide to the Buyer and Buyer's accountants reasonable access to RBS's and RBS's accountants' working papers relating to the Draft Completion Statement.  If the Buyer serves an Objection Notice, it shall ensure that RBS and RBS's accountants shall be given reasonable access to the Buyer's and the Buyer's accountants' working papers relating to the adjustments proposed in the Objection Notice and any other submissions by or on behalf of the Buyer in relation to the Completion Statement. Each of RBS and the Buyer shall co-operate fully with the other and shall permit the other's accountants to take copies (including electronic copies) of the relevant books and records and shall provide all assistance reasonably requested by the other to facilitate the preparation of the Completion Statement.

 

	
9.

	
In the event of the appointment of the Firm, each of RBS and the Buyer shall respectively provide or procure the provision to the Firm of all such information as the Firm may reasonably request including:

 

	
9.1

	
by their respective advisers;

 

	
9.2

	
in the case of the Buyer, the books and records and personnel of the Group Companies; and

 

  

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9.3

	
in the case of RBS, the books and records and personnel of the RBS Group Undertakings.

 

	
10.

	
When the Completion Statement has been agreed or determined in accordance with the preceding paragraphs, then the amount shown in the Completion Statement in respect of each line item shall be final and binding for the purposes of this Agreement.

 

  

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PART D

FORM OF COMPLETION STATEMENT

 

	  	
$m

	
$m

	
1.Cash Free Debt Free Price

	  	
[•]

	
Minus: Third Party Debt, broken down as between:

(a)           ECA Financings Amount;

(b)           Exim Financing Amount; and

(c)           Receivables Financing Amount

	
 

[(•)]

[(•)]

[(•)]

	  
	
2.Third Party Debt

	  	
[(•)]

	
3.Minus: RBS Debt

	  	
[(•)]

	
4.Plus: Cash

	  	
[•]

	
5.Plus: Operating Lease Assets

	  	
[•]

	
6.Minus: Target Operating Lease Assets

	  	
[(•)]

	
7.Minus: UK Lessor Tax Adjustment

	  	
[(•)]

	
8.Sub Total (=‎1-‎2-‎3+‎4+‎5-‎6-‎7)

	  	
[•]

	
9.Trade Debtors

	
[•]

	  
	
10.Other Debtors

	
[•]

	  
	
11.Customer Deposits

	
[(•)]

	  
	
12.Accruals and Deferred Income

	
[(•)]

	  
	
13.Other Creditors

	
[(•)]

	  
	
14.Deferred Tax

	
[(•)]

	  
	
15.Working Capital (=‎9+‎10-‎11-‎12-‎13-‎14)

	  	
[(•)]

	
16.Minus: Target Working Capital

	  	
[(•)]

	
17.Final Share Price (=‎8+‎15-‎16)

	  	
[•]

 

  

- 127 -

  

 

SCHEDULE 12

PRE-COMPLETION OBLIGATIONS

 

	
1.

	
EXIM FINANCING AND ECA FINANCINGS

 

	
1.1

	
Each of RBS and the Buyer shall use all commercially reasonable efforts to procure, as soon as practicable following the date of this Agreement and in any case prior to Completion, that Export-Import Bank of the United States of America (in the case of the Exim Financing) and Compagnie Française d'Assurance pour le Commerce Exterieur and The Secretary of State of Her Britannic Majesty's Government acting by the Export Credits Guarantee Department (in the case of the ECA Financings):

 

	
  

	
1.1.1

	
consent to the irrevocable release and discharge of the Third Party Assurances set out in Part A of Exhibit 2, and the provision of replacement guarantees of the Exim Financing and the ECA Financings (respectively) by the Buyer (the "Replacement Guarantor") on terms substantially the same as such Third Party Assurances; and

 

	
  

	
1.1.2

	
take such other actions (including giving such instructions to the agents and lenders thereunder) as shall be necessary to effect such release and replacement in respect of such guarantees,

 

in each case with effect on and from Completion.

 

	
1.2

	
Without limitation, the obligations of the Buyer and RBS under paragraph ‎1.1 above shall include:

 

	
  

	
1.2.1

	
an obligation to *** any of the parties described in paragraph ‎1.1 above ***, to the extent consistent with the parties' obligations to use all commercially reasonable efforts (provided that the decision as to whether *** shall be determined at the Buyer's business discretion);

 

	
  

	
1.2.2

	
if, ***, the parties described in paragraph ‎1.1 above request ***, an obligation that each party shall *** (provided always that the decision as to whether to comply with any request for *** shall be determined at each party's business discretion);

 

	
  

	
1.2.3

	
an obligation to provide to the parties described in paragraph ‎1.1 such information in relation to the ownership and capital structure of the Replacement Guarantor, and such other information, as such parties may reasonably request or require.

 

	
1.3

	
***

 

	
  

	
1.3.1

	
***

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 128 -

  

 

	
  

	
1.3.2

	
***

 

	
  

	
1.3.3

	
***

 

	
  

	
1.3.4

	
***

 

	
  

	
1.3.5

	
***

 

	
  

	
1.3.6

	
***

 

	
1.4

	
***

 

	
1.5

	
***

 

	
  

	
1.5.1

	
***

 

	
  

	
1.5.2

	
***

 

	
  

	
1.5.3

	
***

 

	
  

	
1.5.4

	
***

 

	
  

	
1.5.5

	
***

 

	
  

	
1.5.6

	
***

 

	
1.6

	
***

 

	
  

	
1.6.1

	
***

 

	
  

	
1.6.2

	
***

 

	
  

	
1.6.3

	
***

 

	
  

	
1.6.4

	
***

 

	
1.7

	
***

 

	
  

	
1.7.1

	
***

 

	
  

	
1.7.2

	
***

 

	
  

	
1.7.3

	
***

 

	
  

	
1.7.4

	
***

 

	
  

	
1.7.5

	
***

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 129 -

  

 

 

	
  

	
1.7.6

	
***

 

	
1.8

	
***

 

	
  

	
1.8.1

	
***

 

	
  

	
1.8.2

	
***

 

	
  

	
1.8.3

	
***

 

	
  

	
1.8.4

	
***

 

	
  

	
1.8.5

	
***

 

	
1.9

	
***

 

	
1.10

	
***

 

	
2.

	
AIRSPEED SERVICING

 

	
2.1

	
Terms defined in the Airspeed Servicing Agreement shall have the same meanings when used in this paragraph ‎2, unless otherwise defined in this Agreement.

 

	
2.2

	
The Buyer shall, as soon as practicable following the date of this Agreement, notify RBS of the name and details (including credit rating) of a Buyer's Group Undertaking that will own, directly or indirectly, at least 50.01% of the economic interest in and voting equity of RBS Aerospace Limited (provided that such entity shall on the date of the consents and waivers below have a long term debt rating of no lower than A- (S&P) and A3 (Moody's)) ("New Parent").

 

	
2.3

	
Each of RBS and the Buyer shall use all commercially reasonable efforts to procure, as soon as practicable following the date of this Agreement, that each of Airspeed Limited and the Policy Providers consents to the ownership by the New Parent of the majority economic interest in and voting equity of RBS Aerospace Limited, and waives in writing its rights to terminate the appointment of the Servicer under the Servicing Agreement due to such ownership.  RBS and the Buyer agree that the intention of the parties is to obtain such consents and waivers prior to Completion, but that their respective obligations under this paragraph ‎2.3 shall continue for a period of 6 months following Completion to the extent that such consents and waivers have not been obtained prior to the expiry of such period.  Such reasonable efforts shall include:

 

	
  

	
2.3.1

	
the Buyer and RBS using all commercially reasonable efforts to procure a Rating Agency Confirmation in relation to such change in ownership; and

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 130 -

  

 

	
  

	
2.3.2

	
the Buyer and RBS using all commercially reasonable efforts to procure an opinion (from Buyer's counsel), reasonably satisfactory to each Policy Provider, stating that such change in ownership will not give rise to adverse tax consequences to the Airspeed Group.

 

	
3.

	
***

 

The Buyer shall promptly prepare letters from *** on terms substantially the same as the ***. The Buyer (with the reasonable commercial assistance of RBS) shall promptly provide any information reasonably requested by *** in connection with the release and termination of the *** and the execution by the Buyer and *** at or prior to Completion.

 

	
4.

	
RECEIVABLES FINANCINGS

 

RBS shall prepay in full (together with any breakage, costs, premiums and prepayment fees payable by any Group Company in relation to the release and termination of any hedging and swap arrangements entered into in connection with a Receivables Financing) and terminate each Receivables Financing  and shall procure that all "receivables" and related rights are reassigned to RBS Aerospace Limited.  RBS shall make available to the Buyer reasonable evidence of such terminations and reassignments prior to Completion.

 

	
5.

	
CORPORATE JET SALE

 

RBS shall use all commercially reasonable efforts to procure that, as soon as practicable following the date of this Agreement, RBS Aerospace Limited shall (pursuant to a sale agreement entered into in January 2012) transfer to RB Leasing Limited all legal and beneficial title to one Bombardier Challenger corporate jet with MSN 5611 (the "Corporate Jet"), together with the associated lease to Arkas Shipping and Transport SA (the "Corporate Jet Sale").  On completion of the Corporate Jet Sale, RBS shall make available to the Buyer a copy of the bill of sale for the Corporate Jet as evidence of such completion.  If the Corporate Jet Sale has not occurred at or prior to Completion, the Buyer shall use all commercially reasonable efforts following Completion to assist in the completion of the Corporate Jet Sale, at no cost to any Buyer's Group Undertaking.  Notwithstanding any provision to the contrary in this Agreement, none of the other provisions of this Agreement (including, for the avoidance of doubt, the definition of "Aircraft" or "Operating Lease Assets" or the Warranties in ‎Schedule 4) shall apply to, or be interpreted as referring to, the Corporate Jet, save to the extent they expressly refer thereto.

 

	
6.

	
OEM AMENDMENTS

 

Each of RBS and the Buyer shall use all commercially reasonable efforts to procure, as soon as practicable following the date of this Agreement, that the OEM

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

- 131 -

  

 

Amendments are made to each of the relevant OEM Contracts (with such amendments to take effect from Completion).

 

	
7.

	
COSTS OF PRE-COMPLETION OBLIGATIONS

 

Save to the extent provided otherwise in this ‎Schedule 12, RBS shall pay (or procure the payment of) any out-of-pocket expenses or fees (including legal fees) of any counterparty (other than any Buyer's Group Undertaking) whose consent, agreement or other co-operation is reasonably required pursuant to the obligations of the parties described in paragraphs ‎1 to ‎6 (inclusive) above, such payment to be made prior to or simultaneously with Completion or, if not so paid, after Completion, provided that:

 

	
  

	
(a)

	
subject always to the proviso in paragraph ‎1.2.1 of this ‎Schedule 12, RBS shall be required to pay such expenses or fees only to the extent of any agreement between a RBS Group Undertaking (including a Group Company) and such third party as in force at the date of this Agreement or to the extent that payment of such fees and expenses is required by such third party as a condition to their consent and agreement to the matters contemplated above; and

 

	
  

	
(b)

	
the Buyer shall indemnify RBS for any such expenses or fees to the extent arising due to a breach by the Buyer of its obligations under this ‎Schedule 12.

 

  

- 132 -

  

 

EXECUTED by the parties:

 

 

	
Signed by Rory Cullinan

 

as attorney for

 

The Royal Bank

 

of Scotland plc:

	
)

 

)

 

)

 

)

 

 

	
Signed by Hiroshi Minoura

 

for and on behalf of

 

Sumitomo Mitsui

 

Banking Corporation:

	
)

 

)

 

)

 

)

 

 

 

  

 

 

EXHIBIT 1

 

PART A - AIRCRAFT

 

	
1.

	
2.

	
3.

	
4.

	
5.

	
6.

	
No.

	
Owner

	
Lessor

	
Lessee

	
MSN

	
Aircraft Type

	
1. 

 

	
RBS Aerospace Limited

	  	
***

	
2157

	
A320-200

 

	
2. 

 

	
RBS Aerospace Limited

	  	
***

	
3169

	
A319-100

	
3. 

 

	
New Skye Leasing Limited

	
RBS Aerospace (UK) Limited

	
***

	
3785

	
A320-200

	
4. 

 

	
New Skye Leasing Limited

	
RBS Aerospace (UK) Limited

	
***

	
3850

	
A320-200

	
5. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
3423

	
A320-200

	
6. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
3439

	
A320-200

	
7. 

 

	
New Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
3755

	
A320-200

	
8. 

 

	
New Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
3781

	
A320-200

	
9. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
145406

	
ERJ-145MP

	
10. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33790

	
B737-700

	
11. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
1634

	
A319-100

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 1 -

  

 

 

	
1.

	
2.

	
3.

	
4.

	
5.

	
6.

	
No.

	
Owner

	
Lessor

	
Lessee

	
MSN

	
Aircraft Type

	
12. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2870

	
A319-100

	
13. 

 

	
New Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
3840

	
A320-200

	
14. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3626

	
A320-200

	
15. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3833

	
A320-200

	
16. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3242

	
A320-200

	
17. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3289

	
A320-200

	
18. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
36116

	
B737-700

	
19. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
36117

	
B737-700

	
20. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37740

	
B737-800

	
21. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37741

	
B737-800

	
22. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37742

	
B737-800

	
23. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
29888

	
B737-800

	
24. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2148

	
A320-200

	
25. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37754

	
B737-800

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 2 -

  

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	
Lessee

	
MSN

	
Aircraft Type

	
26. 

 

	
RBS Aerospace Ireland Leasing 1 Limited

	
RBS Aerospace Ireland Leasing 1 Limited

	
***

	
10029

	
CRJ-700

	
27. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
35107

	
B737-800

	
28. 

 

	
All Nippon Airways Trading Caribian Leasing Ltd.

	
RBS Aerospace (UK) Limited

	
***

	
2998

	
A320-200

	
29. 

 

	
All Nippon Airways Trading Caribian Leasing Ltd.

	
RBS Aerospace (UK) Limited

	
***

	
3099

	
A320-200

	
30. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
30099

	
B737-800

	
31. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2041

	
A321-200

	
32. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2397

	
A320-200

	
33. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3437

	
A320-200

	
34. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3483

	
A320-200

	
35. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3496

	
A320-200

	
36. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
1725

	
A320-200

	
37. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2653

	
A321-200

	
38. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
29672

	
B737-800

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 3 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
39. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
1541

	
A319-100

	
40. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
1551

	
A319-100

	
41. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
1603

	
A319-100

	
42. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3645

	
A321-200

	
43. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3045

	
A319-100

	
44. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3069

	
A319-100

	
45. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
3253

	
A319-100

	
46. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
3279

	
A319-100

	
47. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
3450

	
A319-100

	
48. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
3672

	
A320-200

	
49. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
33451

	
B737-800

	
50. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
33455

	
B737-800

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 4 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
51. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
34002

	
B737-800

	
52. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
34005

	
B737-800

	
53. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2378

	
A319-100

	
54. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2380

	
A319-100

	
55. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2402

	
A319-100

	
56. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2436

	
A319-100

	
57. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2442

	
A319-100

	
58. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2446

	
A319-100

	
59. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2471

	
A319-100

	
60. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2709

	
A319-100

	
61. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2729

	
A319-100

	
62. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
4196

	
A320-200

	
63. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
4233

	
A320-200

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 5 -

  

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
64. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
4250

	
A320-200

	
65. 

 

	
New Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
3902

	
A320-200

	
66. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
17000093

	
ERJ-170LR

	
67. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
17000106

	
ERJ-170LR

	
68. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
17000107

	
ERJ-170LR

	
69. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
17000112

	
ERJ-170LR

	
70. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
1943

	
A319-100

	
71. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
2806

	
A319-100

	
72. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3306

	
A320-200

	
73. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
19000201

	
ERJ-190LR

	
74. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
19000230

	
ERJ-190LR

	
75. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
19000263

	
ERJ-190LR

	
76. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
19000264

	
ERJ-190LR

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 6 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
77. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2736

	
A321-200

	
78. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2756

	
A321-200

	
79. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2889

	
A319-100

	
80. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2996

	
A321-200

	
81. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3054

	
A319-100

	
82. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3102

	
A319-100

	
83. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3209

	
A319-100

	
84. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3377

	
A319-100

	
85. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3380

	
A319-100

	
86. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3443

	
A319-100

	
87. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
37743

	
B737-800

	
88. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
37745

	
B737-800

	
89. 

 

	
White Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
4481

	
A320-200

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 7 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
90. 

 

	
White Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
4535

	
A320-200

	
91. 

 

	
RBS Aerospace Ireland Leasing 3 Limited

	
RBS Aerospace Ireland Leasing 3 Limited

	
***

	
4954

	
A320-200

	
92. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35099

	
B737-800

	
93. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33555

	
B737-800

	
94. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33556

	
B737-800

	
95. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2875

	
A320-200

	
96. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2920

	
A320-200

	
97. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2947

	
A320-200

	
98. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3063

	
A320-200

	
99. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3157

	
A320-200

	
100. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3410

	
A320-200

	
101. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3627

	
A320-200

	
102. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
30361

	
B737-800

	
103. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
30368

	
B737-800

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 8 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
104. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37593

	
B737-800

	
105. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37594

	
B737-800

	
106. 

 

	
RBS Aerospace Limited

	
RBS Labuan Leasing 1 Limited

	
***

	
35105

	
B737-800

	
107. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
33813

	
B737-800

	
108. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
33814

	
B737-800

	
109. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33812

	
B737-800

	
110. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37747

	
B737-800

	
111. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33557

	
B737-800

	
112. 

 

	
New Skye Leasing Limited

	
RBS Aerospace (UK) Limited

	
***

	
3905

	
A319-100

	
113. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35094

	
B737-800

	
114. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
37746

	
B737-800

	
115. 

 

	
RBS Aerospace Limited

	
RBS Paris Leasing 1 SARL

	
***

	
39920

	
B737-800

	
116. 

 

	
RBS Aerospace Limited

	
RBS Paris Leasing 1 SARL

	
***

	
40807

	
B737-800

	
117. 

 

	
New Skye (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
3917

	
A320-200

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 9 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
118. 

 

	
RBS Australia Leasing PTY Limited

	
RBS Australia Leasing PTY Limited

	
***

	
2600

	
A320-200

	
119. 

 

	
RBS Australia Leasing PTY Limited

	
RBS Australia Leasing PTY Limited

	
***

	
33993

	
B737-800

	
120. 

 

	
RBS Australia Leasing PTY Limited

	
RBS Australia Leasing PTY Limited

	
***

	
33994

	
B737-800

	
121. 

 

	
RBS Australia Leasing PTY Limited

	
RBS Australia Leasing PTY Limited

	
***

	
33995

	
B737-800

	
122. 

 

	
Lombard Global Finance Company

	
Lombard Global Finance Company

	
***

	
145398

	
ERJ-145MP

	
123. 

 

	
Lombard Global Finance Company

	
Lombard Global Finance Company

	
***

	
145419

	
ERJ-145MP

	
124. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
35000

	
B737-800

	
125. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
35005

	
B737-800

	
126. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
35017

	
B737-800

	
127. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
35018

	
B737-800

	
128. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37519

	
B737-800

	
129. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37532

	
B737-800

	
130. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37534

	
B737-800

	
131. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37535

	
B737-800

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 10 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
132. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37540

	
B737-800

	
133. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37541

	
B737-800

	
134. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37542

	
B737-800

	
135. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
37543

	
B737-800

	
136. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33597

	
B737-800

	
137. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33621

	
B737-800

	
138. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33622

	
B737-800

	
139. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33634

	
B737-800

	
140. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35022

	
B737-800

	
141. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
36570

	
B737-800

	
142. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
36571

	
B737-800

	
143. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
36572

	
B737-800

	
144. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
36573

	
B737-800

	
145. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37514

	
B737-800

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 11 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
146. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
38494

	
B737-800

	
147. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35095

	
B737-800

	
148. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35096

	
B737-800

	
149. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35097

	
B737-800

	
150. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35098

	
B737-800

	
151. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
40882

	
B737-800

	
152. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
40883

	
B737-800

	
153. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3132

	
A320-200

	
154. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3206

	
A320-200

	
155. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3383

	
A320-200

	
156. 

 

	
Lombard Global Finance Company

	
Lombard Global Finance Company

	
***

	
2140

	
A320-200

	
157. 

 

	
Lombard Global Finance Company

	
Lombard Global Finance Company

	
***

	
500

	
A330-200

	
158. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2268

	
A319-100

	
159. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2281

	
A319-100

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 12 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
160. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2308

	
A319-100

	
161. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2379

	
A319-100

	
162. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2418

	
A319-100

	
163. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33558

	
B737-800

	
164. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33562

	
B737-800

	
165. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
33563

	
B737-800

	
166. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
1952

	
A319-100

	
167. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
2553

	
A321-200

	
168. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
2610

	
A321-200

	
169. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
2687

	
A321-200

	
170. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
2862

	
A321-200

	
171. 

 

	
New Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
3750

	
A320-200

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 13 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
172. 

 

	
New Skye Leasing Limited

	
RBS Aerospace Limited

	
***

	
3972

	
A320-200

	
173. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
2924

	
A320-200

	
174. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3058

	
A320-200

	
175. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
3278

	
A320-200

	
176. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
4320

	
A320-200

	
177. 

 

	
New Skye (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
3734

	
A320-200

	
178. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
3674

	
A320-200

	
179. 

 

	
RBS Australia Leasing PTY Limited

	
RBS Australia Leasing PTY Limited

	
***

	
3275

	
A320-200

	
180. 

 

	
RBS Australia Leasing PTY Limited

	
RBS Australia Leasing PTY Limited

	
***

	
3332

	
A320-200

	
181. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35137

	
B737-800

	
182. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
35149

	
B737-800

	
183. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35100

	
B737-800

	
184. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35138

	
B737-800

	
185. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35145

	
B737-800

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 14 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
186. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37258

	
B737-800

	
187. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37259

	
B737-800

	
188. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
37260

	
B737-800

	
189. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
2928

	
A320-200

	
190. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
2934

	
A320-200

	
191. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
2941

	
A320-200

	
192. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
2984

	
A320-200

	
193. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
3010

	
A320-200

	
194. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
2302

	
A319-100

	
195. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
39921

	
B737-800

	
196. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
40995

	
B737-800

	
197. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
40997

	
B737-800

	
198. 

 

	
RBS Aerospace (UK) Limited

	
RBS Aerospace (UK) Limited

	
***

	
40998

	
B737-800

	
199. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
4805

	
A320-200

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 15 -

  

 

 

	1.	2.	3.	4.	5.	6.
	
No.

	
Owner

	
Lessor

	Lessee	
MSN

	
Aircraft Type

	
200. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
4851

	
A320-200

	
201. 

 

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
Wells Fargo Bank Northwest, National Association as Owner Trustee for RBS Aerospace Limited

	
***

	
4948

 

	
A320-200

 

	
202. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
35829

	
B737-800

	
203. 

 

	
AFEX Leasing LLC

	
RBS Aerospace Limited

	
***

	
36149

	
B737-800

	
204. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35102

	
B737-800

	
205. 

 

	
RBS Aerospace Limited

	
RBS Aerospace Limited

	
***

	
35104

	
B737-800

  

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

- 16 -

  

 

 

PART B – ORDERED AIRCRAFT

 

***

 

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

 

  

- 17 -

  

 

 

PART C – AIRCRAFT SCHEDULED FOR ACQUISITION, DISPOSAL OR SALE AND LEASEBACK

 

***18

 

 

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

 

  

- 18 -

  

 

EXHIBIT 2

 

PART A

 

	
1.  

	
Guarantee dated 25 November 2009 given by The Royal Bank of Scotland PLC in favour of Export-Import Bank of the United States

 

	
2.  

	
Guarantee dated 2 July 2009 given by The Royal Bank of Scotland PLC in favour of Calyon as security trustee

 

	
3.  

	
Guarantee dated 8 February 2011 given by The Royal Bank of Scotland PLC in favour of Sumitomo Mitsui Banking Corporation Europe Limited, London Branch as security trustee

 

 

PART B

 

***

 

 

 

 

 

 

 

 

 

 

  

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

 

  

  

  

 

EXHIBIT 3

	  	  
	  	  
	
Company Registration No: 270775

 

 

 

 

 

	  
	
RBS AEROSPACE LIMITED

 

 

 

DIRECTORS' REPORT AND FINANCIAL STATEMENTS

 

31 December 2010

 

 

 

	  	  	  
	  
	  
	  
	  
	
Group Legal and Secretariat

Ulster Bank Group Centre

Georges Quay,

Dublin 2,

Ireland

 

 

 

  

  

  

 

	
RBS AEROSPACE LIMITED

 

 

	  
	
Contents

	
Page

 

	
Officers and Professional Advisers

	
1

	 	 
	
Directors' Report

	2-5
	 	 
	
Statement of Directors' Responsibilities

	
6

	 	 
	
Independent Auditors' Report

	7-8
	 	 
	
Statement of Comprehensive Income

	
9

	 	 
	
Balance Sheet

	10-11
	 	 
	
Statement of Changes in Equity

	
12

	 	 
	
Cash Flow Statement

	
13

	 	 
	
Notes to the Financial Statements

	14-40

 

  

  

  

 

	
RBS AEROSPACE LIMITED

 

 

OFFICERS AND PROFESSIONAL ADVISERS

 

 

	
DIRECTORS:

	  	  
	  	
P Barrett

	
(Irish)

	  	
C Ennis

	
(Irish)

	  	
B Flannery

	
(Irish)

	  	
D Swan

	
(Irish)

	  	
B Harvey

	
(American)

	  	
R Cullinan

	
(British)

	  	
P Commons

	
(British)

	  	
G Petken

	
(British)

	  	  	  
	
SECRETARY:

	  
	  	
C Ennis

	  	  
	
REGISTERED OFFICE:

	  
	  	
IFSC House

	  	
IFSC

	  	
Dublin 1

	  	  
	
AUDITORS:

	  
	  	
Deloitte & Touche

	  	
Chartered Accountants

	  	
Deloitte & Touche House

	  	
Earlsfort Terrace

	  	
Dublin 2

	  	  
	  	  
	  	  
	
Registered in Ireland.

	  

 

  

- 1 -

  

 

 

	
RBS AEROSPACE LIMITED

 

 

DIRECTORS' REPORT

 

The Directors of RBS Aerospace Limited ("the Company") have pleasure in presenting their report, together with audited financial statements for the year ended 31 December 2010.  The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRSs").

 

ACTIVITIES AND BUSINESS REVIEW

 

Activities

 

The principal business activities of the Company include, acting in the capacity of principal, agent or broker, the financing of aircraft, plant, equipment, machinery, engines, vehicles or other modes of transport and their components and parts, by way of loan, hire purchase, lease rental, credit sale or other appropriate methods of finance, and the sale or purchase, ownership, leasing or management or in any other way dealing with aircraft, plant, equipment, machinery, engines, vehicles or other modes of transport and their components/parts.  The Company also provides financial advice and brokerage services to the airline and airline related industry in connection with financing and refinancing.

 

The Company is a wholly owned subsidiary of International Aviation Management (CI) Limited, a company registered in the Cayman Islands.

 

The Company is a member of The Royal Bank of Scotland Group (the "Group" or the "RBS Group") which provides the Company access to all central resources it needs and provides guidance and frameworks for areas such as finance, risk, human resources or environment.  The annual reports of The Royal Bank of Scotland Group plc review these matters on a group basis.  Copies can be obtained from the Company Secretary, Gogarburn, Edinburgh, EH 12 1HQ, the Registrar of Companies or through the Group's web site at www.rbs.com.

 

Principal risks and uncertainties

 

The airline industry is cyclical and highly competitive.  Most of the Company's aircraft are under operating leases where the cost of the aircraft is not fully recovered over the term of the lease.  The oversupply of a specific type of aircraft in the market could depress aircraft lease rates and values, which would affect re-lease rates.  The supply and demand of aircraft is affected by various cyclical factors including:

 

	
·

	
passenger air travel and air cargo demand

 

	
·

	
fuel prices

 

	
·

	
maintenance costs

 

	
·

	
technological innovation and the introduction of new generation of aircraft types

 

	
·

	
government and environmental regulations

 

Review of the year and future developments

 

The directors are satisfied with the Company's performance in the year.  The Company will be guided by its parent company in seeking further opportunities for growth.

 

 

  

- 2 -

  

 

	
RBS AEROSPACE LIMITED

Review of the year and future developments (continued)

 

At the end of the year, the financial position showed total assets of $6,789.5 million (2009 restated: $7,083.0 million).  The net book value of property, plant and equipment was $6,224.7 million compared with $6,204.5 million at the end of the previous year.

 

The Company has changed the way it accounts for maintenance and depreciation.  The purpose of the change is to:

 

	
·

	
more accurately reflect the economic outcomes of operating leases through the statement of comprehensive income

 

	
·

	
more closely align accounting treatment with industry practices

 

	
·

	
enhance the comparability of its financial statements to other lessors

 

This has resulted in a change in accounting policy with respect to the treatment of maintenance contributions from lessees, and a change in accounting estimate with respect to the treatment of depreciation of assets held for operating lease.  The overall effects of the new accounting treatments are to increase retained profit by $73,598,000 in 2010 (2009: $21,244,000).  Opening reserves as at 1 January 2009 were restated and increased by $29,900,000.  More information is shown in note 1.

 

The Company's functional currency is the US dollar, as its trading and funding is predominately in this currency, and therefore its financial statements are presented in this currency.

 

The Company is funded primarily by facilities from the RBS Group, although additional finance has been raised from other sources in the form of finance lease funding for a number of its aircraft.  It seeks to minimise its exposure to external financial risks other than credit risk, further information is disclosed in Note 2.

 

To the date of signing of the financial statements the directors have not recommended the payment of a dividend (2009:$nil).

 

Going Concern

 

The Company's business activities, together with the factors likely to affect its future development, performance and position are set out above, along with the financial position of the Company.  In addition, also as noted above, note 2 to the financial statements includes: the Group's objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.  Risks are managed in line with guidance given by the Company's parent company.  Exposure to both interest rate risk and currency risk is minimised by the use of derivatives and fixed rate loans.

 

The current economic conditions create higher levels of the risks and uncertainties associated with the airline industry outlined above.  However, the Company has considerable long-term contracts with a number of customers and suppliers across different geographic areas and sectors within the industry.  Past experience indicates that airline risk can be managed carefully and successfully.  The Company has considerable borrowings from the Group.  Although the Company has been designated as non-core to the Royal Bank of Scotland Group, the Directors have no reason to believe that the availability of these borrowings will

 

 

  

- 3 -

  

 

	
RBS AEROSPACE LIMITED

Going concern (continued)

 

cease in the foreseeable future.  As a consequence, the Directors believe that the Company is well placed to manage its business risks successfully despite the current uncertain economic outlook.

 

The directors, having made such enquiries as they considered appropriate, including regarding the continuing availability of sufficient resources from the Group, have prepared the financial statements on a going concern basis.  They considered the financial statements of The Royal Bank of Scotland Group plc for the year ended 31 December 2010, approved on 23 February 2011, which were prepared on a going concern basis.

 

DIRECTORS AND SECRETARY

 

The present directors and secretary, who have served throughout the year (except where noted below), are listed on page 1.  From 1 January 2010 to date the following changes have taken place:

 

	
Directors

	
Resigned

	
Appointed

	
J Higgins

	
15 January 2010

	
-

	
B Harvey

	
-

	
5 May 2011

	
G Petken

	
-

	
22 July 2011

	
Assistant Secretary

	  	  
	
J O'Driscoll

	
20 September 2010

	
-

DIRECTORS' AND SECRETARIES' INTERESTS

 

The directors and secretary of the Company at 31 December 2010 had no beneficial interests in the shares of Group companies other than the following beneficial holdings in the ultimate holding company:

 

The Royal Bank of Scotland Group plc Ordinary Shares of Stg 25p each

 

	  	 	
As at 1 January 2010 (or date of appointment if later)

	 	 	
As at 31 December 2010

	 
	  	 	
Ordinary Shares

	 	 	
Options*

	 	 	
Restricted Stock Awards**

	 	 	
Ordinary Shares

	 	 	
Options*

	 	 	
Restricted Stock Awards**

	 
	
P Barrett

	 	 	16,333	 	 	 	220,825	 	 	 	-	 	 	 	16,333	 	 	 	171,577	 	 	 	273,016	 
	
P Commons

	 	 	32,582	 	 	 	306,480	 	 	 	21,806	 	 	 	37,501	 	 	 	237,857	 	 	 	13,456	 
	
R Cullinan

	 	 	-	 	 	 	4,787,235	 	 	 	5,503,048	 	 	 	-	 	 	 	4,787,235	 	 	 	5,654,960	 
	
C Ennis (Company Secretary)

	 	 	4,198	 	 	 	14,369	 	 	 	-	 	 	 	4,198	 	 	 	14,369	 	 	 	-	 
	
B Flannery

	 	 	10,651	 	 	 	118,353	 	 	 	12,265	 	 	 	14,222	 	 	 	118,353	 	 	 	55,915	 
	
D A Swan

	 	 	16,116	 	 	 	63,250	 	 	 	15,080	 	 	 	20,647	 	 	 	17,794	 	 	 	64,263	 

	
*

	
Options granted under the Executive Option Scheme are exercisable subject to the achievement of performance conditions.

	
**

	
vesting for these awards are subject to the achievement of performance conditions

 

No director had an interest in any of the preference shares of the RBS Group during the year to 31 December 2010.

 

 

  

- 4 -

  

 

	
RBS AEROSPACE LIMITED

 

  

RISK MANAGEMENT POLICY

 

The Company seeks to minimise its exposure to external financial risks other than credit risk, further information is disclosed in Note 2.

 

BOOKS OF ACCOUNT

 

To ensure that proper books and accounting records are kept in accordance with Section 202 of the Companies Act, 1990, the directors have employed appropriately qualified accounting personnel and have maintained appropriate computerised accounting systems.  The books of account are located at the offices of the RBS Group, Global Banking & Markets - Finance in Cheltenham, United Kingdom.

 

ELECTIVE RESOLUTIONS

 

The Company has passed elective resolutions electing to dispense with the requirements to hold annual general meetings, lay accounts before a general meeting and re-appoint auditors annually pursuant to Regulation 8 of the European Communities (Single Member Private Limited Companies) Regulations, 1994.

 

AUDITORS

 

Deloitte & Touche, Chartered Accountants, have signified their willingness to continue in office as auditors in accordance with Section 160(2) of the Companies Act 1963.

 

Approved by the Board of Directors

and signed on behalf of the Board

 

 

	
P Barrett

	
B Harvey

	
Director

	
Director

	
Date:  22 July 2011

	
Date:  22 July 2011

 

  

- 5 -

  

 

	
RBS AEROSPACE LIMITED

 

  

STATEMENT OF DIRECTORS' RESPONSIBILITIES

 

Irish company law requires the directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period.  In preparing those financial statements, the directors are required to:

 

	
·

	
select suitable accounting policies for the Company Financial Statements and then apply them consistently;

 

	
·

	
make judgements and estimates that are reasonable and prudent; and

 

	
·

	
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

 

The directors are responsible for keeping proper books of account which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the European Union and comply with Irish statute comprising the Companies Acts, 1963 to 2009.  They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

Signed on behalf of the Board:

 

 

 

	
P Barrett

	
B Harvey

	
Director

	
Director

	
Date:  22 July 2011

	
Date:  22 July 2011

 

  

- 6 -

  

 

 

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF RBS AEROSPACE LIMITED

 

We have audited the financial statements of RBS Aerospace Limited (the company) for the year ended 31 December 2010 which comprise the Statement of Comprehensive Income, the Balance Sheet, the Statement of Changes in Equity, the Cash Flow Statement, and the related notes 1 to 28.  These financial statements have been prepared under the accounting policies set out therein.

 

This report is made solely to the company's members, as a body, in accordance with Section 193 of the Companies Act 1990.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors' report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditors

 

The directors are responsible for preparing the financial statements, as set out in the Statement of Directors' Responsibilities, in accordance with applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

Our responsibility, as independent auditor, is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

 

We report to you our opinion as to whether the financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, and are properly prepared in accordance with Irish statute comprising the Companies Acts, 1963 to 2009.  We also report to you whether in our opinion: proper books of account have been kept by the company; whether, at the balance sheet date, there exists a financial situation requiring the convening of an extraordinary general meeting of the company; and whether the information given in the Directors' Report is consistent with the financial statements.  In addition, we state whether we have obtained all information and explanations necessary for the purpose of our audit and whether the company's balance sheet and income statement are in agreement with the books of account.

 

We also report to you if, in our opinion, any information specified by law regarding directors' remuneration and directors' transactions is not disclosed and, where practicable, include such information in our report.

 

We read the Directors' Report and consider the implications for our report if we become aware of any apparent misstatement within it.  Our responsibilities do not extend to other information.

 

Basis of audit opinion

 

We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board.  An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements.  It also includes an assessment of the significant estimates and judgements made by the directors in

 

 

  

- 7 -

  

 

INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF RBS AEROSPACE LIMITED (continued)

 

 

 the preparation of the financial statements and of whether the accounting policies are appropriate to the company's circumstances, consistently applied and adequately disclosed.

 

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error.  In forming our opinion we evaluated the overall adequacy of the presentation of information in the financial statements.

 

Opinion

 

In our opinion the financial statements:

 

	
·

	
give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of the affairs of the company as at 31 December 2010 and of the profit for the year then ended; and

 

	
·

	
have been properly prepared in accordance with the Companies Acts 1963 to 2009.

 

We have obtained all the information and explanations we considered necessary for the purpose of our audit.  In our opinion proper books of account have been kept by the company.  The company's balance sheet and its income statement are in agreement with the books of account.

 

In our opinion the information given in the Directors' Report is consistent with the financial statements.

 

The net assets of the company, as stated in the balance sheet are more than half the amount of its called-up share capital and, in our opinion, on that basis there did not exist at 31 December 2010 a financial situation which, under Section 40(1) of the Companies (Amendment) Act, 1983, would require the convening of an extraordinary general meeting of the company.

 

 

Deloitte & Touche

Chartered Accountants and Registered Auditors

Dublin

 

Date: 5th August 2011

 

 

  

- 8 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

 

 

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2010

 

	  	 	 	 	 	 	 	 	
Restated

	 
	  	 	
Note

	 	 	
2010

	 	 	
2009

	 
	  	 	 	 	 	
$'000

	 	 	
$'000

	 
	
CONTINUING OPERATIONS

	 	 	 	 	 	 	 	 	 
	
Revenue

	 	 	3	 	 	 	654,824	 	 	 	592,395	 
	
Cost of sales

	 	 	4,10	 	 	 	(200,040	)	 	 	(218,522	)
	
GROSS PROFIT

	 	 	 	 	 	 	454,784	 	 	 	373,873	 
	
Other operating income

	 	 	5	 	 	 	53,642	 	 	 	20,429	 
	
Administrative expenses

	 	 	 	 	 	 	(42,171	)	 	 	(38,492	)
	
OPERATING PROFIT

	 	 	6	 	 	 	466,255	 	 	 	355,810	 
	
Finance costs

	 	 	 	 	 	 	 	 	 	 	 	 
	
Interest payable

	 	 	8	 	 	 	(299,894	)	 	 	(269,706	)
	
Movement in fair value of derivatives

	 	 	 	 	 	 	37,974 	 	 	 	86,112 	 
	  	 	 	 	 	 	 	(261,920	)	 	 	(183,594	)
	
PROFIT BEFORE TAXATION

	 	 	 	 	 	 	204,335	 	 	 	172,216	 
	
Tax charge

	 	 	9	 	 	 	(25,906	)	 	 	(21,360	)
	
PROFIT FOR THE FINANCIAL YEAR

	 	 	 	 	 	 	178,429 	 	 	 	150,856 	 
	
OTHER COMPREHENSIVE INCOME

	 	 	 	 	 	 	 	 	 	 	 	 
	
Other comprehensive income after tax

	 	 	 	 	 	 	- 	 	 	 	- 	 
	
TOTAL COMPREHENSIVE INCOME FOR THE YEAR

	 	 	 	 	 	 	178,429 	 	 	 	150,856 	 

These financial statements were approved by the Board of Directors on 22 July 2011 and signed on its behalf by;

 

 

 

	
P Barrett

	
B Harvey

	
Director

	
Director

 

 

  

- 9 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

 

 

BALANCE SHEET

as at 31 December 2010

 

	  	 	 	 	 	 	 	 	
Restated

	 	 	
Restated

	 
	  	 	
Note

	 	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	 	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
NON-CURRENT ASSETS

	 	 	 	 	 	 	 	 	 	 	 	 
	
Property, plant and equipment

	 	 	10	 	 	 	6,224,714	 	 	 	6,204,470	 	 	 	5,190,838	 
	
Finance lease receivables

	 	 	13	 	 	 	378,027	 	 	 	415,765	 	 	 	351,514	 
	
Investments in subsidiaries

	 	 	11	 	 	 	12	 	 	 	12	 	 	 	12	 
	
Derivative financial instruments

	 	 	14	 	 	 	56,041 	 	 	 	53,539 	 	 	 	172,566 	 
	  	 	 	 	 	 	 	6,658,794 	 	 	 	6,673,786 	 	 	 	5,714,930 	 
	
CURRENT ASSETS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Finance lease receivables

	 	 	13	 	 	 	39,851	 	 	 	18,430	 	 	 	38,174	 
	
Loan receivable

	 	 	15	 	 	 	37,493	 	 	 	-	 	 	 	35,953	 
	
Trade and other receivables

	 	 	16	 	 	 	16,881	 	 	 	48,805	 	 	 	25,602	 
	
Cash and cash equivalents

	 	 	17	 	 	 	33,189	 	 	 	340,586	 	 	 	418,115	 
	
Derivative financial instruments

	 	 	14	 	 	 	3,297	 	 	 	1,422	 	 	 	-	 
	
Assets held for sale

	 	 	18	 	 	 	- 	 	 	 	- 	 	 	 	38,145 	 
	  	 	 	 	 	 	 	130,711 	 	 	 	409,243 	 	 	 	555,989 	 
	
TOTAL ASSETS

	 	 	 	 	 	 	6,789,505 	 	 	 	7,083,029 	 	 	 	6,270,919 	 
	
CURRENT LIABILITIES

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade and other payables

	 	 	19	 	 	 	(210,307	)	 	 	(178,179	)	 	 	(165,426	)
	
Obligations under finance leases

	 	 	20	 	 	 	(62,268	)	 	 	(45,198	)	 	 	-	 
	
Borrowings

	 	 	21	 	 	 	(435,270	)	 	 	(429,402	)	 	 	(412,151	)
	
Derivative financial instruments

	 	 	14	 	 	 	(6,942	)	 	 	(4,089	)	 	 	(10,014	)
	  	 	 	 	 	 	 	(714,787	)	 	 	(656,868	)	 	 	(587,591	)
	
NON CURRENT LIABILITIES

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade and other payables

	 	 	19	 	 	 	(209,938	)	 	 	(216,602	)	 	 	(229,112	)
	
Obligations under finance leases

	 	 	20	 	 	 	(552,440	)	 	 	(616,749	)	 	 	-	 
	
Borrowings

	 	 	21	 	 	 	(4,479,383	)	 	 	(4,928,883	)	 	 	(4,760,748	)
	
Deferred tax liabilities

	 	 	22	 	 	 	(146,837	)	 	 	(120,949	)	 	 	(99,588	)
	
Derivative financial instruments

	 	 	14	 	 	 	(61,356	)	 	 	(96,643	)	 	 	(298,401	)
	  	 	 	 	 	 	 	(5,449,954	)	 	 	(5,979,826	)	 	 	(5,387,849	)
	
TOTAL LIABILITIES

	 	 	 	 	 	 	(6,164,741	)	 	 	(6,636,694	)	 	 	(5,975,440	)
	
NET ASSETS

	 	 	 	 	 	 	624,764 	 	 	 	446,335 	 	 	 	295,479 	 
	
EQUITY

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Share capital

	 	 	23	 	 	 	500	 	 	 	500	 	 	 	500	 
	
Other reserves

	 	 	24	 	 	 	65,000	 	 	 	65,000	 	 	 	65,000	 
	
Retained earnings

	 	 	 	 	 	 	559,264 	 	 	 	380,835 	 	 	 	229,979 	 
	
TOTAL EQUITY

	 	 	 	 	 	 	624,764 	 	 	 	446,335 	 	 	 	295,479 	 

 

 

  

- 10 -

  

 

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

BALANCE SHEET

as at 31 December 2010

 

 

 

These financial statements were approved by the Board of Directors on 22 July 2011 and signed on its behalf by:

 

 

 

	
P Barrett

	
B Harvey

	
Director

	
Director

 

 

 

  

- 11 -

  

 

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

 

 

STATEMENT OF CHANGES IN EQUITY

as at 31 December 2010

 

	  	 	
Share Capital

	 	 	
Other Reserves

	 	 	
Retained Earnings

	 	 	
Total Equity

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
BALANCE AT 31 DECEMBER 2008

	 	 	500	 	 	 	65,000	 	 	 	200,079	 	 	 	265,579	 
	
Change in accounting policy for maintenance contributions

	 	 	-	 	 	 	-	 	 	 	29,900	 	 	 	29,900	 
	
BALANCE AT 31 DECEMBER 2008 as restated

	 	 	500	 	 	 	65,000	 	 	 	229,979	 	 	 	295,479	 
	
Profit for the year

	 	 	-	 	 	 	-	 	 	 	150,856 	 	 	 	150,856 	 
	
BALANCE AT 31 DECEMBER 2009

	 	 	500	 	 	 	65,000	 	 	 	380,835	 	 	 	446,335	 
	
Profit for the year

	 	 	-	 	 	 	-	 	 	 	178,429 	 	 	 	178,429 	 
	
BALANCE AT 31 DECEMBER 2010

	 	 	500 	 	 	 	65,000 	 	 	 	559,264 	 	 	 	624,764 	 

 

 

  

- 12 -

  

 

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

 

 

CASH FLOW STATEMENT

for the year ended 31 December 2010

 

	  	  	 	 	 	 	
Restated

	 
	  	
Note

	 	
2010

	 	 	
2009

	 
	  	  	 	
$'000

	 	 	
$'000

	 
	
OPERATING ACTIVITIES

	  	 	 	 	 	 	 
	
Profit before tax

	  	 	 	204,335	 	 	 	172,216	 
	
Adjustments for:

	  	 	 	 	 	 	 	 	 
	
Depreciation on assets for hire under operating leases

	  	 	 	200,957	 	 	 	219,503	 
	
Interest expense

	  	 	 	261,919	 	 	 	269,706	 
	
Movement in fair value of derivatives and fair value hedges

	  	 	 	(37,974	)	 	 	(86,112	)
	
Profit on disposal of assets held under operating leases

	  	 	 	(46,465	)	 	 	(3,325	)
	
Operating cash flows before movements in working capital

	  	 	 	582,772	 	 	 	571,988	 
	
Decrease/(increase) in receivables

	  	 	 	11,803	 	 	 	(45,359	)
	
Increase in payables

	  	 	 	27,976 	 	 	 	12,346 	 
	
Cash generated by operations

	  	 	 	622,551	 	 	 	538,975	 
	
Income taxes received

	  	 	 	391	 	 	 	9,831	 
	
Interest paid

	  	 	 	(264,732	)	 	 	(282,078	)
	
NET CASH FROM OPERATING ACTIVITIES

	  	 	 	358,210 	 	 	 	266,728 	 
	
INVESTING ACTIVITIES

	  	 	 	 	 	 	 	 	 
	
Proceeds on disposal of property, plant and equipment

	  	 	 	505,364	 	 	 	260,736	 
	
Purchases of property, plant and equipment

	  	 	 	(680,100	)	 	 	(1,452,327	)
	
NET CASH USED IN INVESTING ACTIVITIES:

	  	 	 	(174,736	)	 	 	(1,191,591	)
	
FINANCING ACTIVITIES

	  	 	 	 	 	 	 	 	 
	
Amounts raised from finance lease funding

	  	 	 	-	 	 	 	664,625	 
	
Repayment of obligations under finance leases

	  	 	 	(47,240	)	 	 	(2,678	)
	
New bank loans raised

	  	 	 	-	 	 	 	191,400	 
	
Repayments of bank loans

	  	 	 	(443,631	)	 	 	- 	 
	
NET CASH (USED IN)/FROM FINANCING ACTIVITIES

	  	 	 	(490,871	)	 	 	853,347 	 
	
NET DECREASE IN CASH AND CASH EQUIVALENTS

	  	 	 	(307,397	)	 	 	(71,516	)
	
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

	  	 	 	340,586 	 	 	 	412,102 	 
	
CASH AND CASH EQUIVALENTS AT END OF YEAR

	
17

	 	 	33,189 	 	 	 	340,586 	 

NOTES TO THE FINANCIAL STATEMENTS

 

 

  

- 13 -

  

 

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

 

	
1

	
SIGNIFICANT ACCOUNTING POLICIES

 

	
a

	
BASIS OF ACCOUNTING

 

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted for use in the EU.  The Company in addition to complying with its legal obligation to comply with IFRS as adopted for use in the European Union, also complies with IFRS as issued by the International Accounting Standards Board.

 

The financial statements have been prepared on the historical cost basis.  The principal accounting policies are set out below.

 

The Company's functional currency is the US Dollar, being the currency of the primary economic environment in which the Company operates.

 

The directors do not believe the adoption of any Standards or Interpretations that have been issued but are not yet effective will have any material impact on the financial statements of the Company.

 

The Company has applied the exemption of IAS 27 'Consolidated and Separate Financial Statements' not to present consolidated financial statements and therefore these statements are the separate financial statements of the Company.

 

The judgements and assumptions involved in the Company's accounting policies which have the most significant effect on the amounts recognised in the financial statements are those that relate to the criteria for assessing whether substantially all the significant risks and rewards of ownership of leased assets are transferred to other entities, the setting of residual values and useful economic lives for aircraft assets and assessing the stage of completion of the service provided in recognising fee income.

 

The accounts, which should be read in conjunction with the Directors' Report, are prepared on a going concern basis and in accordance with IFRS.

 

	
b

	
CHANGE IN ACCOUNTING POLICY

 

In conjunction with a re-assessment of useful economic lives of aircraft under operating lease (as set out below), the Company has changed its accounting policy with respect to the treatment of maintenance contributions received from lessees.  The Company previously deferred these in the balance sheet until the earlier of utilisation for maintenance events or disposal of the aircraft.  The new policy includes an assessment of whether the company takes any risk in respect of the maintenance of each leased asset.  For those "on-risk" assets, maintenance payments received are recorded in income and the major maintenance components of each aircraft are identified and depreciated separately over the period to the next maintenance, or the end of the useful economic life, within property, plant and equipment.  For "off-risk" leases, such payments are deferred on the balance sheet until they are utilised to cover maintenance spending and the Company recognises as revenue all maintenance receipts not expected to be repaid to the lessee.

 

 

  

- 14 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

	
1

	
SIGNIFICANT ACCOUNTING POLICIES – continued

b             CHANGE IN ACCOUNTING POLICY - continued

 

 

The directors believe that the revised policy provides more relevant information as it better reflects the Company's economic position with regards to these amounts.  The effect of the new policy is:

 

	  	 	
Effect on

2010

	 	 	
Effect on

2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Increase in revenue

	 	 	44,111	 	 	 	24,352	 
	
Decrease in other operating income

	 	 	(11,231	)	 	 	(73	)
	
Increase in tax charge

	 	 	(4,110	)	 	 	(3,035	)
	
Increase in profit

	 	 	28,770 	 	 	 	21,244 	 

Balance sheet amounts and opening reserves have been revised accordingly.

 

	
c

	
CHANGE IN ACCOUNTING ESTIMATE

 

On 1 January 2010, the Company has changed its accounting estimate with respect to the treatment of depreciation on property, plant and equipment.  The Company has reviewed the estimate used to calculate the useful economic life of the assets held for operating lease to better reflect the expected use of the assets by the business.  Useful economic lives of the operating lease assets are now shorter and as such the residual values have also been reassessed.

 

Changes in estimates of residual values and useful economic lives are accounted for prospectively under IAS 16.  The effect of these changes in estimate in 2010 is to decrease cost of sales by $51,232,000 and increase the tax charge by $6,404,000, increasing profit by $44,828,000 in 2010 from what it would have been using the old estimates.  There are no changes to 2008 and 2009.

 

	
d

	
INCOME UNDER FINANCE AND OPERATING LEASES

 

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee.  All other leases are classified as operating leases.

 

Finance lease income, which includes the amortisation of the investment in the lease, is allocated to accounting periods so as to reflect a constant periodic rate of return on the net investment outstanding in respect of the leases.

 

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

 

The terms of aircraft operating leases are assessed at the outset of each lease to determine whether the Company has the majority of the risk in connection with the maintenance of the asset ("on-risk"), or whether the economic risk is passed to the lessee ("off-risk").  Any maintenance payments which are received from lessees

 

 

  

- 15 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

1.            SIGNIFICANT ACCOUNTING POLICIES – continued

d             INCOME UNDER FINANCE AND OPERATING LEASES – continued

 

 

through the life of the lease are recorded immediately as income for "on-risk" leases.  For "off-risk" leases, such payments are deferred on the balance sheet until they are utilised to cover maintenance spending and the Company recognises as revenue all maintenance receipts not expected to be repaid to the lessee.

 

	
e

	
FEE INCOME

 

Fee income is recognised by reference to the stage of completion of the service provided.

 

	
f

	
PROGRESS PAYMENTS INCOME RECOGNITION

 

Where assets are subject to progress payments being made prior to the commencement of the primary lease period, interest on the total of such payments at an appropriate rate is added to the cost of the asset and credited to the statement of comprehensive income.

 

	
g

	
BORROWING COSTS

 

All borrowing costs are recognised as an expense in the period in which they are incurred.

 

	
h

	
TAXATION

 

Provision is made for taxation at current enacted rates on taxable profits.

 

Deferred taxation is accounted for in full for all temporary differences between the carrying amount of an asset or liability for accounting purposes and its carrying amount for tax purposes.  Deferred tax assets are only recognised to the extent that it is probable that they will be recovered.

 

	
i

	
FOREIGN CURRENCY

 

Transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions.  At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.  Non-monetary assets and liabilities denominated in foreign currencies are translated at the rates prevailing at the date of the transaction.  Gains and losses arising on retranslation are included in profit or loss for the period.

 

	
j

	
PROPERTY, PLANT AND EQUIPMENT

 

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.  Depreciation on assets for hire under operating leases is charged over the lease term, using the straight-line method. Assets are depreciated over their useful economic life, as follows.

 

	
Aircraft for hire under operating leases

	
5 to 15 years from date of manufacture

 

 

  

- 16 -

  

 

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

1.            SIGNIFICANT ACCOUNTING POLICIES – continued

j               PROPERTY, PLANT AND EQUIPMENT - continued

 

 

 

	
Office equipment and fixtures & fittings

	
3 to 10 years from date when brought into use

 

Aircraft held for hire under operating leases are assessed to determine whether they are "on-risk" or "off risk" for maintenance, as set out in the policy for lease income.  For those leases which are "off-risk", the aircraft is recorded as one asset and depreciated to its residual value as set out below.  The cost of assets owned for operating leases where the company is "on-risk" for maintenance are separated into components representing the prepaid maintenance of the engines, airframe overhaul and underlying airframe.  Maintenance components are amortised over the period from purchase to the next expected maintenance event for that component.  Subsequent expenditure on maintenance is capitalised and depreciated over the period to the next maintenance or the end of the useful economic life.

 

Estimated residual values are reviewed annually at each period end, with reference to current market conditions and the expected maintenance condition of the asset at the end of the useful economic life.  Where estimated residual values are found to have changed significantly, this is recorded prospectively as a change in estimate and depreciation charges over the remaining useful life are adjusted to take account of the revised estimate.

 

	
k

	
ASSETS IN THE COURSE OF CONSTRUCTION

 

Assets in the course of construction are stated at cost and are not depreciated.

 

	
l

	
INVESTMENTS IN SUBSIDIARIES

 

Investments in subsidiary undertakings are stated at cost, less any provision for impairment.

 

	
m

	
FINANCIAL INSTRUMENTS

 

The Company's financial asset categories are loans and receivables and financial assets at fair value through profit and loss.  Loans and receivables comprise finance lease receivables, 'trade and other receivables' and 'cash and cash equivalents' in the balance sheet.

 

The Company's financial liabilities are all categorised as financial liabilities measured at amortised cost and financial liabilities at fair value through profit or loss.  Financial liabilities measured at amortised cost comprises 'bank borrowings', 'obligations under finance leases' and 'trade and other payables' in the balance sheet.

 

All financial assets and liabilities at fair value through profit or loss are those classed as 'held for trading' under IAS 39 and are derivative financial instruments.

 

 

 

  

- 17 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

NOTES TO THE FINANCIAL STATEMENTS

1.            SIGNIFICANT ACCOUNTING POLICIES – continued

 

 

 

	
n

	
DERIVATIVES AND HEDGING

 

The Company has entered into various financial instruments (derivatives) as principal to manage balance sheet foreign exchange and interest rate risk.  Derivatives include swaps, forwards and options.

 

The swaps held are currency swaps and interest rate swaps.  A swap is an agreement to exchange cash flows in the future in accordance with a pre-arranged formula.  In currency swap transactions, interest payment obligations are exchanged on assets and liabilities denominated in different currencies; the exchange of principal may be notional or actual.  Interest rate swap contracts generally involve exchange of fixed and floating interest payment obligations without the exchange of underlying principal.

 

Forwards held are forward foreign exchange contracts.  A forward contract is a contract to buy (or sell) a specified amount of a physical or financial commodity, at an agreed price, on an agreed future date.  Forward foreign exchange contracts are contracts for the delayed delivery of currency on a specified future date.

 

Derivative financial instruments are recognised initially, and subsequently measured, at fair value.  Derivative fair values are determined from quoted prices in active markets where available.  Where there is no active market for an instrument, fair value is derived from prices for the derivative's components using appropriate pricing or valuation models.  The Company's pricing and valuation methods are managed by the ultimate holding company, The Royal Bank of Scotland Group plc (the Group).  Most of the Group's pricing models do not entail material subjectivity because the methodologies utilised do not incorporate significant judgement and the parameters included in the models can be calibrated to actively quoted market prices.  Values established from pricing models are adjusted for credit risk, liquidity risk and future operational costs.

 

Derivatives are classified as fair value through profit and loss.  Gains and losses arising from changes in fair value of a derivative are recognised as they arise in profit or loss.

 

The Company enters into fair value hedge relationships which hedge the changes in fair value of a recognised asset or liability.  Principally, such hedges involve interest rate swaps hedging the interest rate risk in fixed-rate finance leases.  Hedge relationships are formally documented at inception, which includes the identification of the hedged item and hedged instrument, the risk that is being hedged, and the process for monitoring hedge effectiveness.  The gain or loss on the hedging instrument or derivative is recognised in profit or loss.  The gain or loss on the hedged item attributable to the hedged risk is recognised in profit or loss and adjusts the carrying value of the hedged item.  Hedge accounting is discontinued if the hedge no longer meets the criteria for hedge accounting or if the hedge designation is revoked, and any cumulative adjustment is amortised to profit or loss over the remaining life of the hedged item.

 

 

 

  

- 18 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

NOTES TO THE FINANCIAL STATEMENTS

1.            SIGNIFICANT ACCOUNTING POLICIES – continued

 

 

 

	
o

	
AMOUNTS RECEIVABLE UNDER FINANCE LEASES

 

A lease is recognised when there is a contractual right to the asset's cash flows and derecognised when all contractual rights and obligations expire.  Amounts due from lessees under finance leases are recorded as receivables at the amount of the net investment in the leases.  The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income.

 

Progress payments made prior to the commencement of the primary lease are included at cost together with the amount of any interest charged on such payments.

 

	
p

	
TRADE AND OTHER RECEIVABLES

 

Trade and other receivables are measured on initial recognition at fair value, and subsequently measured at amortised cost using the effective interest rate method.  Trade and other receivables do not carry any interest and are stated at their nominal value.

 

	
q

	
LOANS RECEIVABLE

 

Loans receivable are measured on initial recognition at fair value, and subsequently measured at amortised cost using the effective interest rate method.  Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired.  The allowance recognised is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition.

 

	
r

	
CASH AND CASH EQUIVALENTS

 

Cash and cash equivalents comprise cash on hand and demand deposits, and other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

 

	
s

	
BORROWINGS

 

Interest-bearing borrowings are initially recorded at fair value and are subsequently measured at amortised cost using the effective interest rate method.

 

	
t

	
TRADE AND OTHER PAYABLES

 

Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost using the effective interest rate method.  Trade and other payables are not interest bearing and are stated at their nominal value.

 

  

- 19 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

1.            SIGNIFICANT ACCOUNTING POLICIES – continued

 

 

 

	
u

	
OBLIGATIONS UNDER FINANCE LEASES

 

Assets held under finance leases are recognised as assets of the Company at their fair value or, if lower, at the present value of the minimum lease payments, each determined at the inception of the lease.  The corresponding liability to the lessor is included in the balance sheet as a finance lease payable obligation.  Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.

 

	
v

	
PENSIONS

 

The Company provides post-retirement benefits in the form of pensions.

 

The Company has two pension schemes.  The pension entitlement of certain employees arises under a defined contribution pension scheme and is secured by contributions by the company to a separately administered pension scheme.  Contributions to the defined contribution scheme are recognised in the statement of comprehensive income when payable.

 

For other employees the Company participates in the Lombard Ireland Limited Non Contributory Pension and Death Benefits Plan, which is a funded defined benefit scheme whose assets are independent of the Group's finances.  Scheme valuations were carried out by independent professionally qualified actuaries to determine pension costs, any imbalance between assets and liabilities was adjusted over the average future service life of members of the scheme.

 

The latest full valuation of the Plan was carried out as at 1 April 2010.  This valuation identified scheme liabilities on an ongoing funding basis of €91,925,000 and scheme assets were valued at €78,028,000.  The valuation recommended a contribution rate of 26.1% of Pensionable Salaries together with additional annual lump sum contributions of €2m.  The next valuation is due on 1 April 2013.

 

The pension costs of the Plan are assessed across its membership as a whole, and it is not possible to determine the share of the scheme's assets and liabilities that relates to RBS Aerospace Limited.  Accordingly, the requirements of IAS 19 'Pension Costs' relating to multi-employer schemes apply.  Therefore the scheme is being accounted for as a defined contribution scheme.

 

	
w

	
OPERATING PROFIT

 

Operating profit is stated before charging or crediting investment income and finance costs.

 

 

  

- 20 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

	
2

	
FINANCIAL RISK MANAGEMENT

 

	
a

	
INTEREST RATE RISK

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.  The Company's policy is to minimise cash flow interest rate risk when entering into leasing transactions by the use of appropriate matched funding, including the use of derivative financial instruments.  Accounting volatility arises from fair value through profit or loss movements where these derivatives, entered into as an economic hedge, do not qualify for hedge accounting under IAS 39.

 

	
b

	
CURRENCY RISK

 

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.  The Company minimises cash flow currency risk by ensuring its leases and associated financing are in the same currency or, entering into currency swaps or forwards over the life of the lease.  Accounting volatility arises from fair value through profit or loss movements where these derivatives, entered into as an economic hedge, do not qualify for hedge accounting under IAS 39.

 

	
c

	
CREDIT RISK

 

Credit risk is the risk arising from the possibility that the Company will incur losses from the failure of counterparties to meet their obligations.  Credit risk is managed through The Royal Bank of Scotland plc Group Credit Risk Management Framework to enable the Group to achieve appropriate risk versus reward performance whilst maintaining credit risk exposure in line with approved risk appetite on a Group basis.  The key principles of credit risk management set out in the Framework include:

 

	
  

	
-

	
Approval of credit exposure must be granted prior to any advance or extension of credit.

 

	
  

	
-

	
An appropriate credit risk assessment of the customer and related credit facilities must be undertaken prior to approval of credit exposure.  This must include an assessment of, amongst others, the purpose of the credit and sources of repayment, compliance with affordability tests, repayment history, capacity to repay, sensitivity to economic and market developments and risk-adjusted return.

 

	
  

	
-

	
Credit risk authority must be specifically granted in writing to all individuals involved in the granting of credit approval, whether this is exercised personally or collectively as part of a credit committee.  These individuals must act independently and with balanced commercial judgement in exercising credit authority.

 

	
  

	
-

	
Where credit authority is exercised personally, the individual must not have any responsibility or accountability for business revenue origination.

 

 

  

- 21 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

2.            FINANCIAL RISK MANAGEMENT – continued

 

 

	
  

	
-

	
All credit exposures, once approved, must be effectively monitored and managed and reviewed periodically against approved limits.  Review occurs at least annually, with lower quality exposures being subject to a greater frequency of analysis and assessment.

 

	
  

	
-

	
Customers with emerging credit problems must be identified early and classified accordingly.  Remedial actions must be implemented promptly to minimise the potential loss to the Company and consideration should be given whether to transfer customers with credit problems to a specialised problem management or recovery unit.

 

	
  

	
-

	
Portfolio analysis and reporting must be used to identify and manage credit risk concentrations and credit risk quality migration.

 

The Company's principal financial assets are finance lease receivables and derivative financial instruments.  Other financial assets are bank deposits, loans receivable, and trade and other receivables.  The amounts presented in the balance sheet are net of allowances for doubtful receivables.  An allowance for impairment is made where there is an identified loss event which, based on previous experience, is evidence of a reduction in the recoverability of the cash flows.  The credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned by international credit-rating agencies.

 

	
d

	
LIQUIDITY RISK

 

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.

 

Any maturity mis-match within the overall long-term structure of the Company's assets and liabilities is managed to ensure that term asset commitments may be funded on an economic basis over their life.  The short-term maturity structure of the Company's liabilities and assets is managed on a daily basis to ensure that all cash flow obligations can be met as they arise.

 

	
e

	
CAPITAL MANAGEMENT

 

The Company is a member of a group with regulatory disciplines over the use of its capital.  Although the Company itself is not regulated it aims to maintain capital resources commensurate with the nature, scale and risk profile of its business.  It regards its capital as the total equity as shown on the balance sheet.

 

 

  

- 22 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

 

	
3

	
REVENUE

 

	  	 	 	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Finance leases:

	 	 	 	 	 	 
	
Rentals receivable

	 	 	47,020	 	 	 	40,493	 
	
Amortisation

	 	 	(32,798	)	 	 	(21,113	)
	  	 	 	14,222	 	 	 	19,380	 
	
Operating leases:

	 	 	 	 	 	 	 	 
	
Rentals receivable

	 	 	639,283	 	 	 	570,943	 
	
Fee income

	 	 	1,319 	 	 	 	2,072 	 
	  	 	 	654,824 	 	 	 	592,395 	 
	
Included in the above are the following amounts:

	 	 	 	 	 	 	 	 
	
Contingent rentals

	 	 	(75,691	)	 	 	(47,081	)
	
Capital cost of asset additions financed:

	 	 	 	 	 	 	 	 
	
Finance leases

	 	 	2,112	 	 	 	48,402	 
	
Operating leases

	 	 	680,098 	 	 	 	1,452,031 	 
	  	 	 	682,210 	 	 	 	1,500,433 	 

	
4

	
COST OF SALES

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Depreciation on assets held for hire under operating leases

	 	 	200,040 	 	 	 	218,522 	 

	
5

	
OTHER OPERATING INCOME

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Profit on disposal of property, plant and equipment

	 	 	46,465	 	 	 	3,325	 
	
Other operating income

	 	 	7,177 	 	 	 	17,104 	 
	  	 	 	53,642 	 	 	 	20,429 	 

 

 

  

- 23 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

	
6

	
OPERATING PROFIT

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Operating profit has been arrived at after charging:

	 	 	 	 	 	 
	
Depreciation on assets held for hire under operating leases

	 	 	200,040	 	 	 	218,522	 
	
Depreciation - office equipment and fixtures & fittings

	 	 	917	 	 	 	981	 
	
Bad debt charge

	 	 	1,423	 	 	 	-	 
	
Fees & commissions

	 	 	8,997	 	 	 	3,454	 
	
Management charge

	 	 	3,667	 	 	 	3,538	 
	
Purchases

	 	 	7,775	 	 	 	7,787	 
	
Rent on property

	 	 	1,907	 	 	 	2,106	 
	
Staff costs

	 	 	26,864	 	 	 	23,339	 
	
Foreign exchange gain

	 	 	(10,039	)	 	 	(2,941	)
	
Auditors' remuneration

	 	 	- 	 	 	 	- 	 

Costs incurred in respect of audit services to the Company are borne by the parent company and are not recharged.

 

	
7

	
STAFF COSTS

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Directors' salary costs

	 	 	1,843	 	 	 	2,451	 
	
Directors' pension costs

	 	 	321	 	 	 	508	 
	
Directors' bonus

	 	 	3,478 	 	 	 	3,990 	 
	
Directors' emoluments

	 	 	5,642	 	 	 	6,949	 
	
Staff costs (administration)

	 	 	15,973	 	 	 	11,191	 
	
Social security costs

	 	 	2,316	 	 	 	1,966	 
	
Other pension costs

	 	 	2,933 	 	 	 	3,233 	 
	  	 	 	26,864 	 	 	 	23,339 	 

The average number of employees was 58 (2009: 66).

 

 

  

- 24 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

	
8

	
FINANCE COSTS

 

	  	 	 	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Interest payable to group undertakings

	 	 	220,971	 	 	 	236,901	 
	
Interest payable to unconnected third parties

	 	 	2,839	 	 	 	4,501	 
	
Break gains

	 	 	(733	)	 	 	(9,292	)
	
Break losses

	 	 	45,563	 	 	 	30,548	 
	
Finance lease charges

	 	 	-	 	 	 	(84	)
	
Finance lease costs

	 	 	31,254 	 	 	 	7,132 	 
	  	 	 	299,894	 	 	 	269,706	 
	
Gain from movement in financial assets held at fair value through profit and loss

	 	 	(37,974	)	 	 	(86,112	)
	  	 	 	261,920 	 	 	 	183,594 	 
	
Included within the above movement in financial assets held at fair value through profit or loss are the following:

	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 
	
Loss in movement in fair value hedge

	 	 	2,939	 	 	 	-	 
	
Gain in movement in hedged item

	 	 	(1,163	)	 	 	- 	 
	  	 	 	1,776 	 	 	 	- 	 

Included in finance lease costs are contingent rents payable based on changes in interest rates of $12,228,000 (2009: $654,000).

	
9

	
TAXATION

 

	  	 	 	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
a      ANALYSIS OF TAX CHARGE FOR THE YEAR

	 	 	 	 	 	 
	
Current tax charge/(credit):

	 	 	 	 	 	 
	
-Corporation tax - adjustment in respect of prior periods

	 	 	18 	 	 	 	(1	)
	  	 	 	18	 	 	 	(1	)
	
Deferred tax - origination and reversal of temporary differences:

	 	 	 	 	 	 	 	 
	
-Current year

	 	 	25,660	 	 	 	21,685	 
	
-Adjustment in respect of prior periods

	 	 	228 	 	 	 	(324	)
	
Tax charge

	 	 	25,906 	 	 	 	21,360 	 

 

 

  

- 25 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

9.            TAXATION – continued

 

 

	
b      FACTORS AFFECTING THE TAX CHARGE FOR THE YEAR

	 	 	 	 	 	 
	
Profit before tax

	 	 	204,335 	 	 	 	172,216 	 
	
Tax on profit at the rate of 12.5% (2009: 12.5%)

	 	 	25,542	 	 	 	21,527	 
	
Permanent difference - assets not qualifying for capital allowances

	 	 	39	 	 	 	39	 
	
Permanent difference - foreign exchange loss

	 	 	-	 	 	 	57	 
	
Permanent difference - disallowed expenses

	 	 	79	 	 	 	62	 
	
Adjustment to tax charge in respect of prior periods

	 	 	246 	 	 	 	(325	)
	
Tax charge

	 	 	25,906 	 	 	 	21,360 	 

	
10

	
PROPERTY, PLANT AND EQUIPMENT

 

	  	 	
Assets for hire under operating leases

	 	 	
Office equipment and fixtures & fittings

	 	 	
Assets for hire under operating leases

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
COST OR VALUATION

	 	 	 	 	 	 	 	 	 
	
At 1 January 2008

	 	 	4,589,958	 	 	 	8,525	 	 	 	4,598,483	 
	
Additions

	 	 	1,484,085	 	 	 	636	 	 	 	1,484,721	 
	
Transfers

	 	 	54	 	 	 	-	 	 	 	54	 
	
Reclassified as held for sale

	 	 	(39,532	)	 	 	-	 	 	 	(39,532	)
	
Transfers from assets held for sale

	 	 	200,964	 	 	 	-	 	 	 	200,964	 
	
Disposals

	 	 	(563,322	)	 	 	(2	)	 	 	(563,324	)
	
At 1 January 2009

	 	 	5,672,207	 	 	 	9,159	 	 	 	5,681,366	 
	
Additions

	 	 	1,452,031	 	 	 	296	 	 	 	1,452,327	 
	
Transfers

	 	 	39,532	 	 	 	-	 	 	 	39,532	 
	
Disposals

	 	 	(287,549	)	 	 	(4	)	 	 	(287,553	)
	
At 1 January 2010

	 	 	6,876,221	 	 	 	9,451	 	 	 	6,885,672	 
	
Additions

	 	 	680,098	 	 	 	2	 	 	 	680,100	 
	
Disposals

	 	 	(511,565	)	 	 	- 	 	 	 	(511,565	)
	
At 31 December 2010

	 	 	7,044,754 	 	 	 	9,453 	 	 	 	7,054,207 	 
	
ACCUMULATED DEPRECIATION AND IMPAIRMENT

	 	 	 	 	 	 	 	 	 	 	 	 
	
At 1 January 2008

	 	 	325,929	 	 	 	797	 	 	 	326,726	 
	
Charge for the year

	 	 	180,729	 	 	 	1,055	 	 	 	181,784	 
	
Transfers

	 	 	54	 	 	 	-	 	 	 	54	 
	
Reclassified as held for sale

	 	 	(1,387	)	 	 	-	 	 	 	(1,387	)
	
Transfers from assets held for sale

	 	 	18,901	 	 	 	-	 	 	 	18,901	 
	
Disposals

	 	 	(35,550	)	 	 	- 	 	 	 	(35,550	)
	
At 1 January 2009

	 	 	488,676	 	 	 	1,852	 	 	 	490,528	 
	
Charge for the year

	 	 	218,522	 	 	 	981	 	 	 	219,503	 
	
Transfers

	 	 	1,387	 	 	 	-	 	 	 	1,387	 

 

 

 

  

- 26 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

10.          PROPERTY, PLANT AND EQUIPMENT – continued

 

 

	  	 	 	 	 	 	 	 	 	 
	
Disposals

	 	 	(30,212	)	 	 	(4	)	 	 	(30,216	)
	
At 1 January 2010

	 	 	678,373	 	 	 	2,829	 	 	 	681,202	 
	
Charge for the year

	 	 	200,040	 	 	 	917	 	 	 	200,957	 
	
Disposals

	 	 	(52,666	)	 	 	- 	 	 	 	(52,666	)
	
At 31 December 2010

	 	 	825,747 	 	 	 	3,746 	 	 	 	829,493 	 
	
CARRYING AMOUNT

	 	 	 	 	 	 	 	 	 	 	 	 
	
At 31 December 2010

	 	 	6,219,007 	 	 	 	5,707 	 	 	 	6,224,714 	 
	
At 31 December 2009

	 	 	6,197,848 	 	 	 	6,622 	 	 	 	6,204,470 	 
	
At 31 December 2008

	 	 	5,183,531 	 	 	 	7,307 	 	 	 	5,190,838 	 

The amount of borrowing costs that were capitalised in the year was $2,631,900 (2009: $5,814,000).  The average effective capitalisation rate is 4.2% (2009: 5.1%).

 

The cost of sales in the statement of comprehensive income is the depreciation charge for assets for hire under operating leases.

 

Within 'assets for hire under operating leases' are assets in the course of construction of $255,555,000 (2009: $183,966,000).

 

The carrying amount of assets included above subject to obligations under finance leases is $923,349,000 (2009: $941,524,000).

 

	
11

	
INVESTMENT IN SUBSIDIARIES

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
At cost

	 	 	12 	 	 	 	12 	 	 	 	12 	 

The principal trading subsidiary undertakings, the capital of which consists of ordinary shares and preference shares, are shown below.  All share capital is wholly owned.

 

	
Owned by the Company:

	
Nature of business:

	
Country of incorporation:

	
RBS Aerospace Ireland Leasing 1 Limited

	
Leasing

	
Ireland

	
RBS Aerospace Ireland Leasing 2 Limited

	
Leasing

	
Ireland

	
RBS Aerospace Ireland Leasing 3 Limited

	
Leasing

	
Ireland

	
GAL Holdings Limited

	
Intermediate leasing company

	
Bermuda

 

 

  

- 27 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

 

 

 

	
12

	
FINANCIAL INSTRUMENTS

 

	
a

	
CARRYING VALUE AND FAIR VALUE OF FINANCIAL INSTRUMENT BY CATEGORY:

 

Carrying value

 

	  	 	 	 	 	
Restated

	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Financial assets at fair value through profit and loss

	 	 	 	 	 	 	 	 	 
	
Derivative financial instruments

	 	 	59,338	 	 	 	54,961	 	 	 	172,566	 
	
Loans and receivables:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Finance lease receivables

	 	 	417,878	 	 	 	434,195	 	 	 	389,688	 
	
Loans receivable

	 	 	37,493	 	 	 	-	 	 	 	35,953	 
	
Trade and other receivables

	 	 	16,881	 	 	 	48,805	 	 	 	25,602	 
	
Cash and cash equivalents

	 	 	33,189 	 	 	 	340,586 	 	 	 	418,115 	 
	
Financial assets

	 	 	564,779 	 	 	 	878,547 	 	 	 	1,041,924 	 
	
Financial liabilities at fair value through profit and loss

	 	 	 	 	 	 	 	 	 	 	 	 
	
Derivative financial instruments

	 	 	68,298	 	 	 	100,732	 	 	 	308,415	 
	
Financial liabilities measured at amortised cost:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Obligations under finance leases

	 	 	614,708	 	 	 	661,947	 	 	 	-	 
	
Trade and other payables

	 	 	420,245	 	 	 	394,781	 	 	 	394,538	 
	
Borrowings

	 	 	4,914,653 	 	 	 	5,358,285 	 	 	 	5,172,899 	 
	
Financial liabilities

	 	 	6,017,904 	 	 	 	6,515,745 	 	 	 	5,875,852 	 

Fair value

 

The following table shows the fair value of those financial instruments carried on the balance sheet where its carrying value shown above is different from its fair value.

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Financial liabilities measured at amortised cost:

	 	 	 	 	 	 	 	 	 
	
Obligations under finance leases

	 	 	624,915	 	 	 	693,014	 	 	 	-	 
	
Borrowings

	 	 	4,886,942 	 	 	 	5,477,910 	 	 	 	4,961,116 	 

IFRS 7 requires financial instruments that are recorded at fair value through profit and loss to be classified by a fair value hierarchy that reflects the source of the inputs used in measuring their fair value:

 

	
Level 1

	
Unadjusted quoted prices in active markets for identical instruments

	
Level 2

	
Market inputs, other than Level 1 inputs, that are observable either directly or indirectly

	
Level 3

	
Inputs not based on observable market data

 

 

  

- 28 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

12.          FINANCIAL INSTRUMENTS – continued

 

The financial instruments at fair value through profit and loss, being the derivative assets and liabilities shown above, all fall within level 2.  Fair values are estimated based on a discounted cash flow analysis using observable market inputs.

 

	
b

	
FINANCIAL INSTRUMENT - CARRYING AMOUNT BY MARKET RISK EXPOSURE:

 

	  	 	 	 	 	
Restated

	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Interest rate risk:

	 	 	 	 	 	 	 	 	 
	
Financial assets

	 	 	 	 	 	 	 	 	 
	
- variable rate

	 	 	453,767	 	 	 	738,705	 	 	 	748,202	 
	
- fixed rate

	 	 	34,793	 	 	 	36,076	 	 	 	95,554	 
	
- non-interest bearing

	 	 	76,219 	 	 	 	103,766 	 	 	 	198,168 	 
	  	 	 	564,779 	 	 	 	878,547 	 	 	 	1,041,924 	 
	
Financial liabilities

	 	 	 	 	 	 	 	 	 	 	 	 
	
- variable rate

	 	 	2,241,397	 	 	 	3,310,401	 	 	 	2,463,068	 
	
- fixed rate

	 	 	3,287,964	 	 	 	2,709,831	 	 	 	2,709,831	 
	
- non-interest bearing

	 	 	488,543 	 	 	 	495,513 	 	 	 	702,953 	 
	  	 	 	6,017,904 	 	 	 	6,515,745 	 	 	 	5,875,852 	 

If market interest rates had been 2% (2009: 2%) higher or lower the profit or loss and equity of the Company would not have been materially affected (2009: no material effect).

 

Currency risk:

 

All financial instruments are in US dollars with the exception of certain derivatives denominated in Euros and Australian dollars and obligations under finance leases in Euros as well as certain receivables and payables in Euros and Sterling.  Information on the currency derivatives is provided in note 14.  The carrying amounts of other currency denominated monetary assets and liabilities are as follows:

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Euro (liabilities)/assets

	 	 	(116,800	)	 	 	(140,140	)	 	 	9,940	 
	
Sterling liabilities

	 	 	(1,051	)	 	 	(5,149	)	 	 	- 	 

If the functional currency had strengthened or weakened by 10% against Euro then post-tax profit for the year would have been $30,432,000 (2009 restated: $39,657,000) higher or lower.  This is mainly attributable to the change in fair value of currency swaps and forward contracts along with exposure on Euro denominated obligations under finance leases both of which act as an economic hedge of future Euro rentals.

 

 

  

- 29 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

12.          FINANCIAL INSTRUMENTS – continued

 

If the functional currency had strengthened or weakened by 10% against Sterling then post-tax profit for the year would have been $92,000 (2009: $451,000) higher or lower.

 

If the functional currency had strengthened or weakened by 10% against the Australian dollar then post-tax profit for the year would have been $12,964,000 (2009: $11,259,000) higher or lower arising from the change in fair value of forward contracts.

 

	
c

	
FINANCIAL ASSET - CREDIT QUALITY AND CONCENTRATION OF CREDIT RISK:

 

	  	 	 	 	 	
Restated

	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Amounts neither past due nor impaired:

	 	 	 	 	 	 	 	 	 
	
One lessee - a company providing helicopter services

	 	 	417,878 	 	 	 	434,195 	 	 	 	425,641 	 
	
Finance lease receivables and loans receivables

	 	 	417,878	 	 	 	434,195	 	 	 	425,641	 
	
Derivative financial instruments

	 	 	59,338	 	 	 	54,961	 	 	 	172,566	 
	
Group undertakings

	 	 	64,365	 	 	 	335,817	 	 	 	428,055	 
	
Other

	 	 	15,876 	 	 	 	41,929 	 	 	 	9,674 	 
	  	 	 	557,457	 	 	 	866,902	 	 	 	1,035,936	 
	
Amounts where terms have been renegotiated that otherwise would be past due:

	 	 	-	 	 	 	7,385	 	 	 	-	 
	
Amounts past due by:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Less than one month

	 	 	6,978	 	 	 	1,811	 	 	 	1,966	 
	
One to two months

	 	 	253	 	 	 	83	 	 	 	4,022	 
	
More than two months

	 	 	91 	 	 	 	2,366 	 	 	 	- 	 
	  	 	 	7,322 	 	 	 	4,260 	 	 	 	5,988 	 
	
Maximum credit exposure

	 	 	564,779 	 	 	 	878,547 	 	 	 	1,041,924 	 

Based on counterparty payment history the Company considers all the above financial assets to be of good credit quality, except $84,000 (2009: $nil, 2008:$nil) which is in respect of an airline that has filed for bankruptcy and is likely to be impaired.

 

 

  

- 30 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

12.          FINANCIAL INSTRUMENTS – continued

 

 

	
d

	
LIQUIDITY RISK

 

Contractual cash flows payable to maturity on financial liabilities on an undiscounted basis:

 

	  	 	
Less than 1 year

	 	 	
In the 2nd year

	 	 	
3 to 5 years

	 	 	
Over 5 years

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
2010

	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade payables

	 	 	210,307	 	 	 	73,603	 	 	 	93,084	 	 	 	43,251	 
	
Derivative financial instruments

	 	 	88,607	 	 	 	72,568	 	 	 	137,621	 	 	 	10,185	 
	
Obligations under finance leases

	 	 	63,899	 	 	 	68,627	 	 	 	208,552	 	 	 	457,382	 
	
Bank borrowings

	 	 	541,175	 	 	 	615,515	 	 	 	2,830,460	 	 	 	1,904,463	 
	
Capital commitments

	 	 	407,642 	 	 	 	35,081 	 	 	 	3,570,492 	 	 	 	- 	 
	  	 	 	1,311,630 	 	 	 	865,394 	 	 	 	6,840,209 	 	 	 	2,415,281 	 
	
2009

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade payables

	 	 	178,179	 	 	 	58,919	 	 	 	112,471	 	 	 	45,212	 
	
Derivative financial instruments

	 	 	88,355	 	 	 	57,774	 	 	 	130,606	 	 	 	27,819	 
	
Obligations under finance leases

	 	 	65,807	 	 	 	69,563	 	 	 	211,066	 	 	 	535,860	 
	
Bank borrowings

	 	 	583,900	 	 	 	696,865	 	 	 	2,431,814	 	 	 	3,312,100	 
	
Capital commitments

	 	 	600,211 	 	 	 	34,434 	 	 	 	35,212 	 	 	 	3,735,122 	 
	  	 	 	1,516,452 	 	 	 	917,555 	 	 	 	2,921,169 	 	 	 	7,656,113 	 
	
2008

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade payables

	 	 	165,426	 	 	 	84,430	 	 	 	105,572	 	 	 	39,110	 
	
Derivative financial instruments

	 	 	81,266	 	 	 	77,763	 	 	 	176,425	 	 	 	60,867	 
	
Bank borrowings

	 	 	717,722	 	 	 	570,674	 	 	 	2,662,411	 	 	 	3,855,446	 
	
Capital commitments

	 	 	423,807 	 	 	 	112,319 	 	 	 	1,256,317 	 	 	 	3,801,180 	 
	  	 	 	1,388,221 	 	 	 	845,186 	 	 	 	4,200,725 	 	 	 	7,756,603 	 

 

 

  

- 31 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

 

	
13

	
FINANCE LEASE RECEIVABLES

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	
Amounts receivable under finance leases

	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Gross investment in lease:

	 	 	 	 	 	 	 	 	 
	
Within one year:

	 	 	40,847	 	 	 	40,551	 	 	 	39,744	 
	
In the second to fifth years inclusive

	 	 	277,028	 	 	 	254,258	 	 	 	293,343	 
	
After five years

	 	 	190,969 	 	 	 	254,586 	 	 	 	251,936 	 
	  	 	 	508,844	 	 	 	549,395	 	 	 	585,023	 
	
Less: unearned finance income

	 	 	(90,966	)	 	 	(115,200	)	 	 	(195,335	)
	
Present value of minimum lease payments receivable

	 	 	417,878 	 	 	 	434,195 	 	 	 	389,688 	 
	
Present value of minimum lease payments:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Within one year:

	 	 	39,851	 	 	 	18,430	 	 	 	38,174	 
	
In the second to fifth years inclusive

	 	 	235,819	 	 	 	177,860	 	 	 	212,167	 
	
After five years

	 	 	142,208 	 	 	 	237,905 	 	 	 	139,347 	 
	  	 	 	417,878 	 	 	 	434,195 	 	 	 	389,688 	 
	
Analysed as:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Non-current finance lease receivables

	 	 	 	 	 	 	 	 	 	 	 	 
	
- (recoverable after 12 months)

	 	 	378,027	 	 	 	415,765	 	 	 	351,514	 
	
Current finance lease receivables

	 	 	 	 	 	 	 	 	 	 	 	 
	
- (recoverable within 12 months)

	 	 	39,851 	 	 	 	18,430 	 	 	 	38,174 	 
	  	 	 	417,878 	 	 	 	434,195 	 	 	 	389,688 	 

The Company has entered into finance leasing arrangements for aircraft.  The average term of the finance leases entered into is 8 years.

 

Unguaranteed residual values of assets leased under finance leases at the balance sheet date are estimated at $nil (2009: $nil).

 

The interest rate inherent in the leases is determined at the contract date for all the lease term.  The average effective interest rate contracted approximates 5.5% (2009:  5.5%) p.a.

 

	
14

	
DERIVATIVES AT FAIR VALUE

 

All derivatives held at the balance sheet date are with The Royal Bank of Scotland plc, and are in both US Dollars and Euros.  The derivatives held are governed by the International Swap Dealers Association.  All derivatives held are carried at fair value.  The value of derivatives designated as a fair value hedge is $1,163,000 (2009: $nil; 2008: $2,847,000) .  No derivatives are in a cash flow hedge relationship (2009: nil; 2008: nil) .  Interest rate derivatives have an interest rate range from 2.4% to 5.5% (2009: 1.1% to 5.6%; 2008: 1.1% to 5.6%).  The total amount of the change in fair value estimated using a valuation technique recognised in profit or loss during the year was $36,811,000 gain (2009:  $86,112,000 gain) .  The amount of change in the fair value that is not attributable to changes in a benchmark interest rate is nil.

 

 

  

- 32 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

14.          DERIVATIVES AT FAIR VALUE – continued

Derivative Assets

 

	  	 	
Within one year

	 	 	
In the second to fifth years inclusive

	 	 	
After five years

	 	 	
Total Assets

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
2010

	 	 	 	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	-	 	 	 	5,690	 	 	 	5,311	 	 	 	11,001	 
	
Forward contracts

	 	 	562	 	 	 	34,582	 	 	 	111	 	 	 	35,255	 
	
Interest rate swaps

	 	 	2,735 	 	 	 	10,347 	 	 	 	- 	 	 	 	13,082 	 
	  	 	 	3,297 	 	 	 	50,619 	 	 	 	5,422 	 	 	 	59,338 	 
	
2009

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	-	 	 	 	2,397	 	 	 	2,464	 	 	 	4,861	 
	
Forward contracts

	 	 	186	 	 	 	21,508	 	 	 	11	 	 	 	21,705	 
	
Interest rate swaps

	 	 	1,236 	 	 	 	21,177 	 	 	 	5,982 	 	 	 	28,395 	 
	  	 	 	1,422 	 	 	 	45,082 	 	 	 	8,457 	 	 	 	54,961 	 
	
2008

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	-	 	 	 	45,092	 	 	 	99,518	 	 	 	144,610	 
	
Forward contracts

	 	 	-	 	 	 	2,564	 	 	 	-	 	 	 	2,564	 
	
Interest rate swaps

	 	 	- 	 	 	 	20,020 	 	 	 	5,372 	 	 	 	25,392 	 
	  	 	 	- 	 	 	 	67,676 	 	 	 	104,890 	 	 	 	172,566 	 

Derivative Liabilities

 

	  	 	
Within one year

	 	 	
In the second to fifth years inclusive

	 	 	
After five years

	 	 	
Total Liabilities

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
2010

	 	 	 	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	(553	)	 	 	(2,858	)	 	 	-	 	 	 	(3,411	)
	
Forward contracts

	 	 	-	 	 	 	-	 	 	 	(48	)	 	 	(48	)
	
Interest rate swaps

	 	 	(6,389	)	 	 	(28,828	)	 	 	(29,622	)	 	 	(64,839	)
	  	 	 	(6,942	)	 	 	(31,686	)	 	 	(29,670	)	 	 	(68,298	)
	
2009

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	-	 	 	 	(1,577	)	 	 	(16,222	)	 	 	(17,799	)
	
Forward contracts

	 	 	(9	)	 	 	(11,797	)	 	 	(15	)	 	 	(11,821	)
	
Interest rate swaps

	 	 	(4,080	)	 	 	(36,460	)	 	 	(30,572	)	 	 	(71,112	)
	  	 	 	(4,089	)	 	 	(49,834	)	 	 	(46,809	)	 	 	(100,732	)
	
2008

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	-	 	 	 	(103,005	)	 	 	(49,462	)	 	 	(152,467	)
	
Forward contracts

	 	 	-	 	 	 	(12,269	)	 	 	-	 	 	 	(12,269	)
	
Interest rate swaps

	 	 	(744	)	 	 	(1,154	)	 	 	(949	)	 	 	(2,847	)
	
Interest rate swaps in fair value hedge

	 	 	(9,270	)	 	 	(90,529	)	 	 	(41,033	)	 	 	(140,832	)
	  	 	 	(10,014	)	 	 	(206,957	)	 	 	(91,444	)	 	 	(308,415	)

 

 

  

- 33 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

 

Notional Aggregate Principals

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Assets

	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	243,770	 	 	 	266,338	 	 	 	321,781	 
	
Forward contracts

	 	 	194,111	 	 	 	322,426	 	 	 	199,065	 
	
Interest rate swaps

	 	 	460,056 	 	 	 	413,785 	 	 	 	535,525 	 
	
Total aggregate principal

	 	 	897,937 	 	 	 	1,002,549 	 	 	 	1,056,371 	 
	
Liabilities

	 	 	 	 	 	 	 	 	 	 	 	 
	
Currency swaps

	 	 	(234,874	)	 	 	(296,330	)	 	 	(326,663	)
	
Forward contracts

	 	 	(139,088	)	 	 	(249,312	)	 	 	(125,490	)
	
Interest rate swaps

	 	 	(1,236,718	)	 	 	(343,606	)	 	 	(1,255,029	)
	
Total aggregate principal

	 	 	(1,610,680	)	 	 	(889,248	)	 	 	(1,707,182	)

The above table shows the total notional aggregate principal of the derivatives at fair value.

 

	
15

	
LOANS RECEIVABLE

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Amounts due from group undertakings

	 	 	37,493	 	 	 	-	 	 	 	-	 
	
Other loans

	 	 	- 	 	 	 	- 	 	 	 	35,953 	 
	  	 	 	37,493 	 	 	 	- 	 	 	 	35,953 	 

	
16

	
TRADE AND OTHER RECEIVABLES

 

	  	 	 	 	 	
Restated

	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Trade debtors

	 	 	7,322	 	 	 	11,645	 	 	 	7,395	 

 

 

 

  

- 34 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

16.          TRADE AND OTHER RECEIVABLES – continued

 

	  	 	 	 	 	 	 	 	 	 
	
Amounts due from group undertakings

	 	 	173	 	 	 	206	 	 	 	9,940	 
	
Other debtors

	 	 	9,386 	 	 	 	36,954 	 	 	 	8,267 	 
	  	 	 	16,881 	 	 	 	48,805 	 	 	 	25,602 	 

	
17

	
CASH AND CASH EQUIVALENTS

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Bank account

	 	 	6,490	 	 	 	4,975	 	 	 	-	 
	
Bank account with group undertakings

	 	 	11,810	 	 	 	8,657	 	 	 	-	 
	
Short term deposits with group undertakings

	 	 	14,889 	 	 	 	326,954 	 	 	 	418,115 	 
	  	 	 	33,189 	 	 	 	340,586 	 	 	 	418,115 	 

	
18

	
ASSETS HELD FOR SALE

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Property, plant and equipment

	 	 	- 	 	 	 	- 	 	 	 	38,145 	 

	
19

	
TRADE AND OTHER PAYABLES

 

	  	 	 	 	 	
Restated

	 	 	
Restated

	 
	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Customer deposits

	 	 	229,614	 	 	 	204,721	 	 	 	180,285	 
	
Payments received on account

	 	 	5,403	 	 	 	4,926	 	 	 	4,567	 
	
Trade creditors

	 	 	11	 	 	 	49	 	 	 	-	 
	
Amounts due to group undertakings

	 	 	60,202	 	 	 	24,223	 	 	 	34,075	 
	
Other creditors

	 	 	125,015	 	 	 	160,862	 	 	 	175,611	 
	  	 	 	420,245 	 	 	 	394,781 	 	 	 	394,538 	 
	
Analysed as:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Non-current trade and other –

	 	 	 	 	 	 	 	 	 	 	 	 
	
payables (payable after 12 months)

	 	 	209,938	 	 	 	216,602	 	 	 	229,112	 
	
Current trade and other –

	 	 	 	 	 	 	 	 	 	 	 	 
	
payables (payable within 12 months)

	 	 	210,307 	 	 	 	178,179 	 	 	 	165,426 	 
	  	 	 	420,245 	 	 	 	394,781 	 	 	 	394,538 	 

 

 

  

- 35 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

 

	
20

	
OBLIGATIONS UNDER FINANCE LEASES

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	
Amounts payable under finance leases

	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Minimum lease payments:

	 	 	 	 	 	 	 	 	 
	
Within one year

	 	 	63,899	 	 	 	65,807	 	 	 	-	 
	
In the second to fifth years inclusive

	 	 	277,179	 	 	 	280,629	 	 	 	-	 
	
After five years

	 	 	457,382 	 	 	 	535,860 	 	 	 	- 	 
	  	 	 	798,460	 	 	 	882,296	 	 	 	-	 
	
Less: future finance charges

	 	 	(183,752	)	 	 	(220,349	)	 	 	- 	 
	
Present value of lease obligations

	 	 	614,708 	 	 	 	661,947 	 	 	 	- 	 
	
Present value of minimum lease payments:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Within one year

	 	 	62,268	 	 	 	45,198	 	 	 	-	 
	
In the second to fifth years inclusive

	 	 	239,109	 	 	 	196,317	 	 	 	-	 
	
After five years

	 	 	313,331 	 	 	 	420,432 	 	 	 	- 	 
	  	 	 	614,708 	 	 	 	661,947 	 	 	 	- 	 
	
Analysed as:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Amounts due within 12 months

	 	 	62,268	 	 	 	45,198	 	 	 	-	 
	
Amounts due after 12 months

	 	 	552,440 	 	 	 	616,749 	 	 	 	- 	 
	  	 	 	614,708 	 	 	 	661,947 	 	 	 	- 	 

During the year the company leased a number of its aircraft under finance leases.  The average lease term is 11 years.  The average effective borrowing rate is 5.1% (2009:  5.1%)

 

	
21

	
BORROWINGS

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Bank overdraft due to group undertakings

	 	 	-	 	 	 	-	 	 	 	6,014	 
	
Loan amount due to third party

	 	 	5,813	 	 	 	5,549	 	 	 	5,305	 
	
Loan amount due to group undertakings

	 	 	4,908,840 	 	 	 	5,352,736 	 	 	 	5,161,580 	 
	  	 	 	4,914,653 	 	 	 	5,358,285 	 	 	 	5,172,899 	 
	
The borrowings are repayable as follows:

	 	 	 	 	 	 	 	 	 	 	 	 
	
On demand or within one year

	 	 	435,270	 	 	 	429,402	 	 	 	412,151	 
	
In the second year

	 	 	495,967	 	 	 	476,613	 	 	 	403,330	 
	
In the third to fifth year inclusive

	 	 	2,486,114	 	 	 	1,931,379	 	 	 	1,883,095	 
	
After five years

	 	 	1,497,302 	 	 	 	2,520,891 	 	 	 	2,474,323 	 
	  	 	 	4,914,653	 	 	 	5,358,285	 	 	 	5,172,899	 
	
Less: Amounts due for settlement within 12 months

	 	 	(435,270	)	 	 	(429,402	)	 	 	(412,151	)
	
Amounts due for settlement after 12 months

	 	 	4,479,383 	 	 	 	4,928,883 	 	 	 	4,760,748 	 

 

 

 

  

- 36 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

  

NOTES TO THE FINANCIAL STATEMENTS

21.          BORROWINGS – continued

 

A right of set-off exists over the Company's bank account with The Royal Bank of Scotland plc against advances made to the Company's immediate holding company and its subsidiaries.

 

The effective interest rate on the loan is 4.2% (2009: 3.1%) p.a.

 

	
22

	
DEFERRED TAX

 

	  	 	
Deferred taxation

	 
	  	 	
$'000

	 
	
Movements during the year:

	 	 	 
	
At 1 January 2009 - restated

	 	 	99,588	 
	
Charge to statement of comprehensive income

	 	 	21,361 	 
	
At 1 January 2010 - restated

	 	 	120,949	 
	
Charge to statement of comprehensive income

	 	 	25,888 	 
	
At 31 December 2010

	 	 	146,837 	 

Full provision has been made for the potential amount of deferred taxation shown below:

 

	  	 	
2010

	 	 	
Restated 2009

	 	 	
Restated 2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Accelerated capital allowances on assets financed less carried forward tax losses

	 	 	149,407	 	 	 	114,010	 	 	 	96,036	 
	
Other temporary differences

	 	 	(2,570	)	 	 	6,939 	 	 	 	3,552 	 
	  	 	 	146,837 	 	 	 	120,949 	 	 	 	99,588 	 

	
23

	
SHARE CAPITAL

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	$	 	 	 	$	 	 	 	$	 	 
	
Ordinary shares of $1

	 	 	 	 	 	 	 	 	 	 	 	 
	
Authorised:

	 	 	10,000,000 	 	 	 	10,000,000 	 	 	 	10,000,000 	 
	
Issued, called up and fully paid:

	 	 	500,002 	 	 	 	500,002 	 	 	 	500,002 	 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	
Number of shares

	 	 	 	 	 	 	 	 	 
	
Authorised:

	 	 	10,000,000 	 	 	 	10,000,000 	 	 	 	10,000,000 	 
	
Issued, called up and fully paid:

	 	 	500,002 	 	 	 	500,002 	 	 	 	500,002 	 

 

 

  

- 37 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

  

NOTES TO THE FINANCIAL STATEMENTS

23.          SHARE CAPITAL – continued

 

The Company has one class of ordinary voting shares which carry no right to fixed income.

 

	
24

	
OTHER RESERVES

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	$	 	 	 	$	 	 	 	$	 	 
	
Capital contribution

	 	 	65,000 	 	 	 	65,000 	 	 	 	65,000 	 

In 2002 the Company's immediate parent company International Aviation Management (CI) Limited made a non-repayable capital contribution of $65,000,000 to the Company.  The contribution was made absolutely and International Aviation Management (CI) Limited retain no rights, titles or interest whatsoever in the contribution other than the rights it holds as the sole shareholder.

 

	
25

	
OPERATING LEASE ARRANGEMENTS

 

The future minimum lease payments receivable under non-cancellable operating leases are as follows:

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Within one year

	 	 	586,961	 	 	 	635,347	 
	
In the second to fifth years inclusive

	 	 	1,867,783	 	 	 	2,021,715	 
	
After five years

	 	 	419,774 	 	 	 	711,320 	 
	  	 	 	2,874,518 	 	 	 	3,368,382 	 

	
26

	
RELATED PARTIES

 

The Company's immediate parent company is International Aviation Management (CI) Limited, a company registered in the Cayman Islands.

 

The Company's ultimate holding company is The Royal Bank of Scotland Group plc, a company incorporated in Great Britain and registered in Scotland.

 

On 1 December 2008, the UK Government through HM Treasury became the ultimate controlling party of The Royal Bank of Scotland Group plc.  The UK Government's shareholding is managed by UK Financial Investments Limited, a company wholly owned by the UK Government.

 

As at 31 December 2010, The Royal Bank of Scotland Group plc heads the largest group in which the Company is consolidated and The Royal Bank of Scotland plc heads the smallest group in which the Company is consolidated.  Copies of the consolidated accounts of both companies may be obtained from The Secretary, The Royal Bank of Scotland Group plc, Gogarburn, PO Box 1000, Edinburgh EH12.

 

  

- 38 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

26.          RELATED PARTIES – continued

 

RELATED PARTY TRANSACTIONS

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
The Royal Bank of Scotland plc

	 	 	 	 	 	 
	
Transactions during the period:

	 	 	 	 	 	 
	
Fees payable to related party

	 	 	8,882	 	 	 	2,852	 
	
Management charge payable to related party

	 	 	3,667	 	 	 	3,538	 
	
Interest on loan payable to related party

	 	 	220,971	 	 	 	236,901	 
	
Additional borrowing from related party

	 	 	-	 	 	 	(191,400	)
	
Loan repaid to related party

	 	 	443,631 	 	 	 	- 	 
	
Balances at year end:

	 	 	 	 	 	 	 	 
	
Bank account

	 	 	11,810	 	 	 	8,657	 
	
Outstanding balance owed to related party

	 	 	(4,953,980	)	 	 	(5,049,793	)
	
RBS Aerospace Ireland Leasing 2 Limited

	 	 	 	 	 	 	 	 
	
Transactions during the period:

	 	 	 	 	 	 	 	 
	
Interest on loan paid by related party

	 	 	35	 	 	 	-	 
	
Purchase of aircraft from related party

	 	 	37,639 	 	 	 	- 	 
	
Balances at year end

	 	 	 	 	 	 	 	 
	
Loan amount owing by related party

	 	 	37,493	 	 	 	-	 
	
Outstanding balance owed to related party

	 	 	(37,793	)	 	 	- 	 
	
Lombard Ireland Limited

	 	 	 	 	 	 	 	 
	
Transactions during the period:

	 	 	 	 	 	 	 	 
	
Group relief received

	 	 	- 	 	 	 	9,831 	 

The amounts outstanding are unsecured and will be settled in cash.  No guarantees have been given or received.  No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

 

RBS Aerospace Ireland Leasing 2 Limited is a subsidiary of the Company.  The Royal Bank of Scotland plc and Lombard Ireland Limited are fellow subsidiaries of the ultimate holding company The Royal Bank of Scotland Group plc.

 

In addition to the UK Government's shareholding in the Group, the UK Government and UK Government controlled bodies may hold debt securities, subordinated liabilities and other liabilities or shares issued by the Group in the normal course of business.  It is not practicable to ascertain and disclose these amounts.  Certain of the liability balances are secured.  No impairment losses were recognised by the Company in the year in respect of balances with UK Government and affiliated bodies.

 

Key management personnel of the Company comprise the directors of the Company and details of their remuneration are set out in note 7.

 

 

  

- 39 -

  

 

	
RBS AEROSPACE LIMITED

	
Registration number: 0270775

 

NOTES TO THE FINANCIAL STATEMENTS

 

	
27

	
CAPITAL COMMITMENTS

 

At 31 December 2010 the company was authorised and committed to pay $4,013 million (2009: $4,405 million) for aircraft.

 

	
28

	
POST BALANCE SHEET EVENT

 

On 10 March 2011 finance lease receivables with a book value of $375 million were transferred to another Group company for a consideration of $375 million.

 

 

  

- 40 -

  

 

 

 

	  
	
Company Registered No:  04985584

 

 

 

 

 

 

RBS AEROSPACE (UK) LIMITED

 

 

 

DIRECTORS' REPORT AND FINANCIAL STATEMENTS

 

For the year ended 31 December 2010

	  	
 

	  

 

 

 

 

Group Secretariat

The Royal Bank of Scotland Group plc

PO Box 1000

Gogarburn

Edinburgh

EH12 1HQ

 

 

  

  

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

 

	
DIRECTORS' REPORT AND FINANCIAL STATEMENTS 2010

	 
	
CONTENTS

	
Page

	 	 
	
Officers and professional advisers

	
2

	 	 
	
Directors' report

	
3

	 	 
	
Independent auditor's report

	
7

	 	 
	
Statement of comprehensive income

	
9

	 	 
	
Balance sheet

	
10

	 	 
	
Statement of changes in equity

	
12

	 	 
	
Cash flow statement

	
13

	 	 
	
Notes to the financial statements

	
14

 

 

  

1

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

OFFICERS AND PROFESSIONAL ADVISERS

 

	
DIRECTORS:

	
P Barrett

	  	
S J Caterer

	  	
D A Duke (Alternate)

	  	
J E Oliver (Alternate)

	  	
G C Petken

	 	 
	
SECRETARY:

	
C J Whittaker

	 	 
	
REGISTERED OFFICE:

	
The Quadrangle

	  	
The Promenade

	  	
Cheltenham, Gloucestershire

	  	
GL50 1PX

	 	 
	
AUDITOR:

	
Deloitte LLP

	  	
3 Rivergate

	  	
Temple Quay

	  	
Bristol

	  	
BS1 6GD

Registered in England and Wales

 

 

  

2

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

DIRECTORS' REPORT

 

The directors present their report and the audited financial statements for the year ended 31 December 2010.

 

ACTIVITIES AND BUSINESS REVIEW

 

Activity

 

The principal activity of the company continues to be the provision of fixed asset finance usually involving individually structured facilities.

 

The Company's activities are undertaken predominantly in US Dollars and this is the functional currency.  The financial statements are therefore presented in US Dollars.

 

The company is a subsidiary of The Royal Bank of Scotland Group plc which provides the company with direction and access to all central resources it needs and determines policies in all key areas such as finance, risk, human resources or environment.  For this reason, the directors believe that performance indicators specific to the company are not necessary or appropriate for an understanding of the development, performance or position of the business.  The annual reports of The Royal Bank of Scotland Group plc review these matters on a group basis.  Copies can be obtained from Group Secretariat, RBS Gogarburn, Edinburgh, EH12 1HQ, the Registrar of Companies or through the group's website at rbs.com.

 

Review of the year

 

Business review

 

The directors are satisfied with the company's performance in the year.  The company will be guided by its shareholders in seeking further opportunities for growth.  Post balance sheet events are described in note 26 to the financial statements.

 

During the year, the company terminated a finance lease (note 11).  The company also changed the way it accounts for depreciation and maintenance.  The purpose of the change is to:

 

	
·

	
more accurately reflect the economic outcomes of operating leases through the statement of comprehensive income

 

	
·

	
more closely align accounting treatment with industry practices

 

	
·

	
enhance the comparability of its financial statements to other lessors

 

The overall effects of the new accounting treatments are to increase retained profit by $5,968,000 in 2010 (2009:  $135,000 and 2008:  $2,000).  More information is shown in note 1.

 

 

  

3

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

DIRECTORS' REPORT (continued)

 

 

Financial performance

 

The company's financial performance is presented in the statement of comprehensive income.

 

Income fell by $2,134,000 (2009:  grew by $9,900,000) and the profit for the year was $13,848,000 (2009:  $4,575,000), an increase of 203% over 2009.  No dividend in respect of 2010 is proposed (2009:  $nil).

 

At the end of the year, the balance sheet showed total assets of $463,521,000 (2009:  $477,783,000), including income-generating assets comprising finance lease receivables of $nil (2009:  $17,521,000) and property, plant and equipment with net book value of $416,780,000 compared with $424,382,000 at the end of 2009.  Together, this represents a decrease of 6%.  Total equity was $22,447,000 (2009:  $8,599,000).

 

Principal risks and uncertainties

 

The company is funded by facilities from The Royal Bank of Scotland plc.

 

The company's financial risk management objectives and policies regarding the use of financial instruments are set out in note 22 to these financial statements.

 

The company seeks to minimise its exposure to external financial risks other than equity and credit risk, further information on financial risk management policies and exposures is disclosed in notes 2 and 22.  It also has exposure to asset risk on the residual value of property, plant and equipment.  For more details see note 1(h).

 

The airline industry is cyclical and highly competitive.  Most of the Company's aircraft are under operating leases where the cost of the aircraft is not fully recovered over the term of the lease.  The oversupply of a specific type of aircraft in the market could depress aircraft lease rates and values, which would affect re-lease rates.  The supply and demand of aircraft is affected by various cyclical factors including:

 

	
·

	
Passenger air travel and air cargo demand

 

	
·

	
Fuel prices

 

	
·

	
Maintenance costs

 

	
·

	
Technological innovation and the introduction of new generation aircraft types

 

	
·

	
Government and environmental regulations

 

Going concern

 

The directors, having a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future, have prepared the financial statements on a going concern basis.

 

 

  

4

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

DIRECTORS' REPORT (continued)

 

 

DIRECTORS AND SECRETARY

 

The present directors and secretary, who have served throughout the year except where noted below, are listed on page 2.

 

From 1 January 2010 to date the following changes have taken place:

 

	  	
Appointed

	
Resigned

	
Directors

	  	  
	
DA Duke

	
16 November 2010

	  
	
I M Merriman

	  	
16 November 2010

	
J E Blakemore

	  	
23 March 2011

	
G C Petken

	
23 March 2011

	  
	
J E Oliver

	
7 April 2011

	  

DIRECTORS' RESPONSIBILITIES STATEMENT

 

The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the directors to prepare a directors' report and financial statements for each financial year and the directors have elected to prepare them in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union.  Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs at the end of the year and the profit or loss for the financial year of the company.  In preparing these financial statements, under International Accounting Standard 1, the directors are required to:

 

	
·

	
select suitable accounting policies and then apply them consistently;

 

	
·

	
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;

 

	
·

	
provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions of the entity's financial position and performance; and

 

	
·

	
make an assessment of the company's ability to continue as a going concern.

 

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and to enable them to ensure that the directors' report and financial statements comply with the requirements of the Companies Act 2006.  They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

 

  

5

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

DIRECTORS' REPORT (continued)

 

 

DISCLOSURE OF INFORMATION TO AUDITOR

 

Each of the directors at the date of approval of this report confirms that:

 

	
·

	
so far as they are aware, there is no relevant audit information of which the company's auditor is unaware; and

 

	
·

	
the director has taken all the steps that they ought to have taken to make themselves aware of any relevant audit information, and to establish that the company's auditor is aware of that information.

 

This confirmation is given and shall be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

 

AUDITOR

 

Deloitte LLP have expressed their willingness to continue in office as auditor.

 

Approved by the Board of Directors and signed on behalf of the Board

 

 

______________________________________

G C Petken

Director

Date:  08 July 2011

 

 

  

6

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF RBS AEROSPACE (UK) LIMITED

 

We have audited the financial statements of RBS Aerospace (UK) Limited ("the company") for the year ended 31 December 2010 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the cash flow statement and the related notes 1 to 26.  The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.  Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.

 

Respective responsibilities of directors and auditor

 

As explained more fully in the Directors' Responsibilities Statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.  Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland).  Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.

 

Scope of the audit of the financial statements

 

An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error.  This includes an assessment of:  whether the accounting policies are appropriate to the company's circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements.  In addition, we read all of the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements.  If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

 

Opinion on financial statements

 

In our opinion the financial statements:

 

	
·

	
give a true and fair view of the state of the company's affairs as at 31 December 2010 and of its profit for the year then ended;

 

	
·

	
have been properly prepared in accordance with IFRSs as adopted by the European Union; and

 

	
·

	
have been prepared in accordance with the requirements of the Companies Act 2006.

 

 

  

7

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF RBS AEROSPACE (UK) LIMITED (continued)

 

 

Opinion on other matter prescribed by the Companies Act 2006

 

In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

 

Matters on which we are required to report by exception

 

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:

 

	
·

	
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or

 

	
·

	
the financial statements are not in agreement with the accounting records and returns; or

 

	
·

	
certain disclosures of directors' remuneration specified by law are not made; or

 

	
·

	
we have not received all the information and explanations we require for our audit.

 

 

Simon Cleveland (Senior Statutory Auditor)

for and on behalf of Deloitte LLP

Chartered Accountants and Statutory Auditor,

Bristol, United Kingdom

Date:

 

 

  

8

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2010

 

	
Continuing operations

	 	
Notes

	 	 	
2010

	 	 	
(restated) (note 1) 2009

	 
	  	 	 	 	 	
$'000

	 	 	
$'000

	 
	
Revenue

	 	 	3	 	 	 	37,636	 	 	 	39,770	 
	
Cost of sales

	 	 	 	 	 	 	(7,689	)	 	 	(16,087	)
	
Operating income

	 	 	4	 	 	 	4	 	 	 	6	 
	
Operating expenses

	 	 	5	 	 	 	(543	)	 	 	(2,268	)
	
Operating profit

	 	 	 	 	 	 	29,408	 	 	 	21,421	 
	
Finance costs

	 	 	6	 	 	 	(12,285	)	 	 	(15,066	)
	
Profit before tax

	 	 	7	 	 	 	17,123	 	 	 	6,355	 
	
Tax charge

	 	 	8	 	 	 	(3,275	)	 	 	(1,780	)
	
Profit and total comprehensive income for the year

	 	 	 	 	 	 	13,848	 	 	 	4,575	 

The accompanying notes form an integral part of these financial statements.

 

 

  

9

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

BALANCE SHEET

as at 31 December 2010

 

	  	 	
Notes

	 	 	
2010

	 	 	
(restated) (note 1) 2009

	 	 	
(restated) (note 1) 2008

	 
	  	 	 	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Non-current assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Property, plant and equipment

	 	 	9	 	 	 	416,780	 	 	 	424,382	 	 	 	325,763	 
	
Investments in subsidiaries

	 	 	10	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Finance lease receivables

	 	 	11	 	 	 	-	 	 	 	15,828	 	 	 	15,835	 
	  	 	 	 	 	 	 	416,780	 	 	 	440,210	 	 	 	341,598	 
	
Current assets

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Finance lease receivables

	 	 	11	 	 	 	-	 	 	 	1,693	 	 	 	1,277	 
	
Loans and receivables

	 	 	13	 	 	 	45,660	 	 	 	30,700	 	 	 	21,000	 
	
Trade and other receivables

	 	 	14	 	 	 	167	 	 	 	4	 	 	 	26	 
	
Prepayments, accrued income and other assets

	 	 	15	 	 	 	914	 	 	 	3,940	 	 	 	753	 
	
Cash

	 	 	16	 	 	 	-	 	 	 	1,236	 	 	 	6,207	 
	
Total assets

	 	 	 	 	 	 	463,521	 	 	 	477,783	 	 	 	370,861	 
	
Liabilities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Current liabilities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings from group undertakings

	 	 	17	 	 	 	16,376	 	 	 	8,980	 	 	 	9,501	 
	
Trade and other payables

	 	 	18	 	 	 	3,086	 	 	 	2,991	 	 	 	2,903	 
	
Obligations under finance leases

	 	 	19	 	 	 	4,464	 	 	 	4,247	 	 	 	-	 
	
Accruals, deferred income and other liabilities

	 	 	20	 	 	 	870	 	 	 	424	 	 	 	1,058	 
	  	 	 	 	 	 	 	24,796	 	 	 	16,642	 	 	 	13,462	 
	
Non-current liabilities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings from group undertakings

	 	 	17	 	 	 	318,126	 	 	 	360,672	 	 	 	323,293	 
	
Trade and other payables

	 	 	18	 	 	 	3,924	 	 	 	1,883	 	 	 	7,495	 
	
Obligations under finance leases

	 	 	19	 	 	 	53,235	 	 	 	57,406	 	 	 	-	 
	
Deferred tax liability

	 	 	21	 	 	 	40,993	 	 	 	32,581	 	 	 	22,587	 
	
Total liabilities

	 	 	 	 	 	 	441,074	 	 	 	469,184	 	 	 	366,837	 
	
Equity

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Share capital

	 	 	23	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Retained earnings

	 	 	 	 	 	 	22,447	 	 	 	8,599	 	 	 	4,024	 
	
Total equity

	 	 	 	 	 	 	22,447	 	 	 	8,599	 	 	 	4,024	 
	
Total liabilities and equity

	 	 	 	 	 	 	463,521	 	 	 	477,783	 	 	 	370,861	 

The accompanying notes form an integral part of these financial statements.

 

  

10

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

BALANCE SHEET - continued

as at 31 December 2010

 

 

 

The financial statements of were approved by the Board of directors on 08 July 2011 and signed on its behalf by:

 

 

________________________________

G C Petken

Director

 

 

  

11

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

 

STATEMENT OF CHANGES IN EQUITY

for the year ended 31 December 2010

 

	  	 	
Share capital

	 	 	
Retained earnings

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Balance at 31 December 2008 as previously reported

	 	 	-	 	 	 	4,022	 	 	 	4,022	 
	
Change in accounting policy for maintenance contributions

	 	 	-	 	 	 	2	 	 	 	2	 
	
At 31 December 2008 as restated

	 	 	-	 	 	 	4,024	 	 	 	4,024	 
	
Profit for the year

	 	 	-	 	 	 	4,575	 	 	 	4,575	 
	
At 31 December 2009 as restated

	 	 	-	 	 	 	8,599	 	 	 	8,599	 
	
Profit for the year

	 	 	-	 	 	 	13,848	 	 	 	13,848	 
	
At 31 December 2010

	 	 	-	 	 	 	22,447	 	 	 	22,447	 

Total comprehensive income for the year of $13,848,000 (2009:  $4,575,000) was wholly attributable to the owners of the company.

 

The accompanying notes form an integral part of these financial statements.

 

 

  

12

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

CASH FLOW STATEMENT

for the year ended 31 December 2010

 

	  	
Notes

	 	
2010

	 	 	
2009

	 
	  	  	 	
$'000

	 	 	
$'000

	 
	
Operating activities

	  	 	 	 	 	 	 
	
Profit for the year before tax

	  	 	 	17,123	 	 	 	6,355	 
	
Adjustments for:

	  	 	 	 	 	 	 	 	 
	
Depreciation

	  	 	 	7,689	 	 	 	16,087	 
	
Finance costs

	  	 	 	12,285	 	 	 	15,066	 
	
Operating cash flows before movements in working capital

	  	 	 	37,097	 	 	 	37,508	 
	
Decrease/(increase) in finance lease receivables

	  	 	 	17,521	 	 	 	(409	)
	
Increase in trade and other receivables

	  	 	 	(162	)	 	 	(4	)
	
Decrease/(increase) in prepayments, accrued income and other assets

	  	 	 	53	 	 	 	(321	)
	
Increase/(decrease) in trade and other payables

	  	 	 	2,136	 	 	 	(5,522	)
	
Net cash from operating activities before tax

	  	 	 	56,645	 	 	 	31,252	 
	
Tax received from group undertaking – fellow subsidiary company

	  	 	 	8,110	 	 	 	5,373	 
	
Net cash flows from operating activities

	  	 	 	64,755	 	 	 	36,625	 
	
Cash flows from investing activities

	  	 	 	 	 	 	 	 	 
	
Proceeds from disposal of property, plant and equipment

	  	 	 	-	 	 	 	79,172	 
	
Purchases of property, plant and equipment

	  	 	 	(87	)	 	 	(193,878	)
	
Net cash flows used by investing activities

	  	 	 	(87	)	 	 	(114,706	)
	
Cash flows from financing activities

	  	 	 	 	 	 	 	 	 
	
Proceeds from new borrowings from group undertaking – immediate parent company

	  	 	 	-	 	 	 	36,858	 
	
Repayment of borrowings to group undertaking – immediate parent company

	  	 	 	(35,216	)	 	 	-	 
	
(Repayment of)/proceeds from finance lease funding

	  	 	 	(3,954	)	 	 	61,653	 
	
Interest paid to group undertaking – immediate parent company

	  	 	 	(11,840	)	 	 	(15,701	)
	
Net cash flows (used by)/from financing activities

	  	 	 	(51,010	)	 	 	82,810	 
	
Net increase in cash and cash equivalents

	  	 	 	13,658	 	 	 	4,729	 
	
Cash and cash equivalents at beginning of year

	  	 	 	31,936	 	 	 	27,207	 
	
Cash and cash equivalents at end of year

	
16

	 	 	45,594	 	 	 	31,936	 

The accompanying notes form an integral part of these financial statements.

 

 

  

13

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

 

	
1.

	
Accounting policies

 

	
a)

	
Presentation of accounts

 

The accounts are prepared on a going concern basis and in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB as adopted by the European Union (EU) (together IFRS).

 

The company is incorporated in the UK and registered in England and Wales.

 

The accounts are prepared on the historical cost.

 

The company's accounts are presented in accordance with the Companies Act 2006.

 

Adoption of new and revised standards

 

There are a number of changes to IFRS that were effective from 1 January 2010.  They have had no material effect on the company's financial statements for the year ended 31 December 2010.

 

	
b)

	
Change in accounting policy

 

In conjunction with a re-assessment of useful economic lives of aircraft under operating lease (as set out below), the company has changed its accounting policy with respect to the treatment of maintenance contributions received from lessees.  The company previously deferred such contributions in the balance sheet until the earlier of utilisation for maintenance events or disposal of the aircraft.  The new policy includes an assessment of whether the company takes any risk in respect of the maintenance of each leased asset.  For those "on-risk" assets, maintenance payments received are recorded in income and the major maintenance components of each aircraft are identified separately within property, plant and equipment.

 

The directors believe that the revised policy provides more relevant information as it better reflects the company's economic position with regards to these amounts.

 

The effect of the new policy is to increase revenue by $175,000 in 2010 (2009:  $188,000 and 2008:  $3,000) and increase tax by $49,000 (2009:  $53,000 and 2008:  $1,000).  The overall effect of the new policy is to increase retained profit by $126,000 in 2010 (2009:  $135,000 and 2008:  $2,000).  Balance sheet amounts and opening reserves have been revised accordingly.

 

	
c)

	
Change in accounting estimate

 

On 1 January 2010, the company has changed its accounting estimate with respect to the treatment of depreciation on property, plant and equipment.  The company has reviewed the estimate used to calculate the useful economic life of the assets held for operating lease to better reflect the expected use of the assets.  Useful economic lives

 

 

  

14

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
c)

	
Change in accounting estimate - continued

 

of the operating lease assets are now shorter and as such the residual values have also been reassessed.

 

Changes in 2010 estimates of residual values and useful economic lives are accounted for prospectively under IAS 16.  The effect of these changes in estimate for the year ending 2010 is to decrease cost of sales by $8,003,000 and increase the tax charge by $2,161,000, increasing profit by $5,842,000 from what it would have been using the old estimates.

 

	
d)

	
Consolidated financial statements

 

The financial statements contain information about RBS Aerospace (UK) Limited as an individual company and do not contain consolidated financial information as the parent of a group.  The company is exempt under IAS 27 Consolidated and Separate Financial Statements and section 400 of the Companies Act 2006 from the requirement to prepare consolidated financial statements as the company and its subsidiaries are included by full consolidation in the IFRS consolidated financial statements of its parent, The Royal Bank of Scotland Group plc, a public company registered in Scotland.

 

	
e)

	
Foreign currencies

 

The company's financial statements are presented in US dollars which is the functional currency of the company.

 

	
f)

	
Revenue recognition

 

Revenue from finance leases, operating leases and loans and receivables is recognised in accordance with the company's policies on leases and loans and receivables (see below).  Revenue arises in the United Kingdom from continuing activities.

 

Finance lease income is allocated to accounting periods so as to give a constant periodic rate of return before tax on the net investment.  Unguaranteed residual values are subject to regular review to identify potential impairment.  If there has been a reduction in the estimated unguaranteed residual value, the income allocation is revised and any reduction in respect of amounts accrued is recognised immediately.

 

Rental income from operating leases is credited to the income statement on a receivable basis over the term of the lease.

 

The terms of aircraft operating leases are assessed at the outset of each lease to determine whether the Company has the majority of the risk in connection with the maintenance of the asset ("on-risk"), or whether the economic risk is passed to the Lessee ("off-risk").  Any maintenance payments which are received from Lessees through the life of the lease are recorded immediately as income for "on-risk" leases.  For "off-risk" leases, such payments are deferred on the balance sheet until they utilised to cover maintenance spending and the Company recognises as revenue all maintenance receipts not expected to be repaid to the Lessee.

 

 

  

15

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
f)

	
Revenue recognition - continued

 

 

Fee income and interest on hire purchase agreements are credited to profit or loss in proportion to the balances outstanding.

 

Interest income on financial assets that are classified as loans and receivables is determined using the effective interest method.  The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability (or group of financial assets or liabilities) and of allocating the interest income or interest expense over the expected life of the asset or liability.

 

	
g)

	
Taxation

 

Provision is made for taxation at current enacted rates on taxable profits, arising in income or in equity, taking into account relief for overseas taxation where appropriate.  Deferred taxation is accounted for in full for all temporary differences between the carrying amount of an asset or liability for accounting purposes and its carrying amount for tax purposes, except in relation to overseas earnings where remittance is controlled by the company.

 

Deferred tax assets are only recognised to the extent that it is probable that they will be recovered.

 

	
h)

	
Property, plant and equipment

 

Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.  Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for separately.

 

Depreciation is charged to profit or loss on a straight-line basis so as to write-off the depreciable amount of property, plant and equipment (including assets owned and let on operating leases) over their estimated useful lives.

 

The depreciable amount is the cost of an asset less its residual value.  Estimated useful lives are as follows:

 

	
Aircraft for hire under operating lease

	
– 5 to 15 years from date of manufacture

	
Office equipment and fixture & fittings

	
– 3 to 10 years from date when brought into use

Aircraft held for hire under operating leases are assessed to determine whether they are "on-risk" or "off-risk" for maintenance, as set out in the policy for lease income.  For those leases which are "off-risk", the aircraft is recorded as one asset and depreciated to its residual value as set out below.  The cost of assets owned for operating leases where the company is "on-risk" for maintenance are separated into components representing the prepaid maintenance of the engines, airframe overhaul and underlying airframe.  Maintenance components are amortised over the period from purchase to the next expected maintenance event for that component.

 

 

  

16

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
h)

	
Property, plant and equipment - continued

 

 

Subsequent expenditure on maintenance is capitalised and depreciated over the period to the next maintenance or the end of the useful economic life.

 

Estimated residual values are reviewed annually at each period end, with reference to current market conditions and the expected maintenance condition of the asset at the end of the useful economic life.  Where estimated residual values are found to have changed significantly, this is recorded prospectively as a change in estimate and depreciation charges over the remaining useful life are adjusted to take account of the revised estimate.

 

	
i)

	
Impairment of property, plant and equipment

 

At each reporting date, the company assesses whether there is any indication that its property, plant and equipment are impaired.  If any such indication exists, the company estimates the recoverable amount of the asset and the impairment loss if any.

 

	
j)

	
Shares in group undertakings

 

Investments in group undertakings are stated at cost less any impairment.

 

	
k)

	
Leases

 

Contracts to lease assets are classified as finance leases if they transfer substantially all the risks and rewards of ownership of the asset to the customer.  Other contracts to lease assets are classified as operating leases.

 

Finance lease receivables are stated in the balance sheet at the amount of the net investment in the lease being the minimum lease payments and any unguaranteed residual value discounted at the interest rate implicit in the lease.

 

Operating lease assets are included within Property, plant and equipment and depreciated over their useful lives (see note 9).

 

	
l)

	
Financial assets

 

On initial recognition, financial assets are classified into held-to-maturity investments; loans and receivables; held-for-trading; designated as at fair value through profit or loss; or available-for-sale financial assets.

 

Loans and receivables

 

Non-derivative financial assets with fixed or determinable repayments that are not quoted in an active market are classified as loans and receivables, except those that are classified as available-for-sale or as held-for-trading, or designated as at fair value through profit or loss.  Loans and receivables are initially recognised at fair value plus directly related transaction costs.  They are subsequently measured at amortised cost using the effective interest method less any impairment losses.

 

 

  

17

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

 

 

	
m)

	
Financial liabilities

 

On initial recognition financial liabilities are classified into held-for-trading; designated as at fair value through profit or loss; or amortised cost.

 

Amortised cost

 

Other than derivatives, which are recognised and measured at fair value, all other financial liabilities are measured at amortised cost using the effective interest method.

 

	
n)

	
Obligations under finance leases

 

Assets held under finance leases are recognised as assets at the present value of the minimum lease payments determined at the inception of the lease.  The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation.  Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability.  Finance charges are charged directly to profit or loss.

 

	
o)

	
Cash and cash equivalents

 

Cash and cash equivalents comprises cash and demand deposits with banks together with short-term highly liquid investments that are readily convertible to known amounts of cash and subject to insignificant risk of change in value.

 

	
p)

	
Accounting developments

 

The International Accounting Standards Board (IASB) issued 'Improvements to IFRS' in May 2010 implementing minor changes to IFRS, making non-urgent but necessary amendments to standards, primarily to remove inconsistency and to clarify wording.  The revisions are effective for annual periods beginning on or after 1 July 2010 and are not expected to have a material effect on the company.

 

The IASB issued IFRS 9 'Financial Instruments' in October 2010 simplifying the classification and measurement requirements in IAS 39 'Financial Instruments:  Recognition and Measurement' in respect of financial assets and liabilities.  The standard reduces the measurement categories for financial assets to two:  fair value and amortised cost while keeping categories for liabilities broadly the same.  Only financial assets with contractual terms that give rise to cash flows on specified dates that are solely payments of principal and interest on the principal amount outstanding and which are held within a business model whose objective is to hold assets in order to collect contractual cash flows are classified as amortised cost.  All other financial assets are measured at fair value with changes in value generally taken to profit or loss.  The IASB will add impairment and hedging requirements to the standard before it becomes effective for annual periods beginning on or after 1 January 2013; early application is permitted.

 

  

18

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
p)

	
Accounting developments - continued

 

 

This standard makes major changes to the framework for the classification and measurement of financial assets and will have a significant effect on the company's Financial Statements.  The company is assessing the effect which also depends on the outcome of the other phases of IASB's IAS 39 replacement project.

 

The IASB issued 'Disclosures – Transfers of Financial Assets' (Amendments to IFRS 7) in October 2010 to extend the standard's disclosure requirements about derecognition to align with US GAAP.  The revisions are effective for annual periods beginning on or after 1 July 2011 and will not affect the financial position or reported performance of the company.

 

The International Financial Reporting Interpretations Committee issued interpretation IFRIC 19 'Extinguishing Financial Liabilities with Equity Instruments' in December 2009.  The interpretation clarifies that the profit or loss on extinguishing liabilities by issuing equity instruments should be measured by reference to fair value, preferably of the equity instruments.  The interpretation, effective for the company for annual periods beginning on or after 1 January 2011, is not expected to have a material effect on the company.

 

The IASB issued IFRS 10 'Consolidated Financial Statements' in May 2011, it establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities.  IFRS 10 will supersede the current IAS 27 'Consolidated and Separate Financial Statements' and SIC 12 'Consolidation – Special Purpose Entities'.  A new IAS 27 'Separate Financial Statements' has been published.  The new IAS 27 now only contains the accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates in the parent company's separate financial statements.

 

The IASB issued IFRS 11 'Joint Arrangements' in May 2011, it establishes the distinction between joint operations and joint ventures and the principles for financial reporting of them.  IFRS 11 supersedes IAS 31 'Interests in Joint Ventures'.  There are some consequential changes to IAS 28 'Investments in Associates', which is renamed IAS 28 Investments in Associates and Joint Ventures'.

 

The IASB issued IFRS 12 'Disclosure of Interests in Other Entities' in May 2011.  IFRS 12 brings the disclosure requirements in consolidated financial statements for interests in subsidiaries, joint arrangements, associates and unconsolidated structures under one standard.  Disclosures required in separate financial statements are dealt with in IAS 27 Separate Financial Statements.

 

IFRS 10, IFRS 11, & IFRS 12 as well revised IAS 27 and IAS 28 are effective for annual periods beginning on or after 1 January 2013.  Earlier application is permitted.  If adopted early all standards must be adopted together (IFRS 12 may be adopted early without having to adopt the other standards).

 

The IASB issued IFRS 13 'Fair Value Measurement' in May 2011, setting out a single IFRS framework for defining and measuring fair value and requiring disclosures 

 

 

  

19

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
p)

	
Accounting developments - continued

 

 

about fair value measurements.  IFRS 13 is effective for annual periods beginning on or after 1 January 2013.  Earlier application is permitted.

 

	
2.

	
Critical accounting policies and key sources of estimation uncertainty

 

The reported results of the company are sensitive to the accounting policies, assumptions and estimates that underlie the preparation of its financial statements.  UK company law and IFRS require the directors, in preparing the company's financial statements, to select suitable accounting policies, apply them consistently and make judgements and estimates that are reasonable and prudent.  In the absence of an applicable standard or interpretation, IAS 8 'Accounting Policies, Changes in Accounting Estimates and Errors', requires management to develop and apply an accounting policy that results in relevant and reliable information in the light of the requirements and guidance in IFRS dealing with similar and related issues and the lASB's Framework for the Preparation and Presentation of Financial Statements.  The judgements and assumptions involved in the company's accounting policies that are considered by the directors to be the most important to the portrayal of its financial condition are discussed below.  The use of estimates, assumptions or models that differ from those adopted by the company would affect its reported results.

 

Leased assets

 

The judgements and assumptions involved in the Company's accounting policies which have the most significant effect on the amounts recognised in the financial statements are those that relate to the criteria for assessing whether substantially all the significant risks and rewards of ownership of leased assets are transferred to other entities, the setting of residual values and useful economic lives for aircraft assets and assessing the stage of completion of the service provided in recognising fee income.

 

	
3.

	
Revenue

 

	  	 	
2010

	 	 	
(restated) (note 1) 2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Finance lease income:

	 	 	 	 	 	 
	
Rents receivable

	 	 	537	 	 	 	1,730	 
	
Amortisation

	 	 	(432	)	 	 	(1,373	)
	  	 	 	105	 	 	 	357	 
	
Other operating lease income

	 	 	44,043	 	 	 	45,073	 
	
Operating lease contingent rental income

	 	 	(6,512	)	 	 	(5,660	)
	  	 	 	37,636	 	 	 	39,770	 
	
Capital costs of asset additions financed:

	 	 	 	 	 	 	 	 
	
Finance leases and hire purchase contracts

	 	 	-	 	 	 	1,500	 

 

 

  

20

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
3.

	
Revenue - continued

 

 

	  	 	 	 	 	 	 
	
Operating leases

	 	 	87	 	 	 	193,878	 
	  	 	 	87	 	 	 	195,378	 

	
4.

	
Operating income

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Fee income

	 	 	4	 	 	 	6	 

	
5.

	
Operating expenses

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Fees and commissions

	 	 	342	 	 	 	2,264	 
	
Exchange losses

	 	 	84	 	 	 	-	 
	
Management fees paid to group undertaking – immediate parent company

	 	 	113	 	 	 	-	 
	
Other charges

	 	 	4	 	 	 	4	 
	  	 	 	543	 	 	 	2,268	 

Staff costs, number of employees and directors' emoluments

 

All staff and directors were employed by RBS, the accounts for which contain full disclosure of employee benefit expenses incurred in the period including share based payments and pensions.  The company has no employees and pays a management charge for services provided by other group companies.  The directors of the company do not receive remuneration for specific services provided to the company.

 

Management recharge

 

Management charges relate to the company's share of group resources such as the use of IT platforms, staff and a share of central resources.  These are re-charged on an annual basis by Royal Bank Leasing Limited.

 

 

  

21

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

 

	
6.

	
Finance costs

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Interest on loans from group undertakings – immediate parent company

	 	 	8,945	 	 	 	11,590	 
	
Finance charges in respect of finance leases payable

	 	 	3,340	 	 	 	956	 
	
Other

	 	 	-	 	 	 	2,520	 
	  	 	 	12,285	 	 	 	15,066	 

	
7.

	
Operating profit before tax

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Auditor's remuneration – audit services included in the management fee in note 5

	 	 	3	 	 	 	3	 

	
8.

	
Tax

 

	  	 	
2010

	 	 	
(restated) (note 1) 2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Current taxation:

	 	 	 	 	 	 
	
UK corporation tax credit for the year

	 	 	(5,130	)	 	 	(8,214	)
	
Over provision in respect of prior periods

	 	 	(7	)	 	 	-	 
	  	 	 	(5,137	)	 	 	(8,214	)
	
Deferred taxation:

	 	 	 	 	 	 	 	 
	
Charge for the year

	 	 	9,568	 	 	 	9,994	 
	
Under provision in respect of prior periods

	 	 	6	 	 	 	-	 
	
Impact of rate change from 28% to 27%

	 	 	(1,162	)	 	 	-	 
	  	 	 	8,412	 	 	 	9,994	 
	
Tax charge for the year

	 	 	3,275	 	 	 	1,780	 

The actual tax charge differs from the expected tax charge computed by applying the standard rate of UK corporation tax of 28% (2009:  standard tax rate 28%) as follows:

 

 

  

22

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
8.

	
Tax - continued

 

 

 

	  	 	
2010

	 	 	
(restated) (note 1) 2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Expected tax charge

	 	 	4,795	 	 	 	1,780	 
	
Reduction in deferred tax following change in rate of UK corporation tax

	 	 	(1,519	)	 	 	-	 
	
Adjustments in respect of prior periods

	 	 	(1	)	 	 	-	 
	
Actual tax charge for the year

	 	 	3,275	 	 	 	1,780	 

In the Budget on 22 June 2010, the UK Government proposed, amongst other things, to reduce Corporation Tax rates in four annual decrements of 1% with effect from 1 April 2011.  The first decrement was enacted in the Finance (No 2) Act 2010 on 27 July 2010.  In conjunction, reductions to the rate of capital allowances have also been proposed, to take effect from 1 April 2012.  Together as a result of these changes, existing temporary differences may unwind in periods subject to the reduced tax rate giving rise to a reduction of the deferred tax liability.  Accordingly, the closing deferred tax liability has been calculated at the rate of 27%.  An additional 1% decrement, also effective from 1 April 2011, was announced by the UK Government in the Budget on 23 March 2011.  The impact of this further change is estimated as giving rise to a tax credit of £1,518,000, which will be recognised in the accounts for 2011.

 

	
9.

	
Property, plant and equipment

 

	  	 	
Assets held for use in operating leases

	 
	  	 	
$'000

	 
	
Cost

	 	 	 
	
1 January 2010

	 	 	459,691	 
	
Additions

	 	 	87	 
	
31 December 2010

	 	 	459,778	 
	
Accumulated depreciation and impairment

	 	 	 	 
	
1 January 2010

	 	 	35,309	 
	
Depreciation charge for the year

	 	 	7,689	 
	
31 December 2010

	 	 	42,998	 
	
Cost

	 	 	 	 
	
1 January 2009

	 	 	346,172	 
	
Additions

	 	 	193,878	 
	
Disposals

	 	 	(80,359	)
	
31 December 2009

	 	 	459,691	 

 

 

  

23

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
9.

	
Property, plant and equipment - continued

 

 

 

	
Accumulated depreciation and impairment

	 	 	 
	
1 January 2009

	 	 	20,409	 
	
Depreciation charge for the year

	 	 	16,087	 
	
Disposals

	 	 	(1,187	)
	
31 December 2009

	 	 	35,309	 
	
Cost

	 	 	 	 
	
1 January 2008

	 	 	268,041	 
	
Additions

	 	 	78,131	 
	
31 December 2008

	 	 	346,172	 
	
Accumulated depreciation and impairment

	 	 	 	 
	
1 January 2009

	 	 	9,145	 
	
Depreciation charge for the year

	 	 	11,264	 
	
31 December 2008

	 	 	20,409	 
	
Net book value

	 	 	 	 
	
31 December 2010

	 	 	416,780	 
	
31 December 2009

	 	 	424,382	 
	
31 December 2008

	 	 	325,763	 

Leased plant and machinery

 

At 31 December 2010 the net carrying amount of plant and machinery leased from third parties was $72,456,000 (2009:  $75,047,000 and 2008:  $nil).  The leased equipment secures lease obligations (see note 19).

 

	
10.

	
Investments in subsidiaries

 

Investments in group undertakings are carried at cost less impairment.  Movements during the year were as follows:

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	 	$	 	 	 	$	 	 	 	$	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
At 1 January

	 	 	100	 	 	 	-	 	 	 	-	 
	
Additions

	 	 	-	 	 	 	100	 	 	 	-	 
	
At 31 December

	 	 	100	 	 	 	100	 	 	 	-	 

 

 

  

24

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
10.

	
Investments in subsidiaries - continued

 

 

The subsidiary undertakings of the company are shown below.

 

	
Name of subsidiary

	
Country of incorporation

	 	
Proportion of ownership interest

%

	 	 	
Proportion of voting power held %

	 	
Principal activity

	
RBS Labuan

Leasing 1 Limited

	
Malaysia

	 	 	100	 	 	 	100	 	
Intermediate party of the holding company in the lease of an aircraft

	
11.

	
Finance lease receivables

 

	  	 	
Within 1

year

	 	 	
Between

1 and 5 years

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
2010

	 	 	 	 	 	 	 	 	 
	
Future minimum lease payments

	 	 	-	 	 	 	-	 	 	 	-	 
	
Unearned finance income

	 	 	-	 	 	 	-	 	 	 	-	 
	
Carrying value

	 	 	-	 	 	 	-	 	 	 	-	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
2009

	 	 	 	 	 	 	 	 	 	 	 	 
	
Future minimum lease payments

	 	 	1,726	 	 	 	18,056	 	 	 	19,782	 
	
Unearned finance income

	 	 	(33	)	 	 	(2,228	)	 	 	(2,261	)
	
Carrying value

	 	 	1,693	 	 	 	15,828	 	 	 	17,521	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
2008

	 	 	 	 	 	 	 	 	 	 	 	 
	
Future minimum lease payments

	 	 	1,321	 	 	 	19,782	 	 	 	21,103	 
	
Unearned finance income

	 	 	(44	)	 	 	(3,947	)	 	 	(3,991	)
	
Carrying value

	 	 	1,277	 	 	 	15,835	 	 	 	17,112	 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Current

	 	 	-	 	 	 	1,693	 	 	 	1,277	 
	
Non-current

	 	 	-	 	 	 	15,828	 	 	 	15,835	 
	  	 	 	-	 	 	 	17,521	 	 	 	17,112	 

The Company had acquired 2 aircraft under finance leases.  The average term of the finance leases entered into was 5 years.

 

Unguaranteed residual values of assets leased under finance leases at the balance sheet date are estimated at nil (2009:  $nil and 2008:  $nil).

 

The average effective interest rate in relation to finance lease agreements approximates nil (2009:  3.8% and 2008:  3.8%).

 

 

  

25

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
11.

	
Finance lease receivables - continued

 

 

 

During the year, a lease was sold to a third party resulting in no profit or loss on disposal.

 

	
12.

	
Operating lease arrangements

 

At the balance sheet date, the company had contracted with customers for the following future minimum lease rentals receivable under non-cancellable operating leases:

 

	  	 	
Within 1 year

	 	 	
Between 1 and 5 years

	 	 	
After 5 years

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
2010

	 	 	43,773	 	 	 	125,926	 	 	 	80,420	 	 	 	250,119	 
	
2009

	 	 	43,777	 	 	 	143,981	 	 	 	106,086	 	 	 	293,844	 
	
2008

	 	 	33,488	 	 	 	117,325	 	 	 	87,402	 	 	 	238,215	 

 

	
Nature of operating lease assets in the balance sheet:

	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	  	 	 	 	 	 	 	 	 	 
	
Aviation

	 	 	250,119	 	 	 	293,844	 	 	 	238,215	 

	
13.

	
Loans and receivables

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Current

	 	 	 	 	 	 	 	 	 
	
Amounts owed by group undertakings – immediate parent company

	 	 	45,660	 	 	 	30,700	 	 	 	21,000	 

The average effective interest rate over amounts owed by group undertakings approximates 0.3% (2009:  0.3%, 2008:  2.0%)

 

The fair value of loans and receivables is considered not to be materially different to the carrying amounts in the balance sheet.

 

 

  

26

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

 

 

	
14.

	
Trade and other receivables

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	  	 	 	 	 	 	 	 	 	 
	
Trade receivables

	 	 	167	 	 	 	3	 	 	 	-	 
	
Other receivables

	 	 	-	 	 	 	1	 	 	 	26	 
	  	 	 	167	 	 	 	4	 	 	 	26	 

	
15.

	
Prepayments, accrued income and other assets

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	  	 	 	 	 	 	 	 	 	 
	
Prepayments

	 	 	685	 	 	 	738	 	 	 	384	 
	
Group relief receivable from group undertaking – immediate parent company

	 	 	229	 	 	 	3,202	 	 	 	369	 
	  	 	 	914	 	 	 	3,940	 	 	 	753	 

	
16.

	
Cash

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	  	 	 	 	 	 	 	 	 	 
	
Cash held with group undertaking – ultimate parent company

	 	 	-	 	 	 	1,236	 	 	 	6,207	 
	
Deposits with group banks place at within 3 months original maturity – immediate parent company

	 	 	45,660	 	 	 	30,700	 	 	 	21,000	 
	
Overdrafts:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Amounts owed to group banks – ultimate parent company

	 	 	(66	)	 	 	-	 	 	 	-	 
	
Cash and cash equivalents per cash flow statement

	 	 	45,594	 	 	 	31,936	 	 	 	27,207	 

	
17.

	
Borrowings

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	  	 	 	 	 	 	 	 	 	 
	
Overdrafts from group banks – ultimate parent company

	 	 	66	 	 	 	-	 	 	 	-	 
	
Loans from group banks – immediate parent company

	 	 	334,436	 	 	 	369,652	 	 	 	332,794	 
	  	 	 	334,502	 	 	 	369,652	 	 	 	332,794	 
	
Current

	 	 	16,376	 	 	 	8,980	 	 	 	9,501	 

 

 

  

27

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
17.

	
Borrowings - continued

 

 

 

	
Non-current

	 	 	318,126	 	 	 	360,672	 	 	 	323,293	 
	  	 	 	334,502	 	 	 	369,652	 	 	 	332,794	 

	
18.

	
Trade and other payables

 

	  	 	
2010

	 	 	
(restated) (note 1) 2009

	 	 	
(restated) (note 1) 2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Trade creditors

	 	 	6,823	 	 	 	4,874	 	 	 	10,398	 
	
Other payables

	 	 	187	 	 	 	-	 	 	 	-	 
	  	 	 	7,010	 	 	 	4,874	 	 	 	10,398	 
	
Current

	 	 	3,086	 	 	 	2,991	 	 	 	2,903	 
	
Non-current

	 	 	3,924	 	 	 	1,883	 	 	 	7,495	 
	  	 	 	7,010	 	 	 	4,874	 	 	 	10,398	 

Included in other payables is $20,000 (2009 and 2008 $nil) due to group undertakings – immediate parent company

 

	
19.

	
Obligations under finance leases

 

	  	 	
Year in which payment is expected

	 
	  	 	
Within 1 year

	 	 	
Between 1 and 5 years

	 	 	
After 5 years

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
2010

	 	 	 	 	 	 	 	 	 	 	 	 
	
Future minimum lease payments

	 	 	6,900	 	 	 	28,976	 	 	 	37,923	 	 	 	73,799	 
	
Unrecognised finance cost

	 	 	(2,436	)	 	 	(8,717	)	 	 	(4,947	)	 	 	(16,100	)
	
Net carrying value

	 	 	4,464	 	 	 	20,259	 	 	 	32,976	 	 	 	57,699	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
2009

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Future minimum lease payments

	 	 	6,872	 	 	 	28,904	 	 	 	44,900	 	 	 	80,676	 
	
Unrecognised finance cost

	 	 	(2,625	)	 	 	(9,634	)	 	 	(6,764	)	 	 	(19,023	)
	
Net carrying value

	 	 	4,247	 	 	 	19,270	 	 	 	38,136	 	 	 	61,653	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
2008

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Future minimum lease payments

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 

 

 

 

  

28

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
19.

	
Obligations under finance leases - continued

 

 

 

	  	 	 	 	 	 	 	 	 	 	 	 	 
	
Unrecognised finance cost

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Net carrying value

	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	  	 	 	 	 	 	 	 	 	 
	
Current

	 	 	4,464	 	 	 	4,247	 	 	 	-	 
	
Non-current

	 	 	53,235	 	 	 	57,406	 	 	 	-	 
	  	 	 	57,699	 	 	 	61,653	 	 	 	-	 

The Company has acquired 2 aircraft under finance lease.  The average term of the finance lease is 20 years (2009:  20 years).

 

The interest rate inherent in the leases is determined at the contract date for all the lease term.  The average effective interest rate contracted approximates 4.7% p.a. (2009:  4.7%).  The interest rate on the finance lease is fixed at the contract date and no arrangements have been entered into for contingent rental payments.

 

	
20.

	
Accruals, deferred income and other liabilities

 

	  	 	
2010

	 	 	
2009

	 	 	
2008

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Accruals

	 	 	870	 	 	 	424	 	 	 	1,058	 

	
21.

	
Deferred tax

 

The following are the major tax assets recognised by the company, and the movements thereon.

 

	
Restated – note 1

	 	
Capital allowances

	 
	  	 	
$'000

	 
	  	 	 	 
	
At 31 December 2008

	 	 	22,586	 
	
Restatement

	 	 	1	 
	
At 31 December 2008 as restated

	 	 	22,587	 
	
Charge to income

	 	 	9,994	 
	
At 31 December 2009 as restated

	 	 	32,581	 
	
Charge to income

	 	 	8,412	 
	
At 31 December 2010

	 	 	40,993	 

The Finance Act 2010 has reduced the corporation tax rate from 28% to 27% with effect from 1 April 2011.  As a consequence the closing deferred tax liabilities have been recognised at an effective rate of 27.0%.

 

 

  

29

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

 

 

	
22.

	
Financial instruments and risk management

 

	
(i)

	
Categories of Financial instruments

 

The following table shows the carrying value and the fair value of financial instruments carried on the balance sheet where financial instruments are not carried at fair value on the balance sheet.  Where the financial instruments are of short maturity, the carrying value is equal to the fair value.

 

The fair value of loans and receivables and amortised cost liabilities are estimated by discounting expected future cash flows using current interest rates and making adjustments for credit.  As such, all measurements qualify as level 2 fair value measurements, derived from inputs that are observable for the asset or liability.

 

All financial assets are classed as loans and receivables.  All financial liabilities are classed as amortised cost.

 

	  	 	
2010

Carrying value

	 	 	
2010

Fair value

	 	 	
2009

Carrying value

	 	 	
2009

Fair value

	 	 	
2008

Carrying value

	 	 	
2008

Fair value

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Financial liabilities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings

	 	 	334,502	 	 	 	341,384	 	 	 	369,652	 	 	 	378,187	 	 	 	332,794	 	 	 	344,237	 
	
Obligations under finance lease

	 	 	57,699	 	 	 	73,798	 	 	 	61,653	 	 	 	66,917	 	 	 	-	 	 	 	-	 

	
(ii)

	
Financial risk management

 

The principal risks associated with the company's businesses are as follows:

 

Interest rate risk

 

Structural interest rate risk arises where assets and liabilities have different re-pricing maturities.

 

The company manages interest rate risk by monitoring the consistency in the interest rate profile of its assets and liabilities, and limiting any re-pricing mismatches.

 

The following tables indicate financial assets and liabilities that are exposed to interest rate risk together with the corresponding range of applicable interest rates:

 

Finance lease receivables may be based on fixed and/or floating rates.  These are funded primarily through balances owed to group undertakings which are due primarily on demand and a variable rate basis.  The repricing maturity profile of the financial assets of the company may be different to that of the associated borrowings and hence give potential exposure to interest rate risk.

 

 

  

30

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
22.

	
Financial instruments and risk management - continued

 

 

 

The interest profile of the company's assets and liabilities is as follows:

 

	
2010

	 	
Fixed rate

	 	 	
Variable rate

	 	 	
Non-interest earning

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Financial assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Loans and receivables

	 	 	-	 	 	 	45,660	 	 	 	-	 	 	 	45,660	 
	
Trade and other receivables

	 	 	-	 	 	 	-	 	 	 	167	 	 	 	167	 
	  	 	 	-	 	 	 	45,660	 	 	 	167	 	 	 	45,827	 
	
Financial liabilities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings

	 	 	188,572	 	 	 	145,930	 	 	 	-	 	 	 	334,502	 
	
Trade and other payables

	 	 	-	 	 	 	-	 	 	 	7,010	 	 	 	7,010	 
	
Obligations under finance lease

	 	 	57,699	 	 	 	-	 	 	 	-	 	 	 	57,699	 
	  	 	 	246,271	 	 	 	145,930	 	 	 	7,010	 	 	 	399,211	 
	
Net financial liabilities

	 	 	(246,271	)	 	 	(100,270	)	 	 	(6,843	)	 	 	(353,384	)

	
2009

	 	
Fixed rate

	 	 	
Variable rate

	 	 	
Non-interest earning

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Financial assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Finance lease receivables

	 	 	-	 	 	 	17,521	 	 	 	-	 	 	 	17,521	 
	
Loans and receivables

	 	 	-	 	 	 	30,700	 	 	 	-	 	 	 	30,700	 
	
Trade and other receivables

	 	 	-	 	 	 	-	 	 	 	4	 	 	 	4	 
	
Cash

	 	 	-	 	 	 	1,236	 	 	 	-	 	 	 	1,236	 
	  	 	 	-	 	 	 	49,457	 	 	 	4	 	 	 	49,461	 
	
Financial liabilities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings

	 	 	193,051	 	 	 	176,601	 	 	 	-	 	 	 	369,652	 
	
Trade and other payables

	 	 	-	 	 	 	-	 	 	 	4,874	 	 	 	4,874	 
	
Obligations under finance lease

	 	 	61,653	 	 	 	-	 	 	 	-	 	 	 	61,653	 
	  	 	 	254,704	 	 	 	176,601	 	 	 	4,874	 	 	 	436,179	 
	
Net financial liabilities

	 	 	(254,704	)	 	 	(127,144	)	 	 	(4,870	)	 	 	(386,718	)

	
2008

	 	
Fixed rate

	 	 	
Variable rate

	 	 	
Non-interest earning

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Financial assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Finance lease receivables

	 	 	-	 	 	 	17,112	 	 	 	-	 	 	 	17,112	 
	
Loans and receivables

	 	 	-	 	 	 	21,000	 	 	 	-	 	 	 	21,000	 
	
Trade and other receivables

	 	 	-	 	 	 	-	 	 	 	26	 	 	 	26	 
	
Cash

	 	 	-	 	 	 	6,207	 	 	 	-	 	 	 	6,207	 
	  	 	 	-	 	 	 	44,319	 	 	 	26	 	 	 	44,345	 
	
Financial liabilities

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Borrowings

	 	 	147,915	 	 	 	184,879	 	 	 	-	 	 	 	332,794	 

 

 

 

  

31

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
22.

	
Financial instruments and risk management - continued

 

 

	
2008

	 	
Fixed rate

	 	 	
Variable rate

	 	 	
Non-interest earning

	 	 	
Total

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Trade and other payables

	 	 	-	 	 	 	-	 	 	 	10,398	 	 	 	10,398	 
	  	 	 	147,915	 	 	 	184,879	 	 	 	10,398	 	 	 	343,192	 
	
Net financial liabilities

	 	 	(147,915	)	 	 	(140,560	)	 	 	(10,372	)	 	 	(298,847	)

 

The sensitivity analysis below has been determined based on the exposure to interest rates at the balance sheet date.  The analysis is prepared on the assumption that the balances receivable and/or payable at the balance sheet date were receivable and/or payable for the whole year.

 

If interest rates had been 0.5% higher and all other variables were held constant, the company's profit before tax for the year would have increased by $130,000 (2009:  profit after tax for the year would have decreased by $446,000 and 2008:  profit after tax for the year would have decreased by $369,000).  This is mainly due to the company's exposure to interest rates on its variable rate borrowings and variable rate customer balances.  There would be no other material impact on equity.

 

Currency risk

 

The company does not maintain material non-trading open currency positions.

 

The company undertakes certain transactions denominated in foreign currencies, hence exchange rate fluctuations arise.  The company's policy is normally to match foreign currency receivables with borrowings in the same currency.

 

The company is mainly exposed to US dollar currencies.

 

Credit risk

 

The objective of credit risk management is to enable the company to achieve appropriate risk versus reward performance whilst maintaining credit risk exposure in line with approved appetite for the risk that customers will be unable to meet their obligations to the company.

 

The key principles of the group's Credit Risk Management Framework are set out below:

 

	
  

	
·

	
Approval of all credit exposure is granted prior to any advance or extension of credit.

 

	
  

	
·

	
An appropriate credit risk assessment of the customer and credit facilities is undertaken prior to approval of credit exposure.  This includes a review of, amongst other things, the purpose of credit and sources of repayment, compliance with affordability tests, repayment history, capacity to repay, sensitivity to economic and market developments and risk-adjusted return.

 

 

  

32

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
22.

	
Financial instruments and risk management - continued

 

 

 

	
  

	
·

	
Credit risk authority is dictated by the Board and specifically granted in writing to all individuals involved in the granting of credit approval.  In exercising credit authority, the individuals act independently of any related business revenue origination.

 

	
  

	
·

	
All credit exposures, once approved, are effectively monitored and managed and reviewed periodically against approved limits.  Lower quality exposures are subject to a greater frequency of analysis and assessment.

 

Maximum credit exposure and neither past due nor impaired:

 

	
Sector

	 	
No. of counterparties

	 	 	
2010 $'000

	 	 	
2009 $'000

	 	 	
2008 $'000

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 
	
Aviation

	 	 	1	 	 	 	-	 	 	 	17,521	 	 	 	17,112	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Finance lease receivables

	 	 	 	 	 	 	-	 	 	 	17,521	 	 	 	17,112	 
	
Group undertakings

	 	 	 	 	 	 	45,660	 	 	 	31,936	 	 	 	27,207	 
	
Trade and other receivables

	 	 	 	 	 	 	167	 	 	 	4	 	 	 	26	 
	
Maximum credit exposure

	 	 	 	 	 	 	45,827	 	 	 	49,461	 	 	 	44,345	 

Based on counterparty payment history the company considers all the above financial assets to be of good credit quality.

 

Liquidity risk

 

Liquidity risk arises where assets and liabilities have different contractual maturities.

 

Management focuses on both overall balance sheet structure and the control, within prudent limits, of risk arising from the mismatch of maturities across the balance sheet and from undrawn commitments and other contingent obligations.  It is undertaken within limits and other policy parameters set by Group Asset and Liability Management Committee (GALCO).

 

Financial Liabilities

 

The following table shows by contractual maturity the undiscounted cash flows payable from the balance sheet date including future interest payments

 

	
2010

	 	
0 – 3 months

	 	 	
4 – 12 months

	 	 	
1 – 3 years

	 	 	
4 – 5 years

	 	 	
6 – 10 years

	 	 	
11 – 20 years

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Borrowings

	 	 	7,153	 	 	 	17,123	 	 	 	94,144	 	 	 	109,717	 	 	 	134,925	 	 	 	-	 
	
Obligations under finance lease

	 	 	-	 	 	 	6,900	 	 	 	14,452	 	 	 	14,524	 	 	 	37,923	 	 	 	-	 
	
Accruals, deferred income and other liabilities

	 	 	870	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Trade and other payables

	 	 	3,086	 	 	 	-	 	 	 	-	 	 	 	1,346	 	 	 	2,578	 	 	 	-	 
	  	 	 	11,109	 	 	 	24,023	 	 	 	108,596	 	 	 	125,587	 	 	 	175,426	 	 	 	-	 

 

 

  

33

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
22.

	
Financial instruments and risk management - continued

 

 

 

	
2009

	 	
0 – 3 months

	 	 	
4 – 12 months

	 	 	
1 – 3 years

	 	 	
4 – 5 years

	 	 	
6 – 10 years

	 	 	
11 – 20 years

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Borrowings

	 	 	5,021	 	 	 	12,320	 	 	 	105,031	 	 	 	110,706	 	 	 	181,292	 	 	 	48,716	 
	
Obligations under finance lease

	 	 	-	 	 	 	6,872	 	 	 	14,413	 	 	 	14,491	 	 	 	36,546	 	 	 	8,354	 
	
Accruals, deferred income and other liabilities

	 	 	424	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Trade and other payables

	 	 	2,991	 	 	 	-	 	 	 	-	 	 	 	739	 	 	 	1,144	 	 	 	-	 
	  	 	 	8,436	 	 	 	19,192	 	 	 	119,444	 	 	 	125,936	 	 	 	218,982	 	 	 	57,070	 

	
2008

	 	
0 – 3 months

	 	 	
4 – 12 months

	 	 	
1 – 3 years

	 	 	
4 – 5 years

	 	 	
6 – 10 years

	 	 	
11 – 20 years

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Borrowings

	 	 	3,465	 	 	 	14,947	 	 	 	39,121	 	 	 	110,400	 	 	 	213,217	 	 	 	-	 
	
Accruals, deferred income and other liabilities

	 	 	1,058	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Trade and other payables

	 	 	2,903	 	 	 	-	 	 	 	-	 	 	 	739	 	 	 	6,756	 	 	 	-	 
	  	 	 	7,426	 	 	 	14,947	 	 	 	39,121	 	 	 	111,139	 	 	 	219,973	 	 	 	-	 

Operational risk

 

Operational risk is the risk of unexpected losses attributable to human error, systems failures, fraud or inadequate internal financial controls and procedures.  The Company manages this risk, in line with the RBS group framework, through systems and procedures to monitor transactions and positions, the documentation of transactions and periodic review by internal audit.  The Company also maintains contingency facilities to support operations in the event of disasters.

 

	
23.

	
Share capital

 

	  	
2010

	 	
2009

	 	
2008

	  	
$

	 	
$

	 	
$

	
Authorised:

	  	 	  	 	  
	
100

	
Deferred shares of £1 each

	
    193

	 	
    193

	 	
    193

	
1,000

	
Ordinary shares of $1 each

	

1,000

	 	

1,000

	 	

1,000

	  	  	

1,193

	 	

1,193

	 	

1,193

	
Allotted, called up and fully paid:

	  	 	  	 	  
	  	  	 	  	 	  
	
Equity shares

	  	 	  	 	  

 

 

 

  

34

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

	
23.

	
Share capital - continued

 

 

 

	
2

	
shares of £1

	
    4

	 	
    4

	 	
    4

	
100

	
Ordinary shares of $1

	

100

	 	

100

	 	

100

	  	  	

104

	 	

104

	 	

104

The deferred shares carry no dividend or voting rights and have no preferential rights to return of capital on winding up.  The Company may repurchase the shares at any time for an aggregate consideration of $1.  The value attributed to sterling share capital is based on the exchange rate prevailing at the date of issue.

 

	
24.

	
Capital resources

 

The company's capital consists of equity comprising issued share capital, retained earnings, loans from group undertakings and subordinated loans.  The company is a member of The Royal Bank of Scotland group of companies which has regulatory disciplines over the use of capital.  In the management of capital resources, the company is governed by the group's policy which is to maintain a strong capital base:  it is not separately regulated.  The group has complied with the FSA's capital requirements throughout the year.

 

	
25.

	
Related parties

 

On 1 December 2008, the UK Government through HM Treasury became the ultimate controlling party of The Royal Bank of Scotland Group plc.  The UK Government's shareholding is managed by UK Financial investments Limited, a company wholly-owned by the UK Government.  As a result, the UK Government and UK Government controlled bodies became related parties of the company.

 

The company's ultimate holding company is The Royal Bank of Scotland Group plc, and its immediate parent company is Royal Bank Leasing Limited.  Both companies are incorporated in Great Britain and registered in Scotland.

 

As at 31 December 2010, The Royal Bank of Scotland Group plc heads the largest group in which the company is consolidated and The Royal Bank of Scotland plc heads the smallest group in which the company is consolidated.  Copies of the consolidated accounts of both companies may be obtained from The Secretary, The Royal Bank of Scotland Group plc, Gogarburn, Edinburgh, EH12 1HQ.

 

Amounts due to or from related parties are unsecured and will be settled in cash.  No guarantees have been given or received.  No provisions have been made for doubtful debts in respect of amounts owed by related parties.

 

 

  

35

  

	
RBS AEROSPACE (UK) LIMITED

	
04985584

 

NOTES TO THE FINANCIAL STATEMENTS (continued)

 

 

 

	
26.

	
Post balance sheet event

 

On 29 June 2011, the company, together with other members of the RBSG group, became party to a capital support deed (CSD).  Under the terms of the CSD, the company may be required, if compatible with its legal obligations, to make distributions on, or repurchase or redeem, its ordinary shares.  The amount of this obligation is limited to the company's immediately accessible funds or assets, rights, facilities or other resources that, using best efforts, are reasonably capable of being converted to cleared, immediately available funds (the company's available resources).  The CSD also provides that, in certain circumstances, funding received by the company from other parties to the CSD becomes immediately repayable, such repayment being limited to the company's available resources.

 

 

 

  

36

  

 

	  	  
	  	  
	  	  
	  
	
RBS AUSTRALIA LEASING PTY LIMITED

ACN 116 456 065

 

 

FOR THE FINANCIAL YEAR ENDED

31 DECEMBER 2010

 

 

ANNUAL FINANCIAL REPORT

 

 

 

	  	  	  

 

 

  

  

  

 

 

 

	  
	
 

RBS AUSTRALIA LEASING PTY LIMITED

 

	
CONTENTS

 

	  
	 	 
	  	
Page

	 	 
	
Directors' Report

	
1

	 	 
	
Independence Declaration

	
3

	 	 
	
Independent Auditor's Report

	
4

	 	 
	
Directors' Declaration

	
6

	 	 
	
Statement of Comprehensive Income

	
7

	 	 
	
Statement of Financial Position

	
8

	 	 
	
Statement of Changes in Equity

	
9

	 	 
	
Statement of Cash Flows

	
10

	 	 
	
Notes to the Financial Statements

	
11

 

 

 

  

  

  

 

RBS AUSTRALIA LEASING PTY LIMITED

 

 

DIRECTORS' REPORT

 

The Directors of RBS Australia Leasing Pty Limited submit herewith the annual financial report of the company for the financial year to 31 December 2010.  In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

 

The names of the directors of the company during or since the end of the financial year are:

 

	
Director

	
Appointed

	
  Resigned

	 
	
Simon James Hanson

	
29 September 2005

	
28 April 2010

	 
	
John Higgins

	
29 September 2005

	
14 January 2010

	 
	
Stephen Conrad Mark Williams

	
29 September 2005

	  	 
	
Gordon David Jagger

	
29 September 2005

	  	 
	
Barry James Flannery

	
5 May 2010

	  	 
	
Peter John Barrett

	
5 May 2010

	  	 

At the date of this Report, none of the Directors had any beneficial interest in any of the shares of the company.

 

Principal Activities

 

The company is a wholly owned subsidiary of The Royal Bank of Scotland plc, its principal activity is the provision of fixed asset finance involving individually structured facilities.

 

Review of Operations

 

The operating profit after tax of the company for the period ended 31 December 2010 was $12,013,000 (2009 profit:  $24,582,000).

 

Total revenue for the financial period ended 31 December 2010 was $36,043,000 (2009:  $35,449,000).

 

Future Developments

 

The directors do not anticipate any material change in either the type or level of activities of the company.

 

Changes in the State of Affairs

 

During the financial period there was no significant change in the state of affairs of the company other than that referred to in the financial statements or notes thereto.

 

Subsequent Events

 

There has not been any matter or circumstance that has arisen since the end of the year that has significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

 

 

  

- 1 -

  

 

RBS AUSTRALIA LEASING PTY LIMITED

DIRECTORS' REPORT - continued

 

 

Going Concern

 

The directors, having a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseeable future, have prepared the financial statements on a going concern basis.

 

Proceedings on Behalf of the Company

 

The directors are not aware of any persons applying to bring proceedings on behalf of the company.

 

Indemnification of Officers and Auditors

 

During or since the financial period the company has not indemnified or made a relevant agreement to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred by such an officer or auditor.  In addition, the company has not paid, or agreed to pay, a premium in respect of a contract insuring against a liability incurred by an officer or auditor.

 

Auditor's Independence Declaration

 

The auditor's independence declaration is included on page 3 of the financial report.

 

Dividends

 

No dividends have been paid or declared since the start of the financial period (2009:  nil).  The Directors have not declared the payment of a dividend in respect of the financial period (2009:  nil).

 

This Report has been signed in accordance with a resolution of Directors made pursuant to S298(2) of the Corporations Act 2001.

 

On behalf of the Directors,

 

 

_________________________________

Gordon Jagger

Director

 

Sydney

30 June, 2011

 

 

  

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Deloitte Touche Tohmatsu

A.B.N. 74 490 121 060

 

Grosvenor Place

225 George Street

Sydney NSW 2000

PO Box N250 Grosvenor Place

Sydney NSW 1220 Australia

 

DX 10307SSE

Tel:  +61 (0) 2 9322 7000

Fax:  +61 (0) 2 9322 7001

www.deloitte.com.au

 

The Board of Directors

RBS Australia Leasing Pty Limited

88 Phillip St

SYDNEY NSW 2000

 

 

30 June 2011

 

Dear Board Members

 

RBS Australia Leasing Pty Limited

 

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of RBS Australia Leasing Pty Limited.

 

As lead audit partner for the audit of the financial statements of RBS Australia Leasing Pty Limited for the financial year ended 31 December 2010, I declare that to the best of my knowledge and belief, there have been no contraventions of:

 

	
  

	
(i)

	
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

 

	
  

	
(ii)

	
any applicable code of professional conduct in relation to the audit.

 

Yours sincerely

 

DELOITTE TOUCHE TOHMATSU

 

Philip Hardy

Partner

Chartered Accountants

 

 

	
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 Member of Deloitte Touche Tohmatsu Limited

  

  

  

 

 

		 
	 	 
	 	

Deloitte Touche Tohmatsu

ABN 74 490 121 060

 

Grosvenor Place

225 George Street

Sydney NSW 2000

PO Box N250 Grosvenor Place

Sydney NSW 1220 Australia

 

DX 10307SSE

Tel:  +61 (0) 2 9322 7000

Fax:  +61 (0) 2 9322 7001

www.deloitte.com.au

 

Independent Auditor's Report

to the Members of RBS Australia Leasing Pty Limited

 

We have audited the accompanying financial report of RBS Australia Leasing Pty Limited, which comprises the statement of financial position as at 31 December 2010, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors' declaration as set out on pages 6 to 34.

 

Directors' Responsibility for the Financial Report

 

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error.  In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

 

Auditor's Responsibility

 

Our responsibility is to express an opinion on the financial report based on our audit.  We conducted our audit in accordance with Australian Auditing Standards.  Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.  The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error.  In making those risk assessments, the auditor considers internal control, relevant to the entity's preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control.  An audit also includes evaluating the appropriateness of accounting policies used 

 

 

 

	
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and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

 

Auditor's Independence Declaration

 

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.  We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of RBS Australia Leasing Pty Limited, would be in the same terms if given to the directors as at the time of this auditor's report.

 

Opinion

 

In our opinion:

 

	
(a)

	
the financial report of RBS Australia Leasing Pty Limited is in accordance with the Corporations Act 2001, including:

 

	
  

	
(i)

	
giving a true and fair view of the Company's financial position as at 31 December 2010 and of its performance for the year ended on that date; and

 

	
  

	
(ii)

	
complying with Australian Accounting Standards and the Corporations Regulations 2001; and

 

	
(b)

	
the financial statements also comply with International Financial Reporting Standards as disclosed in Note 1.

 

 

DELOITTE TOUCHE TOHMATSU

 

 

Philip Hardy

Partner

Chartered Accountants

Sydney, 30 June 2011

 

 

	
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RBS AUSTRALIA LEASING PTY LIMITED

 

 

DIRECTORS' DECLARATION

 

The directors declare that:

 

	
(a)

	
in the directors' opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;

 

	
(b)

	
in the directors' opinion, the attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance with accounting standards and giving a true and fair view of the financial position and performance of the company and the consolidated entity;

 

	
(c)

	
in the directors' opinion, the financial statements and notes thereto are in accordance with International Financial Reporting Standards issued by the International Accounting Standards Board; and

 

	
(d)

	
the directors have been given the declarations required by s.295A of the Corporations Act 2001

 

Dated at Sydney this 30th day of June 2011.

 

Signed in accordance with a resolution of the directors made pursuant to s.295(5) of the Corporations Act 2001.

 

 

______________________________

Gordon Jagger

Director

 

Sydney

30 June, 2011

 

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

 

STATEMENT OF COMPREHENSIVE INCOME

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

 

	
CONTINUING OPERATIONS

	 	
Note

	 	 	
2010

	 	 	
2009

	 
	  	 	 	 	 	
$'000

	 	 	
$'000

	 
	
Revenue

	 	 	3	 	 	 	36,043	 	 	 	35,449	 
	
Operating Expenses

	 	 	3	 	 	 	(15,728	)	 	 	(15,534	)
	
OPERATING PROFIT

	 	 	 	 	 	 	20,315	 	 	 	19,915	 
	
Interest income

	 	 	 	 	 	 	2,201	 	 	 	1,135	 
	
Finance costs

	 	 	 	 	 	 	(14,375	)	 	 	(13,424	)
	
Gain from movement in fair value of derivatives

	 	 	 	 	 	 	9,149	 	 	 	27,634	 
	
Other expenses

	 	 	3	 	 	 	(128	)	 	 	(142	)
	
PROFIT BEFORE TAX

	 	 	 	 	 	 	17,162	 	 	 	35,118	 
	
Income tax expense

	 	 	5	 	 	 	(5,149	)	 	 	(10,536	)
	
PROFIT FOR THE FINANCIAL YEAR

	 	 	 	 	 	 	12,013	 	 	 	24,582	 
	
Other comprehensive income after tax

	 	 	 	 	 	 	- 	 	 	 	- 	 
	
TOTAL COMPREHENSIVE INCOME FOR THE YEAR

	 	 	 	 	 	 	12,013 	 	 	 	24,582 	 

Notes to the financial statements are included on pages 11 to 34.

 

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

 

STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2010

 

	  	 	
Note

	 	 	
2010

	 	 	
2009

	 
	  	 	 	 	 	
$'000

	 	 	
$'000

	 
	
Current assets

	 	 	 	 	 	 	 	 	 
	
Cash and cash equivalents

	 	 	19	 	 	 	53,140	 	 	 	42,550	 
	
Trade and other receivables

	 	 	7	 	 	 	529 	 	 	 	304 	 
	
Total current assets

	 	 	 	 	 	 	53,669 	 	 	 	42,854 	 
	
Non-current assets

	 	 	 	 	 	 	 	 	 	 	 	 
	
Derivatives at fair value

	 	 	10	 	 	 	5,749	 	 	 	-	 
	
Property, plant & equipment

	 	 	11	 	 	 	260,892 	 	 	 	270,944 	 
	
Total non-current assets

	 	 	 	 	 	 	266,641 	 	 	 	270,944 	 
	
Total assets

	 	 	 	 	 	 	320,310 	 	 	 	313,798 	 
	
Current liabilities

	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade and other payables

	 	 	12	 	 	 	(8,187	)	 	 	(6,258	)
	
Deferred income

	 	 	13	 	 	 	(4,773	)	 	 	(4,453	)
	
Borrowings

	 	 	14	 	 	 	(5,187	)	 	 	(2,869	)
	
Total current liabilities

	 	 	 	 	 	 	(18,147	)	 	 	(13,580	)
	
Non-current liabilities

	 	 	 	 	 	 	 	 	 	 	 	 
	
Deferred income

	 	 	13	 	 	 	(9,606	)	 	 	(14,379	)
	
Derivatives at fair value

	 	 	10	 	 	 	(2,824	)	 	 	(6,222	)
	
Borrowings

	 	 	14	 	 	 	(243,739	)	 	 	(250,785	)
	
Deferred tax liabilities

	 	 	15	 	 	 	(13,799	)	 	 	(8,650	)
	
Total non-current liabilities

	 	 	 	 	 	 	(269,968	)	 	 	(280,036	)
	
Total liabilities

	 	 	 	 	 	 	(288,115	)	 	 	(293,616	)
	
Net assets

	 	 	 	 	 	 	32,195 	 	 	 	20,182 	 
	
Equity

	 	 	 	 	 	 	 	 	 	 	 	 
	
Issued capital

	 	 	16	 	 	 	-	 	 	 	-	 
	
Retained earnings

	 	 	 	 	 	 	32,195 	 	 	 	20,182 	 
	
Total Equity

	 	 	 	 	 	 	32,195 	 	 	 	20,182 	 

Notes to the financial statements are included on pages 11 to 34.

 

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

 

STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

 

	  	 	
Fully Paid Ordinary Shares

	 	 	
Retained Earnings/ (Accumulated Losses)

	 
	  	 	 	$	 	 	
$'000's

	 
	
Balance as at 1 January 2009

	 	 	2	 	 	 	(4,400	)
	
Profit for the year

	 	 	- 	 	 	 	24,582 	 
	
Balance as at 31 December 2009

	 	 	2	 	 	 	20,182	 
	
Profit for the year

	 	 	- 	 	 	 	12,013 	 
	
Balance as at 31 December 2010

	 	 	2 	 	 	 	32,195 	 

Notes to the financial statements are included on pages 11 to 34.

 

 

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

 

 

STATEMENT OF CASH FLOWS

FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2010

 

	  	 	
Note

	 	 	
2010

	 	 	
2009

	 
	  	 	 	 	 	
$'000

	 	 	
$'000

	 
	
Cash flow from operating activities

	 	 	19(b)	 	 	 	15,318 	 	 	 	15,014 	 
	
Cash flows from financing activities

	 	 	 	 	 	 	 	 	 	 	 	 
	
Repayment of borrowings

	 	 	 	 	 	 	(4,728	)	 	 	(6,507	)
	
Net cash used by financing activities

	 	 	 	 	 	 	(4,728	)	 	 	(6,507	)
	
Net increase in cash and cash equivalents

	 	 	 	 	 	 	10,590	 	 	 	8,507	 
	
Cash and cash equivalents at the beginning of the financial period

	 	 	 	 	 	 	42,550 	 	 	 	34,043 	 
	
Cash and cash equivalents at the end of the financial period

	 	 	19(a)	 	 	 	53,140 	 	 	 	42,550 	 

Notes to the financial statements are included on pages 11 to 34.

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

	
1

	
Summary of Accounting Policies

 

General Information

 

The company is registered and domiciled in Australia.  The company's registered office is Level 22, 88 Phillip Street, Sydney, NSW 2000.

 

Statement of Compliance

 

The financial report is a general-purpose financial report, which has been prepared in accordance with the Corporations Act 2001, applicable Accounting Standards and interpretations, and complies with other requirements of the law.  Accounting Standards include Australian equivalents to International Financial Reporting Standards ('A-IFRS').  Compliance with the A-IFRS ensures that the company financial statements and notes of the company comply with International Financial Reporting Standards ('IFRS').

 

The financial statements were authorised for issue by the directors on 30 June, 2011.

 

Basis of preparation

 

The financial report has been prepared on the basis of historical cost except for the revaluation of certain non-current assets and financial instruments.  Cost is based on the fair values of the consideration given in exchange for assets.  All amounts are presented in Australian dollars, unless otherwise noted.

 

The accounts are prepared in accordance with A-IFRS.

 

In the application of A-IFRS management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources.  The estimates and associated assumptions are based on historical experience and various factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgements.  Actual results may differ from these estimates.  The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

Judgements made by management in the application of A-IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable, in the relevant notes to the financial statements.

 

The company is a company of the kind referred to in ASIC Class Order 98/0100, dated 10 July 1998, and in accordance with that Class Order amounts in the financial report are rounded off to the nearest thousand dollars, unless otherwise indicated.

 

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies - continued

 

Newly adopted standards and interpretations

 

The following new and revised standards and interpretations have been adopted in these 31 December 2010 financial statements:

 

	
  

	
·

	
Amendments to AASB 107 Statement of Cash Flows was issued in May 2009 (part of AASB 2009-5 Further Amendments to Australian Accounting Standard arising from the Annual Improvements Project).  The amendments specify that only expenditures that result in a recognised asset in the statements of financial position can be classified as investing activities in the statement of cash flows.  Prior year amounts, where applicable, have been restated for consistent presentation.

 

	
  

	
·

	
AASB 3 Business Combinations (2008) has been adopted in the current year.  In accordance with the relevant transitional provisions, AASB 3 has been applied prospectively and therefore there is no impact on prior periods in the company's 2010 financial statements.  The impact of the adoption of AASB 3 Business Combinations (2008) are as follows:

 

	
  

	
·

	
Any non-controlling interests (previously referred to as 'minority' interests) are now measured either at fair value or at the non-controlling interests' share of the fair value of the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis;

 

	
  

	
·

	
Contingent consideration is measured at fair value at the acquisition date, subsequent changes to the consideration are recognised against goodwill only to the extent that they arise from better information about the fair value at the acquisition date, and they occur within the 'measurement period' (a maximum of 12 months from the acquisition date).  All other subsequent changes therein are recognised in the statement of comprehensive income;

 

	
  

	
·

	
Any pre-existing interest in the acquiree is measured at fair value with the gain or loss recognised in the statement of comprehensive income;

 

	
  

	
·

	
Transaction costs, other than share and debt issue costs, are recognised as incurred.

 

	
  

	
·

	
Amendments to AASB 127 Consolidated and Separate Financial Statements (2008) requires a Group to account for changes in ownership interests by that Group in a subsidiary, while maintaining control, to derecognise all assets, liabilities and non-controlling interests at their carrying amount.  Any retained interest in the former subsidiary is recognised at its fair value at the date control is lost, with the gain or loss arising recognised in the statement of comprehensive income.

 

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies – continued

 

Newly adopted standards and interpretations - continued

 

	
  

	
·

	
AASB 2008-3 Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127 introducing consequential amendments to other standards.

 

	
  

	
·

	
Amendments to AASB 128 Investments in Associates, issued in July 2009, is a consequential amendment as a result of AASB 127 (above), whereby when significant influence is lost, a Group measures any investment retained in the former associate at fair value, with any consequential gain or loss recognised in the statement of comprehensive income.

 

	
  

	
·

	
AASB 2008-6 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project makes amendments to AASB 5 Non-current Assets Held for Sale and Discontinued Operations to include requirements relating to a sale which involves the loss of control of a subsidiary.  The amendments require all net assets of such a subsidiary to be classified as held for sale and clarify the disclosures required when the subsidiary is part of a disposal group that meets the definition of a discontinued operation.

 

	
  

	
·

	
AASB 2008-8 Amendments to Australian Accounting Standards - Eligible Hedged Items clarifies the effect of using options as hedging instruments and the circumstances in which inflation risk can be hedged.

 

	
  

	
·

	
AASB 2009-4 Amendments to Australian Accounting Standards arising from the Annual Improvements Project was issued in May 2009.  It relates to the Annual Improvements Project and made consequential amendments to AASB 2, AASB 138 and AASB Interpretation 9 arising from revised AASB 3.  It also amends the restriction on the entity that can hold hedging instruments in AASB Interpretation 16.

 

	
  

	
·

	
AASB 2009-5 Further Amendments to Australian accounting Standards arising from the Annual Improvement Project was issued in May 2009 made a number of changes in the detail of the company's accounting policies some of which are terminology only, and some of which are substantive but are not expected to have a material impact on amounts reported.

 

	
  

	
·

	
AASB 2009-7 Amendments to Australian Accounting Standards was issued in June 2009 and makes amendments to AASB 5, AASB 7, AASB 139 and Interpretation 17 to correct errors that occurred in AASB 2008-12, AASB 2008-13 and Interpretation 17 itself.

 

 

  

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RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies – continued

 

Newly adopted standards and interpretations - continued

 

	
  

	
·

	
AASB 2009-8 Amendments to Australian Accounting Standards - Group Cash-Settled Share-based Payment Transactions was issued in July 2009.  It requires that an entity that receives goods or services in a share-based payment arrangement accounts for those goods or services no matter which entity in the Group settles the transaction, and no matter whether the transaction is settled in shares or cash.

 

	
  

	
·

	
Interpretation 17 Distributions of Non-cash Assets to Owners provides guidance on the measurement of distributions of assets, other than cash, when paid to owners acting in their capacity as owners.

 

	
  

	
·

	
Interpretation 18 Transfers of Assets from Customers addresses the accounting for property, plant or equipment received from 'customers' in exchange for supplies of goods or services.  The asset is to be recognised at its fair value on the date of the transfer.  Revenue arising from the recognition of the asset is recognised in accordance with the requirements of AASB 118 Revenue.

 

New standards and interpretations not yet adopted

 

The following standards, amendments to standards and interpretations are available for early adoption at 31 December 2010, but have not been applied in preparing these financial statements:

 

	
  

	
·

	
AASB 124 Related Party Disclosures (2009) and AASB 2009-12 Amendments to Australian Accounting Standards (revised December 2009) clarifies the definition of a related party and includes a requirement to disclose commitments involving related parties.  The amendments to AASB 124, which become mandatory for the company's 31 December 2011 statements, are not expected to have a material impact on the company.

 

	
  

	
·

	
AASB 9 Financial instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9, AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9.  AASB 9 introduces the following new requirements for classifying and measuring financial assets:

 

	
  

	
·

	
Debt instruments meeting both a 'business model' test and a 'cash flow characteristics' test are measured at amortised cost (the use of fair value is optional in some limited circumstances);

 

	
  

	
·

	
Investments in equity instruments can be designated as 'fair value through other comprehensive income' with only dividends being recognised in the statement of comprehensive income;

 

 

  

- 14 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies – continued

 

New standards and interpretations not yet adopted - continued

 

	
  

	
·

	
All other instruments (including all derivatives) are measured at fair value with changes recognised in the statement of comprehensive income; and

 

	
  

	
·

	
The concept of 'embedded derivative' does not apply to financial assets within the scope of the standard and the entire instrument must be classified and measured in accordance with the above guidelines.

 

	
  

	
·

	
AASB 9 was further amended in 2010 to require fair value changes attributable to changes in own credit risk for financial liabilities designated at fair value through the statement of comprehensive income to be presented in other comprehensive income unless the treatment would create or enlarge an accounting mismatch in the statement of comprehensive income.  The amendments to AASB 9 becomes mandatory for the company's 31 December 2013 financial statements, the company has not yet had an opportunity to consider how AASB 9 impacts the company's financial assets.

 

	
  

	
·

	
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvement Project amends a number of pronouncements as a result of the IASB's 2008-2010 cycle of annual improvements to provide clarification on certain matters, including clarification on the measurement of non-controlling interests in business combinations.  This amendment becomes mandatory for the company's 31 December 2011 financial statements but is not expected to have a material impact.

 

	
  

	
·

	
AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project which amends a number of pronouncements as a result of the IASB's 2008-2010 cycle of annual improvements.  The key amendments are relating to clarification of content of statement of changes in equity (AASB 101) and financial instrument disclosures (AASB 7).  This amendment becomes mandatory for the company's 31 December 2011 financial statements but it is not expected to have a material impact.

 

	
  

	
·

	
AASB 2010-5 Amendments to Australian Accounting Standards makes amendments to a range of standards and interpretations.  This amendment becomes mandatory for the company's 31 December 2011 financial statements but it is not expected to have a material impact.

 

	
  

	
·

	
AASB 2010-6 Amendments to Australian Accounting Standards - Disclosure on Transfers of Financial Assets makes amendments to AASB 7 Financial Instruments:  Disclosures which includes the introduction of additional disclosures in relation to the transfer of financial assets.  This amendment

 

 

  

- 15 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies – continued

 

becomes mandatory for the company's 31 December 2012 financial statements but it is not expected to have a material impact.

 

Significant Accounting Policies

 

The following significant accounting policies have been adopted in the preparation and presentation of the financial report:

 

	
  

	
(a)

	
Going Concern

 

The financial report has been prepared on the going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

 

	
  

	
(b)

	
Borrowings

 

Borrowings are recorded initially at fair value, net of transaction costs.  Subsequent to initial recognition, borrowings are measured at amortised cost with any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the borrowing using the effective interest rate method.

 

The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period.  The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period.

 

	
  

	
(c)

	
Borrowing Costs

 

All interest costs are expensed as they are incurred within the reporting period.

 

	
  

	
(d)

	
Cash and Cash equivalents

 

Cash and cash equivalents comprise cash on hand and cash in banks.  Bank overdrafts are shown within borrowings in current liabilities in the balance sheet.

 

	
  

	
(e)

	
Operating Leases

 

Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease.

 

 

  

- 16 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies – continued

 

Significant Accounting Policies - continued

 

	
  

	
(f)

	
Foreign Currency

 

Transactions in foreign currency are recorded at the rates of exchange prevailing on the dates of the transactions.  At each balance sheet date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date.  Non-monetary assets and liabilities carried at fair value that are denominated in foreign currencies are translated at the rates prevailing at the date when the fair value was determined.  Gains and losses arising on retranslation are included in net the statement of comprehensive income for the period.

 

The company's functional currency is Australian dollars, as its trading and funding is predominately in this currency, and, therefore, its financial statements are presented in this currency.

 

	
  

	
(g)

	
Income Tax

 

Current tax

 

Current tax is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period.  It is calculated using tax rates and tax laws that have been enacted or substantively enacted by reporting date.  Current tax for current and prior periods is recognised as a liability or asset to the extent that it is unpaid or refundable.

 

Deferred tax

 

Deferred tax is accounted for using the balance sheet liability method.  Temporary differences are differences between the tax base of an asset or liability and its carrying amount in the balance sheet.  The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

 

In principle, deferred tax liabilities are recognised for all taxable temporary differences.  Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary differences or unused tax losses and tax offsets can be utilised.  However, deferred tax assets and liabilities are not recognised if the temporary differences giving rise to them arise from the initial recognition of assets and liabilities (other than as a result of a business combination) which affects neither taxable income nor accounting profit.

 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period(s) when the asset and liability giving rise to them are realised or settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by reporting date.  The measurement of

 

 

  

- 17 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies – continued

 

Significant Accounting Policies - continued

 

deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.

 

Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.

 

Current and deferred tax for the period

 

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

 

	
  

	
(h)

	
Impairment of Assets

 

At each reporting date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss.  If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any).  Where the asset does not generate cash flows that are independent from other assets, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

 

Recoverable amount is the higher of fair value less costs to sell and value in use.  In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.  If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount.  An impairment loss is recognised in the statement of comprehensive income immediately, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.  Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years.  A reversal of an impairment loss is recognised in the statement of comprehensive income immediately, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

 

 

  

- 18 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

 

1.             Summary of Accounting Policies – continued

 

Significant Accounting Policies - continued

 

	
  

	
(i)

	
Property, Plant and Equipment

 

Property, plant and equipment are stated at cost less accumulated depreciation and any recognised impairment loss.

 

Assets are depreciated over their useful economic life, as follows:

 

	
  

	
-

	
Aircraft for hire under operating leases 18 to 25 years from date of manufacture.

 

The balance sheet carrying values of operating lease assets include balances in respect of residual values; unguaranteed residual values are subject to regular review with any revisions being made through depreciation.

 

	
  

	
(j)

	
Derivatives at Fair Value

 

The company has entered into financial instruments (derivatives) to manage balance sheet interest rate risk and foreign currency risk.  The derivatives held are interest rate swaps, currency swaps and foreign currency forward contracts.

 

A swap is an agreement to exchange cash flows in the future in accordance with a pre-arranged formula.  Interest rate swap contracts generally involve exchange of fixed and floating interest payment obligations without the exchange of underlying principal amounts.

 

Currency swaps commit two counterparties to exchange streams of interest payments in different currencies for an agreed period of time.

 

Derivative financial instruments are recognised initially, and subsequently measured, at fair value.  Derivative fair values are determined from quoted prices in active markets where available.  Where there is no active market for an instrument, fair value is derived from prices for the derivative's components using appropriate pricing or valuation models.  The company's pricing and valuation methods are managed by the ultimate holding company, The Royal Bank of Scotland Group plc ("the Group").  Most of the Group's pricing models do not entail material subjectivity because the methodologies utilised do not incorporate significant judgement and the parameters included in the models can be calibrated to actively quoted market prices.  Values established from pricing models are adjusted for credit risk, liquidity risk and future operational costs.

 

 

  

- 19 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

 

1.             Summary of Accounting Policies – continued

 

Significant Accounting Policies - continued

 

Derivatives are classified as either financial assets or financial liabilities, at fair value through the statement of comprehensive income.  Gains and losses arising from changes in fair value of a derivative are recognised as they arise in the statement of comprehensive income.

 

	
  

	
(k)

	
Receivables

 

Trade receivables and other receivables are initially recorded at fair value and subsequently held at amortised cost less any allowance for doubtful debts.

 

	
  

	
(l)

	
Accounts Payable

 

Trade payables and other accounts payable are recognised when the company becomes obliged to make future payments resulting from the purchase of goods and services.

 

	
  

	
(m)

	
Goods and Services Tax

 

Revenues, expenses and assets are recognised net of amount of goods and services tax ("GST"), except:

 

	
  

	
i.

	
where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or

 

	
  

	
ii.

	
for receivables and payables which are recognised inclusive of GST, the net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

 

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

 

Cash flows are included in the cash flow statement on a gross basis.  The GST component of cash flows arising from investing and financing activities which is recoverable from, or payable to, the taxation authority is classified as operating cash flows.

 

	
  

	
(n)

	
Deferred Income - Sale of Lease Income Streams

 

On the sale of lease income stream, the company recognises a profit upfront that is the equivalent of the difference between the credit margin associated with the lessee on acquisition and the corresponding credit margin on disposal times the purchase consideration for the lease receivables.  The remaining balance is recorded on the statement of financial position as deferred income.

 

 

  

- 20 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

1.             Summary of Accounting Policies – continued

 

Significant Accounting Policies - continued

 

The deferred income balance is amortised over the remaining life of the lease.  The amortisation takes into account the lease receipts from the lessee passed through the company and the notional cost of servicing the outstanding deferred income balance.

 

	
2

	
Financial Management

 

	
  

	
(a)

	
Interest Rate Risk

 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

 

The company's policy is to minimise cashflow interest rate risk when entering into an operating lease, by matching the leasing income cash profile with the associated floating rate borrowing and interest rate swap.  Accounting volatility arises from fair value through the statement of comprehensive income movements because these swaps do not qualify for hedge accounting under AASB 139 which leads to timing differences in income recognition between the derivative instruments and the economically hedged operating lease.

 

	
  

	
(b)

	
Currency Risk

 

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.  The company minimises currency risk by ensuring its leases and associated financing are in the same currency or, in the case of certain leases in US dollars, entering into currency swaps over the life of the lease.

 

	
  

	
(c)

	
Credit Risk

 

Credit risk is the risk arising from the possibility that the company will incur losses from the failure of counterparties to meet their obligations.  Credit risk is managed through The Royal Bank of Scotland plc Group Credit Risk Management Framework ("the Framework") to enable the Group to achieve appropriate risk versus reward performance whilst maintaining credit risk exposure in line with approved risk appetite on a Group basis.  The Framework encompasses credit risk assessment prior to the approval of any credit exposure, and the control and monitoring of these exposures against approved limits.

 

	
  

	
(d)

	
Liquidity Risk

 

Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due.

 

 

  

- 21 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

2.             Financial Management - continued

 

The company's activities are funded by its parent, The Royal Bank of Scotland plc.  The company is dependant on the continuing funding support of its parent to meet its financial obligations as they fall due.

 

	
  

	
(e)

	
Capital Management

 

The company is a member of a group with regulatory disciplines over the use of its capital.  Although the company itself is not regulated it aims to maintain capital resources commensurate with the nature, scale and risk profile of its business.  It regards its capital as the total equity as shown on the balance sheet, adjusted for short term fluctuations resulting from fair value revaluations of derivatives used to commercially hedge risks that do not qualify as hedges under A-IFRS.

 

	
  

	
(f)

	
Property, Plant and Equipment Residual Value Risk

 

The term of the company's aircraft leases vary from seven to twelve years, whereas aircraft are depreciated over their useful economic life, being 18 to 25 years.  As a result, the residual value of an aircraft at the end of lease may be materially different from the net book value of the aircraft at that time.  This risk is not measured through the statement of comprehensive income until any realisation of gain or loss upon disposal of the aircraft.

 

 

 

  

- 22 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

 

	
3

	

Revenue from operations

 

Revenue from continuing operations consisted of the following items:

 

	
OPERATING REVENUE

	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Operating Lease Rentals

	 	 	 	 	 	 
	
Amortisation of deferred income

	 	 	4,513	 	 	 	4,214	 
	
Assigned rentals receivable

	 	 	5,676	 	 	 	5,676	 
	
Rentals receivable

	 	 	25,854	 	 	 	25,559	 
	  	 	 	36,043	 	 	 	35,449	 
	
EXPENSES

	 	 	 	 	 	 	 	 
	
Operating expenditure

	 	 	 	 	 	 	 	 
	
Operating lease depreciation

	 	 	10,052	 	 	 	9,858	 
	
Rentals paid

	 	 	5,676	 	 	 	5,676	 
	  	 	 	15,728 	 	 	 	15,534 	 
	
Other expenses

	 	 	 	 	 	 	 	 
	
Fees & commissions

	 	 	101	 	 	 	142	 
	
Management fee

	 	 	27	 	 	 	-	 
	  	 	 	128	 	 	 	142	 

The audit fee was $39,500 (2009:  $39,500).  The auditor of RBS Australia Leasing Pty Limited is Deloitte Touche Tohmatsu.

 

	
4

	
Segmental information

 

The company operates within one business segment being the provision of aircraft operating leases within the Australasia market.

 

	
5

	
Income tax

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
(a) Analysis of tax charge for the year

	 	 	 	 	 	 
	
Deferred tax – origination and reversal of timing differences:

	 	 	 	 	 	 
	
- Current year

	 	 	5,149	 	 	 	10,521	 
	
- Prior year

	 	 	- 	 	 	 	15 	 
	
Tax expense

	 	 	5,149 	 	 	 	10,536 	 
	
(b) Factors affecting the tax charge for the year

	 	 	 	 	 	 	 	 
	
Profit before tax

	 	 	17,162 	 	 	 	35,118 	 
	
Tax on profit at the standard rate of 30% (2009:  30%)

	 	 	5,149	 	 	 	10,536	 
	
Tax expense

	 	 	5,149 	 	 	 	10,536 	 

 

 

  

- 23 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

	
6

	
Key management personnel compensation

 

During the year, the following persons acted as Directors:

 

Simon James Hanson (resigned 28 April 2010)

John Higgins (resigned 14 January 2010)

Stephen Conrad Mark Williams

Gordon David Jagger

Barry Flannery (appointed 5 May 2010)

Peter Barnett (appointed 5 May 2010)

 

The aggregate compensation made to directors and other members of key management personnel in the period and in proportion to the time spent on matters relating to the company was:

 

	  	 	
2010

	 	 	
2009

	 
	  	 	 	$	 	 	 	$	 
	
Short term employee benefits

	 	 	109,770	 	 	 	16,245	 
	
Long term employee benefits

	 	 	- 	 	 	 	1,438 	 
	
Total employee benefits

	 	 	109,770 	 	 	 	17,683 	 

All directors are employed and remunerated by The Royal Bank of Scotland plc, which did not make a recharge to the company in the year (2009: nil).  The average number of employees (including directors) was nil (2009: nil).

 

	
7

	
Trade and other receivables

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Other debtors

	 	 	529 	 	 	 	304 	 

The directors consider that the carrying amount of trade and other receivables approximates to their fair value.

 

 

  

- 24 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

 

	
8

	

Residual value exposure

 

The table below gives details in respect of unguaranteed residual values included in the carrying value of operating lease assets at the balance sheet date.

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Year in which residual value will be recovered

	 	 	 	 	 	 
	
Between two and five years

	 	 	160,220	 	 	 	162,317	 
	
More than 5 years

	 	 	61,165 	 	 	 	61,165 	 
	  	 	 	221,385 	 	 	 	223,482 	 

The company enters into operating leases for aircraft.  The lease terms vary from seven to twelve years.

 

RBS Aerospace Ltd, an affiliated entity wholly owned by RBS plc, entered into forward exchange contracts to manage the foreign exchange risk associated with the foreign exchange exposure arising on the US dollar residual value of 4 aircraft owned and leased by RBS Australia Leasing Pty Limited.  RBS Aerospace Ltd is not contractually bound to pass on the costs or benefits associated with these foreign exchange contracts to RBS Australia Leasing Pty Ltd, however in the past, RBS Aerospace Ltd has provided RBS Australia Leasing Pty Limited with the net settlement value of such foreign exchange contracts on disposal of a RBS Australia Leasing Pty Limited owned aircraft.  RBS Australia Leasing Ply Limited places reliance on RBS Aerospace Ltd's past practice of providing it with the net benefit/ cost of these contracts consistent with the original purpose of entering into such contracts.  However, as RBS Aerospace Ltd is not contractually bound to pass the benefits/costs, RBS Australia Leasing Pty Ltd has not accounted for any gains or losses that may result from doing so in the future.

 

 

  

- 25 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

	
9

	

Financial Instruments

 

a)           Carrying value and fair value of financial instrument by category:

 

	  	 	
Carrying value 2010

	 	 	
Fair value 2010

	 	 	
Carrying value 2009

	 	 	
Fair value 2009

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Loans and receivables:

	 	 	 	 	 	 	 	 	 	 	 	 
	
- Trade and other receivables

	 	 	529	 	 	 	529	 	 	 	304	 	 	 	304	 
	
- Cash and cash equivalents

	 	 	53,140 	 	 	 	53,140 	 	 	 	42,550 	 	 	 	42,550 	 
	  	 	 	53,669	 	 	 	53,669	 	 	 	42,854	 	 	 	42,854	 
	
Financial assets at fair value through the statement of comprehensive income:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
- Derivatives

	 	 	2,925 	 	 	 	2,925 	 	 	 	- 	 	 	 	- 	 
	
Financial assets

	 	 	56,594 	 	 	 	56,594 	 	 	 	42,854 	 	 	 	42,854 	 
	
Financial liabilities measured at amortised cost:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
- Trade and other payables

	 	 	8,187	 	 	 	8,187	 	 	 	6,258	 	 	 	6,258	 
	
- Borrowings

	 	 	248,926 	 	 	 	248,926 	 	 	 	253,654 	 	 	 	253,654 	 
	  	 	 	257,113	 	 	 	257,113	 	 	 	259,912	 	 	 	259,912	 
	
Financial liabilities at fair value through the statement of comprehensive income:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
- Derivatives

	 	 	- 	 	 	 	- 	 	 	 	6,222 	 	 	 	6,222 	 
	
Financial liabilities

	 	 	257,113 	 	 	 	257,113 	 	 	 	266,134 	 	 	 	266,134 	 

b)           Fair value disclosure by fair value hierarchy level

 

Where financial assets or liabilities are designated at fair value through the statement of comprehensive income as per criteria under AASB 139, IFRS 7 requires these financial assets or liabilities to be categorised by 3 levels of hierarchy.  IFRS 7 defines each level of hierarchy by the lowest levels of input into derivations of fair values as shown below.

 

	
Level 1

	
Quoted prices for similar instruments

	
Level 2

	
Directly observable market inputs other than Level 1 inputs

	
Level 3

	
Inputs not based on observable market data

All financial assets and liabilities at fair value through profit and loss fall within level 2.

 

  

- 26 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

9.             Financial Instruments - continued

 

c)           Financial Instrument – carrying amount by market risk exposure

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Interest rate risk

	 	 	 	 	 	 
	
Financial Assets

	 	 	 	 	 	 
	
- Variable rate

	 	 	53,140	 	 	 	42,550	 
	
- Non-interest bearing

	 	 	529	 	 	 	304	 
	
- Derivatives at fair value

	 	 	2,925 	 	 	 	- 	 
	  	 	 	56,594 	 	 	 	42,854 	 
	
Financial liabilities

	 	 	 	 	 	 	 	 
	
- Variable rate

	 	 	248,926	 	 	 	253,654	 
	
- Non-interest bearing

	 	 	8,187	 	 	 	6,258	 
	
- Derivatives at fair value

	 	 	- 	 	 	 	6,222 	 
	  	 	 	257,113 	 	 	 	266,134 	 

If interest rates had been 1% higher or lower during the year then profit after tax would have changed by $1,182,000 (2009:  $1,497,000) because of changes in the fair value of interest rate swaps and from holding cash and cash equivalents.

 

Currency risk

 

If the Australian dollar had strengthened or weakened by 10% against the US dollar, with all other variables held constant, profit after tax for the year would have increased or reduced by $3,359,000 (2009:  $4,187,000), resulting from fair value gains or losses on currency swaps and forward exchange agreements.

 

d)           Credit quality

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Maximum credit exposure and neither past due nor impaired:

	 	 	 	 	 	 
	
Financial Assets

	 	 	 	 	 	 
	
Amount due from group undertakings

	 	 	53,140	 	 	 	42,550	 
	
Other debtors

	 	 	529 	 	 	 	304 	 
	  	 	 	53,669 	 	 	 	42,854 	 
	
Operating Lease Arrangements

	 	 	145,503 	 	 	 	179,162 	 

  

- 27 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

9.             Financial Instruments –continued

 

The company considers all the above financial assets to be of good credit quality.  There are no amounts either past due or impaired (2009:  nil).  The company leases aircraft to two airlines both with good payment histories.

 

e)           Liquidity risk

 

The following table details contractual cashflows payable to maturity on financial liabilities and all derivatives on an undiscounted basis

 

	  	 	
Within 1 year

	 	 	
In the 2nd year

	 	 	
3 to 5 years

	 	 	
Over 5 years

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
2010

	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade payables

	 	 	8,187	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Borrowings

	 	 	18,913	 	 	 	61,071	 	 	 	145,517	 	 	 	85,200	 
	
Derivative financial instruments:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
- Net settled position

	 	 	4,427	 	 	 	3,585	 	 	 	8,701	 	 	 	11,322	 
	
- Gross settled position

	 	 	- 	 	 	 	- 	 	 	 	- 	 	 	 	44,030 	 
	
Total cashflows payable

	 	 	31,527 	 	 	 	64,656 	 	 	 	154,218 	 	 	 	140,552 	 
	
2009

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Trade payables

	 	 	6,258	 	 	 	-	 	 	 	-	 	 	 	-	 
	
Borrowings

	 	 	17,515	 	 	 	21,092	 	 	 	205,562	 	 	 	95,022	 
	
Derivative financial instruments:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
- Net settled position

	 	 	5,281	 	 	 	3,061	 	 	 	9,593	 	 	 	17,509	 
	
- Gross settled position

	 	 	- 	 	 	 	- 	 	 	 	 	 	 	 	46,585 	 
	
Total cashflows payable

	 	 	29,054 	 	 	 	24,153 	 	 	 	215,155 	 	 	 	159,116 	 

The gross settled derivatives are in respect of the forward exchange contracts.

 

 

  

- 28 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

 

	
10

	

Derivatives at Fair Value

 

	  	 	
Assets 2010

	 	 	
Liabilities 2010

	 	 	
Assets 2009

	 	 	
Liabilities 2009

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Interest rate swaps

	 	 	-	 	 	 	(2,824	)	 	 	-	 	 	 	(3,687	)
	
Currency swaps

	 	 	5,164	 	 	 	-	 	 	 	-	 	 	 	(1,454	)
	
Forward exchange contracts

	 	 	585 	 	 	 	- 	 	 	 	- 	 	 	 	(1,081	)
	  	 	 	5,749 	 	 	 	(2,824	)	 	 	 	 	 	 	(6,222	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
Maturity analysis for derivatives

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
In the second to fifth years

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
- Interest rate swaps

	 	 	- 	 	 	 	(2,824	)	 	 	- 	 	 	 	(3,687	)
	  	 	 	 	 	 	 	(2,824	)	 	 	- 	 	 	 	(3,687	)
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
After five years

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
- Currency swaps

	 	 	5,164	 	 	 	-	 	 	 	-	 	 	 	(1,454	)
	
- Forward exchange contracts

	 	 	585 	 	 	 	- 	 	 	 	- 	 	 	 	(1,081	)
	  	 	 	5,749 	 	 	 	- 	 	 	 	- 	 	 	 	(2,535	)
	  	 	 	5,749 	 	 	 	(2,824	)	 	 	- 	 	 	 	(6,222	)

 

Notional aggregate principals

 

The total notional aggregate principal of the derivatives at fair value is as follows:

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Interest rate swaps

	 	 	168,822	 	 	 	172,010	 
	
Currency swaps

	 	 	36,947	 	 	 	41,780	 
	
Forward exchange contracts

	 	 	21,830	 	 	 	24,685	 

All derivatives held at the balance sheet date are with The Royal Bank of Scotland plc, and are denominated in either Australian dollars and US dollars.  The derivatives held are governed by the International Swap Dealers Association.  All derivatives held are carried at fair value.  None of the derivatives are in designated fair value hedge or cash flow hedge relationships.

 

Interest rate swaps are swapping variable for fixed cashflows and have an interest rate range from 6.0% to 6.1% (2009:  6.0% to 6.1%).

 

 

  

- 29 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

 

10.           Derivatives at Fair Value - continued

 

For all derivatives held, the total amount of the change in fair value estimated, using a valuation technique, recognised in the statement of comprehensive income during the year was a gain of $9,149,000 (2009:  gain of $27,634,000).  The amount of change in the fair value of interest rate derivatives that is not attributable to changes in a benchmark interest rate is nil.  The floating interest rate swaps settle on a monthly basis.  The floating rate is the Australian BBSY.  For interest rate swaps the difference between fixed and floating elements are settled on a net basis.

 

	
11

	
Property, Plant and Equipment

 

	  	 	
Assets for hire under operating leases

	 
	
At Cost

	 	
$'000

	 
	
Gross carrying amount

	 	 	 
	
Balance at 1 January 2009 & 31 December 2009

	 	 	306,038 	 
	
At 1 January 2010 & 31 December 2010

	 	 	306,038 	 
	
Accumulated depreciation

	 	 	 	 
	
Balance at 1 January 2009

	 	 	25,236	 
	
Depreciation expense

	 	 	9,858 	 
	
Balance at 31 December 2009

	 	 	35,094 	 
	
Balance at 1 January 2010

	 	 	35,094	 
	
Depreciation charge for the year

	 	 	10,052 	 
	
At 31 December 2010

	 	 	45,146 	 
	
Net book value

	 	 	 	 
	
As at 31 December 2010

	 	 	260,892 	 
	
As at 31 December 2009

	 	 	270,944 	 

During the year, there were no acquisitions or disposal of planes (2009:  none).

 

	
12

	
Current Trade and Other Payables

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Amounts due within one year:

	 	 	 	 	 	 
	
Amounts due to group undertakings

	 	 	601	 	 	 	599	 
	
Other payables and accruals

	 	 	5,900	 	 	 	4,143	 
	
Operating lease rentals received in advance

	 	 	1,686 	 	 	 	1,516 	 
	  	 	 	8,187 	 	 	 	6,258 	 

 

 

  

- 30 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

	
13

	
Deferred income

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Current deferred income

	 	 	4,773	 	 	 	4,453	 
	
Non-current deferred income

	 	 	9,606	 	 	 	14,379	 
	  	 	 	14,379 	 	 	 	18,832 	 

Deferred income is the amount under an arrangement whereby operating lease rentals are received in advance of being earned.

 

	
14

	
Borrowings

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Loan amount due to group undertakings

	 	 	248,926 	 	 	 	253,654 	 
	
The unsecured borrowings are repayable as follows and at amortised cost:

	 
	
On demand or within one year

	 	 	5,187	 	 	 	2,869	 
	
In the second year

	 	 	47,336	 	 	 	5,673	 
	
In the third to fifth year inclusive

	 	 	125,780	 	 	 	172,321	 
	
After five years

	 	 	70,623	 	 	 	72,791	 
	  	 	 	248,926	 	 	 	253,654	 
	
Less:  Amounts due for settlement within 12 months

	 	 	(5,187	)	 	 	(2,869	)
	
Amounts due for settlement after 12 months

	 	 	243,739 	 	 	 	250,785 	 

On 10 June 2009, the company and its lender, The Royal Bank of Scotland plc, signed a facility agreement which alters the repayment schedule of the Company's borrowings to match the repayment schedule of the operating leases.

 

A right of set-off exists over the company's bank account with The Royal Bank of Scotland plc against advances made to the Company's immediate holding company and its subsidiaries.

 

The interest rate is set with reference to the Australian BBSW and is set on a monthly basis.  The directors consider that the carrying amount of loans approximates to their fair value.

 

 

  

- 31 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

	
15

	
Deferred Tax Liabilities/(Assets)

 

	
2010

	 	
Opening Balance

	 	 	
Charged/ (credit) to Income

	 	 	
Closing Balance

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Temporary differences:

	 	 	 	 	 	 	 	 	 
	
Derivatives at fair value through the statement of comprehensive income

	 	 	(1,867	)	 	 	2,745	 	 	 	878	 
	
Property, plant and equipment

	 	 	32,479	 	 	 	5,100	 	 	 	37,579	 
	
Revenue received in advance

	 	 	(6,104	)	 	 	1,285	 	 	 	(4,819	)
	
Other

	 	 	(20	)	 	 	(13	)	 	 	(33	)
	
Total temporary differences before unused tax losses

	 	 	24,488 	 	 	 	9,117 	 	 	 	33,605 	 
	
Unused tax losses:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Deferred tax asset arising from tax losses carried forward

	 	 	(15,838	)	 	 	(3,968	)	 	 	(19,806	)
	
Deferred tax liabilities (Note 5)

	 	 	8,650 	 	 	 	5,149 	 	 	 	13,799 	 

	
2009

	 	
Opening Balance

	 	 	
Charged/ (credit) to Income

	 	 	
Closing Balance

	 
	  	 	
$'000

	 	 	
$'000

	 	 	
$'000

	 
	
Temporary differences:

	 	 	 	 	 	 	 	 	 
	
Derivatives at fair value through the statement of comprehensive income

	 	 	(10,158	)	 	 	8,291	 	 	 	(1,867	)
	
Property, plant and equipment

	 	 	25,655	 	 	 	6,824	 	 	 	32,479	 
	
Revenue received in advance

	 	 	(7,364	)	 	 	1,260	 	 	 	(6,104	)
	
Other

	 	 	- 	 	 	 	(20	)	 	 	(20	)
	
Total temporary differences before unused tax losses

	 	 	8,133 	 	 	 	16,355 	 	 	 	24,488 	 
	
Unused tax losses:

	 	 	 	 	 	 	 	 	 	 	 	 
	
Deferred tax asset arising from tax losses carried forward

	 	 	(10,019	)	 	 	(5,819	)	 	 	(15,838	)
	
Deferred tax liabilities/(assets) (Note 5)

	 	 	(1,886	)	 	 	10,536 	 	 	 	8,650 	 

 

 

  

- 32 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

	
16

	
Issued Capital

 

	  	 	
2010

	 	 	
2009

	 
	  	 	 	$	 	 	 	$	 
	
Issued capital

	 	 	 	 	 	 	 	 
	
2 authorised & fully paid ordinary shares

	 	 	2	 	 	 	2	 
	
Fully Paid Ordinary Shares

	 	 	 	 	 	 	 	 
	
Balance at the beginning of the financial period

	 	 	2	 	 	 	2	 
	
Issue of shares

	 	 	- 	 	 	 	- 	 
	
Balance at the end of the financial period

	 	 	2 	 	 	 	2 	 

Fully paid ordinary shares carry one vote per share and the right to dividends.

2 ordinary shares have been authorised and issued.

 

	
17

	
Operating Lease Arrangements

 

The future minimum lease payments receivable under non-cancellable operating leases are as follows:

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Within one year

	 	 	33,657	 	 	 	33,658	 
	
Between two and five years

	 	 	75,346	 	 	 	99,425	 
	
After more than five years

	 	 	36,500 	 	 	 	46,079 	 
	  	 	 	145,503 	 	 	 	179,162 	 

The company has entered into operating leases of aircraft.

 

 

  

- 33 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

 

	
18

	

Related Party Disclosures

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Transactions with Related Parties:

	 	 	 	 	 	 
	
- The Royal Bank of Scotland plc:

	 	 	 	 	 	 
	
Transactions during the period:

	 	 	 	 	 	 
	
- Interest on loan payable to related party

	 	 	14,375	 	 	 	13,424	 
	
- Interest on loan receivable from related party

	 	 	(2,201	)	 	 	(1,135	)
	
- Derivative movements including interest

	 	 	(9,149	)	 	 	(27,634	)
	
- Repayment of related party borrowing

	 	 	4,728 	 	 	 	6,507 	 
	
Assets at the end of the year:

	 	 	 	 	 	 	 	 
	
- Short term deposit account held with related party

	 	 	41,299	 	 	 	34,898	 
	
- Derivatives at fair value

	 	 	2,925	 	 	 	-	 
	
- Bank account held with related party

	 	 	11,841	 	 	 	7,652	 
	  	 	 	56,065 	 	 	 	42,550 	 
	
Liabilities at the end of the year:

	 	 	 	 	 	 	 	 
	
- Borrowings

	 	 	(248,926	)	 	 	(253,654	)
	
- Derivatives at fair value

	 	 	-	 	 	 	(6,222	)
	
- Interest accrual

	 	 	(553	)	 	 	(578	)
	
- Other

	 	 	(48	)	 	 	(22	)
	  	 	 	(249,527	)	 	 	(260,476	)

The amounts outstanding are unsecured and will be settled in cash.  The company has not given or received any guarantees to or from a related party.  The company's parent has issued guarantees to a counterpart of the company, that guarantees the performance of the company in relation to lease agreements.  No provisions have been made for doubtful debts in respect of the amounts owed by related parties.

 

On 1 December 2008, the UK Government through HM Treasury became the ultimate controlling party of The Royal Bank of Scotland Group plc.  The UK Government's shareholding is managed by UK Financial Investments Limited, a company wholly owned by the UK Government.

 

The company's ultimate holding company is The Royal Bank of Scotland Group plc and its immediate parent company is The Royal Bank of Scotland plc.  Both companies are incorporated in Great Britain and registered in Scotland.

 

As at 31 December 2010, The Royal Bank of Scotland Group plc heads the largest group in which the company is consolidated and The Royal Bank of Scotland plc heads the smallest group in which the company is consolidated.  Copies of the consolidated accounts of both companies may be obtained from The Secretary, The Royal Bank of Scotland Group plc, Gogarburn, PO Box 1000, Edinburgh, Scotland EH12 1HQ.

 

 

  

- 34 -

  

RBS AUSTRALIA LEASING PTY LIMITED

 

NOTES TO THE FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD

ENDED 31 DECEMBER 2010

 

 

	
19

	
Notes to Statement of Cash Flows

 

	
  

	
(a)

	
Reconciliation of cash and cash equivalents

 

For the purpose of the cash flow statement, cash and cash equivalents include cash on hand and in banks and investments in money market instruments, net of outstanding bank overdrafts.  Cash and cash equivalents at the end of the financial year as shown in the cash flow statement is reconciled to the related items in the balance sheet as follows:

 

	  	 	
2010

	 	 	
2009

	 
	  	 	
$'000

	 	 	
$'000

	 
	
Cash and cash equivalents

	 	 	53,140 	 	 	 	42,550 	 

	
  

	
(b)

	
Reconciliation of profit for the period to net cash flows from operating activities

 

	
Profit before tax

	 	 	17,162	 	 	 	35,118	 
	
Adjustments for:

	 	 	 	 	 	 	 	 
	
Depreciation on assets for hire under operating leases

	 	 	10,052	 	 	 	9,858	 
	
Amortisation of deferred income

	 	 	(4,513	)	 	 	(4,214	)
	
Gain on derivatives at fair value

	 	 	(9,149	)	 	 	(27,634	)
	
Interest income

	 	 	(2,201	)	 	 	(1,135	)
	
Interest expense

	 	 	14,375 	 	 	 	13,424 	 
	
Operating cash flows before movements in working capital

	 	 	25,726	 	 	 	25,417	 
	
(Increase)/Decrease in other receivables

	 	 	(223	)	 	 	1,998	 
	
Increase/(Decrease) in payables

	 	 	2,013 	 	 	 	(162	)
	
Cash generated by operations

	 	 	27,516	 	 	 	27,253	 
	
Interest received

	 	 	2,201	 	 	 	1,136	 
	
Interest paid

	 	 	(14,399	)	 	 	(13,375	)
	
Net cash from operating activities

	 	 	15,318 	 	 	 	15,014 	 

	
20

	
Subsequent Events

 

There has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

 

 

  

  

- 35 -  

  

 

EXHIBIT 4

***

 

 

 

 

 

 

 

 

 

 

 

  

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

 

 

 

 

EXHIBIT 5

 

LIST OF DISCLOSED EMPLOYEES

 

	
1.

	
2.

	
3.

	
4.

	
5.

	
No.

	
Given Name

	
Family Name

	
Jurisdiction

	
Employing Entity

	
1.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
2.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
3.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
4.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
5.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
6.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
7.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
8.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
9.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
10.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
11.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
12.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
13.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
14.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
15.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
16.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
17.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
18.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
19.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
20.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
21.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
22.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
23.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
24.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
25.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
26.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
27.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
28.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
29.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
30.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
31.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
32.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
33.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
34.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
35.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
36.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

  

  

- 1 -

  

 

	
1.

	
2.

	
3.

	
4.

	
5.

	
No.

	
Given Name

	
Family Name

	
Jurisdiction

	
Employing Entity

	
37.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
38.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
39.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
40.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
41.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
42.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
43.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
44.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
45.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
46.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
47.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
48.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
49.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
50.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
51.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
52.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
53.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
54.

	
***

	
***

	
France

	
RBS Aerospace Ltd

	
55.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
56.

	
***

	
***

	
Ireland

	
RBS Aerospace Ltd

	
57.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
58.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
59.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
60.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
61.

	
***

	
***

	
Singapore

	
The Royal Bank of Scotland Plc

	
62.

	
***

	
***

	
China

	
China International Intellectech (Shanghai) Corporation

	
63.

	
***

	
***

	
China

	
The Royal Bank of Scotland (China) Co. Ltd, Beijing Branch

	
64.

	
***

	
***

	
Japan

	
The Royal Bank of Scotland Plc, Tokyo Branch

	
65.

	
***

	
***

	
United States

	
The Royal Bank of Scotland Plc

	
66.

	
***

	
***

	
United States

	
Greenwich Capital Markets Inc.

	
67.

	
***

	
***

	
United States

	
RBS Securities Inc.

	
68.

	
***

	
***

	
United States

	
Greenwich Capital Markets Inc.

	
69.

	
***

	
***

	
United States

	
Greenwich Capital Markets Inc.

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

  

  

- 2 -

  

 

EXHIBIT 6

 

LIST OF OFFER EMPLOYEES

 

	
1.

	
2.

	
3.

	
4.

	
5.

	
No.

	
Given Name

	
Family Name

	
Jurisdiction

	
Employing Entity

	
1.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
2.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
3.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
4.

	
***

	
***

	
Hong Kong

	
The Royal Bank of Scotland Plc

	
5.

	
***

	
***

	
Singapore

	
The Royal Bank of Scotland Plc

	
6.

	
***

	
***

	
China

	
China International Intellectech (Shanghai) Corporation

	
7.

	
***

	
***

	
China

	
The Royal Bank of Scotland (China) Co. Ltd, Beijing Branch

	
8.

	
***

	
***

	
Japan

	
The Royal Bank of Scotland Plc, Tokyo Branch

	
9.

	
***

	
***

	
United States

	
The Royal Bank of Scotland Plc

	
10.

	
***

	
***

	
United States

	
Greenwich Capital Markets Inc.

	
11.

	
***

	
***

	
United States

	
RBS Securities Inc.

	
12.

	
***

	
***

	
United States

	
Greenwich Capital Markets Inc.

	
13.

	
***

	
***

	
United States

	
Greenwich Capital Markets Inc.

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

 

 

 

 

EXHIBIT 7

***

 

 

 

 

 

 

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

 

 

 

 

	

	
CLIFFORD CHANCE LLP

 

PRIVILEGED AND CONFIDENTIAL

 

 

 

EXHIBIT 8

 

PROJECT TESS

CLEAN TEAM TERMS

 

Given the commercial and competitive sensitivity of the Sensitive Information (as defined in paragraph 4 of Schedule 7 to the Sale and Purchase Agreement entered into between The Royal Bank of Scotland plc ("RBS") and Sumitomo Mitsui Banking Corporation ("Buyer") on 16 January 2012 ("SPA")), the Sensitive Information will be made available for review by [•], [•] and/or [•] of [•] only ("Clean Team"), on the following terms:

 

•           Access to the Sensitive Information will be restricted to named members of the Clean Team and will be conditional upon compliance with these terms and the signing by each member of the Clean Team of this document.  Under no circumstances will any member of the Clean Team make any copy of the Sensitive Information (including word by word written copy) or provide the Sensitive Information to any person outside of the Clean Team.

 

•           The Clean Team will analyse the information solely for the purposes of ensuring compliance with, or the granting or withholding of consent in accordance with, Schedule 7 of the SPA and convey their conclusions to the Buyer without disclosing the specific details of the Sensitive Information to the Buyer.  Should the Clean Team find any incident of non-compliance with Schedule 7 of the SPA, it may, after prior consultation with RBS (it being agreed that RBS consent shall not be required), disclose to named individuals at the Buyer such information, including Sensitive Information, that is reasonably necessary for the sole purpose of assessing the nature and severity of each incident of non-compliance with Schedule 7 of the SPA, in particular the nature of the business conduct in question, the profit/loss resulting from it and any risk related to it.  For the avoidance of doubt, the information and conclusions may not be used for any other purpose or shared with any other person without RBS’s prior written consent and remains subject to the terms of clause 13 of the SPA.

 

I hereby agree to comply with the terms set out above in relation to the Sensitive Information.

 

	
 

	  
	
Name

 

	  
	
 

	  
	
Signature

 

	  
	
 

	  
	
Organisation

 

	  
	
 

	  
	
Date

	  

 

 

 

 

 

EXHIBIT 9

 

INFORMATION TO BE INCLUDED IN MONTHLY REPORT

 

Period: [______] (the “Report Period”)

 

Fleet Summary

	
Category

	
Total Number

	
Commercial Jets – On Lease

 

	  
	
Commercial Jets – Off Lease

 

	  
	
Commercial Jets – Total

 

	  
	  	  
	
Commercial Jet Deliveries (since PRIOR REPORT DATE)

 

	  

	
Category

	
Aggregate Value

	
Capital Expenditures Incurred (since PRIOR REPORT DATE)

	  

	
Category

	
Total Number

	
Managed Aircraft – On Lease

 

	  
	
Managed Aircraft – Off Lease

 

	  
	
Managed Aircraft – Total

 

	  
	
Sale & Lease Back - Contracted/Not Delivered

	  

	
Category

	
Total Number & Aggregate Value

	
Commercial Jet – Sales (since PRIOR REPORT DATE)

 

	  
	
Commercial Jets – Contracted For Sale But Not Sold (since PRIOR REPORT DATE)

 

	  
	
Engines – Contracted For Sale But Not Sold (since PRIOR REPORT DATE)

 

	  
	
Engine – Sales

	  

 

 

  

1

  

 

Lease Activity

	
Category

	
Total Number and Aggregate Rent (Increase/Decrease)

	
Leases and Lease Extensions Signed

 

	  
	
Letters of Intent Signed

 

	  

Restructuring Activity

	
Category

	
Total Number & Aggregate Value

	
Lessee Payment Defaults (since PRIOR REPORT DATE)

 

 

	  
	
Current Total Lease Arrearage

 

	  

	
Category

	
Brief Summary and Value

	
Lease Restructurings/Deferred Rent

 

	  
	
Aircraft Repossessions

 

	  
	
New Litigation / Claims Against Lessors

 

	  
	
New Litigation / Claims Against Lessees

 

	  
	
Settlements

	  

Finance Activity

	
Category

	
Rate

	
Aggregate Principal Amount

	
Purpose

	
Debt Incurrence

 

	  	  	  
	
Debt Repayment

 

	  	  	  
	
Guarantees/Indemnities/Other Financing Activities

	  	  	  

 

  

2

  

 

EXHIBIT 10

***

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*** Material has been omitted pursuant to a request for confidential treatment and has been filed separately.

 

 

  

  

  

 

 

 

EXHIBIT 11

 

 

	
HEAD LEASE

	
DATED

	
2012

 

 

(1) LOMBARD GLOBAL FINANCE COMPANY

 

(2) RBS AEROSPACE LIMITED

 

 

	  	
 

AIRCRAFT LEASE 

AGREEMENT

relating to

 

One (1) Embraer ERJ-145MP Aircraft 

manufacturer's serial number 145398

 

	  

 

 

 

 

 

 

 

 

 

 

 

CONTENTS

 

	
1.

	
DEFINITIONS AND INTERPRETATION

	
1

	
2.

	
REPRESENTATIONS AND WARRANTIES

	
1

	
3.

	
CONDITIONS PRECEDENT

	
3

	
4.

	
LEASE PERIOD

	
3

	
5.

	
DELIVERY

	
3

	
6.

	
RENT

	
3

	
7.

	
PAYMENTS

	
3

	
8.

	
LESSOR'S COVENANTS AND CERTAIN OTHER MATTERS

	
4

	
9.

	
LESSEE'S COVENANTS

	
4

	
10.

	
SUB LEASING

	
4

	
11.

	
TITLE AND REGISTRATION

	
4

	
12.

	
INDEMNITIES/TAXATION

	
4

	
13.

	
MAINTENANCE/REPAIR

	
4

	
14.

	
TERMINATION

	
5

	
15.

	
FINAL INSPECTION

	
5

	
16.

	
LIMITATION ON RECOURSE

	
5

	
17.

	
MISCELLANEOUS PROVISIONS

	
6

	
18.

	
NOTICES

	
6

	
19.

	
GOVERNING LAW AND JURISDICTION

	
7

	
SCHEDULE 1: DESCRIPTION OF AIRCRAFT

	
9

	
SCHEDULE 2: ACCEPTANCE CERTIFICATE

	
10

 

 

 

 

 

 

This aircraft lease agreement is made on                                       2012

 

BETWEEN:

 

	
(1)

	
LOMBARD GLOBAL FINANCE COMPANY, a company incorporated under the laws of Ireland with its principal place of business at Third Floor, Ulster Bank Group Centre, George's Quay, Dublin 2, Ireland (the "Lessor"); and

 

	
(2)

	
RBS AEROSPACE LIMITED, a company incorporated under the laws of Ireland, whose registered office is at Level 1, IFSC House, IFSC, Dublin 1, Ireland (the "Lessee").

 

BACKGROUND:

 

Lessor is the owner of the Aircraft (as defined below) and wishes to lease the Aircraft to Lessee and Lessee is willing to lease the Aircraft from Lessor on the terms of this Agreement.

 

IT IS AGREED:

 

	
1.

	
DEFINITIONS AND INTERPRETATION

 

Except as otherwise defined in this Agreement, words and expressions used in this Agreement shall have the same meaning as given to them in the aircraft lease agreement between Lessee as sub-lessor ("Sub-Lessor") and Rotana Jet Aviation LLC as sub-lessee ("Sub-Lessee") dated on or about the date of this Agreement ("Sub-Lease"):

 

"Acceptance Certificate" means a certificate substantially in the form set out in schedule 2;

 

"Aircraft" means the aircraft described in schedule 1 (which term includes where the context admits a separate reference to all Engines, Parts and Technical Records) and as more particularly described in the Sub-Lease;

 

"Delivery" means delivery of the Aircraft by Lessor to Lessee under this Agreement;

 

"Delivery Date" means the date on which Delivery occurs;

 

"Lease Period" means the period commencing on the Delivery Date and ending on the occurrence of Title Transfer;

 

"Sale Agreement" means the sale agreement dated [•] 2012 made between Lessor as seller and Lessee as buyer relating to the Aircraft; and

 

"Title Transfer" has the meaning given to the term "Delivery" in the Sale Agreement.

 

	
2.

	
REPRESENTATIONS AND WARRANTIES

 

	
2.1

	
Lessee's Representations and Warranties

 

Lessee represents and warrants to Lessor that:

 

	
  

	
(a)

	
Status:  Lessee is a company duly incorporated and validly existing under the laws of Ireland and has the corporate power to own its assets and carry on its business as it is being conducted;

 

 

1

 

 

 

	
  

	
(b)

	
Power and authority:  Lessee has the corporate power to enter into and perform, and has taken all necessary corporate action to authorise the entry into, performance and delivery of, this Agreement and the transactions contemplated by this Agreement;

 

	
  

	
(c)

	
Legal validity:  this Agreement has been duly authorised, executed and delivered by Lessee and (subject to laws protecting creditors' rights and principles of equity) constitutes Lessee's legal, valid and binding obligation;

 

	
  

	
(d)

	
Authorisation: so far as concerns the obligations of Lessee, all authorisations, consents, registrations and notifications required under the laws of Ireland in connection with the entry into, performance, validity and enforceability of, this Agreement and the transactions contemplated by this Agreement, have been (or will on or before the Delivery Date have been) obtained or effected (as appropriate) and are (or will on their being obtained or effected be) in full force and effect; and

 

	
  

	
(e)

	
No Immunity:  Lessee is subject to private commercial law with respect to its obligations under this Agreement; and neither Lessee nor any of its assets is entitled to any right of immunity, and the entry into and performance of this Agreement by Lessee constitute private and commercial acts.

 

	
2.2

	
Repetition

 

The representations and warranties in clause ‎2.1 (Lessee's Representations and Warranties) will survive the execution of this Agreement and Delivery.  The representations and warranties in clause ‎2.1 will be deemed to be repeated by Lessee on the Delivery Date with reference to the facts and circumstances then existing.

 

	
2.3

	
Lessor's Representations and Warranties

 

Lessor represents and warrants to Lessee that:

 

	
  

	
(a)

	
Status:  Lessor is a company duly incorporated and validly existing under the laws of Ireland and has the corporate power to own its assets and carry on its business as it is now being conducted;

 

	
  

	
(b)

	
Power and authority:  Lessor has the corporate power to enter into and perform, and has taken all necessary corporate action to authorise the entry into, performance and delivery of, this Agreement and the transactions contemplated by this Agreement;

 

	
  

	
(c)

	
Legal validity: this Agreement has been duly authorised, executed and delivered by Lessor and (subject to laws protecting creditors' rights and principles of equity) constitutes Lessor's legal, valid and binding obligation;

 

	
  

	
(d)

	
Authorisation:  so far as concerns the obligations of Lessor, all authorisations, consents, registrations and notifications required under the laws of Ireland in connection with the entry into, performance, validity and enforceability of, and the transactions contemplated by, this Agreement by Lessor have been (or will on or before the Delivery Date have been) obtained or effected (as appropriate) and are (or will on their being obtained or effected be) in full force and effect; and

 

	
  

	
(e)

	
No Immunity:  Lessor is subject to civil commercial law with respect to its obligations under this Agreement; and neither Lessor nor any of its assets is entitled to any right of immunity, and the entry into and performance of this Agreement by Lessor constitute private and commercial acts.

 

 

  

2

  

 

	
3.

	
CONDITIONS PRECEDENT

 

Lessor's obligation to deliver and lease the Aircraft to Lessee under this Agreement and Lessee's obligation to take the Aircraft on lease is subject to the delivery of the Aircraft to Sub-Lessee under the Sub-Lease.

 

	
4.

	
LEASE PERIOD

 

Lessor shall lease the Aircraft to Lessee and Lessee shall take the Aircraft on lease from Lessor in accordance with this Agreement for the duration of the Lease Period.  The Lease Period shall commence on the Delivery Date and shall terminate on the occurrence of Title Transfer.

 

	
5.

	
DELIVERY

 

The Aircraft shall be delivered to and accepted by Lessee immediately prior to delivery of the Aircraft to Sub-Lessee in accordance with the Sub-Lease. At Delivery, Lessee shall deliver the Acceptance Certificate to Lessor, dated and fully completed, and executed by Lessee.

 

	
6.

	
RENT

 

	
6.1

	
Time of Payment

 

Lessee shall pay rent ("Rent") to Lessor or to its order in advance on the Delivery Date and, thereafter, in advance on each Rent Date.  Lessee shall direct Sub-Lessee to pay all amounts of rent due under the Sub-Lease to Lessor's account

 

	
6.2

	
Amount of Rent

 

The amount of Rent payable by Lessee to Lessor on each Rent Date shall be equal to the amount of rent payable by Sub-Lessee pursuant to the Sub-Lease.

 

	
7.

	
PAYMENTS

 

	
7.1

	
Account for Lessee Payments

 

All payments by Lessee to Lessor under this Agreement will be made for value on the due date in dollars and in immediately available funds settled through the New York Clearing House System or such other funds as may for the time being be customary for the settlement in New York City of international payments in dollars by SWIFT transfer to such bank account as Lessor may from time to time notify to Lessee in writing.

 

	
7.2

	
Net Lease

 

Except as otherwise specifically provided herein, this Agreement is a net lease, and Lessee acknowledges and agrees that Lessee's obligations hereunder, including without limitation its obligation to pay all Rent and all amounts payable hereunder, shall be absolute and unconditional under any and all circumstances and shall be paid without notice or demand, and without any abatement, reduction, diminution, setoff, defence, counterclaim or recoupment whatsoever, including without limitation any abatement, reduction, diminution, setoff, defence, counterclaim or recoupment due or alleged to be due to, or by reason of, any past, present or future claims which Lessee may have against Lessor or any other person for any reason whatsoever.

 

  

3

  

 

 

	
8.

	
LESSOR'S COVENANTS AND CERTAIN OTHER MATTERS

 

	
8.1

	
Quiet Enjoyment

 

Lessor shall not interfere with the quiet use, possession and enjoyment of the Aircraft by Lessee during the Lease Period.  The exercise by Lessor of its rights in accordance with this Agreement will not constitute such an interference.

 

	
9.

	
LESSEE'S COVENANTS

 

	
9.1

	
Lessee's Business

 

Lessee shall not make any substantial change in the nature of its business and will maintain its corporate existence (other than in connection with a solvent reconstruction the terms of which have been approved by Lessor, such approval not to be unreasonably withheld).

 

	
10.

	
SUB LEASING

 

Lessee shall not, without the prior written consent of Lessor, sub lease or part with possession of the Aircraft; except insofar as such sub-leasing is consistent with the terms of the Sub-Lease.

 

	
11.

	
TITLE AND REGISTRATION

 

Title to the Aircraft will be, and shall remain, vested in Lessor.  Lessee will have no right, title or interest in the Aircraft except to the extent provided in this Agreement. The Aircraft will be registered in the name of Lessor, as owner, and Sub-Lessee, as operator, in the register of aircraft in the State of Registration.

 

	
12.

	
INDEMNITIES/TAXATION

 

Lessor and Lessee acknowledge and agree to be bound by the same obligations, mutatis mutandis, owed by Sub-Lessor and Sub-Lessee to each other on Indemnities and Taxation as stated in clauses [15] and [21] respectively of the Sub-Lease.

 

	
13.

	
MAINTENANCE/REPAIR

 

Lessor and Lessee acknowledge and agree to be bound by the same obligations, mutatis mutandis, owed by Sub-Lessor and Sub-Lessee to each other on Maintenance and Repair as stated in clause [12.4] of the Sub-Lease.

 

	
14.

	
TERMINATION

 

Lessor may terminate this Agreement upon notice to Lessee on the occurrence of any of the events set out in clause [•] of the Sub-Lease (as if such clause was set out in full in this Agreement and as if references to "Lessee" were to "Lessee and Sub-Lessee".

 

	
15.

	
FINAL INSPECTION

 

Immediately prior to redelivery of the Aircraft, if requested by Lessor, Lessee shall make the Aircraft available to Lessor for inspection in order to verify that the condition of the Aircraft complies with this Agreement.

 

 

  

4

  

 

	
16.

	
LIMITATION ON RECOURSE

 

	
16.1

	
Limitation

 

Notwithstanding anything else contained in this Agreement, to the extent that under the Sub-Lease there is expressed an obligation on Sub-Lessee:

 

	
  

	
(a)

	
to pay a sum of money on account of an obligation; or

 

	
  

	
(b)

	
for the performance or satisfaction of any other obligation or any liability;

 

and (in the case of clauses ‎16.1(a) and ‎16.1(b)) such obligation or liability is reflected in this Agreement by a corresponding obligation or liability of Lessee, Lessor hereby unconditionally agrees with Lessee that:

 

	
  

	
(i)

	
without prejudice to Lessee being liable, Lessor agrees that it will only have recourse against Lessee for such liability to pay such amounts and perform such obligations to the extent that such payments are actually paid or such obligations are actually performed under the Sub-Lease;

 

	
  

	
(ii)

	
performance by Sub-Lessee of its obligations under the Sub-Lease shall (pro tanto) discharge the matching obligations of Lessee hereunder; and

 

	
  

	
(iii)

	
in relation to each obligation expressed hereunder on the part of Lessee to make a payment to Lessor, Lessee's sole obligation shall be to pay to Lessor the same amount (if any) and in like funds as the amount received from Sub-Lessee under the equivalent provision in the Sub-Lease.

 

In this clause ‎16.1 "corresponding obligations" means obligations of a substantially similar nature covering substantially the same requirements, whether or not actually expressed in identical terms to those contained in this Agreement.

 

	
16.2

	
Overriding Provision

 

The provisions of this clause ‎16 override each other provision of this Agreement and each other provision is subject to the provisions of this clause ‎16.  To the extent that any other such provision is inconsistent with the provisions of this clause ‎16, the provisions of this clause ‎16 shall prevail.

 

	
16.3

	
Default by Sub-Lessee

 

Lessee shall not be deemed to have knowledge of the occurrence of any Event of Default under the Sub-Lease unless Lessee has received notice ("Notice of Default") from Sub-Lessor or Sub-Lessee describing such Event of Default and expressly referring to the relevant Event of Default or otherwise has actual knowledge of any Event of Default under the Sub-Lease.  If Lessee receives such a Notice of Default, or otherwise has such actual knowledge of a default under the Sub-Lease, Lessee shall promptly give notice thereof to Lessor.

 

	
16.4

	
Exception

 

Clause ‎16.1 (Limitation) shall not apply, and Lessor shall be entitled to have unlimited recourse to Lessee, in respect of any claim of Lessor arising out of the fraud, wilful misconduct or negligence of Lessee or any misrepresentation by Lessee.

 

  

5

  

 

 

	
17.

	
MISCELLANEOUS PROVISIONS

 

	
17.1

	
Counterparts

 

This Agreement may be executed in any number of counterparts, and by each party on separate counterparts.  Each counterpart is an original, but all counterparts shall together constitute one and the same instrument.  Delivery of an executed counterpart signature page of this Agreement by e-mail (PDF) or facsimile shall be as effective as delivery of a manually executed counterpart of this Agreement.  In relation to each counterpart, upon confirmation by or on behalf of the signatory that the signatory authorises the attachment of such counterpart signature page to the final text of this Agreement, such counterpart signature page shall take effect together with such final text as a complete authoritative counterpart.

 

	
17.2

	
Variation

 

The provisions of this Agreement shall not be varied otherwise than by an instrument in writing executed by or on behalf of Lessor and Lessee.

 

	
17.3

	
Invalidity of any Provision

 

If any provision of this Agreement becomes invalid, illegal or unenforceable in any respect under any law, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired.

 

	
18.

	
NOTICES

 

Any notice or other communication under or in connection with this Agreement will, unless otherwise stated, be given in writing by letter or facsimile or to such other address or facsimile number as the recipient may have notified to the sender at the address and facsimile number specified below in writing.  Any such notice shall be deemed effectively to be given as follows:

 

	
  

	
(a)

	
if by letter, on the seventh Business Day after posting; and

 

	
  

	
(b)

	
if by facsimile, on the Business Day immediately following despatch, provided that full transmission has been separately notified by telephone by the transmitting party.

 

The address and facsimile numbers of Lessor and Lessee are as follows:

 

	
Lessor:

	
Lombard Global Finance Company

	 	 
	  	
Third Floor, Ulster Bank Group Centre

	 	 
	  	
George's Quay

	 	 
	  	
Dublin 2

	 	 
	  	
Ireland

	 	 
	
Attention:

	
Business Development Manager

	 	 
	
Facsimile:

	
+353 1 643 1707

 

	
Lessee:

	
RBS Aerospace Limited

	 	 
	  	
IFSC House

 

 

  

6

  

 

	 	 
	  	
IFSC

	 	 
	  	
Dublin 1

	 	 
	  	
Ireland

	 	 
	
Attention:

	
Head of Transaction Management

	 	 
	
Facsimile:

	
+353 1 859 9230

 

 

	
19.

	
GOVERNING LAW AND JURISDICTION

 

	
19.1

	
Governing Law

 

This Agreement and any non-contractual obligations arising out of or in connection with it are governed by and shall be construed in accordance with the laws of England.

 

	
19.2

	
Jurisdiction

 

For the benefit of Lessor, Lessee agrees that the courts of England are to have jurisdiction to settle any disputes in connection with this Agreement (including any non-contractual obligations arising out of or in connection with this Agreement), and Lessee submits to the jurisdiction of the courts of England in connection with this Agreement.

 

	
19.3

	
Third Parties

 

A person who is not a party to this Agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any of its terms.

 

IN WITNESS whereof the parties hereto have executed this Agreement on the date shown at the beginning of this Agreement.

 

SIGNED on behalf of Lombard Global Finance Company

 

	
By:

	
 

	  
	
 

Name:

	
 

	  
	
 

Title:

	
 

	  
	
 

  

	  	  
	
SIGNED on behalf of RBS Aerospace Limited

	  
	  	  	  
	
 

By:

	
 

	  
	
 

Name:

	
 

	  
	
 

Title:

	
 

	  

 

  

7

  

 

SCHEDULE 1:

 

DESCRIPTION OF AIRCRAFT

 

 

 

Aircraft

 

	
Manufacturer:

	
Empresa Brasileria de Aeronautics S.A.

	 	 
	
Model:

	
ERJ-145MP

	 	 
	
Serial Number:

	
145398

 

 

Engines

 

	
Manufacturer:

	
Rolls Royce

	 	 
	
Model:

	
AE3007-A1

	 	 
	
Serial Numbers:

	
311714 and 311715

 

 

 

 

  

8

  

 

 

SCHEDULE 2:

 

ACCEPTANCE CERTIFICATE

 

This Acceptance Certificate is delivered on the date set out below by RBS Aerospace Limited ("Lessee"), to Lombard Global Finance Company ("Lessor"), pursuant to the Aircraft Lease Agreement dated u                    2012 between Lessor and Lessee ("Head Lease").  Capitalised terms used in this Certificate shall have the meanings given to such terms in the Head Lease.

 

DETAILS OF ACCEPTANCE

 

Lessee hereby confirms to Lessor that Lessee has at u                    o'clock on this u                     day of u                    2012, at u                    , accepted the following, in accordance with the provisions of the Head Lease:

 

	
(a)

	
Airframe

	  	  
	  	
Aircraft Type:

	
Embraer ERJ-145MP

	  
	  	
Aircraft S/N

	
145398

	  
	  	  	  	  
	  	  	  	  
	
(b)

	
Engines

	  	  
	  	
Engine 1 (Type and S/N)

	
AE3007-A1 - 311714

	  
	  	
Engine 2 (Type and S/N)

	
AE3007-A1 - 311715

	  
	  	  	  	  
	  	  	  	  

 

 

IN WITNESS WHEREOF, Lessee has, by its duly authorised representative, executed this Certificate on the date specified in paragraph 1 above.

 

 

	
LESSEE: RBS AEROSPACE LIMITED

	  
	
 

By:

	
 

	
 

	
 

Title:

	
 

	  

 

 

9

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