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No. 96056
Fujitsu Services Limited
Minutes of a Meeting of the Board of Directors
held on 28 March 2003 at 26 Finsbury Square, London EC2A 1SL
Present: R. Christou (in the Chair)
T. Adachi
In attendance: R. Moseley
R.A.J. Allnutt
Apologies: _D. J. Courtley
R. Leek
H. Hirata
BACKGROUND
Ls It was noted that notice had been given to all the Directors of the Meeting and there
was a quorum present.
3. It was reported that the meeting had been convened to consider certain actions to be
taken by the Company pursuant to a proposed restructuring (the "Restructuring") of
the Fujitsu Services group in the United Kingdom (the "FS Group"). It was explained
that the primary reasons for the Restructuring were:
(a) to enable the Company's holding company, Fujitsu Services Holdings plc
("FSH") to continue paying preference dividends out of profits available for
distribution in respect of its Preference Shares and to fully or partially repay
amounts owing in respect of its Preference Shares of approximately
£168,000,000 in July 2005; and
(b) to improve the financial position of the Company so as to provide further
comfort and confidence to its customers and suppliers and reflect the FS
Group's improving financial performance.
3. There was tabled before the meeting a copy of a memorandum setting out in outline
the terms of the Restructuring which was envisaged in relation to the FS Group (the
"Restructuring Memorandum"). It was explained that, as part of the Restructuring,
the Company would be required to perform various actions pursuant to Steps 1, 2, 4
and 5 of the Restructuring Memorandum. The meeting would consider the
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commercial reasons for and legal issues relating to these proposed actions and, if
appropriate, approve these actions in anticipation of the Restructuring.
LEGAL ISSUES
4. There was produced to the meeting a memorandum from the Company's legal
advisors, Mayer, Brown, Rowe & Maw explaining the principal legal issues arising in
relation to the proposed Restructuring and the matters to be considered by the
directors of the relevant FS Group companies ("Legal Issues Memorandum"). The
directors considered the Legal Issues Memorandum.
SALE OF PATHWAY BUSINESS TO THE COMPANY
5. It was noted that Step 1 in the Restructuring Memorandum involved the proposed
acquisition by the Company (the "FSPL Purchase") of the entire business and assets
of Fujitsu Services (Pathway) Limited ("FSPL") (other than cash and the shares in
FSPL's subsidiary, Fujitsu Services (Pathway Asset Company) Limited ("FSPAL")
and the proposed acquisition by the Company of the entire business and assets of
FSPAL (the "FSPAL Purchase") as a going concern on the terms of draft sale and
purchase agreements to be entered into between respectively (1) the Company and (2)
FSPL (the "FSPL Purchase Agreement") and (1) the Company and (2) FSPAL (the
"FSPAL Purchase Agreement") (together the "Purchase Agreements"). Copies of the
latest drafts of the Purchase Agreements were tabled to the meeting and initialled by
the Chairman for the purposes of identification. It was noted that, in relation to the
FSPL Sale, the consideration was £59,400,000 in respect of the Goodwill and
£25,100,000 in respect of the Assets (as adjusted in accordance with the terms of the
FSPL Sale Agreement) and that, in relation to the FSPAL Purchase the consideration
was £9,700,000. The directors noted that the basis for the valuations of the asset
transfers in respect of the FSPL Purchase and the FSPAL Purchase were set out in a
board paper prepared by Neil Henfrey addressed to the directors of FSPL and FSPAL
(the "Pathway Board Paper"). The Pathway Board Paper confirmed that the
consideration for the FSPL Purchase would be equal to the net book value of the
FSPL's assets plus an amount representing goodwill. The consideration payable for
the FSPAL Purchase would be the economic value of FSPAL's deferred tax assets.
The directors concluded that, on the basis of the information set out in the Pathway
Board Paper, the consideration payable for the FSPL Purchase and the FSPAL
Purchase represented the market value of the businesses being acquired. Accordingly
the directors noted that the issues referred to in the Legal Issues Memorandum in
relation to the transfers were satisfactory addressed.
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NOVATION OF POST OFFICE AGREEMENT AND RELATED MATTERS
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8.1
8.2
8.3
Ot
92
It was reported that under the agreement between Post Office Limited (the "Post
Office") and FSPL dated 28 July 1999, in its revised form dated 31 December 2002,
(the "Post Office Agreement"), FSPL is obligated to novate the Post Office
Agreement to the Company (the "Novation"), subject to receiving confirmation from
the Post Office that it wishes the Novation to be carried out. It was explained that
such confirmation has been received from the Post Office and that the Novation is due
to occur on or before 1 April 2003.
It was explained that under the Post Office Agreement, the Post Office had agreed
that, having given the confirmation referred to in the previous minute, it would enter
into a deed of novation (subject to agreement on the precise terms of that deed) under
which the entire benefit and burden of FSPL's rights and obligations under the Post
Office Agreement would be transferred to the Company.
A copy of the form of the deed of novation (the "Post Office Novation Agreement")
which had agreed by FSPL, the Post Office and the Company was tabled to the
meeting. It was noted that the effect of the Deed of Novation would be:
to place the Company in a position as if it was, and had at all times been, an original
party to the Post Office Agreement in place of FSPL;
that the Post Office would release and discharge FSPL from any further performance
under the Post Office Agreement and from all claims, demands and obligations
whatsoever in relation to the Post Office Agreement; and
that any further performance under the Post Office Agreement would be undertaken
by the Company and all claims, demands and obligations whatsoever in relation to the
Post Office Agreement would be made against the Company.
It was reported that in connection with the Novation:
under the Post Office Agreement, FSPL would be required to novate relevant
subcontracts to the Company; and
a number of other third party contracts and licence agreements would need to be
transferred to the Company by FSPL and by FSPAL to enable the Company to
perform its obligations under the Post Office Agreement following the Novation.
Pursuant to Minute 9.1, copies of the forms of the novation agreements (the
"Subcontract Novation Agreements") proposed to be entered into by (1) the
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Company, (2) FSPL and (3) the relevant subcontractor were tabled to the meeting. It
was noted that the relevant subcontractors were the following entities:
. Energis Communications Limited
. The Escher Group Limited
. Fujitsu Consulting Limited
. Hypercom Financial Terminals AB
. Romec
11. Pursuant to Minute 9.2, copies of the forms of the novation agreements (the "Supplier
Novation Agreements") proposed to be entered into by (1) the Company, (2) FSPL or
FSPAL (as appropriate) and (3) the relevant principal supplier in relation to the Post
Office Agreement, were tabled to the meeting. It was noted that the principal
suppliers were the following entities:
. IBM UK Limited (Sequent)
. EMC? Computer Systems (UK) Limited
. IBM UK Limited (Tivoli)
° Oracle Corporation UK Limited
. Metron Technology Limited.
12. It was reported that the intention was that each Subcontract Novation Agreement and
each Supplier Novation Agreement would be entered into on, or as soon as the
Novation is completed after, 31 March 2003.
13. It was further reported that:
13.1 all other agreements between FSPL and third parties relevant to the performance of
the Post Office Agreement were listed in Schedule 2 (Contracts Schedule) to the
FSPL Purchase Agreement which it is intended be entered into by FSPL and the
Company on 31 March 2003; and
13.2 it was intended that the transfer of those agreements would be effected by the FSPL
Purchase Agreement or by such other additional agreements as may be necessary to
effect such transfer.
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14. _ The directors present carefully considered:
14.1 the form of the Post Office Novation Agreement;
14.2 the forms of the Supplier Novation Agreements;
14.3 the forms of the Subcontract Novation Agreements; and
14.4 _ the form of Schedule 2 (Contracts Schedule) to the FSPL Purchase Agreement.
15. The meeting discussed the financial and commercial aspects of the Novation,
including the requirement to novate relevant subcontracts to the Company (as noted in
Minute 9.1) and the need to transfer a number of other third party contracts and
licence agreements to the Company (as noted in Minute 9.2) (together, the
"Transaction") and concluded that:
(a) _ the Transaction is in the best interests of the Company; and
(b) the Post Office Novation Agreement, the Subcontract Novation Agreements;
Supplier Novation Agreements, and the list in Schedule 2 to the FSPL
Purchase Agreement each be and are hereby approved subject to such changes
as the Committee (established pursuant to Minute 9.2) (the "Committee") may
approve.
16. It was noted that FSH was party to a guarantee entered into on 31 December 2002 (the
"Guarantee") relating to FSPL's obligations and liabilities under the Pathway
Contract. It was also noted that the provisions of the Guarantee confirmed that,
following execution of the Novation Agreement, FSH would guarantee the
performance of the Company's obligations and liabilities (in substitution for FSPL's
obligations and liabilities) under the Pathway Contract. Consequently, no re-
statement or re-execution of the Guarantee was required as part of the Restructuring.
FSPL LOAN
17. The Chairman explained that, as part of Step 1 of the Restructuring, FSPL would on
31 March 2003 lend to the Company an amount equal to the consideration payable by
the Company in relation to the FSPL Purchase (as adjusted in accordance with the
FSPL Sale Agreement) (the "FSPL Loan"). The FSPL Loan would be interest free,
unsecured and repayable on demand. The meeting noted the issues raised in the Legal
Issues Memorandum and it was noted that in practice this meant that were FSPL ever
to go into insolvent liquidation, the Company would be required to repay to FSPL an
amount equal to the value of the loss of interest (that is, an amount equal to the
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commercial rate of interest that would have been payable on the FSPL Loan).
However, it was also noted that it was intended that FSPL was to be left dormant and
then wound up or dissolved after the proposed Restructuring so that there was no
reason to believe FSPL would be insolvently wound up.
FSPAL LOAN
18. The Chairman explained that, as part of Step 1 of the Restructuring, FSPAL would on
31 March 2003 lend to the Company an amount equal to the consideration payable by
the Company in relation to the FSPAL Purchase (the "FSPAL Loan"). The FSPAL
Loan would be interest free, unsecured and repayable on demand. The meeting noted
the issues raised in the Legal Issues Memorandum and it was noted that in practice
this meant that were FSPAL ever to go into insolvent liquidation, the Company would
be required to repay to FSPAL an amount equal to the value of the loss of interest
(that is, an amount equal to the commercial rate of interest that would have been
payable on the FSPAL Loan). However, it was also noted that it was intended that
FSPAL was to be left dormant and then wound up or dissolved after the proposed
Restructuring so that there was no reason to believe FSPAL would be insolvently
wound up.
SORBUS LOAN
19. I The Chairman explained that, as part of Step 2 of the Restructuring, ICL Sorbus
Limited ("Sorbus") would on 31 March 2003 lend to the Company the amount of
£101,834,000 (the "Sorbus Loan"). The Sorbus Loan would be interest free,
unsecured and repayable on demand. The meeting noted the issues raised in the Legal
Issues Memorandum and it was noted that in practice this meant that were Sorbus
ever to go into insolvent liquidation, the Company would be required to repay to
Sorbus an amount equal to the value of the loss of interest (that is, an amount equal to
the commercial rate of interest that would have been payable on the Sorbus Loan).
However, it was also noted that it was intended that Sorbus was to be left dormant and
then wound up or dissolved after the proposed Restructuring so that there was no
reason to believe Sorbus would be insolvently wound up.
FSIL LOAN
20. It was noted that Step 2 of the Restructuring also contemplated the creation of an
inter-company loan between Fujitsu Services Investments Limited ("FSIL") and the
Company (the "FSIL Loan"). It was explained that the terms of the FSIL Loan were
set out in a draft loan agreement (the "FSIL Loan Agreement"). A copy of the latest
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draft of the FSIL Loan Agreement was tabled to the meeting. It was noted that
interest would be repayable at the rate of 1% above LIBOR and the FSIL Loan would
be repayable on 16 March 2004 (or as otherwise contemplated by the FSIL Loan
Agreement). The directors considered whether FSIL ought to be capable of repaying
the FSIL Loan and concluded that there was no reason for this not to be the case,
given the existence of the comfort letter from the Company's ultimate shareholder,
Fujitsu Limited (and Fujitsu Limited's strong balance sheet). The directors also noted
that the legal issues relating to the establishment of the FSIL Loan had been set out in
the Legal Issues Memorandum and considered earlier in the meeting.
CONVERSION OF FSL SUBORDINATED LOAN
21. It was explained that Step 4 of the Restructuring involved the Company converting
£125,000,000 of a subordinated loan of £210,000,000 between the Company and FSH
to 125,000,000 ordinary shares of £1 each in the share capital of the Company. The
meeting noted that the legal issues relating to the conversion had already been
discussed earlier in the meeting and that, in view of the primary reasons for the
Restructuring (as stated above) the conversion of the Subordinated Loan would be in
the best interests of the Company. The meeting also noted that the Company would be
required to pass the necessary ordinary and special resolutions in order to give effect
to the conversion. This would involve increasing the authorised share capital of the
Company by £210,000,000, granting the directors of the Company the necessary
authority under s80 CA to allot relevant securities up to a maximum nominal amount
of £210,000,000 and disapplying the provisions of s89 CA in relation to such
allotment as set out in the draft notice of Extraordinary General Meeting which was
produced to the meeting.
AMENDMENT OF MEMORANDUM
22, It was proposed that Clause 3 of the Memorandum of Association of the Company be
amended with respect to its objects in order to reflect a change in activities conducted
by the Company. The meeting noted that the Company would be required to pass the
necessary special resolution in order to give effect to the amendment and that such
resolution was set out in the draft notice of Extraordinary General Meeting which was
produced to the meeting. A print of the amended Memorandum of Association (the
"Amended Memorandum") was also produced to the meeting.
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EXTRAORDINARY GENERAL MEETING
23. It was noted that the sole shareholder of the Company, FSH, would be required to
provide its consent to hold the Extraordinary General Meeting of the Company at
short notice so as to pass the resolutions contemplated by Paragraphs 10 and 11 (the
Resolutions"). After due and careful consideration IT WAS RESOLVED, subject to
the requisite consent to short notice being obtained, to convene an Extraordinary
General Meeting of the Company for the above purpose to be held at [26 Finsbury
Square, London EC2A 1SL] on [31] March 2003. The Secretary was instructed to
make the necessary arrangements for such meeting and, subject to the Resolutions
being passed, to file a copy thereof with the Registrar of Companies.
24. The meeting was then adjourned for the purpose of holding the Extraordinary General
Meeting. On resumption it was reported that the Resolutions (set out in the consent to
short notice of the Extraordinary General Meeting) had been duly passed at the
Extraordinary General Meeting.
THE FSH LOAN
25. _ It was reported that Step 5 of the Restructuring contemplated the creation of an inter-
company loan between the Company and FSH whereby the Company would lend to
FSH the amount of £64,000,000 (the "FSH Loan"). It was explained that the terms of
the FSH Loan were set out in a draft loan agreement (the "FSH Loan Agreement"). A
copy of the latest draft of the FSH Loan Agreement was tabled to the meeting. It was
noted that interest would be charged at the rate of 0.375% above LIBOR and the FSH
Loan would be repayable on 30 March 2004 (or as otherwise contemplated by the
FSH Loan Agreement). The directors considered whether FSH ought to be capable of
repaying the FSH Loan and concluded that there was no reason for this not to be the
case, given the existence of the comfort letter from the Company's ultimate
shareholder, Fujitsu Limited (and Fujitsu Limited's strong balance sheet). The
directors also noted that the legal issues relating to the establishment of the FSH Loan
had were set out in the Legal Issues Memorandum and had been considered earlier in
the meeting.
TPT LOAN
26. The Chairman explained that, as part of Step 5 of the Restructuring, ICL Third Party
Trading (Holdings) Limited ("TPT") would on 31 March 2003 lend to the Company
the amount of £64,000,000 (the "TPT Loan"). The TPT Loan would be interest free,
unsecured and repayable on demand. The meeting noted the issues raised in the Legal
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Issues Memorandum and it was noted that in practice this meant that were TPT ever
to go into insolvent liquidation, the Company would be required to repay to TPT an
amount equal to the value of the loss of interest (that is, an amount equal to the
commercial rate of interest that would have been payable on the TPT Loan).
However, it was also noted that it was intended that TPT was to be left dormant and
then wound up or dissolved after the proposed Restructuring so that there was no
reason to believe TPT would be insolvently wound up.
RESOLUTIONS
27. The directors present took time to consider all the proposed actions of the Company
pursuant to the Restructuring. Having fully and carefully considered those actions
and the legal issues relevant to those actions (which had been discussed earlier in the
meeting) the directors present were unanimously of the opinion that it was in the best
commercial interests of the Company and the FS Group to approve the Restructuring
and for the Company to enter into the documents set out in the Resolutions contained
in this Minute 27.
and IT WAS THEREFORE UNANIMOUSLY RESOLVED that
(a) the terms of the proposed Restructuring in substantially the form set out in the
Restructuring Memorandum be approved (subject to any amendments considered
appropriate by Toshio Adachi and Richard Christou);
(b) the terms of the Purchase Agreements, the FSPL Loan, the FSPAL Loan, the Sorbus
Loan, the FSIL Loan Agreement, the FSH Loan Agreement and the TPT Loan be and
they are hereby approved subject to such final amendments as the directors may in
their sole discretion consider to be necessary or appropriate in the interests of the
Company;
(c) any director, or in the case of any deed any two directors or any director and the
secretary, be and is hereby authorised to sign the Purchase Agreements, the FSIL
Loan Agreement and the FSH Loan Agreement for and on behalf of the Company;
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opinion of the Committee, be necessary and in such form as the Committee may
approve;
(f) Richard Christou and Toshio Adachi be and are hereby appointed as a Committee of
the Board and that such Committee be and is hereby given full authority to do all such
things as might seem to the Committee to be necessary, desirable or expedient in
connection with (whether directly or indirectly) the Transaction including (but
without limitation):
(i) approving the Post Office Novation Agreement, the Subcontract
Novation Agreements, the Supplier Novation Agreements, and the list
in Schedule 2 in their final forms;
(ii) approving any additional agreements which may be necessary in order
to effect the transfers of the other third party contracts and licence
agreements to the Company;
(iii) I approving any other documents, deeds, matters, acts or things which
might be necessary or desirable in connection with the Transaction;
(g) that in connection with the Transaction:
(i) any document requiring a signature on behalf of the Company should
be signed by any director of the Company or Colin Lenton-Smith;
(ii) any document to be executed by the Company should be executed as
provided by the Company's Articles of Association or as otherwise
provided by law and that such document be exchanged with the other
parties thereto but pending any such exchange any such document
would not be considered as delivered; and
(iii) that approval of any document may be given by the Committee; and
(h) any director, or in the case of any deed any two directors or any director and the
secretary, be and is hereby authorised to take all steps and do all such things and
deeds as they consider necessary to give effect to the Restructuring and to the above
resolutions and to agree any amendments to the above which he may consider
necessary to give effect to the Restructuring.
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MEETING CLOSED
28. There being no further business, the Chairman declared the meeting closed.
Chairman
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31 Mar 03 03:12 &
No. 96056
Fujitsu Services Limited
Resolutions in writing of the Board of Directors in accordance with the Articles of
Association.
Whereas:
It was reported that an application had been received for the issue and
allotment of ordinary shares in the capital of the Company from the person
and for the number of shares set out below. It was noted that the directors
were, by a resolution of the Company passed on 28 March 2003, authorised
to make such allotment and that the allotment could validly be made to the
applicant ang in the number listed below since the pre-emption rights
conterred on existing members by Section 89 Companies Act 1985 did not
apply to the allotment by virtue @ resolution of the Company passed on 28
March. 2003.
Accordingly:
iT WAS RESOLVED to allot to the person listed below the number of ordinary
shares in the capital of the Company set against their name credited as fully
paid at par by way of capitalisation of the £125,000,000 being part of tho
moneys owing to the applicant by the Company:
Applicant Number of Moneys owing to
shares. applicant to be
capitalised
Fujitsu Services Holdings 125,000,000 £125,000,000
pie
The Secretary was instructed to issue appropriate share certificate, to file the
necessary retum with the Registrar of Companies and to make all
(DV. arhangements incia ntal to such issue anc allotment.
pate: 3) /o3/ 2003
Date: 2003
David Courtley
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No. 96056
Fujitsu Services Limited
Resolutions in writing of the Board of Directors in accordance with the Articles of
Association.
Whereas:
It was reported that an application had been received for the issue and
allotment of ordinary shares in the capital of the Company from the person
and for the number of shares set out below. It was noted that the directors
were, by a resolution of the Company passed on 28 March 2003, authorised
to make such allotment and that the allotment could validly be made to the
applicant and in the number listed below since the pre-emption rights
conferred on existing members by Section 89 Companies Act 1985 did not
apply to the allotment by virtue a resolution of the Company passed on 28
March 2003.
Accordingly:
IT WAS RESOLVED to allot to the person listed below the number of ordinary
shares in the capital of the Company set against their name credited as fully
paid at par by way of capitalisation of the £125,000,000 being part of the
moneys owing to the applicant by the Company:
Applicant Number of Moneys owing to
shares applicant to be
capitalised
Fujitsu Services Holdings 125,000,000 £125,000,000
pic
The Secretary was instructed to issue appropriate share certificate, to file the
necessary return with the Registrar of Companies and to make all
arrangements incidental to such issue and allotment.
ee ee ee Date: 2003
Date: 3 tLea\ 2003
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Roger Leek
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Date: 2003
Date: 37/03 / 2003
Date: 2003
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Date:
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0% . 2003
Roger Leek
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Date:
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