BT 2001 Annual Report Download - page 152

Directors’ borrowing powers
To the extent that the legislation and the Articles allow, the Board may exercise all the powers of the company to borrow money,
to mortgage or charge its business, property and assets (present and future) and to issue debentures and other securities, and give
security either outright or as collateral security for any debt, liability or obligation of the company or another person. The Board
must limit the borrowings of the company and exercise all voting and other rights or powers of control exercisable by the
company in relation to its subsidiary undertakings so as to ensure that the aggregate amount of all borrowings by the group
outstanding at any time is not more than three times the adjusted capital and reserves (as de¢ned in the Articles). This a¡ects
subsidiary undertakings only to the extent that the Board can do this by exercising these rights or powers of control. This limit
can be exceeded if the consent of the shareholders has been given in advance by passing an ordinary resolution.
Material contracts
The following contracts (not being contracts entered into in the ordinary course of business) have been entered into in the two
years preceding the date of this document by BT or another member of the group and are, or may be, material to the group or
have been entered into by BT or another member of the group and contain a provision under which a member of the group has an
obligation or entitlement which is, or may be, material to BT or such other member of the group.
(i) Viag Interkom
On 16 August 2000, the company, through its wholly-owned subsidiary BT Interkom Verwaltungs GmbH, entered into
option agreements with each of its partners in the Viag Interkom joint venture, E.ON AG and Telenor A.S., giving BT the
option to purchase, and the other partners the right to sell, their interests in Viag Interkom which holds a third-generation
mobile telecommunications licence in Germany.
On 19 February 2001, BT and BT Interkom Verwaltungs GmbH exercised their options and entered into share transfer
agreements with each of the joint venture partners for the transfer of their interest to BT.
ThepurchasepricesforE.ON’s45%shareandTelenor’s10%shareoftheventurewereEuro7.25billionandEuro1.61
billion, respectively.
The agreement with E.ON includes the right for BT to continue to use the name ‘‘VIAG’’ or ‘‘Viag Interkom’’ for three
years, following which they may enter into good faith negotiations for its continued use. It also contains covenants
restricting E.ON’s rights to compete with Viag Interkom for 12 months.
The agreement with Telenor contains certain indemnities granted by BT to Telenor.
(ii) Japan Telecom
A sale and purchase agreement dated 2 May 2001 among BT, a subsidiary of BT, Vodafone Group plc (‘‘Vodafone’’) and a
subsidiary of Vodafone, under which the subsidiary of BT agreed to sell three subsidiaries which hold BT’s interests in
Japan Telecom Co., Ltd. (‘‘JT’’), J-Phone Communications Co., Ltd. (‘‘JPC’’), J-Phone Central Co., Ltd (‘‘JC’’), J-Phone East Co.,
Ltd. (‘‘JEC’’) and J-Phone West Co., Ltd. (‘‘JWC’’). JT is one of Japan’s leading telecommunications companies and parent of
JPC, which in turn has controlling interests in the three regional J-Phone wireless operating companies, JC, JEC and JWC.
The consideration for the transaction comprises a cash payment of »3.7 billion, and the assumption by Vodafone of »782
million of BT debt guarantees in favour of JT.
The closing of the transaction remains conditional upon relevant procedural approvals in Japan. Closing of the transfer of
the subsidiaries holding BT’s interests in JT and JPC (for »3.05 billion) may occur prior to (and is not conditional upon)
closing of the transfer of its interests in JEC and JWC for the Euro equivalent of »650 million (which will follow upon
completion of the exercise of certain options over shares in JC, JEC and JWC, with the option price of some »380 million to
be paid by BT).
The agreement contains certain warranties and indemnities in favour of Vodafone. These largely expire on 30 June 2002,
however certain limited tax and title warranties survive inde¢nitely. The agreement is conditional on certain matters,
including the need for consent from the Bank of Japan, and the parties have certain termination rights.
Additional information for shareholders
152 BT Annual report and Form 20-F