BT 2004 Annual Report Download - page 150

Retirement of directors
Provisions of the legislation which, read with the Articles, would prevent a person from being or becoming
a director because that person has reached the age of 70 do not apply to the company.
At every annual general meeting any director who was elected or last re-elected a director at or before
the annual general meeting held in the third year before the current year, shall retire by rotation. Any director
appointed by the directors automatically retires at the next following annual general meeting. A retiring
director is eligible for re-election.
Directors’ borrowing powers
To the extent that the legislation and the Articles allow, the Board can 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 the company’s 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, net of amounts borrowed intra-group among other things, at any time does not exceed £35 billion.
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.
Cegetel
On 5 December 2002, Vivendi Universal (‘‘Vivendi’’) served a notice exercising its pre-emption rights under
the Shareholders’ Agreement in respect of Cegetel Groupe SA (‘‘Cegetel’’) to acquire BT’s entire shareholding –
a 26% interest – in Cegetel from Cegetel Holdings I BV Sarl (‘‘Cegetel Holdings’’), a BT group company for
e4.0 billion (£2.6 billion) in cash. This pre-emption right became exercisable as a result of Cegetel Holdings
having entered into a share purchase agreement for the sale of its shareholding in Cegetel to Vodafone AG for
e4.0 billion in cash, in October 2002.
Vivendi paid e2.7 billion of the consideration to Cegetel Holdings on 17 January 2003 and the transaction
was completed when Vivendi paid the balance of e1.3 billion on 22 January 2003.
Taxation (US Holders)
This is a summary only of the principal US federal income tax and UK tax consequences of the ownership and
disposition of ordinary shares or ADSs by US Holders (as defined below) who hold their ordinary shares or ADSs
as capital assets. It does not address all aspects of US federal income taxation and does not address aspects
that may be relevant to persons who are subject to special provisions of US federal income tax law, including
US expatriates, insurance companies, tax-exempt organisations, financial institutions, securities broker-dealers,
traders in securities who elect a mark-to-market method of accounting, persons subject to alternative minimum
tax, investors that directly, indirectly or by attribution own 10% or more of the outstanding share capital or
voting power of BT, persons holding their ordinary shares or ADSs as part of a straddle, hedging transaction or
conversion transaction, persons who acquired their ordinary shares or ADSs pursuant to the exercise of options or
otherwise as compensation, or persons whose functional currency is not the US dollar, amongst others. Those
holders may be subject to US federal income tax consequences different from those set forth below.
For purposes of this summary, a ‘‘US Holder’’ is a beneficial owner of ordinary shares or ADSs that, for US
federal income tax purposes, is: an individual citizen or resident of the United States, a corporation (or other
entity taxable as a corporation for US federal income tax purposes) created or organised in or under the laws of
the United States or any state thereof, an estate the income of which is subject to US federal income taxation
regardless of its source, or a trust if a US court can exercise primary supervision over the administration of the
trust and one or more US persons are authorised to control all substantial decisions of the trust. If a partnership
holds ordinary shares or ADSs, the tax treatment of a partner generally will depend upon the status of the
partner and the activities of the partnership. A partner in a partnership that holds ordinary shares or ADSs is
urged to consult its own tax advisor regarding the specific tax consequences of owning and disposing of the
ordinary shares or ADSs.
In particular, this summary is based on (i) current UK tax law and UK Inland Revenue practice and US law and
US Internal Revenue Service (‘‘IRS’’) practice, including the Internal Revenue Code of 1986, as amended,
Treasury regulations, rulings, judicial decisions and administrative practice, all as currently in effect, (ii) the
United Kingdom–United States Income Tax Convention that entered into force on 25 April 1980 as in effect on
1 January 2003 (the ‘‘1980 Convention’’), (iii) the United Kingdom–United States Convention relating to estate
and gift taxes, and (iv) the new United Kingdom–United States Tax Convention that entered into force on
BT Annual Report and Form 20-F 2004149 Additional information for shareholders