LR 10.2 Classifying transactions

Except as otherwise provided in this chapter, transactions are classified as follows:

1. (1)

   [deleted]3

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2. (2)

   Class 2 transaction: a transaction where any percentage ratio is 5% or more but each is less than 25%; and2

3. (3)

   Class 1 transaction: a transaction where any percentage ratio is 25% or more.2

4. (4)

   [deleted]2

   2

1. (1)

   Any agreement or arrangement with a party (other than a wholly owned subsidiary undertaking of the listed company):

   1. (a)

      under which a listed company agrees to discharge any liabilities for costs, expenses, commissions or losses incurred by or on behalf of that party, whether or not on a contingent basis;

   2. (b)

      which is exceptional; and

   3. (c)

      under which the maximum liability is either unlimited, or is equal to or exceeds an amount equal to 25% of the average of the listed company's profits (as calculated for classification purposes) for the last three financial years (losses should be taken as nil profit and included in this average);

   is to be treated as a class 1 transaction.

2. (2)

   Paragraph (1) does not apply to a break fee arrangement (see LR 10.2.6A R, LR 10.2.6B G and LR 10.2.7 R which deal3 with break fee arrangements3).

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3An arrangement is a break fee arrangement if the purpose of the arrangement is that a compensatory sum will become payable by a listed company to another party (or parties) to a proposed transaction if the proposed transaction fails or is materially impeded and there is no independent substantive commercial rationale for the arrangement.

1. (1)

   Sums payable pursuant to break fee arrangements3 in respect of a transaction are to be treated as a class 1 transaction if the total value of those sums 3exceeds:

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   1. (a)

      if the listed company is being acquired, 1% of the value of the listed company calculated by reference to the offer price; and

   2. (b)

      in any other case, 1% of the market capitalisation of the listed company.

2. (1A)

   3The total value of sums payable pursuant to break fee arrangements for the purpose of paragraph (1) is the sum of:

   1. (a)

      any amounts paid or payable pursuant to break fee arrangements in relation to the same transaction or in relation to the same target assets or business in the 12 months prior to the date the most recent arrangements were agreed unless those arrangements were approved by shareholders; and

   2. (b)

      the aggregate of the maximum amounts payable pursuant to break fee arrangements in relation to the transaction;

   save that if the arrangements are such that a particular sum will only become payable in circumstances in which another sum does not, the lower sum may be left out of the calculation of the total value.

3. (2)

   For the purposes of paragraph (1)(a):

   1. (a)

      the 1% limit is to be calculated on the basis of the fully diluted equity share capital of the listed company;

   2. (b)

      any VAT payable is to be taken into account in determining whether the 1% limit would be exceeded (except to the extent that the VAT is recoverable by the listed company); and

   3. (c)

      for a securities exchange offer, the value of the listed company is to be fixed by reference to the value of the offer at the time the transaction is announced (and is not to be taken as fluctuating as a result of subsequent movements in the price of the consideration securities after the announcement).

If:

1. (1)

   a major subsidiary undertaking of a listed company issues equity shares for cash or in exchange for other securities or to reduce indebtedness;

2. (2)

   the issue would dilute the listed company's percentage interest in the major subsidiary undertaking; and

3. (3)

   the economic effect of the dilution is equivalent to a disposal of 25% or more of the aggregate of the gross assets or profits (after the deduction of all charges except taxation) of the group;

the issue is to be treated as a class 1 transaction.

LR 10.2.8 R does not apply if the major subsidiary undertaking is itself a listed company.

1. (1)

   Transactions completed during the 12 months before the date of the latest transaction must be aggregated with that transaction for the purposes of classification if:

   1. (a)

      they are entered into by the company with the same person or with persons connected with one another;

   2. (b)

      they involve the acquisition or disposal of securities or an interest in one particular company; or

   3. (c)

      together they lead to substantial involvement in a business activity which did not previously form a significant part of the company's principal activities.

2. (2)

   Paragraph (1) does not apply in relation to a break fee arrangement (see LR 10.2.6A R, LR 10.2.6B G and LR 10.2.7 R which deal with break fee arrangements)3.

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3. (3)

   If under this rule aggregation of transactions results in a requirement for shareholder approval, then that approval is required only for the latest transaction.

4. (4)

   Paragraph (1) does not apply to a transaction where:4

   1. (a)

      the listed company has obtained shareholder approval for it; and4

   2. (b)

      it has been completed.4