Cyprotex PLC. (Incorporated and registered in England and Wales with registered number )

Transcription

1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this document or the action you should take, you should immediately consult a person authorised under the Financial Services and Markets Act 2000 ( FSMA ) who specialises in advising on the acquisition of shares and other securities before taking any action. If you have sold or transferred all of your holding of Existing Ordinary Shares, please forward this document together with the accompanying Form of Proxy for the General Meeting as soon as possible to the purchaser or transferee or to the stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold part of your holding, please consult the stockbroker, banker or other agent through which the sale was made. This document does not comprise a prospectus for the purpose of the Prospectus Rules and has not been submitted to the Financial Conduct Authority. In issuing this document, the Company is relying on an exemption from the requirement to publish a prospectus pursuant to section 85(5) and paragraph 9 of Schedule 11A of FSMA. The Convertible Loan Notes and the Redeemable Loan Notes will not be admitted to trading on AIM. Application will be made for the New Ordinary Shares to be admitted to trading on AIM assuming exercise of the conversion rights in accordance with the terms of the Convertible Loan Note Instrument. AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attached than to larger more established companies. AIM securities are not admitted to the Official List of the UKLA (the Official List ). A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest only after careful consideration and, if appropriate, consultation with an independent financial adviser. The AIM Rules are less demanding than those of the Official List. Neither the UKLA nor London Stock Exchange plc has examined or approved the contents of this document. The New Ordinary Shares will not be traded on any other recognised investment exchange and no such applications have been or will be made for them to be admitted to trading on any such exchange. Cyprotex PLC (Incorporated and registered in England and Wales with registered number ) Proposed Open Offer for 4,000,000 nominal value Convertible Loan Notes and Subscription for 3,000,000 nominal value Redeemable Loan Notes Notice of General Meeting N+1 Singer Nominated Adviser and Broker To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. N+1 Singer, which is authorised and regulated in the United Kingdom by the Financial Conduct Authority, is acting exclusively for the Company and no one else in connection with the Proposals and will not be responsible to anyone other than the Company for providing the protections afforded to clients of N+1 Singer, nor for providing advice in relation to the Proposals in this document nor any other matter in relation to the contents of this document. N+1 Singer is not making any representation or warranty, express or implied, as to the content of this document. No liability is accepted by N+1 Singer for the accuracy of any information or opinions contained in or for the omission of any material information from this document, for which the Company and the Directors are solely responsible. Neither this document, nor the Form of Proxy is to be taken, transmitted or distributed, directly or indirectly, in or into any Restricted Jurisdiction. The distribution of this document in other jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about, and observe any such restrictions. This document should be read in its entirety. This document does not constitute an offer to sell or the solicitation of an offer to buy a security. Your attention is drawn, in particular, to the letter from the Chairman, set out at Part I of this document which contains the Independent Directors recommendation that you vote in favour of the Resolutions to be proposed at the General Meeting. Notice of a General Meeting of the Company to be held at the offices of N+1 Singer, One Bartholomew Lane, London EC2N 2AX, at a.m. on 26 September 2013 is set out on pages 40 to 43 of this document. To be valid, the Form of Proxy must be completed and returned so as to be received at the offices of the Company s Registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3 4TU, as soon as possible and, in any event, no later than a.m. on 24 September The return of a completed Form of Proxy will not preclude a member from attending and voting in person at the General Meeting.

2 Contents Page Expected Timetable 3 Key Statistics 4 Definitions 5 Part I Letter from the Chairman 8 Part II Summary of the principal terms and conditions of the Convertible Loan Notes 15 Part III Summary of the principal terms and conditions of the Redeemable Loan Notes 24 Part IV Details of the Open Offer 33 Notice of General Meeting 40 2

3 Expected Timetable Record date and time for entitlements under the Open Offer Publication of this document and announcement of the Proposals Ex entitlement date for the Open Offer Latest time and date for splitting of Application Forms (to satisfy bona fide market claims only) Latest time and date for receipt of completed Application Forms and payment in full under the Open Offer Latest time and date for receipt of Forms of Proxy for the General Meeting General Meeting Results of the Open Offer announced through a Regulatory Information Service Despatch of definitive loan note certificates p.m. on 2 September 3 September 3 September 3.00 p.m. on 19 September a.m. on 23 September a.m. on 24 September a.m. on 26 September 27 September before 10 October Each of the times and dates in the above timetable are London GMT times and are subject to change at the absolute discretion of the Company and N+1 Singer Advisory. Any such change will be notified by an announcement on a Regulatory Information Service. 3

4 Key Statistics Number of Existing Ordinary Shares as at the date of this document 224,340,569 Nominal value of the Convertible Loan Notes 4,000,000 Nominal value of the Redeemable Loan Notes 3, Estimated net proceeds of the Proposals 6,900,000 Interest rate per annum of the Convertible Loan Notes Interest rate per annum of the Redeemable Loan Notes 5.0 per cent. 5.0 per cent. Maximum amount repayable (including in respect of PIK Notes) on the Maturity Date 5,105,792 (1) Number of New Ordinary Shares to be issued upon conversion of the Convertible Loan Notes on the Maturity Date 66,666,667 (2) Maximum number of New Ordinary Shares to be issued in respect of PIK Notes on the Maturity Date assuming no conversion prior to the Maturity Date 18,429,871 Enlarged ordinary share capital following conversion of the Convertible Loan Notes and the PIK Notes on the Maturity Date 309,437,107 (3) Percentage of the enlarged ordinary share capital represented by the New Ordinary Shares issued upon conversion of the Convertible Loan Notes and the PIK Notes on the Maturity Date per cent. (3) (1) Assumes the accrual of interest from and including 1 October 2013 to but not excluding the Redemption Date. (2) Excludes PIK Notes. (3) Assumes that the Convertible Loan Notes (including rolled up interest from and including 1 October 2013 to but excluding the Maturity Date, in the form of PIK Notes) are converted into New Ordinary Shares on the Maturity Date and that no other issues of shares by the Company take place following the date of this document. 4

5 Definitions The following definitions apply throughout this document unless the context requires otherwise: Act Acting in Concert AIM AIM Rules Amended Articles Application Form Board or Directors Business Day Code or Takeover Code Company or Cyprotex Conversion Convertible Loan Note Instrument Convertible Loan Notes CREST Existing Articles Existing Ordinary Shares FCA Form of Proxy FSMA the Companies Act 2006 (as amended) has the meaning attributed to it in the Code AIM, a market operated by the London Stock Exchange the rules for companies whose securities are admitted to trading on AIM as published by the London Stock Exchange, as amended from time to time the articles of association of the Company, as amended following the passing of Resolution 3 at the General Meeting the application form to be used by Qualifying Shareholders in connection with the Open Offer the board of directors of the Company from time to time and as at the date hereof as set out on page 8 of this document a day (other than a Saturday, a Sunday or a public holiday) on which dealings in securities may take place on the London Stock Exchange the City Code on Takeovers and Mergers Cyprotex PLC, a company incorporated and registered in England and Wales with registered number the conversion of the Convertible Loan Notes (including any PIK Notes) into New Ordinary Shares following exercise by a Noteholder of the conversion rights in accordance with terms and conditions of the Convertible Loan Notes the deed constituting the Convertible Loan Notes executed by the Company on 20 August 2013 the 5 per cent. fixed rate 4,000,000 nominal amount unsecured convertible loan notes, to be issued on the terms of the Convertible Loan Note Instrument, further details of which are set out in Part II of this document the system for paperless settlement of trades and the holding of uncertificated shares administered through Euroclear UK & Ireland Limited the articles of association of the Company as at the date of this document the 224,340,569 ordinary shares of 0.1 pence each in the capital of the Company in issue at the date of this document the Financial Conduct Authority the form of proxy accompanying this document for use in connection with the General Meeting the Financial Services and Markets Act 2000, as amended from time to time 5

6 GM or General Meeting Group Harwood Independent Directors London Stock Exchange the general meeting of the Company convened for a.m. on 26 September 2013, notice of which is set out on pages 40 to 43 of this document the Company, its Subsidiaries and Subsidiary Undertakings and/or (where the context requires) any one or more of them Harwood Capital LLP, a limited liability partnership registered in England and Wales with registered number OC the directors of the Company, save for Christopher Mills London Stock Exchange plc Maturity Date 30 September 2018 Money Laundering Regulations the Money Laundering Regulations 2007 N+1 Singer N+1 Singer Advisory N+1 Singer CM New Ordinary Shares Noteholder Notice of General Meeting Open Offer Open Offer Entitlement Ordinary Shares Oryx Proposals N+1 Singer Advisory and/or N+1 Singer CM as the context shall require Nplus1 Singer Advisory LLP, the Company s nominated adviser, which is a limited liability partnership incorporated and registered in England and Wales with registered number OC Nplus1 Singer Capital Markets Limited, the Company s broker, which is a company incorporated and registered in England and Wales with registered number new ordinary shares of 0.1 pence each in the capital of the Company following conversion of the Convertible Loan Notes a registered holder of the Convertible Loan Notes the notice of the General Meeting set out on pages 40 to 43 of this document the offer by the Company to all Shareholders to subscribe for the Convertible Loan Notes entitlements to subscribe for Convertible Loan Notes, allocated to a Qualifying Shareholder pursuant to the Open Offer so that each Ordinary Share would entitle the Qualifying Shareholder to of nominal value 1.00 Convertible Loan Notes ordinary shares of 0.1p each in the capital of the Company Oryx International Growth Fund Limited, a closed-ended investment company incorporated in Guernsey as a company limited by shares which are admitted to the Official List and to trading on the main market of the London Stock Exchange whose registered office is at BNP Paribas House, 1 St Julian s Avenue, St Peter Port, Guernsey GY1 1WA, with registered number together the Open Offer and the Subscription 6

7 Prospectus Rules the rules made by the FCA under Part VI of the FSMA in relation to offers of transferable securities to the public and admission of transferable securities to trading on a regulated market Record Date 6.00 p.m. on 2 September 2013 Redeemable Loan Notes Redeemable Loan Note Instrument Registrar or Capita Resolutions Restricted Jurisdiction Shareholder(s) Subscription Subscription Agreement Subsidiary Subsidiary Undertaking Takeover Panel or Panel TPE III UK or United Kingdom UKLA or UK Listing Authority United States or US the 5 per cent. fixed rate 4,000,000 nominal amount unsecured loan notes, to be issued on the terms of the Redeemable Loan Note Instrument, further details of which are set out in Part III of this document the deed constituting the Redeemable Loan Notes executed by the Company on 20 August 2013 means Capita Registrars Limited, a private limited company incorporated in England and Wales, with registered number , whose registered office is at 34 Beckenham Road, Beckenham, Kent, BR3 4TU the resolutions to be proposed at the General Meeting, as set out in the Notice of General Meeting means the United States, Australia, Canada, Japan, the Republic of South Africa or New Zealand a holder of Existing Ordinary Shares the subscription by Harwood of the Redeemable Loan Notes and, if applicable, the Convertible Loan Notes, pursuant to the Subscription Agreement an agreement dated 20 August 2013 made between (1) TPE III and (2) the Company, further details of which are set out in paragraph 3.2 of Part I of this document a subsidiary of the Company as that term is defined in Section 1159 and Schedule 6 of the Act a subsidiary undertaking of the Company as that term is defined in Section 1162 and Schedule 7 of the Act the Panel on Takeovers and Mergers Trident Private Equity Fund III LP, registered in England, whose registered office is at 6 Stratton Street, Mayfair, London W1J 8LD, a fund managed by Harwood the United Kingdom of Great Britain and Northern Ireland the Financial Conduct Authority in its capacity as the competent authority for the purposes of Part VI of FSMA the United States of America, its territories and possessions and any state of the United States of America and the District of Columbia 7

8 Part I Directors Letter from the Chairman Cyprotex PLC (Incorporated in England and Wales with registered number ) Ralph Stephen Harris, Non-Executive Chairman Anthony David Baxter, Chief Executive Officer John Kevin Dootson, Chief Financial Officer Christopher Garth Clothier, Non-Executive Director Christopher Harwood Bernard Mills, Non-Executive Director Registered Office 100 Barbirolli Square Manchester M2 3AB 3 September 2013 To Shareholders and, for information only, to holders of options and warrants over Existing Ordinary Shares Dear Shareholder, Open Offer for 4,000,000 nominal value Convertible Loan Notes Subscription for 3,000,000 nominal value Redeemable Loan Notes Notice of General Meeting 1 Introduction On 21 August 2013, the Company announced that it had entered into a loan note subscription agreement (the Subscription Agreement ) with Trident Private Equity Fund III LP ( TPE III ), a fund managed by Harwood Capital LLP. Oryx International Growth Fund Limited for which Harwood acts as Investment Manager currently holds 61,250,000 Existing Ordinary Shares in the Company representing a holding of 27.3 per cent. of the issued share capital. Christopher Mills, who was appointed as non-executive director of the Company on 24 July 2013, is the Chief Investment Officer of Harwood and a director of Oryx. Under the terms of the Subscription Agreement, TPE III irrevocably has undertaken, subject to certain conditions, to subscribe for 3,000,000 nominal value Redeemable Loan Notes. In addition, TPE III has undertaken to subscribe for Convertible Loan Notes which are not taken up by Shareholders under an open offer of up to 4,000,000 nominal value Convertible Loan Notes to all Shareholders, further details of which are set out below. The Convertible Loan Notes will be convertible into New Ordinary Shares at a price of 6 pence per share, subject to adjustment in certain circumstances including without limitation, discounted rights issues, the payment of non-cash dividends and bonus issues, and likewise the redemption price for the Redeemable Loan Notes will be based the higher of a notional conversion at 6 pence per share, also subject to adjustment in the same circumstances as the Convertible Loan Notes, or their nominal value. Further details of the Convertible Loan Notes and the Redeemable Loan Notes are set out in Parts II and III of this document respectively. Whilst the issue of the Redeemable Loan Notes and the Convertible Loan Notes is not subject to Shareholder approval and the Directors have sufficient existing authorities pursuant to section 551 of the Act to issue the Convertible Loan Notes, the Directors believe it is in the best interests of the Company and its members as a whole if they seek an increase in the Company s borrowing powers and 8

9 the renewal of authorities in respect of the issue of securities. The Directors therefore propose certain Resolutions at the General Meeting in order to maintain that flexibility. Further details of the General Meeting and the Resolutions being proposed at it are set out in paragraph 8 of this Part I. The purpose of this document is to give you further information regarding the Proposals, to explain why your Board considers that they are in the best interests of the Shareholders and to seek your approval of certain Resolutions at the General Meeting. 2 Background to and reasons for the Proposals As stated in the Company s interim statement of 7 August 2013, the Board believes it can, with the support of the Company s new investors, continue to grow the Company, both through investment in new technology, particularly in its Watertown site, and through selective acquisitions to enhance its customer service offering. The Board strongly believes there are major opportunities to significantly grow the business. Such opportunities arise primarily, but not exclusively, from the pharmaceutical industry. As previously alluded to on a number of previous occasions, there is a continuing drive to reduce costs in drug development. This includes outsourcing ever-increasing elements of this process and also assessing the likelihood of ADME-Tox (Absorption Distribution Metabolism Excretion-Toxicity) issues as early, and thus as cheaply, as possible in the process. The Board believes that both of these factors bode well for the growth of the Company s business. Many of these opportunities for growth are in the US and to capture them will require additional investment in the Company s US facilities to replicate both the high throughput analytical capabilities and advanced automated workflows attained presently in the UK giving significant increased operational capacity. US operations would then be capable of matching the range, standards and performance of the facilities in the UK. Additionally the CRO (contract research organisation) industry in which the Company operates, particularly in the US and to a lesser extent in Europe, is consolidating and is anticipated to continue to do so. This presents acquisition opportunities which the Company wishes to be in a position to take advantage. The Board believes that the Proposals will enable the Company to take advantages of the opportunities outlined above. 3 Overview of the principal terms of the Open Offer and the Subscription 3.1 The Open Offer Under the terms of the Open Offer, the Shareholders may subscribe for up to their Open Offer Entitlement, which, if fully taken up by Shareholders will be in aggregate 4,000,000 nominal value Convertible Loan Notes. The Convertible Loan Notes are unsecured and no application will be made to any listing authority, stock exchange or other market for the Convertible Loan Notes to be listed or otherwise traded. The Open Offer will be made to Qualifying Shareholders on the register on the Record Date. The Open Offer invites Qualifying Shareholders to subscribe for Convertible Loan Notes payable in full on application and free from all expenses, pro rata to their holdings of Existing Ordinary Shares on the basis of: of 1.00 nominal value Convertible Loan Note for every 1 Existing Ordinary Share held at the Record Date and so in proportion for any other number of Existing Ordinary Shares then held. Entitlements of Qualifying Shareholders will be rounded down to the nearest whole number of Convertible Loan Notes. Fractional entitlements which would otherwise arise will not be issued. 9

10 The Convertible Loan Notes carry a five per cent. per annum coupon (after deduction of any applicable income tax) and will be credited in arrears in the form of PIK Notes to the relevant Noteholder. Such interest will accrue on an annual basis or, if redeemed or converted less than one year from the previous interest accrual date, the interest will be pro-rated for the period from the previous interest accrual date to the date of redemption or conversion. Subject to any conversion rights being exercised by the Noteholder, the Convertible Loan Notes will be repayable on 30 September 2018 (the Maturity Date ) or the date on which a change of control occurs and the amount to be paid by the Company will be the greater of: l l the nominal amount of the Convertible Loan Notes and the associated PIK Notes; and the amount calculated by applying the average mid-market closing price of the Existing Ordinary Shares in the 30 dealing days prior to the Maturity Date to the number of New Ordinary Shares represented by the Convertible Loan Notes on the assumption that conversion of the Convertible Loan Notes had occurred. The Convertible Loan Notes will be convertible at the option of the Noteholder on 30 September 2014 or any anniversary of that date at the conversion price of 6 pence per share, subject to adjustment in certain circumstances including without limitation, discounted rights issues, the payment of non-cash dividends and bonus issues. The Company will use its reasonable endeavours to procure that any New Ordinary Shares issued upon conversion of the Convertible Loan Notes are admitted to trading on AIM as soon as practicable following conversion. Further details of the Convertible Loan Notes are set out in Part II of this document. Further details of the Open Offer are set out in Part IV of this document. 3.2 The Subscription Pursuant to the Subscription Agreement, TPE III has irrevocably undertaken, subject to certain conditions, to subscribe for 3,000,000 nominal value Redeemable Loan Notes. In addition, TPE III has undertaken to subscribe for Convertible Loan Notes which are not taken up by Shareholders under the Open Offer of up to 4,000,000 nominal value Convertible Loan Notes to all Qualifying Shareholders. In consideration of the subscriptions to be made by TPE III pursuant to the Subscription Agreement, the Company has agreed that Christopher Mills or some other person nominated by Harwood shall continue to be a director of the Company for so long as funds managed by Harwood continue to hold over 50 per cent. in nominal value of the Redeemable Loan Notes and the Convertible Loan Notes in aggregate. The Redeemable Loan Notes are unsecured and no application will be made to any listing authority, stock exchange or other market for the Redeemable Loan Notes to be listed or otherwise traded. The Redeemable Loan Notes carry a five per cent. per annum coupon (after deduction of any applicable income tax) and will be credited in arrears in the form of PIK Notes to TPE III. Such interest will accrue on an annual basis or, if redeemed less than one year from the previous interest accrual date, the interest will be pro-rated for the period from the previous interest accrual date to the date of redemption. The Redeemable Loan Notes will be repayable by the Company on the earlier of the Maturity Date or the date on which a change of control of the Company occurs. The amount to be paid by the Company in respect of the redemption of the Redeemable Loan Notes will be the greater of: l the nominal amount of the Redeemable Loan Notes and the associated PIK Notes; and 10

11 l the amount calculated by applying the average mid-market closing price of the Ordinary Shares in the capital of the Company in the 30 dealing days prior to the Maturity Date to the number of Ordinary Shares in the capital of the Company represented by the Redeemable Loan Notes on the assumption that the nominal value of the Redeemable Loan Notes then in issue had been converted into Ordinary Shares of the Company at 6 pence per share, subject to certain adjustments in certain circumstances including without limitation, discounted rights issues, the payment of non-cash dividends and bonus issues. 4 Effect of the Proposals on the Shareholders Assuming no further exercise of options under the the Company s option schemes and/or issues of Ordinary Shares, if the Conversion were to occur in full, the Company would have an enlarged share capital comprising 309,437,107 Ordinary Shares and any Shareholder who does not take up the Open Offer would suffer an immediate maximum dilution of approximately per cent. to their interests in the Company. 5 City Code on Takeovers and Mergers The conversion of the Convertible Loan Notes could give rise to certain considerations under the Takeover Code. Brief details of the aspects of the Takeover Code and the protections it affords to you as a Shareholder are described below: The Code is issued and administered by the Takeover Panel. The Code governs, inter alia, transactions which may result in a change of control of a company to which the Code applies. The Company is a company to which the Code applies and its Shareholders are entitled to the protections afforded by its provisions. Under Rule 9 of the Code ( Rule 9 ), when a person acquires an interest (as defined in the Code) in shares which, taken together with shares in which he is already interested and in which persons Acting in Concert with him are interested (as defined in the Code), carry 30 per cent. or more of the voting rights of a company that is subject to the Code, than that person together with persons Acting in Concert with him are normally required to make a general offer in cash to all the remaining shareholders to acquire their shares. Similarly where any person who, together with any person or persons Acting in Concert with him, is interested in shares which in aggregate carry not less than 30 per cent. of the voting rights of such a company, but does not hold shares carrying more than 50 per cent. of such voting rights, a general offer will normally be required if any further interest in shares is acquired by him or by any person Acting in Concert with him. An offer under Rule 9 must be made at the highest price by the person required to make the offer, or any persons Acting in Concert with him, for any interest in shares in the company during the twelve months prior to the announcement of the offer for the remaining equity share capital of the company. In the event that any Noteholder converted such number of Convertible Loan Notes that resulted in, when aggregated with other shares held by the Noteholder (and any persons Acting in Concert with him), the Noteholder holding shares which carry 30 per cent. or more of the voting rights of the Company, the provisions of Rule 9 as referred to above will, prima facie, apply to the Noteholder. 6 Related Party Transaction By virtue of its current interests in the Company, Harwood is a related party of the Company (as defined under the AIM Rules) and accordingly its participation in the Proposals via its managed fund TPE III and as a shareholder constitutes a related party transaction for the purposes of Rule 13 of the AIM Rules. 11

12 The Independent Directors having consulted with the Company s nominated adviser, N+1 Singer Advisory, consider that the terms of the Subscription to be fair and reasonable so far as the Shareholders are concerned. In providing advice to the Independent Directors, N+1 Singer Advisory has taken into account the Independent Directors commercial assessments. 7 Current Trading The Company announced its interim results for the six month period ended 30 June 2013 on 7 August An extract from the Chairman s statement in that announcement is as follows: 2013 has seen the most promising trading start to the financial year in the Company s history. The success has come from all geographical territories and from all parts of our technical service offering. It is particularly pleasing to note that our investments in improving our high content toxicity assay CellCiphr and in our new cardiotoxicity assay e-ciphrcardio have been rewarded with excellent uptake. Additionally, we have secured two notable new deals in the last 12 months with a 5 year contract with the EPA worth up to $10m for supporting the ToxCast programme and the 18 month Research Collaboration agreement with Pfizer proceeding well. The Board remains confident of achieving market expectations for revenues and operating profits for the full year, prior to any potential impact from the EPA contract which is anticipated to commence towards the end of The Board continues to be encouraged by current trading and remains confident in the Company s future growth prospects. 8 General Meeting A notice convening a General Meeting of the Company to be held at a.m. on 26 September 2013 at the offices of N+1 Singer, 1 Bartholomew Lane, London EC2N 2AX is set out at the back of this document. Set out below is a summary of the Resolutions which are to be proposed at the GM. Resolution 1 will be proposed as an ordinary resolution, whereas Resolutions 2 and 3 will be proposed as special resolutions. Resolution 1 Authority for directors to allot securities Resolution 1 is being proposed to authorise the Directors for the purposes of section 551 of the Act to allot shares or grant rights to subscribe for or convert any security into shares in the capital of the Company. This authority will replace all existing authorities. The Directors will limit this authority to an aggregate nominal amount of 74,780 being equal to one third of the Existing Ordinary Shares. This authority shall expire (unless it is revoked, varied, renewed or extended) at the conclusion of the next annual general meeting except that the Company may, before such expiry, make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of such offer or agreement as if the authority conferred by this resolution had not expired. Resolution 2 Authority to allot securities on a non pre-emptive basis Resolution 2 is being proposed to authorise the Directors to disapply the statutory pre-emption rights contained in section 561(1) of the Act in respect of the allotment of New Ordinary Shares. This authority will replace all existing authorities. The Directors are to be given a general authority to disapply statutory pre-emption rights in respect of the allotment of New Ordinary Shares for cash for up to 56,085, being equal to 25 per cent. of the Existing Ordinary Shares. This authority shall expire (unless it is revoked, varied, renewed or extended) at the conclusion of the next annual general meeting except that the Company may, before such expiry, make an offer or agreement which would or might require relevant securities to be allotted after such expiry and the Directors may allot relevant securities in pursuance of such offer or agreement as if the authority conferred by this resolution had not expired. 12

13 Resolution 3 Amendment to the articles of association of the Company Resolution 3 is being proposed to amend the articles of association of the Company to increase the borrowing powers of the Directors as described on page 41 of this circular. The Proposals are not conditional upon the passing of the Resolutions. The Directors consider the authorities in Resolutions 1 and 2 to be appropriate in order to allow the Company flexibility to finance business opportunities or to conduct a pre-emptive offer or rights issue without the need to comply with the strict requirements of the statutory pre-emption provisions. Save in respect of the allotment of any New Ordinary Shares that may need to be issued pursuant to the terms of the Convertible Loan Notes the Directors currently have no plans to issue any New Ordinary Shares. The Directors believe that it will be in the best interests of the Company for the Directors to be granted the authorities contained in the Resolutions. 9 Action to be taken in respect of the General Meeting Shareholders will find enclosed with this document a Form of Proxy for use at the GM. The Form of Proxy should be completed and returned in accordance with the instructions printed thereon so as to arrive at the Company s Registrars, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent, BR3 4TU as soon as possible and in any event not later than a.m. on 24 September If the Form of Proxy is not returned by a.m. on 24 September 2013, your vote will not count. 10 Action to be taken in respect of the Open Offer If you are a Qualifying Shareholder you will find an Application Form accompanying this document which gives details of your Open Offer Entitlement (i.e. the number of Convertible Loan Notes available to you). You may apply for any number of Convertible Loan Notes up to a maximum of your Open Offer Entitlement as set out on your Application Form. If you wish to apply for Convertible Loan Notes under the Open Offer, you should complete the enclosed Application Form in accordance with the procedure set out at paragraph 3 of Part IV of this document and on the Application Form itself and post it in the accompanying prepaid envelope (for use within the UK only), together with payment in full in respect of the number of Convertible Loan Notes applied for to Capita Registrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to arrive as soon as possible and in any event so as to be received no later than a.m. on 23 September 2013, having first read carefully Part IV of this document and the contents of the Application Form. The latest time for applications to be received under the Open Offer is a.m. on 23 September The procedures for application and payment are set out in Part IV of this document. Further details also appear on the Application Form which has been sent to Qualifying Shareholders. If you are in any doubt as to the procedure for acceptance, please contact Capita by telephone on from within the UK or on +44 (0) if calling from outside the UK. Calls to the cost approximately 10 pence per minute. Other network providers costs may vary. Calls to the helpline from outside the UK will be charged at the applicable international rate. Different charges may apply to calls from mobile telephones and calls may be recorded and randomly monitored for security and training purposes. Capita cannot provide advice on the merits of the Proposals nor give any financial, legal or tax advice. 13

14 11 Recommendation The Independent Directors, who have been so advised by N+1 Singer Advisory, believe that the Proposals are fair and reasonable and in the best interests of the Shareholders and the Company as a whole. They recommend that Shareholders vote in favour of the Resolutions as they intend to do in respect of their aggregate shareholdings of 3,456,171 Existing Ordinary Shares, equivalent to 1.54 per cent. of the Existing Ordinary Shares. In providing advice to the Independent Directors, N+1 Singer Advisory has taken into account the Independent Directors commercial assessments. Yours faithfully Steve Harris Chairman 14

15 PART II SUMMARY OF THE PRINCIPAL TERMS AND CONDITIONS OF THE CONVERTIBLE LOAN NOTES The Company is proposing to raise 4,000,000 million through the offer of the Convertible Loan Notes to the Shareholders of a pre-emptive basis. Pursuant to a resolution of the Board, 4,000,000 million in nominal amount of five per cent. convertible unsecured loan notes of the Company are proposed to be created and constituted as an unsecured obligation of the Company in accordance with the terms of the Convertible Loan Note Instrument. A summary of the principal terms of the Convertible Loan Notes is set out below. 1. Status No application will be made to any listing authority, stock exchange or other market for the Convertible Loan Notes to be listed or otherwise traded. In the event that Conversion occurs, application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. The Convertible Loan Notes will be freely transferable in whole or in part by the Noteholder. 2. Interest The Company will pay interest on the principal amount of the Convertible Loan Notes at a rate of five per cent. per annum compounded annually, which subject to early redemption or Conversion will be satisfied by the issue of additional notes ( payment in kind notes, PIK Notes ) to the relevant Noteholders. Interest will accrue daily at the above rate and will be calculated on the basis of a 365- day year and the actual number of days elapsed from the date of the issue of the Convertible Loan Notes to the Maturity Date or such earlier date of redemption, as applicable. The PIK Notes issued upon a conversion date or redemption date shall be deemed to be issued immediately prior to a conversion or redemption so that they are able to be converted or redeemed on such conversion date or redemption date if applicable. 3. Accelerated repayment The Convertible Loan Notes shall become immediately repayable at par together with any accrued interest on demand by a Noteholder made on or after the occurrence of any of the following events: (a) (b) (c) (d) the Company fails to pay in full on the due date any sum due from it under the Convertible Loan Notes or Convertible Loan Note Instrument in the currency and in the manner specified in the Convertible Loan Note Instrument unless its failure to pay is caused by administrative or technical error and payment is made within two Business Days of its due date; the Company fails duly to perform or comply with any obligation expressed to be assumed by it under Convertible Loan Notes or Convertible Loan Note Instrument and such failure (if remediable) is not remedied to the satisfaction of the Noteholder within 10 Business Days of the Company becoming aware of the relevant breach; any representation, warranty or statement made or deemed to be made by the Company in Convertible Loan Note Instrument (or in any notice or other document, certificate or statement delivered by it pursuant to hereto or in connection herewith) is or proves to have been incorrect or misleading in any material respect when made or deemed to be made; the Company or any other member of the Group is deemed unable to pay its debts as they fall due, admits its inability to pay its debts as they fall due, commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness, or makes a general assignment for the benefit of, or a composition with, its creditors; 15

16 (e) (f) (g) (h) (i) (j) the Company or any other member of the Group takes any corporate action or other steps are taken or legal proceedings are started for its winding-up, dissolution or re-organisation or for the appointment of a receiver, administrator, administrative receiver, trustee or similar officer of it or of any or all of its revenues and assets or distress is executed against, or an encumbrancer takes possession of, any part of its revenues or assets (save in relation to any winding-up petition which is frivolous or vexatious and is discharged, stayed or dismissed within 14 days of commencement); the Company ceases to carry on the business it carries on at the date hereof; the Company repudiates any of the Convertible Loan Notes or Convertible Loan Note Instrument or does or causes to be done any act or thing evidencing an intention to repudiate any of the Convertible Loan Notes or Convertible Loan Note Instrument; at any time it is or becomes unlawful for the Company to perform or comply with any or all of its obligations under any of the Convertible Loan Notes or Convertible Loan Note Instrument or any of the obligations of the Company under any of the Convertible Loan Notes or Convertible Loan Note Instrument are not, or cease to be, legal, valid and binding; any circumstances arise which give grounds in the opinion of the Noteholder (acting reasonably) for belief that the Company may not (or may be unable to) perform, or comply with, its payment obligations under any of the Convertible Loan Notes or Convertible Loan Note Instrument; or any other loan notes or any loan stock or other indebtedness issued or owing by the Company or any member of the Group becoming repayable before its due date by reason of the Company s or any member of the Group s default or remaining unpaid when due after the expiry of any relevant grace period. 4. Redemption Subject to any conversion rights being exercised by the Noteholder, the Convertible Loan Notes will be repayable by the Company on the earlier of: (a) (b) the Maturity Date, in which event the amount to be paid by the Company in respect of the redemption of the Convertible Loan Notes will be the greater of: (i) (ii) the nominal amount of the Convertible Loan Notes and the PIK Notes; and the amount calculated by applying the average mid-market closing price of the Ordinary Shares in the 30 Business Days prior to the Maturity Date to the number of Shares represented by the Convertible Loan Notes on the assumption that Conversion had occurred (including in relation to any PIK Notes issued or to be issued on or immediately prior to the Maturity Date) on the Maturity Date; the date (the Offer Date ) on which an offer implemented either by way of a general offer or a scheme of arrangement (the Offer ) bringing about a change of control (as such term is defined in the Convertible Loan Instrument) becomes unconditional in all respects (or in the case of a scheme of arrangement, becomes effective, in which event the amount to be paid by the Company in respect of the redemption of the Convertible Loan Notes will be the greater of: (i) (ii) the nominal amount of the Convertible Loan Notes and the PIK Notes; and the amount calculated by applying the offer price per Ordinary Share applicable to the Offer to the number of Ordinary Shares represented by the Convertible Loan Notes on the assumption that Conversion had occurred (including in relation to any PIK Notes issued or to be issued on or immediately prior to the Offer Date) on the Offer Date. 16

17 5. Conversion Any Noteholder may by notice, to be received by the Company not later than 25 Business Days prior to any anniversary of the date of the Convertible Loan Note Instrument (a Conversion Date ), require the Company to convert the principal amount outstanding in respect of its Convertible Loan Notes (whether in whole or part) and to allot to it (or its nominee) such number of New Ordinary Shares as calculated in accordance with the Convertible Loan Note Instrument (and summarised below). If such notice specifies that a proportion of the Convertible Loan Notes held by a Noteholder are to be converted, such notice shall only be valid to the extent that the aggregate par value of Convertible Loan Notes is not less than 5,000 or their entire holding of Convertible Loan Notes (if less). The number of New Ordinary Shares to be allotted and issued upon the conversion of Convertible Loan Notes specified in a conversion notice shall be calculated in accordance with the following formula: A = B divided by C where: A means the number of New Ordinary Shares to be allotted and issued to the relevant Noteholder (or its nominee); B means the par value of the Convertible Loan Notes specified in a conversion notice (such number to be no greater than the par value of Convertible Loan Notes currently in issue and in respect of which that Noteholder is the registered holder (to the extent not already redeemed or converted); and C means the Conversion Price (being 6 pence, subject to adjustment as described below), provided always that a Noteholder shall not be entitled to receive any fractions of Ordinary Shares, and any Convertible Loan Notes which are the subject of a conversion notice which cannot be converted otherwise than into fractions of Ordinary Shares will be paid to the Noteholder in cash (and the number of New Ordinary Shares to be allotted and issued shall be rounded down to the nearest whole number accordingly). Interest on Convertible Loan Notes converted shall cease to accrue as from the relevant Conversion Date, provided that the relevant Noteholders shall be entitled to any accrued interest as at the relevant Conversion Date which has not been satisfied by the issue of PIK Notes ( Conversion Interest ). All New Ordinary Shares issued in respect of Convertible Loan Notes which are subject to conversion will be issued, credited as fully paid, and from the date of allotment will rank pari passu in all respects and form one class with the Ordinary Shares in issue on that date, except that they will not rank for any interim or final dividend to be declared in respect of any period up to and including the relevant Conversion Date. 6. Adjustments The following definitions apply throughout this paragraph 6 unless the context requires otherwise: Capital Distribution means any Non-Cash Dividend; Cash Dividend means any dividend which is to be paid or made in cash (in whatever currency and translated into Sterling in accordance with the provisions set out in the definition of Fair Market Value); Current Market Price means the average mid-market closing price of the Ordinary Shares in the 10 Dealing Days prior to the Effective Date; Non-Cash Dividend means any Dividend which is not a Cash Dividend; Fair Market Value means, with respect to any assets, securities, options, warrants or other rights on any date, the fair market value of that asset, security, option, arrant or other right as determined by an Independent Financial Adviser provided that: 17

18 (i) (ii) (iii) (iv) the Fair Market Value of a Cash Dividend shall be the amount of such Cash Dividend; the Fair Market Value of any other cash amount shall be the amount of such cash; where securities, options, warrants or other rights are publicly traded on a stock exchange or securities market of adequate liquidity (as determined by an Independent Financial Adviser), the Fair Market Value of such securities, options, warrants or other rights shall equal the arithmetic mean of the the average mid-market closing price of such securities, options, warrants or other rights during the period of 10 dealing days on the relevant stock exchange or securities market on which such securities, options, warrants or other rights are traded commencing on such date (or, if later, the first such dealing day such securities, options, warrants or other rights are publicly traded) or such shorter period as such securities, options, warrants or other rights are publicly traded; where securities, options, warrants or other rights are not publicly traded on a stock exchange or securities market, the Fair Market Value of such securities, options, warrants or other rights shall be determined by an Independent Financial Adviser, on the basis of a commonly accepted market valuation method and taking account of such factors as it considers appropriate. Such amounts shall, in the case of (i) above, be translated into pounds Sterling (if declared or paid or payable in another currency) at the rate of exchange used to determine the amount payable to Shareholders who were paid or are to be paid or are entitled to be paid the Cash Dividend in question; and in any other case, shall be translated into pounds Sterling (if expressed in another currency ) at the spot rate of exchange of Barclays Bank PLC for the purchase of the relevant currency with Sterling in the foreign exchange market at or about 11am on that date. In addition, in the case of (i) and (ii) above, the Fair Market Value shall be determined on a gross basis and disregarding any withholding or deduction required to be made on account of tax, and disregarding any associated tax credit; Independent Financial Adviser means: (i) (ii) in respect of the valuation of Ordinary Shares, warrants, options or other securities (including rights attaching to the same) or derivatives of the same, any firm whose name is on the register of nominated advisers maintained by London Stock Exchange and which has not, at any time within the 5 years prior to the relevant time, been retained as nominated adviser and/or broker to the Company chosen by the Board at its absolute discretion; otherwise, the auditors of the Company or, if they refuse or are unable to act, any other reputable firm of accountants chosen by the Board at its absolute discretion. (a) If and whenever there shall be a consolidation, reclassification or subdivision in relation to the Ordinary Shares, or if the Company issues any Ordinary Shares credited as fully paid by way of capitalisation of profits or reserves, the Conversion Price shall be adjusted by multiplying the Conversion Price in force immediately prior to such consolidation, reclassification or subdivision, or capitalisation issue as the case may be, by the following fraction: A B where: A is the aggregate number of Ordinary Shares in issue immediately before such consolidation, reclassification or subdivision, or capitalisation issue as the case may be; and B is the aggregate number of Ordinary Shares in issue immediately after, and as a result of, such consolidation, reclassification or subdivision, or capitalisation issue as the case may be. 18