2 July 2025                                                                                                                          

THE INFORMATION CONTAINED IN THIS ANNOUNCEMENT IS RESTRICTED AND IS NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION IN WHOLE OR IN PART IN THE UNITED STATES, AUSTRALIA, CANADA, JAPAN, NEW ZEALAND, THE REPUBLIC OF SOUTH AFRICA OR ANY OTHER JURISDICTION WHERE ITS RELEASE, PUBLICATION OR DISTRIBUTION IS OR MAY BE UNLAWFUL. THIS ANNOUNCEMENT DOES NOT CONSTITUTE AN INVITATION TO PARTICIPATE IN THE TENDER OFFER (AS DEFINED HEREIN) IN OR FROM ANY JURISDICTION IN OR FROM WHICH, OR TO OR FROM ANY PERSON TO OR FROM WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER UNDER APPLICABLE SECURITIES LAWS OR OTHERWISE.

K3 BUSINESS TECHNOLOGY GROUP PLC

("K3" or "the Group" or "the Company")

Proposed Return of up to £29.0 million to Shareholders by Way of a Tender Offer for up to 34,117,647 Shares at 85 pence per Share

and
Cancellation of Admission of Shares to Trading on AIM

Publication of Circular and Notice of General Meeting

K3, which provides business-critical software solutions focused on fashion and apparel brands, announces that it will shortly be posting a Circular (the "Circular") setting out the details of a proposed return of capital to Shareholders of up to £29.0 million as distribution from the proceeds of the Nexsys Disposal (the "Tender Offer") and the proposed cancellation of admission of shares to trading on AIM (the "De-Listing" and, together with the proposed Tender Offer, the "Proposals").

Further to its announcement on 3 April 2025, the Company is seeking to return up to approximately £29.0 million of cash to Qualifying Shareholders by way of the Tender Offer. The Tender Offer will be conducted at a fixed price of 85 pence per Ordinary Share (the "Tender Price"), which represents the closing mid-market price of an Ordinary Share on 1 July 2025 (being the "Latest Practicable Date") and will be subject to the passing of the Tender Offer Resolution.

If the maximum number of Ordinary Shares under the Tender Offer is acquired, this would result in the purchase of approximately 74.3 per cent. of the Company's current issued share capital. The Tender Offer and De-Listing remain subject to approval by Shareholders at the General Meeting, to be held at the offices of Cavendish Financial plc at One Bartholomew Close, London EC1A 7BL 11.00 a.m. on 18 July 2025.

The Circular sets out the background to and reasons for the Proposals, terms and conditions of the Tender Offer and explains how Qualifying Shareholders may tender Shares, should they wish to do so. The Circular will be published on the Company's website at https://www.k3btg.com/investor-centre/regulatory-news/#circulars.

Unless otherwise defined, capitalised terms in this announcement shall have the meaning set out in the Circular.

Enquiries:

Expected Timetable

Notes:

1                 Each of the times and dates referred to in the expected timetable above and elsewhere in this announcement may be extended or brought forward at the discretion of the Company. If any of the above times and/or dates change, the revised time(s) and/or date(s) will be notified to Shareholders by an announcement through a Regulatory Information Service.

2                 All times referred to in this announcement are, unless otherwise stated, references to London time.

K3 BUSINESS TECHNOLOGY GROUP PLC

("K3" or "the Group" or "the Company")

Proposed Return of up to £29.0 million to Shareholders by Way of a Tender Offer for up to 34,117,647 Shares at 85 pence per Share

and
Cancellation of Admission of Shares to Trading on AIM

Publication of Circular and Notice of General Meeting

1.     Introduction

Following on from the Company's sale of NexSys Solutions Limited ("Nexsys") which was completed on 6 January 2025 for cash consideration of approximately £36 million (the "Nexsys Disposal"), and the capital reorganisation as approved by the Court on 11 June 2025, the Company now intends to return up to approximately £29.0 million of cash to Qualifying Shareholders by way of a tender offer and subsequent repurchase from Cavendish of the Shares successfully tendered (the "Tender Offer"). The Tender Offer will be conducted at a fixed price of 85 pence per Share (the "Tender Price"). Once the Tender Offer is completed the Directors are also proposing to de-list the Company from AIM.

The Tender Offer is being made available to all Shareholders who are on the Register at the close of business on 18 July 2025, with the exception of holders in certain overseas jurisdictions. Qualifying Shareholders can decide whether they want to tender some or (subject to scale back) all of their Shares at a price of 85 pence per Share, being the closing mid-market price on the Latest Practicable Date.

The Tender Offer is being made by Cavendish, the Company's corporate broker, as principal on the basis that all Shares that it buys under the Tender Offer will be purchased from it by the Company. The Company requires the authority from Shareholders to purchase any such Shares and this is being sought at the General Meeting to be held at the offices of Cavendish Financial Plc, One Bartholomew Close, London, EC1A 7BL at 11.00 a.m. on 18 July 2025. The General Meeting will also seek Shareholder approval for the Delisting Resolution.

The purpose of the Circular is to explain the terms and conditions of the Tender Offer and subsequent repurchase of Shares and to explain how Qualifying Shareholders may tender Shares, should they wish to do so, and the background to and reasons for the Delisting and why the Board unanimously recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out in Part 9 of the Circular.

The Board is unanimously recommending Shareholders to vote in favour of the Resolutions to be proposed at the General Meeting, as the Directors intend to do in respect of their own beneficial holdings of Shares amounting to 0.14 per cent. in aggregate of the Company's issued share capital. The Directors also intend to tender for no less than their Basic Entitlements in the Tender Offer.

Further, both Kestrel Partners LLP ("Kestrel") and PJ Claesson have irrevocably undertaken to tender for no less than their Basic Entitlements in the Tender Offer and to vote in favour of the Tender Offer Resolution in respect of their holdings of 13,274,493 Shares and 11,321,780 Shares, respectively, amounting to 53.5 per cent. in aggregate of the issued share capital.

2.     Background to and reasons for the Tender Offer and the De-listing

When the Company announced the conditional sale of NexSys on 2 December 2024 the Board was clear that it anticipated returning a substantial proportion of the net proceeds of the disposal to Shareholders. Since completion of the NexSys Disposal the Board has focused on:

•       stabilising the Group's remaining businesses, comprising the K3 Products Division and the Third Party Solutions Division (the "Remaining Group") with a view to returning the Group's continuing operations to a month on month cashflow breakeven position from March 2025 onwards. In this regard we are pleased to report that, with ongoing focus on cost discipline and cash management, month on month cashflow breakeven was achieved in April and May 2025;

•       reorganising the Company's balance sheet in order to permit a lawful distribution of capital by way of a process such as the Tender Offer; and

•       assessing the different options through which it may distribute capital to Shareholders, with the Board concluding that the Tender Offer is the most suitable way of doing so quickly and efficiently, taking into account the relative costs, complexity and timeframes of other possible methods, as well as the likely tax treatment for and equality of treatment of Shareholders.

Integral to the above has been assessment of the quantum of the NexSys Disposal proceeds considered appropriate to be retained within the Group to leave it with sufficient working capital and restructuring funding to operate debt free. This amount is expected to be approximately £6.0 million (including £3.3 million of restricted cash, restricted until July 2026), leaving approximately £29.0 million (after costs) to be returned by way of the Tender Offer, equating to approximately 4 per cent. more than the entire market capitalisation of K3 prior to the announcement of the sale of NexSys.

As the Group stated in its final results announcement for the year ended 30 November 2024 ("FY24") on 27 February 2025, FY24 was a challenging year, especially at Global Accounts (the predominant part of the Third-Party Solutions Division) whose revenue fell by approximately 41.4 per cent. Whilst FY24 results were nonetheless in line with Board's expectations, with Third Party Solutions' revenue now holding at a significantly reduced level with no expectation of return to previous levels, the rate of deal closure in the K3 Products Division is slowing and further restructuring is still required. In light of these prospects and the factors described below, the Board does not believe that K3's future is best served by its continued admission to AIM. Accordingly, the Board has now concluded that the De-Listing, following completion of the Tender Offer, is in the best interests of the Company and its Shareholders as a whole.

Whether or not the De-Listing Resolution is approved, the Board's focus remains on delivering value to Shareholders. It is expected that this will be achieved by maintaining strong financial discipline, continuing to simplify the Group, as appropriate, through the sale of non-core businesses and to judiciously invest in profitable growth opportunities. As further value is realised and cash generated, the Board intends to return this to Shareholders on a timely basis.

In reaching its conclusion in relation to the De-Listing, in addition to the Group's trading prospects described above, the Board has also considered the following factors:

•       the scale and structure of the UK Small Cap market has changed for the foreseeable future and K3 is too small to be of interest to the vast majority of a reducing number of investors in UK publicly-quoted companies;

•       In the opinion of the Board, the Tender Offer represents a near term opportunity for Qualifying Shareholders to realise a large part of the current value of their investment in the Company for cash;

•       in the opinion of the Board, the level of free float in the shares of the Company is not of a scale to attract sufficient interest from institutional and other investors and it is difficult therefore to create a more liquid market for its Shares to effectively or economically utilise its AIM quotation;

•       in light of the limited trading in the Shares, the costs associated with maintaining the AIM quotation are considered by the Directors to be disproportionately high when compared to the benefits, and the Board believes that these funds could be better utilised; and

•       the management time and the legal and regulatory burden associated with maintaining the Company's admission to trading on AIM is, in the Directors' opinion, disproportionate to the benefits to the Company.

If the De-Listing Resolution is not approved by Shareholders the Company will remain liable for the ongoing professional and related costs associated with maintaining its admission to AIM, which amounted to approximately £0.3 million during FY24.

Further information in relation to the proposed De-Listing is set out in paragraph 5 below.

3. The Tender Offer

The Tender Offer will be implemented on the basis that Cavendish will acquire, as principal, the successfully tendered Shares from all Shareholders (other than certain Overseas Shareholders) ("Tendered Shares"). Full details of the Tender Offer, including the terms and conditions on which it is being made, are set out in Part 3 of the Circular and, in relation to Shareholders holding Shares in a certificated form, on the Tender Form to be sent to them.

The Tender Offer is conditional on the passing of Resolution 1 (which will be proposed as an ordinary resolution) set out in the notice of General Meeting at the end of the Circular and the satisfaction of the other Conditions specified in Part 3 of the Circular.

The Tender Offer (subject to the overriding terms and conditions set out in Part 3 of the Circular) involves the following:

•       The Tender Offer is being made to all Shareholders (other than certain Overseas Shareholders) for the purchase of up to 34,117,647 Shares. Under the Tender Offer, each Shareholder is entitled to have up to 74.3 per cent. of his or her shareholding (representing his/her Basic Entitlement) purchased by Cavendish at the Tender Price together with potentially further purchases depending on the number of Shares tendered by other Shareholders. Basic Entitlements will be calculated by the Receiving Agent as at the Record Date by reference to the Qualifying Shareholder's holding of Shares as at that date.

•       The Tender Offer is being made at a price of 85 pence per Share, being the closing mid-market price on the Latest Practicable Date, for a maximum aggregate consideration of approximately £29.0 million.

•       Successfully Tendered Shares will be purchased free of commission and dealing charges.

•       Shareholders (other than certain Overseas Shareholders) will be able to decide to tender none, some or all of their Shares within the overall limits of the Tender Offer.

•       Tenders in excess of a Shareholders' Basic Entitlement can only be accepted to the extent that other Shareholders tender less than their Basic Entitlement or do not tender any Shares.

•       All Shares validly tendered by any Shareholder up to their Basic Entitlement are intended to be accepted in full.

•       The Tender Form to be completed by Shareholders who hold their Shares in certificated form contains a box to enable those Shareholders who wish to tender their Basic Entitlement to do so (Box 2A). If Shares are held in certificated form and this box is ticked, the Receiving Agent will calculate Basic Entitlements on the Record Date. If Shareholders wish to tender a different number of Shares to their Basic Entitlement, such number of Shares can be inserted in the alternate box provided on the Tender Form (Box 2B).

•       Shareholders who hold their Shares in uncertificated form (i.e. in CREST) and who wish to tender their Basic Entitlement should send a TTE instruction through CREST to the member account set out in paragraph 3.3(v) of Part 3 of the Circular. The Receiving Agent will calculate Basic Entitlements on the Record Date and return any excess Shares. If Shareholders wish to tender a different number of Shares to their Basic Entitlement, they should send a TTE Instruction through CREST to the same member account specifying such number of Shares that they wish to tender.

•       If the total number of Shares validly tendered by all Shareholders equates to a number greater than 34,117,647 Shares, tenders are intended to be accepted in the order set out below:

-      all Shares validly tendered by any Shareholder up to their Basic Entitlement are intended to be accepted in full; and

-      all Shares validly tendered by Shareholders in excess of their Basic Entitlements will be satisfied at the discretion of the Board. The number of Shares to be purchased in the Tender Offer will not, in any event, exceed 34,117,647 Shares.

•       All successfully Tendered Shares purchased by Cavendish will be repurchased from Cavendish by the Company pursuant to the Repurchase Agreement and will be immediately cancelled and will not rank for any future dividends.

•       Any rights of Shareholders who choose not to tender their Shares will be unaffected, however, the reduction in the Company's issued share capital is likely to result in a further reduction in the liquidity of the Shares in the secondary market. Attention is also drawn to section 5 below regarding the effects of the De-Listing.

Shareholders who are in any doubt as to the contents of the Circular or as to the action to be taken should immediately consult their stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under FSMA.

4.     Repurchase Agreement

Under the Repurchase Agreement, the parties have agreed that, subject to, amongst other things, the sum of approximately £29.0 million (equal to the Tender Price multiplied by the maximum number of Shares that could be repurchased under the Tender Offer) being received by Cavendish (or its custodian) by no later than 5.00 p.m. on 23 July 2025 (or such later time and/or date as may be agreed by Cavendish and the Company) and the Tender Offer becoming unconditional in all respects and not lapsing or terminating in accordance with its terms, Cavendish shall, as principal, purchase, "on exchange", at the Tender Price, Shares successfully tendered to it, up to a maximum aggregate value, at the Tender Price, of approximately £29.0 million.

The Company has agreed that, immediately following the purchase by Cavendish of all Shares which it has agreed to purchase as principal under the terms of the Tender Offer, the Company will purchase from Cavendish all such Shares at a price per Share equal to the Tender Price. All transactions will be carried out on the London Stock Exchange.

Under the Repurchase Agreement, the Company has agreed to cancel any Shares purchased by it under the Tender Offer. The Repurchase Agreement contains certain warranties from Cavendish in favour of the Company concerning its authority to enter into the Repurchase Agreement and to make the purchase of Shares pursuant thereto. The Repurchase Agreement also contains warranties and undertakings from the Company in favour of Cavendish and incorporates an indemnity in favour of Cavendish in respect of any liability which it may suffer in relation to the performance of its obligations under the Tender Offer. The Company will also be liable to pay Cavendish's fees, costs and expenses under the terms of Cavendish's engagement by the Company in connection with the Tender Offer.

5.     The De-Listing

a)     Effects of the De-Listing

The principal effects of the De-Listing will be that:

•       there will not be a formal market mechanism enabling the Shareholders to trade Shares;

•       while the Shares will remain freely transferrable, it is possible that the liquidity and marketability of the Shares will, in the future, be more constrained than at present and the value of such shares may be adversely affected as a consequence. Shareholders will note however, as set out above, that the Directors believe that the existing liquidity in the Shares is, in any event, limited. Shareholders should also note that the Directors intend to establish the Matched Bargain Facility with effect from De-Listing, as referred to below, though no representation is made that this will guarantee liquidity in the future;

•       in the absence of a formal market and quote, it may be more difficult for Shareholders to determine the market value of their investment in the Company at any given time;

•       the regulatory and financial reporting regime applicable to companies whose shares are admitted to trading on AIM will no longer apply and the Company will no longer be subject to UK MAR or the Disclosure Guidance and Transparency Rules and so will therefore no longer be required to disclose significant shareholdings in the Company;

•       Shareholders will no longer be afforded the protections given by the AIM Rules and the requirement that the Company seek Shareholder approval for certain corporate actions, where applicable, including substantial transactions, reverse takeovers, and fundamental changes in the Company's business;

•       the levels of transparency and corporate governance within the Company may not be as stringent as for a company quoted on AIM;

•       Cavendish will cease to be the Company's nominated adviser and the Company will cease to have a broker;

•       stamp duty will be payable on transfers of Shares as the Shares will no longer be traded on AIM; and

•       the De-Listing may have personal taxation consequences for Shareholders. Shareholders who are in any doubt about their tax position should consult their own professional independent tax adviser.

Shareholders should note that the Takeover Code will continue to apply to the Company provided its registered office is in the UK, the Channel Islands or the Isle of Man for a period of two years following the date of the De-Listing. After this period, the Code will cease to apply to the Company. Further details regarding the scope and applicability of the Takeover Code are set out in paragraph 8 below.

The Company will also continue to be bound by the Companies Act (which requires shareholder approval for certain matters) following the De-Listing.

The above considerations are not exhaustive, and Shareholders should seek their own independent advice when assessing the likely impact of the De-Listing on them.

b)     Process for De-Listing

Under the AIM Rules, the De-Listing can only be effected by the Company after securing a special resolution of Shareholders in a general meeting and the expiry of a period of 20 clear Business Days from the date on which notice of the De-Listing is given to the London Stock Exchange. In addition, a period of at least five clear Business Days following Shareholders' approval of the De-Listing is required before the De-Listing may become effective. The Notice of General Meeting contains a special resolution which seeks the approval of Shareholders for the De-Listing. Assuming that the De-Listing Resolution is approved, the De-Listing is expected to take place at 7.00 a.m. on 30 July 2025.

c)     Provision of information, services and facilities following the De-Listing

The Company currently intends to continue to provide certain information, services and facilities to Shareholders following the De-Listing. The Company intends to:

•       continue to communicate information about the Company (including annual accounts) to its Shareholders, as required by the Companies Act;

•       continue, for at least 12 months following the Cancellation, to maintain its website, www.k3btg.com and to post updates on the website from time to time, although Shareholders should be aware that there will be no obligation on the Company to include all of the information required under the Disclosure Guidance and Transparency Rules, AIM Rule 26, UK MAR or to update the website as currently required by the AIM Rules; and

•       make available to Shareholders, by way of J P Jenkins' Matched Bargain Facility, the means to buy and sell Shares on a matched bargain basis following the De-Listing. J P Jenkins is an appointed representative of Prosper Capital LLP, which is authorised and regulated by the FCA.

It is intended that the Matched Bargain Facility will operate for a minimum of 12 months after the De-Listing. The Directors' current intention is that it will continue beyond that time but Shareholders should note that it could be withdrawn and therefore inhibit the ability to trade the Shares. Further details will be communicated to the Shareholders at the relevant time.

6.     Overseas Shareholders

The attention of Qualifying Shareholders who are citizens, residents or nationals of countries outside the UK wishing to participate in the Tender Offer is drawn to paragraph 6 (entitled "Overseas Shareholders") in Part 3 of the Circular.

7.     Taxation

Qualifying Shareholders should be aware that there may be tax considerations that they should take into account when deciding whether or not and/or the extent to which to participate in the Tender Offer. A summary of the taxation consequences of the Tender Offer for UK resident Shareholders is set out in Part 5 of the Circular. It should be noted that this tax summary is merely a guide to current tax law and practice in the UK. Shareholders are advised to consult their own professional advisers regarding their own tax position.

8.     Takeover Code

The Code is issued and administered by the Panel. The Code currently applies to the Company and, accordingly, Shareholders are entitled to the protections afforded by the Code.

The Code and the Panel operate principally to ensure that shareholders in an offeree company are treated fairly and are not denied an opportunity to decide on the merits of a takeover and that shareholders in the offeree company of the same class are afforded equivalent treatment by an offeror. The Code also provides an orderly framework within which takeovers are conducted. In addition, it is designed to promote, in conjunction with other regulatory regimes, the integrity of the financial markets.

The Code is based upon a number of General Principles, which are essentially statements of standards of commercial behaviour. The General Principles apply to takeovers and other matters to which the Code applies. They are applied by the Panel in accordance with their spirit in order to achieve their underlying purpose.

In addition to the General Principles, the Code contains a series of rules. Like the General Principles, the rules are to be interpreted to achieve their underlying purpose. Therefore, their spirit must be observed as well as their letter. The Panel may derogate or grant a waiver to a person from the application of a rule in certain circumstances.

The Takeover Code applies to any company which has its registered office in the UK, the Channel Islands or the Isle of Man if any of its equity share capital or other transferable securities carrying voting rights are admitted to trading on a UK regulated market, a UK MTF, or a stock exchange in the Channel Islands or the Isle of Man. The Code therefore applies to the Company as its securities are admitted to trading on AIM, which is a UK multilateral trading facility ("MTF").

The Code also applies to any company which has its registered office in the UK, the Channel Islands or the Isle of Man if any of its securities were admitted to trading on a UK regulated market, a UK MTF, or a stock exchange in the Channel Islands or the Isle of Man at any time during the preceding two years.

Accordingly, if the De-Listing is approved by Shareholders at the General Meeting and becomes effective, the Code will continue to apply to the Company for a period of two years after the De-Listing, following which the Code will cease to apply to the Company.

While the Code continues to apply to the Company, a mandatory cash offer will be required to be made if either:

(a)    any person acquires an interest in shares which (taken together with the shares in which the person or any person acting in concert with that person is interested) carry 30 per cent. or more of the voting rights of the company; or

(b)    any person, together with persons acting in concert with that person, is interested in shares which in the aggregate carry not less than 30 per cent. of the voting rights of a company but does not hold shares carrying more than 50 per cent. of such voting rights and such person, or any person acting in concert with that person, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which that person is interested.

Brief details of the Takeover Panel, and of the protections afforded by the Code, are set out in Part 6 of the Circular.

Before voting on the De-Listing, Shareholders may want to take independent professional advice from an appropriate independent financial adviser.

Cavendish will purchase, as principal, voting shares under the Tender Offer which could result in Cavendish acquiring an interest in Shares carrying 30 per cent. or more of the voting rights of the Company. Promptly following such purchase, under the terms of the Repurchase Agreement, Cavendish will sell all such Shares to the Company and the Company will buy and thereafter cancel all such Shares. Accordingly, a waiver has been obtained from the Panel on Takeovers and Mergers in respect of the application of Rule 9 to the purchase by Cavendish of the voting shares under the Tender Offer.

9.     Action to be taken

General Meeting

Whether or not Shareholders intend to attend the General Meeting in person, they are encouraged to submit a proxy vote online.

Shareholders can appoint proxies electronically via the MUFG Corporate Markets Investor Centre app or via the web browser at https://uk.investorcentre.mpms.mufg.com/ so that the instruction is received by MUFG Corporate Markets by not later than 11.00 a.m. on 16 July 2025. CREST members can also appoint proxies by using the CREST electronic proxy appointment service and transmitting a CREST Proxy Instruction in accordance with the procedures set out in the CREST Manual so that it is received by MUFG Corporate Markets (under CREST participant RA10) by not later than 11.00 a.m. on 16 July 2025. The time of receipt will be taken to be the time from which MUFG is able to retrieve the message by enquiry to CREST in the manner prescribed by CREST. An institutional investor may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io.

If Shareholders are in any doubt as to the action they should take, they are recommended to seek their own independent advice.

Tender Offer

Only Qualifying Shareholders whose names appeared on the Register as at 6.00 p.m. on the Record Date are able to participate in the Tender Offer in respect of the Shares held as at that date. Qualifying Shareholders who hold Shares in certificated form who have acquired Shares in the period between the date of the Circular and the Record Date can obtain a Tender Form by contacting the Receiving Agent as set out on page 15 of the Circular.

(a)  Shares held in certificated form

Qualifying Shareholders who hold Shares in certificated form and who wish to participate in the Tender Offer should follow the instructions on the Tender Form provided to them and return it to the Receiving Agent, together with their share certificates or other document(s) of title, to arrive by no later than 1.00 p.m. on 18 July 2025. Qualifying Shareholders who hold their Shares in certificated form should also send their original share certificate(s) in respect of the Shares tendered with their Tender Form.

(b)  Shares held in uncertificated form

Qualifying Shareholders who hold their Shares in uncertificated form (that is, in CREST) and who wish to participate in the Tender Offer should tender electronically through CREST so that the TTE Instruction settles no later than 1.00 p.m. on 18 July 2025.

Further details of the procedures for tendering and settlement are set out in Part 3 of the Circular.

Shareholders who do not wish to participate in the Tender Offer should not complete the Tender Form and should not make or arrange for a TTE Instruction.

10.   General

Any repurchase of Shares pursuant to the Repurchase Agreement will be financed solely from the Company's existing cash resources. No borrowings will be incurred by the Company in respect of any repurchase of Shares pursuant to the Repurchase Agreement.

If Shareholders choose not to tender their Shares under the Tender Offer, their holding will be unaffected, save for the fact that, assuming the successful completion of the Tender Offer and subsequent repurchase of Shares by the Company, they will end up holding a greater percentage of the issued share capital of the Company than they did before the Tender Offer as there will be fewer Shares in issue after completion of the Tender Offer and subsequent repurchase of Shares. Attention is also drawn to section 5 above regarding the De-Listing.

11.    Irrevocable undertakings

The Company has received irrevocable undertakings to tender Shares under the Tender Offer from Kestrel and PJ Claesson pursuant to which they have each committed to tender for no less than their Basic Entitlements in the Tender Offer and to vote in favour of the Tender Offer Resolution in respect of their current holdings of 13,274,493 Shares and 11,321,780 Shares respectively amounting to 53.5 per cent. in aggregate of the current issued share capital.

12.   Related party transaction

The entering into by the Company of the undertakings referred to in paragraph 11 above constitute related party transactions under AIM Rule 13. Both Kestrel and PJ Claesson are substantial shareholders of the Company as defined in the AIM Rules for Companies. The independent Directors consider that, having consulted with the Company's nominated adviser, Cavendish, the terms of these undertakings are fair and reasonable insofar as Shareholders are concerned. As a partner of and being beneficially interested in Kestrel and in 355,360 Shares held within funds managed by Kestrel, Oliver Scott is not deemed to be an independent Director for these purposes.

13.   Issued Shares following the Tender Offer

Assuming that the maximum number of Shares under the Tender Offer are bought back by the Company and cancelled, the Company's issued share capital will be reduced by 34,117,647 Shares to 11,814,732 Shares. An announcement setting out the Company's new issued share capital for the purposes of making DTR 5.1.2 notifications will be made following any purchase by the Company of Shares from Cavendish in relation to the Tender Offer.

14.   Further information

Shareholders' attention is drawn to the information contained in the rest of the Circular, including, in particular, the terms and conditions of the Tender Offer in Part 3 of the Circular.

15.   Recommendation

The Board considers the Resolutions to be in the best interests of Shareholders as a whole. Accordingly, the Board recommends that Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as the Directors intend to do for their respective individual beneficial holdings of, in aggregate, 65,286 Shares, representing approximately 0.14 per cent. of the Company's issued share capital as at the Latest Practicable Date.

Oliver Scott, Tom Crawford and Lavinia Alderson also intend to tender for no less than their Basic Entitlements in respect of their current shareholdings (amounting to 0.14 per cent. in aggregate of the current issued share capital).

The Directors are making no recommendation to Qualifying Shareholders in relation to participation in the Tender Offer itself. If Shareholders are in any doubt as to the action they should take, they are recommended to seek their own independent advice.

DEFINITIONS