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Kanyon PLC (KNYN)

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Wednesday 12 December, 2007

Kanyon PLC

Acquisition

Kanyon PLC
12 December 2007

12 December 2007



                           Kanyon Plc (the 'Company')



            Proposed acquisition of Oxford Advanced Surfaces Limited

         Proposed 1 for 10 Share Consolidation ('Share Consolidation')

  Proposed subscription by Ora Capital Partners plc ('Ora') for 12,000,000 New
    Ordinary Shares of £0.01 each at 25 pence per share ('the Subscription')

              Change of name to Oxford Advanced Surfaces Group Plc

                        Application for Admission to AIM

                    Adoption of New Articles of Association

                                      and

                           Notice of General Meeting



Kanyon Plc (the 'Company') has today announced that terms have been agreed for
the conditional acquisition of Oxford Advanced Surfaces Limited ('OAS') (the '
Acquisition'), a company engaged in the development and commercialisation of
technology which enables the modification of the surface properties of a broad
range of materials. The aggregate consideration for the Acquisition is
approximately £19.4 million to be satisfied by the payment of £50,000 in cash
and the allotment of 77,539,907 New Ordinary Shares of 1 pence each (the '
Consideration Shares') to be issued and credited as fully paid at 25 pence per
New Ordinary Share of 1 pence each ('New Ordinary Share'). The Company also
proposes to consolidate its existing share capital on the basis of 1 New
Ordinary Share for every 10 existing ordinary shares of 0.1 pence each, creating
1 pence shares in place of the existing 0.1 pence shares ('the Share
Consolidation').



The Company has also today announced that it has conditionally raised £3 million
(before expenses) by way of a conditional subscription for 12,000,000 New
Ordinary Shares by Ora Capital Partners Plc (the 'Subscription'). The funds from
the Subscription will be used to meet the costs of the Acquisition, Subscription
and General Meeting and to provide additional working capital for the Enlarged
Group (comprising the Company, Solar Labs plc and OAS).



By reason of the size of OAS in proportion to the Company, the Acquisition is
classified as a reverse take-over under the AIM Rules and is therefore
conditional, inter alia, on the approval of the Company's shareholders (the '
Shareholders') at the Company's General Meeting proposed to be held on short
notice at 10.00 a.m. on 21 December 2007 (or, if the meeting cannot be held on
short notice, at 10.00am on 7 January 2008), in either case at the offices of
Fasken Martineau Stringer Saul LLP, 17 Hanover Square, London, W1S 1HU (the 'GM
').



The Acquisition will also constitute a related party transaction under the AIM
Rules by reason of both David Norwood and Alan Aubrey being directors and
shareholders of the Company, directors and shareholders of IP Group Plc (which,
through its wholly owned subsidiary IP2IPO Limited, holds at the date of this
announcement, 38.05 per cent of OAS and will, on  Admission, hold 36.1 per cent
of OAS) and holders of the beneficial interest in certain of the shares held by
IP2IPO Nominees Limited in OAS.



Furthermore, by reason of the relationships that David Norwood and Alan Aubrey
have as set out above, Section 190 of the Companies Act 2006 ('CA 2006') will
also apply to the Acquisition as the transaction amounts to a substantial
property transaction involving a director of the Company. Section 190 of the CA
2006 provides that the Acquisition cannot be completed without the prior
approval of Shareholders. The Company will seek this approval at the GM, at
which the Shareholders will be asked to approve the Acquisition and the
completion of the agreement relating to the Acquisition (the 'Acquisition
Agreement') for the purposes of Section 190 of the CA 2006.



Matthew Sutcliffe and Byron Lloyd ('the Independent Directors') confirm that,
having consulted Zimmerman Adams International Limited, the Company's nominated
adviser ('ZAI'), which, in providing advice to the Independent Directors, has
taken into account the information supplied by and the commercial assessment of
the Independent Directors, they consider the terms of the Acquisition Agreement
to be fair and reasonable insofar as the Shareholders are concerned.





BACKGROUND TO AND REASONS FOR THE PROPOSALS



The Company's Ordinary Shares of 0.1 pence each were admitted to AIM on 10
October 2006. At the same time, the Company outlined a strategy of investing in,
or acquiring assets, businesses or companies in the energy and resources
sectors. In April 2007, the Company completed the acquisition of the entire
issued share capital of Solar Labs plc ('Solar Labs') with the objective of
harnessing a diverse range of technologies to support the development of
economically viable solar energy solutions.



The Acquisition therefore constitutes a further broadening of the Company's
strategy from that set out above as OAS is a company whose principal business is
that of developing and commercialising a portfolio of technologies which enable
the development of advanced materials through the modification of the surface
properties of a range of materials.



A resolution to approve the change of the investment strategy of the Company is
being proposed at the GM.



The principal reasons for this change in strategy and for undertaking the
Acquisition are as follows:



•         the Directors believe that the Acquisition presents an opportunity to
acquire a company that has the potential to significantly increase shareholder
value;

•         OAS's platform technology (the 'Technology') can be used to deliver
advanced materials and technology solutions across a range of markets; and

•         the Directors believe that OAS' Technology can be further developed to
deliver solutions in photovoltaics which are complementary to the business of
Solar Labs.







INFORMATION ON OAS



OAS was incorporated in June 2006 to develop and commercialise technology which
enables the modification of the surface properties of a range of materials in
order to increase and diversify their applications and functions. The Technology
is based on research that commenced over ten years ago at the Department of
Chemistry at the University of Oxford which has led to the platform of
intellectual property rights which, together with further know-how developed
since this time, comprise the Technology.  The Technology is capable of being
applied to modify the surface properties of materials such as natural and
synthetic polymers, as well as inorganic surfaces such as glass and diamonds.
Initial applications for the Technology include colouration, adhesion,
bio-activity and tailored wetting properties.  OAS commenced commercial
operations in September 2006.





STRATEGY OF THE ENLARGED GROUP



The Enlarged Group's strategy is to become an advanced materials and technology
solutions company with business units across a range of markets. The Board of
Directors of the Company as it will be following completion of the Acquisition
and as further detailed below (the 'Continuing Board') have identified three
priority markets for the application of the Technology, which are:



1. Electronics (including printed circuit boards, plastic electronics,
electromechanical devices and flat displays);

2. Industrial specialties (including specialty fibres, textiles, laminates and
composites); and

3. Life sciences/health care markets (including sterile surfaces, separation
media and microarrays).



The Continuing Board's intention is that Solar Labs will continue as a distinct
business unit to cover a full range of solar technologies including solar
photovoltaics, solar thermal, solar lighting/air conditioning, solar water
splitting and other solar chemical processes. Solar Labs objective is intended
to be achieved through the acquisition, development and commercialisation of
technologies in the solar energy sector and it will initially seek to develop
and commercialise opportunities leveraging the Technology. The Continuing
Board's focus will be on both exploiting the Technology in the markets described
above as well as developing further applications of the Technology in areas such
as photovoltaics through Solar Labs, biomedical materials and specialised
filtration media.



The Continuing Board plans to establish three distinct business units in the
above markets within OAS and to recruit commercial directors to run and develop
these business units. In addition, it is the intention of the Continuing Board
to continue to seek to establish opportunities in-house or through external
collaborations in markets such as photovoltaics and membranes for separation and
filtration processes.



It is expected that the Enlarged Group will initially generate development fees
from these partnerships before ultimately licensing its Technology for
commercial use. The Continuing Board believe such partnering arrangements will
enable OAS to leverage the relevant partners expertise in particular sectors as
well as their market access resulting in lower risk for OAS and a faster route
to market. The Enlarged Group does not, however, intend to manufacture chemicals
or materials on a large scale itself.



Instead, its strategy will be to enter into co-development arrangements with
leading companies with applications in high value markets as well as leading
speciality chemical companies. Where appropriate, OAS will enter into contract
manufacturing arrangements.

To support the Enlarged Group's business and technology development needs, it is
the Continuing Board's intention to establish a base research and design
capability with both an organic chemistry synthesis team and several focused
application development teams in electronics, speciality industrials and life
sciences.



The Enlarged Group will also explore opportunities to establish various external
collaborations with academics both at the University of Oxford and elsewhere to
develop further intellectual property rights in these areas. The Enlarged Group
will use the experience of the Continuing Board in the development of
collaborations with academic research institutions to commercialise intellectual
property.



DETAILS OF THE ACQUISITION



Under the terms of the Acquisition Agreement, the Company has conditionally
agreed to acquire the entire issued share capital of OAS. The consideration for
the Acquisition, which is payable on AIM Admission, is to be satisfied by the
allotment and issue by the Company to the vendors of OAS (the 'OAS Vendors') of
the Consideration Shares, credited as fully paid up at 25 pence per
Consideration Share and the payment of £50,000 in cash. The Consideration Shares
will, when issued, represent 43.58 per cent. of the issued share capital of the
Company on Admission (the 'Enlarged Issued Share Capital') and will rank pari
passu in all respects with the New Ordinary Shares then in issue, including all
rights to receive all dividends and other distributions declared, made or paid
following Admission. Application will be made for the admission of the
Consideration Shares to trading on AIM and dealings are expected to commence
following completion of the Acquisition.



CURRENT TRADING AND PROSPECTS



Historical unaudited financial information of the Kanyon Group (comprising the
Company and Solar Labs) for the six months to 31 July 2007 discloses a profit
before tax of £22,000 for the period. Net equity attributable to shareholders at
31 July 2007 was £7.75 million inclusive of cash and cash equivalent balances of
£3.91 million. The Kanyon Group has, subsequent to 31 July 2007, traded in line
with expectations.



The audited financial statements of OAS for the period from incorporation on 14
June 2006 to 31 July 2007 disclose a loss before tax of £142,000 for the period
coupled with net equity attributable to shareholders at the period end of £0.55
million. Since the start of its current financial year commencing 1 August 2007,
OAS has traded in line with expectations. Following completion of the
Acquisition and the Subscription, the Continuing Board will continue to evaluate
a number of opportunities arising for the further development of both new and
existing businesses.



FINANCIAL EFFECTS OF THE ACQUISITION AND SUBSCRIPTION



The Acquisition and the Subscription are expected to strengthen the Company's
balance sheet and provide the Enlarged Group with funding to pursue its proposed
strategy as outlined above.



BOARD CHANGES



The directors of the Company as at the date of this announcement are Matthew
Sutcliffe, Michael Bretherton, Byron Lloyd, Alan Aubrey and David Norwood
(together the 'Directors'). It is proposed that, with effect from Admission,
Matthew Sutcliffe, Byron Lloyd and Alan Aubrey will resign from the Board and
Marcelo Bravo, Jeremy Scudamore, Dr Mark Moloney and Dr Andrew Naylor (together
the 'Proposed Directors') will join the Company's Board as Chief Executive
Officer, Non-Executive Chairman and Non-Executive Directors respectively.



CITY CODE ON TAKEOVERS AND MERGERS ('CITY CODE')



The terms of the Acquisition give rise to certain considerations and
consequences under the City Code. Brief details of the Takeover Panel (the '
Panel'), the City Code and the protections they afford to Shareholders are
described below.



The Panel is an independent body. It has been designated as the supervisory
authority to carry out certain regulatory functions in relation to takeovers
pursuant to the Directive on takeover bids. Its statutory functions are set out
in and under Chapter 1 of Part 28 of the Companies Act 2006.



Under Rule 9 of the City Code when (i) any person acquires an interest in shares
which, when taken together with shares in which he is already interested in or
shares acquired by persons acting in concert with him, carry 30 per cent or more
of the voting rights of a company subject to the City Code or (ii) any person
who, together with persons acting in concert with him, has an interest of more
than 30 per cent. but less than 50 per cent. of the voting rights of a company
subject to the City Code, and such person, or persons acting in concert with
him, acquires any additional shares which increases his percentage of voting
rights, that person is normally obliged to make a general offer in cash to all
shareholders to purchase their shares at the highest price paid by him, or any
person acting in concert with him, within the preceding 12 months.  Furthermore,
when any person who, together with persons acting in concert with him, holds
more then 50 per cent. of the voting rights of a company subject to the City
Code, that person, together with persons acting in concert with him, may acquire
additional shares in the company without triggering the requirement to make a
general offer in cash to all shareholders under Rule 9 of the City Code.
However, individual members of such a concert Party will not be able to increase
their percentage shareholdings through a Rule 9 threshold without Panel consent.





Immediately following completion of the Acquisition, the Subscription, the
General Meeting and Admission ('Completion'), there will be three seperate new
concert parties (the 'New Concert Parties' and each a 'New Concert Party') who
will be interested in the following number of New Ordinary Shares:























Oxford University Concert Party


Concert Party        Number of New        Percentage of        Number of New        Maximum percentage
                     Ordinary Shares      Enlarged Issued      Ordinary Shares
                                          Share Capital        under following      in Enlarged Group on
                                                               Completion           a fully diluted
                                                                                    following the
                                                                                    exercise of the
                                                                                    options held by the
                                                                                    Oxford University
                                                                                    Concert Party
Oxford University    17,264,429           9.70                 Nil                  9.70
Concert Party






IP Group and Kanyon Concert Party





IP2IPO Limited, IP2IPO Nominees Limited and Dr Andrew Naylor are deemed to be
acting in concert (the 'IP Group Concert Party').  In turn, the IP Group Concert
Party has been deemed to be acting in concert with the existing Kanyon concert
party which includes James Ede-Golightly (the 'Kanyon Concert Party'). The IP
Group Concert Party and the Kanyon Concert Party shall together be referred to
as the 'Kanyon/IP Concert Party'. David Norwood and Alan Aubrey are members of
the Kanyon Concert Party.  They are also directors and shareholders of IP Group
plc (the parent company of IP2IPO Limited and IP2IPO Nominees Limited).  In
addition, IP2IPO Nominees Limited holds shares in OAS as nominee for both David
Norwood and Alan Aubrey. IP2IPO Limited and IP2IPO Nominees Limited are both
members of the IP Group Concert Party. The IP Group Concert Party was formed on
the date of this announcement



The total interest of the Kanyon/IP Concert Party is as follows:





Concert Party        Holding of New       Percentage in        Number of New in      Maximum percentage
Members              Ordinary Shares      Enlarged Group       Ordinary Shares under
                     following Completion following Completion option following      in Enlarged Group on
                                                               Completion            a fully diluted
                                                                                     basis
IP2IPO Limited       27,995,045           15.73                Nil                   15.73
IP2IPO Nominees      5,938,487            3.34                 Nil                   3.34
Limited *
Andrew Naylor        Nil                  Nil                  848,219               0.47
ORA                  49,950,002           28.07                Nil                   28.07
Richard Griffiths    10,075,003           5.66                 Nil                   5.66
David Norwood        9,075,003            5.10                 Nil                   5.10
Barnard Nominees Ltd 9,024,998            5.07                 Nil                   5.07
Bainunah Trading Ltd 6,000,000            3.37                 Nil                   3.37
Alan Aubrey          1,425,000            0.80                 Nil                   0.80
Robert Quested       550,000              0.31                 Nil                   0.31

Michael Bretherton   435,000              0.24                 Nil                   0.24
James Ede Golightly  535,000              0.30                 Nil                   0.30
Total                121,003,538          67.99%               848,219               68.46



* This includes 848,219 New Ordinary Shares held on behalf of Andrew Naylor





The Kanyon/IP Concert Party will immediately following Admission, hold more than
50 per cent. of the Company's voting share capital and (for so long as its
members  continue to be treated as acting in concert) may accordingly be able to
increase its aggregate shareholding without incurring any obligation under Rule
9 of the City Code to make a general offer.  However, individual members of the
Kanyon/IP Concert Party will not be able to increase their percentage
shareholdings through a Rule 9 threshold without Panel consent.





Other Vendors Concert Party


Members of the   Holding of New Ordinary    Percentage in      Number of New in   Maximum
Concert Party    Shares following           Enlarged Group    Ordinary Shares    percentage
                 Completion                 following         under option
                                            Completion        following          in Enlarged
                                                              Completion         Group on a
                                                                                 fully diluted
                                                                                 basis

Mark Moloney                    10,120,527  5.69%             848,219            6.14
                                                              
Jon-Paul                        10,120,527  5.69%             Nil                5.69
Griffiths

Jeremy Scudamore                714,390     0.40%             3,886,282          2.53
                                                       
Marcelo Bravo                   5,386,502   3.03%             5,386,502          5.88
                                                     
Total                           26,341,946  14.81%            10,121,003         20.24





These three New Concert Parties are separate concert parties, for the purposes
of the City Code but are not acting in concert with each other.



Accordingly, immediately following Completion, none of the Oxford University
Concert Party nor the Other Vendors Concert Party will hold more than 30 per
cent. of the Enlarged Issued Share Capital.



Therefore, so long as the interests of each of the separate Oxford University
Concert Party the Other Vendors Concert Party (as outlined above) does not reach
or exceed 30 per cent or more of the voting rights of the Company, the
individual members of each such New Concert Party may acquire and dispose of New
Ordinary Shares without triggering a Rule 9 obligation.





INFORMATION ON THE CONTINUING BOARD



Details of the Continuing Board are set out below.



Existing Directors

Michael Bretherton (Aged 52) Executive Director

Michael Bretherton graduated with a first class degree in Economics from
University of Leeds in 1978. He worked as an accountant and manager with
PriceWaterhouse for seven years in both London and the Middle East before
joining The Plessey Company Plc in 1985 as a corporate financial manager.
Michael was appointed finance director of the fully listed Bridgend Group Plc in
1988 where he was involved in the strategic evaluation and commercial
implementation of a broad range of business initiatives over a twelve year
period, including acquisitions, disposals and company restructurings. He
subsequently worked at the

property and services company, Mapeley Limited, as financial operations director
until he was recruited to the entertainment software games developer, Lionhead
Studios Limited, in 2002 where he helped to complete a venture capital syndicate
funding and also a trade sale of the business to Microsoft in 2006. Michael
Bretherton is currently a director of Ora.



David Norwood (Aged 39) Non Executive Chairman

David Norwood is the founder and special projects director of IP Group plc, a
company focused on the commercialisation of research and intellectual property
from universities. David graduated in modern history from Keble College,
University of Oxford following which he worked as a foreign exchange trader at
Bankers Trust and then as an investment analyst at Duncan Lawrie. In 1997 he
joined Williams de Broe to advise quoted and unquoted technology companies.
David founded IndexIT Partnership in 1999, a technology advisory boutique which
was subsequently acquired by Beeson Gregory Group Plc, at which time he joined
the board of Beeson Gregory and was appointed chief executive at the beginning
of 2001. David joined the board of The Evolution Group Plc following its merger
with Beeson Gregory in July 2002 and then became chief executive (now special
projects director) of IP Group Plc (formerly IP2IPO Group plc) when it was
admitted to AIM in October 2003 and subsequently transferred to the Official
List. Finally, David is a currently a director of several other AIM quoted
companies.



Proposed Directors

Marcelo Bravo (Aged 48) Chief Executive Officer

Marcelo Bravo has a background in chemistry and chemical engineering and
business development experience with major blue-chip companies. Marcelo worked
for the Procter & Gamble company for 16 years commencing in 1983 and
subsequently with Boots (now Boots Alliance Plc) for three years commencing in
2000 in various operational and strategic roles and has significant experience
in developing, launching and growing new products and services across a range of
both geographic and product markets. Marcelo is also an experienced entrepreneur
having founded two start up businesses in the past 15 years. He is currently a
director of Super Foods Ltd, a company he founded. Marcelo holds a B.A. in
Chemistry from the College of Wooster, USA and a B.Sc. in Chemical Engineering
from Case Western Reserve University, USA and M.Sc. in Management from the
London Business School.



Jeremy Scudamore (Aged 60) Non Executive Chairman

Jeremy Scudamore worked for ICI, Zeneca, AstraZeneca, and Avecia for 35 years in
a number of senior positions, latterly as chairman and chief executive of the
Avecia Group and previously as chief executive of Zeneca Specialties, managing
director of Zeneca Seeds, business director of Zeneca Agrochemicals, and has
held various general manager and international roles including Zeneca Group
regional executive for Eastern Europe and general manager in Brazil. Jeremy was
educated at Nottingham University and INSEAD, France. Currently Jeremy is non
executive chairman of SkyePharma plc, non executive director of Oxford Catalysts
Group plc, Stem Cell Sciences plc, and ARM Holdings plc, director of The Board
Link Group, chairman of England's North West Science Council and board member of
Manchester Knowledge Capital.



Dr Mark Moloney (Aged 48) Non Executive Director

Dr Mark Moloney, one of the founders, provides technical counsel on a
consultancy basis and is a Non-executive Director. Mark is an internationally
recognised lecturer in organic chemistry at the University of Oxford where he
was appointed in 1990, and he was promoted to Reader in Chemistry in 2006. Mark
has over 115 publications, including research articles, books and patents, and
has been involved in organic synthesis research for twenty-five years. His main
areas of interest are the synthesis of chemical compounds with antibiotic,
cytotoxic or neuroexcitatory activity; the development of new chemical
methodology; and the surface modification of polymers. Much of Mark's research
work has been conducted in collaboration with industry, including
GlaxoSmithKline, AstraZeneca, Merck, Sharp and Dohme and Associated Octel.



Dr Andrew Naylor (Aged 35) Non Executive Director

Dr Andrew Naylor has had extensive experience with university spin-out companies
in a number of roles. Andrew is currently Chief Executive Officer of Pembroke
House Technologies Limited, an intellectual property commercialisation company
based in Oxford. Andrew was with IP Group plc from 2001 to 2007 and prior to
that he was with IndexIT Partnership Limited and Beeson Gregory. Andrew received
a first class degree and PhD in Physics from the University of Nottingham.



INFORMATION ON SENIOR MANAGEMENT OF THE ENLARGED GROUP



Prof. Peter Dobson (Aged 65) Consultant and Chief Scientific Adviser to Solar
Labs

Prof. Peter Dobson has extensive experience in sustainable energies including
solar energy. He was appointed to a university lectureship and college
fellowship at Queen's College, University of Oxford in 1988 and a Professorship
in 1996. Prior to this he lectured in Physics at Imperial College and was senior
principal scientist at Philips Research laboratories. At the University of
Oxford, Prof. Dobson is responsible for setting up new interdisciplinary
research institutes that combine University activities with commercial R&D. One
of these research institutes will be devoted to sustainable energy. Prof. Dobson
has been responsible for two university spinouts, Oxonica Plc and Oxford
Biosensors Limited. Oxonica Plc is an AIM listed company. He also serves on
advisory committees of several companies that have been 'spun out' of the
University of Oxford.



Dr Jon-Paul Griffiths (Aged 29) Chief Technical Officer to the Company

Dr Jon-Paul Griffiths is a co-founder of OAS and is a key employee of OAS.
Jon-Paul, has a background in organic materials and has researched the coating
of polymers for approximately three years with Dr Mark Moloney at Oxford.
Jon-Paul obtained his Masters degree in Chemistry at The Nottingham Trent
University in 2000. He completed a Ph.D. in novel organic materials at The
Nottingham Trent University in 2005. Jon-Paul received a university merit award
at the University of Oxford in recognition of outstanding performance and is a
member of the Royal Society of Chemistry.



DETAILS OF THE PROPOSED DIRECTORS' SERVICE CONTRACTS AND LETTERS OF APPOINTMENT



Marcelo Bravo has entered into a service agreement with the Company, dated 12
December 2007, under which he agrees, subject to and with effect from Admission,
to act as Chief Executive Officer of the Company. The service agreement may be
terminated on not less than twelve months notice given by either party to the
other at any time. The service agreement contains provisions for early
termination, inter alia, in the event of a breach by Marcelo Bravo, payment in
lieu of notice and garden leave. Confidentiality provisions and post termination
restrictions are also included. Restrictions regarding non-solicitation of and
non-dealing with customers are for a period of 12 months, and restrictions
regarding non competition and non solicitation of staff are for 6 months.
Marcelo Bravo will be paid an annual salary of £70,000 to be reviewed annually
(without any obligation to increase the same).



Jeremy Scudamore has entered into a letter of appointment with the Company,
dated 12 December 2007. His appointment, which is subject to Admission, is for
an indefinite period and may be terminated on not less than three months notice
given by either party to the other at any time. The letter of appointment
contains provisions for early termination, inter alia, in the event of a breach
by Jeremy Scudamore. The basic fee payable to Jeremy Scudamore is £25,000 per
annum to be reviewed annually (without any obligation to increase the same).



Dr Mark Moloney has entered into a letter of appointment with the Company, dated
12 December 2007. His appointment, which is subject to Admission, is for an
indefinite period and may be terminated on not less than three months notice
given by either party to the other at any time. The letter of appointment
contains provisions for early termination, inter alia, in the event of a breach
by Mark Moloney. The basic fee payable to Mark Moloney is £22,000 per annum to
be reviewed annually (without any obligation to increase the same).



Andrew Naylor has entered into a letter of appointment with the Company, dated
12 December 2007. His appointment, which is subject to Admission, is for an
indefinite period and may be terminated on not less than three months notice
given by either party to the other at any time. The letter of appointment
contains provisions for early termination, inter alia, in the event of a breach
by Andrew Naylor. The basic fee payable to Andrew Naylor is £25,000 per annum to
be reviewed annually (without any obligation to increase the same



LOCK IN AGREEMENTS



The OAS Vendors who following Admission, will be interested, in aggregate, in
77,539,907 New Ordinary Shares, representing 43.58 per cent. of the Enlarged
Issued Share Capital, have each undertaken to the Company and ZAI that they will
not, save in certain limited circumstances, (namely (a) as permitted by the AIM
Rules and (b) in order to meet warranty claims under the Acquisition Agreement),
sell or dispose of any interest in New Ordinary Shares held by them on Admission
for a period of fifteen months following Admission, and that, for a further
period of nine months, they will only dispose of any interest in such New
Ordinary Shares through Hichens Harrison & Co. Plc ('Hichens') (or the Company's
broker from time to time) in accordance with Hichens' (or the relevant broker's)
requirements for the maintenance of an orderly market in the New Ordinary
Shares.



In addition, each of Ora Capital Partners plc ('Ora'), David Norwood, Richard
Griffiths and Alan Aubrey who will, on Admission, be interested, in aggregate,
in 70,525,008 New Ordinary Shares (including the New Ordinary Shares subscribed
by Ora pursuant to the Subscription), representing 39.64 per cent. of the
Enlarged Issued Share Capital of the Company, have each undertaken to the
Company and ZAI not to dispose of the same for a period of (a) fifteen months
following Admission save as permitted by the AIM Rules and (b) then for a
further nine months thereafter only in accordance with Hichens' (or the relevant
broker's) requirements for the maintenance of an orderly market in the New
Ordinary Shares.



Finally, each of the Michael Bretherton and Andrew Naylor (as those members of
the Continuing Board, Directors and Proposed Directors who are not listed in the
above two paragraphs), who will, on Admission, be interested, in aggregate, in
1,283,219 New Ordinary Shares (including those shares which may be issued on the
exercise of options over New Ordinary Shares to be granted at Admission),
representing 0.72 per cent. of the Enlarged Issued Share Capital of the Company,
have each undertaken to the Company and ZAI not to dispose of the same for a
period of (a) fifteen months following Admission save as permitted by the AIM
Rules and (b) then for a further nine months thereafter only in accordance with
Hichens' (or the relevant broker's) requirements for the maintenance of an
orderly market in the New Ordinary Shares.



DETAILS OF THE SUBSCRIPTION



Ora has conditionally agreed to subscribe for a total of 12,000,000 New Ordinary
Shares (the 'Subscription Shares') at 25 pence per Subscription Share to raise
£3 million, before expenses of approximately £0.4 million. The Subscription
Shares will represent, in aggregate, approximately 6.74 per cent. of the
Enlarged Issued Share Capital. The Subscription Shares will be issued credited
as fully paid and will, upon issue, rank pari passu in all respects with the New
Ordinary Shares then in issue, including all rights to receive all dividends and
other distributions declared, made or paid following Admission. The Subscription
has not been underwritten or guaranteed.



The Subscription is conditional, inter alia, on the Introduction Agreement
between the Directors, the Proposed Directors and ZAI dated 12 December 2007
becoming unconditional (save for any condition as to Admission) on or before 31
December 2007 (ors such later time as Ora and the Company may agree, subject to
the date for completion of the Introduction Agreement also being extended by
such similar period).



USE OF PROCEEDS



The proceeds of the Subscription will be used to provide the funds needed by the
Enlarged Group in order to develop and grow the existing businesses and provide
funding for future businesses in line with its revised business and investment
strategy.



WORKING CAPITAL



The Directors and Proposed Directors, having made due and careful enquiry and
taking into account the proceeds of the Subscription and existing cash resources
available to the Enlarged Group, are of the opinion that the Enlarged Group will
have sufficient working capital available to it for its present requirements,
being for at least 12 months from Admission.



SHARE CONSOLIDATION



The Company proposes to consolidate its existing share capital on the basis of 1
(one) New Ordinary Share of 1 pence each for every 10 (ten) existing Ordinary
Shares of 1 pence each ('Existing Ordinary Shares'). Shareholders on the
register of members of the Company at the close of business on the date of the
GM (the 'Record Date') shall receive 1 (one) New Ordinary Share for every 10
(ten) Existing Ordinary Shares. The Share Consolidation is to become effective
on the Record Date.



The Directors and Proposed Directors believe that the Share Consolidation will
be beneficial to the Company as it may facilitate trading in, increase liquidity
and potentially reduce the volatility of the price of the New Ordinary Shares on
AIM. Other than the change in nominal value, the New Ordinary Shares arising on
implementation of the Share Consolidation will have the same rights as the
Existing Ordinary Shares, including voting, dividend and other rights.



No shareholder of the Company shall be entitled to receive a fraction of a New
Ordinary Share and where, as a result of the Share Consolidation, any
Shareholder is entitled to a fraction of a New Ordinary Share in respect of
their holding of Ordinary Shares at the Record Date (a 'Fractional Shareholder')
such fractions shall be aggregated with the fractions of New Ordinary Shares to
which other Fractional Shareholders of the Company may be entitled so as to form
full New Ordinary Shares and shall be sold for the benefit of the Fractional
Shareholder.



Any shareholder of the Company not holding a number of Existing Ordinary Shares
which is exactly divisible by 10 on the Record Date will be entitled to receive
the proceeds of this sale in respect of his fractional entitlement. The
Continuing Board shall be authorised to sell New Ordinary Shares arising from
fractional shareholdings on behalf of the Fractional Shareholders in the market
as soon as reasonably practicable following the passing of relevant resolution
at the GM for the best price then reasonably available for such shares.



The proceeds of such sale (net of all costs and expenses) will then be
distributed to the Fractional Shareholders in proportion to the fractions of New
Ordinary Shares held by each of them. However, any cash proceeds of less than £3
will not be distributed to Fractional Shareholders but will be retained for the
benefit of the Company. In view of the current share price, the Directors and
Proposed Directors do not believe that the due proportion of the proceeds of the
sale of any fractional entitlements will amount to £3 and consider it unlikely
that any sums will be paid to the Shareholders concerned.



Furthermore, the Directors and Proposed Directors have calculated that two New
Ordinary Shares will be derived from the Share Consolidation, and have made
arrangements for Ora to acquire those shares, under the Fractional Entitlement
Purchase, at 25p per share.



If a shareholder holds a share certificate in respect of an Existing Ordinary
Share, the certificate will no longer be valid from the time the proposed Share
Consolidation becomes effective. If a shareholder holds 10 or more Existing
Ordinary Shares at the Record Date, such shareholder shall be sent a new share
certificate evidencing the New Ordinary Shares that such shareholder is entitled
to under the Share Consolidation. Such certificates are expected to be
despatched no later than 7 days after Admission. Upon receipt of the new
certificate, shareholders should destroy any old certificates. Pending the
despatch of new certificates, transfers of certificated New Ordinary Shares will
be certified against the Company's share register.



CHANGE OF NAME



It is proposed that the name of the Company be changed to Oxford Advanced
Surfaces Group Plc. A special resolution will be proposed at the GM in order to
approve this.



DIVIDEND POLICY OF THE ENLARGED GROUP



It is the intention of the Continuing Board to achieve shareholder capital
growth. In the short term, the Continuing Board intends to reinvest any future
profits in the Company and, accordingly, are unlikely to declare dividends in
the foreseeable future. However, the Continuing Board will consider the payment
of dividends out of distributable profits of the Company when they consider it
is appropriate to do so.



Contact


Michael Bretherton - Kanyon Plc                                                              020 7099 7262


David Galan/Jonathan Evans  - Zimmerman Adams International (Nominated                       020 7060 1760
Adviser)







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