Nighthawk Energy Regulatory News (HAWK)

15 March 2017

Nighthawk Energy plc

("Nighthawk" or "the Company")

Approval of waiver of Rule 9 of the City Code

Notice of General Meeting

On 1 August 2016 the Company announced details of financing for the Arikaree Creek Water Flood Pilot Project ("Pilot Project") and the amendment of certain existing loan notes and facility agreements, further to which the Independent Directors are seeking the approval of Independent Shareholders of a waiver of the obligations on the part of Johan Claesson and the Concert Party to make a general offer to Shareholders under Rule 9 of the City Code which might otherwise arise upon the election, by such parties, for the share payment of deferred cash interest and/or royalty payments following the amendment to the terms of certain interest-paying loan notes and facility agreements. In the event that certain Noteholders/Lenders who are members of the Concert Party were to elect for share payment under the amended terms, this could trigger an obligation to make a general offer under Rule 9 of the City Code, and thus the Waiver is being sought. The Independent Directors are also seeking the approval of Shareholders for (i) the grant of authority to allot equity securities and (ii) the grant of authority to allot equity securities for cash other than in accordance with the statutory pre-emption rights in certain circumstances.

At the time of the Company's announcement on 1 August 2016, detailing financing for the Pilot Project and the amendment of certain existing loan notes and facility agreements, a concert party was deemed to exist comprising the current Concert Party members (as defined herein) together with Mr Peter Gyllenhammar, a substantial shareholder in the Company, and Mr Jan Borekull. Subsequently, following representations made by Mr Gyllenhammar and Mr Claesson, and with the agreement of the Panel and the Company, it has been agreed that Mr Gyllenhammar and Mr Borekull have been deemed to no longer be acting in concert with the Concert Party.

A circular is being posted to shareholders today, which includes a notice of General Meeting to be held on 5 April 2017 at 3.00 p.m., to explain the background to and reasons for the Waiver and to seek its approval, and to explain why the Independent Directors believe that the Waiver is in the best interests of the Company and its Shareholders as a whole and to recommend that Independent Shareholders vote in favour of the Resolutions to be proposed at the General Meeting

Those members of the Concert Party who are current Shareholders are not considered to be independent for the purposes of voting on the Resolution to approve the Waiver (the "Whitewash Resolution"), therefore only the Independent Shareholders (being all Shareholders other than those members of the Concert Party) are entitled to vote on the Whitewash Resolution. As Johan Claesson is a member of the Concert Party, he is not deemed to be an Independent Director for the purposes of considering the Waiver.

Shareholders are advised that in the event that the Whitewash Resolution and the Resolution to disapply statutory pre-emption rights are not passed, the Company will become further committed to fund approximate £0.43 million and $2.62 million (a total of approximately £2.58 million at prevailing exchange rates) lump sum payments to its Noteholders and Lenders within 91 days of 31 July 2017. The Board believes that this significant cash payment will further challenge the liquidity of the Company.

The Independent Directors, having been so advised by Stockdale, consider the Waiver to be fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. In providing its advice to the Independent Directors, Stockdale has taken into account the Independent Directors' commercial assessments.

Accordingly, the Independent Directors recommend that Independent Shareholders vote in favour of the Resolutions, as they have irrevocably undertaken to do in respect of their entire beneficial holdings amounting, in aggregate, to 3,291,500 Ordinary Shares, representing approximately 0.3% of the Existing Share Capital held by Independent Shareholders.

Johan Claesson is not considered to be independent for the purposes of considering the Whitewash Resolution, and is not participating as a Director in this recommendation to Independent Shareholders.

Enquiries:

Nighthawk Energy plc

Rick McCullough, Chairman +1 303 407 9600

Kurtis Hooley, Chief Financial Officer +44 (0) 20 3582 1350

Stockdale Securities Limited +44 (0) 20 7601 6100

Richard Johnson

David Coaten

Market Abuse Regulation (MAR) Disclosure

Certain information contained in this announcement would have been deemed inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 until the release of this announcement.

The distribution of this announcement in certain jurisdictions may be restricted by law. Persons outside of the UK into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities law of any such jurisdictions.

The following has been extracted from the Company's circular which is being published later today and will be available at www.nighthawkenergy.com:

1. "Introduction

On 1 August 2016 the Company announced details of financing for the Arikaree Creek Water Flood Pilot Project ("Pilot Project") and the amendment of certain existing loan notes and facility agreements, further to which the Independent Directors are seeking the approval of Independent Shareholders of a waiver of the obligations on the part of Johan Claesson and the Concert Party to make a general offer to Shareholders under Rule 9 of the City Code which might otherwise arise upon the election, by such parties, for the share payment of deferred cash interest and/or royalty payments following the amendment to the terms of certain interest-paying loan notes and facility agreements. In the event that certain Noteholders/Lenders who are members of the Concert Party were to elect for share payment under the amended terms, this could trigger an obligation to make a general offer under Rule 9 of the City Code, and thus the Waiver is being sought. The Independent Directors are also seeking the approval of Shareholders for (i) the grant of authority to allot equity securities and (ii) the grant of authority to allot equity securities for cash other than in accordance with the statutory pre-emption rights in certain circumstances. The purpose of this document is to explain the background to the Waiver and to seek your approval for the Resolutions being proposed at the General Meeting to be held at 3.00 p.m. on 5 April 2017 at the offices of Greenberg Traurig, LLP, The Shard, Level 8, 32 London Bridge Street, London SE1 9SG, notice of which is set out at the end of this document.

Those members of the Concert Party who are current Shareholders are not considered to be independent for the purposes of voting on the Resolution to approve the Waiver (the "Whitewash Resolution"), therefore only the Independent Shareholders (being all Shareholders other than those members of the Concert Party) are entitled to vote on the Whitewash Resolution. As Johan Claesson is a member of the Concert Party, he is not deemed to be an Independent Director for the purposes of considering the Waiver.

The purpose of this document is to explain the background to and reasons for the Waiver and to seek its approval. It is also to explain why the Independent Directors believe that the Waiver is in the best interests of the Company and its Shareholders as a whole and to recommend that Independent Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, notice of which is set out at the end of this document.

2. Background to and reasons for recommending the Waiver

Starting in December 2015, the Company was involved in negotiations with the Bank over an amendment to its existing loan arrangements. This negotiation was protracted because the Company's Pilot Project was not approved until 7 June 2016.

The Board believes the Bank is, and has been, supportive of the Company's development of the Pilot Project and recognises that the completion of the Pilot Project is key to the Company's improvement in operating cash flows and producing reserves. As the Company has previously disclosed, while the Pilot Project required State of Colorado regulatory approval, a process which began in October 2015, the Pilot Project did not obtain final regulatory approval until 7 June 2016 due to objections from certain non-cost bearing royalty interest owners. The Bank issued its proposal for a debt restructuring around the time of this regulatory approval and the Company reached an agreement on terms with the Bank and finalised the new Bank agreement on 29 June 2016.

As set out further below, the Bank agreement was subject to two conditions to be satisfied on or before 31 July 2016 and 31 August 2016, respectively. Satisfaction of these conditions and the provision of funding under the Bank agreement was critical in order for the Company's operational team to carry out the buildout of the Pilot Project.

Pilot Project

As first announced in October 2015, the Company made a filing seeking approval of its planned Arikaree Water Flood Project with the Colorado Oil and Gas Conservation Commission (the "COGCC"), the state oil and gas regulatory body. The filing was made to approve a new revenue sharing project in anticipation of increasing the Estimated Ultimate Recovery ("EUR") of oil from the field as well as accelerating the year by year production volumes. After a delay from the original hearing date, the COGCC heard the case in March 2016 and conditionally approved the project provided that the Company was able to obtain 80% of non-cost bearing royalty interest owners approval and a modified revenue sharing approach was used. This initial project encompassed the entire 1,240 acres of the Arikaree Creek field.

Efforts to obtain sufficient approvals from non-cost bearing royalty interest owners for the initial project was not going to be timely completed so in an effort to expedite the project, the Company filed an amendment to the original development plan, which reduced the size of the initial water flood area to approximately 600 acres in the southern portion of the Arikaree Creek field.

On 7 June 2016, the COGCC unconditionally approved the Pilot Project.

The original estimated Oil in Place ("OIP") for the Arikaree Creek field was approximately 16-17 million barrels of oil. This has been confirmed by the Company's internal and independent external engineers. The water flood development methodology is commonly used as part of a secondary recovery approach for maturing fields, or where the formation lends itself to accelerated recovery processes, such as is the case for Arikaree Creek. The Company's engineers have gathered extensive technical information and data during the Company's multi-year drilling program and this data was evaluated to support the Pilot Project's feasibility. The Board anticipates that, as the Pilot Project achieves expected results, the remaining acreage from the original water flood proposal could be developed fully.

The Company's engineers estimate that the southern acreage in the Pilot Project contains OIP of approximately 8.6 million barrels and believe that development of the water flood project could increase the project's EUR to between 30%-40% of the OIP. This would result in ultimate recoveries of oil of 2.6-3.4 million barrels from this area of the field. As at 31 January 2017, the Company had only produced approximately 0.5 million barrels from the acreage in the Pilot Project with approximately 0.4 million barrels of remaining recoverable using primary methods. The Board believes the Pilot Project has the potential of substantially increasing the existing booked reserves and could also accelerate total production, making the project highly attractive. At a capital cost of approximately $3.5 million to implement the Pilot Project, the Board believes it is one of the best courses of action the Company could pursue in the current oil and gas environment. In the Board's opinion, the financial enhancements that are possible through the execution of the Pilot Project are significant to the Company, and thus the debt restructuring, was critical to the future success of the Company.

The Company has commenced injection into both of the Pilot Project injection wells. It is anticipated that as the injected water fills existing pore volume, consistent with the normal nature of water flood projects, a measurable response will be seen. The Company expects this response to be during second quarter 2017. As such, the incremental volumes expected from the Pilot Project have not been included in the Company's audited Proved Developed Producing reserves, but remain as Probable Reserves at the 2016 year-end. Once adequate response and evidence is seen as to the response, the reserves are expected to begin being reclassified to Proved Developed Producing reserves.

Financing Arrangements

On 29 June 2016, the Company executed a new amendment to the existing facility agreement with the Bank that renewed the $23 million principal amount of the financing, reduced covenants and established a new interest rate. The amended facility agreement required the Company to meet two conditions. Firstly, the Company was required to complete an additional $3 million financing for the Pilot Project by 31 July 2016; secondly, existing unsecured Noteholders/Lenders were required, by 31 August 2016, to agree to defer all cash interest and royalty payments due to them until 31 July 2017.

On 1 August 2016, the Company announced that it had satisfied both of these conditions.

The deferral applied to interest and royalty payments on the following loan notes and facility agreements currently in issue:

- Interest on the 2013 Convertible Loan Notes

- Interest and royalties pursuant to the amended and restated FK Facility Agreement, originally dated 23 July 2013 (as amended)

- Royalty payments of 10% on profit sharing pursuant to the KF Facility Agreement dated 23 March 2013 (as amended)

as further described in paragraph 6 of Part III.

In return for accepting the interest and royalty deferral, the Noteholders/Lenders have been given the option, exercisable at their discretion, but subject to the condition below, to receive the deferred sums through either of two routes:

- Cash Payment: payment in cash of the deferred sums together with interest on those deferred sums applied at a rate equivalent to 15% per annum; or

- Share Payment: subject to the approval of the Waiver by the Independent Shareholders and the passing of the Resolution to dis-apply statutory pre-emption rights, through the issue of new Ordinary Shares, with the deferred sums converted at £0.01 per new Ordinary Share. No interest shall be applied to the deferred sums if the Share Payment option is exercised. This represents a premium of 18.3% based on closing price of 0.845 pence per share on 29 July 2016 (being the latest practicable date prior to the announcement made on 1 August 2016 relating to the Waiver).

If the Resolutions are not passed then the share payment option will not continue to exist, and the Company will be required to make approximate £0.43 million and $2.62 million (a total of approximately £2.58 million at prevailing exchange rates) cash payments to Noteholders and Lenders in September 2017. In the Board's opinion, the Company has limited working capital resources and the Shareholders should be aware that should the Company be required to make the cash payment in September 2017, this could have a significant negative effect on its available cash and working capital. The Independent Directors, therefore, support the approval of the Share Payment.

The maximum total deferred sums would be approximately £0.38 million and $2.28 million (a total of approximately £2.24 million at prevailing exchange rates). If the Noteholders or Lenders all elect to receive the deferred sums in Ordinary Shares, at the conversion rate of £0.01 per share and prevailing USD/GBP exchange rate of 1.22, this would equate to the issue of approximately 224.2 million new ordinary shares, or 18.9 per cent of the issued share capital as enlarged through the new share issue, assuming all deferred interest was taken as Share Payment and no further new Ordinary Shares were issued in the intervening period. If the Noteholders and Lenders all elect for the Cash Payment option, the total sums due by the Company would comprise approximately £0.38 million and $2.28 million, plus £0.06 million and $0.34 million interest on those sums at 15% per annum (a total of approximately £2.58 million at prevailing exchange rates.) 

As outlined below, these new arrangements involve Johan Claesson, the Company's largest shareholder and Board member, certain of his related companies who, together with his connected persons and Johan Damme, are deemed to be members of a Concert Party in relation to the Company.

2016 Loan Notes

Nighthawk has completed the new $3 million note financing for the Pilot Project with funding arranged in accordance with the new agreement with the Bank. The Company entered into this note agreement with two of its largest shareholders and two other investors:

- FABK, a company controlled by Johan Claesson, a Director & Concert Party member (invested $1.65m)

- The Union Discount Company of London Limited, a wholly owned subsidiary of Gyllenhammar Holding AB, a company controlled by Peter Gyllenhammar, a significant shareholder of the Company (invested $0.75m)

- Two other investors (invested a total of $0.6m)

In the case of the 2016 Loan Notes the debt is secured against the Company's U.S. subsidiary, NP LLC's existing assets, including its interests in oil, hydrocarbons and real estate. While the Bank retains a first lien on these assets, the Board believes that the parties recognise the growth in these assets associated with the development and operations of the Pilot Project and, accordingly, the Bank has agreed that the 2016 Loan Notes may take a second lien position in the assets. The 2016 Loan Notes bear interest at 15%, payable quarterly, and includes a 1% royalty interest, based upon production in excess of projected rates from the Company's Pilot Project.

The 2016 Loan Notes were executed on 29 July 2016. As part of this process, the Bank, the Noteholders and the Company have executed an Intercreditor Agreement that defines terms and rights between the parties and lien holders.

Amendment to the 2013 Convertible Loan Notes, the KF Facility Agreement, the FK Facility Agreement

The Noteholders of the 2013 Convertible Loan Notes and the Lenders under the FK Facility Agreement and the KF Facility Agreement, in respect of which the loans have been repaid, accepted amendments to the terms of their notes to defer interest and royalty payments on 29 July 2016. Under the amended KF Facility, royalty payments have been deferred from 1 April 2016 to 31 July 2017, with deferred royalty payments capped at $200,000. Under the amended FK Facility Agreement, interest and royalty payments have been deferred from 1 April 2016 to 31 July 2017, with deferred royalty payments capped at $75,000. Under the amended 2013 Convertible Loan Notes, the interest payable under the loan note has been deferred from 1 April 2016 until 31 July 2017. The deferral has been accepted in exchange for either cash plus accrued interest or (subject to the Whitewash Resolution and the Resolution to disapply statutory pre-emption rights having been passed) conversion into Ordinary Shares at a rate of £0.01 per share. The Noteholders may elect for payment either in cash or, subject to the Resolutions having been passed, conversion into Ordinary Shares.

Fifth Amendment to the Facility

Furthermore, pursuant to discussions with certain noteholders of the Company, a fifth amendment to the Facility was entered into on 29 June 2016. Under the fifth amendment, if the Bank proposes to assign all or a portion of its rights and obligations under the facility agreement to a proposed assignee, then prior to such assignment taking place, the Bank shall provide FABK a right of first refusal to acquire such rights and obligations.

3. Nighthawk Energy current POSITION

As reported within the Company's announcement dated 30 September 2016, through the first six months of fiscal year 2016 US markets saw a reduction in oil production As oil prices remained depressed as compared to prior year for the same period, which resulted in decreased revenues for the Company and a net loss of $4.1 million for the six months ended 30 June 2016 as compared to a net loss of $8.0 million for the six months ended 30 June 2015. The decrease in the net loss was due primarily to an exceptional administrative expense of $8.8 million in H1 2015 to impair certain producing assets.

The Company's 2016 operating and financial results have been in line with management's expectations. The Company has reduced its operating and administrative expenses and the Company's production continues to remain strong January 2017 as evidenced by the January 2017 production being approximately 43,595 gross (35,544 net) barrels as compared to December 2016 production of 35,985 gross (28,885 net) barrels. The Company believes this is due to continued oil enhancement projects implemented in the field and additional recoveries due to a natural water drive in the Arikaree Creek Field. The Company pursued the approval of the Pilot Project during 2015 and 2016 and obtained approval from the State of Colorado regulatory agency on 7 June 2016

As of 31 December 2016, the Company's cash balance was US$5.7 million, of which approximately US$1.2m is committed for expenditure on the Pilot Project. Total expenditures for the Pilot Project are estimated to total $3.5 million. Based upon current projections, the Company will have adequate cash reserves to maintain its current normal operating activities through 2017.

As the results of the Pilot Project become available during Q2 of 2017, these will provide critical data to enable the Board to evaluate the future position of the Company's reserves and production capability, together with capital requirements and availability. Once the results of the Pilot Project become available, the Board intends to evaluate the future potential strategic options available to the Company in its continuing effort to create and grow shareholder value at the most appropriate risks.

4. Information on the Concert Party

At the time of the Company's announcement on 1 August 2016, detailing financing for the Pilot Project and the amendment of certain existing loan notes and facility agreements, a concert party was deemed to exist comprising the current Concert Party members (as defined herein) together with Mr Peter Gyllenhammar, a substantial shareholder in the Company, and Mr Jan Borekull. Subsequently, following representations made by Mr Gyllenhammar and Mr Claesson, and with the agreement of the Panel and the Company, it has been agreed that Mr Gyllenhammar and Mr Borekull have been deemed to no longer be acting in concert with the Concert Party.

As set out in this document, in the absence of the Waiver and the passing of the Whitewash Resolution, under the City Code, Johan Claesson and the Concert Party would be obliged following election of a Share Payment to make an offer for the entire issued and to be issued share capital of the Company in which it does not have an interest.

Johan Claesson, Johan Damne and their connected persons are deemed to be members of a Concert Party in relation to the Company. Johan Damne is a director of KFAB, a company controlled by Mr Claesson, and also acts as Chief Executive Officer of Claesson & Anderzén AB, of which Johan Claesson is a 55.6% shareholder and Chairman.

Johan Claesson - Varvsuddsgatan 2, 39230, Kalmar, Sweden

Mr Claesson is domiciled in Kalmar, Sweden, and is the Chairman and controlling shareholder of Claesson & Anderzén AB, a Swedish investment group. He has been a Non-Executive Director of Nighthawk Energy plc since April 2014, and is also a director of Leeds Group plc and K3 Business Technology Group plc. Johan Claesson has extensive business interests, principally in property development and real estate, healthcare and IT. Johan Claesson holds his interests in the Company through three corporate entities, FABK, JMCAB and KFAB, and also as a direct interest in his own name.

Fastighetsaktiebolaget Korpralen

FABK, incorporated in Sweden under company number 556034-6032 and with registered address at Box 716, 391 27 Kalmar, Sweden, is a special purpose vehicle principally for investing in publicly quoted companies. The entire share capital of FABK is held by CA Fastigheter AB, which itself is a 100 per cent. subsidiary of Claesson & Anderzén AB. Johan Claesson holds 55.6 per cent. of the shares of Claesson & Anderzén AB. Both Johan Claesson and Johan Damne are directors of FABK.

In the year ended 31 December 2015, FABK earned revenue and profit after tax of approximately 0 SEK (2014: loss of 1,000 SEK) and 1.9 million SEK (2014: 20.6 million SEK) respectively, equivalent to approximately £0 and £0.2 million respectively at the date of publication of this document.

Johan och Marianne Claesson AB

JMCAB is a personal investment company with a primary focus on publicly quoted companies. JMCAB is incorporated in Sweden under company number 556358-6154 and with registered address at Box 716, 391 27 Kalmar, Sweden. Johan Claesson and his wife, Marianne Claesson, own 100 per cent. of JMCAB.

In the year ended 31 December 2015, JMCAB earned revenue and profit after tax of approximately 3.1 million SEK (2014: 4.9 million SEK) and 4.7 million SEK (2014: loss of 23.4 million SEK) respectively, equivalent to approximately £0.3 million and £0.4 million respectively at the date of publication of this document.

Kattrumpan Fastighets AB

KFAB, incorporated in Sweden under company number 556891-7909 and with registered address at Box 716, 391 27 Kalmar, Sweden is a special purpose vehicle principally for investing in Nighthawk Energy plc. The entire share capital of KFAB is held by CA Fastigheter AB, which itself is a 100 per cent. subsidiary of Claesson & Anderzén AB. Johan Claesson holds 55.6 per cent. of the shares in Claesson & Anderzén AB. The directors of KFAB are Johan Claesson and Johan Damne.

In the year ended 31 December 2015, KFAB earned revenue and profit/loss after tax of approximately 0 SEK (2014: 0 SEK) and 40,000 SEK (2014: 6.4 million SEK) respectively, equivalent to approximately £0 and £3,600 respectively at the date of publication of this document.

CA Fastigheter AB

CA Fastigheter AB, incorporated in Sweden under company number 556227-5700 and with registered address at Box 716, 391 27 Kalmar, Sweden, is principally a real estate investment company, with a focus on both residential and commercial properties. The company's properties amount to approximately 640,000m3 of lettable space. The entire share capital of CA Fastigheter AB is owned by Claesson & Anderzén AB. Johan Claesson holds 55.6 per cent. of the shares in Claesson & Anderzén AB. The directors of CA Fastigheter AB are Johan Claesson (Chairman), Magnus Claesson and Johan Damne.

In the year ended 31 December 2015, CA Fastigheter AB earned revenue and profit after tax of SEK 1 billion (2014: SEK 765 million) and SEK 530 million (2014: SEK 318 million) respectively, equivalent to approximately £90.9 million and £48.2 million respectively at the date of publication of this document.

The statutory accounts for the years ended 31 December 2014 and 31 December 2015 are available on the CA Fastigheter AB website - www.cafastigheter.se/Om_CA_Fastigheter/Finansiell_information (only available in Swedish).

Claesson & Anderzén AB

Claesson & Anderzén AB is incorporated in Sweden under company number 556395-3701 and with registered address at Box 716, 391 27 Kalmar, Sweden. Originally focused on the construction sector, the Group has been involved in a number of different business sectors including biochemistry, aircraft leasing, textiles and IT. Currently it also has investments in the finance, agriculture, oil and gas, and wind power sectors. Johan Claesson holds 55.6 per cent. of the shares in Claesson & Anderzén AB and is Chairman of the company. The other directors are Magnus Claesson, Johan Damne, Eje Wictorson, Leif Andersson and Anders Ek.

In the year ended 31 December 2015, Claesson & Anderzén AB earned revenue and profit after tax of 1.4 billion SEK (2014: 994 million SEK) and 787 million SEK (2014: 462 million SEK) respectively, equivalent to approximately £127.3 million and £71.5 million respectively at the date of publication of this document.

The statutory accounts for the years ended 31 December 2014 and 31 December 2015 are available on the Claesson & Anderzén AB website -

www.claessonanderzen.com/ca-group/financial-information (only available in Swedish)

Connected persons

In addition, the following persons are considered to be connected with Johan Claesson and are deemed members of the Concert Party:

Magnus Claesson - brother of Johan Claesson

Carlton Telecom AB - a company controlled by Magnus Claesson

Pernilla Claesson - daughter of Johan Claesson

Charlotte Claesson - daughter of Johan Claesson

Malin Claesson - daughter of Johan Claesson

Johan Stenstrom - partner of Mr Claesson's daughter

Marco Gonzalez - partner of Mr Claesson's daughter

Johan Damne - Mjölnaregatan 9, 39632, Kalmar, Sweden

Mr Damne, is domiciled in Kalmar, Sweden, and is currently the Chief Executive Officer of Claesson & Anderzén AB, an investment company controlled by Johan Claesson, with a focus on estate and other investments. Prior to this board position, Johan Damne had also held Chief Financial Controller, Chief Operating Officer and also Vice Chief Executive Officer positions at Claesson & Anderzén AB. Mr Damne is also a director of CA Fastigheter AB. Mr Damne holds his interest in the Company directly.

5. Intentions of the Concert Party

Each member of the Concert Party has confirmed on their own behalf, and on behalf of their families and any companies they control (as outlined in paragraph 4 above), that other than as described in this document, if the Whitewash Resolution is passed on a poll by Independent Shareholders, they are not intending to seek any changes to the general nature of the business of the Company, and do not intend to take any action to alter the deployment of the Company's fixed assets, the continued employment of the employees and management of the Company (including any material change in the conditions of employment), the pension rights of the employees, and the locations of the Company's places of business.

Each member of the Concert Party has confirmed on their own behalf, and on behalf of their families and any companies they control (as outlined in paragraph 4 above), that they have no intention of making a general offer for the Company, nor of causing the Company to cease to maintain any of the trading facilities in respect of the Ordinary Shares, and have confirmed that they have no intention of disposing of any interests in the Ordinary Shares outside the Concert Party.

6. Related Party TransactionS

The subscription for the 2016 Loan Notes and the amendment of the terms of the 2013 Convertible Loan Notes, the KF Facility Agreement and the FK Facility Agreement by Johan Claesson (and related companies) and Peter Gyllenhammar were considered related party transactions for the purposes of Rule 13 of the AIM Rules for Companies. On 1 August 2016, the Company notified that the independent directors, being the Directors other than Johan Claesson, having consulted with the Company's nominated adviser, Stockdale Securities Limited, considered the terms of the transactions to be fair and reasonable insofar as the Company's shareholders are concerned.

7. Waiver of Rule 9 of the City Code

Under Rule 9 of the City Code, when (i) a person acquires an interest in shares which, taken together with shares in which he and persons acting in concert with him are interested, carry 30% 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, is interested in shares which in aggregate carry not less than 30% of the voting rights of a company, but does not hold shares carrying more than 50% of the voting rights of the company subject to the City Code, and such person, or any persons acting in concert with him, acquires an interest in any other shares which increases the percentage of the shares carrying voting rights in which he is interested, then in either case, that person together with the persons acting in concert with him, is normally required to make a general offer in cash, at the highest price paid by him, or any persons acting in concert with him, for shares in that company or an interest in shares in that company within the preceding 12 months, for all the remaining equity share capital of that company.

Under the City Code, a 'Concert Party' arises, inter alia, when persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate, to obtain or consolidate control of that company. Under the City Code, control means an interest, or interests, in shares carrying in aggregate 30% or more of the voting rights of a company, irrespective of whether such interest or interests give de facto control. In this context, voting rights means all the voting rights attributable to the capital of the company which are currently exercisable at a general meeting.

The Board believes that approval of the proposed Waiver is in the Company's and the Shareholders best interest, and failure to support the Board's recommendation may jeopardise the ability of the Company to fully realize the potential of its existing assets when the required cash payment would be payable under the amended 2013 Convertible Loan Notes, the amended FK Facility Agreement and/or the amended KF Facility Agreement.

Under Note 1 of the Notes on the Dispensation of Rule 9, the Panel will normally waive the requirements for a general offer to be made in accordance with Rule 9 if, inter alia, the Independent Shareholders pass an ordinary resolution on a poll at a general meeting approving such a waiver.

The Panel has agreed, subject to Independent Shareholders' approval on a poll at the General Meeting, to waive the requirement for Johan Claesson and the Concert Party to make a general offer to all Shareholders where such an obligation would arise as a result of the Share Payment.

The Waiver granted by the Panel relates only to the Ordinary Shares issued in accordance with the Share Payment, and is conditional on the passing of the Whitewash Resolution (set out in the Notice of General Meeting) by Independent Shareholders of the Company on a poll.

Unless the Waiver is approved by Independent Shareholders, Johan Claesson and the Concert Party will not be able to have the option to convert his/its deferred interest and royalty payments into Ordinary Shares and the Company will be required to pay deferred interest and royalty payments in cash.

Maximum controlling position of the Concert Party

The Company has granted Noteholders of the 2013 Convertible Loan Notes and the Lenders under the KF Facility Agreement and the FK Facility Agreement with the option, at their election, but subject to passing the Waiver Resolution and the Resolution to disapply statutory pre-emption rights, to convert the unpaid cash interest and royalty payments on such notes/pursuant to such facility agreements payable from 30 April 2016 until 31 July 2017 into Ordinary Shares (converted at a £0.01 conversion price).

If the Resolutions are passed and the Concert Party takes their full share of new shares (and using the minimum exchange rate of $1 to £1 to determine the maximum number of shares available to them as specified in the terms of the amended 2013 Convertible Loan Notes, the amended KF Facility Agreement and the amended FK Facility Agreement and based on the maximum amount of deferred royalty payment as specified in the amended KF Facility Agreement and amended FK Facility Agreement) and no other Noteholders/Lenders take this share option and assuming that no other Ordinary Shares are issued from the date of this document up to that time, the Concert Party will then own 430,665,262 shares of voting Ordinary Shares representing approximately 35.5% of the total voting rights of the Company at that time. 

If the Resolutions are passed and Johan Claesson takes his full share of new shares (and using the minimum exchange rate of $1 to £1 to determine the maximum number of shares available to him as specified in the terms of the amended 2013 Convertible Loan Notes, the amended KF Facility Agreement and the amended FK Facility Agreement and based on the maximum amount of deferred royalty payment as specified in the amended KF Facility Agreement and amended FK Facility Agreement) and no other Noteholders/Lenders take this share option and assuming that no other Ordinary Shares are issued from the date of this document up to that time, Johan Claesson will then own 406,347,523 shares of voting Ordinary Shares representing approximately 33.6% of the total voting rights of the Company at that time. 

The above maximum controlling positions of the Concert Party and/or Johan Claesson have been calculated using a minimum exchange rate of $1 to £1, as specified in the terms of the amended 2013 Convertible Loan Notes, the amended KF Facility Agreement and the amended FK Facility Agreement. However, if the prevailing exchange rate of approximately $1.22 to £1 is used instead the maximum controlling positions of the Concert Party and/or Johan Claesson would be:

- For illustrative purposes only, if the Resolutions are passed and the Concert Party takes their full share of new shares (based on the prevailing exchange rate of approximately $1.22 to £1) and no other Noteholders/Lenders take this share option and assuming that no other Ordinary Shares are issued from the date of this document up to that time, the Concert Party will then own 389,615,968 shares of voting Ordinary Shares representing approximately 33.3% of the total voting rights of the Company at that time.

- For illustrative purposes only, if the Resolutions are passed and if Johan Claesson takes his full share of new shares (based on the prevailing exchange rate of approximately $1.22 to £1) and no other Noteholders/Lenders take this share option and assuming that no other Ordinary Shares are issued from the date of this document up to that time, Johan Claesson will then own 365,298,229 shares of voting Ordinary Shares representing approximately 31.2% of the total voting rights of the Company at that time.

8. General Meeting

Set out at the end of this document is a notice convening the General Meeting to be held on 5 April 2017, at the offices of Greenberg Traurig, LLP, The Shard, Level 8, 32 London Bridge Street, London SE1 9SG commencing at 3.00 p.m.

Resolution 1 - to approve the Waiver will be proposed as an Ordinary Resolution, to be taken on a poll of Independent Shareholders to approve the Waiver and requiring more than 50% of Independent Shareholders present in person or by proxy and exercising their vote, to vote in favour for it to be passed.

Resolution 2 - to grant the Directors authority to allot shares and grant rights to subscribe for or to convert any security into shares, will be proposed as an Ordinary Resolution, requiring more than 50% of the Shareholders present in person or by proxy and exercising their vote to vote in favour for it to be passed.

Resolution 3 - to grant to the Directors authority to allot equity securities for cash other than in accordance with the statutory pre-emption rights in certain circumstances will be proposed as a Special Resolution, and requiring 75% or more of Shareholders present in person or by proxy and exercising their vote, to vote in favour for it to be passed.

The Directors are seeking authority to allot Ordinary Shares up to a maximum amount of £863,207, which will be in substitution for the authority granted at the recent Annual General Meeting. Of this amount, £663,207 is required in connection with the amendments to the 2013 Convertible Loan Notes, the FK Facility Agreement and the KF Facility Agreement.

In addition, the Directors are seeking power to allot additional Ordinary Shares up to a maximum nominal amount of £863,207 without first offering them to existing Shareholders. £663,207 is required in connection with the proposals set out in this document and the balance will enable the Company to raise capital quickly and easily when needed, and permit it to allot shares as consideration in a transaction, if so required.

9. Irrevocable undertakings

The Independent Directors and their related parties have irrevocably undertaken to vote in favour of the Resolution in respect of their aggregate shareholding of 3,291,500 Ordinary Shares, representing approximately 0.3% of the Existing Share Capital held by Independent Shareholders.

Further details of the irrevocable undertakings received by the Company are set out in paragraph 3 of Part III of this document.

10. Action to be taken

You will find enclosed with this document a Form of Proxy for use at the General Meeting.

Whether or not Shareholders propose to attend the General Meeting in person, it is important that Shareholders complete and sign the enclosed Form of Proxy in accordance with the instructions printed thereon and return it to the Company's Registrars, Capita Asset Services, at PXS, 34 Beckenham Road, Kent, BR3 4TU, as soon as possible and, in any event, so as to be received not later than 3.00 p.m. on 3 April 2017.

The completion and return of a Form of Proxy will enable you to vote at the General Meeting without having to be present in person but will not preclude you from attending the General Meeting and voting in person if you so wish. If a Shareholder has appointed a proxy and attends the General Meeting in person, his proxy appointment will automatically be terminated and his votes in person will stand in its place.

If you hold Ordinary Shares in CREST, you may appoint a proxy by completing and transmitting a CREST Proxy Instruction to Capita Asset Services so that it is received no later than 3.00 p.m. on 3 April 2017.

11. Recommendation

In the absence of alternative funding sources to meet the remainder of the debt restructuring programme negotiated with the Bank, the Board believe the Company has secured the best terms available from its Noteholders and Lenders.

Shareholders are advised that in the event that the Whitewash Resolution and the Resolution to disapply statutory pre-emption rights are not passed, the Company will become further committed to fund approximate £0.43 million and $2.62 million (a total of approximately £2.58 million at prevailing exchange rates) lump sum payments to its Noteholders and Lenders within 91 days of 31 July 2017. The Board believes that this significant cash payment will further challenge the liquidity of the Company.

The Independent Directors, having been so advised by Stockdale, consider the Waiver to be fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. In providing its advice to the Independent Directors, Stockdale has taken into account the Independent Directors' commercial assessments.

Accordingly, the Independent Directors recommend that Independent Shareholders vote in favour of the Resolutions, as they have irrevocably undertaken to do in respect of their entire beneficial holdings amounting, in aggregate, to 3,291,500 Ordinary Shares, representing approximately 0.3% of the Existing Share Capital held by Independent Shareholders.

Johan Claesson is not considered to be independent for the purposes of considering the Whitewash Resolution, and is not participating as a Director in this recommendation to Independent Shareholders.

Yours faithfully,

Richard McCullough, Executive Chairman"

expected timetable of principal events

Each of the times and dates in the above timetable may be subject to change.

DEFINITIONS

The following definitions apply throughout this document, the Notice of General Meeting and the Form of Proxy unless the context otherwise requires:

All references to times in this document are to GMT unless otherwise stated. References to the singular shall include references to the plural, where applicable and vice versa.

Save where specifically required or indicated otherwise, words importing one gender shall be treated as importing any gender and words importing the singular shall be treated as importing the plural and vice versa. All references to legislation are to English legislation, unless the contrary is indicated, and any reference to any provision of any legislation includes any amendment, modification, re-enactment or extension thereof.