Last checked at 2 Jul 2009 07:00
Hardide plc ('Hardide' or 'the Company')
Notice of General Meeting, Fundraising, Share Reorganisation and Grant of Options
The Board of Hardide (AIM: HDD), the provider of unique metal surface engineering technology, is pleased to announce it has raised, subject to shareholder approval and certain other conditions, £2,566,200 (before expenses) via a Fundraising. The net proceeds will fund working capital needs and also allow further development of the Company's diamond coating technology, as well as enhancement of market development in the USA.
Further to the announcement of 1 May 2009 the Board has now completed its strategic review via the Fundraising and is not currently seeking a trade sale.
A circular to shareholders has been posted convening a General Meeting of the Company to seek shareholder approval for each of the Resolutions.
A full copy of the circular is available on the Company's website: www.hardide.com and a summary of the key points are set out below.
For further information:
| Hardide plc | |
| Graham Hine, Chief Executive Officer Jackie Robinson, Head of Communications | Tel: +44 (0) 1869 353 830 |
| jrobinson@hardide.com | www.hardide.com |
| Seymour Pierce Limited | |
| Nicola Marrin, Corporate Finance | Tel: +44 (0) 20 7107 8000 |
| nicolamarrin@seymourpierce.com | www.seymourpierce.com |
The Fundraising
The Company proposes to raise approximately £2,566,200 (before expenses). The new capital raised will fund working capital needs and allow the continuation of development of the Company's applications, including its diamond coating technology, as well as enhancement of market development in the USA.
A number of Shareholders and new investors have agreed to subscribe under the Placing for a total of 311,066,667 New Ordinary Shares at an issue price of 0.3 pence per share. Pursuant to the terms of the Placing Agreement, Seymour Pierce, as agent for the Company, has agreed conditionally to use reasonable endeavours to procure subscribers for the Placing Shares at the Placing Price. The Placing Agreement is conditional upon, amongst other things, the Resolutions being duly passed at the Meeting and Admission becoming effective on or before 8.00 a.m. on 20 July 2009 (or such later time and/or date as the Company and Seymour Pierce may agree, but in any event no later than 8.00 a.m. on 7 August 2009). The Placing Agreement contains provisions entitling Seymour Pierce to terminate the Placing Agreement at any time prior to Admission in certain circumstances. If this right is exercised, the Placing will not proceed. The Placing has not been underwritten by Seymour Pierce.
One other existing Shareholder has agreed (subject to certain conditions) to provide £633,000 in the form of a loan note with a coupon of 8 per cent. and convertible into New Ordinary Shares at a conversion price of 0.45 pence per share, representing a 50 per cent. premium to the Placing Price. The conversion price of the Existing Loan Note, which was also provided by this Shareholder, is to be reduced from 4.5p per share to 0.45p per share, representing a 50 per cent. premium to the Placing Price. Certain other terms of the Existing Loan Note are to be amended to conform to the terms of the New Loan Note. The maximum aggregate number of New Ordinary Shares that the New Loan Note and the Existing Loan Note can be converted into is 190,666,667 New Ordinary Shares.
In addition, two Shareholders, Boyce Investments Limited and Mrs M D Badenoch, each of whom have previously made loans of £500,000 each to the Company, have both agreed (subject to certain conditions) to convert their loans into New Ordinary Shares at the Placing Price. They have also agreed (subject to certain conditions) to reduce the exercise price for the associated option agreements (the "Option Agreements"), each to subscribe for 4,166,667 Ordinary Shares, from 9p per share to 0.45p per share, representing a 50 per cent. premium to the Placing Price, and to extend the exercise period until the third anniversary of the Fundraising. The Directors, having consulted with Seymour Pierce, the Company's nominated adviser, consider the terms of the conversion and the new option terms to be fair and reasonable insofar as shareholders are concerned.
The Directors of Hardide are also taking part in the placing and subscribing for a total of £135,000 as follows:
Cash amount Number of
Name Position subscribed Placing Shares
Graham Hine CEO £30,000 10,000,000
Yuri Zhuk Technical Director £5,000 1,666,667
Peter Davenport Finance Director £5,000 1,666,667
William Zakroff Non-Executive Director £5,000 1,666,667
Hugh Smith Non-Executive Director £80,000 26,666,667
Robert Goddard Chairman £10,000 3,333,333
As all of the Directors are participating in the Fundraising and thus there are no independent Directors, Seymour Pierce, the Company's nominated adviser, has reviewed the terms on which the above Directors are participating in the Fundraising and on the grounds that they are participating on the same terms as all of the other placees, consider such terms to be fair and reasonable insofar as shareholders are concerned.
Share Re-organisation
The nominal value of the Existing Ordinary Shares is currently £0.01 per share. As a matter of English law, the Company is unable to issue the Placing Shares at a Placing Price which is below their nominal value. It is therefore proposed to sub-divide the entire existing authorised share capital, both issued and to be issued, consisting of 250,000,000 Ordinary Shares of £0.01 each. Each Existing Ordinary Share will be sub-divided into one New Ordinary Share of £0.001 each and one Deferred Share of £0.009 each, thus enabling the Company lawfully to implement the Placing at the Placing Price. The aggregate nominal value of the Company's authorised share capital immediately after this alteration is approved by Shareholders will remain the same, but it is intended, as indicated below, then to seek approval to increase the Company's authorised share capital to permit the Placing to occur.
The rights attached to the New Ordinary Shares will be substantially the same as the rights attached to the Existing Ordinary Shares. The lower nominal value of the New Ordinary Shares will allow the Placing to proceed. The Deferred Shares will, as their name suggests, have very limited rights which are deferred to the New Ordinary Shares and will effectively carry no value as a result. Accordingly, the holders of the Deferred Shares will not be entitled to receive notice of, attend or vote at general meetings of the Company; nor be entitled to receive any dividends or any payment on a return of capital until at least £10,000,000 has been paid on each New Ordinary Share. No application will be made for the Deferred Shares to be admitted to trading on AIM.
The Company will also be given power to arrange for all the Deferred Shares to be transferred to a custodian or to be purchased for nominal consideration only without the prior sanction of the holders of the Deferred Shares. It is the current intention of the Directors to exercise this power within a reasonable period after the passing of the Resolutions so that the Shareholders in the Company will, as now, hold only Ordinary Shares in the Company. It is not intended therefore to issue share certificates for the Deferred Shares.
Existing options will be unaffected by the Share Re-organisation, save that the Ordinary Shares to be issued on the exercise of such options will be New Ordinary Shares. In the case of EMI options granted under the Company's Enterprise Management Incentive Scheme, the confirmation of HMRC will be applied for, such that options granted as EMI options will retain their tax approved status and that no adjustment will be required to the exercise price payable under the options as part of the Share Re-organisation. However, please see further the section below in relation to the grant of New Options to employees.
No new certificates for the New Ordinary Shares will be dispatched if the Share Re-organisation becomes effective. Instead, on the date the Share Re-organisation is due to become effective, a letter confirming that the Share Re-organisation has become effective will be sent to Shareholders holding New Ordinary Shares in certificated form. If any Shareholder wishes to receive a replacement certificate for New Ordinary Shares he should send his certificate in respect of his holding of Existing Ordinary Shares to the Company's registrars, Capita Registrars, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU and the registrars will then issue to the Shareholder a replacement certificate for New Ordinary Shares.
If the Share Re-organisation becomes effective, then, prior to the commencement of dealings in the New Ordinary Shares on AIM, the appropriate stock account in CREST of the relevant shareholder will be credited with such person's entitlement to New Ordinary Shares and the relevant holding of the Existing Ordinary Shares will be cancelled. The New Ordinary Shares are expected to be eligible to be traded through the CREST system with effect from the date of commencement of dealings on AIM.
Grant of New Options to employees
The Board wishes to continue to incentivise employees and the Remuneration Committee has resolved to offer certain of its employees and directors new share options at an exercise price of 0.45p or the market price of the shares at the date of grant, whichever is the higher (the "Exercise Price") 0.45p represents a 50 per cent. premium to the Placing Price. It is proposed that a proportion of each of the grants will vest over 3 years and the balance of the grants will vest according to performance criteria to be established by the Remuneration Committee. Options will be exercisable after vesting at any time until the tenth anniversary of grant. In the event of an acquisition of the Company, employees holding options may exercise any vested options.
Employees holding existing share options under the Company's EMI Scheme will be offered the opportunity to exchange their existing share options over Existing Ordinary Shares for options over the same number of New Ordinary Shares, but exercisable at the Exercise Price in which case their existing share options would be cancelled.
The number of New Ordinary Shares over which options may be granted to employees, or exchanged for existing options, on any date is limited so that the total number of shares issued or capable of being issued in a ten-year period under all employee share option schemes adopted by the Company shall not exceed 10 per cent. of the sum of Company's Diluted Ordinary Share capital from time to time.
If all of the employees concerned take up the offer of New Options, on completion of the Fundraising, the total number of share options granted to employees and directors will be equivalent to approximately 7.2225 per cent. of the Diluted Share Capital or 9.6421 per cent. of the issued share capital immediately following completion of the Placing. As a percentage of the Diluted Share Capital, the number of options granted to individual directors and other employees after the passing of the resolutions at this general meeting will be as follows:
Peter Davenport 0.7500%
Robert Goddard 0.6000%
Graham Hine 2.7914%
Yuri Zhuk 0.7500%
Other Employees 2.3311%
The Remuneration Committee intends that the grant of the new share options and the exchange of the existing share options for new share options as detailed above shall take place on or around the date of the Fundraising.
Recommendation
The Directors believe that the Fundraising and the Resolutions to be proposed at the Meeting are in the best interests of the Company and Shareholders as a whole and unanimously recommend that you vote in favour of the Resolutions, to enable the Fundraising, as they intend to do in respect of their own beneficial holdings of shares in the Company representing in total 4.80 per cent. of the current issued share capital.
Should the Resolutions not be approved at the Meeting, the Fundraising would not be able to be completed and, in the absence of alternative funding arrangements being made available, it is unlikely that the Company would be able to meet its financial obligations and may therefore be unable to continue to trade.
Meeting
The General Meeting will be held at the offices of Seymour Pierce Limited, 20 Old Bailey, London, EC4M 7EN on 17 July 2009 at 11.30 a.m.
Set out below are details of the Resolutions to be proposed at the Meeting and an explanation of the Resolutions:
| Resolution 1 | to effect the Share Re-organisation including the creation of the Deferred Shares; |
| Resolution 2 | to increase the authorised share capital of the Company from £2,500,000 to £4,000,000 by the creation of an additional 1,500,000,000 New Ordinary Shares; |
| Resolution 3 | to approve the changes to the Company's Articles of Association required to create the rights attaching to the New Ordinary Shares and the Deferred Shares and to authorise any technical variation of the rights of the Existing Ordinary Shares involved in the Share Re-organisation; |
| Resolution 4 | to grant the Directors authority for the purposes of section 80 of the Act to allot relevant securities up to an aggregate nominal value of £1,560,358 (1,560,357,764 New Ordinary Shares). This authority, which is over the balance of the unissued ordinary share capital as increased pursuant to Resolution 2, covers the issue of the Placing Shares, the granting of the conversion rights under the New Loan Note and under the amended Existing Loan Note, the Loan Conversion, the granting of New Options and the granting of options pursuant to the amended Option Agreements. The authority sought by Resolution 4 will last for a period of 15 months from the date of the passing of the Resolution or if earlier the date of the next Annual General Meeting; and |
| Resolution 5 | to disapply the statutory pre-emption rights contained in section 89 of the Act in connection with (i) the issue of the Placing Shares, (ii) the granting of the conversion rights under the New Loan Note and under the amended Existing Loan Note, (iii) the Loan Conversion, (iv) the granting of options pursuant to the amended Option Agreements, (v) the grant of the New Options, (vi) in respect of a rights issue and (vii) any other issue of equity securities for cash for up to approximately 15 per cent., of the Enlarged Ordinary Share Capital. The authorities sought by Resolution 5 will last for 15 months from the date of the passing of the Resolution or, if earlier, until the next Annual General Meeting. |
All the Resolutions are, for technical reasons, conditional on the other Resolutions being passed. Resolutions 1, 2 and 4 will be proposed as ordinary resolutions and Resolutions 3 and 5 as special resolutions.
The circular, which contains further and more detailed information, will be available on the website at www.hardide.com
Definitions as referred to above:
| "Act" | the Companies Act 1985 including any statutory modification or re-enactment of such Act for the time being in force and any provisions of the Companies Act 2006 for the time being in force |
| "Admission" | the admission of the New Ordinary Shares to trading on AIM becoming effective in accordance with the AIM Rules |
| "AIM" | AIM, a market operated by the London Stock Exchange plc |
| "AIM Rules" | the AIM Rules for Companies published by the London Stock Exchange plc from time to time |
| "Capita Registrars" | a trading name of Capita Registrars Limited |
| "City Code" | The City Code on Takeovers and Mergers |
| "Company" or "Hardide" | Hardide plc |
| "CREST" | the computerised settlement system (as defined in the CREST Regulations) operated by Euroclear UK & Ireland Limited which facilitates the transfer of title to shares in uncertificated form |
| "Deferred Shares" | deferred shares of £0.009 pence each in the capital of the Company following the passing of the Resolutions |
| " Diluted Share Capital" | the Enlarged Ordinary Share Capital plus the maximum number of New Ordinary Shares to be issued pursuant to the Option Agreements, upon conversion of the Existing Loan Note and the New Loan Note and pursuant to the exercise of the New Options |
| "Directors" or "Board" | the directors of the Company, whose names are set out on page 5 of the circular |
| "Enlarged Ordinary Share Capital" | the 834,042,236 New Ordinary Shares (including the Placing Shares) in issue immediately following Admission and the Loan Conversion |
| "Existing Issued Ordinary Shares" | the 189,642,236 Existing Ordinary Shares in issue at the date of this document |
| "Existing Loan Note" | the loan note of £225,000 issued by the Company in June 2008, the terms of which are to be amended, further details of which are set out on page 6 of the circular |
| "Existing Ordinary Shares" | ordinary shares in the capital of the Company, having a nominal value of £0.01 prior to the passing of the Resolutions |
| "Form of Proxy" | the form of proxy enclosed with this document for use in connection with the Meeting |
| "Fundraising" | the Placing, the Loan Conversion and the New Loan Note to raise approximately £2,566,200 before expenses |
| "Group" | the Company and its subsidiaries and subsidiary undertakings |
| "HMRC" | Her Majesty's Revenue and Customs |
| "Loan Conversion" | the conversion of loans totalling £1 million previously made to the Company, further details of which are set out on page 6 of the circular |
| "Meeting" | the general meeting of the Company convened for 11.30 a.m. on 17 July 2009, notice of which is set out at the end of this document of the circular |
| "Meeting Notice" | the notice convening the Meeting which is set out at the end of the circular |
| "New Loan Note" | a loan note of £633,000 to be issued by the Company, further details of which are set out on page 8 of the circular |
| "New Options" | Options (including any replacement options) over New Ordinary Shares to be granted to certain Directors and employees of the Company, further details of which are set out on pages 7 and 8 of the circular |
| "New Ordinary Shares" | ordinary shares in the capital of the Company having a nominal value of £0.001 following the passing of Resolutions |
| "Option Exercise Price" | 0.45 pence per New Ordinary Share |
| "Option Agreements" | shall have the meaning ascribed on page 7 of of the circular |
| "Ordinary Shares" | ordinary shares in the capital of the Company having a nominal value of £0.01 prior to the passing of the Resolutions set out in the Meeting Notice and following the passing of such Resolutions having a nominal value of £0.001 |
| "Placing" | the conditional placing by Seymour Pierce of the Placing Shares pursuant to the Placing Agreement |
| "Placing Agreement" | the conditional agreement dated 1 July 2009 between the Company and Seymour Pierce relating to the Placing |
| "Placing Price" | 0.3 pence per Placing Share |
| "Placing Shares" | the 311,066,667 New Ordinary Shares to be issued pursuant to the Placing |
| "Resolutions" | the resolutions set out in the Meeting Notice at the end of of the circular |
| "Seymour Pierce" | Seymour Pierce Limited |
| "Shareholders" | holders of Ordinary Shares |
| "Share Issuance Authorities" | the authorities proposed as Resolutions 4 and 5 set out in the Meeting Notice |
| "Share Re-organisation" | the share re-organisation proposed to be effected by Resolutions 1 to 3 set out in the Meeting Notice |