7 May 2008 16:31
Virotec International PLC07 May 2008 Not for release, publication or distribution, in whole or in part in, intoorfrom the United States of America or any of its territories, Canada, or Japan,or any other jurisdiction where to do so would constitute a violation oftherelevant laws of such jurisdiction. 7 May 2008 RECOMMENDED ACQUISITION by Hydrodec Group plc ("Hydrodec") of Virotec International plc ("Virotec") to be effected by means of a scheme of arrangement under sections 895 to 901 of the Companies Act 2006 Summary • The Hydrodec Independent Directors and the Virotec IndependentDirectors are pleased to announce that they have reached agreement on the termsof a recommended acquisition of the entire issued and to be issued share capitalof Virotec by Hydrodec. The Acquisition is to be effected by way of a scheme ofarrangement under sections 895 to 901 of the 2006 Act (the "Scheme"). • Under the terms of the Acquisition Virotec Shareholders (other than Restricted Overseas Persons) will be entitled to receive: For every Virotec Share held 13 pence in cash(up to a maximum of 20,000 Virotec (up to a maximum aggregateShares) amount of £2,600) And thereafter, for every 3.75 Virotec Shares held 1 New Hydrodec Share • The consideration under the Scheme is arranged such that theamount due in respect of the first 20,000 Virotec Shares held by each VirotecShareholder is payable in cash. However, a Share Alternative will be madeavailable to all Virotec Shareholders (other than Restricted Overseas Persons)who may elect, subject to certain limitations and conditions, to receive NewHydrodec Shares in lieu of the Cash Consideration to which they would otherwisebe entitled pursuant to the Scheme. • Based on the Closing Price of 54.75 pence per Hydrodec Share on6 May 2008 (being the last Business Day prior to this announcement), theAcquisition (assuming that all Virotec Shareholders validly elect to receive theShare Alternative) values each Virotec Share at approximately 14.6 pence and theentire issued share capital of Virotec at approximately £38.57 million. • The consideration payable under the Scheme values Virotec: (i) in respect of Virotec Shareholders who receive all of their consideration incash, at a premium of approximately: • 89.1 per cent. to the Closing Price of 6.875 pence per VirotecShare on 2 April 2008 (being the last business day prior to Hydrodec notifyingVirotec that it had acquired Virotec Shares); and • 57.4 per cent. to 8.258 pence per Virotec Share being theaverage Closing Price for the last 30 days trading before 2 April 2008; (ii) in respect of Virotec Shareholders who receive all of their considerationin New Hydrodec Shares, at a premium of approximately: • 112.4 per cent. to the Closing Price of 6.875 pence per VirotecShare on 2 April 2008 (being the last business day prior to Hydrodec notifyingVirotec that it had acquired Virotec Shares); and • 76.8 per cent. to 8.258 pence per Virotec Share being theaverage Closing Price for the last 30 days trading before 2 April 2008. • Subject to the Scheme becoming Effective, the consent of HydrodecShareholders to the Hydrodec Resolutions being obtained at the Hydrodec GeneralMeeting and the consent of Virotec Shareholders being obtained at the GeneralMeeting, it is proposed that the Executive Directors acquire for AUD$1 theentire share capital of the Operating Businesses of the Virotec Group. • Virotec owns 54.5 million shares in Hydrodec, representingapproximately 26.7 per cent. of Hydrodec's issued share capital, assumingcompletion of the Placing. Hydrodec intends to utilise these shares to satisfyallotments of new Hydrodec Shares in respect of the exercise of options underthe existing Hydrodec option scheme and/or the conversion of the HydrodecConvertible Loan Notes. The Hydrodec Convertible Loan Notes are not listed andare, in aggregate, convertible into approximately 72.63 million new HydrodecShares. • The Virotec Independent Directors, who have been advised byArden, consider that the terms of the Acquisition are fair and reasonable andintend unanimously to recommend the Acquisition to Virotec Shareholders. Inproviding their advice, Arden has relied upon the commercial assessments of theVirotec Independent Directors. • The Virotec Independent Directors and Justin Seager, who havebeen advised by Arden, consider that the terms of the Disposal are fair andreasonable in the context of the Acquisition so far as the Virotec Shareholdersare concerned. In forming their advice Arden has relied upon the commercialassessments of the Virotec Independent Directors and Justin Seager. • Irrevocable undertakings to vote (or procure the vote) in favourof the Scheme at the Court Meeting (or, if requested by Hydrodec to execute anagreement consenting to and undertaking to the Court to be bound by the Scheme)and the resolutions to be proposed at the General Meeting (other than as set outbelow) have been received from the following holders of, in aggregate,116,910,450 Virotec Shares representing approximately 44.26 per cent. of theexisting issued ordinary share capital of Virotec, being; • the holders (other than Virotec Directors) of 96,516,117 VirotecShares, representing approximately 36.54 per cent. of the existing issuedordinary share capital of Virotec; • the Virotec Independent Directors and Justin Seager in respectof their own aggregate beneficial holdings of 1,901,300 Virotec Shares,representing (as at the date of this announcement) approximately 0.72 per cent.of the existing issued ordinary share capital of Virotec; and • the Executive Directors in respect of their own aggregatebeneficial holdings of 18,493,033 Virotec Shares, representing (as at the dateof this announcement) approximately 7.00 per cent. of the existing issuedordinary share capital of Virotec. The Executive Directors will not vote on theresolution at the General Meeting relating to the Disposal. • In addition to the irrevocable undertakings, Hydrodec andpersons acting or deemed to be acting in concert with Hydrodec hold inaggregate, 8,803,998 Virotec Shares representing 3.33 per cent. of the existingissued share capital of Virotec, although these shares will not be available tobe voted at the Court Meeting. • It is expected that the Scheme Document, containing furtherdetails of the Acquisition and Disposal, will be dispatched on or around 12 May2008 and that the Scheme will become effective on, or shortly after, 25 June2008, subject, inter alia, to the satisfaction of the conditions set out inAppendix I to this announcement and to be set out in the Scheme Document. • Brian Sheeran and Bruno Bamonte, currently non-executivedirectors of Hydrodec, have agreed to step down from the board of Hydrodec uponthe Scheme becoming Effective. • Hydrodec is being advised by Ludgate and Numis and Virotec isbeing advised by Arden. Commenting on the Acquisition, John Gunn, Chairman of Hydrodec Group plc, said: "The Acquisition will enable Virotec Shareholders to participate directly inHydrodec's future growth potential. It will create a broader shareholder basefor the enlarged group and will have a substantial benefit on the future profitmargins of Hydrodec as the Hydrodec Board seeks to deliver on its plans forcreating a major international oil services company." Commenting on the Acquisition and Disposal, John Glynn, on behalf of theindependent non-executive directors of Virotec International plc, said: "The Acquisition represents an opportunity for Virotec Shareholders to receive asignificant premium to the share price prior to the announcement of sharepurchases by Hydrodec. The Scheme also provides Virotec Shareholders with adirect investment in the fast developing Hydrodec business as well as giving acash exit for smaller shareholders who might otherwise be constrained by dealingcosts." This summary should be read in conjunction with, and is subject to, the fulltext of this announcement and the Appendices to this announcement. Appendix Icontains the conditions to, and certain further terms of, the Acquisition andthe Scheme. Appendix II contains further details of the bases and sources ofinformation contained in this announcement. Appendix III contains furtherdetails relating to the irrevocable undertakings received by Hydrodec andAppendix IV contains definitions of certain expressions used in this summary andin this announcement. Ludgate and Numis are acting exclusively as financial adviser to Hydrodec. Numisis also NOMAD and corporate broker to Hydrodec. Arden is acting exclusively as financial adviser and corporate broker to Virotecin respect of the Acquisition. Arden is also NOMAD to Virotec. Enquiries Hydrodec Group plc Virotec International plcJohn Gunn Angus CraigTel: +44 (0) 20 7621 5770 Tel: +61 755 733 353 John DicksonTel: +61 418 454 818 Ludgate Investments Limited Arden Partners plcCharles Sebag-Montefiore Christopher HardieRobert Petch Matthew ArmittTel: +44 (0) 20 7621 5770 Tel: +44 (0) 20 7398 1600 Numis Securities LimitedAnthony RichardsonNick WestlakeTel: +44 (0) 20 7260 1000 This announcement is not intended to, and does not, constitute, or form part of,any offer to sell or any invitation to purchase or subscribe for any securitiesor the solicitation of any vote or approval in any jurisdiction. Thisannouncement does not constitute a prospectus or a prospectus equivalentdocument. Any decision in relation to the Acquisition should be made only on thebasis of the information contained in the Scheme Document, Forms of Proxy andForm of Election or any other document by which the proposals of the Acquisitionare made, which will include the full terms and conditions of the Acquisition. Virotec and Hydrodec encourage Virotec Shareholders to read the Scheme Documentwhen it becomes available because it will contain important information relatingto the Acquisition. The proposals of the Acquisition will be made solely throughthe Scheme Document. Ludgate, which is regulated in the United Kingdom by the Financial ServicesAuthority, is acting for Hydrodec and no-one else in connection with theAcquisition and will not be responsible to anyone other than Hydrodec forproviding the protections afforded to customers of Ludgate or for providingadvice in relation to the Acquisition or any other matter referred to in thisannouncement. Arden, which is regulated in the United Kingdom by the Financial ServicesAuthority, is acting for Virotec and no-one else in connection with theAcquisition and will not be responsible to anyone other than Virotec forproviding the protections afforded to customers of Arden or for providing advicein relation to the Acquisition or any other matter referred to in thisannouncement. Numis, which is regulated in the United Kingdom by the Financial ServicesAuthority, is acting for Hydrodec and no-one else in connection with theAcquisition and will not be responsible to anyone other than Hydrodec forproviding the protections afforded to customers of Numis Securities Limited orfor providing advice in relation to the Acquisition or any other matter referredto in this announcement. The release, publication or distribution of this announcement in jurisdictionsother than the United Kingdom may be restricted by law and therefore any personsinto whose possession this announcement comes should inform themselves about,and observe, any applicable restrictions or requirements. Any failure to complywith such restrictions or requirements may constitute a violation of thesecurities laws of any such jurisdiction. This announcement has been preparedfor the purposes of complying with the AIM Rules and the information disclosedmay not be the same as that which would have been disclosed if this announcementhad been prepared in accordance with the City Code or the laws and regulationsof any jurisdiction other than England. Persons in, or resident in, Australia should note that the Scheme is exempt fromthe requirement to issue a prospectus under the provisions of Parts 6D.2 and6D.3 and sections 1012A, 1012B and 1012C of the Corporations Act 2001 ofAustralia (Cth), pursuant to the provisions of the Australian Securities andInvestments Commission (ASIC) Class Order 07/9 ("Prospectus relief for foreignschemes of arrangement and PDS relief for Pt 5.1 schemes and foreign schemes ofarrangement"). ASIC Class Order 07/9 provides that where securities are offeredfor issue under a scheme of arrangement which is between a foreign company andits members and regulated under a law that is in force in an 'eligible foreigncountry' (which includes the United Kingdom) the issuer is exempt from therequirement to prepare a prospectus under the Corporations Act 2001 (Cth). US Persons should note that the Scheme relates to the shares of a UK company andwill be governed by English law. Neither the proxy solicitation nor the tenderoffer rules under the US Securities Exchange Act of 1934, as amended, will applyto the Scheme. Moreover, the Scheme will be subject to the relevant disclosurerequirements and practices applicable in the UK to schemes of arrangement, whichdiffer from the disclosure requirements of the US proxy solicitation rules andtender offer rules. Financial information included in this announcement and theScheme Document has been or will have been prepared in accordance withaccounting standards applicable in the UK that may not be comparable tofinancial information of US companies or companies whose financial statementsare prepared in accordance with generally accepted accounting principles in theUnited States. The New Hydrodec Shares that may be issued pursuant to the Scheme have not beenand will not be registered under the US Securities Act or under the relevantsecurities laws of any state, district, territory or other jurisdiction of theUnited States. Accordingly, New Hydrodec Shares may not be offered or sold inthe United States, except in an offer not subject to, or in reliance on anexemption from, the registration requirements of the US Securities Act and suchstate securities laws. Any New Hydrodec Shares which may be issued pursuant to the Scheme have not beenand will not be registered under the relevant securities laws of the US, Canada,Australia, New Zealand, Republic of Ireland or Japan and no regulatoryclearances in respect of the New Hydrodec Shares have been, or will be, appliedfor in any jurisdiction. In particular, any relevant clearances andregistrations have not been, and will not be, obtained from the securitiescommission of any province of Canada and no prospectus in relation to the NewHydrodec Shares has been, or will be, lodged with, or registered with, theAustralian Securities and Investments Commission, the Registrar of Companies inNew Zealand or the Japanese Ministry of Finance. Accordingly, unless otherwisedetermined by Hydrodec and permitted by applicable law and regulation, the NewHydrodec Shares may not be, offered, sold, resold, transferred, delivered ordistributed, directly or indirectly in or into the US, Canada, Australia, NewZealand, Republic of Ireland or Japan or any other jurisdiction where to do sowould violate the laws of that jurisdiction or would require registration orclearance thereof in such jurisdiction. No listing authority or equivalent has reviewed, approved or disapproved of thisannouncement or any of the proposals described in this announcement. Virotec confirms that as at the close of business on 6 May 2008 it had264,168,231 ordinary shares of 1 penny each in issue. The InternationalSecurities Identification Number (ISIN) for Virotec's ordinary shares isGB00B15PVR02. Hydrodec confirms that as at the close of business on 6 May 2008 it had193,845,402 ordinary shares of 0.5 pence each in issue. The InternationalSecurities Identification Number (ISIN) for Hydrodec's ordinary shares isGB00B02FJF09. Forward Looking Statements This announcement includes statements that are, or may be deemed to be, 'forwardlooking statements' that are based on current expectations or beliefs, as wellas assumptions about future events. These forward-looking statements can beidentified by the use of forward-looking terminology, including the terms''believes'', ''estimates'', ''plans'', ''anticipates'', ''targets'', ''aims'',''continues'', ''expects'', ''intends'', ''hopes'', ''may'', ''will'',''would'', ''could'' or ''should'' or, in each case, their negative or othervariations or comparable terminology. These forward-looking statements includematters that are not facts. They appear in a number of places throughout thisannouncement and include statements regarding the directors of Hydrodec'sintentions, beliefs or current expectations concerning, amongst other things,Hydrodec's and/or Virotec's results of operations, financial condition,liquidity, prospects, growth, strategies and the industries in which Hydrodecand Virotec operates. By their nature, forward-looking statements involve riskand uncertainty because they relate to future events and circumstances.Forward-looking statements contained in this announcement based on past trendsor activities should not be taken as a representation that such trends oractivities will continue in the future. Subject to any requirement under the AIMRules or other applicable legislation or regulation, none of Hydrodec, Virotec,Numis, Ludgate or Arden undertakes any obligation to update or revise anyforward-looking statements, whether as a result of new information, futureevents or otherwise. Undue reliance should not be placed on forward-lookingstatements, which speak only as of the date of this announcement. There are several factors which could cause actual results to differ materiallyfrom those expressed or implied in forward-looking statements. Among the factorsthat could cause actual results to differ materially from those described in theforward-looking statements are changes in the global, political, economic,business, competitive, market and regulatory forces, future exchange andinterest rates, changes in tax rates and future business combinations ordispositions. Profit Forecasts Nothing in this announcement is intended, or is to be construed, as a profitforecast or to be interpreted to mean that earnings per New Hydrodec Share forthe current or future financial years, or those of the combined group, willnecessarily match or exceed the historical published earnings per Hydrodec Shareor Virotec Share. Not for release, publication or distribution, in whole or in part in, into or from the United States of America or any of its territories, Canada, or Japan, or any other jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. 7 May 2008 RECOMMENDED ACQUISITION by Hydrodec Group plc of Virotec International plc to be effected by means of a scheme of arrangement under sections 895 to 901 of the Companies Act 2006 1. Introduction The Independent Directors of Hydrodec Group Plc ("Hydrodec") and the IndependentDirectors of Virotec International Plc ("Virotec") are pleased to announce thatthey have reached agreement on the terms of a recommended acquisition of theentire issued and to be issued share capital of Virotec by Hydrodec. 2. Terms of the Acquisition The Acquisition will be effected by means of a scheme of arrangement betweenVirotec and the Virotec Shareholders pursuant to sections 895 to 901 of the 2006Act. The Acquisition is conditional on the Scheme becoming Effective, theconsent of Hydrodec Shareholders to the Hydrodec Resolutions being obtained atthe Hydrodec General Meeting and the consent of the Virotec Shareholders to theDisposal being obtained at the General Meeting. The Scheme requires, inter alia,the approval of Virotec Shareholders at the Court Meeting and the GeneralMeeting and the sanction of the Court, to become Effective. Virotec Shareholders (other than Restricted Overseas Persons) will be entitledto receive: For every Virotec Share held 13 pence in cash(up to a maximum of 20,000 Virotec (up to a maximum aggregate amountShares) of £2,600) And thereafter, for every 3.75 Virotec Shares held 1 New Hydrodec Share Based on the Closing Price of 54.75 pence per Hydrodec Share on 6 May 2008(being the last business day prior to this announcement), the Acquisition(assuming that all Virotec Shareholders validly elect to receive the ShareAlternative) values each Virotec Share at approximately 14.6 pence and theentire issued share capital of Virotec at approximately £38.57 million. The consideration payable under the Scheme values Virotec: (i) in respect of Virotec Shareholders who receive all of their consideration incash, at a premium of approximately: • 89.1 per cent. to the Closing Price of 6.875 pence per VirotecShare on 2 April 2008 (being the last business day prior to Hydrodec notifyingVirotec that it had acquired Virotec Shares); and • 57.4 per cent. to 8.258 pence per Virotec Share being theaverage Closing Price for the last 30 days trading before 2 April 2008; (ii) in respect of Virotec Shareholders who receive all of their considerationin New Hydrodec Shares, at a premium of approximately: • 112.4 per cent. to the Closing Price of 6.875 pence per VirotecShare on 2 April 2008 (being the last business day prior to Hydrodec notifyingVirotec that it had acquired Virotec Shares); and • 76.8 per cent. to 8.258 pence per Virotec Share being theaverage Closing Price for the last 30 days trading before 2 April 2008. The consideration under the Scheme is arranged such that the amount due inrespect of the first 20,000 Virotec Shares held by each Virotec Shareholder ispayable in cash. However, a Share Alternative will be made available to VirotecShareholders (other than Restricted Overseas Persons) who may elect, subject tocertain limitations and conditions, to receive New Hydrodec Shares in lieu ofthe Cash Consideration to which they would otherwise be entitled pursuant to theScheme. Satisfaction of elections under the Share Alternative will be effectedon the basis of one New Hydrodec Share for every 3.75 Virotec Shares. Restricted Overseas Persons shall not be entitled to receive New Hydrodec Sharesand shall not be eligible to elect for the Share Alternative. RestrictedOverseas Persons will receive a cash payment of 13 pence per Virotec Share. Virotec currently has 4,860,000 options outstanding, the exercise prices ofwhich range between 20 and 40 pence per share. All holders of options are to beoffered a cash payment of 1 penny per share to which they would otherwise beentitled, under the options for the cancellation and surrender of such options.Full acceptance of this offer would require the payment by Hydrodec of the cashsum of £48,600. Virotec also has a Short Term Incentive Plan ("STIP") under the terms of whichthe Executive Directors are due to be allotted an aggregate of 5,041,264 VirotecShares, and a Long Term Incentive Plan ("LTIP") under which they are due to beallotted further Virotec Shares. The Executive Directors have agreed, subject tocompletion of the Scheme and the Disposal, to waive all their rights under theLTIP and STIP in return for an aggregate cash payment of approximately £605,000,which will be payable over six months in equal monthly instalments. Virotec owns 54.5 million shares in Hydrodec, representing approximately 26.7per cent. of Hydrodec's issued share capital, assuming completion of thePlacing. Hydrodec intends to utilise these shares to satisfy, in part,allotments of new Hydrodec Shares in respect of options under the existingHydrodec option scheme and the Hydrodec Convertible Loan Notes. The HydrodecConvertible Loan Notes are not listed and are, in aggregate, convertible intoapproximately 72.63 million new Hydrodec Shares. The New Hydrodec Shares to be issued under the Scheme will be allotted andissued credited as fully paid. An application will be made for the admission ofthe New Hydrodec Shares to trading on AIM. The New Hydrodec Shares will rankpari passu in all respects with the Hydrodec Shares in issue at the time suchNew Hydrodec Shares are allotted and issued, including the right to receive andretain dividends and other distributions declared, made or paid after theEffective Date. The Virotec admission document dated 1 August 2006 indicated that Virotec wassubject to the provisions of the City Code. As a result of changes that havetaken place since then, the Panel now considers that the place of centralmanagement and control of Virotec is located outside the UK, the Channel Islandsor the Isle of Man and has therefore confirmed that Virotec is no longer withinthe jurisdiction of the City Code. The Panel is not, as a result, regulating theAcquisition. The Acquisition will be subject to the Conditions and certain further terms setout in Appendix I to this announcement and to be set out or referred to in theScheme Document, Forms of Proxy, Form of Election and any other document bywhich the proposals of the Acquisition are made. 3. The Share Alternative The consideration under the Scheme is arranged such that the amount due inrespect of the first 20,000 Virotec Shares held by each Virotec Shareholder ispayable in cash. There are just under 3,000 shareholders who each hold 20,000 orless Virotec Shares and approximately 2,600 shareholders are either resident inAustralia or New Zealand. For Hydrodec, the cost of administering a large numberof overseas shareholders is relatively expensive. Consequently, the provision ofthe Cash Consideration will both allow such shareholders to realise the value oftheir investments in full without incurring any costs in selling in the marketand also result in lower administrative costs for Hydrodec going forward. However, as an alternative to the Cash Consideration which would otherwise bereceivable under the Scheme, a Share Alternative is being made available to allVirotec Shareholders other than Restricted Overseas Persons. Under the ShareAlternative, Virotec Shareholders will, subject to the conditions and furtherterms which will be set out in the Scheme Document and the Form of Election, beable to elect to receive New Hydrodec Shares on the following basis: For every 3.75 Virotec Shares held 1 New Hydrodec Share The New Hydrodec Shares to be issued under the Share Alternative will beallotted and issued credited as fully paid. An application will be made for theadmission of the New Hydrodec Shares to trading on AIM. The New Hydrodec Shareswill rank pari passu in all respects with the Hydrodec Shares in issue at thetime such New Hydrodec Shares are allotted and issued, including the right toreceive and retain dividends and other distributions declared, made or paidafter the Effective Date. Elections under the Share Alternative will only be capable of being made inrespect of all (and not part only) of the Cash Consideration. Fractions of NewHydrodec Shares will not be allotted and issued to holders of Scheme Shares whomake an election under the Share Alternative. Fractional entitlements to NewHydrodec Shares will be retained and sold in the market for the benefit of theenlarged Hydrodec Group. The Share Alternative will remain open until the time and date specified in theScheme Document and may be closed then without prior notice. If the ShareAlternative has been closed, Hydrodec reserves the right to reintroduce a sharealternative. No election under the Share Alternative will be valid unless a valid Form ofElection, duly completed in all respects and accompanied by all relevant sharecertificates(s) in respect of Scheme Shares held in certificated form or, if theScheme Shares are in uncertificated form, a settlement of a TTE instruction inrelation to those shares in accordance with the procedures to be set out in theScheme Document, are duly received and/or made by the time and date on which theShare Alternative closes. Further details of the Share Alternative will be set out in the Scheme Document. 4. Background to and reasons for the Acquisition The principal assets of Virotec are related to, and reliant upon, the success orotherwise of Hydrodec. Virotec owns 54.5 million shares (the "Reserve Shares")in Hydrodec (which represent approximately 26.7 per cent. of Hydrodec's existingissued share capital assuming completion of the Placing) and is entitled toreceive a royalty of 5 per cent. on Hydrodec revenues derived from the use ofits technology. Virotec's interest in Hydrodec results from the sale of HydrodecDevelopment Corporation Pty Ltd by a former subsidiary of Virotec to Hydrodec inreturn for the allotment of Hydrodec Shares and the royalty as partconsideration. The Acquisition will eliminate the cost of the royalty to the Hydrodec Group.This will have a substantial benefit on the future profit margins of Hydrodec,which in turn will benefit Virotec Shareholders that become holders of NewHydrodec Shares, as well as existing Hydrodec Shareholders. Virotec has made substantial losses of AUD$7.57 million (£3.57 million) and AUD$13.37 million (£6.31 million) respectively in the six months ended 31 December2006 and the year ended 31 December 2007. Despite, the award of the NyrstarHobart Pty Ltd contract which is expected to generate up to AUD$3.5 million(£1.65 million) in revenue in 2008, there is no certainty that Virotec wouldrecord a profit for the current year or in the near future. In December 2007, Virotec sold 5.5 million shares in Hydrodec to fund its nearterm requirements and the business is expected to require further funding tomake its future secure. Furthermore, the major Virotec Shareholders haveindicated that they would not support any further significant fundraisings inVirotec. As a result, the Directors of Virotec may need to make further sales ofHydrodec Shares, or other assets. The Acquisition will both remove thispotential overhang in Hydrodec Shares and will broaden the shareholder base ofthe enlarged group. 5. The Disposal The Operating Businesses comprise environmental remediation services for themining, agriculture and aquaculture industries, applications for the treatmentof water and waste-water and services relating to the treatment of aluminarefinery residue. These businesses have to date been consistently loss making and cash consuming.Whilst Virotec has recently announced a significant contract to supply solidwaste treatment services to Nyrstar Hobart Pty Ltd which is expected to generateup to AUD$3.5 million (£1.65 million) in revenue in 2008, there is no certaintythat the Virotec Group will record a profit for the current year or in the nearfuture. The board of Hydrodec has informed Virotec that it intends to focus all of theenlarged Hydrodec Group's resources on the development of Hydrodec as a majorinternational oil services company. Consequently, Virotec is proposing to selland the Executive Directors are proposing to acquire the Operating Businesses,subject to the Scheme becoming Effective, Hydrodec Shareholders consenting tothe Hydrodec Resolutions at the Hydrodec General Meeting and Virotec Shareholderconsent being obtained in respect of the Disposal at the General Meeting. The consideration for the Disposal will be the sum of AUD$1 payable to Virotecin cash and the assumption of the liabilities of the Operating Businesses. TheOperating Businesses reported combined operating losses of AUD$6.43 million(£3.05 million) and AUD$11.75 million (£5.54 million) and combined turnover ofAUD$1.47 million (£0.70 million) and AUD$3.52 million (£1.66 million)respectively in the six months ended 31 December 2006 and the year ended 31December 2007. The total liabilities and the total assets of the OperatingBusinesses were approximately AUD$5.3 million (£2.5 million) and AUD$7.9 million(£3.7 million) respectively, as at 31 December 2007. Further information on the Virotec Group appears in Section 7 and furtherdetails of the Disposal will appear in the Scheme Document. 6. Information on Hydrodec Hydrodec is a public company, whose shares are admitted to trading on AIM, witha market capitalisation of approximately £106.1 million based on the currentissued share capital as at 6 May 2008 (the last dealing day prior to thisannouncement). Hydrodec's technology is an oil refining process that producesnew speciality oils using spent transformer oil as the primary feedstock. Theprocess also removes dangerous contaminants such as PCB's from oil and similarfluids. Hydrodec reported revenues of approximately £0.8 million and £1.9 million withan operating loss of £2.9 million and £2.3 million for the years ended 31December 2006 and 2007 respectively. Hydrodec is currently developing two new production facilities in the US. Thefirst of these in Canton, Ohio received its first feedstock of transformer oilat the end of February 2008 and Hydrodec expects the plant to be fullyoperational early in the second half of 2008. Construction of the secondproduction facility at Laurel, Mississippi, is due to start in the third quarterof 2008, with commercial operations commencing within a further twelve months.Each plant is expected to have a minimum production capacity per day in excessof 80,000 litres of SuperfineTM transformer oil. SuperfineTM is continuing to receive considerable support from the Australiantransformer industry. This includes an agreement with Schneider Electric, a keymanufacturer of distribution transformers which supplies major power utilitiesacross the country. Schneider Electric has targeted conditional allocation of upto 75 per cent. of its annual new transformer oil purchase in Australia toSuperfineTM. In addition Australian power utilities including the two largestelectricity distribution companies in Victoria and Queensland, the largestelectricity distributor in New South Wales and a major South Australiandistribution utility have approved SuperfineTM transformer oil for use in theirnew transformers. The market feedback for SuperfineTM in the USA is very positive and the recentlyannounced purchase commitment by one of the largest purchasers of transformeroil in the US supports Hydrodec's expansion plans and shows the confidence ofthe US power industry in Hydrodec's SuperfineTM product. In addition to its encouraging progress in the US, Hydrodec is now looking toexpand in Japan and Europe. In particular, Hydrodec has validated market datathat confirms the competitiveness of its re-refining model in the Japanesemarket and has secured interest from key market players. Hydrodec expects thatthe Japanese market will comfortably support a Hydrodec production capacity inexcess of 160,000 litres per day in the near future. In Europe, Hydrodec isinvestigating scope for further growth through Turkey, which is a major Europeantransformer manufacturing centre and into which Hydrodec is already exportingfrom its plant in Australia. The treatment of other spent or used speciality oils (e.g. hydraulic oils) forrefining is being evaluated at the request of major producers and users in thissector. The directors of Hydrodec consider that the market opportunity forHydrodec in these areas is many times the size of the transformer oil market.Hydrodec expects to reach a conclusion on the viability of these market sectorswithin twelve months. 7. Information on Virotec Virotec provides environmental services in the following areas: •Environmental Remediation - application developed for the mining, agricultural, fertiliser and aquaculture industries; •Drinking Water, Wastewater and Solids Treatment - applications developed for the treatment of drinking water, wastewater from industrial sites and the sewage industry; and •Other Services - services to the alumina industry relating to the treatment of refinery residue. Operations are conducted in three geographical areas: (i) USA; (ii) Australiaand Asia; and (iii) Europe. Other than the Operating Businesses, Virotec: (i) owns the Reserve Shares whichrepresent approximately 26.7 per cent. of the existing issued share capital ofHydrodec assuming completion of the Placing; (ii) is entitled to receive a 5 percent. royalty payable on Hydrodec's sales derived from the use of its technology; and (iii) owns 30 million shares in the capital of The Greenhouse Fundrepresenting approximately 19.3 per cent. of the issued share capital of thatcompany. On 18 April 2008, Virotec announced its results for the year ended 31 December2007 which showed revenues of AUD$3.52 million (£1.66 million) compared withAUD$1.57 million (£0.74 million) for six months ended 31 December 2006. The lossafter tax for the year ended 31 December 2007 was AUD$13.37 million (£6.32million), compared to a loss of AUD$7.57 million (£3.58 million) for the sixmonths ended 31 December 2006. Virotec's balance sheet disclosed net assets of AUD$17.4 million (£8.21 million)with limited borrowings and significant investments in two listed companies(Hydrodec and The Greenhouse Fund). These are recorded at their book value inthe balance sheet of AUD$9.7 million (£4.58 million) whilst their current marketvalue is in excess of AUD$69.6 million (£32.8 million). The cash balance at theyear end was AUD$0.4 million (£0.2 million), but this does not includeapproximately AUD$2.0 million (£0.94 million) relating to the sale of HydrodecShares in December 2007, which was received in January 2008. In March 2008, Virotec announced a significant new contract to supply solidwaste treatment services to Nyrstar Hobart Pty Ltd (formerly part of ZinifexLtd) using its ViroFlowTM Technology. The contract is to treat mercurous filtercake and is expected to generate up to AUD$3.5 million (£1.65 million) inrevenue in 2008. Following a restructuring, all US operations are now being managed directly byDr Lee Fergusson on a much reduced headcount of five employees. The Directorsbelieve the US operations are now both financially and operationally structuredto resemble more closely Virotec's Australian operations. 8. Recommendations The Virotec Independent Directors are John Glynn and David McConchie. TheExecutive Directors cannot be treated as independent directors of Virotec asthey are directors of Hydrodec and are proposing to acquire the OperatingBusinesses from the Virotec Group under the Disposal. Justin Seager isinterested in 1,000,000 Hydrodec Shares, representing approximately 0.51 percent. of the issued share capital of Hydrodec prior to completion of the Placingand cannot therefore be treated as independent in relation to the Acquisition. Accordingly, the Executive Directors and Justin Seager have absented themselvesfrom the deliberations in connection with the Acquisition and a committee of theBoard, comprising the Virotec Independent Directors has been established for thepurpose of progressing and considering the terms of the Acquisition and makingthe recommendation in relation to the Acquisition. In addition, the ExecutiveDirectors have absented themselves from the deliberations in connection with theDisposal and a committee of the Board, comprising the Virotec IndependentDirectors and Justin Seager has been established for the purpose of progressingand considering the terms of the Disposal and making the recommendation inrelation to the Disposal. 8.1 Recommendation of the Acquisition The Virotec Independent Directors recommend the Acquisition to VirotecShareholders. The Virotec Independent Directors recognise that the Acquisitionrepresents an opportunity for Virotec Shareholders to realise a premium fortheir Virotec Shares and to receive shares in a larger company which the VirotecIndependent Directors believe should have greater liquidity than Virotec Shares. The Virotec Independent Directors believe that Hydrodec has a valuabletechnology which has been successfully exploited in Australia and which hasdemonstrated very substantial potential in the US by virtue of the advanceorders from its initial plant and the decision to proceed with a secondfacility. Other opportunities worldwide add to the attractive growth prospectsof Hydrodec. In coming to these views the Virotec Independent Directors have considered thefollowing factors: • the Virotec Operating Businesses have made substantial losses in thepast three years and despite the recent award of the Nyrstar solid wastetreatment contract, there is no certainty that Virotec would record a profit forthe current year or in the near future; • Virotec has raised approximately £18.43 million in aggregate fromshareholders on four separate occasions since July 2001 and the business willrequire further funding to make its future secure. The major shareholders haveindicated that they would not support a major fundraising. The alternative is toconsider further sales of Hydrodec Shares, its holding in The Greenhouse Fund orother assets of the Virotec Group; • the Hydrodec royalty arrangements entitle Virotec to a 5 per cent.share in relevant sales achieved by Hydrodec. Valuing such a stream of income isinherently uncertain and subjective. It is also the case that, to the extentthat Virotec Shareholders become shareholders of Hydrodec, they will share inthe enhanced profitability of Hydrodec arising from the cancellation of theroyalty. Nevertheless the value which the Virotec Independent Directorscalculate has been attributed to the royalty is at the lower end of their viewsof its valuation; • Virotec Shareholders with holdings of less than 20,000 VirotecShares will be entitled to receive cash in respect of their holding thusproviding a cost-effective exit for such shareholders at a significant premiumto the price prior to the announcement of an approach for the Company; and • 44.26 per cent. of shareholders in Virotec have provided irrevocableundertakings to vote (or procure the vote) in favour of the Scheme at the CourtMeeting (or, if requested by Hydrodec to execute an agreement consenting to andundertaking to the Court to be bound by the Scheme) and the resolutions to beproposed at the General Meeting, save that the Executive Directors will not votein the resolution to approve the Disposal. Shareholders are being offered a cash price of 13 pence per share in respect oftheir holding up to a maximum of 20,000 Virotec Shares. The offer of 13 pencecurrently represents a lesser consideration than that being offered under theShare Alternative offer which, based on the Closing Price of Hydrodec of 54.75pon the last business day before the announcement of the Acquisition, valued eachVirotec Share at 14.6 pence. Whilst the cash offer is currently 11.0 per cent. lower than the ShareAlternative, Virotec Shareholders should be aware that the share price ofHydrodec may increase or decrease in the period up to the conclusion of theAcquisition in which case this difference in consideration may increase ordecrease, accordingly. Virotec Shareholders will need to be aware of theHydrodec share price at the time when they make their election for cash orshares but should take into account the costs of any subsequent sale of theirHydrodec Shares in such a decision. After considering the above factors, the Virotec Independent Directors, who havebeen advised by Arden Partners plc, consider the terms of the Acquisition to befair and reasonable. In providing their advice Arden have relied upon thecommercial assessments of the Virotec Independent Directors. 8.2 Recommendation in respect of the Disposal The rationale and detail of the transaction involving the disposal of theOperating Businesses, which comprise all of the operating businesses of theVirotec Group, to the two Executive Directors are set out in Section 5 above.This transaction requires the approval of Virotec Shareholders pursuant to Rule15 of the AIM Rules and constitutes a related party transaction for the purposesof Rule 13 of the AIM Rules. The Virotec Independent Directors and Justin Seagerbelieve the following points to be relevant: • although the Virotec Independent Directors and Justin Seager haveconsiderable faith in the technology behind the Operating Businesses, they donot believe that it is practical to embark on a separate sales process withinthe timescale of the Acquisition proposal and there is no certainty of findingan alternative purchaser for such specialist businesses; and • the Hydrodec management have made it clear that resources will notbe made available to the Virotec's Operating Businesses as they intend to focuson the development of Hydrodec as a major international oil services company andhence an immediate sale is an important element of their proposals. The VirotecIndependent Directors and Justin Seager recognise that the existing Virotecmanagement are best placed to develop the businesses and are able to conclude anearly completion of the transaction. The Virotec Independent Directors and Justin Seager, who have been advised byArden, believe the terms of the Disposal to be fair and reasonable in thecontext of the Acquisition so far as the Virotec Shareholders are concerned. Inproviding their advice Arden have relied upon the commercial assessments of theVirotec Independent Directors and Justin Seager. 9. Irrevocable Undertakings Irrevocable undertakings to vote (or procure the vote) in favour of the Schemeat the Court Meeting (or, if requested by Hydrodec to execute an agreementconsenting to and undertaking to the Court to be bound by the Scheme) and theresolutions to be proposed at the General Meeting (other than as set out below)have been received, in aggregate from the holders of 116,910,450 Virotec Sharesrepresenting approximately 44.26 per cent. of the existing issued ordinary sharecapital of Virotec, being: • the holders (other than the Virotec Directors) of 96,516,117Virotec Shares, representing approximately 36.54 per cent. of the existingissued ordinary share capital of Virotec; • the Virotec Independent Directors and Justin Seager in respectof their own aggregate beneficial holdings of 1,901,300 Virotec Shares,representing (as at the date of this announcement) approximately 0.72 per cent.of the existing issued ordinary share capital of Virotec; and • the Executive Directors in respect of their own aggregatebeneficial holdings of 18,493,033 Virotec Shares, representing (as at the dateof this announcement) approximately 7.00 per cent. of the existing issuedordinary share capital of Virotec. The Executive Directors will not vote on theresolution at the General Meeting relating to the Disposal. The undertakings received from the Executive Directors will cease to be bindingonly if the Scheme lapses or is withdrawn (other than in connection with aswitch to an Offer or if an Offer is announced within 21 Business Days of suchlapse or withdrawal) or the Offer lapses or is withdrawn (other than inaccordance with a switch to a Scheme). All other irrevocable undertakings will,subject to certain conditions, cease to be binding in circumstances where athird party offer is made on terms which represent an improvement of more than10 per cent in the value of the consideration payable by Hydrodec. Each of the Directors has irrevocably undertaken not to solicit, engage with, orprovide any information relating to any competing acquisition for Virotec and tonotify Hydrodec promptly of any approach he receives or becomes aware of inrelation to such a competing acquisition (including providing details of thematerial terms) and to keep Hydrodec informed as to the progress of any suchcompeting acquisition. In addition to the irrevocable undertakings, Hydrodec and persons acting ordeemed to be acting in concert with Hydrodec hold, in aggregate 8,803,998Virotec Shares, representing 3.33 per cent. of the existing issued share capitalof Virotec, although these shares will not be available to be voted at the CourtMeeting. Further details of these shareholdings are set out in Section 14 below. Further details of the irrevocable undertakings are set out in Appendix III tothis announcement. 10. Management and Employees In the event of the Acquisition and Disposal proceeding, the existingcontractual and statutory employment rights, including pension rights, of allthe employees of the Virotec Group will be safeguarded. 11 Financing of the Consideration The Cash Consideration payable pursuant to the Acquisition will be provided byHydrodec from its own cash resources, which will be increased by receipt of theproceeds of the Placing. Ludgate is satisfied that sufficient resources are available to Hydrodec tosatisfy in full the Cash Consideration payable pursuant to the Acquisition. The maximum number of New Hydrodec Shares that would be issued as considerationfor the Acquisition (assuming all Virotec Shareholders make a valid election forthe Share Alternative) is 68,271,528, which represents 26.0 per cent. of theenlarged issued share capital of Hydrodec or 19.8 per cent. following conversionof all the Hydrodec Convertible Loan Notes and the completion of the Placing. 12. Structure of the Acquisition It is intended that the Acquisition will be effected by means of acourt-sanctioned scheme of arrangement between Virotec and the SchemeShareholders under sections 895 to 901 of the 2006 Act. The Scheme is subject to the Conditions and certain further terms referred to inAppendix I to this announcement and to be set out in the Scheme Document. Inparticular, to become Effective, the Scheme requires the approval of holders ofScheme Shares by the passing of a resolution at the Court Meeting. Thatresolution must be approved by a majority in number of the Scheme Shareholderspresent, entitled to vote and voting at the Court Meeting (or at any adjournmentthereof), either in person or by proxy, representing not less than 75 per cent.in value of all Scheme Shares which are voted at the Court Meeting (or at anyadjournment thereof). The holders of the Excluded Voting Shares will not be ableto vote at this meeting, but will separately consent to and undertake to bebound by the Scheme in respect of their interests in Virotec Shares. Implementation of the Scheme will also require the passing of certainresolutions to facilitate the Acquisition at the General Meeting, which will beheld immediately after the Court Meeting. Following the Meetings, the Scheme must be sanctioned and the Reductionconfirmed by the Court, and will only become effective on delivery to theRegistrar of Companies of a copy of the Order and the Order and the Minute beingregistered by the Registrar of Companies. Upon the Scheme becoming Effective, it will be binding on all VirotecShareholders, irrespective of whether or not they attended or voted at the CourtMeeting or the General Meeting. The Acquisition is also conditional upon approval of the Disposal by VirotecShareholders at the General Meeting and the passing of the Hydrodec Resolutionsat the Hydrodec General Meeting. Further details of the Scheme, including the timetable for its implementation,will be set out in the Scheme Document which is expected to be posted to VirotecShareholders on or around 12 May 2008. 13. Delisting and re-registration Hydrodec intends to apply for cancellation of the admission of the VirotecShares to trading on AIM and to re-register Virotec as a private company, eitheras part of the Scheme, or under the relevant provisions of the 2006 Act. If the Acquisition is effected by way of an Offer and such Offer becomes or isdeclared unconditional in all respects and sufficient acceptances are received,Hydrodec intends to exercise its rights to acquire compulsorily the remainingVirotec Shares in respect of which the Offer has not been accepted. 14. Disclosure of interests in Virotec Except as disclosed below, as at the close of business on 6 May 2008, being thelatest practicable Business Day prior to the date of this announcement, neitherHydrodec nor any of the directors of Hydrodec, nor, so far as Hydrodec is aware,any person acting in concert with Hydrodec has: (i) any interest in or right tosubscribe for any Virotec Shares, nor (ii) any short positions in respect ofVirotec Shares (whether conditional or absolute and whether in the money orotherwise), including any short position under a derivative, any agreement tosell or any delivery obligation or right to require another person to purchaseor take delivery, nor (iii) borrowed or lent any Virotec Shares (save for anyborrowed shares which have been on-lent or sold):- Name Interest in Per cent. of issued Virotec share capital SharesHydrodec Group plc 8,150,000 3.09%Ludgate Investments Limited 253,998 0.10% Non-executive directors ofLudgate Investments Limited:David Burton 200,000 0.08%Trevor Cooke 200,000 0.08% Brian Sheeran (a)(b) 10,947,540 4.14%Bruno Bamonte (a)(b) 7,545,493 2.86% Notes to table: (a) Virotec's Executive Directors, Brian Sheeran and Bruno Bamonte, are includedin the above table as a result of their being directors of Hydrodec, and havebeen excluded from discussions of both the Hydrodec and Virotec boards inrespect of the Acquisition. (b) Under the terms of the Virotec STIP and LTIP, the Executive Directors, BrianSheeran and Bruno Bamonte are due to be allotted shares are not included in theabove table. The Executive Directors have chosen to waive their rights under theSTIP and LTIP in return for a cash payment - refer to Section 2. 15. Overseas Shareholders Restricted Overseas Persons shall not be entitled to receive New Hydrodec Sharesand shall not be eligible to elect for the Share Alternative. RestrictedOverseas Persons will receive a cash payment of 13 pence per Virotec Share. The ability of the Virotec Shareholders who are not resident in the UnitedKingdom to receive the consideration resulting from the implementation of theScheme may be affected by the laws of their relevant jurisdiction. Such personsshould inform themselves of, and observe, any applicable legal or regulatoryrequirements of their jurisdiction. Virotec Shareholders who are in any doubtregarding such matters should consult an appropriate independent professionaladviser in the relevant jurisdiction without delay. 16. Implementation Agreement Virotec and Hydrodec have entered into the Implementation Agreement which setsout, inter alia, various matters in relation to the implementation of the Scheme(or, if applicable, the Offer) the conduct of Virotec's business prior to theEffective Date or the lapse or withdrawal of the Acquisition, and a non-solicitundertaking. Hydrodec also has the right, upon Virotec receiving details of a competingproposal, to match or better the value implied by that competing proposal by5.00 p.m. on the third Business Day after being advised of such proposal. IfHydrodec announces a revised offer (whether by way of scheme of arrangement orotherwise) within such period, the Virotec Independent Directors have agreedthat the Scheme or, if applicable, the Offer will continue to be the subject ofa unanimous and unqualified recommendation by them. Further information in relation to the Implementation Agreement will be set outin the Scheme Document. 17. General The Acquisition will be subject to the Conditions and certain further terms setout in Appendix I and the further terms and conditions to be set out in theScheme Document, the related Forms of Proxy, the Form of Election and any otherdocument by which the proposals of the Acquisition are made. The bases and sources of certain information contained in this announcement areset out in Appendix II. Details of the irrevocable undertakings received byHydrodec are set out in Appendix III. Certain terms used in this announcementare defined in Appendix IV. The Scheme will be governed by English law and will be subject to the applicablerequirements of the AIM Rules. The Scheme Document is expected to be posted to Virotec Shareholders on oraround 12 May 2008 and the Scheme is expected to become Effective on or shortlyafter 25 June 2008. Enquiries Hydrodec Group plc Virotec International plcJohn Gunn Angus CraigTel: +44 (0) 20 7621 5770 Tel: +61 755 733 353 John DicksonTel: +61 418 454 818 Ludgate Investments Limited Arden Partners plcCharles Sebag-Montefiore Christopher HardieRobert Petch Matthew ArmittTel: +44 (0) 20 7621 5770 Tel: +44 (0) 20 7398 1600 Numis Securities LimitedAnthony RichardsonNick WestlakeTel: +44 (0) 20 7260 1000 This announcement is not intended to, and does not, constitute, or form part of,any offer to sell or any invitation to purchase or subscribe for any securitiesor the solicitation of any vote or approval in any jurisdiction. Thisannouncement does not constitute a prospectus or a prospectus equivalentdocument. Any decision in relation to the Acquisition should be made only on thebasis of the information contained in the Scheme Document, Forms of Proxy, Formof Election and Hydrodec Circular or any other document by which the proposalsof the Acquisition are made, which will include the full terms and conditions ofthe Acquisition. Virotec and Hydrodec encourage Virotec Shareholders to read the Scheme Documentwhen it becomes available because it will contain important information relatingto the Acquisition. The proposals of the Acquisition will be made solely throughthe Scheme Document. Ludgate, which is regulated in the United Kingdom by the Financial ServicesAuthority, is acting for Hydrodec and no-one else in connection with theAcquisition and will not be responsible to anyone other than Hydrodec forproviding the protections afforded to customers of Ludgate or for providingadvice in relation to the Acquisition or any other matter referred to in thisannouncement. Arden, which is regulated in the United Kingdom by the Financial ServicesAuthority, is acting for Virotec and no-one else in connection with theAcquisition and will not be responsible to anyone other than Virotec forproviding the protections afforded to customers of Arden Partners plc or forproviding advice in relation to the Acquisition or any other matter referred toin this announcement. Numis, which is regulated in the United Kingdom by the Financial ServicesAuthority, is acting for Hydrodec and no-one else in connection with theAcquisition and will not be responsible to anyone other than Hydrodec forproviding the protections afforded to customers of Numis Securities Limited orfor providing advice in relation to the Acquisition or any other matter referredto in this announcement. The release, publication or distribution of this announcement in jurisdictionsother than the United Kingdom may be restricted by law and therefore any personsinto whose possession this announcement comes should inform themselves about,and observe, any applicable restrictions or requirements. Any failure to complywith such restrictions or requirements may constitute a violation of thesecurities laws of any such jurisdiction. This announcement has been preparedfor the purposes of complying with the AIM Rules and the information disclosedmay not be the same as that which would have been disclosed if this announcementhad been prepared in accordance with the City Code or the laws and regulationsof any jurisdiction other than England. Persons in, or resident in, Australia should note that the Scheme is exempt fromthe requirement to issue a prospectus under the provisions of Parts 6D.2 and6D.3 and sections 1012A, 1012B and 1012C of the Corporations Act 2001 ofAustralia (Cth), pursuant to the provisions of the Australian Securities andInvestments Commission (ASIC) Class Order 07/9 ("Prospectus relief for foreignschemes of arrangement and PDS relief for Pt 5.1 schemes and foreign schemes ofarrangement"). ASIC Class Order 07/9 provides that where securities are offeredfor issue under a scheme of arrangement which is between a foreign company andits members and regulated under a law that is in force in an 'eligible foreigncountry' (which includes the United Kingdom) the issuer is exempt from therequirement to prepare a prospectus under the Corporations Act 2001 (Cth). US Persons should note that the Scheme relates to the shares of a UK company andwill be governed by English law. Neither the proxy solicitation nor the tenderoffer rules under the US Securities Exchange Act of 1934, as amended, will applyto the Scheme. Moreover, the Scheme will be subject to the relevant disclosurerequirements and practices applicable in the UK to schemes of arrangement, whichdiffer from the disclosure requirements of the US proxy solicitation rules andtender offer rules. Financial information included in this announcement and theScheme Document has been or will have been prepared in accordance withaccounting standards applicable in the UK that may not be comparable tofinancial information of US companies or companies whose financial statementsare prepared in accordance with generally accepted accounting principles in theUnited States. The New Hydrodec Shares that may be issued pursuant to the Scheme have not beenand will not be registered under the US Securities Act or under the relevantsecurities laws of any state, district, territory or other jurisdiction of theUnited States. Accordingly, New Hydrodec Shares may not be offered or sold inthe United States, except in an offer not subject to, or in reliance on anexemption from, the registration requirements of the US Securities Act and suchstate securities laws. Any New Hydrodec Shares which may be issued pursuant to the Scheme have not beenand will not be registered under the relevant securities laws of the US, Canada,Australia, New Zealand, Republic of Ireland or Japan and no regulatoryclearances in respect of the New Hydrodec Shares have been, or will be, appliedfor in any jurisdiction. In particular, any relevant clearances andregistrations have not been, and will not be, obtained from the securitiescommission of any province of Canada and no prospectus in relation to the NewHydrodec Shares has been, or will be, lodged with, or registered with, theAustralian Securities and Investments Commission, the Registrar of Companies inNew Zealand or the Japanese Ministry of Finance. Accordingly, unless otherwisedetermined by Hydrodec and permitted by applicable law and regulation, the NewHydrodec Shares may not be, offered, sold, resold, transferred, delivered ordistributed, directly or indirectly in or into the US, Canada, Australia, NewZealand, Republic of Ireland or Japan or any other jurisdiction where to do sowould violate the laws of that jurisdiction or would require registration orclearance thereof in such jurisdiction. No listing authority or equivalent has reviewed, approved or disapproved of thisannouncement or any of the proposals described in this announcement. Virotec confirms that as at the close of business on 6 May 2008 it had264,168,231 ordinary shares of 1 penny each in issue. The InternationalSecurities Identification Number (ISIN) for Virotec's ordinary shares isGB00B15PVR02. Hydrodec confirms that as at the close of business on 6 May 2008 it had193,845,402 ordinary shares of 0.5 pence each in issue. The InternationalSecurities Identification Number (ISIN) for Hydrodec's ordinary shares isGB00B02FJF09. Forward Looking Statements This announcement includes statements that are, or may be deemed to be, 'forwardlooking statements' that are based on current expectations or beliefs, as wellas assumptions about future events. These forward-looking statements can beidentified by the use of forward-looking terminology, including the terms''believes'', ''estimates'', ''plans'', ''anticipates'', ''targets'', ''aims'',''continues'', ''expects'', ''intends'', ''hopes'', ''may'', ''will'',''would'', ''could'' or ''should'' or, in each case, their negative or othervariations or comparable terminology. These forward-looking statements includematters that are not facts. They appear in a number of places throughout thisannouncement and include statements regarding the directors of Hydrodec'sintentions, beliefs or current expectations concerning, amongst other things,Hydrodec's and/or Virotec's results of operations, financial condition,liquidity, prospects, growth, strategies and the industries in which Hydrodecand Virotec operates. By their nature, forward-looking statements involve riskand uncertainty because they relate to future events and circumstances.Forward-looking statements contained in this announcement based on past trendsor activities should not be taken as a representation that such trends oractivities will continue in the future. Subject to any requirement under the AIMRules or other applicable legislation or regulation, , Virotec, Numis, Ludgateor Arden undertakes any obligation to update or revise any forward-lookingstatements, whether as a result of new information, future events or otherwise.Undue reliance should not be placed on forward-looking statements, which speakonly as of the date of this announcement. There are several factors which could cause actual results to differ materiallyfrom those expressed or implied in forward-looking statements. Among the factorsthat could cause actual results to differ materially from those described in theforward-looking statements are changes in the global, political, economic,business, competitive, market and regulatory forces, future exchange andinterest rates, changes in tax rates and future business combinations ordispositions. Profit Forecasts Nothing in this announcement is intended, or is to be construed, as a profitforecast or to be interpreted to mean that earnings per New Hydrodec Share forthe current or future financial years, or those of the combined group, willnecessarily match or exceed the historical published earnings per Hydrodec Shareor Virotec Share. APPENDIX I PART A CONDITIONS TO IMPLEMENTATION OF THE ACQUISITION AND THE SCHEME 1 The Acquisition is conditional upon: 1.1 the Scheme becoming Effective by no later than 30September 2008 or such later date (if any) as Virotec and Hydrodec may agree and(if required) the Court may allow. The Scheme will comply with the AIM Rules andapplicable securities laws; 1.2 approval of the requisite majorities of the HydrodecShareholders being received at a general meeting of Hydrodec in order toincrease the authorised share capital of Hydrodec and to authorise the directorsto allot the New Hydrodec Shares under the Scheme; and 1.3 the approval of the Disposal by the Virotec Shareholdersat the General Meeting. 2 The Scheme is conditional upon:- 2.1 its approval by a majority in number representing not lessthan three-fourths in value of the Scheme Shareholders who are on the registerof members of Virotec at the Voting Record Time, present and voting, whether inperson or by proxy, at the Court Meeting (or any adjournment thereof); 2.2 the resolutions set out in the notice of General Meetingrequired to approve and implement the Scheme and to approve certain relatedmatters being duly passed by the requisite majority at the General Meeting (orany adjournment thereof); and 2.3 (i) the sanction (with or without modification (butsubject to such modification being acceptable to Hydrodec and Virotec)) of theScheme and the confirmation of the Reduction of Capital by the Court, (ii) anoffice copy of the Order and of the Minute being delivered for registration tothe Registrar of Companies and (iii) the registration of the Order and of theMinute by the Registrar of Companies. 3 In addition, Hydrodec and Virotec have agreed that theScheme will also be conditional upon, and accordingly the necessary actions tomake the Scheme become Effective will only be taken upon, the satisfaction orwaiver of the following Conditions:- 3.1 no government or governmental, quasi-governmental, supranational,statutory, regulatory, environmental or investigative body (including withoutlimitation, any national or supranational anti-trust or competition authority),court, trade agency, association, institution or any other person or bodywhatsoever in any relevant jurisdiction (each a "Third Party") having decided totake, institute, implement or threaten any action, proceeding, suit,investigation, enquiry or reference, or having made, proposed or enacted, anystatute, regulation, decision or order, or taken any other steps which would ormight reasonably be expected to:- 3.1.1 require, prevent, limit or delay the divestiture, oralter the terms for any proposed divestiture, by any member of the Wider VirotecGroup or by any member of the Hydrodec Group of all or any portion of theirrespective businesses, assets, undertakings or properties or impose anylimitation on the ability of any of them to conduct all or any portion of theirrespective businesses or own or control all or any portion of their respectiveassets or properties, which in each case would be material in the context of theAcquisition or the Hydrodec Group, as applicable; 3.1.2 require, prevent, limit or delay the divestiture byany member of the Hydrodec Group of any shares or other securities in any memberof the Wider Virotec Group; 3.1.3 impose any limitation on, or result in a delay in, theability of any member of the Hydrodec Group to acquire or to hold or to exerciseeffectively, directly or indirectly, all or any rights of ownership of shares orloans or securities convertible into shares in Virotec or any other member ofthe Wider Virotec Group or on the ability of any member of the Wider VirotecGroup to hold or exercise effectively, directly or indirectly, all or any rightsof ownership in respect of shares or other securities in any member of the WiderVirotec Group or to exercise management control over any such member of theWider Virotec Group; 3.1.4 require any member of the Hydrodec Group or the WiderVirotec Group to acquire, offer to acquire, redeem or repay any shares or othersecurities (or interest therein) and/or any indebtedness of any member of theWider Virotec Group or the Hydrodec Group owned by or owed to any third party; 3.1.5 make the Scheme or its implementation or theacquisition or proposed acquisition by Hydrodec of any shares or othersecurities in, or control of, Virotec or any other member of the Wider VirotecGroup void, illegal, and/or unenforceable under the laws of any relevantjurisdiction, or otherwise, directly or indirectly, restrain, restrict,prohibit, or delay the same, or impose any additional conditions or financial orother obligations with respect thereto, or otherwise challenge, hinder orinterfere, therewith or require amendment to the Acquisition; or 3.1.6 otherwise adversely affect the business, assets,profits or prospects of any member of the Wider Virotec Group or the HydrodecGroup in a manner which is material to the obligations of the Hydrodec Grouptaken as a whole in connection with the Acquisition, and all applicable waiting and other time periods during which any Third Partycould institute, implement or thereafter take any such action, proceedings,suit, investigation, enquiry or reference or otherwise intervene under the lawsof any relevant jurisdiction having expired, lapsed or been terminated; 3.2 all reasonably necessary filings having been made inconnection with the Acquisition and all statutory or regulatory obligations inany relevant jurisdiction having been complied with in connection with theAcquisition or the acquisition by any member of the Hydrodec Group of any sharesor other securities in or under the control of Virotec, and all necessaryapprovals, including antitrust approvals, having been obtained (and all waitingperiods, including extensions thereto under any applicable legislation and/orregulations of any relevant jurisdiction having expired, lapsed or beenterminated), in each case which are material in the context of the Acquisition; 3.3 all Authorisations reasonably necessary or appropriate foror in respect of the Acquisition and the proposed acquisition of any shares orother securities in or under the control of Virotec by Hydrodec having beenobtained in terms and in a form satisfactory to Hydrodec, from all appropriateThird Parties or persons with whom any member of the Wider Virotec Group hasentered into contractual arrangements and all such Authorisations, together withall Authorisations necessary or appropriate to carry on the business of anymember of the Wider Virotec Group, remaining in full force and effect and therebeing no notice or intimation of any intention to revoke, suspend, not renew oramend or not to renew the same at the time at which the Scheme becomes Effectivein all respects and all necessary statutory or regulatory obligations in anyrelevant jurisdiction having been complied with in all material respects; 3.4 Save as Disclosed, there being no provision of anyarrangement, agreement, licence, permit or other instrument to which any memberof the Wider Virotec Group is a party or by or to which any such member or anyof its assets is or are bound, entitled or subject and which, in consequence ofthe Scheme, or the proposed change in the control of Virotec, could or mightreasonably be expected to result, to an extent which would be material in thecontext of the Acquisition, in each case in:- 3.4.1 any monies borrowed by, or any other indebtedness(actual or contingent) of, any such member of the Wider Virotec Group being orbecoming repayable or capable of being declared repayable immediately or priorto their stated maturity date or repayment date or the ability of such member toborrow monies or incur any indebtedness being withdrawn or inhibited or beingcapable of becoming or being withdrawn or inhibited; 3.4.2 the creation of any mortgage, charge or othersecurity interest over the whole or any part of the business, property or assetsof any such member of the Wider Virotec Group or any such security (whenevercreated, arising or having arisen) being enforced or becoming enforceable; 3.4.3 any such arrangement, agreement, licence, permit orinstrument of any member of the Wider Virotec Group being (or becoming capableof being) terminated or adversely modified or any adverse action being taken orany obligation or liability arising thereunder; 3.4.4 any assets or interests of, or any asset the use ofwhich is enjoyed by, any such member of the Wider Virotec Group being or fallingto be disposed of or charged or ceasing to be available to any member of theVirotec Group or any right arising under which any such asset or interest couldbe required to be disposed of or charged or could be expected not to beavailable to any member of the Virotec Group, otherwise than in the ordinarycourse of business; 3.4.5 the rights, liabilities, obligations, interests orbusiness of any member of the Wider Virotec Group thereunder being terminated oradversely modified or affected; 3.4.6 any member of the Wider Virotec Group ceasing to beable to carry on business under any name under which it presently does so; or 3.4.7 the creation of any liability, actual or contingent,by any member of the Wider Virotec Group, and no event having occurred which, under any provision of any agreement,arrangement, licence, permit, or other instrument to which any member of theWider Virotec Group is a party or by or to which, any such member or any of itsassets is bound, entitled or subject, is likely to result in any of the eventsor circumstances as are referred to in sub-paragraphs 3.4.1 to 3.4.7 (to anextent which would be material in the context of the Acquisition); 3.5 Save as Disclosed, no member of the Wider Virotec Grouphaving, since 31 December 2007:- 3.5.1 save as between wholly owned subsidiaries of Virotecor between Virotec and any of its wholly owned subsidiaries, issued or agreed toissue or authorised or proposed the issue or grant of additional shares of anyclass, or securities convertible into or exchangeable for shares, or rights,warrants or options to subscribe for or acquire any such shares or convertibleor exchangeable securities; 3.5.2 recommended, declared, paid, made or proposed torecommend, declare, pay or make any dividend or other distribution (whetherpayable in cash or otherwise) other than to another wholly owned member of theWider Virotec Group; 3.5.3 save as between wholly owned subsidiaries of Virotecor between Virotec and any of its wholly owned subsidiaries, effected,authorised or proposed or announced its intention to effect, authorise orpropose any merger, demerger or scheme or any acquisition, disposal or transferof or the creation of any security interests over any assets or shares or anychange in its share or loan capital; 3.5.4 issued, authorised or proposed the issue of or madeany change in or to any debentures or, save in the ordinary course of business,incurred or increased any indebtedness or become subject to any contingentliability; 3.5.5 disposed of or transferred, mortgaged or encumberedany asset or any right, title or interest in any asset save in the ordinarycourse of business; 3.5.6 proposed or entered into any contract, anyreconstruction or amalgamation, any transaction or arrangement otherwise than inthe ordinary course of business; 3.5.7 proposed or entered into an agreement, contract,arrangement or commitment or passed any resolution or made any offer (whichremains open for acceptance) with respect to any of the transactions or eventsreferred to in this paragraph 3.5; 3.5.8 proposed or entered into or varied the terms of anyservice agreement with any of the directors or senior executives of Virotec orany director or senior executive of any member of the Virotec Group; 3.5.9 proposed or entered into any agreement whichconsents to the restriction of the scope of the business of any member of theWider Virotec Group (which in any case would be material in the context of theAcquisition); 3.5.10 waived or compromised any claim (which in any casewould be material in the context of the Acquisition); 3.5.11 other than in the ordinary course of business, enteredinto, varied, authorised or proposed any contract, transaction or commitment(whether in respect of capital expenditure or otherwise) which is of aloss-making, long term, onerous or unusual nature or magnitude or which is or islikely to be restrictive to the businesses of any member of the Wider VirotecGroup or which involves or could involve an obligation of such a nature ormagnitude; 3.5.12 purchased, redeemed or repaid or announced any proposalto purchase, redeem or repay any of its own shares or other securities orreduced or made any other change to any part of its share capital or any othersecurities; 3.5.13 taken or proposed any corporate action or had any legalproceedings started or threatened against it for its winding-up (voluntary orotherwise), dissolution, striking-off or reorganisation or for the appointmentof a receiver, administrative receiver, administrator, trustee or similarofficer of all or any of its assets or revenues or any analogous proceedings inany jurisdiction or had any such person appointed (which in any case would bematerial in the context of the Acquisition); 3.5.14 been unable or admitted that it is unable to pay itsdebts or having stopped or suspended (or threatened to stop or suspend) paymentof its debts generally or ceased or threatened to cease carrying on all or asubstantial part of its business or proposed or entered into any composition orvoluntary arrangement with its creditors (or any class of them) or the filing atcourt of documentation in order to obtain a moratorium prior to a voluntaryarrangement or, by reason of actual or anticipated financial difficulties,commenced negotiations with one or more of its creditors with a view torescheduling any of its indebtedness or any form of insolvency proceeding orevent similar or analogous to any of the aforementioned events in anyjurisdiction; 3.5.15 made any alteration to its memorandum or articles ofassociation or other constitutional documents; 3.5.16 made or announced any proposal to make any change oraddition to any retirement, death or disability benefit or any otheremployment-related benefit of or in respect of any of its directors, employees,former directors or former employees; 3.5.17 made or formally consented to any change to the termsof the trust deeds or rules constituting the pension schemes established for itsdirectors and/or employees and/or their dependants or to the benefits whichaccrue, or to the pensions which are payable thereunder, or to the basis onwhich qualification for or accrual or entitlement to such benefits or pensionsare calculated or determined, or to the basis upon which the liabilities(including pensions) of such pension schemes are funded or made, or agreed orconsented to any change to the trustees; or 3.5.18 merged with any body corporate or acquired or disposed(in either case otherwise than in the ordinary course of trading) of any assets(including shares in subsidiaries, associates and trade investments) or made anychange in its share or loan capital, or authorised or proposed or announced anyintention to propose any merger, de-merger, acquisition, disposal or change asaforesaid; 3.6 Save as Disclosed, since 31 December 2007:- 3.6.1 there having been no material adverse change in thebusiness, financial or trading position or profits or prospects of Virotec orany other member of the Wider Virotec Group ; 3.6.2 there having been no litigation, arbitrationproceedings, prosecution or other legal proceedings to which any member of theWider Virotec Group is or may become a party (whether as plaintiff or defendantor otherwise), no such proceedings having been threatened against any member ofthe Wider Virotec Group and no investigation by a third party against or inrespect of any member of the Wider Virotec Group having been instituted,threatened or announced by or against or remaining outstanding in respect of anymember of the Wider Virotec Group which in any such case might materially affectany member of the Wider Virotec Group in any way; and 3.6.3 no contingent or other liability having arisen orbecome apparent or increased (which in any case would be material in the contextof the Acquisition); 3.7 Save as Disclosed, Hydrodec not having discovered:- 3.7.1 that the financial, business or other informationconcerning the Wider Virotec Group, as contained in the information publiclydisclosed by any member of the Wider Virotec Group prior to the date of thisannouncement or as otherwise fairly disclosed to any member of the HydrodecGroup or its advisers by or on behalf of Virotec prior to the date of thisannouncement, contains a misstatement of a fact or omits to state a factnecessary to make the information contained therein true or not misleading inany case which has not been subsequently corrected by appropriate disclosureprior to the date of announcement; 3.7.2 that any member of the Wider Virotec Group is subjectto any liability, contingent or otherwise, which is not disclosed in the AnnualReport and Accounts of Virotec for the financial year ended 31 December 2007(which in any case would be material in the context of the Wider Virotec Group); 3.7.3 that any partnership or company in which any member ofthe Wider Virotec Group has a significant economic interest (being, in the caseof a company, an interest carrying 10 per cent, or more of the voting capital ofthat company) and which is not a subsidiary of Virotec is subject to anyliability, contingent or otherwise, which is not disclosed in the Annual Reportand Accounts of Virotec for the financial year ended 31 December 2007 (which inany case would be material in the context of the Acquisition); 3.7.4 that any past or present members of the Wider VirotecGroup has not complied with all applicable legislation or regulations of anyjurisdiction with regard to the disposal, spillage or leak of waste or disposalor emission of hazardous substances or any other environmental matters whichnon-compliance would be likely to give rise to any liability (whether actual orcontingent) on the part of any member of the Wider Virotec Group (which in anycase would be material in the context of the Acquisition); 3.7.5 that there has been a disposal, spillage, leak ofwaste or hazardous substances on, or an emission of waste or hazardoussubstances from, any property now or previously owned, occupied or made use ofby any past or present member of the Wider Virotec Group which would be likelyto give rise to any liability (whether actual or contingent) on the part of anymember of the Wider Virotec Group (which in any case would be material in thecontext of the Acquisition); 3.7.6 that there is any liability (whether actual orcontingent) to make good, repair, reinstate or clean up any property now orpreviously owned, occupied or made use of by any past or present member of theWider Virotec Group under any environmental legislation, regulation or order ofany government, or governmental, quasi-governmental, supranational, statutory orregulatory body, court, trade agency or professional association or any otherperson or body in any jurisdiction (which in any case would be material in thecontext of the Acquisition); 3.7.7 that circumstances exist (whether as a result of theAcquisition or otherwise):- (i) which would be likely to lead to any government orgovernmental, quasi-governmental, supranational, statutory or regulatory body,court, trade agency, professional association or any other person or body in anyjurisdiction instituting, or (ii) whereby any member of the Wider Virotec Group or anypresent or past member of the Wider Virotec Group would be likely to be requiredto institute, an environmental audit or take any other steps which would in any case be likelyto result in any actual or contingent liability to make good, repair, reinstateor clean up any property now or previously owned, occupied or made use of by anymember of the Wider Virotec Group (which in any case would be material in thecontext of the Acquisition); or 3.7.8 the Virotec Group has failed to comply with applicablestatutory or regulatory obligations in any relevant jurisdiction (which in anycase would be material in the context of the Acquisition). 4 Hydrodec reserves the right to waive, in whole or inpart, all or any of the above Conditions, except Condition 2. 5 Hydrodec shall be under no obligation to waive ortreat as fulfilled any of such Conditions earlier than the date of the sanctionof the Scheme referred to in Condition 2 notwithstanding that the otherConditions may at such earlier date have been waived or fulfilled and that thereare at such earlier date no circumstances indicating that any of such Conditionsmay not be capable of fulfillment or waiver. PART B Certain further terms of the Acquisition 1. Hydrodec reserves the right to elect to implement the Acquisition by way ofan Offer. In such event, such Offer(s) will be implemented on the same terms(subject to appropriate amendments, including (without limitation) thatCondition 2 would not apply and that the Offer would be subject to an acceptancecondition set at ninety per cent. (or such lesser percentage (being more than 50per cent.), as Hydrodec may decide), so far as applicable, as those which wouldapply to the Scheme. 2. Any Virotec Shares acquired under the Acquisition will be acquired free fromall liens, equities, charges, encumbrances, rights of pre-emption and otherinterests and rights and together with all rights now and hereafter attachingthereto, including voting rights and the right to receive and retain in full alldividends and other distributions and other distributions (if any) declared,made or paid on or after the date of this announcement. 3. The Acquisition and Scheme will be governed by English law and be subject tothe jurisdiction of the English courts, and to the conditions set out in thisannouncement and any further terms to be set out in the Scheme Document, therelated Forms of Proxy, the Form of Election or any other document by which theproposals of the Acquisition are made. APPENDIX II BASES AND SOURCES OF INFORMATION 1. As at the close of business on 6 May 2008, Virotec had in issue 264,168,231ordinary shares of 1 penny each. 2. Unless otherwise stated, the financial information on Virotec is extractedfrom or derived (without any adjustment) from the Virotec annual report andaccounts for the six months ended 31 December 2006, and the reports and accountsfor the year ended 31 December 2007. 3. Unless otherwise stated, the financial information on Hydrodec is extractedfrom or derived (without any adjustment) from the audited annual report andaccounts for the year ended 31 December 2006 and the preliminary unauditedresults for the year ended 31 December 2007. 4. Unless otherwise stated, all prices for Virotec Shares and Hydrodec Shareshave been derived from the AIM appendix to the Daily Official List of the LondonStock Exchange and represent closing middle market prices on the relevant dates. 5. The currency exchange rate used throughout the announcement is £1 to AUD$2.12which was the rate ruling as at 28 April 2008. APPENDIX III DETAILS OF IRREVOCABLE UNDERTAKINGS Irrevocable undertakings as described in Section 9 of this announcement havebeen given in respect of the number of Virotec Shares set out opposite the namesof the following Virotec Shareholders below (and any further Virotec Sharesacquired by them prior to the completion of the Acquisition): Name Number of Virotec Per cent. of existing Shares Ordinary Share Capital of VirotecBNY Norwich Union Nominees 1,340,751 0.51LtdChase Nominees Ltd 12,488,568 4.73CUIM Nominee Ltd 3,408,055 1.29Guardian Trust Company Ltd 141,600 0.05JP Morgan Chase 1,560,129 0.59Lewetta Investments Ltd 335,571 0.13Ludgate Environmental Fund 7,500,000 2.84LtdLudgate 181 (Jersey) 5,900,000 2.23LimitedMajedie Investments Plc 7,000,000 2.65Pershing Keen Nominees Ltd 7,642,300 2.89PIHL Equity LLP 10,583,333 4.01Damor Investments Ltd 4,166,667 1.58Roger & Rita Griffiths 1,600,000 0.61Securities Services 2,499,910 0.95Nominees LtdState Street Nominees Ltd 26,498,965 10.03The Sawyer Trust 156,000 0.06Vidacos Nominees Ltd 2,371,868 0.90WB Nominees Limited 1,322,400 0.50 96,516,117 36.54 The following Virotec Independent Directors and Justin Seager have givenirrevocable undertakings as described in Section 9 of this announcement inrespect of the number of Virotec Shares set out opposite their names below (andany further Virotec Shares acquired by them prior to the completion of theAcquisition):Name Number of Virotec Per cent. of existing Shares Ordinary Share Capital of VirotecDavid McConchie 500,000 0.19John Glynn 56,300 0.02Justin Seager 1,345,000 0.51 1,901,300 0.72 The Executive Directors have given irrevocable undertakings as described inSection 9 of this announcement in respect of the number of Virotec Shares setout opposite their names below (and any further Virotec Shares acquired by themprior to the completion of the Acquisition):Name Number of Virotec Per cent. of existing Shares Ordinary Share Capital of VirotecBrian Sheeran 10,947,540 4.14Bruno Bamonte 7,545,493 2.86 18,493,033 7.00 APPENDIX IV DEFINITIONS The following definitions apply throughout this announcement unless the contextotherwise requires: "2006 Act" the Companies Act 2006"Acquisition" the proposed acquisition of Virotec (other than the Excluded Shares) to be effected by means of the Scheme (or should Hydrodec so elect, by means of an Offer)"Act" or the "Companies Act" the Companies Act 1985, as amended"AIM" the AIM market of the London Stock Exchange"AIM Rules" the London Stock Exchange's AIM Rules for Companies as amended from time to time"Arden" Arden Partners plc"Australia" the Commonwealth of Australia and its dependant territories"Authorisations" authorisations, orders, grants, recognitions, confirmations, consents, licences, clearances, certificates, permissions or approvals"AUD$" Australian Dollars, the lawful currency of Australia"Board" the board of Directors"Business Day" a day (other than a Saturday or Sunday or public holiday) on which banks are open for business in London"Canada" Canada, its provinces and territories and all areas subject to its jurisdiction or any political sub-division thereof"Cash Consideration" the cash consideration due to Scheme Shareholders under the Scheme, being 13 pence per Scheme Share up to a maximum amount of £2,600"City Code" or "Code" the City Code on Takeovers and Mergers"Closing Price" the closing middle-market quotation of a Hydrodec Share and a Virotec Share as derived from the AIM appendix to the Daily Official List of the London Stock Exchange"Company" or "Virotec" Virotec International plc, incorporated in England and Wales with registered number 05796515"Conditions" the conditions to the implementation of the Offer, which are set out in Appendix I of this announcement"Court" the High Court of Justice in England and Wales"Court Meeting" the meeting of the Scheme Shareholders (other than the holders of the Excluded Shares) convened by order of the Court pursuant to section 896 of the 2006 Act, to consider and, if thought fit, to approve the Scheme with or without modification (including any adjournment or postponement thereof)"Directors" the directors of Virotec"Disclosed" disclosed in the 2007 annual report and accounts of Virotec or otherwise publicly announced via a Regulatory Information Service by or on behalf of Virotec prior to the date of this announcement or as otherwise fairly disclosed in writing prior to the date of this announcement to Hydrodec or the Hydrodec Group by or on behalf of Virotec"Disposal" the proposed disposal of the Operating Businesses of Virotec to the Executive Directors, which is conditional upon the Scheme becoming Effective and the approval of Virotec Shareholders at the General Meeting"Effective" if the Acquisition is implemented by way of the Scheme, the Scheme having become effective in accordance with its terms"Effective Date" the date on which the Scheme becomes effective in accordance with its terms"Excluded Shares" any Virotec Shares beneficially owned by any member of the Hydrodec Group at the Scheme Record Time"Excluded Voting Shares" means the Excluded Shares and any Scheme Shares beneficially owned by persons acting in concert (as defined in the Code), or considered to be acting in concert, with Hydrodec (including, for the avoidance of doubt Bruno Bamonte and Brian Sheeran)"Executive Directors" each of Bruno Bamonte and Brian Sheeran, being directors of Virotec"Form of Election" the form of election to be sent to Virotec Shareholders pursuant to which a Virotec Shareholder may make an election under the Share Alternative in respect of his Cash Consideration"Forms of Proxy" the forms of proxy for use by Virotec Shareholders at the Court Meeting and the General Meeting"General Meeting" the general meeting of Virotec to be convened in connection with the Acquisition and the Disposal, or any adjournment thereof"The Greenhouse Fund" The Greenhouse Fund Limited, an AIM listed company, incorporated in Jersey"Hydrodec" Hydrodec Group plc, incorporated in England and Wales with registered number 05188355"Hydrodec Circular" the document to be addressed to Hydrodec Shareholders containing, notice of the general meeting of Hydrodec"Hydrodec Convertible Loan Notes" £1 fixed rate unsecured convertible loan notes 2012 in the capital of Hydrodec issued under an instrument dated 5 November 2007"Hydrodec Independent Directors" each of John Gunn, Mark McNamara, John Dickson, John Cowan and Rodger Sargent, being directors of Hydrodec"Hydrodec General Meeting" the general meeting of Hydrodec to be called to approve the Hydrodec Resolutions"Hydrodec Group" Hydrodec, its subsidiaries and subsidiary undertakings"Hydrodec Resolutions" resolutions to be proposed to Hydrodec Shareholders to increase the authorised share capital of Hydrodec and to authorise the directors of Hydrodec to issue the New Hydrodec Shares"Hydrodec Shareholder" a holder of Hydrodec Shares"Hydrodec Shares" ordinary shares of 0.5 pence each in the capital of Hydrodec"holder" a registered holder and includes any person(s) entitled by transmission"Japan" Japan, its cities, prefectures, territories and possessions"London Stock Exchange" London Stock Exchange plc"Ludgate" Ludgate Investments Limited, financial adviser to Hydrodec, of 80 Cannon Street, London EC4N 6HL"Meetings" the Court Meeting and the General Meeting"Minute" the minute (approved by the Court) confirming the Reduction in accordance with section 138 of the Act"New Hydrodec Shares" new ordinary shares of 0.5 pence each in the capital of Hydrodec to be issued under the Scheme"Numis" Numis Securities Limited"Offer" a takeover offer as that term is defined in section 974 of the 2006 Act"Operating Businesses" Mt Carrington Mines Pty Ltd, Virotec Technologies Pty Ltd, Virotec Global Solutions Pty Ltd, Virotec Italia srl, Virotec USA Inc, Virotec Aquasolve LLC, Virotec Europe Ltd and Sterling Environmental Solutions Ltd, and any other subsidiary of the Company, other than Virotec Investments Pty Limited"Order" the order of the Court sanctioning the Scheme under section 899 of the 2006 Act and confirming the Reduction under section 137 of the Act"Panel" the Panel on Takeovers and Mergers"pence", "£" and "Sterling" the lawful currency of the United Kingdom"Placing" the placing of 10,000,000 Hydrodec Shares at a placing price of 50 pence per share to raise £5 million before expenses, announced by Hydrodec on 21 April 2008 and expected to complete on 7 May 2008"Reduction" the proposed reduction of capital pursuant to section 137 of the Act, to be provided for under the Scheme"Reduction Hearing" the hearing by the Court of the claim form to confirm the Reduction in accordance with section 137 of the Act"Regulations" the Uncertificated Securities Regulations 2001 (SI 2001/3755)"Regulatory Information Service" has the meaning attributed to it by the AIM Rules"Reserve Shares" the 54.5 million Hydrodec Shares registered in the name of Virotec"Restricted Overseas Person" (i) a US Person, a person in the US or a person whom Hydrodec reasonably believes to be in or resident in the US; (ii) a person (including an individual, partnership, unincorporated syndicate, limited liability company, unincorporated organisation, trust, trustee, executor, administrator or other legal representative) in, or resident in, or any person whom Hydrodec reasonably believes to be in or resident in Canada or Japan (or any custodian, nominee or trustee for such person); and (iii) any person in any other jurisdiction (other than persons in the UK or Australia) whom Hydrodec is advised to treat as a restricted overseas person in order to observe the laws of such jurisdiction or to avoid the requirement to comply with any governmental or other consent or registration, filing or other formality which Hydrodec regards as unduly onerous"Scheme" or "Scheme of the scheme of arrangement underArrangement" sections 895 to 901 of the 2006 Act to be proposed by Virotec to the Virotec Shareholders in connection with the Acquisition, with or subject to any modification, addition or condition approved or imposed by the Court and agreed to by Virotec and Hydrodec"Scheme Document" the document to be addressed to Virotec Shareholders containing, inter alia, the Scheme and an explanatory statement in compliance with section 897 of the 2006 Act"Scheme Hearing" the Court hearing of the claim form to sanction the Scheme and of the claim form to confirm the Reduction in accordance with section 137 of the Act"Scheme Record Time" 6.00 p.m. on the Business Day immediately prior to the date of the Scheme Hearing"Scheme Shareholders" the holders of Scheme Shares in the register of members of the Company at the Scheme Record Time"Scheme Shares" the Virotec Shares: (i) in issue at the date of the Scheme Document; (ii) (if any) issued after that date and before the Voting Record Time; and (iii) (if any) issued at or after the Voting Record Time but on or before the Scheme Record Time either on terms that the original or any subsequent holder therof shall be bound by the Scheme or in respect of which the holder therof shall have agreed in writing to be bound by the Scheme, in each case excluding the Excluded Shares"Share Alternative" the facility to be provided for in the Scheme whereby a Virotec Shareholder may elect, subject to certain limitations and conditions, to receive New Hydrodec Shares in lieu of the Cash Consideration to which they would otherwise be entitled to pursuant to the Scheme"subsidiary" has the meaning given in section 736 of the Act"subsidiary undertaking" has the meaning given in section 258 of the Act"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland"US" or "United States" the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia"US Person" as defined in Regulation S under the US Securities Act"US Securities Act" the US Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder"Virotec" Virotec International plc, incorporated in England and Wales with registered number 05796515"Virotec Group" or "Group" Virotec and its subsidiaries and subsidiary undertakings"Virotec Independent Directors" each of John Glynn and David McConchie, being directors of Virotec"Virotec Shareholders" the holders of Virotec Shares"Virotec Shares" ordinary shares of 1 pence each in the capital of Virotec"Voting Record Time" 6.00 p.m. on the day prior to the day immediately before the Court Meeting and the General Meeting or any adjournment thereof (as the case may be)"Wider Virotec Group" the Virotec Group and associated undertakings of Virotec and any other body corporate, partnership, joint venture or person in which Virotec and such undertakings (aggregating their interests) have an interest of more than 20 per cent. of the voting or equity capital or the equivalent"$" or "US Dollars" the lawful currency of the United States All references in this announcement to time are to the time in London, UK unlessotherwise stated. This information is provided by RNS The company news service from the London Stock Exchange
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