Inspiration Hlt Regulatory News (IHC)

 Inditherm plc

Proposed Acquisition of Inspiration Healthcare Limited

Proposed change of name to Inspiration Healthcare Group plc

Proposed Share Consolidation

Admission of Enlarged Share Capital to trading on AIM

Approval of waiver of obligations under Rule 9 of the Takeover Code

and

Notice of General Meeting

Inditherm, the provider of innovative specialised heating solutions, is pleased to announce the proposed acquisition by way of a reverse takeover of the entire issued share capital of Inspiration Healthcare Limited, a privately owned global medical device distribution company.

The Acquisition constitutes a reverse takeover under the AIM Rules and as such is conditional, inter alia, on approval by Shareholders which will be sought at a general meeting of the Company to be held on 23 June 2015, notice of which is set out at the end of the Admission Document, which will be posted to Shareholders today and is available on the Company's website: www.inditherm.co.uk.

Inspiration was founded in Leicestershire in 2003 as a medical device distribution company focused on innovative products for critical care. The company now provides a range of products for critical care, specialised surgical procedures and parenteral feeding through distribution agreements typically covering the UK and the Republic of Ireland. Inspiration also has a range of own-branded products focused on critical care which are sold in over 40 countries. In addition, Inspiration has a technical support business maintaining and repairing medical equipment.

In the year ended 31 January 2015 Inspiration recorded revenue of £9.5 million (2014: £8.8 million) and unaudited Adjusted EBITDA before exceptional items and research and development costs of £1.0 million (2014: £0.6 million) and unaudited Adjusted EBITDA after exceptional items and research and development costs of £0.8 million (2014: £0.4 million).

The Proposals include a Share Consolidation pursuant to which, subject to the passing of the Resolutions, every ten Existing Ordinary Shares will be consolidated into one Ordinary Share. The New Board believes that the Share Consolidation will result in a more appropriate market price for the Ordinary Shares. Further details of the Share Consolidation are set out below.

A circular comprising an Admission Document will be sent to Shareholders giving notice of a general meeting of Inditherm to be held on 23 June 2015 at 11.00 a.m. at the offices of Eversheds LLP, Bridgewater Place, Water Lane, Leeds LS11 5DR. The Company has received Irrevocable Undertakings to vote in favour of the Resolutions in respect of 15,385,356 Existing Ordinary Shares, representing 30.1% of the Existing Ordinary Shares that are entitled to be voted.

Strategic rationale for the Acquisition

· Inspiration has an unbroken track record of year-on-year sales growth since its formation in 2003;

· Inspiration supplies a broad range of both capital and consumable medical devices;

· Inspiration has a range of own-branded products for critical care which are complementary to Inditherm's existing range;

· The synergies with Inditherm's product range should provide economies of scale and strengthen the Company's position as a technology supplier to the NHS and overseas markets;

· Inspiration benefits from a strong, recurring source of revenue from providing technical support for maintaining and repairing medical equipment;

· Investment is being made by Inspiration in R&D to grow its range of own-branded capital and consumable products which will supplement the Inditherm range in key international markets, offering the potential to increase sales of the Enlarged Group's products through existing distribution channels;

· The Inspiration management team will add significant experience and resource, particularly in sales and marketing, to the growth of Inditherm's range of medical devices; and

· The relatively large overhead cost associated with being an AIM quoted company currently borne by Inditherm, will be spread over a much larger entity.

The Independent Directors, who have been so advised by WH Ireland, consider that the Proposals are fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. Furthermore the Independent Directors, who have been so advised by WH Ireland, consider that the Rule 9 Waiver is fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. In providing advice to the Independent Directors, WH Ireland has taken into account the Independent Directors' commercial assessment of the transaction.

Accordingly, the Independent Directors recommend that Independent Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial holdings of 335,356 Existing Ordinary Shares, representing 0.66% of the Company's issued share capital. Furthermore the Independent Directors recommend that Independent Shareholders vote in favour of Resolution 2 to approve the Rule 9 Waiver.

Commenting on the transaction, Mark Abrahams, Chairman, said, "We have believed for some time that there is underlying value in Inditherm, but the combination of small scale and overhead costs have been a constraint. This transaction has the potential to unlock shareholder value and represents an excellent outcome to our review of strategic options which we have undertaken over the last year."

Enquiries:

1. Introduction

The Company announced today that it has conditionally entered into the Acquisition Agreement pursuant to which Inditherm is to acquire the entire issued share capital of Inspiration. As a result, the Proposals are to be put to Shareholders at the General Meeting. The Admission Document, which will be posted to Shareholders today, sets out the details of, and reasons for, the Proposals and explains why the Independent Directors consider the Proposals to be in the best interests of the Company and its Independent Shareholders as a whole and recommend that Independent Shareholders vote in favour of the Resolutions to be proposed at the General Meeting.

Inspiration was founded in Leicestershire in 2003 as a medical device distribution company focused on innovative products for critical care. The company now provides a range of products for critical care, specialised surgical procedures and parenteral feeding through distribution agreements typically covering the UK and the Republic of Ireland. Inspiration also has a range of own-branded products focused on critical care which are sold in over 40 countries. In addition, Inspiration has a technical support business maintaining and repairing medical equipment.

The Acquisition constitutes a reverse takeover under the AIM Rules and as such is conditional, inter alia, on approval by Shareholders which will be sought at a general meeting of the Company to be held on 23 June 2015, notice of which is set out at the end of the Admission Document.

In view of Ian Smith's position as Finance Director of the Company and the changes to the terms of his employment as set out in paragraph 8(b) of Part VII of the Admission Document, Mr. Smith has taken no part in the decision of the other members of the Inditherm Board to recommend the Proposals to Shareholders and is not deemed to be independent for the purpose of voting on Resolution 2 in his capacity as a Shareholder.

Following implementation of the Proposals, the Vendors will be deemed to be acting in concert (pursuant to the Takeover Code) and will hold 25,556,290 Ordinary Shares (following the Share Consolidation), representing 83.3% of the Enlarged Share Capital.

Under Rule 9 of the Takeover Code, the Concert Party would normally be obliged to make a mandatory offer to all Shareholders to acquire their Ordinary Shares. Following an application by the Company, the Takeover Panel has agreed to waive this obligation, subject to the approval of the Independent Shareholders on a poll at the General Meeting. Your attention is drawn to the Takeover Code and the Rule 9 Waiver section contained in paragraph 12 of Part I of the Admission Document.

The Directors and the Proposed Directors believe that it is appropriate, should the Acquisition be approved by Independent Shareholders at the General Meeting and the Acquisition completes, that the name of the Company be changed to Inspiration Healthcare Group plc.

In addition, the Proposals include the Share Consolidation pursuant to which, subject to the passing of the Resolutions, every ten Existing Ordinary Shares will be consolidated into one Ordinary Share. The New Board believes that the Share Consolidation will result in a more appropriate market price for the Ordinary Shares. Further details of the Share Consolidation are set out in paragraph 13 of Part I of the Admission Document.

The purpose of the Admission Document is to provide Shareholders with further information regarding the matters described above and to seek Independent Shareholder approval for the Resolutions, which include the Rule 9 Waiver (which specifically requires the approval of the Independent Shareholders taken on a poll), at the General Meeting. The notice of General Meeting, which has been convened for 11.00 a.m. on 23 June 2015, is set out at the end of the Admission Document. The Proposals are conditional, inter alia, on the passing of the Resolutions. If the Resolutions are approved by Independent Shareholders, it is expected that Admission will become effective and dealings in the Enlarged Share Capital will commence on AIM on or around 8.00 a.m. on 24 June 2015. Further details of the General Meeting are set out in paragraph 19 of Part I of the Admission Document.

2. PRINCIPAL TERMS OF THE ACQUISITION

The Acquisition will be undertaken subject to the conditions referred to in Part I of the Admission Document and the full details set out in the Acquisition Agreement. On Admission, the Vendors will receive 25,556,290 Consideration Shares (following the Share Consolidation), representing 83.3% of the Enlarged Share Capital.

Based on a share price of 2.8p per Existing Ordinary Share (being the volume weighted average price for the five Business Days up to 22 May 2015), the Acquisition values the issued share capital of Inspiration at £7.2 million. Completion is conditional upon, inter alia, (i) approval of the Resolutions; and (ii) Admission.

3. INFORMATION ON THE COMPANY

Inditherm was formed in 1998 and was admitted to AIM in December 2001, having developed a new heating product using new technology, also called Inditherm, which is capable of generating a uniform heat with no hot or cold spots when a low voltage is applied. The product is material-based and flexible, robust, energy efficient and controllable. In addition, use of the product can deliver significant, cost-efficient warming in a number of different areas, particularly in medical applications.

The Company manufactures and licenses its specialised heating technology for use in numerous applications that require temperature maintenance and stability. The principal applications of the product lie in the following markets:

· Medical - operating theatres, neonatal and obstetrics; and

· Industrial - Inditherm provides a range of standard low voltage heating products for intermediate bulk containers, drums and the warming of gas bottles.

Since admission to AIM, Inditherm has applied the technology in a number of areas with limited commercial success. Starting as a predominantly industrial business and expanding into the related areas of construction and sports surface heating, the business faced challenges in relation to market conditions and acceptance. The medical business started to develop in 2004, when it had a single product offering for warming patients in the operating theatre. The medical business has progressively expanded, initially by product range extension into neonatal warming, wider neonatal care, chemotherapy, veterinary patient warming and latterly into specialist obstetrics. More recently, in 2013 the medical business was granted the distribution rights to ATOM incubators and other products in the UK and the Republic of Ireland.

In December 2010 Inditherm announced its intention to withdraw from applying the technology in industrial process heating applications and focus on developing the medical business and as a result has taken a series of steps to focus its operations accordingly. The medical part of the business now accounts for over 90% of revenue.

The medical business had already developed a wide export distribution network. Part of the strategy latterly has been to invest in export resource to accelerate growth in that area to compensate for the difficulties faced within the NHS, particularly in relation to capital expenditure.

4. BACKGROUND TO AND REASONS FOR THE PROPOSALS

As reported in the final results published on 16 April 2015, the Company has been experiencing challenging conditions in the NHS, which have been partially offset by an improving export performance. There is interest in the product range, however the Company has continued to experience delays to projects, particularly within the NHS.

Overall, revenue in 2014 was £1,847,000, a reduction of 10% compared to 2013, and this resulted in an operating loss (before exceptional costs) of £356,000. The cash outflow for the year was £470,000 and the Company had cash at the year-end of £1,165,000.

The principal cause of the reduction in revenue was a fall of 9% in the turnover of the medical business. This was due primarily due to some sizeable NHS sales made in 2013 not being repeated which, the Inditherm Directors believe, is due to NHS Trusts pursuing other, perhaps larger, cost-saving projects.

The Inditherm Directors believe that there will continue to be pressure on capital equipment sales in the UK medical market. The Company has therefore developed a managed service proposition in order to access revenue, rather than capital, budgets. Interest has been shown in this proposition which would also have the benefit of providing a recurring revenue stream, however it is at a relatively early stage.

The Company's lack of scale has meant that the level of overheads has prevented profitable trading in any full year. The overheads include, inter alia, costs associated with the public company status, management costs and development costs.

Accordingly, the Inditherm Directors identified the need to make the business part of a larger entity, thereby allowing the medical business to grow with fewer constraints. As a result, in September 2014 the Company announced that it was reviewing strategic options with the objective of creating shareholder value.

The Inditherm Directors have reviewed many potential options, most of which have now been eliminated. Of those remaining, the Inditherm Directors are of the opinion that the proposed Acquisition is substantially the most attractive with regard to potential Shareholder value. The Inditherm Directors consider that the following factors demonstrate that the proposed combination with Inspiration has the potential to generate value for Shareholders:

● Inspiration has an unbroken track record of year-on year sales growth since its formation in 2003;

● Inspiration supplies a broad range of both capital and consumable medical devices;

● Inspiration has a range of own branded products for critical care which are complementary to Inditherm's existing range;

● The synergies with Inditherm's product range should provide economies of scale and strengthen the Company's position as a technology supplier to the NHS and overseas markets;

● Inspiration benefits from a strong, recurring source of revenue from providing technical support for maintaining and repairing medical equipment;

● Investment is being made by Inspiration in R&D to grow its range of own-branded capital and consumable products which will supplement the Inditherm range in key international markets, offering the potential to increase sales of the Enlarged Group's products through existing distribution channels;

● The Inspiration management team will add significant experience and resource, particularly in sales and marketing, to the growth of Inditherm's range of medical devices; and

● The relatively large overhead cost associated with being an AIM quoted company, currently borne by Inditherm, will be spread over a much larger entity.

5. INFORMATION ON INSPIRATION

Inspiration was founded by Neil Campbell, Toby Foster, Simon Motley and Malcolm Oxley in Leicestershire in 2003 as a patient-focused distributor of critical care equipment in the UK and the Republic of Ireland. Each of the founders is still active in the business.

Using cash generated from operations to invest in sales and marketing activities and to add further products to the portfolio under distribution agreements, Inspiration has experienced unbroken year-on-year sales growth since 2003. Inspiration has also used cash generated to license technology for sale under its own brand worldwide with these products manufactured by third parties. In addition, the Company has invested in an R&D team based in Albourne, West Sussex, to develop its own products.

In the year ended 31 January 2015 Inspiration recorded revenue of £9.5 million and Adjusted EBITDA before exceptional items and research and development costs of £1.0 million (2014: £0.6 million) and Adjusted EBITDA after exceptional items and research and development costs of £0.8 million (2014: £0.4 million).

In the year ended 31 January 2015, the breakdown of sales was as follows:

Sales of distributed products, Inspiration own-branded products and service and equipment hire represented 45.1%, 37.6% and 17.3% respectively of sales in the year ended 31 January 2015.

The distribution business has grown strongly through the sourcing of both capital and consumable products from suppliers around the world. Agreements are typically exclusive arrangements within the UK and the Republic of Ireland. Key principals include:

· Xenios GmbH (specifically the Novalung and Medos brands), manufacturers of extra-corporeal ventilation systems for both surgical and intensive care use;

· Micrel Medical Devices S.A., manufacturers of infusion pumps for parenteral feeding and other applications; and

· Acutronic Medical AG, manufacturers of neonatal and jet ventilation products.

In addition, Inspiration has agreements with a number of other smaller suppliers and principals providing complementary and supplementary products mainly for neonatal intensive care. No one principal accounts for more than 20% of the company's turnover.

To supplement the distribution business, Inspiration has invested in the development of its own-branded range of products which are focused on:

· Non-invasive respiratory support (nCPAP) for premature and sick babies; and

· Therapeutic and diagnostic products of birth asphyxiated babies.

Inspiration currently exports to over 40 countries and has recently started exporting one of its devices to the USA having received 510(k) clearance in November 2014.

Inspiration's combination of capital and consumable products as well as recurring revenues from Technical Support, for both planned preventative maintenance and ad hoc repair, have meant growth has been achieved with positive cash generation and the reinvestment of profits.

Inspiration is also a shareholder in, and supplies technology to, Neuroprotexeon Limited, a drug-device technology company which is pioneering the use of the inert gas, xenon, as a neuro-protectant.

Inspiration currently employs 40 staff across three locations in the UK, an analysis of the headcount is detailed below:

6. STRATEGY OF THE ENLARGED GROUP

Following Admission, the New Board intends that the Enlarged Group will continue to build on the foundations of the two companies in medical devices.

In the UK and Ireland, the strategy will be to strengthen the Enlarged Group's position in the market through continuing organic growth and by increasing the range of products through new distribution arrangements with third party manufacturers, as well as introducing new own-branded products.

Internationally, the Enlarged Group will be in a position to offer more products to distributors, gaining economies of scale and competitive advantages which are not available as two separate, smaller entities. In addition, the Enlarged Group should have the ability to address new export markets more quickly and effectively.

After-sales technical support will be a core area of the business due to its ability to differentiate the Enlarged Group from its competitors in both the sourcing and supplying of innovative technology. This area of the business is profitable, cash generative and a recurring source of income. The Enlarged Group will continue to invest in this area, particularly in technology to provide support to customers both domestically and internationally, adding value to the after-sales service proposition.

The Enlarged Group will continue to develop more products in the area of critical care through investment in R&D and leveraging its relationships with the academic medical community to find and commercialise further innovative technologies. This will be especially focussed on neonatal intensive care. In addition to its own product development, the company will target strategic alliances to develop further technologies to sell under licence.

In addition, for its devices used in the operating theatre, the Enlarged Group will continue to invest in R&D in patient warming to increase its product offering adding to sales and market share whilst maintaining the competitive advantage as a technology leader. As with critical care, the Enlarged Group will also seek additional strategic alliances and distribution opportunities.

Whilst not in the short term, the Enlarged Group will consider appropriate acquisitions which would help to grow the Enlarged Group on a complementary basis without a proportionate increase in costs.

7. CURRENT TRADING AND PROSPECTS FOR THE ENLARGED GROUP

The Inditherm Directors are satisfied with performance to date during the current financial year, particularly with some recovery in orders from the UK.

Since 31 January 2015, Inspiration has traded in line with management expectations and has experienced strong cash collection.

Over the next twelve months, the New Board will seek to achieve organic growth from the existing products of the Enlarged Group and to increase the range of products through new distribution arrangements with third party manufacturers, as well as introducing new own-branded products.

The New Board considers the risks to the business from changes in UK Government policy on healthcare spending following the general election to be mitigated as a significant proportion of the Enlarged Group's revenues are generated from repeat orders for disposable products and Technical Support in the UK as well as a growing percentage of the business being generated outside the UK.

8. INFORMATION ON THE DIRECTORS AND PROPOSED DIRECTORS

Immediately following Admission, the Board will comprise three executive and two non-executive directors, brief biographical details of whom are set out below.

Mark Abrahams - Non-Executive Chairman

Mark is currently Non-executive Chairman of Fenner Plc, having been Chief Executive for 18 years. There he led a strategy of converting the group from a power transmissions manufacturer to a world leader in reinforced polymers. Mark was Vice Chair of Leeds Teaching Hospitals Trust and was Non-Executive Chairman of the Darby Group Plc. He is a Chartered Accountant and a Companion of the Institute of Management. He is a member of the Economics Growth Board of the CBI.

Neil Campbell - Chief Executive Officer

After beginning his career in medical devices at Smiths Medical, Neil held several sales and marketing positions including regional International Sales Manager at Eschmann. He subsequently joined Electro Medical Equipment Limited ("EME") as marketing manager for the global neonatal company. In 2003, Neil became CEO and founding partner of Inspiration. In total Neil has spent 23 years in the Medical Device sector in each of critical care, neonatal intensive care and the operating theatre. Neil's commitment to perinatology has been recognised by his being invited to be an industry and scientific board member at the Infant Centre in Ireland. Neil is also a Non-Executive Director of Neuroprotexeon Limited, a drug-discovery and biotechnology company, in which Inspiration is a shareholder.

Ian Smith - Chief Financial Officer

Ian joined Inditherm in January 2004. He is a Chartered Accountant having trained with Ernst & Young. After moving into industry he qualified as a Corporate Treasurer and has over 25 years' board level experience gained at both group and operating company level in a wide range of industries. Amongst previous roles, Ian has been Finance Director for Portakabin Limited, Divisional Finance Director of the turbocharging division of Cummins Engine Co Inc. and Divisional Finance Director and Group Treasurer at Hickson International.

Toby Foster - Sales Director

Toby joined EME in 1992 having previously run his own small business in the construction and property industry. During his time at EME, he was instrumental in launching new products including neonatal ventilators, neonatal nCPAP, adult high frequency oscillation and developmental care. He then moved to international sales management before heading up the UK sales team. In 2003 he was a founding director of Inspiration; responsible for all sales and sales recruitment, the 24/7 clinical support service and patient first philosophy, launching several new technologies including the Novalung extracorporeal lung assist into the UK critical care market.

Brook Nolson - Non-Executive Director

Having established and managed a regional electronics retail chain, Brook moved into a marketing role with Balfour Beatty plc in 1986. He assumed the role of Regional Marketing Director in 1989 for the North East. Following a period as Business Development Director of Birse Group plc, Brook was appointed Strategic Key Accounts Director of Willmott Dixon Group. His roles included development of marketing strategy, establishing a customer care process and managing innovation, research and development. In 2001, he was appointed Group Strategic Director of Morgan Sindall plc, with responsibility to consolidate individual operating companies into one brand.  Brook remains an adviser to a number of businesses across various sectors, which include turnaround and start up situations.

The New Board has undertaken to consider the appointment of a further Non-Executive Director in due course.

Conditional upon and with effect from Admission, Nick Bettles will stand down as Chief Executive Officer of the Company. Nick joined Inditherm in April 2004 and became Chief Executive Officer in November 2007 and, during this time, has been instrumental in growing the medical business and identifying new market opportunities for the Company. In addition, John Markham will stand down as a Non-Executive Director with effect from Admission. John joined Inditherm in March 2002 and has provided invaluable advice and technical expertise. The Board would like to thank both Nick and John for their leadership and contribution to the Company.

With effect from Admission Neil Campbell and Toby Foster of Inspiration will become Chief Executive Officer and Sales Director respectively, and Brook Nolson will be appointed as a Non-Executive Director to the Company.

9. Corporate governance

The Inditherm Directors and the Proposed Directors support the highest standards of corporate governance and recognise the imp[ortance of the UK Corporate Governance Code (compliance with which is not mandatory for companies admitted to AIM). Following Admission, the New Board intends to comply with its principles so far as it is practicable and appropriate given the nature and size of the Company and the size and constitution of the New Board. The New Board also intends to comply with the principles of the Corporate Governance Guidleines for AIM companies published by the Quoted Companies Alliance in 2010.

The New Board will be responsible for the strategic direction of the Company, monitoring the Enlarged Group's trading performance and appraising and executing development and acquisition opportunities. The New Board will seek to comply with a number of the provisions of Financial Reporting Council's Corporate Governance Code in so far as it considers them to be appropriate for a company of its size and nature. The Company will hold regular meetings of the New Board, at which financial and other reports, including, inter alia, working capital reports, review of new business opportunities and acquisition opportunities, will be considered and, where appropriate, voted on.

Details of the New Board members' beneficial interests in Ordinary Shares and options, both immediately prior to and following Admission, are set out in paragraph 7 of Part VII of the Admission Document. The Directors and Proposed Directors understand their obligation to comply with Rule 21 of the AIM Rules relating to directors' dealings and will take all reasonable steps to ensure compliance by any employees of the Company to whom Rule 21 applies. The Company has, in addition, adopted a share dealing code.

It is proposed that each of the Proposed Directors will be appointed to the New Board, conditional on completion of the Acquisition, by the Existing Shareholders passing Resolutions 3, 4 and 5 as ordinary resolutions, rather than being appointed by a resolution of the Board. Accordingly, as their appointment will have been made by the Shareholders, none of the Proposed Directors will be required under the Articles to submit themselves for re-appointment at the next annual general meeting of the Company unless otherwise subject to retirement by rotation at that time.

The New Board has agreed the composition and terms of reference of an Audit Committee, a Nomination Committee and a Remuneration Committee, each of which will have formally delegated duties and responsibilities taking effect on Admission. Details on these committees are set out in paragraph 9 of Part VII of the Admission Document.

10. Share Option Scheme

The New Board intend to adopt the Share Option Scheme with effect from Admission. The Share Option Scheme will allow the New Board to grant both EMI options and unapproved options over Ordinary Shares to any employee of the Company and any of its subsidiaries (including executive directors), subject to various scheme and individual limits.

Further details of the Share Option Scheme are set out in paragraph 6 of Part VII of the Admission Document.

11. DIVIDEND POLICY

The New Board currently proposes to reinvest earnings in financing the growth of the Enlarged Group's business and therefore do not propose to declare or pay, nor are they likely to declare or pay, any dividends in the short term. Over time, subject to the financial performance, the New Board intends that the Company will adopt a progressive dividend policy.

12. Takeover code and Rule 9 Waiver

The Takeover Code applies to the Company and governs, inter alia, transactions which may result in a change of control of a company to which the Takeover Code applies. Under Rule 9 of the Takeover Code any person who acquires, whether by a series of transactions over a period of time or not, an interest (as defined in the Takeover Code) in shares which, taken together with shares in which he is already interested or in which persons acting in concert with him are interested, carry 30% or more of the voting rights of a company which is subject to the Takeover Code, is normally required to make a general offer to all the remaining Shareholders to acquire their shares.

Rule 9 of the Takeover Code also provides that when any person, together with persons acting in concert with him, is interested in shares which, in aggregate, carry more than 30% of the voting rights of such company, but does not hold shares carrying 50% or more of such voting rights, a general offer will normally be required if any further interest in shares is acquired by any such person. Investors should be aware that, under the Takeover Code, if a group of persons acting in concert holds interests in shares carrying more than 50% of the company's voting rights, the members of that concert party will normally be entitled to increase their holding or voting rights without incurring any further obligations under Rule 9 to make a mandatory offer, although individual members of the concert party will not be able to increase their percentage shareholding through or between a Rule 9 threshold without Panel consent. Such persons should, however consult with the Panel in advance of making such further acquisitions.

An offer under Rule 9 must be in cash and must be at the highest price paid by the person required to make the offer, or any person acting in concert with him, for any interest in shares of the company in question during the twelve months prior to the announcement of the offer.

Persons acting in concert comprise persons who, pursuant to an agreement or understanding (whether formal or informal), co-operate to obtain or consolidate control of a company or to frustrate an offer for a company.

The Concert Party comprises five individuals who together own the entire share capital of Inspiration. The vendors of a private company are generally deemed to be acting in concert in relation to an acquisition of that company by a company subject to the Takeover Code. The Inspiration Shareholders therefore are deemed to be acting in concert for the purposes of the Takeover Code. Full details of the members of the Concert Party are set out in paragraph 2 of Part III of the Admission Document.

Maximum potential controlling position

Immediately following the issue of the Consideration Shares, and the Share Consolidation, the Concert Party will hold in aggregate 25,556,290 Ordinary Shares, representing 83.3% of the Enlarged Share Capital which, without a waiver of the obligations under Rule 9 of the Takeover Code, would oblige the Concert Party to make a general offer to Shareholders under Rule 9 of the Takeover Code.

The Concert Party's current shareholdings in the Company and immediately following Admission are set out in the table below.

The Company has applied to the Panel for a waiver of Rule 9 of the Takeover Code in order to permit the Acquisition without triggering an obligation on the part of the Concert Party to make a general offer to Shareholders.

The Panel has agreed, subject to Resolution 2 at the General Meeting being passed on a poll of the Independent Shareholders, to waive the requirement which might otherwise arise for the members of the Concert Party (individually or collectively) to make a general offer under Rule 9 of the Takeover Code in cash for the remaining shares in the Company as a result of the issue of the Consideration Shares to members of the Concert Party pursuant to the Acquisition. To be passed, Resolution 2 will require a simple majority of the votes cast on a poll by the Independent Shareholders. Accordingly, Independent Shareholders should be aware that, following completion of the Acquisition, as the members of the Concert Party will between them hold more than 50% of the Company's voting share capital, for as long as they continue to be treated as acting in concert they will normally be entitled to increase their aggregate holding in the Company without incurring any obligation under Rule 9 of the Takeover Code to make a mandatory offer to the other Shareholders. Individual members of the Concert Party will not however be able to increase their percentage shareholding through or between a Rule 9 threshold without Panel consent.

Additional information required by the Takeover Code in relation to the Rule 9 Waiver is detailed in Part III of the Admission Document.

13. Share Consolidation

Under the Share Consolidation it is proposed that every ten Existing Ordinary Shares be consolidated into one Ordinary Share. Accordingly, the proportion of Ordinary Shares held by each Shareholder immediately before the Share Consolidation will, save for fractional entitlements (which are discussed further below), be the same as the proportion of Ordinary Shares held by each Shareholder immediately after the Share Consolidation.

In the event that the number of Existing Ordinary Shares held by a Shareholder is not exactly divisible by ten, the Share Consolidation will generate an entitlement to a fraction of a new Ordinary Share. Any Ordinary Shares in respect of which there are such fractional entitlements will be aggregated and sold in the market for the best price reasonably obtainable. Given the small economic value of such fractional entitlements, the Directors and Proposed Directors are of the view that the distribution of the sale proceeds to the relevant Shareholders would result in a disproportionate cost to the Company. Based on a price per Existing Ordinary Share of 2.8 pence (being the volume weighted average price traded during the five trading days preceding the date of the Admission Document), the maximum value of the fractional entitlement applicable to any individual shareholding would be 25.2 pence.

Any Shareholder holding fewer than ten Existing Ordinary Shares at the Record Date will cease to be a Shareholder.

The Directors and Proposed Directors believe that the Share Consolidation will result in a more appropriate number of shares in issue given the Company's size. The Share Consolidation may also help to make the Company's shares more attractive to investors and may result in a narrowing of the bid/offer spread, thereby improving liquidity.

The entitlements to Ordinary Shares of holders of share options or other instruments convertible into Ordinary Shares will be adjusted in accordance with their terms to reflect the Share Consolidation.

14. Lock-Ins and Orderly Market Arrangements

Each of Mark Abrahams, Ian Smith and the Vendors has undertaken to the Company and WH Ireland that he will not sell or otherwise dispose of any interest in Ordinary Shares or any other securities held by him in the Company for a period of twelve months following Admission, save in limited circumstances such as, inter alia, a disposal pursuant to a general, partial or tender offer made to all Shareholders of the whole or part of the issued share capital of the Company; the giving of an irrevocable undertaking to accept an offer; or a disposal pursuant to a court order; or by his personal representatives.

In addition, each of Mark Abrahams, Ian Smith and the Vendors have also undertaken that they will not dispose of any interest in Ordinary Shares for a period of twelve months following the first anniversary of Admission without effecting such sale through WH Ireland (or the Company's broker from time to time).

The Company will ensure, in accordance with Rule 21 of the AIM Rules, that the New Board and applicable employees do not deal in any Ordinary Shares during a close period (as defined in the AIM Rules) and will take all reasonable steps to ensure compliance by the New Board and applicable employees.

15. Irrevocable undertakings

In addition to the undertakings of the Independent Directors set out in paragraph 22, Dion Steward has irrevocably undertaken to use all reasonable endeavours to procure that the nominee vote in favour of the Resolutions to be proposed at the General Meeting, in respect of his aggregate beneficial holding of 15,050,000 Existing Ordinary Shares, representing approximately 29.4% of the Existing Ordinary Shares. In aggregate, therefore, irrevocable undertakings to vote in favour of the Resolutions have been given by holders of 15,385,356 Existing Ordinary Shares, representing 30.1% of the Ordinary Shares that are entitled to vote.

Further details on the Irrevocable Undertakings are set out in paragraph 10(d) of Part VII of the Admission Document.

16. Change of name

Subject to the approval of Independent Shareholders by way of a special resolution, it is proposed, pursuant to Resolution 11, that the name of the Company be changed to Inspiration Healthcare Group plc shortly following the General Meeting. If Resolution 10 to approve the change of name of the Company is passed at the General Meeting, the Company's TIDM will change to IHC and its website address will be changed to www.inspiration-healthcare.com as soon as practicable following the General Meeting.

17. Admission, Settlement and CREST

Application will be made to the London Stock Exchange for the Enlarged Share Capital to be admitted to trading on AIM. It is expected that Admission will become effective and dealings, for normal settlement, will commence at 8.00 a.m. on 24 June 2015. This date and time may change.

Application will be made for the simultaneous cancellation of the Existing Ordinary Shares from CREST and admission of the Ordinary Shares to CREST and their admission to trading on AIM. The Ordinary Shares may thereafter be held and transferred by means of CREST. It is expected that Ordinary Shares which are held in uncertificated form will be credited to the relevant CREST accounts on 24 June 2015 and admitted to trading on AIM on the same day.

Definitive share certificates in respect of those Ordinary Shares which will be held by Shareholders who hold their Existing Ordinary Shares in certificated form are expected to be dispatched to relevant Shareholders by 1 July 2015. Share certificates in respect of Existing Ordinary Shares will cease to be valid on 24 June 2015 and, pending delivery of share certificates in respect of Ordinary Shares, transfers will be certified against the register.

Following the Share Consolidation the Company's new ISIN code will be GB00BXDZL105.

18. General Meeting

The notice convening the General Meeting is set out at the end of the Admission Document. The General Meeting has been convened for 11.00 a.m. on 23 June 2015 at the offices of Eversheds LLP, Bridgewater Place, Water Lane, Leeds LS11 5DR at which the following Resolutions will be proposed (in the case of Resolutions 1 to 7 (inclusive) as ordinary resolutions, with resolution 2 to be conducted on a poll of Independent Shareholders, and in the case of Resolutions 8 to 11 as special resolutions):

1. the Acquisition for the purposes of Rule 14 of the AIM Rules;

2. the Rule 9 Waiver;

3. the appointment of Neil Campbell as a director of the Company;

4. the appointment of Toby Foster as a director of the Company;

5. the appointment of Brook Nolson as a director of the Company;

6. the Share Consolidation;

7. the authorisation of the Directors to allot Ordinary Shares;

8. the removal of the concept of authorised share capital from the Company's memorandum and articles of association;

9. the authorisation of the Directors to make market purchases of Ordinary Shares on behalf of the Company;

10. the authorisation of the Directors to disapply statutory pre-emption rights in respect of the allotment of Ordinary Shares; and

11. the change of name of the Company to Inspiration Healthcare Group plc.

19. Recommendation and voting intentions

The Independent Directors, who have been so advised by WH Ireland, consider that the Proposals are fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. Furthermore the Independent Directors, who have been so advised by WH Ireland, consider that the Rule 9 Waiver is fair and reasonable and in the best interests of the Independent Shareholders and the Company as a whole. In providing advice to the Independent Directors, WH Ireland has taken into account the Independent Directors' commercial assessment of the transaction.

Accordingly, the Independent Directors recommend that Independent Shareholders vote in favour of the Resolutions to be proposed at the General Meeting, as they have irrevocably undertaken to do in respect of their own beneficial holdings of 335,356 Existing Ordinary Shares, representing 0.66% of the Company's issued share capital. Furthermore the Independent Directors recommend that Independent Shareholders vote in favour of Resolution 2 to approve the Rule 9 Waiver.