Sondrel Plc Regulatory News (SND)

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (EU) 596 / 2014 which forms part of United Kingdom law by virtue of the European Union (Withdrawal) Act 2018. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

28 March 2024

Sondrel (Holdings) plc

("Sondrel", the "Company" and together with its subsidiaries the "Group")

Further Convertible Loan and Amended Exclusivity Agreement

Further to the announcement on 6 March 2024 (RNS Number: 7221F) ("Previous Announcement"), Sondrel is pleased to announce that it has entered into a further £2 million ("Principal Amount") secured 15% convertible loan agreement (the "Second Loan") with ROX Equity Partners Limited ("ROX"), a UK-based private equity firm and long term investor specialising in emerging technology companies (the "Second Loan Agreement").

Second Loan Agreement

The Second Loan Agreement is substantially on the same terms as the first £874,600 loan (the "First Loan") agreement made between Sondrel and ROX which is described in the Previous Announcement (the "First Loan Agreement"). The same rate of interest of 15% per annum applies to the Second Loan which accrues daily and is payable quarterly on the last day of March, June, September and December with the Second Loan and any unpaid interest being repayable in full on the third anniversary of the drawdown date.

The proceeds of the Second Loan are expected to be received by the Company on 28 March 2024 and will be utilised to enable the Group to meet March and April 2024 payroll and immediate working capital requirements.

Subject to certain events set out in the Second Loan Agreement, the Principal Amount of the Second Loan (excluding any interest accrued but unpaid or compounded) is convertible into ordinary shares of £0.001 in the Company ("Ordinary Shares") at the discretion of ROX or, if earlier, automatically on completion of the proposed equity fundraise by the Company as envisaged by the amended Exclusivity Agreement referenced below (the "Fundraise"). The conversion price for the Principal Amount will be 10 pence per Ordinary Share ("Second Conversion Shares").

The Second Loan is secured by the all-monies debenture and deed of guarantee granted by the Company's UK subsidiaries, Sondrel Limited and Sondrel (SOC Solutions) Ltd, to ROX in connection with the First Loan Agreement as referenced in the Previous Announcement.

Exclusivity Agreement

As confirmed in the Previous Announcement, the Company entered into an exclusivity agreement with ROX on 5 March 2024 ("Exclusivity Agreement"), granting ROX the right to participate, alongside existing shareholders, in the Fundraise. The Company has entered into a deed of variation to the Exclusivity Agreement pursuant to which the size of the proposed Fundraise has been increased from £6.5 million to £8.5 million, inclusive of the proceeds of the First Loan and Second Loan.

Under the terms of the Exclusivity Agreement (as amended), ROX has confirmed, depending on the level of existing shareholders' participation in the Fundraise and subject to certain conditions including, inter alia, a waiver of Rule 9 of the City Code on Takeovers and Mergers (the "Takeover Code") being obtained from the Panel on Takeovers and Mergers of the obligation that would otherwise arise on ROX to make a general offer to the shareholders of the Company pursuant to Rule 9 of the Takeover Code as a result of the issue to them of more than 29.9 per cent. of the Company's issued ordinary share capital as enlarged by the Fundraise ("Rule 9 Waiver") and the approval of the Company's shareholders of such Rule 9 Waiver ("Shareholders' Approval"), its willingness to subscribe for all of the new Ordinary Shares to be issued in the Fundraise to raise gross proceeds of £8.5 million for the Company ("Potential Investment"). Therefore, subject to the relevant conditions being fulfilled, the Fundraise is expected to be fully subscribed.

In addition to the Rule 9 Waiver and the Shareholders' Approval, ROX's commitment to acquire up to 85,000,000 new Ordinary Shares (including the Conversion Shares referenced in the Previous Announcement and the Second Conversion Shares) and is subject to the approval of the Secretary of State pursuant to the National Security and Investments Act 2021.

In addition, under the amended terms of the Exclusivity Agreement, the Company has agreed, in the event that the Fundraise completes, to extend the exclusivity period for a further 12 months from completion of the Fundraise. During this 12 month period, ROX has agreed to consider a request from the Company to provide additional funding in order to finance the Transformation Plan (as defined below), up to a maximum additional amount of £1.5 million which would, if approved by ROX, be subscribed for by way of additional Ordinary Shares at 10 pence per share.

Transformation Plan

Under the Second Loan Agreement the Company has agreed to implement a transformation plan which is expected to involve certain changes being made to its board of directors including the appointment of two additional independent non-executive directors in due course ("Transformation Plan").

As part of the Transformation Plan, Graham Curren has agreed that he will transition from his role as Chief Executive Officer of the Company and become Chief Executive Officer of a newly established subsidiary of the Company which will concentrate on the strategy and growth of the Group. In this new role, which would take effect from completion of the Fundraise, Graham's significant experience and relationships with participants in the semiconductor industry will continue to deliver value to the Company. Graham will retain his role as a statutory director on the board of the Company.

It is anticipated that David Mitchard will shortly be appointed by the Company as interim Chief Executive Officer in a non-board capacity. David has more than 20 years' experience in leading large corporate divisions in complex engineering environments and successfully implementing turnaround strategies. Most recently, David was Managing Director of Maritime Services at BAE Systems. David brings with him a wealth of experience which the Company believes will benefit its ability to execute the transformation of its business.

As part of the Transformation Plan, the Company has resolved (including by unanimous approval of the independent non-executive directors) to seek a proposal to cancel the admission of the Ordinary Shares to trading on AIM ("Cancellation") in such manner that would allow an orderly exit for those shareholders who do not wish to hold shares in a private company environment, where a trading facility will not be offered. The Company and ROX are of the opinion that the costs and complexities of being quoted on AIM do not benefit the Company and its shareholders during a period where the business is undergoing transformation.

It is anticipated that a Cancellation resolution will be put to Shareholders within six months of completion of the Fundraise. Graham Curren has irrevocably undertaken to the Company and to ROX to vote in favour of a Cancellation resolution in respect of those shares in which he and his connected persons are interested, being in aggregate 39,253,866 Ordinary Shares, representing 44.88% of the Company's existing issued Ordinary Share capital.

Details of any changes to the Company's board of directors will be announced in due course and further details of the Transformation Plan will be included in the Rule 9 Waiver circular and further announcements to be released by the Company in connection with the Fundraise and the Potential Investment. The irrevocable undertaking provided by Graham Curren also includes an irrevocable undertaking to the Company and to ROX to vote in favour of the resolutions to be proposed by the Company in the Rule 9 Waiver circular in respect of those shares in which he and his connected persons are interested, being in aggregate 39,253,866 Ordinary Shares, representing 44.88% of the Company's existing issued Ordinary Share capital.

There can be no certainty that the conditions to the Potential Investment will be satisfied or that ROX will proceed with the Potential Investment or that ROX will provide any further funding to the Company. Under the terms of the Exclusivity Agreement, the Company has undertaken (subject to ROX not withdrawing from negotiations with the Company) not to solicit other forms of investment from third parties prior to 30 September 2024 save for engaging with the Company's existing shareholders in connection with their participation in the Fundraise. Should ROX not proceed with the Potential Investment, the Company will not have sufficient working capital resources to meet its immediate requirements and may have to cease trading.

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About Sondrel

Sondrel is a UK-based fabless semiconductor company specialising in high end, complex digital Application Specific Integrated Circuits (ASICs) and System on Chips (SOCs). It provides a full turnkey service in the design, prototyping, testing, packaging and production of ASICs and SoCs.

The Company is one of only a few companies capable of designing and supplying the higher-spec chips built on the most advanced semiconductor technologies, selling into a range of hyper growth end markets such as high-performance computing, automotive, artificial intelligence, VR/AR, video analytics, image processing, mobile networking and data centres. Sondrel designs have enabled products by leading technology brands including Apple (iPhone), Sony (PlayStation), Meta's (Oculus), Samsung, Google and Sony smartphones, JVC (prosumer camcorders), Tesla and Mercedes-Benz cars.

Sondrel is well-established, with a 20-year track record of successful delivery, supported by long standing ecosystem partnerships including Arm, TSMC and Samsung. Headquartered in the UK, Sondrel has a global presence with offices in UK, USA, China, India and Morocco.

For more information please visit: ir.sondrel.com.