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2008 equity fundraising significantly exceeded 2007

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2008 equity fundraising significantly exceeded 2007

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  1. PLC Forum - Oxford28April 2009Speakers:Mark Russon, Business Development Manager, London Stock ExchangeWilliam Axtell, Associate, Charles Russell LLPPeter Elliott. Partner, Charles Russell LLPSusan Robertson, Chief Financial Officer, Oxford Catalysts Group plcTim Davis, Business Development Director, Charles Stanley Securities

  2. Market Activity • 2008 equity fundraising significantly exceeded 2007 • £71bn raised via IPOs and Secondary Issues in 2008 • £46bn raised via IPOs and Secondary Issues in 2007 • Underpinned by a number of substantial Secondary Issues • £47.6bn raised by the FTSE Bank sub-sector during 2008 • £27.6bn raised via Rights Issues during 2008 • Royal Bank of Scotland Group raised £12.2bn in May 2008 • Imperial Tobacco Group raised £5bn in May 2008 • HBOS raised £4.1bn in June 2008 • Centrica raised £2.2bn in November 2008

  3. Market Activity • Confirmed our position in 2008 as the world’s most international capital market • London Stock Exchange attracted 25 international IPOs • 13 international IPOs on the New York Stock Exchange and Nasdaq combined • Number of IPOs and capital raised were less in 2008 than in 2007 • 73 IPOs raised £7.2bn in 2008 • 35 Main Market, PSM and SFM IPOs raised £6.3bn • 38 AIM IPOs raised £917m • 269 IPOs raised £26.5bn in 2007 • 87 Main Market, PSM and SFM IPOs raised £20.2bn • 182 AIM IPOs raised £6.3bn

  4. Market Activity – Q1 2009 • Secondary Issues • £29.5bn raised during Q1 2009 (£1.9bn, Q1 2008) • £29bn raised by Main Market companies • HSBC Holdings raised £12.8bn in March • Lloyds Banking Group raised £4.5bn in January • £561m raised by AIM companies • Omega Insurance Holdings raised £130m in January • Raven Russia raise £76m in March • IPOs • £2.6m raised via 1 Main Market IPO during Q1 2009 • £253m raised via 16 IPOs during Q1 2008

  5. Market Activity – Main Market

  6. Market Activity - AIM

  7. Developments for Quoted Companies • Trading • New price list for trading services effected from September 2008 • Designed to reward liquidity providers for competing more aggressively to offer tighter spreads and greater depth of liquidity • Introduction of ‘Minimum Order Size’ • Growing Companies Investor Days • A one day meeting bringing together quoted companies and private client brokers • UK series underway for 2009 – Birmingham, Edinburgh, Leeds, Manchester, London • Equity Research • New equity research service for smaller companies launched in March 2009 • Developed to address the need for greater coverage of smaller quoted companies • Complements research from existing providers

  8. PLC Forum - OxfordApril 2009Mark RussonBusiness Development ManagerLondon Stock Exchange10 Paternoster Square, London, EC4M 7LSM: +44 (0)7766 421 679 F: +44 (0)20 7959 9760MRusson@londonstockexchange.comwww.londonstockexchange.com

  9. Acquiring a Listed Company 28 April 2009 William Axtell 0845 359 0096 william.axtell@charlesrussell.co.uk Charles Russell LLP 7600 The Quorum, Oxford Business Park North, Oxford OX4 2JZ www.charlesrussell.co.uk

  10. Acquiring a Listed Company • Two main ways to acquire an AIM or main market company: • A standard Takeover Offer (an “Offer”); or • A Scheme of Arrangement (a “Scheme”). • An Offer is a proposal by a bidder to the shareholders of a target company. • A Scheme is a statutory procedure which allows a company (in this case, the target) to make an arrangement or compromise with some or all of its members or creditors. • A Scheme is regulated by the Takeover Code and statute (Part 26 of the Companies Act 2006) and in addition requires sanction by the Court.

  11. Key differences between an Offer and a Scheme

  12. Key differences between an Offer and a Scheme Continued

  13. Key differences between an Offer and a Scheme Continued

  14. www.charlesrussell.co.uk Charles Russell LLP is a limited liability partnership registered in England and Wales, registered number OC311850, and is regulated by the Solicitors Regulation Authority. A list of members is available for inspection at the registered office, 5 Fleet Place, London EC4M 7RD. Any reference to a partner in relation to Charles Russell LLP is to a member of Charles Russell LLP. Charles Russell LLP is a member of the Association of European Lawyers and Alfa International.

  15. Reverse Takeovers 28 April 2009 Peter Elliott 0845 359 0091 peter.elliott@charlesrussell.co.uk Charles Russell LLP 7600 The Quorum, Oxford Business Park North, Oxford OX4 2JZ www.charlesrussell.co.uk

  16. Transactions involved within a Reverse Takeover A reverse takeover (“RTO”) consists of two transactions: • An acquisition; and • An admission to trading on AIM.

  17. RTO Thresholds • Rule 14 of the AIM Rules for Companies (the “AIM Rules”) defines a RTO as an acquisition or related acquisitions in a 12 month period which for an AIM company would: • Exceed 100% in any of the class tests; or • Result in a fundamental change in its business, board of directors or voting control. NB For an explanation of the class tests see Appendix 1.

  18. Conditions • The share purchase agreement entered into in order to effect a RTO is usually conditional upon the following: • The AIM company’s shareholders approving the transaction by way of a simple majority in a general meeting (i.e. more than 50% of those attending and voting being in favour of the transaction) (Rule 14 of the AIM Rules); and • The admission of the securities of the enlarged entity to trading on AIM.

  19. Break Fees • Where the City Code of Takeovers and Mergers (the “City Code”) applies, care should be taken when negotiating any break or abort fees payable to the AIM company. • The payment of no more than 1% of the value of the target calculated by reference to the offer price is usually acceptable. • The parameters that need to be observed with respect to break or abort fees are set out in Rule 21 of the City Code.

  20. Regulatory Considerations When considering a RTO the following regulatory issues must be considered: • Insider Dealing. (See Appendix 2) • Disclosures required under Rules 13 and 14 of the AIM Rules. (See Appendix 3) • Potential requirement that the target’s shareholders make a general offer for all the shares of the AIM company under Rule 9 of the City Code. (See Appendix 4)

  21. Re-Admission • On completion of the RTO trading in the AIM company’s securities is cancelled. • The enlarged entity must apply for re-admission and produce the same standard Admission Document that it would need to if it was making an application for the first time. • The AIM Admission Document requirements are set out in Schedule 2 to the AIM Rules. NB For more information on how to structure an AIM Admission Document see Appendix 5.

  22. Timing Typical Timetable for a RTO: • Entry into heads of terms and non disclosure agreement, due diligence exercise and negotiation of share purchase agreement. (4 - 8 weeks) • AIM Admission Document to be approved by the panelwhere necessary. (Procedure governed by Appendix 1 to the City Code) • From publication of the AIM Admission Document to re-admission to trading on AIM. (3 – 4 weeks)

  23. Appendix 1 – Class Tests • The class tests which are used to determine whether a transaction constitutes a RTO are set out in Schedule 3 to the AIM Rules. • They involve a comparison of the target and the AIM company with respect to the following: • Gross assets; • Profits; • Turnover; or • Gross capital. • They also involve a comparison of the consideration payable for the target and the market value of the securities to be issued in consideration relative to the market capitalisation of the AIM company.

  24. Appendix 2 – Insider Dealing • During the negotiation process of a transaction, any persons having knowledge of the transaction would be an insider for the purposes of the insider dealing rules under the Criminal Justice Act 1993 and also for market abuse under section 118 of the Financial Services and Markets Act 2000. • Insiders are prohibited from dealing in respect of securities in either the AIM company or the target until such time as the insider information is released into the public domain. • Rule 11 of the AIM Rules provides: • That a company need not publicise information about impending developments or matters in the course of negotiation; • May give such information in confidence to certain recipients, including advisors, prospective underwriters or placees (provided that such recipients are made aware that they cannot deal until the information is made public).

  25. Appendix 3 – Disclosure of Information • Disclosures required in respect of RTOs pursuant to Rule 14 of the AIM Rules include the following: • Particulars of the transaction; • A description of the business carried on / assets subject of the transaction; • The profits attributable to those assets; • The value of those assets; • The full consideration and how it is being satisfied; • The effect on the AIM company; • Details of any service contracts of its proposed directors; • For disposals, the application of the sale proceeds; • For disposals, if part of the consideration will consist of securities, whether such securities are to be sold or retained; and • Any other information necessary to evaluate the effect of the transaction.

  26. Appendix 3 – Disclosure of Information (Continued) • Under Rule 13 of the AIM Rules there are additional disclosures required if any party to a RTO is related to any other party. These include: • The name of the related party and the nature and extent of their interest in the transaction; and • A statement that, having consulted with the nominated advisor and with the exception of any related party director, its directors consider, that the terms of the transaction are fair and reasonable insofar as the shareholders are concerned. • NB A related party is a director or a substantial shareholder of the AIM company or person related to one of them.

  27. Appendix 4 – Waiver of Rule 9 • The issue of shares by the AIM company to the target’s shareholders could strictly trigger a requirement to make a general offer for all the shares of the AIM company under Rule 9 of the City Code. • This obligation may be waived by the Takeover Panel (the “Panel”) if the issue of the shares, and the waiver of Rule 9, is approved by a majority of shareholders independent of the transaction, i.e. independent of the Target and its shareholders (a “Whitewash”). • Where the Panel agrees to a Whitewash the Admission Document will need to be approved by the Panel which could have an impact on the timing. • Where there is a Whitewash additional disclosure requirements need to be met and these are covered by Appendix 1 to the City Code.

  28. Appendix 5 - AIM Admission Document • AIM Admission Document – RTO Typical Structure: • Front Cover; • Risk Factors (covering both companies/businesses); • Presentation of Information; • Summary; • Part I – Information on the company and its business including: • Background to and reasons for the acquisition; • Benefits of the acquisition; • A summary of the key terms of the acquisition; • Brief details of the proposed board of directors of the enlarged entity; • Resolutions to be put to general meeting; • If relevant, details of the City Code; • Part II – Information on the AIM company and its business.

  29. Appendix 5 – Admission Document (Continued) • Part III – Information on the target and its business; • Part IV – Financial information on the target; • Part V – Pro forma financial information, showing the effect of the acquisition on the profit and loss account and balance sheet of the AIM company as if the transaction had occurred at the date of such balance sheet; • Part VI – Additional information about the company and its management, including enlarged group working capital and information on both the AIM company and target on litigation and significant change; • Part VII – Competent person’s / expert’s report on the AIM company’s business; • Part VIII – Competent person’s / expert’s report on the target business; • Definitions; and • Notice of general meeting.

  30. www.charlesrussell.co.uk Charles Russell LLP is a limited liability partnership registered in England and Wales, registered number OC311850, and is regulated by the Solicitors Regulation Authority. A list of members is available for inspection at the registered office, 5 Fleet Place, London EC4M 7RD. Any reference to a partner in relation to Charles Russell LLP is to a member of Charles Russell LLP. Charles Russell LLP is a member of the Association of European Lawyers and Alfa International.

  31. Deal Analysis: Oxford Catalysts: Acquisition of Velocys, Inc 28 April 2009 Peter Elliott 0845 359 0091 peter.elliott@charlesrussell.co.uk Charles Russell LLP 7600 The Quorum, Oxford Business Park North, Oxford OX4 2JZ www.charlesrussell.co.uk

  32. Deal Structure • Oxford Catalysts Group Plc (“OCG”) acquired Velocys, Inc (“Velocys”) for approximately £21.4 million. • The deal was funded as follows: • £17.2 million by the issue of 10,442,207 new shares; • £3.1 million in cash; and • £1.1 million either in rollover options or cash to holders of options over Velocys stock. • Overall dilution was approximately 18%.

  33. Rationale for the Deal • The main rationale for the deal was the potential synergy in the area of reactors utilising Fischer Tropsch high activity catalysts and the opportunity to offer integrated catalyst / reactor solutions; (For further details of the synergy benefit see Appendix 1) • An accelerated time to market; • Access to Velocys’ partnerships in the market; • Stronger competitiveness; and • Strengthened critical mass.

  34. The Placing • To fund the cash element of the acquisition price, and to provide working capital to finance the enlarged entity’s integration, development and commercialisation strategies, OCG raised approximately £10.3 million (approximately £8.2 million net of expenses). • The fund-raising was: • Conditional; • Non-pre-emptive; and • Underwritten by the two joint brokers/book-runners/underwriters. NB OCG’s NOMAD, KBC, who was one of the two (above), was also NOMAD in connection with the deal.

  35. Details of the Placing • The two book-runners conditionally placed shares at £1.25 per share with institutional investors to raise £10.3 million before expenses. • The placing was underwritten by the booker-runners by way of an Underwriting Agreement. (For further details see Appendix 2) • Estimated placing and other transaction costs were £500,000. • There were additional associated costs of £1,600,000. • OCG acquired Velocys under a full Share Purchase Agreement. (For further details see Appendix 3)

  36. Other Deal Issues • Costs Agreement – this determined who was liable for costs dependent upon the different scenarios covered in the Agreement. (For further details see Appendix 4) • Irrevocable Undertakings – OCG secured irrevocable undertakings to vote in favour of the resolutions at the general meeting from shareholders representing 46.62% of the existing shares in issue. • Share Options – OCG had both stand alone options and an EMI share option plan. Velocys had a stock incentive plan under which it had granted options over its stock. These options had to be either exercised prior to completion or rolled over into options over the shares of the enlarged entity. • Lock In and Orderly Market Arrangements – The Directors and key employees of OCG signed up to a 12 month lock in and a further 12 month orderly market arrangement. Battelle signed up to a 24 month lock in. (For further details see Appendix 5)

  37. Reports Technical Expert’s Report: • Covers both OCG and Velocys technologies; and • Endorses the synergies of the Acquisition. Patent Attorney’s Report: • Covers the patent strategy and portfolio of both OCG and Velocys; and • Explains the composition of the respective portfolios.

  38. Financial Information The Admission Document gives: • Interim financial information on both groups; • 3 years financial information for OCG extracted from its audited financial statements; • Accountant’s report for Velocys for a 3 year period; and • An unaudited pro-forma statement of the net assets of the enlarged entity.

  39. Management and Incentive Arrangements • The existing 5 directors remained directors of OCG on Admission, so at board level the acquisition did not result in a change. • At key management level, the enlarged entity benefited from the integration of key people – 3 were from OCG and 5 were from Velocys. Thus Velocys contributed key marketing, technology, IP/licensing and product development people. • OCG took the opportunity to change its share option scheme such that options could be granted at an exercise price equal to the nominal value of the shares (rather than market value). The nominal value exercise price options are to be used in future to pay part of the annual bonus of executive management as shares, rather than cash.

  40. Appendix 1 – Synergy Benefits • The main rationale for the deal was the potential synergy in the area of reactors utilising Fischer Tropsch (“FT”) high activity catalysts. • OCG develops and commercialises FT catalysts primarily for synthetic fuels. These are significantly more active than those that can be utilised by conventional reactors. • Velocys has developed microchannel reactors, which are able to use high activity FT catalysts. Microchannel reactors are considerably more efficient and cost effective than conventional technologies and Velocys are a world leader in the process. • The fit, therefore, between the two companies, is that, following the merger, OCG is now able to extend its offering to include Velocys’ microchannel reactors. This gives OCG a strong competitive advantage in offerings in the emerging synthetic fuels market, particularly in smaller scale applications of FT, where their catalysts can be made to be extremely active.

  41. Appendix 2 – Details of the Underwriting Agreement • Under the Underwriting Agreement: • OCG and its directors gave warranties and indemnities as to the accuracy of the information contained in the Admission Document; • OCG paid a commission of 3% on all funds raised; and • OCG paid a corporate finance fee to KBC.

  42. Appendix 3 – Details of the Acquisition Agreement • The Acquisition Agreement: • Was subject to the OCG shareholder approval and re-admission; • Provided for the payment of the consideration; • Provided for adjustment of the consideration by reference to completion accounting; • Contained full warranties, and a tax covenant in favour of OCG; and • Contained specific indemnities in favour of OCG.

  43. Appendix 4 – Details of Costs Agreement • The Costs Agreement stipulated that: • If completion had not occurred Battelle would have been required to pay half of both the Acquisition and Admission costs up to £425,000; • If completion had not occurred as a result of Battelle breaching certain exclusivity provisions, Battelle would have been liable to pay all of the costs incurred; and • If completion had not occurred because of OCG’s shareholders failure to approve the deal, OCG would have been liable for all costs.

  44. Appendix 5 – Lock In and Orderly Market Arrangements • Directors and key employees (and their families) accepted restrictions under which they agreed not to dispose of any shares for 12 months other than in limited circumstances, and, for a further 12 months they agreed only to dispose of shares through KBC. • Battelle entered into a similar lock-in for 24 months, subject to the ability to sell shares in the second period of 12 months in the event of claims under the Acquisition Agreement exceeding $5 million.

  45. www.charlesrussell.co.uk Charles Russell LLP is a limited liability partnership registered in England and Wales, registered number OC311850, and is regulated by the Solicitors Regulation Authority. A list of members is available for inspection at the registered office, 5 Fleet Place, London EC4M 7RD. Any reference to a partner in relation to Charles Russell LLP is to a member of Charles Russell LLP. Charles Russell LLP is a member of the Association of European Lawyers and Alfa International.

  46. Securing investment in the current climate 28 April 2009

  47. Agenda • Where we are now • Maintaining existing shareholders’ support • Widening your shareholder base • Standing out from the crowd • The future

  48. Where we are now • Stockmarket remains in limbo • valuations do not reflect reality • “cheap” propositions abound - smaller companies particularly so • institutional move towards larger, more liquid companies • poor market liquidity • reducing corporate earnings: will it get worse before it gets better? • some interest in specific stocks / fund raisings, but value-driven • investors sitting on cash / their hands • advisory / broking firms have their own problems

  49. Maintaining existing shareholders’ support – considerations • Be consistent and remain transparent • No alarms, no surprises • be as open as you can without compromising them or you • Under promise and over deliver • Disappoint at your peril

  50. Maintaining existing shareholders’ support – practical steps • Engage with them • help them understand the opportunities / threats / issues • demonstrate progress • build credibility / track record • Maintain consistent information flow • City • Trade and industry • Be available for results / institutional meetings

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