ROCK SOLID IMAGES PLC 
By If you are in any doubt as to the action you should take, you are recommended to seek your own independent financial advice immediately from your stockbroker, bank manager, solicitor, accountant or other independent financial adviser duly authorised under the Financial Services and Markets Act 2000, if you are in the United Kingdom, or, if not, from another appropriately authorised independent financial adviser.
If you have sold or otherwise transferred all of your Rock Solid Images plc ("RSI") shares please send this document as soon as possible to the purchaser or transferee, or to the stockbroker, bank or other agent through whom the sale or transfer was effected, for transmission to the purchaser or transferee. However, this document and the accompanying documents should not be forwarded or transmitted in or into a Restricted Jurisdiction. The distribution of this document in jurisdictions other than the United Kingdom may be restricted by law and therefore persons into whose possession this document comes should inform themselves about and observe such restrictions. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.
Fox-Davies Capital Limited ("Fox-Davies"), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting exclusively for RSI and no one else in connection with the Partial Offer and will not be responsible to anyone other than RSI for providing the protections afforded to customers of Fox-Davies nor for providing advice in relation to the Partial Offer or any other matter referred to in this document.
ROCK SOLID IMAGES plc(a company incorporated in England and Wales and registered with number 04329960)
OFFEREE BOARD RESPONSE TO OFFERYour attention is drawn to the letter from the Chairman of RSI which is set out in this document and which contains, inter alia, a statement from the RSI Directors that they make no recommendation to RSI Shareholders to accept or decline the Partial Offer. Unless permitted by applicable law and regulation, copies of this document and any related documents are not being, and must not be, directly or indirectly, mailed or otherwise forwarded, distributed or sent in or into or from a Restricted Jurisdiction and persons receiving such documents (including, without limitation, custodians, nominees and trustees) must not mail or otherwise forward, distribute or send them in or into or from a Restricted Jurisdiction.
Forward-looking statements
This document, including information included or incorporated by reference in this document, contains "forward looking statements" concerning RSI. These statements are based on the current expectations of the Board and are naturally subject to uncertainty and changes in circumstances. Generally, the words "will", "may", "should", "could", "would", "can", "continue", "opportunity", "believes", "expects", "intends", "anticipates", "estimates" or similar expression identify forward-looking statements. Forward-looking statements involve risk and uncertainties that could cause actual results to differ materially from those expressed in the forward- looking statements. Some of these risks and uncertainties relate to factors that are beyond RSI's ability to control or estimate precisely, such as future market conditions and the behaviours of other market participants. These include factors such as: local and global political and economic conditions; significant price discounting by competitors; changes in customer habits and preferences; foreign exchange rate fluctuations and interest rate fluctuations (including those from any potential credit rating decline); legal or regulatory developments and changes; the outcome of any litigation; the impact of any acquisitions or similar transactions; competitive product and pricing pressures; success of business and operating initiatives; and changes in the level of capital investment. Other unknown or unpredictable factors could cause actual results to differ materially from those in the forward looking statements. Given these risks and uncertainties, undue reliance should not be placed on forward-looking statements as a prediction of actual results. RSI assumes no obligation and does not intend to update these forward-looking statements whether as a result of new information or otherwise, except as required pursuant to applicable law and regulation.
Directors:
Richard Charles Cooper (Executive Chairman and Chief
Executive Officer)
Robert Ian Auckland (Chief Financial Officer)
Dr. Lucy MacGregor (Chief Technology Officer)
Keith Geddes Lough (Independent Director and Non-executive
director)
Registered Office:
c/o Pinsent Masons LLP
30 Crown Street
London
EC2A 4ES
7 May 2012
Dear Shareholder and holders of options in relation to RSI Shares
On 23 April 2012 Thalassa Holdings Ltd ("Thalassa") posted a
Partial Cash Offer to RSI Shareholders pursuant to which
Thalassa offered to acquire up to 40,952,521 RSI Shares,
representing approximately
25.89 per cent. of the entire issued ordinary share capital
of RSI. If the Partial Offer is accepted in full,
Thalassa, together with its existing shareholding of
6,342,322 RSI Shares, will hold 47,295,496 RSI Shares,
representing approximately 29.90 per cent. of the entire
issued ordinary share capital of RSI.
After evaluating various factors in relation to the Offer,
the Directors make no recommendation to RSI Shareholders to
accept or decline the Offer. In assessing whether or not to
accept the Partial Offer, the Directors suggest that RSI
Shareholders take the following issues into account.
The Cash Offer price appears opportunistic given that it
represents a discount of approximately
52.0 per cent to 1.0 pence, being the closing price on AIM on
30 March 2012 (being the last
Business Day prior to the commencement of the Offer Period).
As previously stated, in the Directors' opinion, the trading
price of the Ordinary Shares on AIM did not reflect the true
value of the Company and its business.
The Cash Offer of 0.48 pence values the entire RSI Group at
approximately £760,000, which is significantly less than the
consideration of approximately £12.0 million paid by the
Company when it acquired Rock Solid Images, Inc. on 22 August
2007. Rock Solid Images, Inc. is the Company's principal
trading subsidiary and since it joined the RSI Group over
four years ago it has strengthened its technology portfolio
and made no significant asset disposals.
The Directors have concluded that RSI needs to raise further
capital to continue to build on the significant progress
made, however, they have yet to conclude on how much capital
will be required and consequently terms have not been agreed
with potential providers of this capital. These terms, once
agreed and approved would determine the extent of any future
dilution of the interests of existing RSI shareholders.
The delisting from AIM has resulted in limited liquidity for
RSI Shares. RSI Shares can no longer be traded on a
recognised stock exchange although a matched bargain platform
for RSI shares is provided by BritDAQ on its website at
www.britdaq.com.
The Partial Offer states that Thalassa has no intention of
proposing any changes to the board of RSI or Thalassa or the
existing employment rights of management and employees of RSI
or Thalassa. Furthermore the Partial Offer states that
Thalassa has no intention to propose changes to the location
of any of RSI's or Thalassa's operations, nor to propose the
redeployment of any of the fixed assets of RSI or Thalassa.
Thalassa have also stated that they have no intention to
propose changes to the existing trading facilities of
Thalassa or RSI Shares. Accordingly the Board are indifferent
to the Partial Offer in so far is relates to the offeror's
plans for the Group and its employees.
The following is an extract from the announcement made on 12
March 2012:
"Since 18 January 2012, when the Company reported its results
for the 12 months ending 31 August 2011, it has continued to
move forward with developing its business. Sales revenues in
January and February were less than anticipated due to
operational delays in processing client data, however
management has now resolved the issue and the processing team
is working hard to catch up.
Revenues in the second half are anticipated to be
significantly above those of the first half and will benefit
from the large contract awards announced in November,
December and January. Consequently the second half is
expected to also be significantly more profitable than the
first half at the pre-tax level. Total revenues for the full
year to 31st August 2012 are expected to be in the £5.5 to £7
million range, which compares favourably with revenues of
£4.0 million for the year ended 31st August 2011.
Although the Company's backlog and prospective pipeline
are at record levels the aforementioned production delays and
larger contracts require the Company to have a stronger
working capital base and in order to address this short term
requirement the Board has agreed, subject to finalising
legally binding documentation, with EuroTrans Skips AS
("EuroTrans") and East Hill Venture Fund, LLP (an
affiliate of East Hill Hedge Fund, LLC ("East
Hill")) two of the Company's largest shareholders,
to put in place a secured Credit Facility of up to $1
million. To the extent that it is drawn upon (and an initial
advance of $250,000 has already been made) the Credit Line
facility will carry an annual interest charge of 10.75% above
US prime and will expire on 30 September 2012. Due to their
respective holdings of 24.82% and 12.13% in the ordinary
share capital of the Company, EuroTrans and East Hill are
classified as related parties for the purposes of the Credit
Facility. The directors of the Company have consulted with
its nominated adviser, Fox-Davies Capital Limited, and
consider that the terms of the Credit Facility are fair and
reasonable insofar as the Company's shareholders are
concerned."
Since this announcement was made on 12 March 2012, the
Company has added to its backlog, though not at the rate that
was anticipated earlier, and although revenues are expected
to be higher in the second half of the year, total revenues
for the full year to 31 August 2012 are expected to be in the
£5.0 to £5.5 million range, which still compares favourably
with revenues of £4.0 million for the year ended 31 August
2011.
The Directors, who have been so advised by Fox-Davies, make
no recommendation whether to accept or reject the Partial
Offer. In providing advice to the Directors, Fox-Davies has
taken into account the commercial assessments of the
Directors.
The employee representative's opinion can be found in
Appendix 2.
As previously stated, the Directors do not intend to accept
the Partial Offer in respect of their own shareholdings.
Yours faithfully
Executive Chairman and Chief Executive Officer
Rock Solid Images plc
The Directors, whose names are set out in paragraph 2 below, accept responsibility for the information contained in this document, except that the only responsibility accepted by them in respect of the information contained in this document relating to the Thalassa Group and the Thalassa Directors, which has been compiled from published sources, is to ensure that such information has been correctly and fairly reproduced and presented. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
2. Directors
The names of the Directors, and their respective positions,
are set out below: Name Position
Richard Charles Cooper Chief Executive Officer and Executive
Chairman
Robert Ian Auckland Chief Financial Officer
Dr. Lucy MacGregor Chief Technology Officer
Keith Geddes Lough Non-executive Director and Independent
Director
The following are no longer Directors: Name Position
Alan Kennedy Faichney Non-executive Director (resigned 18
April 2012) Peter Andrew Reilly Non-executive Chairman
(resigned 18 April 2012)
Each of the Directors has a business address at c/o Pinsent
Masons LLP, 30 Crown Street, London, EC2A
4ES, which is the registered office of RSI.
3.1 For the purposes of this paragraph 3 and paragraph 4
below:
(a) "acting in concert" has the meaning given to it in the
City Code;
(b) "arrangement" includes indemnity or option arrangements,
and any agreement or understanding, formal or informal, of
whatever nature, relating to securities which may be an
inducement to deal or refrain from dealing (but does not
include an irrevocable undertaking or letter of intent to
accept or not accept the Partial Offer, or to vote in favour
of or against a resolution of Thalassa or RSI in the context
of the Partial Offer or, in either case, to procure another
person to do so);
(c) "associate" of any company means, unless otherwise
stated:
(i) its parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies (for this purpose ownership or control of 20% or more of the equity share capital of a company is regarded as the test of associated company status);
(ii) connected advisers and persons controlling, controlled by or under the same control as such connected advisers;
(iii) the directors (together with their close relatives and related trusts) of the company or any company covered in sub-paragraph (i);
(iv) the pension fund of the company or any company covered in sub-paragraph (i);
(v) any investment company, unit trust or other person whose investments an associate manages on a discretionary basis, in respect of the relevant investment accounts;
(vi) an employee benefit trust of the company or any company covered in subparagraph
(i); and
(vii) a company having a material trading arrangement with a company;
(d) "connected adviser" includes (i) in relation to RSI, an
organisation which is advising RSI in relation to the Offer,
and a corporate broker to RSI; (ii) in relation to a person
who is acting in concert with RSI, an organisation which is
advising that person either in relation to the Partial Offer
or in relation to the matter which is the reason for that
person being a member of the relevant concert party; and
(iii) in relation to a person who is an associate of RSI by
virtue of sub-paragraph (i) of paragraph 3.1(c), an
organisation which is advising that person in relation to the
Partial Offer (save that a corporate broker which is unable
to act in connection with the Partial Offer because of a
conflict of interest will not normally be treated as a
connected adviser);
(e) "control" means an interest, or interests, in shares
carrying 30 per cent. or more of the voting rights
attributable to the share capital of a company which are
currently exercisable at a general meeting, irrespective of
whether the holding or holdings give(s) de facto control;
(f) "dealing" includes:
(i) the acquisition or disposal of securities, of the right (whether conditional or absolute) to exercise or direct the exercise of the voting rights attaching to securities, or of general control of securities;
(ii) the taking, granting, acquisition, disposal, entering into, closing out, termination, exercise (by either party) or variation of an option (including a traded option contract) in respect of any securities;
(iii) subscribing or agreeing to subscribe for securities;
(iv) the exercise or conversion, whether in respect of new or existing securities, of any securities carrying conversion or subscription rights;
(v) the acquisition of, disposal of, entering into, closing out, exercise (by either party) of any rights under, or variation of, a derivative referenced, directly or indirectly, to securities;
(vi) entering into, terminating or varying the terms of any agreement to purchase or sell securities; and
(vii) any other action resulting, or which may result, in an increase or decrease in the number of securities in which a person is interested or in respect of which he has a short position.
(g) "derivative" includes any financial product whose value
in whole or in part is determined directly or indirectly by
reference to the price of an underlying security;
(h) "disclosure period" means the period beginning on 2 April
2012 and ending on 4 May 2012 (being the latest practicable
date prior to the posting of this document);
(i) "exempt fund manager" has the meaning given to it in the
City Code;
(j) "exempt principal trader" has the meaning given to it in
the City Code;
(k) a person has an "interest", or is "interested", in
relevant securities if he has long economic exposure, whether
absolute or conditional, to changes in the price of
securities. In particular, a person will be treated as having
an interest in securities if:
(i) he owns them;
(ii) he has the right (whether conditional or absolute) to
exercise or direct the exercise of the voting rights
attaching to them or has general control of them;
(iii) by virtue of any agreement to purchase, option or
derivative he:
(A) has the right or option to acquire them or call for their
delivery; or
(B) is under an obligation to take delivery of them,
whether the right, option or obligation is conditional or
absolute and whether it is in the money or otherwise; or
iv) he is party to any derivative:
(A) whose value is determined by reference to their price;
and
(B) which results, or may result, in his having a long
position in them,
and references to interests of a Director in relevant
securities shall include all interests of any other person
whose interests in shares are attributed to that Director,
pursuant to Part 22 of the Companies Act 2006;
(l) "relevant Thalassa securities" mean relevant securities
(such term having the meaning given to it in the City Code in
relation to an offeror) of Thalassa including Thalassa
Consideration Shares and other equity share capital in
Thalassa (or derivatives referenced thereto) and securities
convertible into, rights to subscribe for and options
(including traded options) in respect thereof;
(m) "relevant RSI securities" mean relevant securities (such
term having the meaning given to it in the City Code in
relation to an offeree) of RSI including RSI Shares and other
equity share capital of RSI (or derivatives referenced
thereto) and securities convertible into, rights to subscribe
for and options (including traded options) in respect
thereof; and
(n) "short position" means any short position (whether
conditional or absolute and whether in the money or
otherwise), including any short position under a derivative,
any agreement to sell or any delivery obligation or right to
require another person to purchase or take deliver.
References to a pension fund of RSI or of any company that is
an associate of RSI by virtue of sub- paragraph (i) of
paragraph 3.1(c) do not include any such pension fund whose
assets are managed under an agreement or arrangement with an
independent third party which gives the third party absolute
discretion regarding dealing, voting and offer acceptance
conditions relating to the fund.
Interests in RSI Shares
3.2 As at 4 May 2012 (being the latest practicable date prior to the posting of this document), the Directors (and those persons Directors who have recently resigned as directors of the Company) held the following interest in, or rights to subscribe in respect of, relevant RSI securities:
Issued Share Capital:
Name | Number of RSI Shares | Percentage of RSI issued share capital |
Keith Lough | 550,000 | 0.35% |
Alan Faichney (Resigned) | 125,000 | 0.08% |
Peter Reilly (Resigned) | 1,705,000 | 1.08% |
Richard Cooper | 323,306 | 0.20% |
Dr. Lucy MacGregor | 1,064,686 | 0.67% |
Robert Auckland | 325,000 | 0.21% |
TOTAL | 4,092,992 | 2.59% |
Share options and share awards:
Richard Cooper has the following share options and share awards:
(i) A share award of 570,859 Shares at an award price of 1 pence, subject to performance conditions which are required to be met by 30 November 2012
(ii) Options over 2,750,000 Shares at an exercise price of 6 pence with an earliest exercise date of 28 February 2012 and an expiry date of 28 February 2021
Lucy MacGregor has the following share options and share awards:
(i) Options over 141,031 Shares at an exercise price of 29.81 pence with an earliest exercise date of 1 December 2004 and an expiry date of 30 November 2013.
(ii) A share award of 339,030 Shares at an award price of 1 pence, subject to performance conditions which are required to be met by 30 November 2012
(iii) Options over 1,750,000 Shares at an exercise price of 6 pence with an earliest exercise date of 28 February 2012 and an expiry date of 28 February 2021
Bob Auckland has the following share options and share awards:
(i) A share award of 354,519 Shares at an award price of 1 pence, subject to performance conditions which are required to be met by 30 November 2012
(ii) Options over 1,750,000 Shares at an exercise price of 6 pence with an earliest exercise date of 28 February 2012 and an expiry date of 28 February 2021
4. Interests and dealings - General
4.1 Save as disclosed in paragraph 3 above, as at 4 May 2012
(being the latest practicable date prior to the posting of
this document):
(a) no member of the RSI Group nor any person acting in
concert with RSI or with whom RSI or any person acting in
concert with RSI has an arrangement had any interest in,
right to subscribe in respect of or any short position in
relation to relevant RSI securities or relevant Thalassa
securities nor has any such person dealt for value in any
relevant RSI securities or relevant Thalassa securities
during the Offer Period;
(b) none of the Directors had any interest in, right to
subscribe in respect of, or any short position in relation to
relevant RSI securities, or relevant Thalassa securities nor
has any such person dealt for value in any relevant RSI
securities or any relevant Thalassa securities during the
Offer Period;
(c) no companies which are associates of RSI by virtue of
sub-paragraph (i) of paragraph 3.1(c) had any interest, right
to subscribe in respect of or any short position in relation
to relevant RSI securities or relevant Thalassa securities
nor has any such person dealt for value in any relevant RSI
securities or relevant Thalassa securities during the Offer
Period;
(d) no pension funds of RSI or of any company which is an
associate of RSI by virtue of sub- paragraph (i) of paragraph
3.1(c) had any interest, right to subscribe in respect of or
any short position in relation to relevant RSI securities or
relevant Thalassa securities nor has any such person dealt
for value in any relevant RSI securities or relevant Thalassa
securities during the Offer Period;
(e) no employee benefit trusts of RSI or of any company which
is an associate of RSI by virtue of sub-paragraph (i) of
paragraph 3.1(c) had any interest, right to subscribe in
respect of or any short position in relation to relevant RSI
securities or relevant Thalassa securities nor has any such
person dealt for value in any relevant RSI securities or
relevant Thalassa securities during the Offer Period;
(f) no connected advisers (including any person controlling,
controlled by or under the same control as any connected
adviser (except for an exempt principal trader or an exempt
fund manager)) to RSI, or to any company which is an
associate of RSI by virtue of sub-paragraph (i) of paragraph
3.1(c) had any interest, right to subscribe in respect of or
any short position in relation to relevant RSI securities or
relevant Thalassa securities nor has any such person dealt
for value in any relevant RSI Securities or relevant Thalassa
securities during the Offer Period;
(g) no persons who have an arrangement with RSI, or with any
company which is an associate of RSI by virtue of
sub-paragraphs (i) to (iv) of paragraph 3.1(c) had any
interest, right to subscribe in respect of or any short
position in relation to relevant RSI securities or relevant
Thalassa securities nor has any such person dealt for value
in any relevant RSI Securities or relevant Thalassa
securities during the Offer Period; and
(h) neither RSI, nor any person acting in concert with RSI
has borrowed or lent any relevant RSI securities or any
relevant Thalassa securities save for any borrowed shares
which have been either on-lent or sold.
4.2 Save as disclosed in paragraph 7 below, neither RSI nor
any of its associates has procured that any other person give
any irrevocable or other commitment in relation to relevant
RSI securities.
4.3 Save as disclosed herein, neither RSI nor any associate
of RSI has any arrangement in relation to relevant
securities.
4.4 No relevant RSI securities have been redeemed or
purchased by RSI during the disclosure period.
Executive Directors:
Dr. MacGregor entered into a service agreement with the
Company on 1 February 2003 as amended on 1
November 2003 and 27 October 2010 and further amended on 11
September 2011, the principal terms of which are that she is
entitled to a salary of £140,625 per annum and her service
agreement is terminable on twelve months' notice by either
party. There is no entitlement to permanent health insurance
but she receives contributions to her personal pension plan,
life insurance cover and private medical insurance.
Mr. Cooper entered into a service agreement with the Company
on 23 August 2008, the principal terms of which are that he
is entitled to a salary of £186,737 per annum and his service
agreement is terminable on twelve months' notice by either
party. There is no entitlement to permanent health insurance
but he receives life insurance cover and private medical
insurance.
Mr. Auckland entered into a service agreement with the
Company on 1 January 2006 as amended on 27
October 2010, the principal terms of which are that he is
entitled to a salary of £135,955 per annum and his
service agreement is terminable on nine months' notice by
either party. There is no entitlement to
permanent health insurance but he receives contributions to
his personal pension plan, life insurance cover and private
medical insurance.
Non-executive Director:
Mr. Lough received a letter of appointment from the Company
on 11 August 2004, the principal terms of which are that he
is entitled to a salary of £45,000 per annum and his service
agreement is terminable on three months' notice by either
party. There is no entitlement to permanent health insurance,
life insurance cover or private medical insurance.
Save as disclosed above, there are no service contracts in
force between any Director of RSI and RSI or any of its
subsidiaries and no such contract has been entered into or
amended during the last six months preceding the date of this
document.
6.1 Save as disclosed in paragraphs 6.2, 6.3, 6.4, 6.5 and
6.6 below, there have been no contracts entered into by RSI
or any of its subsidiaries during the period commencing on 2
April 2010 (being the date two years before commencement of
the Offer Period) and ending on 4 May 2012 (being the latest
practicable date prior to posting of this document) which are
outside the ordinary course of business and which are or may
be considered material.
6.2 OHM Disposal - November 2010
The Company entered into a conditional sale agreement on 13
October 2010 (the "Sale Agreement") pursuant to
which it conditionally agreed to sell OHM Ltd and OHM Surveys
Sdn Bhd ("OHM Malaysia") to a company controlled by
Sector Asset Management and its affiliates ("Sector") and
Euro Trans Skips AS ("ETS") for a consideration of $150,000
(the "Disposals"). The sale and purchase was conditional
inter alia upon the Asset Transfer Agreement being entered
into and the Company writing off the inter-company debt due
from OHM Ltd to the Company (excluding any sum outstanding on
inter-company trading account), ETS and Sector committing to
OHM Ltd to provide
$7 million of funding and ETS entering into arrangements
pursuant to which it agreed to defer payments due from OHM
Ltd of up to $3 million until 20 December 2010. The Company
provided a limited number of warranties to the buyer and an
indemnity against any tax liability that OHM Ltd might suffer
by reason of the writing off of the inter-company loan
account.
Prior to the Disposals being completed the Company entered
into an asset transfer agreement (the "Asset Transfer
Agreement") pursuant to which the employment contracts
for certain key personnel (including Robert Auckland and Dr.
Lucy MacGregor), patents, software and computer hardware and
contracts were transferred from OHM Ltd to the Company and
certain patents tranferred from the Company to OHM Ltd. The
agreement was entered into so that those assets and employees
relating to the data acquisition business which were then
owned/employed by the Company were transferred to OHM Ltd and
any assets/employees within OHM Ltd relating to the
geophysical consulting business carried on by the RSI Group
were transferred to the Company.
By an agreement entered into on 13 October 2010 (the
"Subscription Agreement") Sector and ETS
conditionally subscribed for 9,000,000 Shares in aggregate at
10 pence per share representing a premium of 60 per cent. to
the closing mid-market price on 12 October 2010 (the "First
Placing") and had also conditionally agreed to subscribe for
a further 11,000,000 Shares at the same price (the
"Placing"). In aggregate, the First Placing and the Placing
raised £2.0 million (£1.8 million after expenses) for the
Company. The First Placing was conditional only upon
admission of the First Placing Shares to trading on AIM and
the First Placing Shares were admitted to trading on AIM on
19
October 2010. Following admission of the First Placing Shares
to AIM, the Concert Party held 51.11 per cent. of the
Company's issued share capital (including the First Placing
Shares). The members of the Concert Party were deemed to be
acting in concert by the Panel. In order to complete the
First Placing and the Placing, the Panel agreed to a waiver
of the requirement for the Concert Party to make a general
offer for the Company for the purposes of Rule 9 of the City
Code following written
confirmations consenting to such waiver from independent
Shareholders who held in excess of 50
per cent. of the Company's voting rights, excluding those of
the Concert Party.
The Disposals and the Placing (together the "Proposals") were
conditional, inter alia, upon Shareholder approval being
obtained. Due to the size of the Disposals in relation to the
Company, the Directors were required to seek Shareholder
consent to the Disposals for the purposes of AIM Rule 15. In
addition, in order to effect the Placing the Directors sought
the required authorities under the Companies Act 2006.
Accordingly, the Company dispatched a circular to
Shareholders convening a general meeting of the Company held
on 1 November 2010 (the "Circular"). The Circular (which is
available to view on the Company's website,
www.rocksolidimages.com) contained further details of the
background to and reasons for the Disposals and the Placing
and set out in further detail why the Board considered the
Proposals to be in the best interests of Shareholders as a
whole. The Disposals were completed on 2 November 2010 and
the Placing Shares were admitted to trading on AIM on 2
November 2010.
On completion of the Sale Agreement on 2 November 2010 the
Company entered into an agreement with OHM Ltd, OHM Malaysia
and Rock Solid Images, Inc (the "Services
Agreement") pursuant to which the parties agreed to
provide services to each other in order for the parties to
continue to provide a seamless integrated CSEM service to the
oil industry and with a view to developing a marketing
strategy to progress and capitalise on joint opportunities to
utilise their respective services. Under the terms of the
Services Agreement OHM Ltd and OHM Malaysia agreed to prepay
$3 million (the "Advance Payment") to secure 2,033
man-days of WISE services at a rate of $2,200 per day of
which $1,475 per day was prepaid by way of the Advance
Payment with a balance of $725 per day payable as the
man-days are utilised. WISE services are those services
relating to the advanced combination of CSEM data and seismic
information to provide analysis of rock and fluid properties.
Under the Services Agreement the parties also agreed to
provide certain administrative and management function
services to each other at contracted rates agreed on an
arm's length basis to reflect the cost to the service
provider. Under the Services Agreement the unutilised balance
of the Advance Payment (currently $2.5 million) is repayable
on 30 June 2012.
With a view to preserving the independence of the Company
from its majority shareholders the Company entered into a
relationship agreement (the "Relationship
Agreement") with ETS and Sector pursuant to which each
of them agreed that, for so long as it controlled 25 per
cent. or more of the voting rights of the Company, it would
use its reasonable endeavours to ensure that the majority of
the members of the Board will be independent of ETS and
Sector and their respective associates.
In connection with the Proposals, the Company entered into
the Subscription Agreement and the Sale Agreement and also
entered into the Asset Transfer Agreement, the Services
Agreement and the Relationship Agreement. Further details of
these agreements are set out in the Circular. The Concert
Party was deemed to be a related party for the purposes of
the AIM Rules and accordingly the entering into of the
Subscription Agreement, the Sale Agreement, the Services
Agreement and the Relationship Agreement (together the
"Related Party Agreements") were all deemed to be related
party agreements for the purposes of the AIM Rules.
6.3 Change of Nomad and Broker - April 2011
Pursuant to the Nominated Advisor and Broker Agreement dated
8 April 2011 between the Company (1) and Fox-Davies (2) the
Company appointed Fox-Davies to act as Nominated Advisor and
Broker to the Company for the purposes of the AIM Rules. The
agreement contains certain undertakings and indemnities given
by the Company in respect of, inter alia, compliance with all
applicable laws and regulations. The agreement continues for
a fixed period of one year from the date of the agreement
and, thereafter, is subject to termination on the giving of
three month's notice.
6.4 Placing - June 2011
Pursuant to a placing agreement dated 9 June 2011 between the
Company (1), the Directors (and Fox-Davies agreed to use its
reasonable endeavours, as agent for the Company, to procure
subscribers for 47,342,700 Shares at 4 pence per Share. The
placing agreement contained warranties and indemnities from
the Company in favour of Fox-Davies together with provisions
which enabled Fox-Davies to terminate the placing agreement
in certain circumstances prior to Admission, including
circumstances where any warranties were found to be untrue or
inaccurate in any material respect.
6.5 Simmons - October 2011
The Board was keen to capitalise on the industry's renewed
focus on RSI's services and value
proposition and therefore engaged Simmons & Company
International Limited ('Simmons') on 9
September 2011 to assist in reviewing the strategic options
available to RSI and its operating divisions, WSS and WISE.
The engagement with Simmons was terminated on 13 March
2012.
6.6 Credit Facility Agreement
By an agreement dated 4 April 2012 (the "Credit Facility
Agreement") between (1) the Company and (2) ETS and East Hill
Venture Fund, L.P. - Series 08A (an associate of East Hill
Venture Fund LLP, one of the largest shareholders in the
Company) ("East Hill"), ETS and East Hill (together the
"Lenders") agreed to provide the Company with a credit
facility of up to $1 million. The principal terms of the
facility are:
(a) the Lenders agreed to provide up to $1 million
equally;
(b) interest is payable at 14% per annum payable monthly in
arrears commencing on 31 March
2012
(c) security cover is a floating charge over all of the
assets of the Company and Rock Solid
Images, Inc, the Company's main trading subsidiary
(d) the facility ceases to be available on 30 September 2012
and is repayable on or before such date unless the Lenders
agree otherwise.
Each of the Directors do not intend to accept the Offer in respect of their own beneficial holdings of RSI Shares, as set out in paragraph 3.2 above, amounting to, in aggregate, 2,262,992 RSI Shares, representing approximately 1.43% of RSI's current issued share capital.
8. ConsentFox-Davies has given and not withdrawn its consent to the issue of this document with the inclusion of the references to its recommendation and to its name in the form and context in which they appear.
9. Material changesSave as disclosed in this document there have been no known material changes in the financial or trading position of RSI subsequent to 31 August 2011 (being the date to which the last published audited accounts of RSI were prepared).
10. Fees and expenses
The aggregate fees and expenses which are expected to be
incurred by RSI in connection with the Partial Offer are
estimated to amount to between £40,000 and £50,000 (excluding
applicable VAT). This aggregate number consists of the
following categories:
(i) Financial and corporate broking advice: £25,000
(excluding VAT);
(ii) Legal advice: between £10,000 and £15,000 (excluding
applicable VAT);
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