TIDMHMF
RNS Number : 2660B
Handmade PLC
23 October 2009
NOT FOR DISSEMINATION IN THE UNITED STATES OR TO UNITED STATES NEWSWIRE
SERVICES"; and (ii) in the body of the press release, "This press release is not
an offer to sell, or a solicitation of an offer to buy, any securities. The
securities referred to in this press release have not been and will not be
registered under the U.S. Securities Act of 1933, as amended and may not be
offered or sold in the United States except pursuant to an exemption from, or in
a transaction not subject to, the registration requirements of the U.S.
Securities Act of 1933.
23 October 2009
HandMade plc
("HandMade" or the "Company")
Proposed joint venture with National Geographic Kids Entertainment
Acquisition of the Animation Collective Group
Agreements entered into for certain intellectual property assets of Sarah
Ferguson
Formation of HandMade Kids division
HandMade to raise GBP17 million via share and secured convertible loan stock
placement
Placing of 68,000,000 new Ordinary Shares at 10 pence per share together with
attached half Warrant to subscribe for additional Ordinary Shares in the Company
and
GBP10,200,000 nominal 12 per cent. secured convertible loan stock 2012
Extraordinary General Meeting
HandMade plc (AIM: HMF), the UK and US based film entertainment company that
owns, produces, acquires and exploits intellectual property rights, today
announces:
i. That it has, through Canaccord Adams Limited ("Canaccord"),
conditionally placed:
· 68,000,000 million new Ordinary Shares at a price of 10 pence per share
(the "Placing Price") together with attached half Warrant to subscribe for
additional Ordinary Shares; and
· GBP10,200,000 nominal 12 per cent. secured convertible loan stock 2012
(the "Loan Stock") summary terms for which can be found in Appendix 2 with
institutional and other investors, for gross proceeds of GBP17 million (the
"Placing");
ii. A proposed joint venture ("JV") with National Geographical Kids
Entertainment ("NGK"), a well regarded childrens entertainment venture founded
by the world renowned National Geographic Society;
iii. The proposed acquisition of the Animation Collective Group ("AC"), a
highly regarded creator and producer of content for childrens entertainment
based in New York;
iv. Agreements entered into relating to certain intellectual property
assets of Sarah Ferguson;
v. The launch of HandMade Kids division, a major integrated children and
family media business formed by the combination of Handmades existing Eloise
brand with the JV and proposed acquisition of Animation Collective;
vi. The strengthening of the Board of Directors through the proposed
appointment of Richard Northcott as Chairman of the Board, Simon Flamank as
Chief Operating Officer/Chief Financial Officer and Keith Luxon as Non-executive
Director; and
vii. The restructuring of financing arrangements with Cartier and Satya
(each as defined below).
The Company intends to use the net proceeds of the Placing for the following
purposes:
1) To form the HandMade Kids division through:
a. A newly established JV with NGK. HandMade will invest GBP3.40 million
(US$5.60 million) for working capital;
b. Acquisition of Animation Collective for a total maximum consideration of
US$12 million subject to profit performance over a three year period. HandMade
to pay an initial consideration of US$1,060,000 to be settled in cash and shares
with approximately US$560,000 (GBP340,000) to be paid in cash on completion with
assumed debt of approximately US$2.50m;
c. The recruitment, with effect from Completion, of key experienced
merchandising, sales and creative executives; and
d. Further investment in childrens productions GBP3.22 million;
2) Repayment of existing debts amounting to approximately GBP7.63 million; and
3) Provision of GBP2.41 million of general working capital to HandMade and its
operations as well as payment of transaction fees.
The Placing is conditional on, and subject to, inter alia, shareholder approval
at a general meeting of the Company to be convened for 16 November 2009 (the
"EGM"). Further details about the EGM and the Placing are set out below.
Canaccord acted as broker to the Placing, full details of which are set out in
Appendix 1. Definitions used in this announcement are set out in Appendix 3.
The Company is also pleased to announce that it has now published its
outstanding financial accounts and copies of the annual report and accounts for
the financial year ended 31 December 2008 will be sent to shareholders during
the course of today and will be available on the Companys website
www.handmadeplc.com shortly. Accordingly, trading in the Companys securities
on the AIM Market of the London Stock Exchange is expected to resume at 8.00am
on Monday 26 October 2009.
The Companys annual general meeting will be held at the offices of Field Fisher
Waterhouse, 35 Vine Street, London EC3N 2AA at 9.45am on Monday 16 November
2009.
Patrick Meehan, Executive Chairman of HandMade plc, commented:
"The launch of HandMade Kids into the Handmade Group complements our existing
Library Rights and Content; Eloise Rights Exploitation, Film Production; and
Film Sales divisions.
Its launch will create one of the leading independent producers of childrens
content for TV and combines a global and trusted brand in National Geographic
Kids, award winning creative talent and childrens content in Animation
Collective, together with the Duchess of Yorks childrens properties and our
existing iconic US childrens character Eloise.
Television broadcasting in the US is an essential platform for building
awareness because of its size and influence. HandMade Kids will have a total of
11 productions, aimed at children, currently being broadcast on US television
with a further show scheduled to be broadcast and an additional eight in
development. HandMade Kids will focus on marketing and monetising these assets
through HandMades experience together with the recruitment of several high
profile personnel in the childrens entertainment sector.
These transactions come at an exciting time for HandMade plc. Our US$70 million
CGI animation film Planet 51 is premiering next month in the US and is being
distributed by Sony in over 3,500 cinemas. Furthermore, our first Eloise feature
film, "Eloise in Paris", starring Uma Thurman, is set to begin pre-production
shortly together with a further six films set for release over the next two
years."
David Beal, President of National Geographic Entertainment, commented:
"This joint venture gives us the chance to combine our excellent creative and
marketing teams with a management and sales team that has worked with some of
the biggest childrens brands in the industry. We are excited about the
opportunities to establish the full potential of our critically acclaimed brands
such as 'Mama Mirabelles Home Movies and 'Toot & Puddle."
Larry Schwarz, Founder and CEO of Animation Collective, said:
"ACs brands such as Kappa Mikey and Thumb Wrestling Federation offer tremendous
merchandising potential and synergies with HandMade Kids. I look forward to
working with HandMade to build both our existing brands and develop new
productions."
Commenting on the agreement Sarah Ferguson, Duchess of York, said,
"The launch of HandMade Kids brings together several extremely well-regarded
brands and childrens programming. I am pleased that "Tea for Ruby" and the
"Little Red" series will be developed by what we firmly believe will become a
leading childrens entertainment company."
Press Briefing
The management of HandMade plc and HandMade Kids will be holding a press
briefing today at The Arts Club, 40 Dover Street, W1S 4NP at 11.00am, a photo
call at 12:00pm will follow with the management and Sarah Ferguson, The Duchess
of York. If you would like to attend either, please contact Jos Simson on 0207
429 6603 or jos@conduitpr.com.
HandMade plc
Patrick Meehan, Chairman 020
7518 8230
David Ravden, CEO
Conduit PR
Jos Simson/Charlie Geller
020 74296603
Canaccord Adams
Mark Williams/Andrew Chubb 020
7050 6500
About HandMade
HandMade Plc, which encompasses HandMade Films International and HandMade Film
Productions, is an international rights and film Production Company with one of
the UK's largest independent film libraries. The HandMade Group owns, acquires
and exploits intellectual property rights, comprising film, TV and theatrical
productions, book and music rights, and merchandising. They are the sole owners
of all ancillary and merchandising rights to the iconic children's book
character 'Eloise' and specialise in the marketing and branding of all 'Eloise'
merchandise plus production and marketing of remakes of all films in their
library. HandMade plc was re-admitted to trading on AIM in May 2006 and has
offices in both London and Los Angeles.
Under the original ownership of George Harrison, HandMade was responsible for
producing some of the great British films of the 70's and 80's: The Long Good
Friday, Mona Lisa and Time Bandits to name but a few.
Appendix 1
Summary Terms of the Acquisitions
The National Geographic Joint Venture
Subject, inter alia, to Admission, the Company will invest $5.6 million (GBP3.4
million) in cash into a joint venture with National Geographic Kids, a
well-regarded childrens entertainment venture founded by the world renowned
National Geographic Society. As a result of its investment, the Company will
control 50.1 per cent. of the voting rights in the Joint Venture Company.
Handmade will be funding the capital injection into the Joint Venture Company
from proceeds of the Placing, and NGK will be contributing its rights to
specific childrens TV entertainment properties to the Joint Venture Company.
The $5.6 million will be used as working capital for the Joint Venture Company.
The Joint Venture Company will have the exclusive right to use the "National
Geographic Kids" and "National Geographic Little Kids" trademarks in connection
with the childrens television programming contributed by NGK to the Joint
Venture, as well as new programming properties developed by the Joint Venture
and approved by NGK. The Joint Venture will have its headquarters in New York.
Established in 2003, NGK is an independent production entity and part of
National Geographic Entertainment. NGK brings the highly regarded National
Geographic brand to childrens entertainment through the development and
production of quality animated and live-action, entertainment-driven programming
that aims to excite children to explore their world.
NGK is a fully integrated production and sales company that develops and
produces childrens television programming focusing on providing content to two
distinct age groups (2 - 5 year olds and 6 - 11 year olds) for the global
free-to-air, pay, cable, satellite, VOD, IPTV and home entertainment markets.
NGK is contributing to the Joint Venture its rights to the following:
- Mama Mirabelle (for 2-5 year olds): the series has been sold into more than 75
international
territories with top 5 slots in UK, Australia and the US (on weekends), and has
won awards
including Parents Choice, iParenting Media and was nominated for a Puchinella
and an Emmy ;
- Toot & Puddle (for 2-5 year olds): the series is based on an award winning
book (with over one million copies sold worldwide) and has been pre-sold in over
17 territories around the world including US, Canada, Australia and UK;
- Are We There Yet? World Adventure (for 4-7 year olds): a live action global
adventure series hosted by real sibling duos who travel the world and share
their explorations with viewers. The series is a top performer in Canada and
Australia and also has a very strong and popular website with interactive games,
videos and social networking capabilities;
- Iggy Arbuckle (for 6-12 year olds): sold in more than 125 territories
worldwide with a companion game online, this animated series has been nominated
for 2 Gemini Awards as well as winning the Canadian Screenwriters Award; and
- Other projects currently under development including Frankie & Beans, Aloutah
and Cooper Stishus.
As a newly established joint venture, the Joint Venture Company does not have
any historic accounts. However the Directors understand that the assets being
transferred into the Joint Venture Company generated an EBITDA loss of US$0.05
million in the year to 31 December 2008 on turnover of US$1.4 million and the
Directors estimate that NGK had net assets of approximately US$6.2 million as at
31 December 2008.
The following summaries present the key terms of the material agreements
executed or to be executed in connection with the Joint Venture.
Contribution Agreement
Pursuant to the contribution agreement dated 22 October 2009 and entered into
between Handmade Kids and NGK, Handmade Kids will contribute US$5,600,000 in
exchange for a 50.1 per cent. class A membership interest in the Joint Venture
Company. NGK will transfer to the Joint Venture Company all of NGKs or its
affiliates right, title and interest in and to the "Iggy Arbuckle", "Mama
Mirabelle", "Toot & Puddle" and "Are We There Yet?" television programmes and
certain other childrens programming in development in exchange for a 49.9 per
cent. class A membership interest in the Joint Venture Company and all of the
class B membership interests. As the holder of the class B membership interests
NGK is entitled to priority distributions on its class B membership interests up
to a total aggregate amount of $5,122,355, plus interest at an agreed upon
annual rate, which total aggregate amount must be fully distributed on or before
the third anniversary of the completion of the formation of the Joint Venture.
In connection with the transfer of these assets, NGK is making representations
and warranties as to organisation and standing, corporate action and authority,
no conflicts, absence of certain changes, no litigation and no requirements for
government approvals.
Handmade Kids will provide representations and warranties as to organisation and
standing, corporate action and authority, no conflicts, no litigation (as
relating to the execution of the contemplated transactions) and no requirements
for governmental approvals and filings.
Completion of the Contribution Agreement is conditional on, inter alia,
completion of the Placing resulting in aggregate net proceeds sufficient to fund
the requisite cash contribution by Handmade Kids to the Joint Venture. HandMade
has guaranteed the performance of Handmade Kids obligations under the
Contribution Agreement and the Operating Agreement.
Operating Agreement
On the completion of the Contribution Agreement, Handmade Kids and NGK will form
NG Kids Entertainment LLC, a Delaware limited liability company, which will be
governed by the terms of the Operating Agreement. Pursuant to the Operating
Agreement, the Joint Venture will be formed primarily to develop, produce,
licence, distribute, invest in and otherwise exploit television and video
programming intended primarily for viewing by children aged 12 years old and
younger and related derivative works. The Joint Venture will have two classes of
membership interests: class A membership interests and class B membership
interests. In exchange for its cash contribution made pursuant to the
Contribution Agreement (described above), Handmade Kids will hold 50.1 per cent.
of the class A membership interests. In exchange for the contributed assets
pursuant to the Contribution Agreement (described above) NGK will receive the
remaining 49.9 per cent. of the class A membership interests and all of the
class B membership interests.
Trademark Licence Agreement
On the completion of the transactions contemplated by the Contribution
Agreement, NGK and the Joint Venture Company will enter into a trademark licence
agreement pursuant to which NGK will grant to the Joint Venture an exclusive,
non-transferable, limited purpose licence to use the "NATIONAL GEOGRAPHIC KIDS"
and "NATIONAL GEOGRAPHIC LITTLE KIDS" trademarks and a non-exclusive,
non-transferable, limited purpose licence to use the NATIONAL GEOGRAPHIC &
YELLOW BORDER DESIGN trademark throughout the world and in connection with the
properties contributed by NGK to the Joint Venture, as well as new properties
approved by NGK.
The Animation Collective Acquisition
The Animation Collective Group is a leading independent creator and producer of
childrens
entertainment with content distributed in more than 100 countries and in 18
languages. The Animation Collective Group is based in New York with its own 2D
and 3D animation studios that employed approximately 60 employees as of 31 March
2009. The team is comprised of 10 administrators and 50 key production
personnel.
Founded by Larry Schwarz, the Animation Collective Group has grown to be a
well-regarded
independent producer of childrens animated content in the United States,
generating approximately 50 half hours of childrens content each year from 2006
to 2008. Larry Schwarz is the companys CEO and is the creator and executive
producer of all its original series.
Pursuant to the Acquisition Agreement, the Company has agreed to acquire the
entire issued share capital of Animation Collective Holdings Corporation in
consideration for an initial consideration and deferred consideration payable
over a period of three years.
The total maximum consideration is up to US$12 million. The initial
consideration of US$1,060,000 is to be settled in cash and shares, with
US$560,000 (GBP342,717) payable in cash on completion (subject to US$60,000
being retained in an escrow account against any warranty claims) and the balance
of US$500,000 to be settled by the issue of the Initial Consideration Shares.
Larry Schwarz has entered into a letter of undertaking with Canaccord pursuant
to which he has agreed that, subject to certain exceptions, he will not dispose
of any Initial Consideration Shares for a period of 12 months from Admission and
that for a further 12 months following the first anniversary of Admission he
shall not dispose of any Initial Consideration Shares except through Canaccord.
Handmade will pay a maximum deferred consideration with a value of US$11 million
by reference to earnings and profits targets for the calendar years 2009, 2010
and 2011 which will deliver minimum earnings and profits of the Animation
Collective Group of US$9.5 million.
The cash element of the initial consideration will be paid out of the proceeds
of the Placing and any deferred consideration payable in the form of cash is
expected to be satisfied by cash generated from the revenuesof theEnlarged
Group.
Each payment of earn-out consideration is to be settled as to 50 per cent. in
cash and as to 50 per cent. in new Ordinary Shares in the Company to be issued
at the market price prevailing for the 20 business days prior to their issue. In
the event that the number of Ordinary Shares that may be issued as earn-out
consideration would result in Larry Schwarz acquiring an interest in Handmade
that (taken together with any Ordinary Shares held by such other persons acting
in concert with Larry Schwarz) represents 30 per cent. or more of the voting
rights of Handmade, then Handmade shall only issue the number of Ordinary Shares
to Larry Schwarz that would take him (and any persons acting in concert with
him) to
29.9 per cent. of the voting rights of Handmade and the balance of the earn-out
consideration shall be paid to Larry Schwarz in cash.
The Acquisition Agreement includes customary warranties from Larry Schwarz in
favour of the Company and completion is conditional on, inter alia, completion
of the Placing and Admission.
Prior to entering into the Acquisition Agreement, Handmade has entered into two
agreements relating to the Animation Collective Groups borrowings, as follows.
On 17 January 2009 Handmade entered into a loan agreement, subsequently amended
on 15 October 2009, with Animation Collective Inc., Larry Schwarz Company, Inc.,
Animation Partners One, Inc., Animation Partners Two, Inc., So Media, Inc. and
Kanonen & Bestreichen, Inc. (together, the "Borrowers") whereby Handmade agreed
to provide a short-term bridge loan facility to the Borrowers. The maximum
facility available under the loan is US$1,132,079 which has been fully drawn
down. Any principal amount drawn down under the loan is repayable at any time
after 31 October 2009. Interest is payable on any amounts drawn down at the rate
of 20 per cent. per annum. The facility was secured by a first position security
interest in and to the assets of the Borrowers subject only to those security
interests held prior to the date of the loan agreement by Aver Media LP, Lions
Gate Entertainment and
Firemans Fund Insurance.
On 19 January 2009 Handmade entered into a debt purchase agreement with Aver
Media LP ("Aver") whereby Handmade acquired all of Avers rights, title and
interest in a loan agreement between Aver and Animation Collective, Inc. dated
10 September 2008, as well as all security taken by Aver pursuant to that
agreement, in consideration for a payment by Handmade to Aver of $244,403.22.
The Animation Collective Group has not produced consolidated accounts to date,
however, the Directors understand that the Animation Collective Group generated
approximately $3.1 million of EBITDA in the year to 31 December 2008 from
revenues of US$9.3 million and as at 30 June 2009 the Directors estimate that
the Animation Collective Group had net assets of approximately $14.0 million.
The Animation Collective Groups principal assets are the following television
shows which it has created, owns the rights to and which are currently being
broadcast across leading world networks:
- Kappa Mikey (for 6-11 year olds; 52 episodes x 22 minutes) - In its second
season, Kappa Mikey continues to grow in popularity and repeat episodes are
performing better than when they first aired.
- Thumb Wrestling Federation (for 6-11 year old boys; 500 minutes of
interstitials) - Since airing in the UK in September 2007 on the BBC, Thumb
Wrestling Federation has been one of the top 10 childrens shows in England,
recently rated the #1 childrens show. TWF also airs in Canada on YTV, where it
has been a top 10 show with 12 to 17 year olds. In the US, the series premiered
on Cartoon Network in November 2008. Complete licensing and merchandising
campaign exists for the series in the UK and US.
- Ellens Acres (for Preschool; 52 x 11 minutes) - A critically acclaimed
pre-school series on
Cartoon Network in the US and the UK and TV Ontario in Canada. The series also
premiered on ABC Australia in March 2009. Deals have recently been signed with
Al Jazeeras family channel for the Middle East, and Canal+ in France.
- Three Delivery (for 6-11 year olds; 26 x 22 minutes and 11 x 2 minutes) -
Nicktoons Network (US), YTV (Canada), SRC (Canada), BBC, Canal +, Nickelodeon
Australia. Three Delivery premiered in Summer 2008 on Nicktoons Network and
March 2009 on the BBC to immediate critical and fan acclaim. The show is
currently one of the Nicktoons top original series overall.
- Dancing Sushi (for 6-11 year olds, 26 x 1.5 minutes) - Already a cult hit,
this humorous music-based spin-off from Kappa Mikey will begin airing on
Nicktoons Network in the US and
Nickelodeon stations worldwide.
- Leader Dog (for 6-11 year olds, 13 x 3 minutes) - An interstitial short series
airing on Nicktoons Network in the US and on MTV Germany.
- Tortellini Western (for 6-11 year olds; 13 x 3 minutes) - An interstitial
short series airing on
Nicktoons Network in the US and MTV Benelux.
- Animation Collective acts as an agent for the worldwide television
distribution rights for its
original series created for America Onlines KOL service. These include Princess
Natasha,
SKWOD, Kung Fu Academy and the Chubby Butter teen targeted package of
interstitials.
Currently in pre-production (pre-sold to some territories):
- Jolly Rabbit (for 6-11 year old boys; 26 x 22 minutes) - BBC, ABC (Australia),
Canal+. It is
intended that this series will begin delivery in January 2010.
- HTDT (for kids; 52 x 11 minutes) - CW4Kids (US), Canal +, MTV Oy (Finland).
Will begin
delivery January 2010.
In development (not pre-sold anywhere):
- Black Dawn (for 10-14 year olds; 26 x 22 minutes) - An action adventure series
for teenagers combining live action and animation and unfolding across multiple
platforms, including television, publishing and online designed to incorporate
strong play patterns and collectable toys.
The Animation Collective Group also conducts service work for third parties
where it does not hold the rights to the underlying show. Examples of these
include Eloise in Africa, Speed Racer: The Next Generation (Lions Gate,
Nicktoons Network) and Wulin Warriors (Cartoon Network).
Handmade does not expect to be making any material changes to the staff base of
the Animation Collective Group. Larry Schwarz has agreed to enter into a new
service agreement with Animation Collective Holdings Corporation and will
continue to be the creative force behind all of the Animation Collective Group
shows and will also have a position on the Handmade Kids board of directors.
Larry Schwarz is the founder of Animation Collective and is the creator and
executive producer of all the companys original series. Prior to Animation
Collective, Larry was involved in various childrens multimedia entertainment
businesses.
Doug MacLennan is currently the chief operating officer of Animation Collective
and will be joining the board of Handmade Kids. Doug negotiated all of ACs
licensing and distributions deals and ACs content has been broadcast by
Nickelodeon, Disney, Cartoon Network and Canal +. Prior to AC, Doug was Vice
President of Finance at Axial Entertainment Group which he co-founded and
oversaw growth from two to 12 people. Prior to Axial, Doug spent seven years at
Merrill Lynch where he was Assistant Vice President of Corporate Strategy and
Development.
Licensing of Sarah Ferguson Rights
Handmade has entered into agreements relating to the following intellectual
property assets of Sarah Ferguson focused on children:
- Tea for Ruby: a picture book (illustrated by Robin Preiss Glasser) about a
little girl who tries to perfect her manners in time for tea with the Queen. The
book reached No. 2 on the New York Times Bestseller List in 2008; and
- Little Red: a series of books about a group of children, their adventures and
the value of
friendship, integrity and loyalty.
Following the exercise of certain options granted to Handmade pursuant to the
agreements, Handmade will control and utilise certain of the rights in these
intellectual property assets (such rights to exclude book publishing rights)
worldwide, including new merchandising, film and animated content for theatre,
home video, TV and the internet.
The Directors intend that Sarah Ferguson will remain closely involved in
marketing and promoting these brands and in enhancing the profile of Handmade
and Handmade Kids and will be a non-executive director on the Handmade Kids
board.
Set out below is a summary of the principal terms of agreements between
companies in the Handmade Group and Sarah Ferguson, together with some further
areas which are currently under discussion.
Tea for Ruby
Handmade has entered into an agreement with Sarah Ferguson under which Handmade
has been granted an exclusive option to purchase certain rights in the recently
published Sarah Ferguson childrens book "Tea for Ruby" for certain lump sum
payments. The rights it will acquire will include television, film and character
merchandising rights in the current and future Ruby books, but excluding the
book publishing rights which remain vested in Sarah Ferguson. It will also
engage Sarah Ferguson as an executive producer of the television series under
the terms of a separate agreement.
Sarah Ferguson will be entitled to receive a proportion of the final budgeted
costs of the first series, a fixed sum per episode and a right to participate in
a percentage of net receipts from exploitation of the first series and certain
ancillary rights including merchandise. Sarah Ferguson will also be entitled to
payments in proportion to the final budgeted cost of each subsequent series and
a percentage of their net receipts.
Little Red
Handmade has entered into an agreement with Sarah Ferguson under which Handmade
has been granted an option to purchase certain rights in the two published Sarah
Ferguson childrens books in the "Little Red" series for certain lump sum
payments. The rights it will acquire include television, film and 12 character
merchandising rights in the current and future Little Red books, but excluding
the book publishing rights which remain vested in Sarah Ferguson. It will also
engage Sarah Ferguson as an executive producer of the television series under
the terms of a separate agreement.
Sarah Ferguson will be entitled to receive a proportion of the final budgeted
costs of the first series, a fixed sum per episode and a right to participate in
a percentage of net receipts from exploitation of the first series and certain
ancillary rights including merchandise. Sarah Ferguson will also be entitled to
payments limited to the final budgeted cost of each subsequent series and a
percentage of their net receipts.
In The Footsteps Of...
Handmade has entered into an agreement with Sarah Ferguson to help develop and
then act as presenter of a documentary series retracing journeys of great women
explorers.
Handmade will produce the series and will control the commercialisation of both
of the series and merchandising derived from the series.
Sarah Ferguson will take fees as presenter and executive producer of the series
and will participate in the profits of the series.
Sarah Ferguson Branding
Handmade is also negotiating an agreement to represent the licensing of the
Sarah Ferguson "brand" on goods and services in the United States and Canada.
The term of the appointment will be five years, extendable for five years if
certain financial thresholds are achieved.
Handmade Kids and Future Strategy
The childrens rights and content business generates income from three main
sources. The first and most important is from television broadcast of
programming. This creates awareness in the market place ("eyeballs on screens")
enabling the other two income streams, being merchandising and home
entertainment to be exploited. Without TV broadcasts it is difficult to create
awareness to drive the other two income streams. Television broadcasting of
programming in the US is an essential platform for building global awareness
because of the size and influence of the US market.
On completion of the Proposals, the Company will launch a major integrated
children and family media business through its Handmade Kids division and brand.
Handmade Kids will be formed by the integration of its existing Eloise brand
with the Joint Venture Company, the Sarah Ferguson Rights and Animation
Collective. Uniting these four brands will mean that Handmade Kids will become a
significant independent producer of childrens content for TV.
The Directors believe that Handmade Kids can become a leader in the
entertainment sector for children and families in the following ways:
- Retaining a top management team;
- Developing the Joint Venture Company and, subject to the terms of the
Trademark Licence
Agreement, building upon National Geographics trusted global brand and content;
- Leveraging the Animation Collective Groups creative leadership and
relationships with major US broadcasters; and
- Raising popularity of Eloise through the feature film 'Eloise in Paris (in
pre-production) and the animation film 'Adventures of Eloise, Africa (in
production).
NGK and AC have a total of 11 shows currently being broadcast on US television
with a further show scheduled to be broadcast and represent a strong asset and
brand base. However, to date there has been limited emphasis on merchandising
and monetising of these assets. The Directors intend, through Handmade Kids, to
build a first-class merchandising, licensing and home entertainment team to
maximise all available revenue streams.
The Directors believe the Acquisition and Joint Venture to be highly
complementary to the current business of the Company and, as part of Handmade
Kids, that the Company will be able to maximise revenue through global
distribution, merchandising and multi-platform sales. The Company will provide a
management structure to maximise the commercial potential of the under-exploited
brands that will be integrated into Handmade Kids.
Additionally, the Animation Collective Group provides an animation studio under
the creative guidance of Larry Schwarz where new content can be created
alongside the advancement of both Handmades existing projects, which currently
include the production of Adventures of Eloise, Africa, and will include the NGK
development projects.
As previously described, AC founder, Larry Schwarz is staying on to provide
creative drive for Handmade Kids. The Directors are also very pleased to have
secured the following appointments to the Handmade Kids board.
Handmade Kids proposed new Chief Executive Officer, Josh Kislevitz, who will
join conditional on Admission, is currently senior vice president of a major US
licensing and brand management company. He manages a portfolio of global
childrens brands which represents over $1 billion in annual domestic retail
sales and has over 20 years experience in marketing, development and retail
promotion.
Debbie Back has recently joined AC and following Admission will become president
of sales at Handmade Kids. Debbie was senior vice president for Program Sales
and Co-Productions at Nickelodeon/MTV Networks, managing offices in New York,
Miami, London, Sydney and Singapore. Debbie worked on franchise management
efforts with the Nickelodeon Consumer Products division in order to maximise
broadcast exposure for childrens programmes including SpongeBob, Dora the
Explorer and Rugrats. Debbie has over 26 years experience in the TV industry.
In addition, Jennifer Liang has recently joined AC and following Admission will
become head of international sales for Handmade Kids. Her previous positions
include director of international sales at Nickelodeon/MTV Networks and HBO.
It is currently intended that Sarah Ferguson will become a non-executive
director of Handmade Kids.
Board Structure
Conditional on Admission the following changes to the Handmade Board will take
place.
Richard Northcott will join Handmades Board as Non-Executive Chairman with
effect from
Admission. Richard Northcotts entertainment industry and corporate know how and
experience is extensive. Having co-produced "9 1/2 Weeks", Richard led an
investment team that acquired Embassy Home Entertainment (then one of the
worlds largest video companies) and became Chairman and Chief Executive Officer
of the resulting corporate group, Nelson Entertainment and its affiliates
("Nelson"). Nelson obtained a public quote on both the Toronto Stock Exchange
and the American Stock Exchange in New York. With Castle Rock Entertainment and
other producers, Nelson produced over 30 films (including "Bill & Teds
Excellent Adventure", "When Harry Met Sally", "Prancer", "Lord of the Flies",
"Misery" and Mel Gibsons "Hamlet") and had the video distribution rights to
over 80 films (including "The Princess Bride" and "The Last Emperor"). After
Richard disposed of Nelson and its enlarged library of film rights, he became a
Board Consultant with PolyGram Filmed Entertainment until their US domestic
distribution arrangements were sufficiently advanced for their purposes.
Benefiting from his professional qualifications as a Chartered Accountant,
Richard has capitalized on several entrepreneurial opportunities, from the sale
of Dodge Citys D.I.Y. business to what is now B&Q to the sale of Pet City to
Petsmart in the US and as a major shareholder of the high fashion jewellers,
Theo Fennell Plc. Throughout his post-Nelson activities, Richard has maintained
his film industry interests and connections, and with his corporate and
entrepreneurial expertise, he is an ideal Chairman for Handmade at this stage in
its development.
Patrick Meehan, presently the Companys Chairman, will become Deputy Chairman
and Joint Chief Executive Officer with David Ravden, with primary responsibility
for the Companys film and childrens operations in the United States.
Simon Flamank will join Handmades Board as Chief Operating Officer/Finance
Director on
2 December 2009 at which point Peter Parkinson will step down as Finance
Director but will remain on the Board. Simon is currently the CEO of TV-Loonland
AG the German media and childrens brand management company. TV-Loonlands
brands include "Little Princess" and "The Owl" which are shown in 165 and 180
territories respectively. TV-Loonland was also the majority shareholder of
Metrodome plc, the AIM listed film distribution business, of which Simon was
Chairman. Simon has over 27 years experience in the media and entertainment
industry, in film, television and music.
Keith Luxon will also join the Board of Handmade with effect from Admission.
Keith is an international banker of over 25 years experience. Previously a
director of Coutts bank in Jersey, Keith took residence in Monaco in 2002 in
order to establish Coutts & Co Monaco. In 2005 Keith moved out of banking in
order to concentrate on a small number of private clients. Keith has been
investing in the film industry for a number of years and along with his general
banking and financial background will add considerable value to the board and
assistance in moving the Company forward. As well as the relationship with Satya
Productions Limited (described on page 18 of the Circular), Keith Luxon owns the
entire issued share capital of Kestin Limited, which holds 363,000 Ordinary
Shares, and the entire issued share capital of Black Number 13 Limited, which
holds 75,000 Ordinary Shares. Keith Luxon also manages the affairs of the
Ibrahim family who, along with the relationship with Satya Productions Limited
described on page 18, own M 1 Properties Limited, which in turn holds 1,200,000
Ordinary Shares.
In addition, the Board has also resolved, as soon as practicable following
Admission, to further strengthen the Board to ensure that the Company is better
placed to achieve its objectives.
The existing and proposed Directors and the senior management of the Enlarged
Group have been granted new options over Ordinary Shares as follows:
Name
Number of Ordinary Shares under option
Richard Northcott
3,000,000
David Ravden
3,000,000
Simon Flamank
1,500,000
Josh Kislevitz
500,000
Doug MacLennan
500,000
Debbie Back
500,000
The options are exercisable at the Placing Price. Save in respect of options
over 500,000 Ordinary Shares granted to Simon Flamank, the options have been
granted conditional on Admission and the final date for exercise is the fifth
anniversary of Admission. 1,000,000 options have been granted to Simon Flamank
exercisable from Admission, with a further 500,000 options exercisable from the
first anniversary of Admissionprovided that he is still employed by the Company.
All of Simon Flamanks options expire on the fifth anniversary of Admission. In
addition, a total of 500,000 new options have been granted to other key
employees.
The following information relating to proposed directors of the Company is
disclosed under Schedule 2(g) of the AIM Rules and, save as disclosed in this
document, there is no further information to be disclosed in relation to the
same:
a. Richard Northcott
Current Directorships
FRN Associates Limited
Calco Holdings Limited
Calco Midlands Limited
Northumbrian Taverns
The Bold Pub Company
The Foley Pub Company Limited
Directorships held in the past 5 years
Wigwam Holdings
Caledonian South
Goodison Limited
Theo Fennell Plc
b. Simon Flamank
Current Directorships
TV-Loonland Homeentertainment Ltd
TV-Loonland AG
Loonland Merchandising GMbH
Loonland Pictures GmbH
Loonland Animacios Kft
Telemagination Limited
Directorships held in the past 5 years
Signals and Software Limited
Software Radio Limited
The Metrodome Group plc
c. Keith Anthony Luxon
Current Directorships:
Ibrahim Family Management Limited
Asia Strategic Investments Limited
Chateau Des Louannes Limited
Kestin Limited
Fareway Investments Limited
Black Number 13 Limited
Directorships held in the last five years:
Dagger Investments Limited
2008 Financial Results and 2009 Interim Financial Results and Current Trading
The Company has today also announced its financial results for the year ended 31
December 2008 which showed revenue of GBP4.86 million and a retained loss of
GBP5.72 million and a copy of the Companys report and accounts have also been
sent to Shareholders today. In addition, the Company today announced its 2009
interim financial results for the six months ended 30 June 2009 which showed
revenue of GBP1.12 million and a retained loss of GBP2.12 million. Copies of
both the 2008 report and accounts and the 2009 interim financial results are
available on the Companys website.
Details of the Placing and Use of Proceeds
The Company is proposing to raise up to GBP17 million, before expenses, by the
issue of 68,000,000 new Ordinary Shares at 10 pence per Placing Share, the issue
of the Warrants and the creation and issue of GBP10.2 million nominal 12 per
cent. secured convertible Loan Stock 2012 which have been conditionally placed
with institutional and other investors, pursuant to the Placing. Canaccord
Adams, as agent for the Company, has agreed conditionally to use its reasonable
endeavours to procure subscribers for the Placing Shares and the Loan Stock
pursuant to the terms of the Placing Agreement. The Placing is conditional,
inter alia, upon shareholder approval at the EGM. The Placing Shares will
represent approximately 29.2 per cent. of the Enlarged Issued Share Capital.
In the event that the Company is able to raise up to an additional GBP1 million
(in excess of the GBP17 million envisaged as at the date of this document) than
the Company will utilize the authorities granted at the EGM to issue up to an
additional 10 million Ordinary Shares to institutional and other investors.
In addition to the Placing, the Company will issue the Initial Consideration
Shares to Larry Schwarz and the Cartier Conversion Shares to Cartier at the
Placing Price.
Further to the announcement on 26 September 2008 that it had reached agreement
with Cartier to amend the terms of the Cartier Agreement, Cartier have agreed
that the Company shall:
The Company intends to use the net proceeds of the Placing for the following
purposes:
- convert GBP2 million of the GBP3 million of the outstanding deferred
consideration into Ordinary Shares at the Placing Price;
- pay the interest accruedon the deferred consideration from 16 May 2008 until
31 October 2009 of GBP437,500 in cash and on a quarterly basis on the balance
thereafter;
- pay Cartier the sum of GBP100,000 in cash on 30 November 2009 which shall be
deducted from the remaining deferred consideration; and
- defer payment of the remaining GBP0.9 million until 31 December 2010 whereupon
it will be payable in full.
The repayments of capital due under the convertible loan note ("CLN") issued to
Cartier pursuant to the Cartier Agreement will also be deferred until 31
December 2010 with all other terms of the CLN remaining in full force and effect
including quarterly interest payments.
Patrick Meehan and certain members of his family are potential beneficiaries of
a discretionary trust, known as The Meehan Family Settlement, which owns 100 per
cent. of the issued share capital of Cartier.
Due to Patrick Meehans relationship with Cartier, any amendment to the Cartier
Agreement and the CLN is classified as a related party transaction under the AIM
Rules. The Directors, with the exception of Patrick Meehan who is involved in
the transaction as a related party, having consulted with the Companys
nominated adviser, Canaccord Adams consider that the terms of the amendments to
the Cartier Agreement and the CLN are fair and reasonable insofar as the
Companys shareholders are concerned.
Details of the Cartier Agreement and the CLN were set out in the Companys
admission document dated 15 May 2006 and announcement dated 26 September 2008,
which can be obtained from the Companys website www.handmadeplc.com.
The Company intends to use the net proceeds of the Placing for the following
purposes:
1. Initial consideration:
- Animation Collective Acquisition, approximately GBP340,000
- National Geographic Joint Venture, approximately GBP3,400,000
2. Repayment of existing debts, approximately GBP7,630,000
3. Further investment in childrens productions, GBP3,220,000
4. Working capital and transaction fees, approximately GBP2,410,000
Debt Restructuring
In connection with the financing of its film projects, members of the Group have
entered into financing arrangements with Satya Productions Limited ("Satya") and
Amalfi Productions Limited ("Amalfi").
In particular, Satya advanced $5,000,000 to Amalfi under a financing agreement
dated 1 September 2008 (the "Satya Loan"). Amalfi in turn advanced $5,000,000 to
Handmade (the "Amalfi Loan"). In an agreement dated 31 July 2009, Satya agreed
to defer repayment of the Satya Loan in consideration for, inter alia, Flaming
Films, Inc. (a subsidiary of Handmade) guaranteeing Amalfi's obligations to
repay the Satya Loan (the "Satya Guarantee").
The parties have agreed to restructure these arrangements in a restructuring
deed dated 22 October 2009 (the "Restructuring Deed").
Satya Loan
Handmade has agreed that, on Admission, it will issue to Satya Loan Stock with a
nominal value equal to GBP3,050,000 in respect of the principal due on the Satya
Loan, 20,000,000 Satya Warrants to subscribe for Ordinary Shares at 15p per
Ordinary Share and Ordinary Shares with a value equal to GBP744,981 in respect
of the amount of interest due on the Satya Loan at the Placing Price. Satya has
agreed to release and discharge Amalfi from its obligations to repay the
principal amount of the Satya Loan and any interest due thereon with effect from
Admission. Satya has also agreed to release and discharge Flaming Films from its
obligations under the Satya Guarantee and from a charge relating to the Handmade
Films Library dated 31 July 2009. Amalfi has agreed to release and discharge
Handmade from any obligation to repay the Amalfi Loan with effect from
Admission.
Each of the parties to the Restructuring Deed has undertaken to execute all such
documents and do all such acts and things as may from time to time be reasonably
required to provide to each of the other parties the full benefit of the
Restructuring Deed.
Keith Luxon owns four per cent. of the issued share capital of Satya. The
balance of issued shares in Satya is owned by the Ibrahim family, whose affairs
are managed by Keith Luxon.
Reasons for calling the Extraordinary General Meeting
Placing Authorities
The Company has a current authorised share capital of GBP20 million, divided
into 400 million Ordinary Shares with a nominal value of 5p each, of which
142,325,997 Ordinary Shares have been issued. Following the completion of the
Proposals, the Company will have an Enlarged Issued Share Capital of232,986,845
Ordinary Shares.
Section 551 of the 2006 Act prohibits Directors from allotting any shares in the
Company without prior authority from Shareholders. Section 570 of the 2006 Act
gives holders of equity securities certain rights of pre-emption on the issue
for cash of new equity securities.
In order to implement the Proposals the Directors wish to seek a new section 551
authority in respect of an aggregate nominal amount of GBP21 million and
authority under section 551 of the 2006 Act to disapply section 561 in respect
of theissue of the Placing Shares, Loan Stock, Cartier Conversion Shares,
Warrants, Satya Warrants, options to directors and employees of the Group and
the allotment of further equity securities up to an aggregate nominal amount of
GBP1,750,000 (being approximately 15 per cent. of the Enlarged Issued Share
Capital). This authority will expire at the end of the Companys annual general
meeting to be held in 2010.
The Resolutions will enable the Company to complete the Acquisition, the Joint
Venture and the Placing as well as giving the Directors the flexibility to raise
additional funds or make acquisitions using shares in the future, as and when
suitable opportunities may arise.In the event that the Company is able to raise
up to an additional GBP1 million (in excess of the GBP17 million envisaged as at
the date of this document) than the Company will utilize the authorities granted
at the EGM to issue up to an additional 10 million Ordinary Shares to
institutional and other investors.
New Articles
A special resolution is proposed to adopt the New Articles to take advantage and
account of the 2006 Act relating, inter alia, to electronic communications,
disclosure of interests in shares, directors duties, shareholder meetings and
proxies.
A copy of the New Articles is available for inspection during normal business
hours at the registered office of the Company until the date of the EGM or upon
request of the Company Secretary. Copies will also be available at the EGM until
its conclusion.
The material differences between the Existing Articles and the New Articles are
summarised below. Changes of a minor, conforming or purely technical nature have
not been mentioned specifically.
(a) The Companys objects
The provisions regulating the operations of the Company are currently set out in
the Companys memorandum and articles of association. The Companys memorandum
contains, inter alia, the objects clause which sets out the scope of the
activities the Company is authorised to undertake. This is drafted to give a
wide scope.
The 2006 Act significantly reduces the constitutional significance of a
companys memorandum. The 2006 Act provides that a memorandum will record only
the names of subscribers and the number of shares each subscriber has agreed to
take in the company. Under the 2006 Act, the objects clause and all other
provisions which are contained in a companys memorandum, for existing companies
at 1 October 2009, are deemed to be contained in the Companys articles of
association but the company can remove these provisions by special resolution.
Furthermore, the 2006 Act states that unless a companys articles of association
provide
otherwise, a companys objects are unrestricted. This abolishes the need for
companies to have objects clauses. For this reason the Company is proposing to
remove its objects clause together with all other provisions of its memorandum
which, by virtue of the 2006 Act, are treated as forming part of the Companys
articles of association as of 1 October 2009. Resolution 3(a) confirms the
removal of these provisions for the Company. As the effect of this resolution
will be to remove the statement currently in the Companys memorandum of
association regarding limited liability, the New Articles also contain an
express statement regarding the limited liability of shareholders.
(b) Authorised share capital and unissued shares
The 2006 Act abolishes the requirement for a company to have an authorised share
capital and the New Articles reflect this. Directors will still be limited as to
the number of shares they can at any time allot because allotment authority
continues to be required under the 2006 Act, save in respect of employee share
schemes.
(c) Voting by and appointment of proxies
The 2006 Act provides that each proxy appointed by a member has one vote on a
show of hands, unless the proxy is appointed by more than one member in which
case the proxy has one vote for and one vote against if the proxy has been
instructed by one of more members to vote for the resolution and by one or more
members to vote against the resolution. The New Articles remove provisions in
the Existing Articles that only permitted members personally present at the
meeting (or, being a corporation, present by a duly appointed representative) to
have a vote on a show of hands and therefore effectively precluded proxies
voting on a show of hands. The New Articles also permit members to appoint more
than one proxy to attend on the same occasion and appoint different proxies to
exercise the rights attaching to different shares held by that member.
(d) Voting by corporate representatives
The 2006 Act enables multiple representatives to be appointed by the same
corporate member and to vote in different ways on a show of hands and a poll.
The New Articles contain provisions which permit the appointment of multiple
corporate representatives but do not specifically deal with voting by corporate
representatives on the basis that these are dealt with in the 2006 Act.
(e) Notice of general meetings
The Existing Articles require the company to give 21 clear days notice of
general meetings at which a special resolution is proposed. Pursuant to the 2006
Act a company may convene all general meetings which are not annual general
meetings on 14 clear days notice and the New Articles amend the provisions
applicable to the Company convening general meetings to reflect this.
In addition, the time limits for the appointment or termination of a proxy
appointment have been altered by the 2006 Act so that the articles cannot
provide that they should be received more than 48 hours before the meeting or in
the case of a poll taken more than 48 hours after the meeting, more than 24
hours before the time for the taking of a poll, with weekends and bank holidays
being permitted to be excluded for this purpose. The New Articles reflect all of
these new provisions.
(f) Conflicts of interest
The 2006 Act sets out directors general duties which largely codify the
existing law but with
some changes. Under the 2006 Act, from 1 October 2008 a director must avoid a
situation where he has, or can have, a direct or indirect interest that
conflicts, or possibly may conflict with the companys interests. The
requirement is very broad and could apply, for example, if a director becomes a
director of another company or a trustee of another organisation. The 2006 Act
allows directors of public companies to authorise conflicts and potential
conflicts, where appropriate, where the articles of association contain a
provision to this effect. The 2006 Act also allows the articles of association
to contain other provisions for dealing with directors conflicts of interest to
avoid a breach of duty. The New Articles give the Directors authority to approve
such situations and to include other provisions to allow conflicts of interest
to be dealt with in a similar way to the current position.
There are safeguards which will apply when Directors decide whether to authorise
a conflict or potential conflict. First, only Directors who have no interest in
the matter being considered will be able to take the relevant decision, and
secondly, in taking the decision the Directors must act in a way they consider,
in good faith, will be most likely to promote the Companys success. The
Directors will be able to impose limits or conditions when giving authorisation
if they think this is appropriate.
It is also proposed that the New Articles should contain provisions relating to
confidential
information, attendance at board meetings and availability of board papers to
protect a Director being in breach of duty if a conflict of interest or
potential conflict of interest arises. These provisions will only apply where
the position giving rise to the potential conflict has previously been
authorised by the Directors.
(g) Electronic and web communications
Provisions of the 2006 Act which came into force in January 2007 enable
companies to communicate with members by electronic and/or website
communications. The New Articles allow communications to members in electronic
form and, in addition, they also permit the Company to take advantage of the
provisions relating to website communications. Before the
Company can communicate with a member by means of a website communication, the
relevant member must be asked individually by the Company to agree that the
Company may send or supply documents or information to him by means of a website
and the Company must either have received a positive response or have received
no response within the period of 28 days beginning with the date on which the
request was sent. The Company will notify the member (either in writing, or by
other permitted means) when a relevant document or information is placed on the
website and a member can always request a hard copy version of the document or
information.
(h) Notice of refusal to register transfer and suspension of transfers
Where the Directors refuse to register a transfer of shares, in accordance with
the 2006 Act, the New Articles oblige them to send the transferee notice of
their refusal as soon as practicable and, in any event, within two months after
the date on which the instrument of transfer was lodged with the Company
together with the reasons for the refusal, as required by the 2006 Act.
The Existing Articles permit the Directors to suspend the registration of
transfers. Under the 2006 Act share transfers must be registered as soon as
practicable. The power in the Existing Articles to suspend the registration of
transfers is inconsistent with this requirement. Accordingly, this power has
been removed in the New Articles.
(i) Directors indemnities
The 2006 Act has in some areas widened the scope of the powers of a company to
indemnify directors and to fund expenditure incurred in connection with certain
actions against directors. In particular, a company that is a trustee of an
occupational pension scheme can now indemnify a director against liability
incurred in connection with the companys activities as trustee of the scheme.
In addition, the existing exemption allowing a company to provide money for the
purpose of funding a directors defence in court proceedings now expressly
covers regulatory proceedings and applies to associated companies. The indemnity
provisions in the New Articles have been amended to reflect the 2006 Act
position.
(j) Execution of documents
Since 6 April 2008, the 2006 Act has provided for documents (whether they are
simple contracts or deeds) to be executed by a company in one of three ways: (a)
by affixing its common seal; or (b) by a director and secretary of a company or
two directors of a company each signing the document on behalf of the company;
or (c) by the document being signed on behalf of a company by a director in the
presence of a witness who attests the signature. The New Articles reflect these
provisions of the 2006 Act.
Extraordinary General Meeting
You will find at the end of this document a notice convening the EGM to be held
at the offices of Field Fisher Waterhouse LLP, 35 Vine Street, London, EC3N 2AA
on 16 November 2009 at 10.00 a.m (or as soon thereafter as the Companys annual
general meeting shall have concluded or been adjourned) at which the following
resolutions will be proposed:
1. an ordinary resolution to authorise the Directors to allot relevant
securities pursuant to section 551 of the 2006 Act up to an aggregate maximum
nominal amount of GBP21 million;
2. a special resolution pursuant to section 570 of the 2006 Act to disapply the
pre-emption provisions contained in section 561(1) of the 2006 Act in respect of
the allotment and issue of the Placing Shares, the Warrants, the Loan Stock, the
issue of the Cartier Conversion Shares,the Satya Warrants, options to directors
and employees of the Group the allotment and issue of equity securities in
connection with offers to existing Shareholders where such offer is made in
proportion to existing holdings and otherwise up to an aggregate nominal amount
of GBP1,750,000; and
3. a special resolution to adopt the New Articles.
Irrevocable Undertakings
In addition to irrevocable undertakings given by David Ravden, Simunek and
Cartier have given an irrevocable undertaking to vote in favour of the
Resolutions. Irrevocable Undertakings to vote in favour of the Resolutions,
including those of the Directors, will therefore amount to an aggregate of
78,159,015 Ordinary Shares or 54.9 per cent. of the current issued share
capital.
Action to be taken
A Form of Proxy is enclosed with this document for use at the EGM.
Whether or not you propose to attend the EGM in person, you are requested to
complete the enclosed Form of Proxy in accordance with the instructions printed
on it. To be valid, completed Forms of Proxy must be returned by post to the
Companys Registrars, Capita Registrars, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU or by hand to the same address so as to arrive not later
than 48 hours before the time appointed for holding the EGM or any adjournment
of it.
If you complete and return a Form of Proxy, you may still attend and vote at the
EGM in person should you decide to do so.
Recommendation
The Directors consider that the Placing, Joint Venture, Acquisition and the
adoption of the New Articles are likely to promote the success of the Company
and are in the best interests of the Company and accordingly they unanimously
recommend you to vote in favour of the Resolutions to be proposed at the EGM as
they have irrevocably undertaken to do in respect of their own beneficial
holdings of Ordinary Shares amounting, in aggregate, to approximately 3.2 per
cent. of the existing issued ordinary share capital of the Company.
Appendix 2
Summary Terms of Secured Convertible Loan Stock
Issuer: Handmade plc
("Handmade" or the "Company")
Placing: Placing of up
to GBP10.2m nominal 12.0 per cent. secured convertible loan notes 2012 (the
"Loan Stock")
Underlying security: Ordinary shares of the
Company (AIM: HMF.L)
Price: Par
Reference share price: 10 pence (the "Reference
Share Price")
Conversion terms: 11.5 pence (Initial
Exchange Price and subject to adjustment, if applicable) of nominal of Loan
Stock to one new ordinary share
Initial Exchange Price: 11.5 pence
Exchange premium ("EP"): 15 per cent. premium to the
Reference Share Price
Principal repayment: Principal repaid as a
bullet on the expiration of the term or, at the option of the Loan Stock holder,
converted at the Conversion Price
Interest repayment Interest wrapped up
over term of the Loan Stock and repaid as a bullet on expiration of the term or,
at the option of the Loan Stock holder, converted at the Conversion Price
Conversion by the Loan Stock holder: Each Loan Stock holder may, at any
time, give 15 business days notice of its intention to convert all (but not
part) of their outstanding amounts (being the principal owed plus accrued
interest up to and including that date) under the Loan Stock at the Conversion
Price
Call by the Company: If, following the
expiration of 18 months (inclusive) from the issue date of the Loan Stock, the
average share price of the Company over any period of 20 business days exceeds
20 pence per share, the Company may give 15 days notice of its intention to
redeem any and all outstanding amounts under the Loan Stock together with any
interest accrued up to and including that date
Clean-up call: If, at any time,
less than 15 per cent. of the aggregate nominal amount of the Loan Stock remains
outstanding, the Company may give 15 days notice of its intention to require
each Loan Stock holder to convert any and all outstanding amounts under the Loan
Stock at the Conversion Price
Term of Loan Stock: 3 years from the date of
Admission
Listing of Loan Stock: It is intended the Loan
Stock will be listed on the Luxembourg Stock Exchanges Euro MTF Market or
another recognised stock exchange in due course
Guarantee and security: Senior Secured against the
intellectual property film library of the Company from time to time as updated
Negative pledge: Negative pledge clause
relating to relevant debt, subject to certain exclusions
Lock-up: The Company
will not issue Ordinary Shares or certain related securities for a period of 90
days from the date of the issue of the Loan Stock subject to customary
exceptions including pursuant to existing or future share option or incentive
schemes
Dilution adjustment: Standard dilution
adjustment dealing with, inter alia, share splits and consolidations, rights
issues and capital distributions etc.
Dividend Protection: Full. In the event of
any dividend, the conversion price shall be adjusted for any distribution on the
shares of the Company
Change of control protection: If there is a change of control
("Change of Control"), holders will, at their election, either:
(i)
have the one-off right to require redemption of their Loan Stock at the
principal amount plus accrued interests; or
(ii)convert all (but not part) of their outstanding Loan Stock at the Conversion
Price (such Conversion Price shall be adjusted downwards in accordance with the
ratchet mechanism detailed in the Loan Stock instrument which shall include the
following formula: COCEP = OEP/(1+(EP x a/b)), for a period of at least 30
calendar days, where:
COCEP =
the change of control exchange price
OEP =
the exchange price in effect on the relevant exchange date
EP =
15 per cent. (expressed as a fraction)
a =
the number of days from and including the date of the Change of Control to but
excluding the maturity date of the Loan Stock
b =
the number of days from and including the expected payment date to but
excluding the maturity date of the Loan Stock
Events of Default The Loan Stock
Instrument is subject to usual commercial events of default provisions. In
addition, the Loan Stock Instrument includes a requirement that the Handmade
film library be valued as at 31 December in each calendar year by an independent
firm of valuers of reputable standing appointed by the Company. If the value of
the Handmade film library is assessed at less than GBP30 million then this shall
constitute an event of default under the Loan Stock Instrument and each Loan
Stock holder may give notice to the Company that its holding of Loan Stock is
repayable whereupon such Loan Stock shall become immediately repayable at its
outstanding principal amount together with accrued interest thereon to the date
of repayment.
Governing Law Jurisdiction: The Laws of England and Wales
Use of Proceeds: The proceeds of the
Placing will be used, inter alia, to fund the Joint Venture, the Acquisition and
provide working capital for the Company
Appendix 3
Summary Terms of the Loan Stock
DEFINITIONS
The following definitions apply throughout this document, unless the context
otherwise requires:
"1985 Act" the Companies
Act 1985 including any modification or reenactment thereof for the time being in
force
"2006 Act" the Companies
Act 2006 including any modification or reenactment thereof for the time being in
force
"Acquisition" the acquisition
of Animation Collective Holdings Corporation by the Company pursuant to the
Acquisition Agreement
"Acquisition Agreement" the conditional
agreement dated 22 October 2009 between the Company and Larry Schwarz for the
acquisition of Animation Collective Holdings Corporation
"Admission" admission of the
Placing Shares and the Initial Consideration Shares to trading on AIM becoming
effective in accordance with the AIM Rules
"AIM" the AIM
market of the London Stock Exchange
"AIM Rules" the AIM Rules
for Companies issued by the London Stock Exchange
"Animation Collective Group" or "AC" Animation Collective Holdings
Corporation and its proposed subsidiaries, Animation Collective Inc., Larry
Schwarz Company, Inc., Animation Partners One, Inc., Animation Partners Two,
Inc., So Media, Inc., Kanonen & Bestreichen, Inc. and Adams, Barnes, Henry,
Cantwell & Hudson Inc.
"BBC" the British
Broadcasting Corporation
"Board" or "Directors" the board
of directors of the Company
"Canaccord Adams" Canaccord Adams Limited
"Cartier Agreement" the agreement dated
15 May 2006 between Cartier and the Company under which Cartier acquired 100 per
cent. of the issued share capital of Handmade Holdings Limited (as amended on 26
September 2008)
"Cartier Conversion Shares" the 20,000,000 Ordinary
Shares to be issued to Cartier to repay GBP2 million of the outstanding deferred
consideration payable pursuant to the Cartier Agreement
"Cartier" Cartier
Investments Inc., a company 100 per cent. owned by The Meehan Family Settlement
of which Patrick Meehan and certain members of his family are potential
beneficiaries
"Company" or "Handmade" Handmade plc
"Consideration Shares" the Initial
Consideration Shares and the Deferred Consideration Shares
"Contribution Agreement" the conditional agreement
dated 22 October 2009 between Handmade Kids and NGK for the purposes of the
Joint Venture and the formation of the Joint Venture Company and the granting of
membership interests therein
"Deferred Consideration Shares" the new Ordinary Shares to be
issued to Larry Schwarz as part of the deferred consideration for the
Acquisition
"Enlarged Group" Handmade plc and its
subsidiaries following
completion of the Acquisition and the formation of the Joint Venture including,
for the avoidance of doubt, the Joint Venture Company
"Enlarged Issued Share Capital" the issued Ordinary Share
capital of the Company immediately following Admission
"Existing Articles" the existing
articles of association of the Company
"Extraordinary General Meeting" or "EGM" the extraordinary general meeting
of the Company, notice of which is set out at the end of this document
"Form of Proxy" the form of proxy
for use at the Extraordinary General Meeting, which is enclosed with this
document
"Group" Handmade and
its subsidiary companies at the date of this document
"Handmade Kids" Handmade Kids, Inc. a
California corporation and wholly-owned subsidiary of Handmade
"Handmade Television Productions" Handmade Television Productions
Limited, a wholly-owned subsidiary of Handmade
"Initial Consideration Shares" the 2,660,848 new
Ordinary Shares to be issued to Larry Schwarz as part of the initial
consideration for the Acquisition, being a number of Ordinary Shares calculated
by dividing US$500,000 by the average closing sales price of the Ordinary Shares
for the 20 business days prior to the completion of the Acquisition
"IPTV" internet
protocol television, the delivery of digital
television programming by video stream encoded as a series of internet protocol
packets over a network infrastructure
"Joint Venture" the joint
venture between National Geographic Kids and Handmade Kids formed through the
Joint Venture Company and governed by the Operating Agreement
"Joint Venture Company" NG Kids Entertainment
LLC., a new limited liability company formed under the laws of the State of
Delaware, United States of America
"Loan Stock" the GBP10,200,000
nominal 12 per cent. secured
convertible loan stock 2012 constituted by the Loan Stock Instrument
"Loan Stock Instrument" the loan stock
instrument constituting the Loan Stock
"London Stock Exchange" London Stock Exchange plc
"National Geographic Kids" or "NGK" NGHT, Inc. D/B/A/ National
Geographic Kids
Entertainment
"New Articles" the
proposed new articles of association of the
Company to be approved and adopted at the EGM
"Operating Agreement" the agreement between
Handmade Kids and NGK to be entered into on completion of the transactions
contemplated by the Contribution Agreement, which will govern the rights and
obligations of the parties with respect to the Joint Venture Company
"Ordinary Shares" the ordinary shares
of GBP0.05 each in the capital of the Company
"Placing" the
conditional placing by Canaccord Adams of the Placing Shares at the Placing
Price, the Warrants and the Loan Stock pursuant to the Placing Agreement
"Placing Agreement" the conditional
agreement dated 22 October 2009 between the Company, Patrick Meehan, David
Ravden and Canaccord Adams pursuant to which Canaccord Adams has conditionally
agreed to use reasonable endeavours to procure subscribers for the Placing
Shares and attached Warrants at the Placing Price and for the Loan Stock
"Placing Price" 10 pence per
Placing Share
"Placing Shares" 68,000,000 new
Ordinary Shares which are the subject of the Placing
"Proposals" the Acquisition,
the Joint Venture, the Placing and the issue of the Cartier Conversion Shares
"Resolutions" the resolutions
set out in the notice of Extraordinary General Meeting at the end of this
document
"Sarah Ferguson Rights" the rights over which
Sarah Ferguson has granted options to licence to the Company; being the rights
relating to "Tea for Ruby" and "Little Red", as set out in the paragraph headed
"Licensing of Sarah Ferguson Rights"
"Satya Warrants" 20,000,000 warrants
to be issued to Satya Productions Limited as described on page 17 and 18 of the
circular, each Satya Warrants giving the right to subscribe for one Ordinary
Share at 15p per Ordinary Share
"Shareholder(s)" holder(s) of
Ordinary Shares
"Animation Collective Holdings Corporation" the proposed parent company of the
Animation
Collective Group
"VOD" video on
demand, an interactive television technology that allows subscribers to view
programming in real time or download programmes and view them later
"Warrants" 34,000,000
warrants to be issued to placees pursuant to the Placing at a ratio of one
Warrant for every two Placing Shares, each Warrant giving the right to subscribe
for one Ordinary Share at the Placing Price for a period of 12 months from
Admission
A GBP-US$ exchange rate of 1:1.634, based on the spot exchange rate as at 20
October 2009, has been used throughout this document
This information is provided by RNS
The company news service from the London Stock Exchange
END
ACQFLLLLKBBEFBF
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