Nostra Terra Oil and Gas : Posting of Circular and Notice of General Meeting

RNS Number : 8388C

Nostra Terra Oil & Gas Company PLC

13 February 2020

13 February 2020

Nostra Terra Oil and Gas Company plc

("Nostra Terra" or the "Company")

Posting of Circular and Notice of General Meeting

Nostra Terra (AIM:NTOG), the oil and gas explora on and produc on company with a por olio of assets in Texas, USA, announces that it will today be pos ng to Shareholders a circular (the "Circular"), along with accompanying no ce of general mee ng and form of proxy (together, with the Circular, the "Documents"), in relation to the Requisitions.

The General Mee ng will be held at11:00 a.m. on 3 March 2020 at the offices of Druces LLP, Salisbury House, London Wall, London EC2M 5PS. The Documents will shortly be available on the Company's website.

The Le er from the Chairman of the Company has been extracted and included in this announcement below.

Unless the context requires otherwise, defini ons used in this announcement will have the same meaning as ascribed to them in the Circular.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

For further information, visit www.ntog.co.ukor contact:

Nostra Terra Oil and Gas Company plc	[phone]
Matt Lofgran, CEO
Strand Hanson Limited	[phone]
(Nominated & Financial Adviser & Joint Broker)
Rory Murphy / Ritchie Balmer / Jack Botros
Shard Capital Stockbrokers (Joint Broker)	[phone]
Damon Heath / Erik Woolgar
Lionsgate Communications (Public Relations)	[phone]
Jonathan Charles

LETTER FROM THE CHAIRMAN

Dear Shareholder,

NOTICE OF GENERAL MEETING

As Chairman of Nostra Terra, I invite you to a General Mee ng of the Company to be held at 11:00 a.m. on 3 March 2020 at the offices of Druces LLP, Salisbury House, London Wall, London EC2M 5PS.

Background

On 17 January 2020, the Company announced that it had received a le er from Eridge Capital Limited ("Eridge") (formerly New World Oil and Gas plc),dated 15 January 2020, requisi oning a general meeting of the Company's shareholders (the "First Requisition").

The First Requisi on proposed that, inter alia, Shareholders be asked to consider resolu ons to remove Ma Lofgran from the Board of Directors of Nostra Terra (the "Board"); to appoint Andrew Morrison to the Board; and to remove any Directors that may be appointed in the period between the date of the First Requisition and the proposed general meeting.

On 24 January 2020, having reviewed the First Requisi on with its advisers, the Company announced that the First Requisition had been deemed as valid.

On 3 February 2020, the Company announced that, on 31 January 2020, it had received a further le er from Eridge validly requisi oning a second general mee ng of the Company's shareholders (the "Second Requisi on" and, together with the First Requisi on, the "Requisi ons"). The Second Requisi on proposed that Shareholders be asked to consider resolu ons to remove myself (Ewen Ainsworth) from the Board; and to remove any Directors that may be appointed in the period between the date of the Second Requisition and the proposed general meeting.

On 5 February 2020, the Company announced that the Board believed that it was in the best interests of the Company and its Shareholders as whole to consider the Requisi ons at a single general mee ng rather than to incur the addi onal costs and expenses associated with publishing two separate Shareholder circulars. In addi on, the Second Requisi on was received along with a statement from Eridge to Shareholders concerning the Requisi ons (the "Eridge Statement") for inclusion in the circular. The Eridge Statement, which has not been verified, is set out as an appendix to the Circular. The Directors do not accept responsibility for anything contained within the Eridge Statement.

Accordingly, the purpose of this circular is to convene a General Mee ng of the Company at which the Resolu ons will be put to a vote of the Shareholders. For each of the Resolu ons to be passed, more than half of the votes cast must be cast in favour of such Resolu on. In this le er, I set out the reasons why the Board considers that the Resolu ons are not in the best interests of Shareholders and explain why Shareholders should vote AGAINSTthe Resolutions.

The Board has provided Eridge mul ple opportuni es to present its business case for changes (or not) to the Company's business model, but no concrete plan has been forthcoming. The Board does not believe that Eridge has a credible business proposi on with regard to the future of Nostra Terra; the Directors have certainly not seen any evidence of one to date.

Furthermore, if Eridge succeeds and the Resolu ons are passed by Shareholders, the Company will be le with two Directors and no Chairman. The Chairman is elected by the Board and, in this event, the two Directors may not agree on which such Director should be appointed Chairman and, therefore, the Board could be deadlocked. If this scenario arises, it is likely, in the opinion of the Board, that addi onal shareholder mee ngs will be necessary, at further expense to the Shareholders, and further distrac ng the then reduced Board from overseeing the Company's operations.

Addi onally, there is the possibility that Mr Stafford may end up as the only Director. Nostra Terra is required to have two or more Directors under the Companies Act 2006 and pursuant to its ar cles of associa on ("Ar cles"). In addi on, in this event, it is likely that the Company will be unable to discharge its management and opera ng du es sufficiently pursuant to the AIM Rules to the Companies ("AIM Rules"), which may result in trading in the Ordinary Shares on AIM being suspended un l such

me as a suitable Board has been established. The Board believes that Eridge has not thought through the implica ons of its strategy at all, which, when the history of Eridge itself, formerly an AIM-listed company under the name New World Oil and Gas plc, which was de-listed and re-domiciled from Jersey to the Bri sh Virgin Islands is also considered, should, in the Board's view, be of major concern to Shareholders.

Accordingly, the Board unanimously recommends Shareholders to vote AGAINSTthe proposed Resolu ons, as they intend so to do in respect of their own beneficial holdings, which amount, in aggregate, to 10,309,632 Ordinary Shares, represen ng approximately 5 per cent. of the issued share capital of the Company.

THE RESOLUTIONS

Set out below is a rebu al of the Resolu ons to be considered at the General Mee ng, all of which will be proposed as ordinary resolu ons. This means that for each of the Resolu ons to be passed, more than half of the votes cast must be cast in favour of such Resolution.

The Board's response to the Requisitions is provided below.

I write in my capacity as Chairman of the Board. The Board has considered the Requisi ons and has the following observations and recommendations by way of response.

Firstly, I shall address the Requisi ons in a general sense and then respond in more detail to each specific point, highligh ng where necessary informa on and observa ons, which may be of use to Shareholders in forming a considered opinion.

General Opinion

It is the Board's firm belief that the proposals outlined in the Requisi ons are not to the benefit of Shareholders. The Requisi ons are an opportunis c way of trying to gain board control of a public listed company, whilst not providing any succession planning, new strategic direc on or even a basic business plan to accompany the proposed changes.

The Board is acutely aware of the disappoin ng share price performance over the last twelve months, which has been a difficult period for the small cap oil and gas sector, but it strongly believes that the fundamentals of the underlying business are sound and are improving.

The Company's near-term work plan is designed to grow produc on by approximately 50%, whilst minimising costs, over the next twelve months and as set out in more detail below. The Board recognises the need to augment the Board through suitable Board appointments to bring in new thinking and challenge ideas and opinions. Prior to receipt of the First Requisi on, we had talked to several high calibre candidates about joining the Board but the Requisi on process and the build-up to it has not allowed the Board to execute this strategy. In short, we have a plan to grow the Company, increase produc on, minimise costs and generate shareholder value; the Board believes the proposals underpinning the Requisi ons would prevent us from delivering this and therefore we strongly recommend that Shareholders should vote AGAINSTthe Resolutions.

I shall now review the specific demands/proposals of Requisitions, taking each Resolution in turn.

Resolution 1: to remove Matthew Lofgran from the Board

Mr Lofgran has been a Board member and CEO of Nostra Terra for 10 years; it is he who has personally nego ated most of the transac ons completed by the Company over this me. Since the adop on of the Company's new strategy in 2016, as detailed in each of the 2016, 2017 and 2018 Annual Report and Accounts (please refer to the Chairman's Report in each), this has included, inter alia:

• Acquisi on of the Chisholm Trail asset, which was sold for US$2.73 million in 2016 and yielded a profit
• Acquisi on of both the Pine Mills and the Permian Basin (where the Twin Well and G6 well were both successfully drilled) producing assets, with combined produc on, during December 2019, of 127 barrels of oil per day ("bopd") bopd gross, 93 bopd net to Nostra Terra
  o Total revenue in 2018 before the benefit of hedging was US$2.3 million
• Acquisition and Field Development Plan of the Mesquite Asset, West Texas
• Nego a on of the Washington Federal Bank ("WAFD") loan facility (the "Loan Facility"), which has a current outstanding balance of approximately US$1.74 million
• Negotiation of hedging contracts with BP

Through discussion with Eridge, it is apparent that they wish Ma Lofgran to remain an employee, at

least ini	ally and, strangely, in the Board's opinion, that he should con nue to lead the Company as the
only full	me execu ve, even if removed from the Board. However, there is, of course, no guarantee

that, if Mr Lofgran were to be removed from the Board, he would remain with the Company. Therefore, the removal of Mr Lofgran from the Board could well mean his exit from the Company.

The Board firmly believes that removal of Mr Lofgran from the Board and from the Company would not benefit the Company in any way. He is the only execu ve of the Company and he has the primary knowledge of all the Company's current assets and contracts, including financing, in the US and he has a clear vision and executable strategy for growth. The rela onships Mr Lofgran has developed with our lenders in the USA, our contractors in the industry and with our opera onal staff in the field are far too valuable to be discarded based on a perceived past twelve-month difficult spell. It is short sighted to suggest Mr Lofgran's removal, especially in view of Eridge's proposed replacement, which is considered

under Resolution 3.

In rela on to the Loan Facility, the loan documenta on contains a number of customary nega ve covenants required by WAFD, one of which relates to the ongoing appointment of Ma Lofgran as President of the Company's subsidiary, New Horizons Energy 1 LLC ("New Horizons") (the "key man clause"). The key man clause stipulates that New Horizons must obtain written consent from WAFD prior to Ma Lofgran ceasing to be President of New Horizons. Otherwise New Horizons will have 30 days to remedy the situa on or it will be in default of the Loan Facility and the outstanding principal and interest will immediately become due.

In the event Matt Lofgran is voted off the Board at the Company's forthcoming General Meeting, there is no guarantee that Mr Lofgran would remain as an employee of the Nostra Terra group, and therefore as President of New Horizons. Indeed, if Ma Lofgran does stay as an employee, he may choose to resign as President of New Horizons. Accordingly, the Company's Board at such me would seek the wri en consent of WAFD to waive the key man clause. However there is clearly a risk that this would not be given, a risk the Board believes is increased by this unwelcome General Mee ng. Shareholders should note that the outstanding balance under the Loan Facility is approximately US$1.74 million.

The Board believes that the confidence that Ma Lofgran has brought to WAFD, not only in nego a ng the Loan Facility ini ally, but also in managing it since, through the drawdown and repayment of funds,

and the structured hedging of the oil price for the Company's produc	on, should not be underes mated
by Eridge or other	Shareholders. Ma	Lofgran has also worked	ac vely with WAFD on poten al
acquisi	on opportuni	es and WAFD has been very suppor ve, providing le ers of support regarding the
potential for a significant increase in the facility size and borrowing base.
Given this material and important rela	onship that the Company has with WAFD, not only with regard to
the exis	ng Loan Facility, but also poten	al access to further funds if the right growth opportunity
presents	itself, the	Board believes that	the removal of Ma Lofgran from the Board is counter-
productive to shareholders' interests.
The Board recommends that Shareholders vote against this Resolution.
Resolution 2: to remove Ewen Ainsworth from the Board

Ewen Ainsworth joined Nostra Terra as Non-Execu ve Chairman in 2015. Ewen has over 30 years upstream oil and gas finance experience with a vast array of commercial, legal and most importantly financial contacts within the City and beyond. In the opinion of the Board, he has, over this me, along with Ma Lofgran, been instrumental in structuring the Company's financial posi on in terms of the type and composi on of the borrowing undertaken. Furthermore, he has provided advice and exper se on a consultancy basis to assess commercial risk, corporate structures and lending vehicles suitable to the Company and of benefit to its shareholders. He chairs the Board's Audit and Remunera on Committees and is in the process of restructuring the finance function within the business.

Ewen has demonstrated his commitment to the Company and his belief in the Board by accep ng a significant part of his remuneration in shares instead of cash. Crucially, he also has loaned the Company £382,000 (of which £268,000 plus unpaid interest is outstanding) in two tranches over the last four years to help avoid dilu on to Shareholders. Thus, he is personally invested in seeing the Company grow and its share price performance improve; removing Ewen would be an extremely high risk strategy as a replacement may not be so personally mo vated and would have to absorb five years' experience and relationships almost instantly.

The Board recommends that Shareholders vote against this Resolution.

Resolution 3: to appoint Andrew Morrison to the Board

The Board has met Mr Morrison and finds him personable. However, other candidates reviewed by the Board as part of its already ongoing process prior to the receipt of the First Requisi on, would, the Board believes, be a be er fit for the Company. The most relevant corporate history in rela on to Mr Morrison for Nostra Terra Shareholders to note is the failure of Silvermere Energy plc ("Silvermere"), which had oil and gas assets in Texas (where Nostra Terra is an operator and all of its asset are currently located), which, under Mr Morrison's leadership as founder and CEO, was suspended from trading on AIM and entered into a company voluntary arrangement ("CVA") within two years of lis ng (at which point Mr Morrison resigned) a er which the company changed its name and strategy. Over this two-year period (where oil prices were largely in the US$90 per barrel range) Mr Morrison failed to build a portfolio for Silvermere and ultimately the company entered into a CVA, failing on a single well.

Further informa on rela ng to Mr Morrison is set out below in compliance with the AIM Rules for Companies:

Andrew John Gowdy Morrison (aged 59)

Current directorships/partnerships	Past directorships/partnerships (last five
	years)
Spinnaker Opportunities plc	None
Spinnaker Management Resources Ltd

Between 31 August 2011 and 16 August 2013, Mr Morrison was a director of Silvermere, which entered into a CVA with its creditors on 16 August 2013, with a deficiency to creditors of £1.2 million. The CVA completed on 20 December 2013, pursuant to which creditors were issued shares in Silvermere, which was then renamed Tern plc.

The Board recommends that Shareholders vote against this Resolu on as exis ng higher calibre candidates have already been identified to strengthen the Board.

Resolu on 4: to remove any Directors appointed subsequent to receipt of the Requisi ons and the General Meeting

The Board does not anticipate any appointments in this period.

The Company has been considering appoin ng addi onal Directors to the Board and, prior to the receipt of the Requisi ons, had held discussions with a number of experienced poten al appointees, with strong track records in the sector, to strengthen the Board and to assist in implementing its plans for the Company. The Requisi ons and other interference from Eridge, including inappropriately contac ng two candidates directly (which the candidates relayed to the Board), has made this process more difficult and delayed any poten al appointments. In the event the Resolu ons do not pass, the Board will continue to expedite this process once again.

The Board recommends that Shareholders vote against this Resolution.

RESPONSE TO ERIDGE STATEMENT

The Board disagrees with the overall sen ment of the Eridge Statement, which is set out as an appendix to the Circular, and wishes to draw Shareholders' attention to the following:

1. Loans by Directors

Two of the Company's Directors, being myself and John Stafford, provided loans to enable Nostra Terra to crystallise certain significant opportunities, being the original acquisition of Pine Mills and the drilling of the G5 well in the Permian Basin, without diluting shareholders through the issue of further equity.

I advanced £230,000 funds for the ini al acquisi on of Pine Mills with an ini al interest rate of 10% and reduced to 7.5%. This loan, including any unpaid interest, is immediately repayable by the Company on demand by myself. At the end of January 2020, the outstanding balance was £230,000 plus unpaid interest.

John Stafford and I advanced a loan of, in aggregate, £287,000 to drill the G5 well, with an interest rate of 7.5%. This loan, including any unpaid interest, is immediately repayable on demand by either Mr Stafford or myself. At the end of January 2020, the outstanding balance was £71,750 plus unpaid interest.

The loans were announced as related party transac ons under the AIM Rules at the me they were provided and have been disclosed as related party transac ons in the Company's annual report and accounts.

Your Non-Execu ve Directors have been financially suppor ve of the development of the Company, accep ng risk and demonstra ng faith in Ma Lofgran. These loans were provided in order to assist the Company whilst minimising dilution to shareholders.

Shareholders should note that the loans provided by the Directors are repayable on demand.

2. Directors Fees and Remuneration

Ma	Lofgran's annual remunera on is US$250,000 and his service agreement contains a six-month
no	ce period. Ma Lofgran's role as CEO, director and/or employee can be terminated, subject to his
no	ce period running, at any me. There have been no further payments or benefits accruing to Mr

Lofgran such as a pension, bonus or healthcare, as would be normal for a CEO of his calibre. The Board believes that the level of remunera on for Ma Lofgran as CEO, and the sole execu ve director of the Company, is appropriate given the wide range of responsibili es and demonstrated ability to grow the Company. 2018 reported revenue of US$2.3 million with field operations achieving a gross profit, and we are expec ng 2019 to be similar. The plan for 2020 is designed to increase revenues significantly and to

cover the overheads of the business. In 2020, led by Ma Lofgran, it is intended that the costs of the business will be covered by the increased annual revenue. This should provide a solid founda on, de- risked over a portfolio of wells, for continued further growth.

My director fees, which are paid to me directly, and consultancy fees, which are paid to Discovery Energy Limited ("Discovery"), a company that I control, are, in aggregate, £50,000 per annum of which £30,000 is paid in cash and £20,000 in shares. In addi on, a further £21,500 annually on average is incurred by the Company for additional services provided by Discovery.

During 2018, my total fees, including consultancy fees, were:

Director fee	£16,667
Consultancy fee	£33,333
Sub-total	£50,000
Additional Consultancy	£38,650
Prior year adjustment	£2,500
Total	£91,150 at £1 = US$1.33458 = US$121,647

As set out above, the Directors have been financially suppor ve of the Company, deferring payment in order to progress the business. Currently around £91,000 of fees are outstanding to me personally and Discovery rela ng to 2018 and 2019. Hence, whilst director and consultancy fees may have been accrued in the Company's accounts as being due, there is usually a considerable me lag before payment is made in order to preserve cash in the business, which relies on the forbearance of the relevant Directors. The director fee for John Stafford is £30,000 per annum and currently £12,500 is outstanding. Given the limited human resource at the Company's disposal, it is en rely reasonable that the Company accesses suitable additional skills, at competitive consultancy rates, when needed.

Amounts owed to Directors should also be viewed in the context of the substan al funds provided via these Director loans and the current outstanding balances.

3. Directors interests in the Company

The interests of the Directors are aligned with other Shareholders in Nostra Terra through either Ordinary Shares that they hold or various warrants and op ons. These interests provide compelling incen ve to the Directors in order to grow the business and drive future value for all Shareholders. The poten al value to be realised from a successful strategy is many mes that realised from the remuneration the Directors may receive as a result of that success.

The warrants and op ons granted to the Directors have been designed, being priced out of the money at the me of grant, to reward significantly other Shareholders with value accre on before they can be exercised by Directors.

4. Communications with Eridge

Nostra Terra has, during 2019 and early 2020, sought to engage posi vely with Ben Turney, a director of Eridge, via email, telephone calls and mee ngs. In this process, the Board has listened to his concerns and proposals, spending a significant amount of time doing so.

Mr Turney's communica ons with the Company have focused on an overhaul of the Board, including the appointment of a new Execu ve Chairman, as well as verbally demanding rights for Eridge to appoint two further directors to the Board, with Mr Lofgran accep ng a reduced role on the Board, moving from CEO to COO, while remaining on the Board.

Whilst the Board strongly felt that the proposals contained in these communica ons to it were not in the best interest of Shareholders, it s ll endeavoured to communicate posi vely and construc vely with Mr Turney, including commencing due diligence and background checks on Mr Morrison.

Within a week of the demands outlined above, a second plan was put forward by Mr Turney, involving the appointment of Mr Morrison as Execu ve Chairman, but not requiring the removal of the other Directors. However, shortly a er this, Mr Turney changed his mind again, this me demanding Mr Lofgran step down from the Board completely, which was followed in due course by the same demand regarding me.

The ideas put forward by Mr Turney were always closely scru nised by the Board and the Board sought to enter into dialogue with Mr Turney. It is the Company's belief that should Eridge have entered into a construc ve and open dialogue, Eridge's stated concerns could have been addressed and a way forward for the Company agreed. The Board's a empts to engage construc vely with Eridge have been rejected and we believe that Eridge's intent all along has been effec vely to take control of the Company by taking control of the Board. In the Board's view, Mr Turney has never seriously posi vely engaged with us in order to find a compromise. A compromise, in the Board's belief, would be an outcome in the best interests of ALLShareholders.

In addi on, Eridge has never presented a plan for the future direc on of the Company. Given this, the Board expects it would be a period of tremendous uncertainty for Nostra Terra should Mr Lofgran and/or myself be removed from the Board. In the Board's view, Eridge and Mr Turney are seeking to place their own interests before those of all other Shareholders.

5. Corporate Governance

Eridge has stated that there was a failure to report a cri cal banking covenant, being the key man clause rela ng to Ma Lofgran. This is not accurate, being normal terms of business with lending agreements, where banks o en require such a clause, and to suggest otherwise is in the view of the Board highly misleading. The key man clause has only become relevant in the context of Resolu on 1 to be proposed at the General Meeting regarding the removal of Matt Lofgran.

It is certainly true that Nostra Terra is a small company with low overheads and a small management team and, therefore, by defini on, the risk associated with the loss of a senior employee is much different to that within larger organisa ons. Ma Lofgran, as CEO, leads the entrepreneurial and operational activity of the Company which is overseen and scrutinised by the Non-Executive Directors.

Given Eridge's focus on corporate governance, the Board finds it ironic that, when Mr Turney became a director of, and took control at, New World Oil and Gas plc ("New World"), in rela on to the company's migra on to the Bri sh Virgin Islands ("BVI"),"a number of shareholders…raised concerns about the proposed move to the BVI". In an a empt to assuage the concerns of New World shareholders, New World said: "New World is required to have an annual audit and to present the accounts to shareholders each year" and "New World is required to host its Annual General Mee ngs in the United Kingdom."The Board notes that Eridge's website, as at 12 February 2020, shows that in the last two years since New World migrated to the BVI, it has neither published any accounts nor held any annual general mee ngs in the UK. The Board believes that this failure to adhere to standards of corporate governance should concern all our Shareholders.

6. 2020 Workplan

The Board now wishes to provide Shareholders with some insight into the workplan it wants the Company to execute in 2020 (the "2020 Workplan") with a target for year end to grow produc on by approximately 50% from current levels. We share this to demonstrate that a firm growth strategy is in place and to show that adop on of the Eridge proposals would, in the Board's view, significantly damage our ability to deliver the shareholder growth envisaged.

The 2020 Workplan is designed to be the 'low cost, high impact produc on growth plan'. This focuses on minimising capital expenditure, whilst growing produc on and revenues. There are several key steps identified in delivering this:

Pine Mills

• Iden fied 3 well workover candidates which each could add 6-10 bopd produc on for a total cost of approximately US$75k
• Repair casing at an exis ng shut-in well adding approximately 10 bopd for a capital expenditure of approximately US$100k
• Expand electricity infrastructure to allow more pumps and tank ba eries to be placed into production (largely complete)
• Increase water handling capacity to boost reliability and field run- me for a cost of approximately US$100k
• Poten al farm-in for a por on of Pine Mills, wherein a well would be drilled and Nostra Terra would a carried working interest

Permian Basin

• Plug uneconomic well to eliminate expense of water handling for a cost of approximately US$20k
• Potential purchase of target lease nearby at a cost to be determined
• Perform comple on on exis ng well and recomple on of other wells at the poten al acquisition site, which has the potential for 20+ bopd for a cost of approximately US$150k

As can be seen from the above, the 2020 Workplan does not envisage significant capital expenditure. Whilst the Company has been looking to finance the capital expenditure and working capital of the Company via opera onal cashflow, the Board recognises that in order to accelerate the plan to increase produc on by 50%, further funds will need to be raised. To this end the Company is in advanced discussions with a funding provider to raise finance, although there is no guarantee that this can be finalised satisfactorily.

There are also transac ons and opportuni es about which the Board is talking to interested par es and hopes to execute in due course.

In summary, the Board believes that Shareholders will be best served by rejectingthe Eridge proposals, vo ng AGAINSTthe Requisi ons and allowing the current Board to con nue to strengthen, grow and execute its growth strategy for this year and beyond.

Action to be taken

You will find enclosed with this document a Form of Proxy for use in connec on with the General Mee ng. Whether or not you intend to be present at the General Mee ng, you are requested to complete the Form of Proxy in accordance with the instruc ons printed on it so as to be received by Share Registrars Limited as soon as possible, but in any event no later than 11.00 a.m. on 28 February 2020. Alterna vely, if you hold shares in CREST, you can appoint a proxy electronically by using the CREST electronic proxy appointment service.

EVERY SHAREHOLDER'S VOTE IS IMPORTANT - PLEASE COMPELTE AND RETURN YOUR FORM OF PROXY AS SOON AS POSSIBLE.

Comple on of the Form of Proxy will not preclude you from a ending and vo ng at the General Mee ng should you so wish.

Recommendation

For the reasons set out in this le er, your Board believes that Resolu ons 1-4 (inclusive) will not promote the success of, and are not in the best interests of, the Company and its Shareholders as a whole.

Your Board therefore unanimously recommends that you vote AGAINST Resolutions 1-4 (inclusive), as the Directors intend so to do in respect of their own beneficial holding of, in aggregate, 10,309,632 Ordinary Shares, represen ng approximately 5 per cent. of the issued share capital of the Company.

Shareholders should note that in the event that Resolu ons 1 and 2 are passed but Resolu on 3 is voted down, the Company will have only one Director, which is in breach of the Companies Act 2006 and the Company's Ar cles. In addi on, in this event, it is likely that the Company will be unable to discharge its management and opera ng du es sufficiently pursuant to the AIM Rules, which may result in trading in the Ordinary Shares on AIM being suspended un l such me as a suitable Board has been established.

Yours faithfully

Ewen Ainsworth

Chairman

ENDS

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