Issue of Loan Notes, EGM

RNS Number:4982N
Nipson Digital Printing Systems PLC
07 February 2008


For Immediate Release                                            7 February 2008


        NIPSON DIGITAL PRINTING SYSTEMS PLC ("Nipson" or "the Company")


 ISSUE OF 5 PER CENT. UNSECURED CONVERTIBLE LOAN NOTES AND NOTICE OF A GENERAL
                                    MEETING

Nipson is pleased to announce the posting of a circular to shareholders setting
out the proposals for the issue of 5 per.cent unsecured convertible loan notes
and a notice of General Meeting to be held on 28 February 2008 at 2pm.

The following is the text of a letter to shareholders. Full details of the
transaction are set out in the circular which has been sent to shareholders and
is available on the Company's web-site at www.nipson.com/investors/rule26.php
(under "Admission Document and Circulars").


1. INTRODUCTION

Nipson Digital Printing Systems Plc is delighted to confirm that, as announced
on 31 January 2008, it has secured in principle funding of up to 3.5 million
Euros in the form of 5 per cent. unsecured convertible loan notes to be issued
to the Investor, which has been established by new outside investors of an
Israeli brokerage firm, D Roseman. In addition, conditional upon the issue of
Investor Loan Notes, Polar will have the right to convert up to 4.25 million
Euros of its existing debt in the Group into the Polar Loan Notes.

The purpose of this document is to explain to you the background to and reasons
for the Transaction and why the Independent Directors believe the Transaction to
be in the best interests of the Company and its Shareholders. The Transaction is
conditional, inter alia, upon Shareholders approving the Resolutions. At the end
of this document is a notice convening a General Meeting for 2 p.m. on 28
February 2008 at which the Company will seek your approval of the Resolutions.


2. TRADING UPDATE AND REASONS FOR THE ISSUE

The total sales for the last quarter of the year to 31 December 2007 were
encouraging at £8.1 million (2006: £7.8m), bringing the total sales for 2007 to
£27.0 million (2006: £31.6m).

Equipment sales were substantially up on previous quarters of 2007 at £3.2
million to reach £8.1 million for the full year (2006: £13.5m). Recurrent
revenues continued to increase steadily at £4.9 million for the fourth quarter
and at £18.9 million for the full year (2006: £18.1m).

These figures are subject to audit and no information is available concerning
the full year 's results at this time. The preliminary results are expected to
be announced no later than 20 March 2008.

This increase in the Group's activity requires additional funding of its working
capital beyond the levels agreed with its bankers and its major shareholder,
Polar.

Currently, the Group owes Polar a total sum of 14.5 million Euros (including
accrued interest). The amount includes a medium term loan of 2.9 million Euros,
debtor financing of 10.9 million Euros and 0.7 million Euros interest (at rates
of 5 per cent. and 4.8 per cent. respectively).

The Company has been working with Polar for some time to secure additional
sources of financing for the business. These efforts included discussions with
banks within and outside France and negotiations with a number of funds and
investment institutions. To date no other concrete proposals were made to the
Company committing to potential funding of the Company's operations. The
Independent Directors believe that if this funding is not secured, the Group may
not be able to meet its working capital requirements which are increasing as its
business activities and sales of new equipment are growing.


The Independent Directors believe that this funding secures the financing of the
Group to enable it to take advantage of the opportunities provided by the
potential increase in the Group's business.


3. LOAN NOTE AGREEMENTS

The Company entered into the Investor Loan Note Agreement on 30 January 2008
with the Investor and Polar, conditional on certain resolutions being passed by
Shareholders to issue on subscription by the Investor a maximum of 3.5 million
Euros worth of Investor Loan Notes to the Investor on or before 15 March 2008.
In the event that the Investor does not subscribe for Investor Loan Notes with a
minimum value of 1.363 million Euros by 15 March 2008, the Investor Loan Note
Agreement will terminate and all Investor Loan Notes issued will be cancelled,
unless the Company informs the Investor that it does not require further
investment, in which case all Investor Loan Notes already issued shall continue
in force on the terms of the Investor Loan Note Agreement.

The Investor Loan Notes carry a five per cent. annual interest with the
principal payable at the expiration of a three year term and with interest
payable annually. One half of the principal of the loan amount may be converted
into Ordinary Shares at a price of 0.06687 Euros (5p as at 29 January 2008) per
Ordinary Share and the other half at a price of 0.093618 Euros (7p as at 29
January 2008) per Ordinary Share. The conversion can take place at any time at
the option of the Investor, or at the option of the Company or the Investor in
the event of a merger or sale of the Company or its business. On an event of
default, the Investor Loan Notes either become immediately due and payable or,
at the option of the Investor, convert into ordinary shares of ILS0.1 each in
the capital of Polar (with Polar assuming the rights and benefits of the
Investor under the Investor Loan Notes). The closing mid-market price of
Nipson's Ordinary Shares on 30 January 2008 (being the last business day before
the announcement of the Transaction) was 4.125p.

D Roseman will receive a commission of five per cent. of the funds invested by
the Investor as well as Warrants over Ordinary Shares in proportion to the level
of such investment up to a maximum of 4,375,000 Ordinary Shares, exercisable for
a period of three years, at a price per Ordinary Share of 5p in regard to one
half of the Warrants and 7p in regard to the other half.

The Transaction is subject to Shareholders' approval in relation to seeking
authority for the new Ordinary Shares to be issued under the conversion rights
and, on exercise of the Warrants, to be issued to D Roseman.

Subject to completion of the Investor Loan Note Agreement, and receipt by the
Company of the minimum subscription thereunder, and as part of the same
transaction, it is also proposed that Polar be given the right to convert up to
4.25 million Euros, being part of short-term advances made by Polar to the Group
(to reduce the ongoing level of such short-term advances from Polar to some 10
million Euros), into the Polar Loan Notes, which are on the same terms as the
Investor Loan Notes save that:


(a) the conversion rights into Polar shares on an event of default do not apply
to the Polar Loan Notes; and


(b) the Polar Loan Notes are transferable within the Polar Group.

The Company, its main operating subsidiary Nipson SAS and Polar entered into the
Polar Loan Note Agreement on 30 January 2008 setting out the terms of the Polar
Loan Notes and Polar's subscription for them.

The issue of the Polar Loan Notes is required to be treated as a Related Party
Transaction under the AIM Rules as Polar holds 54.2 per cent. of the Company's
issued ordinary share capital. In addition, Messrs. Rimon Ben-Shaoul, Chairman
of Nipson, and Ken Lalo, Executive Director of Nipson, are respectively
President and CEO and Executive Vice President of Polar and both have interests
in shares of Polar through holdings of shares and options.

Accordingly, the Independent Directors consider, having consulted the Company's
Nominated Adviser, that the terms of the transaction involving the issue of the
Polar Loan Notes to Polar and Polar's involvement in respect of the issue of the
Investor Loan Notes to the Investor in relation to the Polar conversion options
on an event of default, are fair and reasonable insofar as Shareholders are
concerned.


The Independent Directors believe that this funding secures the financing of the
Group to enable it to take advantage of the opportunities provided by the
potential increase in the Group's business and which is required to address its
present working capital requirements.


4. BACKGROUND ON LOANS RECEIVED BY NIPSON GROUP FROM THE POLAR GROUP

Polar initially advanced funds to Nipson SAS, the French wholly owned subsidiary
of Nipson DPS PLC, via its subsidiary in Belgium, Koonras BV BVBA. The first
loans, which started at the end of November 2005, covered specific receivables
where the Nipson Group was required to offer the same payment terms given by
competitors, such as prolonged payment terms in traditional markets or extended
credit into countries where traditional financing options were too limited to
cover the level of equipment sales. The first loans reached a level of 3,966,000
Euros. Some of the advanced funds were repaid. However, following the
requirement to cover increased working capital requirements from the increase in
equipment sales in 2006, the amounts were not repaid but were used to finance
new sales projects.

The financing requirements of the Group attained a higher level towards the end
of 2006 with the financing of the new writing heads project and the financing of
the French Government DGCP project. This level was met by advances of 2.9
million Euros direct from Polar, later formalised into a medium term loan.

Continued growth in recurrent revenues from sales of consumables and spares kept
pressure on the cash requirements, despite the very low equipment sales in the
first half of 2007. In fact, further finance was required to cover the losses
caused by the reduced activity in the equipment sales. This was completed by
additional funds direct from Polar of 2.3 million Euros from May through to July
of 2007.

The Group had already decided to sell the land & buildings of their French
subsidiary. This was progressed and Polar accepted to advance the 2.0 million
Euros expected from the proceeds of the sale to finance the second printing line
of the French Government DGCP Project.

During the period from mid September 2007 through to the end of the year a
higher level of equipment sales orders was received, requiring additional
working capital and this cumulated with the continued growth in sales of
consumables and spares. Efforts were made to find alternative funds to finance
the growth, but due to the poor reported results of the first 6 months,
traditional financial solutions were not readily available and in fact were
reduced. To counteract this Polar advanced a further 2.0 million Euros to ensure
the new equipment sales could be delivered on time. Polar advanced a further 0.5
million Euros in mid January 2008 to enable Nipson to produce further new
equipment against orders for delivery in the first quarter.

The Group, therefore, owes Polar a total sum of 14.5 million Euros (including
accrued interest), in respect of a medium loan of 2.9 million Euros, debtor
financing of 10.9 million Euros and 0.7 million Euros interest (at rates of 5
per cent. and 4.8 per cent. respectively). Of this, it is proposed that up to
4.25 million Euros of the short-term advances are converted to the Polar Loan
Notes, reducing the ongoing level of such short-term advances to some 10
milllion Euros. The loans are secured against current assets. The medium term
loan of 2.9 million Euros is for a fixed term ending 5 January 2009. Since 31
December 2007 all other loans and advances from Polar are effectively at call
with no fixed repayment date.

Under the AIM Rules, the various loans and advances from Polar are considered to
be related party transactions. The Independent Directors, who have no
involvement in such arrangements, consider, having consulted the Company's
Nominated Adviser, that the terms of such arrangements to date and on an ongoing
basis, are fair and reasonable insofar as Shareholders are concerned.

5. INFORMATION ON POLAR AND D ROSEMAN

Polar is an Israeli public company specialising in investments in companies from
the telecommunications and technology sectors. The company is based in Tel Aviv,
Israel and listed on the Tel Aviv Stock Exchange. Polar has been a major
shareholder in Nipson since 2002.

D Roseman is a private Israeli company established and controlled by its
majority shareholder, Mr Dov Roseman who was a manager at Discount Bank, one of
the three largest banks in Israel. This was followed by a period in which he
managed the Netanya branch of Betucha, one of the largest Israeli brokerage
firms investing in traded securities and managing monies. The Investor comprises
a broad spread of private investors through their limited partnership interests
in the special purpose vehicle. At the date of this document, D Roseman does not
hold any shares in Nipson.

There is no relationship or connection between Polar and D Roseman.


6. TAKEOVER CODE

Although the Company is incorporated in England, the place of central management
of the Company is currently located outside of the UK, the Channel Islands and
the Isle of Man because the main place of business is in France. Accordingly,
the Company is one to which paragraph 3(a)(ii) of the Takeover Code does not
apply, and the Panel has confirmed that the Company is not subject to the
Takeover Code and Shareholders will not be afforded any protection under the
Code.

If circumstances change, including if changes to the Board are made, the Company
will consult with the Panel to ascertain whether this will affect the central
place of management of the Company. If the Panel determines that, as a result of
such changes, the Takeover Code becomes applicable to the Company, an
announcement will be made.


7. SHARE CAPITAL

The Company currently has an authorised share capital of £700,000, made up of 70
million Ordinary Shares. Assuming maximum subscription of the Investor Loan
Notes and Polar Loan Notes, the maximum number of Ordinary Shares into which the
Investor Loan Notes and Polar Notes would convert is 99,339,871 Ordinary Shares.
In addition, again assuming maximum subscription, D Roseman would be granted
Warrants over an additional 4,375,000 Ordinary Shares.

In order to provide sufficient flexibility for the Company, the Directors are
seeking to increase the authorised share capital of the Company from £700,000 to
£1,740,000 by the creation of an additional 104,000,000 Ordinary Shares. In
addition, the Directors are seeking specific authority from Shareholders to
allot equity securities pursuant to section 80 of the Act up to an aggregate
nominal amount of the Company's increased authorised share capital, free of the
pre-emption rights set out at section 89(1) of the Act. Assuming the Resolutions
are passed, the Directors will have authority to issue up to 121,696,419 new
Ordinary Shares on a non pre-emptive basis (representing approximately 233 per
cent. of the Existing Share Capital), of which 103,714,871, will be reserved for
issue on conversion of the Polar Loan Notes and the Investor Loan Notes and on
exercise of the Warrants. The remaining 17,981,548 new Ordinary Shares,
representing 34.38 per cent. of the Existing Share Capital, will be under the
control of the Board and available for other purposes.

It should be noted that, in the event that the Investor and Polar Loan Notes are
fully subscribed and there is a subsequent conversion by the Investor and Polar
and assuming the exercise of the Warrants, Polar would be interested in 53.07
per cent. of the so enlarged share capital, the Investor would be interested in
28.76 per cent., D Roseman would be interested in 2.8 per cent. and the
interests of existing Shareholders (excluding Polar) would be diluted from 45.85
per cent. to 15.37 per cent.

The Independent Directors believe these approvals to be in the best interests of
the Company to enable the Board to take advantage of any appropriate
opportunities to issue further shares in the Company.



Ends


Contacts


Nipson Digital Printing Systems PLC
Robert Cahill, Group Finance Director                [phone]


Beaumont Cornish Limited
Roland Cornish/Rosalind Hill Abrahams                0207 628 3396



                                  DEFINITIONS

The following definitions apply throughout this document unless the context
otherwise requires:

"Act"               the Companies Act 1985 (as amended), and/or the
                    Companies Act 2006 (to the extent it is in force and
                    is applicable)

"AIM"               the market of that name operated by the London Stock
                    Exchange

"AIM Rules"         the AIM Rules for Companies published by the London
                    Stock Exchange, from time to time

"Board" or          the directors of the Company

"Directors"

"Company" or        Nipson Digital Printing Systems Plc

"Nipson"

"D Roseman"         D. Roseman Investments Limited

"Existing Share     the 52,303,581 issued Ordinary Shares
Capital"

"General Meeting"   the general meeting of the Company

"Form of Proxy"     the form of proxy sent to Shareholders in connection
                    with the General Meeting

"Group"             the Company and its subsidiaries

"Independent        the Directors other than Rimon Ben-Shaoul and Ken
Directors"          Eliahou Lalo, who due to their directorships and
                    interests in Polar are considered to have an
                    interest in the Transaction

"Investor"          D. Roseman Nipson Limited Partnership

"Investor Loan Note the agreement dated 30 January 2008 between the
Agreement"          Company, the Investor and Polar

"Investor Loan      the convertible loan notes to be issued to the
Notes"              Investor pursuant to the Investor Loan Note
                    Agreement

"Ordinary Shares"   ordinary shares of 1p each in the capital of the
                    Company
" Panel"
                    the Panel on Takeovers and Mergers

"Polar"             Polar Communications Ltd

"Polar Loan Note    the agreement dated 30 January 2008 between the
Agreement"          Company, Nipson SAS and Polar

"Polar Loan Notes"  the convertible loan notes to be issued to Polar
                    pursuant to the Polar Loan Note Agreement

"Registrars"        Computershare Investor Services PLC of PO Box 82,
                    The Pavilions, Bridgwater Road, Bristol BS99 7NH

"Resolutions"       the resolutions set out in the notice of the General
                    Meeting
"Shareholders"      the holders of Ordinary Shares

"Transaction"       the proposals to issue the Investor Loan Notes and
                    Polar Loan Notes

"Warrants"          the warrants over Ordinary Shares to be issued to D
                    Roseman in connection with the Transaction




                      This information is provided by RNS
            The company news service from the London Stock Exchange

END
MSCILFSIFVIDIIT