Notice of EGM

RNS Number:7328N
Screen FX PLC
12 December 2006




Press Release                                                  12 December 2006


                                 ScreenFX plc
                         ("ScreenFX" or "the Company")



                            Notice of EGM regarding

      the grant of a convertible loan note and the approval of the waiver

              to be granted by the Panel on Takeovers and Mergers



Further to the Circular issued to Shareholders on 27 November 2006, ScreenFX plc
(AIM: SFX), the digital advertising and communications specialist, announces
that a further Circular was despatched to Shareholders yesterday.  This '
Whitewash Circular' gives notice of an Extraordinary General Meeting regarding
the waiver of the obligation of Michael Cottman under Rule 9 of the City Code to
make a general offer for the entire issued share capital of the Company which
would otherwise arise on completion of the placing and conversion of the Loan
Note issued to Michael Cottman. The Extraordinary General Meeting will be held
at the offices of Halliwells LLP, St James's Court, Brown Street, Manchester, M2
2JF at 11.00 a.m. on 27 December 2006. Copies of the Whitewash Circular may be
inspected at the registered offices of Seymour Pierce Limited and the Company,
during normal business hours on any weekday (Saturdays and public holidays
excepted) until immediately prior to the EGM.



                                    - Ends -



For further information:
ScreenFX plc
David Clark, Chief Executive                           Tel: [phone]
[e-mail]                                      www.screenfxplc.com


Seymour Pierce Limited
Stuart Lane / John  Depasquale, Corporate Finance      Tel: [phone]
[e-mail]                                  www.seymourpierce.com



Media enquiries:
Abchurch
Henry Harrison-Topham / Laura Riascos                  Tel: [phone]
[e-mail]                            www.abchurch-group.com





Seymour Pierce which is regulated by the Financial Services Authority is acting
as nominated and financial adviser to the Company in connection with the matters
described in this document. Persons receiving this document should note that
Seymour Pierce will not be responsible to anyone other than the Company for
providing the protections afforded to clients of Seymour Pierce or for advising
any other person on the arrangements described in this document. Seymour Pierce
has not authorised the contents of, or any part of, this document and no
liability whatsoever is accepted by Seymour Pierce for the accuracy of any
information or opinions contained in this document or for the omission of any
information.


The following information is an excerpt from the whitewash circular to
Shareholders (the "Circular") posted today.  Copies of the Circular are
available at the offices of Seymour Pierce Limited (Bucklersbury House, 3 Queen
Victoria Street, London, EC4N 8EL) upon request.  Definitions used in the
Circular apply in this announcement unless the context otherwise requires.



Introduction



On 28 November 2006 the Board announced that Screen FX proposes to raise #5
million (after repayment of an existing loan note, interest and costs of the
Placing) by means of the issue of a Loan Note to be subscribed for by one of the
Company's shareholders, Michael Cottman, of #1.5 million, and a further #3.8
million by the issue of further shares by way of a placing at 0.35 pence per
share (the "Placing").  Following the completion of the Placing Sir Geoffrey
Pattie will be standing down from the Board and Michael Cottman will be joining
as executive Chairman and David Moore has agreed to be appointed as Chief
Operating Officer.  Richard Schultz and David Neale will also be stepping down
from the Board.  The Company also announced that it intended that the Loan Note
is to be Convertible following approval of the proposals by Shareholders and the
Panel on Takeover and Mergers confirming that the provisions of Rule 9 of the
City Code on Takeovers and Mergers ("the Code") shall not apply.



Background to and reasons for the proposals



In the Circular sent to shareholders on 27 November 2006 the Company stated the
following:



"During 2006 Screen FX has continued to make strong progress towards its initial
objective of establishing the leading digital screen network in the UK shopping
mall environment.  Following the acquisition of POPtv in August 2006, the
Company now has the ability to reach over 450 million shoppers per annum across
its network.



Having invested in the build phase of the mall network, in order to deliver
critical mass, the Company has continued to build its sales operation with the
opening of regional sales offices, and the strengthening of the National sales
operation in London.  Whilst this has increased costs in the short term, media
sales revenues are now building and we anticipate the growth to accelerate
through 2007.



The first phase of the TrainFX service on Central Trains in Birmingham has been
very well received by both the operating company management and passengers.
This has enabled the Company to secure a valuable contract for a significant
roll-out of this service during 2007.



This channel represents a considerable growth opportunity for the Company.
Results of the initial testing of the potential for media and advertising
revenues is very promising and revenues are expected to build over the medium
term following further investment in expanding into other regions."



However, the Company has an urgent short term funding requirement which has been
provided for by Michael Cottman via the Loan Note.  The Loan Note is redeemable
on 31 December 2006 and if Michael Cottman were to redeem the Loan Note the
Company would not be in a position to effect a repayment and in those
circumstances would not be able to continue trading.  Michael Cottman has agreed
to convert the Loan Note at the Placing Price.  This conversion will only occur
with Independent Shareholder approval.  Application will be made for the New
Ordinary Shares to be issued pursuant to the Conversion to be admitted to
trading on AIM and dealings are expected to commence on 28 December 2006.



Details of the convertible loan note



The Loan Note carries a coupon of 3 per cent. above the base rate of Barclays
Bank plc. The rate at which the Loan Note is converted is calculated by dividing
the principal amount of the Loan Note being redeemed together with the
redemption premium equivalent to an additional 20 per cent. on the principle
amount of such notes and all accrued but unpaid interest thereon (after
deducting tax) at the time of the conversion at the Placing Price of 0.35 pence
per share. The Loan Note if not converted is redeemable after 31 December 2006
and will be secured against the Company's assets by way of a fixed and floating
charge.



The City Code on Takeovers & Mergers



The Conversion gives rise to certain considerations under the Code.  Brief
details of the Panel, the Code and the protections they afford to Shareholders
are described below.



The Code is issued and administered by the Panel. The Code applies to all
takeovers and merger transactions, however effected, where the offeree company
is, inter alia, a listed or unlisted public company resident in the UK and to
certain categories of private limited companies.  Screen FX is such a company
and its Shareholders are entitled to the protections afforded by the Code.



Under Rule 9 of the Code, where any person acquires, whether by a single
transaction or series of transactions over a period of time, interests in
securities in which he or persons acting in concert with him carry 30 per cent.
or more of the voting rights of a company which is subject to the Code, that
person is normally required by the Panel to make a general offer to the
shareholders of that company to acquire their shares.



Rule 9 of the Code also provides, inter alia, that where any person who,
together with persons acting in concert with him, is interested in shares which
in aggregate carry not less than 30 per cent. but does not hold shares carrying
more than 50 per cent. of the voting rights of the company, a general offer will
normally be required if any further interests in shares are acquired by any such
person.



An offer under Rule 9 must be made in cash and at the highest price paid per
share by the person required to make the offer, or any person acting in concert
with him, for any interest in shares of the company acquired during the 12
months prior to the announcement of the offer.



Under the Code, a concert party arises where persons acting together pursuant to
an agreement or understanding (whether formal or informal) co-operate, to obtain
or consolidate control of that company.  A person has control of a company if he
is interested in shares carrying 30 per cent. or more of the company.



Shareholders should note that, if the relevant Resolutions are passed and the
Loan Note is converted, then Michael Cottman would, on Admission, hold
687,722,061 New Ordinary Shares representing 32.69 per cent. of the then issued
voting share capital of the Company.



The Panel has agreed, subject to the approval of Independent Shareholders at the
Extraordinary General Meeting, to waive the obligation for Michael Cottman to
make a general offer to Shareholders under Rule 9 that would otherwise arise
upon Conversion.  Accordingly, Resolution 1 is being proposed at the EGM and
will be taken on a poll.  Michael Cottman will not be entitled to vote on this
Resolution.



Michael Cottman will hold more than 30 per cent. but not more than 50 per cent.
of the Company's enlarged issued voting share capital and any further increase
in his percentage interest in shares will be subject to the provisions of Rule 9
of the Code.



Michael Cottman has confirmed that the existing employment contracts, including
the pension rights, of all employees of the Company will be fully safeguarded
and that there will be no material change to the business activities of the
Company.  Michael Cottman realises that in order to make the Company more
commercially viable, he will, once he joins the Board undertake a strategic
review of the Company.  The outcome of this may include overhead reductions and
redundancies. Michael Cottman has no intentions regarding the redeployment of
fixed assets of the Company or for the relocation of the Company's businesses.




Information on Michael Cottman



Following completion of the Proposals, Michael Cottman, aged 52, will become
Executive Chairman of the Company.  Michael has an extensive background in
marketing having worked for companies such as Mars Confectionery and the Field
Marketing & Consultancy Group (FMCG).  He took FMCG public in 1996 by reversing
it in to a Canadian marketing services company, Mosaic Group Inc "MGI").  During
the next 5 years as, initially, CEO for Europe and then, more latterly, as
President & Chief Operating Officer of the Group, Michael was a key part of the
senior executive team responsible for taking MGI from a small Canadian marketing
services company trading on the Canadian Dealer Network, to a Toronto Stock
Exchange company which traded in 14 different countries, with a market
capitalisation of in excess of C$2 billion, revenues of C$1 billion and EBIT of
approximately C$100 million.  He retired from this company at the time of the
millennium and now has a small number of private investments that he has
interests in.



Michael's address is Lower Farm Barn, Frog Lane, Cuddington, Bucks HP18 0AU.



Extraordinary General Meeting



At the EGM the following resolution will be proposed:



1. to approve the waiver from the Panel referred to above of the obligation for
Michael Cottman to make a general offer to Shareholders under Rule 9 which would
otherwise arise as a result of the Conversion.



Action to be taken



A Form of Proxy is enclosed with the Circular for use by Shareholders at the
Extraordinary General Meeting.  Whether or not Shareholders intend to be present
at the Extraordinary General Meeting they are asked to complete, sign and return
the Form of Proxy.  The Form of Proxy should be completed in accordance with the
instructions thereon and returned to the Company's registrars, Park Circus
Registrars of James Sellars House, 144 West George Street, Glasgow as soon as
possible, but in any event so as to be received by 11.00 a.m. on 24 December
2006.  The completion and return of a Form of Proxy will not preclude
Shareholders from attending the EGM and voting in person should they so wish.



Accordingly, whether or not Shareholders intend to attend the Extraordinary
General Meeting, they are urged to complete and return the Form of Proxy as soon
as possible.



Michael Cottman is disenfranchised from voting on Resolution 1 at the EGM.



Recommendation



If the proposed fundraising does not proceed then the Company will be in serious
financial difficulty and if the Resolution is not approved then the Directors
will have to consider the feasibility of continuing the Company as a going
concern.



The Directors, who have been so advised by Seymour Pierce Limited, consider that
the Conversion and the securing of the waiver of Michael Cottman's obligation to
make a general offer for the Company which would otherwise arise under Rule 9 of
the Code are in the best interests of the Company and its Shareholders as a
whole.  In providing advice to the Directors, Seymour Pierce has taken into
account the Directors' commercial assessments.



The completion of this fundraising is important for the continuation of the
Company and accordingly, the Directors and David Moore unanimously recommend
that Shareholders vote in favour of the Resolution, to be proposed at the EGM,
as they intend to do in respect of their own beneficial holdings amounting in
aggregate to 35,620,000 Ordinary Shares representing approximately 7.11 per
cent. of the existing issued ordinary share capital of the Company.



Definitions



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


"Act"                                      the Companies Act 1985 (as amended)

"AIM"                                      a market operated by London Stock Exchange

"Capital Reorganisation"                   the proposed sub-division of each of the issued and unissued
                                           Ordinary Shares into one New Ordinary Share and one Deferred
                                           Share

"Code" or "City Code"                      The City Code on Takeovers and Mergers

"Company" or "SFX"                         Screen FX plc

"Conversion"                               A conversion of the Loan Notes

"Directors" or "Board"                     the directors of the Company whose names are set out in the
                                           Circular, or any authorised committee thereof

"EGM"                                      the extraordinary general meeting of the Company convened by
                                           the EGM Notice

"EGM Notice"                               the notice convening the EGM which is set out in the Circular

"Form of Proxy"                            the form of proxy for use in relation to the EGM which
                                           accompanies the Circular

"Group"                                    the Company and its subsidiary undertakings

"Independent Shareholders"                 the Shareholders of the Company excluding Michael Cottman

"Loan Notes"                               the variable rate unsecured convertible loan notes 2007
                                           (series 2) constituted by the convertible Loan Note Instrument

"Loan Note Instrument"                     the deed poll constituting the Loan Notes

"London Stock Exchange"                    London Stock Exchange plc

"New Ordinary Shares"                      the fully paid ordinary shares of 0.1p each in the capital of
                                           the Company created pursuant to the Capital Reorganisation and
                                           which will be issued on conversion of the Loan Note or
                                           pursuant to the Placing

"Ordinary Shares"                          ordinary shares of 1 pence each in the capital of the Company

"Panel"                                    The Panel on Takeovers and Mergers

"Proposed Directors"                       Michael Cottman and David Moore

"Resolution"                               the resolution set out in the EGM Notice

"Shareholders"                             holders of Ordinary Shares in the Company

"UK"                                       The United Kingdom of Great Britain and Northern Ireland



The term "subsidiary undertakings" as used in these definitions shall have the
meaning given in the Act.



                                    - Ends -


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

NOEBXBDDRUBGGLD