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Hexagon Human Capital plc

('Hexagon' or 'the Company')

Doc re: Notice of General Meeting

Further to the announcement released by the Company earlier today, the Board confirms that the Circular convening a General Meeting of the Company to be held at 11.00a.m. on 5 March 2009 at the offices of Hexagon Human Capital plc, First Floor, 33 Cornhill, London EC3V 3ND has today been posted to Shareholders and will shortly be available to download from the Company's website at www.hexagongroup.com

The full text of the Chairman's Letter is set out below.  Definitions in this announcement shall bear the same meaning as those in the Circular to Shareholders.  

To the holders of Existing Ordinary Shares and, for information only, to holders of options over Ordinary Shares

Dear Shareholder

REVISED BANKING FACILITIES

INTRODUCTION

The purpose of this document is to outline the background to and reasons for the Revised Banking Facilities and, in accordance with The Takeover Code, to seek Shareholder approval for the Proposals.

As announced today the Board of Hexagon has received an indicative conditional proposal from a third party, interested in making an offer for the Company. The Board wishes to inform Shareholders that discussions with the third party are at a very preliminary stage and that there can be no guarantee that any offer will be forthcoming.

Mindful of their overriding responsibility to maximise value for Shareholders, the Board believes it to be in Shareholders' interests to progress with the Proposals, details of which are set out below. Despite the current challenging broader economic environment the Board remains confident of the short term trading outlook for the Company. In the event that Hexagon's trading deteriorates markedly from the levels currently being experienced, the Proposals will provide the Group with significant flexibility against its current banking covenants.

In light of the receipt of the Indicative Proposal, in accordance with Rule 21 of The Takeover Code, the Company requires the approval of Shareholders in general meeting before entering into the Proposals.

Revised Banking Facilities

The Company proposes to enter in to an agreement with Barclays Bank to reduce the level of its senior debt by £1,500,000 in return for the issue of the Convertible Loan Notes on the terms set out below. A condition of the Revised Banking Facilities proposed by Barclays is that Hexagon uses the Company's existing authorities and allots new shares for cash on a non pre-emptive basis to raise a minimum of £300,000 (net of expenses) for the Company within 60 days of the issue of the Convertible Loan Notes.

The net proceeds of the Revised Banking Facilities and the Placing will be used, inter alia, towards improving the Group's working capital position thereby increasing the level of headroom available under Hexagon's current banking covenants. Further details of the Revised Banking Facilities are set out on page 6 of this Circular.

BACKGROUND TO AND REASONS FOR THE PROPOSALS

At the time of flotation Hexagon's strategy was to achieve growth through both organic initiatives and a buy and build model. A number of successful acquisitions have been completed since this time which have strengthened both the Group's Senior Interim Management operations, where the Group is a market leader, and its portfolio of executive search businesses, which have been expanded and diversified in terms of sector and geography. The Directors believe this strategy has created a differentiated business model relative to the majority of its peers as Hexagon is able to meet client needs for short term talent through its Senior Interim Management division as well as their needs for full time business leaders through its specialist executive search portfolio.

As can be seen in the table below the Group's acquisition model has been successful in delivering substantial growth in net fee income, profits and earnings per share:

		Year ended 31 December 2005*	15 months to 31 March 2007*	% growth	Year ended 31 March 2008*	% growth
		£'000s	£'000s		£'000s
Net Fee Income		2,369	10,588	347%	19,488	84%
EBITA		300	1,620	440%	5,672	250%
Profit before tax		166	175		2,872
Earnings per share (p)		(0.08)	(2.60)		9.78

 

* Reported figures extracted without material adjustment from the Group's Annual Report and Accounts for the 12 months to 31 December 2005, 15 months to March 2007 and 12 months to 31 March 2008.

The Group raised some £8.9 million net of expenses on Flotation and since then has utilised its banking facilities to finance its acquisition activities.

The Directors consider that Hexagon has to date performed favourably relative to other human capital services companies as a result of the diversification of its portfolio of search business and defensive qualities of its interim management business.

The Board is mindful that Hexagon's operations are unlikely to be immune from the impacts of a prolonged economic recession. As a result the Board has been in discussions with its bankers, Barclays Bank, for a number of months to restructure the Group's facilities to ensure that in the event that Hexagon begins to experience a significant trading slowdown it has sufficient working capital to meet its obligations. A condition of the revised banking facilities proposed by Barclays is that Hexagon uses the Company's existing authorities and allots new Ordinary Shares for cash on a non pre-emptive basis to raise a minimum of £300,000 (net of expenses) within 60 days of the issue of the Convertible Loan Notes.

DETAILS OF THE REVISED BANKING FACILITIES

The Board is pleased to announce that it has secured an offer from Barclays Bank to convert £1,500,000 of its senior term debt into the Convertible Loan Notes. The cash proceeds of the CLNs will equate to a £1,500,000 reduction in the Group's senior debt repayments between the Issue Date and 31 December 2011 (the 'Maturity Date'). The particulars of the terms and conditions of the CLNs are set out below.

Status and term

The CLNs will have a nominal value of £100,000 per note and will be secured against the assets of Hexagon, as is the Group's senior term debt. The maturity date of the CLNs will be 31 December 2011 being the same date at which the Group is currently obliged to complete the repayment of all its outstanding term debt.

Fees and interest

A one-off arrangement fee of £125,000, payable in two equal installments on 30 June 2009 and 30 December 2009, will be charged along with a monitoring fee of £10,000 per annum payable quarterly in advance whilst the CLNs are outstanding.

Interest on the CLNs will be charged at an annual rate of 3.5 per cent. above LIBOR. Additionally, the interest charge on the Group's remaining senior debt facilities will be adjusted to an annual rate of 3.5 per cent. (currently 2.0 per cent.) above LIBOR. Based on a rate of LIBOR of 2.5 per cent. this would result in an estimated likely incremental interest cost to the Maturity Date of approximately £194,500.

If the CLNs have not been issued on or before 16 March 2009 a fee of £75,000 will become immediately due and payable to Barclays Bank by Hexagon.

Redemption of the CLNs

Upon redemption (but not conversion) of the CLNs a redemption premium will be charged. Such premium will accrue on the nominal value of the CLNs at a rate of 4.0 per cent. per annum (compounded quarterly) from the Issue Date to the Maturity Date resulting in an estimated likely cost of c.£185,000.

Conversion of the CLNs

Barclays will hold the option to convert the loan notes into new Ordinary Shares by giving notice not less than 15 days prior to 31 December 2011. The conversion price per Ordinary Share is the volume-weighted average price of Ordinary Shares over the 15 days prior to the Issue Date increased by a premium of 18 per cent. (the 'Conversion Price'). As at the date of this Circular, the Conversion Price would be approximately 44p equating to the issue of 3,393,497 new Ordinary Shares, representing 14.83 per cent. of the Company's issued share capital as enlarged by the issue of the New Ordinary Shares. Hexagon will hold an option, exercisable up to three days after the conversion notice is issued, to pay a cash sum to Barclays (within 30 days of the exercise of such option) equal to the amount of the Loan Note Conversion Shares multiplied by the closing price of Ordinary Shares on the date of the conversion notice served by Barclays. Hexagon will also have the ability after 14 months from the Issue Date to redeem the CLNs early, if, during such 14 month period, Hexagon's share price trades at a level of 150 per cent. of the Conversion Price for 20 out of 30 days.

Conditions subsequent

A condition of the CLNs is that at least £300,000 of new equity is raised by Hexagon within 60 days of the Issue Date.

A copy of the instrument constituting the Convertible Loan Notes will be available for inspection at the Company's registered office, First Floor, 33 Cornhill, London EC3V 3ND, from the date of this Circular to the time and date of the GM.

GENERAL MEETING

As a result of the Indicative Proposal the Company is currently within a technical 'offer period' for the purposes of The Takeover Code. Pursuant to Rule 21.1 of The Takeover Code the Company is required to obtain Shareholder approval (by way of an ordinary resolution) for the issue of the CLNs and the Placing. A notice convening the GM to be held at 11.00 a.m. on 5 March 2009 at the offices of Hexagon Human Capital plc, First Floor, 33 Cornhill, London EC3V 3ND is set out at the end of this document. The purposes of the Resolution will be to approve the Proposals pursuant to Rule 21.1 of The Takeover Code.

SHAREHOLDER SUPPORT

The Company has received letters of intent from certain existing Shareholders and irrevocable undertakings from the Directors as set out below, to vote in favour of the Resolution, amounting to, in aggregate, 6,178,338 Ordinary Shares representing 31.70 per cent. of the Existing Ordinary Shares.

ACTION TO BE TAKEN

You will find enclosed with this document a Form of Proxy for use at the GM. Whether or not you propose to attend the GM in person, you are asked to complete the form of proxy and return it to the Company's Registrars, Capita Registrars, at Proxies, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to arrive as soon as possible, but in any event not less than 48 hours before the time of the meeting or of any adjournment of the meeting. Completion and return of a form of proxy will not preclude you from attending and voting at the GM in person if you wish.

RECOMMENDATION

The Directors believe that the Proposals as described in this Circular are in the best interests of the Company and its Shareholders. Accordingly, the Directors unanimously recommend that you vote in favour of the Resolution to be proposed at the General Meeting. The Directors intend to vote in favour of the Resolution in respect of their own beneficial holdings amounting to 2,801,148 Ordinary Shares, representing approximately 14.4 per cent. of the Existing Ordinary Shares.

Yours sincerely

Robert Walker

Non-executive Chairman

Enquiries:

Jonathan Wright, Chief Executive  Carl Thompson, Finance Director	020 7337 1133
Hexagon Human Capital plc

Matt Davis
Alison Barrow
Brewin Dolphin Investment Banking Financial Adviser	0845 213 3219
Sanna Sumner/Anna Dunkin
Redleaf Communications	020 7566 6700

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