10 March 2020

THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION AS DEFINED UNDER THE MARKET ABUSE REGULATION (EU) NO. 596/2014

Urban Exposure Plc

Proposed disposals, cancellation from AIM and members' voluntary liquidation

Urban Exposure Plc ("Urban Exposure" or the "Company" and, together with its subsidiaries, the "Group") announces the proposed disposal of Urban Exposure Lendco Limited ("Lendco") to Honeycomb Holdings Limited ("HHL") and Urban Exposure Amco Limited ("Amco") to the Founders (together, the "Transactions").

The Company also announces, conditional on completion of the Transactions, the proposed cancellation of the admission of its ordinary shares to trading on AIM (the "Cancellation") and the change of name of the Company to "Residential Property Finance Realisation Plc".

Following the completion of the Transactions, the proposed Cancellation and the change of name, it is proposed that the Company is placed into a solvent member's voluntary liquidation (the "Liquidation" and, together with the Transactions, the change of name and the Cancellation, the "Proposals").

Based on certain assumptions set out in full later in this announcement, pursuant to the Proposals, each holder of the Company's ordinary shares (each, a "Shareholder") is expected to receive an initial distribution in the Liquidation equal to approximately 72 pence per share and a final distribution anticipated to be around 1 penny per share, making a total distribution of approximately 73 pence per share.

Lendco owns the Group's loan portfolio and its interest in the Group's joint venture with KKR & Co. (the "KKR Joint Venture").

Amco provides asset management services in respect of the Group's loan portfolio and is the employer of the Group's employees.

It is a condition of the Lendco Disposal that Amco continues to provide asset management services to Lendco following Lendco's sale to HHL and Amco's sale to the Founders on the terms of a new asset service agreement agreed between Lendco and Amco (the "Service Agreement").

Each of Randeesh Sandhu, Daljit Sandhu, Ravi Takhar and Victor Librae (the "Founders") is a member of the Group's executive team and is an existing director of Amco. Randeesh Sandhu and Ravi Takhar are also executive directors of the Company.

HHL is a limited company registered in England and Wales. HHL is a member of the Pollen Street Capital Group, a global, independent alternative asset investment management company focused on the financial and business services sector, with significant experience in specialty finance. It was established in 2013 and has £2.6 billion gross assets under management across private equity and credit strategies. It is expected that, following completion of the Transactions, HHL will transfer the beneficial and/or economic interests in Lendco's loan portfolio and/or its interest in the KKR Joint Venture to one or more investment vehicles managed by or entities connected with the Pollen Street Capital Group.

Shareholder approval requirements and inter-conditionality of the Proposals

Completion of the Transactions, the Cancellation and the Company's proposed change of name are conditional on approval by Shareholders.  A circular (the "Circular") containing a notice convening a general meeting for these purposes to be held at 12.00 p.m. on 30 March 2020 (the "First General Meeting") will be posted to Shareholders shortly.  

As well as being conditional on completion of the Transactions, the Cancellation and the change of name, the Liquidation is also conditional on Shareholder approval. A second notice convening a general meeting for this purpose to be held at 12.00 p.m. on 28 April 2020 (the "Second General Meeting") will also be included in the Circular.

Completion of each of the Lendco Disposal and the Amco Disposal is conditional on Shareholders approving the other and the Cancellation is conditional on completion of each of the Lendco Disposal and the Amco Disposal.

In the event that the Lendco Disposal, the Amco Disposal, the Cancellation and the change of name do not take place (including if they are not approved by Shareholders), the Second General Meeting will be indefinitely adjourned by the Company. Accordingly, the Liquidation and any subsequent distribution to Shareholders are effectively conditional on the passing of the resolutions being proposed at the First General Meeting.

Recommendation

William McKee CBE, Andrew Baddeley, Nigel Greenaway and Sam Dobbyn (the "Independent Directors") consider that the Proposals are in the best interests of Shareholders as a whole, and unanimously recommend that Shareholders vote in favour of the Resolutions.

Each member of the Company's board of directors (the "Board") intends to vote in favour of each of the Resolutions in respect of their respective direct and indirect shareholdings in the Company which, in aggregate, amount to 4,718,220 shares representing 2.98 per cent. of the issued share capital of the Company (other than shares held in treasury) on an undiluted basis.

Related Party Transaction

As Randeesh Sandhu and Ravi Takhar are directors of the Company and the Amco Disposal exceeds 5 per cent. in one or more of the class tests set out in Schedule 3 to the AIM Rules, the Amco Disposal constitutes a related party transaction for the purposes of AIM Rule 13. Having consulted with the Company's Nominated Adviser, Liberum Capital Limited, the Independent Directors consider that the terms of the Amco Disposal are fair and reasonable insofar as Shareholders are concerned.

Background to and reasons for the Proposals

The Company was incorporated and its shares were admitted to trading on AIM in May 2018 ("Admission") with the intention of leveraging both its own newly formed balance sheet and third-party capital to provide funding for UK real estate development loans originated and managed by the Company's management.

Since its formation, the Company has maintained a consistently strong pipeline of opportunities both in terms of lending opportunities on UK residential real estate developments and capital raising opportunities for its asset management strategy.

This has included making available facilities in excess of £1 billion in aggregate to real estate developers, in part funded by the Company's own resources and in part through co-funding agreements with leading financial institutions, including the KKR Joint Venture and funding lines from UBS AG and Aviva Investors.  The Company believes that these achievements are a clear acknowledgement of its operational expertise in an under-served market.

Since launch, the Company has made significant investment in its personnel in order to deliver increased deal capacity, enhance execution capability and to meet the governance and reporting requirements of an AIM-traded company. Although this investment has materially improved the Company's operating performance, the resulting increased cost base has held back near-term profitability. Further, the market in which the Company operates - including the large size of deals, the unpredictability of timing for closing loans, the profile of revenue generation from lending and asset management activity and the accounting treatment of this revenue - together mean that it is not always possible to predict the Company's and its group's anticipated volume of business and, therefore, profitability for specific financial periods. The Board believes that these factors, together with the Company's increased cost base, resulted in an underperformance compared with expectations set at the time of Admission. These challenges have been further exacerbated by a volatile political climate in the UK, with sector specific uncertainty arising both from Brexit and the run-up to the UK general election in December 2019, and negative sentiment towards small-cap investment due to market events.

In light of these challenges to performance, the shares traded at a significant discount to the Company's prevailing net asset value throughout 2019. Following requests from certain Shareholders, the Board has conducted, alongside the Company's financial adviser, a full review of the Company's operations and undertook a thorough appraisal of a range of options, including, amongst other things, a full formal sale process, a break up and, latterly, a disposal of its loan book and management vehicle.

The Transactions

Following a period of due diligence and negotiation, HHL proposes to acquire Lendco on the terms of the Lendco SPA for a total purchase price of £113.8 million, which is equal to the par value of Lendco's loan portfolio as at 18 February 2020 (including its interest in the KKR Joint Venture) discounted by £2.7 million, plus Lendco's net cash at that date (assuming repayment of outstanding intercompany indebtedness). The £2.7 million discount to the par value of the loan portfolio reflects the anticipated amount of asset management fees that Lendco will pay in respect of the management of the loan portfolio going forward.

Each of the Company and Amco has provided customary warranties and undertakings to HHL under the Lendco SPA, although (save in respect of a VAT indemnity given by the Company to HHL) the liability of the Company to HHL under the Lendco SPA will terminate on the date that is 15 business days following completion of the Lendco Disposal. In addition, HHL may terminate the Lendco SPA between exchange and completion if there is a material adverse change in the financial condition of Lendco or if there is a material breach of the Lendco SPA.

Further details of the Lendco SPA are set out in the appendix to this announcement. Shareholder approval of the Lendco Disposal is required because it is a fundamental change of the Company's business for the purposes of Rule 15 of the AIM Rules.

Simultaneously with the Lendco Disposal, the Founders propose to acquire Amco from the Company because HHL requires Amco to continue to provide management services to Lendco following the Lendco Disposal. The Independent Directors have undertaken a detailed review of the valuation of Amco and, including on the basis of advice received, have determined that Amco has a negative value as a standalone business. Accordingly, the Company has agreed to sell Amco to the Founders for a total cash consideration of £1,599,999, on the basis that on completion of the sale, Amco will have net working capital available to it of £7.1 million. In addition, the Group will transfer to Amco certain assets currently owned by the Group, including certain legacy receivables, office equipment, intellectual property rights and business records related to Amco's business, for a consideration of £1. Amco's future costs in excess of the net working capital available to it at completion of the Amco Disposal will be funded from its own income and the Founders' own resources. The Independent Directors believe that these arrangements have the benefit to the Company of providing sufficient certainty to HHL that Amco will be able to continue to provide services to Lendco going forward, thereby facilitating the Lendco Disposal, while terminating the Company's obligations to continue to finance Amco's costs.

Further details of the Amco SPA are set out in the appendix to this announcement. Shareholder approval of the Amco Disposal is required because it is a substantial property transaction for the purposes of section 190 of the Companies Act.

On completion of the Transactions, Amco and Lendco will also enter into the Service Agreement, further details of which are also set out in the appendix to this announcement.

The consent of each of KKR & Co., and UBS AG, as lender to the KKR Joint Venture has been obtained to the Transactions, subject to certain agreed changes to the documents constituting the KKR Joint Venture arrangements being implemented by the Company, HHL and KKR & Co.

The Cancellation

As the Company will no longer have any continuing operations following the completion of the Transactions, the Directors propose to seek cancellation of the shares from trading on AIM and, thereafter, to seek Shareholder approval to wind up the Company.

It is proposed that the Cancellation takes place on 27 April 2020 following completion of the Transactions but before the Second General Meeting at which the Liquidation will be proposed so that the Company is no longer listed at the time that the Liquidation commences.

Accordingly, Shareholders should be aware that in the event that the resolutions proposed at the First General Meeting are passed and the Transactions complete, they will no longer be able to trade shares on AIM with effect from 27 April 2020, which is in advance of the Second General Meeting.

Under the AIM Rules, cancellation requires the expiration of a period of not less than 20 clear business days from the date on which notice of the intended cancellation is given to the London Stock Exchange. The Company has notified the London Stock Exchange of the proposed cancellation. Subject to the passing of the Cancellation Resolution, it is expected that trading in the shares on AIM will cease at the close of business on 24 April 2020, with Cancellation expected to take effect at 7:00 a.m. on 27 April 2020.

If the Cancellation Resolution is not approved by Shareholders, following completion of the Transactions, the Company would become an AIM Rule 15 cash shell and, as such, would be required to make an acquisition or acquisitions which constitute a reverse takeover under AIM Rule 14 on or before the date falling six months from completion of the Transactions, or be re-admitted to trading on AIM as an investing company under the AIM Rules, failing which, the shares would be suspended from trading on AIM pursuant to AIM Rule 40. Admission to trading on AIM would be cancelled six months from the date of suspension should the suspension not have been lifted by that time. As a cash shell, the Company would have no operating cash flow and would be dependent on the net proceeds of the Transactions for its working capital requirements.

Assuming the Cancellation Resolution is approved and Cancellation takes effect, there will be no formal market mechanism enabling Shareholders to trade their shares on AIM or any other recognised market or trading facility, which is likely to affect the liquidity and marketability of the shares. In addition, Shareholders will no longer be afforded the protections given by the AIM Rules, such as the requirement to be notified of certain events and the requirement that the Company seek shareholder approval for certain corporate actions, where applicable, including substantial transactions, financing transactions, reverse takeovers, related party transactions and fundamental changes in the Company's business, including certain acquisitions and disposals. The Company will also cease to have an independent nominated adviser and broker.

The Liquidation

Assuming that the Transactions complete and the Cancellation is effective, the Company intends that Geoffrey Paul Rowley and David Frederick Shambrook, both of FRP Advisory LLP should be appointed as the joint liquidators of the Company and the other remaining members of the Group. The appointment of the Liquidators is proposed to take place shortly after the liability of the Company to HHL under the warranties contained in the Lendco SPA terminates, being the date that is 15 business days following completion of the Lendco Disposal.

Following their appointment, the Liquidators will take control of the Company, take custody of all of the Company's assets, invite creditors to submit particulars of debt and consider and settle each liability of the Company.

The Liquidators have indicated to the Company that, subject to the circumstances of the Company at the time, they expect around one week following their appointment as joint liquidators to make an interim distribution to Shareholders (the "Interim Distribution") in respect of substantially all of the net proceeds of the Transactions, equal to approximately 72 pence per Share, on the basis of the following assumptions:

(a) the number of shares in issue is 158,494,130;

(b) the total proceeds received by the Company from the Transactions are £115.4 million, there are no adjustments to the purchase price payable under the Lendco SPA, and no claims are brought against the Company under the Lendco SPA;

(c) the Transaction expenses and other liabilities of the Company in the period prior to the Interim Dividend are equal, in aggregate, to not more than £7.4 million;

(d) the Group has aggregate cash balances of £7.4 million immediately following completion of the Transactions; and

(e) the Liquidators hold back for contingent liabilities of the Company (including under the VAT indemnity contained in the Lendco SPA) an amount equal to £1.2 million.

The Interim Distribution is expected to represent a discount of approximately 12.9 per cent. to the Company's unaudited net tangible asset value per Share of 82.7 pence per Share on 31 December 2019 which reflects, amongst other things, a write down in the value of certain legacy loan receivables acquired by the Company at the time of Admission from UE Holdco (Jersey) Limited (and to be acquired by the Founders under the Amco SPA) of approximately £2.3 million since the Company's last published unaudited tangible net asset value as at 30 June 2019.

In addition to the discount to the par value of Lendco's loan portfolio at which Lendco is to be acquired under the Lendco Disposal, the per Share discount to the Company's 31 December 2019 unaudited net tangible asset value per Share which the Interim Distribution is expected to represent is principally attributable to the impact of:

1. the interim dividend of 1.67 pence per Share paid on 18 October 2019, the costs and expenses of the Transaction and the other liabilities of the Company of approximately £7.4 million (equal to approximately 4.7 pence per share); and

2. the amount of the net working capital contribution to be made to Amco under the Amco SPA of £7.1 million (equal to approximately 3.5 pence per share, once adjusted to account for the consideration to be received by the Company under the Amco SPA).

It should be noted that these are estimated figures and the final figures may not be known with certainty until after the Second General Meeting. Before any distribution can be made to Shareholders, the Liquidators must be satisfied that either all liabilities of the Company have been settled or that sufficient cash has been retained to discharge or provide for all actual and contingent liabilities.

Following the Interim Distribution, once the joint liquidators are satisfied that all actual and contingent liabilities have been paid, any surplus (including any amount held back by the Liquidators in respect of contingent liabilities of the Company and not applied in discharging such liabilities) will be distributed to Shareholders.  This final distribution is anticipated to be around 1 penny per share, making a total distribution of approximately 73 pence per share.

A copy of the proposed final account must be sent to Shareholders, giving a minimum of eight weeks' notice of the date upon which the joint liquidators intend to deliver the final account to the Registrar of Companies. Once finalised, the final account will be sent to Shareholders and to the Registrar of Companies within 14 days of the date to which the final account is made up. The Company will be dissolved after the expiry of three months from the filing of the final account with the Registrar of Companies.

Impact of LTIP and employee payments

The holders of existing vested awards under the Company's long-term incentive plan will be required to exercise those awards prior to Liquidation, otherwise those awards will lapse. Instead of requiring award holders to receive shares on exercise of their awards, the Company proposes to agree with those award holders who so choose to cancel their vested awards for a cash payment equal to the amount that each award holder would have received in the Liquidation of the Company had he or she received shares instead.

In addition, the vesting of awards under tranche 2 of the Company's 2018 long term incentive plan (which would otherwise have vested following publication of the Company's audited financial statements in April 2020), will be accelerated so as to vest prior to the completion of the Transaction. Relevant award holders will be offered the ability to cancel their awards for a cash payment equal to the amount that such award holder would have received in the Liquidation of the Company had he or she received shares instead.

In aggregate, awards corresponding to 328,491 shares will be cancelled for cash payments equal in aggregate to approximately £239,800 (excluding employer's National Insurance, which will be borne by Amco).

Otherwise, all other existing unvested awards under the long-term incentive plan will lapse.

The Group's bonus pool has been determined on the basis of metrics set out by the Company's Remuneration Committee for performance in 2019. In accordance with those metrics, eligible employees of the Group will receive, in addition to any long term incentive plan awards, bonus payments in respect of 2019 equal in aggregate to approximately £2.2 million (excluding employer's National Insurance, which will be borne by Amco).

Information on the Transactions required for the purposes of the AIM Rules for Companies

For the period ended 31 December 2018, Lendco recorded an audited loss before tax of £816,515 on interest income of £3.22 million. The audited total assets of Lendco as at 31 December 2018 were £106.33 million, with net assets being £(672,335).

For the period ended 31 December 2018, Amco recorded an audited loss before tax of £821,911 on revenues of £4.04 million. The audited total assets of Amco as at 31 December 2018 were £9.93 million, with net assets being £1.27 million.

For the period ended 31 December 2018, the Group recorded an audited loss before tax of £1.99 million on revenues of £3.90 million. The audited total assets of the Group as at 31 December 2018 were £158.94 million with net assets being £150.52 million.

In the six months ended 30 June 2019, the Group reported an unaudited loss before tax of £306,000 on revenues of £5.31 million. The unaudited total assets of the Company as at 30 June 2019 were £155.14 million with net assets being £147.74 million.

The proceeds of the Transactions will be used to cover the costs of the Transactions and other liabilities of the Company, which are expected to total approximately £7.4 million, and to fund the amount of the net working capital contribution to be made to Amco under the Amco SPA of £7.1 million.

 

Expected Timetable of events

Record date in respect of the First General Meeting	6.30 p.m. on 27 March 2020
Latest time and date for receipt of yellow Forms of Proxy for the First General Meeting	12.00 p.m. on 27 March 2020
First General Meeting	12.00 p.m. on 30 March 2020
Expected date of Completion of the Transactions	1 April 2020
Expected last day for dealings in shares on AIM and record date for first distribution payment	24 April 2020
Record date in respect of the Second General Meeting	6.30 p.m. on 24 April 2020
Latest time and date for receipt of blue Forms of Proxy for the Second General Meeting	12.00 p.m. on 24 April 2020
Expected date of Cancellation	27 April 2020
Second General Meeting and appointment of Liquidators	12.00 on 28 April 2020
Anticipated date for first distribution to Shareholders	By 7 May 2020
Anticipated date for distribution of any remaining cash surplus to Shareholders	By 30 April 2021

All references are to local time in London on the day in question.

The dates set out in the expected timetable may be adjusted by the Company in which event details of the new dates will be notified to Shareholders via an announcement made by the Company through a Regulatory Information Service.

General Meetings

The completion of the Transactions, the Cancellation and the Liquidation in each case requires the approval of Shareholders.

First General Meeting

A notice convening the First General Meeting of the Company for 30 March 2020 at 12.00 p.m. at the offices of Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London EC1A 2FG, and at which the Transaction Resolutions, the Cancellation Resolution and the Change of Name Resolution will be proposed, will be attached to the Circular.

Each of the Transaction Resolutions is an ordinary resolution, which requires a simple majority of the votes cast in person or by proxy on a show of hands or a poll to be in favour.

The Cancellation Resolution and the Change of Name Resolution are special resolutions, which require three-quarters of the votes cast in person or by proxy on a show of hands or a poll to be in favour.

The quorum for the First General Meeting is two Shareholders present in person or by proxy.

Second General Meeting

A notice convening the Second General Meeting of the Company, for 28 April 2020 at 12.00 p.m. at the offices of Hogan Lovells International LLP, Atlantic House, Holborn Viaduct, London EC1A 2FG, and at which the Liquidation Resolutions will be proposed, will be attached to the Circular.

The Liquidation Resolutions include special resolutions to wind up the Company voluntarily and to authorise the Liquidators (once they have been appointed) to divide and distribute the Company's assets amongst the Shareholders, and ordinary resolutions to appoint and appropriately authorise the Liquidators as joint liquidators of the Company and to approve their remuneration and recovery of any disbursements. The ordinary resolutions require a simple majority of the votes cast in person or by proxy on a show of hands or a poll to be in favour and the special resolutions require three-quarters of the votes cast in person or by proxy on a show of hands or a poll to be in favour.

The quorum for the Second General Meeting is two Shareholders present in person or by proxy.

Publication of Circular

The Circular, which contains the full details of the Proposals, is being posted to Shareholders today.

A copy of the Circular will shortly be available to view on the Company's website at http://www.urbanexposureplc.com

Enquiries:

Urban Exposure plc                Tel: +44(0)207 408 0022

William McKee, Chairman

Randeesh Sandhu, Chief Executive Officer

Sam Dobbyn, Chief Financial Officer

 

Jefferies (Financial adviser and Joint Corporate Broker)  Tel: +44(0)20 7029 8000

Rishi Bhuchar

Ed Matthews

James Thomlinson

William Brown

 

Liberum (NOMAD and Joint Corporate Broker)   Tel: +44(0)203 100 2000

Neil Patel

Gillian Martin

Jonathan Wilkes-Green

Louis Davies

 

MHP Communications (Financial Public Relations)          Tel: +44(0)203 128 8100

Charlie Barker

Patrick Hanrahan

Sophia Samaras

UrbanExposure@mhpc.com

 

Camarco (PR adviser to Pollen Street)          Tel: +44 (0)20 3757 4984

 

Ed Gascoigne-Pees / Jennifer Renwick

ed.gascoigne-pees@camarco.co.uk

 

 

APPENDIX

FURTHER INFORMATION ON THE TRANSACTIONS

Terms of the Lendco SPA

Parties and Structure

The Lendco SPA has been entered into between the Company, HHL and Amco. Pursuant to the Lendco SPA, the Company will agree to sell to HHL the entire issued share capital of Lendco. The Lendco SPA is subject to the conditions described below.

Conditions to Completion

Completion of the Lendco Disposal is conditional on the passing of Resolution 1 at the First General Meeting.

Consideration

The Lendco SPA provides for the sale of Lendco to HHL for a total purchase price equal to £113.8 million, subject to adjustment as described below, and payable in full on completion.

Of this purchase price, £1 will be paid in respect of the issued share capital of Lendco, with the balance being used to repay outstanding intercompany debt between Holdco and Lendco.

The consideration payable under the Lendco SPA has been determined by reference to the financial position of Lendco as at 18 February 2020.

Warranties and Indemnity

The Lendco SPA includes customary representations and warranties from the Company and Amco to HHL in respect of Lendco. The Company has provided warranties to HHL, including, among others, warranties relating to its authority to enter into and perform the obligations under the Lendco SPA. The Company has also provided additional warranties including, amongst other things, warranties in respect of the condition of Lendco, Lendco's loan portfolio and certain matters relating to tax.

The warranties are subject to the disclosures made by Amco in a disclosure letter provided to HHL.

Any claim made by HHL against the Company in respect of a breach of warranty under the Lendco SPA must be notified to the Company within 15 business days of the date of completion of the Lendco Disposal. Any such claims are subject to the following financial thresholds and limitations (save in the case of fraud and certain other carve-outs):

(a) the aggregate liability of the Company and Amco in respect of certain fundamental claims shall be limited to £113.8 million;

(b) the aggregate liability of the Company and Amco in respect of all claims other than fundamental claims and amounts owed by Lendco to the Group is £500,000;

(c) there is a de minimis in respect of all warranty claims of £15,000 (meaning that any claims below £15,000 will be disregarded for all purposes); and

(d) there is a de minimis in respect of the aggregate liability under the warranty claims of £150,000 (meaning that there is no liability in respect of a warranty claim unless the amount of damages resulting from all warranty claims exceeds £150,000 in aggregate.

The Company has also agreed to indemnify HHL in respect of any liabilities which may arise as a result of Lendco having been a member of the Company's VAT group. The Company's liability under this indemnity is capped at £250,000, and any claims under it must be notified to the Company by HHL within 9 months of the date of the Lendco SPA.

Amco will not be liable to HHL in respect of any warranty claim which is notified to the Company during the 15 business day period following completion of the Transaction (in respect of which the Company will be liable to HHL). Thereafter, remedies of HHL against Amco for breach of the Lendco SPA will survive completion, subject to the monetary limits set out above and customary time periods.

Pre-completion Undertakings and Adjustments to Consideration

The Lendco SPA includes a consideration adjustment mechanism under which the Company has agreed to reimburse HHL (including by way of deduction from the consideration payable by HHL under the Lendco SPA) up to £10 million in respect of any reduction in the net asset value of Lendco between 18 February 2020 and completion of the Lendco Disposal, to the extent that such reduction results from a breach of the Lendco SPA by the Company or Amco (including a breach of warranty between exchange and completion of the Lendco Disposal) or any breach, default or potential default by a borrower under any of the loans in Lendco's loan portfolio. Any claim under this consideration adjustment mechanism must be notified to the Company by HHL within 15 business days of completion of the Lendco Disposal.

The Lendco SPA also includes customary pre-completion undertakings and "leakage" covenants regarding the conduct of, and payments from, Lendco in the period from 18 February 2020 to the date of completion of the Lendco Disposal. In the event that any such undertakings or covenants are breached, HHL may be entitled to make a deduction from the consideration payable under the Lendco SPA equal to the amount of the relevant leakage.

Fees and Expenses

The Company has agreed to reimburse HHL's legal fees and other expenses in respect of the Lendco Disposal, up to a maximum amount equal to £450,000 (plus VAT) and to pay the costs of a warranty and indemnity insurance policy placed by HHL in respect of the warranties given by the Company and Amco under the Lendco SPA and a tax insurance policy which are equal in aggregate to £893,280.

Termination

Should Shareholders not approve the Lendco Disposal by 10 June 2020, the Lendco SPA will terminate unless a further longstop date can be agreed between the parties.

HHL may terminate the agreement if between exchange and completion of the Lendco SPA there is or is likely to be a material adverse change in the financial condition of Lendco (defined for these purposes as a reduction in the net asset value of Lendco as at 18 February 2020 in excess of £10 million) which results from a breach or default by a borrower under any of the loans in Lendco's loan portfolio, or if there is a material breach of the Lendco SPA.

If either the Company or HHL fails to comply with any of its completion obligations under the Lendco SPA, the other party may choose to either proceed to completion or to defer completion to a date no more than 10 business days after the initial completion date and, if completion does not take place on that deferred date, to terminate the agreement.

Governing Law and Jurisdiction

The Lendco SPA is governed by the laws of England and Wales and the court of England have jurisdiction over any dispute or claim arising out of or in connection with the Lendco SPA.

Service Agreement

Completion of the Lendco Disposal is effectively conditional on Amco entering into the Service Agreement with Lendco, pursuant to which Amco will provide ongoing loan origination, loan monitoring and loan administration services in respect of Lendco's loan portfolio.

Under the Service Agreement, Amco will be entitled to receive from Lendco a management fee, paid monthly in arrear equal, broadly, to 1.5 per cent. of the aggregate of the principal on all outstanding, unpaid balances on loans held by Lendco plus the capitalised and/or accrued interest on such loans and any accrued fees and expenses in connection with the loans, less any fee received by Amco from the KKR Joint Venture.

Amco will also be entitled to receive a performance fee from Lendco calculated by reference to the return made by Lendco on tranches of loans made by Lendco equal, broadly, to 20 per cent. of the amount by which the return made by Lendco in respect of each tranche of loans exceeds an annualised internal rate of return of 10 per cent. on such loans.

The Service Agreement contains certain key executive provisions relating to Randeesh Sandhu as the identified key executive for Amco. The Service Agreement also contains customary provisions in respect of limitation of liability and indemnification in favour of Amco.

The Service Agreement will continue indefinitely, subject to each of Amco and Lendco being entitled to terminate the Services Agreement in the case of certain customary default events relating to the other or, in the case of Lendco, relating to the identified key executive.

Terms of the Amco SPA

Parties and Structure

The Amco SPA has been entered into between the Company, the Founders and Amco. Pursuant to the Amco SPA, the Company will agree to sell to the Founders the entire issued share capital of Amco, as well as certain assets associated with Amco's business which are owed by the Company and members of the Group, including certain legacy receivables, office equipment, intellectual property rights and business records and information. The Amco SPA is subject to the conditions described below.

Conditions to Completion

Completion of the Amco Disposal is conditional on:

(a) the passing of Resolution 2 at the First General Meeting; and

(b) the Lendco Disposal.

Consideration

The total cash consideration under the Amco SPA of £1.6 million, will remain outstanding as a loan from the Company to the Founders which will be repayable from the proceeds received by the Founders in their capacity as Shareholders in the Liquidation.

The Amco SPA provides that the Company will, on completion of the Amco Disposal, ensure that Amco has net working capital of £7.1 million, in order to ensure that Amco remains viable once independent from the Group.

Warranties

The Amco SPA includes customary representations and warranties from the Company in respect of its ownership of Amco.

The remedies of the Founders against the Company in respect of breach of the Amco SPA will be limited to the termination of the Amco SPA prior to completion of the Amco Disposal.

Indemnity

Amco shall be responsible for and shall indemnify the Company against all losses suffered or incurred by the Company out of or in connection with the employment of Amco's employees.

Change of name

It is also a term of the Amco SPA that, following completion of the Transactions, the Company will agree to change its name and the name of Holdco so that they no longer included the words "Urban Exposure" or "UE".

Termination

Should the Amco Disposal not complete by 10 June 2020, the Amco SPA will terminate unless a further longstop date can be agreed between the parties.

Governing Law and Jurisdiction

The Amco SPA is governed by the laws of England and Wales and the court of England have jurisdiction over any dispute or claim arising out of or in connection with the Amco SPA.