Restructure Proposals

Quadrant Group PLC
28 February 2002

                               Quadrant Group plc


               ANNOUNCEMENT OF PROPOSED MAJOR RESTRUCTURING



•      COMPANY TO BECOME FOCUSSED ON CCTV SECURITY SYSTEMS AS ITS
       SOLE ACTIVITY

•      SALE OF FLIGHT SIMULATION BUSINESSES

•      NEW INCENTIVE AND REWARD SCHEME FOR KEY CCTV SECURITY MANAGERS

•      CHANGE OF NAME TO QUADNETICS GROUP PLC

•      BOARD AND MANAGEMENT CHANGES TO REFLECT THE NEW STRUCTURE



Peter Rae, Chairman, comments:

'These proposals represent an extremely important milestone for the company.
They reflect the Board's determination to deliver value to shareholders through
focussing exclusively on the exciting technical developments and growth
prospects that are now coming to fruition in our CCTV security systems
businesses.  The company's prospects look very bright'.



For further information contact:


David Coghlan, Chief Executive        01527 850080
Nigel Poultney, Finance Director      01527 850080



Summary of Proposals

Quadrant Group today announces a number of proposals in connection with the
future direction of the Company. Over the past three years, the Company has been
successfully restructured through the disposal of non-core operations to focus
on growth opportunities in its electronic systems businesses. The Board now
believes that the future best interests of the Company will be served by
concentrating its resources on a single business area - video-based security
systems.


The principal proposals are:

       i. to sell  the Company's interests in its Flight Simulation
Businesses, Quadrant Flight Training Limited ('QFT') and Quadrant Systems
Limited ('QSL'), to a company connected with two Directors, David Coghlan and
Jeffrey Sandiford;

     ii.  to transfer 21 per cent. of the share capital in the CCTV
Security Business, Quadrant Video Systems plc ('QVS') and Synectics, to four key
members of the management team, including Russell Singleton, with a view to
these managers converting the acquired minority shareholdings into new Shares in
the Company, the number, and timing, of which depends on future performance of
the CCTV Security Business;

    iii.  to rename the Company Quadnetics Group plc; and

   iv.    to appoint Russell Singleton as Chief Executive, and to implement
other Board changes to reflect the new Group structure.



Background to and Reasons for the Proposals

The Company's recent  strategy has been to concentrate on the development of its
specialist electronic systems businesses involved in the CCTV security and
flight simulation markets. This has involved a series of disposals of non-core
businesses, most recently of Quadrant Visual Solutions Limited and Axiom Design
& Print Limited.

During this period, the continuing businesses have achieved a number of notable
successes including, in Flight Simulation, the winning of a major long-term
government contract for military flight training and, in CCTV Security, market
acceptance of a new range of networked digital video components and systems.
Current market developments within the CCTV Security Business are particularly
encouraging, leading to expectations of strong sales growth this financial year
and apparent opportunities for further substantial progress over the medium
term. At the same time, the recent downturn in civil aviation has caused a
decline in the results and short-term expectations for the Flight Simulation
Business as a whole.

The combination of these developments has led the Board to a unanimous
conclusion that the Company should focus its energy and resources entirely on
developing the maximum potential growth of the CCTV Security activities. In the
immediate term this will require both the sale of the Flight Simulation
Business, and the provision of an appropriate incentive and reward structure for
the key individuals most critical to the success of the CCTV Security Business.


The Proposals

       i.         Sale of the Company's interests in  QSL and QFT

The Company's sole remaining activities outside CCTV security comprise its
shareholdings in QSL, which provides flight simulator maintenance and upgrade
products and services, and QFT, a joint venture company which provides flight
training for RAF E-3D crews under a long-term contract with the UK Ministry of
Defence ('the E-3D Contract').

The Company invested in QSL as a start-up in 1994 with a particular view to
growing a substantial business owning flight simulators and providing outsourced
simulator training for civil airlines. The subsequent entry of large competitors
such as Boeing and GE Capital into this market changed the competitive dynamics
so significantly that QSL could no longer realistically expect to gain an
acceptable market share, and the assets supporting this activity  were sold to
FlightSafety Boeing in September 1999. The remaining simulation products and
services activity of QSL has established a good market position in a highly
specialised area, but its revenues in any given period are derived primarily
from a small number of relatively large contracts. This means that the level of
sales and profitability of the business are volatile and difficult to predict,
especially in the current environment.

QFT is a special-purpose vehicle, 50 per cent. owned by the Company, set up for
the E-3D Contract.  The remaining 50 per cent. is owned by Evans & Sutherland
Computer Corporation, based in the United States. The initial phase of this
contract, just completed, involved taking over and updating the MoD's E-3D
simulator and returning it to full training service, after which QFT is
contracted to  provide training to RAF flight crews on a fixed price
pay-by-the-hour basis until at least 2025.

The Flight Simulation Business made an operating profit of £126,000 in the year
to 31 May 2001. Prior to the sudden downturn in the aviation market last autumn,
the businesses were expected to achieve improved results in the current year;
however, as reported in the Announcement of Interim Results issued earlier
today, these businesses together made an operating loss of £39,000 (QSL £56,000
loss and QFT attributable profit of £17,000) for the six months to 30 November
2001. Furthermore the indications are that current levels of activity will not
pick up in the remainder of the current financial year.

The Company has conditionally agreed to sell its shareholdings in QSL and QFT
to Law 2364, a company in which Directors David Coghlan and Jeffrey Sandiford
have an interest. The purchase price will be £1.5 million, of which  £900,000 is
payable in cash on completion, and the balance of £600,000 is deferred for up to
two years at the Purchaser's option. In addition the Purchaser will assume QSL's
net debt, estimated to be around £250,000 at completion. The deferred amount
will bear interest at 7 per cent. per annum. The net asset value of the Flight
Simulation Business immediately prior to completion of the sale is expected to
be approximately £1.5 million.

The Company has previously guaranteed certain actual and contingent obligations
of QSL and QFT in respect of, inter alia, the performance of QSL and QFT under
the E-3D Contract. The Purchaser will provide an indemnity to the Company in
respect of any liability which the Company may suffer under any of these
guarantees, and has agreed to use reasonable endeavours to secure the release of
the Company from the guarantees. This indemnity, as well as payment of the
deferred consideration, will be supported by security, ranking behind security
to be given in favour of Barclays Bank, over 1,925,250 of the Company's Shares
owned by shareholders of the Purchaser.

As the Purchaser of the Flight Simulation Business is a company which is
connected with David Coghlan and Jeffrey Sandiford, the sale is required to be
approved by the Company's shareholders in accordance with Section 320 of the
Companies Act.

    ii.        Restructuring of QVS and Synectics

An arrangement has existed since August 1998 under which the CCTV Security
Management Team, comprising Russell Singleton and three other managers, have
received bonuses equal to 20 per cent. of the profit before tax of the CCTV
Security Business each quarter. In addition, this arrangement required the
Company to reward these individuals with a further payment based upon the
disposal proceeds of Quadrant Visual Solutions Limited and the valuation of the
CCTV Security Business as at 31 December 2001. In broad terms this liability
might amount to around 20 per cent. of the assessed value of the CCTV Security
Business.

The Board seeks, by virtue of the CCTV Security Proposals, both to provide an
alternative to the further obligations under the above arrangement, and to
enable the Company to provide appropriate incentives to retain and reward the
senior managers who have been instrumental in the development of these
businesses so far, and whom the Board believes capable of leading the CCTV
Security Business in achievement of the growth potential now becoming apparent.

The specific proposal is that the Company transfers 21 per cent. of its
shareholdings in QVS and Synectics to SJC 120 Limited, a company owned by the
four senior managers of QVS and Synectics. The sale price will be £367,500,
payable as to £20,000 in cash on completion and the balance outstanding on an
inter-company loan account bearing interest at 5 per cent. per annum.. The
entire shareholdings of SJC 120 Limited will be subject to a put and call option
arrangement (the 'Option Agreement'), whereby it is intended that the Company
will re-acquire the minority shareholdings in QVS and Synectics in exchange for
new shares in the Company. The number of the Company's new Shares to be issued
pursuant to the Option Agreement will be determined by a formula based upon the
market value of the QVS and Synectics shares acquired at the date the options
are exercised and will be capped at 987,800 Shares in total, comprising up to
500,000 shares for Russell Singleton and 162,600 shares for each of the other
three individuals (representing in aggregate 13.3 per cent. of the Company's
enlarged issued share capital). The put option may be exercised by the CCTV
Security Management Team only if certain performance criteria are met, whilst
the Company can exercise its call option at any time between  1 July  2002 and
30 June 2012 .

The CCTV Security Business made operating profits of £463,000 in the year ended
31 May 2001 (QVS £395,000 and Synectics £68,000). The Directors reported in the
Interim Results that these businesses continued to make progress and made
operating profits of £310,000 in the six months to 30 November 2001. The
Directors expect a stronger second half performance from the CCTV Security
Business.

The net asset value of the CCTV Security Business was £3.466 million at 30
November 2001. However during the current year there have been various
intra-group charges and write offs, such that pro forma net asset value at that
date is £1.19 million.

In addition, the Company proposes to offer the CCTV Security Management Team
(excluding Russell Singleton) interest-free loans from the Company of up to
£60,000 each for a period of up to ten years and for Russell Singleton to
receive a bonus of £167,000.

The CCTV Security Management Team has agreed to retain at least 80 per cent. of
the Ordinary Shares issued to them following the exercise of the options under
the Option Agreement until March 2005, other than in certain specified
circumstances. Additionally, each of these individuals has signed or will sign
a service agreement  that includes  a  12 month  notice period  and certain
restrictive covenants.

The intention of these arrangements  is that the managers will have a strong
incentive to stay with the Company on reasonable current remuneration and to put
exceptional effort into growing the long-term value of the Company's shares as
rapidly as possible.

Resolution 2 approving the transfer is conditional upon the passing of
Resolution 1 to approve the sale of the Flight Simulation Business at the EGM.

The CCTV Security Agreement is conditional upon the Flight Simulation Agreement
becoming unconditional in all respects.


Management Changes

Following completion of the disposal of the Flight Simulation Business, the
Company will have a single business activity and therefore the positions of
Group Chief Executive and Managing Director of the CCTV Security Business will
cease to have separate full-time functions. Accordingly, at that time Russell
Singleton, Managing Director of the CCTV Security Business since 1993, will be
appointed as Group Chief Executive. David Coghlan will  move from Group Chief
Executive to become  a non-executive Director, without compensation for loss of
office.  On completion of the Flight Simulation Agreement, Jeffrey Sandiford,
Managing Director of the Flight Simulation Business, will resign as a Director
of the Company, again without compensation for loss of office.


Change of Name

In line with the Board's strategy, in the last couple of years non-core
subsidiaries have been disposed of and the Group has undergone significant
change. This process will be completed by the disposal of the Flight Simulation
Business, and the Directors believe it is appropriate that the name of the
Company is changed from Quadrant Group plc, which has been associated with many
of the former businesses, to Quadnetics Group plc to reflect this change.


Financial Effects of the Proposals

These proposals, if approved, will result in an exceptional charge of
approximately £350,000 in the financial statements for the current financial
year ending 31 May 2002, of which £192,000 relates to goodwill written off
directly to reserves. No tax charges are expected to arise as a result of these
transactions, as the Company has significant available capital losses.

The Proposals will lead to an immediate cash receipt of £900,000 from the Flight
Simulation Agreement and £20,000 from the CCTV Security Agreement. Other amounts
will remain due to the Company totalling £600,000 from the Flight Simulation
Agreement and £347,500 from the CCTV Security Agreement.

The proceeds  will be used : a) to meet the expenses of the Proposals which
amount to approximately £232,000, b) to finance the payment of a bonus of
£167,000 to Russell Singleton, c) to finance the loan offer to be made to three
members of the CCTV Security Management Team of up to £180,000 in aggregate, and
d) as working capital within the remaining business of the Group.


Extraordinary General Meeting

An Extraordinary General Meeting of the Company has been convened to be held at
the offices of Brewin Dolphin Securities Limited, 5 Giltspur Street, London EC1A
9BD at 10.30 a.m. on  26 March 2002. At this meeting the Resolutions will be
proposed to:


1)       Approve the disposal of the Flight Simulation Business to Law 2364
Limited;

2)       Approve the disposal of 21 per cent. of the share capital of QVS and
Synectics to SJC 120 Limited, and the issue of up to 987,800 new ordinary shares
on exercise of the options under the Option Agreement,

3)       (i) Extend the section 80 authority granted at the last Annual General
Meeting to allot shares to include a) the maximum number of shares issuable
under the Option Agreement and b) subsequent options granted under the EMI
Scheme which was approved by shareholders in general meeting on 27  December
2001 ; and (ii) to disapply  pre-emption rights in respect of up to 5 per cent.
of this extra authority; and

4)    Approve the change of the Company's name to Quadnetics Group plc.


Recommendations

As Mr Coghlan and Mr Sandiford have an interest in the disposal of the Flight
Simulation Business, which constitutes a related party transaction under AIM
rules, they have not taken part in the consideration of Resolution 1 in the
Notice of EGM, and are not able to vote their shares in respect of that
resolution. Accordingly the Directors (other than Messrs Coghlan and Sandiford),
having consulted with the nominated adviser, believe the disposal to be in the
interests of shareholders taken as a whole. The Directors (other than Messrs
Coghlan and Sandiford) recommend that shareholders vote in favour of  Resolution
1, as they have irrevocably undertaken to do  in respect of their own beneficial
holdings which in aggregate amount to 1,569,566 shares, representing 34.81 per
cent. of the shares entitled to vote on this resolution. In addition, an
irrevocable undertaking has been obtained from another shareholder in respect of
1,095,492 ordinary shares to vote in favour of Resolution 1, representing 24.3
per cent. of the shares entitled to vote on this resolution.

As Mr Singleton has an interest in the arrangements relating to the CCTV
Security Business, which constitute a related party transaction under AIM rules,
he has not taken part in the consideration of Resolution 2 in the Notice of EGM,
and he is not able to vote his shares in respect of this resolution. Accordingly
the Directors (other than Mr Singleton), having consulted with the Company's
nominated adviser, believe the arrangements to be in the interests of
shareholders taken as a whole. The Directors (other than Mr Singleton) recommend
that shareholders vote in favour of Resolution 2, as they have irrevocably
undertaken to do  in respect of their own beneficial holdings which in aggregate
amount to 3,457,066 shares, representing 54.0 per cent. of the shares entitled
to vote on this resolution. In addition, an irrevocable undertaking has been
obtained from another shareholder in respect of 1,095,492 shares to vote in
favour of Resolution 2, representing 17.11 per cent. of the shares entitled to
vote on this resolution.

All of the Directors unanimously recommend that shareholders vote in favour of
Resolutions 3 and  4, as they intend to in respect of their own beneficial
holdings which in aggregate amount to 3,494,816 shares, representing 54.27 per
cent. of the issued share capital of the Company.



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