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Ultima Networks PLC (UTN)

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Wednesday 24 October, 2001

Ultima Networks PLC

Proposed Co Voluntary Arrgmt

Ultima Networks PLC
24 October 2001


                  Proposed Company Voluntary Arrangement

On 24 September 2001 Ultima Networks plc ('the Company') announced that it and 
its subsidiaries ('the Group') were in severe financial difficulty. With HSBC 
plc having made it clear to the directors of the Company ('the Directors') that 
it intended to withdraw its facilities, the Company also announced the proposed 
transfer to the Akhter Group plc ('Akhter') of the Group's entire indebtedness 
to HSBC plc ('the Transfer'). The Transfer was duly completed on 9 October 2001.

As anticipated, the Transfer has enabled the Directors to put forward proposals 
('the Proposals') for the restructuring of the Company aimed at reaching a 
settlement with the Company's unsecured creditors, based on a Company Voluntary 
Arrangement ('the CVA') for the Company.

In the opinion of the Directors, the Group currently does not have sufficient 
working capital for its present requirements, that is for at least the next 12 
months from the date of this announcement. Following approval of the CVA and 
similar arrangements between the Company's subsidiaries and their respective 
creditors as set out below, the Directors will negotiate with Akhter to provide 
any additional working capital required by the Company. If these negotiations 
with Akhter are not successful, it is unlikely that the Company will be able to 
meet its obligations under the CVA, in which case the Supervisor of the CVA 
would be obliged to consider presenting a petition to wind up the Company as set
out below.

Assuming that the CVA and subsidiary companies' arrangements with creditors are 
put in place, the Directors intend to apply for the suspension of the Company's 
listing to be lifted in January 2002, following announcement of the Company's 
interim results for the six months ended 30 June 2001.

Basis of CVA Proposal under the Insolvency Act 1986

Under the Insolvency Act 1986, the Directors have made the Proposals to the 
Company to put in place a CVA to satisfy its unsecured creditors. As a qualified
insolvency practitioner, S R Cork of Smith & Williamson Chartered Accountants 
('the Nominee') has been appointed to act in relation to the Proposals for the 
purpose of supervising implementation of the proposed CVA.

The Nominee has received the Proposals from the Directors and on 18 October 2001
filed them as necessary with the High Court of Justice ('the Court'). The 
Nominee has also provided a report to the Court stating that in its opinion 
separate meetings of the Company's creditors ('the Creditors' Meeting') and its 
shareholder ('the Members' Meeting') should be held to consider the Proposals. 
In order for the CVA to be implemented, the Proposals must be approved at both 
the Creditors' Meeting and the Members' Meeting.

At the Creditors' Meeting, a majority of at least 75% in value of the creditors 
present and voting (in person or by proxy) is required to approve the Proposals.
The Members' Meeting is held immediately following the meeting of creditors. A 
simple majority of over 50% in value of shareholders present and voting (in 
person or by proxy) is required for approval. Notice of these meetings which are
due to be held on 9 November 2001 has been sent to all creditors and 
shareholders today.

Under the Insolvency Act, at the Creditors' Meeting the creditors may propose a 
modification to the Proposals. The Nominee and the Company must then decide 
whether such a modification to the Proposals is to be accepted, before the 
creditors and the shareholders vote on whether to approve the modified 
Proposals.

If the Proposals are approved at both of the above meetings, every creditor who 
has received notice of the Creditors' Meeting is bound by the Proposals and 
cannot take any enforcement action in relation to their claims against the 
Company. At that point, the Nominee will also be formally appointed as 
Supervisor of the CVA.


Summary of Proposals

The Proposals contain detailed information regarding the history of the Company,
the current financial position, details of all assets and liabilities, and how 
the Proposals will be effected. Shareholders are being sent a copy of the 
Proposals filed with the Court on 18 October 2001.


In summary, under the Proposals:

(i)   the Company's subsidiaries, its associates and its Directors will not seek
to claim any amounts owed to them under the CVA. The only secured creditor, 
Akhter, will agree to defer its debt for an indefinite period and will agree to 
write-off £0.8 million of the total secured debt of approximately £2.6 million. 
Intra-group creditors will remain unaffected by the CVA.

(ii)  the holders of loan notes, being certain of the shareholders, will not 
seek to claim any amounts owed to them under the terms of the CVA, but will 
remain with the Company to be dealt with in the normal course of business at the
conclusion of the CVA.

(iii) the Company will continue to trade so that it may make contributions to me
Supervisor of the CVA. These contributions will be placed in a fund ('the Scheme
Fund'), which accumulates until the Supervisor is able to make distributions to 
the unsecured creditors in accordance with their priority and the terms of the 
CVA.

(iv)  The current aggregate amount owed by the Company to unsecured creditors is
approximately £2.1 million, including the associated and loan note creditors for
approximately £1.4 million. A comparison of estimated outcomes, included within 
the Proposals and the Nominee's report to the Court, shows that, if the Company 
were to be liquidated, unsecured creditors would not receive any payment of the 
amounts owed to them. On the other hand, under the Proposals, the projected 
Scheme Fund of £50,000 would enable them to receive a dividend of 6.57% of the 
amount owed to them by the Company, subject to costs of implementing the CVA. 
The Projected Scheme Fund of £50,000 will be distributed to eligible creditors 
in full and final settlement of their claims against the Company.

(v)   The duration of the CVA is anticipated to be six months from approval, 
unless terminated earlier under the provisions contained in the Proposals. The 
Company will make contributions of £50,000 in aggregate into me Scheme Fund, 
structured as £10,000 per month in the final five months of the CVA. The 
majority of these funds will be generated by profits from continued trading and 
the remainder by sub-letting of parts of the freehold properties held. The 
Supervisor shall review the Company's financial position every month.

(vi)  In the event that the Company's contributions into The Scheme Fund reach 
£50,000 prior to the expiry of the six months, the Company will be released from
the CVA at that earlier date, provided it has complied with the other terms of 
the CVA, including committing no breach or default of the CVA and having met 
ongoing trading liabilities as and when they fall due.

(vii) On successful conclusion of the CVA, the Company will be released from its
obligations under the CVA and able to continue trading in normal terms.


Role of the Nominee/Supervisor

The Nominee, who must be a qualified insolvency practitioner is appointed by the
Directors to act in relation to the CVA to report to the Court and the creditors
on the Directors' Proposals, and to call the meetings of members and creditors. 
It is intended that the Nominee become the Supervisor upon approval of the CVA, 
subject to the consent of the creditors of the Company.

The Supervisor's powers and functions are as set out in Section 3.7 of the 
Proposal, and include agreeing the liabilities of the Company as at the date of 
the meeting of creditors, employing professional and legal advisors as 
necessary, retaining sufficient funds to petition to wind up the Company in the 
event of default, and monitoring the payments to creditors and ensuring that 
dividends are paid as and when due.

The Supervisor shall not be concerned with the management of the business of the
Company, other than to review the Company's financial position every month to 
ascertain if further contributions to the Scheme Fund are required. At no time 
will the Supervisor or his agents or employees incur any personal liability in 
connection with his acting as Supervisor.


Default of the CVA

In the event that the Company fails to meet its obligations under the CVA, the 
Supervisor is obliged to consider presenting a petition to wind up the Company 
as detailed in Section 3.3 of the CVA Proposal. Should insufficient funds be in 
hand to present such a petition, the Supervisor shall issue a Certificate of 
Default, at which time the creditors shall cease to be bound by the CVA.


Eligibility to vote on the Proposals

At the Creditors' Meeting, secured creditors may only vote in relation to any 
amount of unsecured debt they are owed. Following the Transfer, Akhter is owed 
an aggregate of approximately £2.6 million, which is secured by way of a 
debenture creating fixed and floating charges over assets of the Company valued 
at approximately £1.0 million on a forced sale basis. Akhter is therefore 
eligible to vote in respect of the unsecured proportion of its debt, which is 
approximately £1.6 million. Akhter has undertaken to the Company to vote in 
favour of the Proposals at the Creditors' Meeting. No other creditor is secured.
The total value of creditors eligible to vote at the Creditors Meeting is 
approximately £3.7 million.

All shareholders are eligible to vote at the Members' Meeting. As a substantial 
shareholder, Akhter is a related party to the Company. As it is also an 
unsecured creditor to be treated under the CVA (although, as noted above, Akhter
will not seek to claim any amount owed to it under the CVA), Akhter has 
undertaken to the Company to abstain from voting at the Members' Meeting.


Summary of effects of all proposed arrangements with creditors across the Group

If the CVA is approved, the Company's subsidiaries will immediately seek to 
enter into similar company voluntary arrangements with their respective 
creditors. Meetings of creditors of the Company's subsidiaries to seek the 
approval of these arrangements will also be held on 9 November 2001. 
Shareholders of Ultima Networks plc are not required to approve these 
arrangements with creditors of its subsidiary companies. However, the Proposals 
for the Company are not likely to be successful unless the proposed arrangements
between the Company's subsidiaries and their creditors are themselves approved 
by creditors.

Total creditors of Group companies are approximately £9.0 million, including 
intra-group creditors of approximately £1.3 million. The aggregate value of 
creditors who may claim under the CVA and under the company voluntary 
arrangements proposed for subsidiary companies amounts to approximately £2.0 
million. Within this amount under the proposed arrangements, approximately 
£300,000 will be repaid in full to preferential creditors, being VAT and PAYE 
due. The aggregate maximum dividend proposed in full and final settlement of the
remaining unsecured creditors of approximately £1.7 million is approximately 
£160,000 (representing approximately 9.38% of the amount currently owed), 
subject to costs of implementing the arrangements. As such, the minimum
write-off of unsecured creditors at the end of the CVA amounts to approximately 
£1.6 million. In addition, Akhter has agreed that the Group will write-off £0.8 
million owed to it. As such the level of existing creditors anticipated to 
remain after these steps is approximately £6.2 million.