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1 For personal use only OPUS GROUP LIMITED ACN CIRCULAR TO SHAREHOLDERS COMPRISING NOTICE OF GENERAL MEETING, EXPLANATORY NOTES AND INDEPENDENT EXPERT'S REPORT Date: Thursday, 28 March 2013 Time: a.m. (AEDT) Place: PricewaterhouseCoopers Freshwater Place Lv 19, 2 Southbank Blvd, Southbank Victoria 3006 The Notice of Meeting is dated 26 February This circular is important and requires your prompt attention. Please consult your stockbroker, solicitor, accountant, licensed financial adviser or other professional adviser if you have any queries as to its contents or are in any doubt as to how to respond to it. legal/ _22

2 Page 2 For personal use only Table of Contents Corporate Directory 1. Chairman's Letter 3 2. Notice of General Meeting 5 3. Explanatory Notes 8 4. Glossary 29 Annexure A: Terms of issue of Convertible Notes 31 Annexure B: Independent Expert's Report 34 NOTE: Capitalised terms used in this document are defined in the Glossary (Section 4). Key Dates Due date for lodgement of proxy forms Record Date General Meeting a.m. (AEDT) on 26 March p.m. (AEDT) on 26 March a.m. (AEDT) on 28 March 2013 NOTE: The above timetable is indicative only. The Company may vary any of the above dates subject to the Corporations Act, the ASX Listing Rules and any other applicable law. Important Information This Notice of Meeting is dated 26 February A copy of this Notice of Meeting has been lodged with ASIC and ASX. Neither ASIC nor ASX takes any responsibility for the contents of this Notice of Meeting. This Notice of Meeting does not take into account the individual investment objectives, financial situation or particular needs of any person. Shareholders should seek professional advice from a licensed financial adviser, accountant, stockbroker, lawyer or other professional adviser before deciding whether or not to approve the resolutions set out in the Notice of Meeting. Financial amounts in this Notice of Meeting are expressed in Australian dollars unless otherwise stated. This Notice of Meeting is governed by the law in force in New South Wales. legal/ _22 Directors Mr William Mackarell (Chairman, Non Executive Director) Mr Richard Celarc (Executive Director) Mr Bret Jackson (Non Executive Director) Mr Matthew McGrath (Non Executive Director) Mr Simon Rowell (Non Executive Director) Mr James Sclater (Non Executive Director) Joint Company Secretaries Mr David Watkins Mr Robert Alexander Registered Office 12 Rachael Close SILVERWATER NSW 2128 Tel: (02) Fax: (02) Website Bankers Commonwealth Bank of Australia Share Register Computershare Investor Services Pty Limited Yarra Falls 452 Johnston Street ABBOTSFORD VIC 3067 Tel: Auditors PricewaterhouseCoopers Darling Park Tower Sussex Street SYDNEY NSW 2000 Independent Expert Lonergan Edwards & Associates Limited Level 27, 363 George Street SYDNEY NSW 2000 Solicitors Thomsons Lawyers Level 25 1 O'Connell Street SYDNEY NSW 2000

3 Page 3 For personal use only 1 Chairman's Letter 26 February 2013 Dear OPUS Group Shareholder, Notice of Meeting and associated Independent Expert's Report On behalf of the board of directors of OPUS Group Limited, I am pleased to invite you to an extraordinary general meeting of the Company to be held on 28 March 2013 at a.m. (AEDT) at PricewaterhouseCoopers, Freshwater Place, Lv 19, 2 Southbank Blvd, Southbank, Victoria 3006 (General Meeting), and to present this Notice of Meeting to you. The Directors appointed Lonergan Edwards & Associates Pty Limited as an Independent Expert to assess the merits of the resolutions being put forward at the General Meeting. A copy of their report is set out in the Annexure B to this booklet and should be read in its entirety in conjunction with this Notice of Meeting. Most importantly I am writing to you to provide further insight and background to the recently announced two major shareholder loans to the Company and their proposed conversion to convertible notes subject to shareholder approval, and which are accordingly the subject of the meeting resolutions. The last six months has seen the Company undergo a significant merger and transition with the integration of McPherson's Printing Pty Limited into the OPUS Group. Although there have been major inroads into the integration and transformation of the OPUS Group, the difficult economic environment, particularly with Government cutbacks in Canberra and significant softening in the Australian Publishing market has resulted in the OPUS Group s financial performance being behind expectations. As noted in the market update on 25 January 2013, the Out of Home division in Australia also fell short of expectations in the December month, in-line with the outdoor media market s spend. The costs associated with the closing and redeploying of equipment from the Mulgrave facility in Melbourne in December 2012 were significant and put additional pressure on the OPUS Group s balance sheet. The closure was seen as necessary considering the trading environment and rationalisation required in the business. Associated cost reductions will be realised from January 2013 onwards. Given the circumstances, the Board decided the best practical option was to seek support from its two largest shareholders by way of loans proposed to be converted into convertible notes, subject to shareholder approval. The decision was not taken lightly, and was arrived at after careful consideration of all relevant factors by a subcommittee of the Board comprising Directors independent to the transaction. Further details in this regard are set out in Section 3.3 of the Notice of Meeting. Subsequent to the entering into these loans each of the lenders has agreed to: amend the terms of the Convertible Notes so that it cannot convert any of its Convertible Notes into Shares before the earlier of 30 June 2013 and the allotment of Shares pursuant to the Intended Capital Raising; and if any Convertible Notes are converted to Shares within 3 months after the Intended Capital Raising or by 30 September 2013 (whichever is earlier), the conversion price will be the same as the issue price of Shares under the Intended Capital Raising. The Company has negotiated a revised banking facility with its senior lender which has allowed the Company to pursue the continued development of the Company. OPUS Group is working hard to deliver the full value of the integrated businesses and significant progress has been made in the first half of the 2013 financial year through reducing the Company s cost base and through selective investment. legal/ _22

4 Page 4 Recommendation of the Directors As stated in the Explanatory Materials your Independent Directors have carefully considered the options available to the OPUS Group and recommend you vote in favour of the relevant resolutions. The Independent Directors are unanimously of the view that the benefits and advantages of entering into the shareholder loans and approving the associated convertible note terms (allowing these to be converted to shares) outweigh any disadvantages. Their reasoning in this regard is set out fully in the Notice of Meeting and Explanatory Notes. Most importantly the support from the two largest shareholders in what is a very uncertain economic environment resulting in challenging trading conditions is welcomed by the Board. Consideration has also been given to the Independent Experts report with respect to the resolutions. The Independent Expert states that although the terms of the convertible note are not fair they are reasonable to the non-associated shareholders of the Company (under ASIC Regulatory Guide 111). Under ASIC Regulatory Guide 111 the potential conversion of the Convertible Notes may only be deemed fair if the conversion price is equal to or greater than the value of the Company s Shares at the time of conversion. As the Shares issued pursuant to the exercise of the conversion rights are to be priced at a discount to the Volume Weighted Average Price (VWAP) of OPG's Shares, in compliance with ASIC Regulatory Guide 111, the Independent Expert has found the proposed conversion not fair. However, in the Independent Expert's opinion, the conversion rights attached to the Convertible Notes are reasonable in the absence of a superior funding proposal. Further comprehensive information about the Resolutions and shareholder loans is set out in the Notice of Meeting and Explanatory Notes and the Independent Expert s Report. On behalf of the Directors, I encourage you to read the full contents of the accompanying documents carefully, and to participate in the voting process. If you have any questions about this Notice of Meeting, please contact Computershare Investor Services on (within Australia) and +61 (03) (outside Australia) or consult your licensed financial advisor, stockbroker or other professional adviser. Yours sincerely, William J. Mackarell Chairman legal/ _22

5 Page 5 For personal use only 2 Notice of Meeting NOTICE IS HEREBY GIVEN that a General Meeting of the Shareholders of OPUS Group Limited (Company or OPG) will be held at PricewaterhouseCoopers, Freshwater Place, Lv 19, 2 Southbank Blvd, Southbank, Victoria 3006 on Thursday, 28 March 2013 at a.m. (AEDT). BUSINESS 1. Approval of proposed conversion of Knox Loan Facility to Convertible Notes and of the proposed terms of those Convertible Notes To consider and, if thought fit, to pass the following resolution as an ordinary resolution: "That, for the purposes of ASX Listing Rules 10.11, section 611 (item 7) of the Corporations Act 2001 (Cth) and for all other purposes, shareholders approve: (a) the conversion by the Company of the loan facility provided to the Company by Knox OPUS LP (a New Zealand limited partnership) entered into on 3 January 2013 (as amended on 15 January 2013 and 22 February 2013) to convertible notes issued by the Company; and (b) the proposed terms of the resulting convertible notes, (including the future issue of ordinary shares in the Company to Knox OPUS LP (a New Zealand limited partnership) (or its nominees) on conversion of those convertible notes), on the terms and conditions described in the explanatory notes accompanying the notice convening this meeting." 2. Approval of proposed conversion of Celarc Loan Facility to Convertible Notes and of the proposed terms of those Convertible Notes To consider and, if thought fit, to pass the following resolution as an ordinary resolution: "That, for the purposes of ASX Listing Rules 10.11, section 611 (item 7) of the Corporations Act 2001 (Cth) and for all other purposes, shareholders approve: (a) the conversion by the Company of the loan facility provided to the Company by DMRA Property Pty Limited (ACN ) entered into on 3 January 2013 (as amended on 15 January 2013 and 22 February 2013) to convertible notes issued by the Company; and (b) the proposed terms of the resulting convertible notes, (including the future issue of ordinary shares in the Company to DMRA Property Pty Limited (ACN ) (or its nominees) on conversion of those convertible notes), on the terms and conditions described in the explanatory notes accompanying the notice convening this meeting." By Order of the Board Robert Alexander Company Secretary Date: 26 February 2013 legal/ _22

6 Page Voting Exclusions (a) Resolution 1 The Company will disregard any votes cast on Resolution 1 by: (i) (ii) Knox OPUS LP, Knox Fund IV NZD LP, Knox Fund IV AUD LP, Knox Limited Partnership, Knox Investment Partners Fund III AUD 3 Limited, Knox Investment Partners Fund III AUD 4 Limited, Knox Investment Partners Fund III AUD 5 Limited, Bret Jackson and Takatimu Investments Limited as trustee for the Takatimu Investment Trust; and any associate of any of those persons. However, the Company need not disregard a vote if: (i) (ii) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides. (b) Resolution 2 The Company will disregard any votes cast on Resolution 2 by: (i) (ii) Richard Celarc in his personal capacity and in his capacity as trustee for the Richard Celarc Family Trust, DMRA Property Pty Limited (ACN ), and Navigator Australia Limited (ACN ) as custodian for Richard Celarc; and any associate of any of those persons. However, the Company need not disregard a vote if: (i) (ii) it is cast by a person as proxy for a person who is entitled to vote, in accordance with the directions on the proxy form; or it is cast by the person chairing the meeting as proxy for a person who is entitled to vote, in accordance with a direction on the proxy form to vote as the proxy decides. 2.3 Voting and Proxies The Company has determined in accordance with the Corporations Act that for the purpose of voting at the General Meeting or adjourned meeting, Shares will be taken to be held by those persons recorded in the Company's Register of Members as at 7.00 p.m. (AEDT) on Tuesday, 26 March Any member entitled to attend and vote is entitled to appoint a proxy to attend and vote instead of the member. If a member is entitled to cast 2 or more votes at the General Meeting, that member may appoint 2 proxies. Where 2 proxies are appointed, each proxy may be appointed to represent a specified proportion or number of the member's voting rights. If the member does not specify the proportion or number of the member's voting rights that each proxy is to represent, each proxy will be entitled to exercise half the member's votes. A proxy need not be a member of the Company. A form of proxy is enclosed. In order to be valid the properly completed form of proxy must be lodged at the office of the Company's Share Registrar, Computershare Investor Services Pty Limited at GPO Box 242, Melbourne VIC 3001 (envelope enclosed), by facsimile on (within Australia) or (outside Australia), online by visiting or at the Company's offices at 12 Rachael Close, Silverwater NSW 2128, before a.m. (AEDT) on Tuesday, 26 March Intermediary Online subscribers only (custodian voting) may visit to submit their voting intentions. legal/ _22

7 Page Enquiries For further information, please contact Mr Robert Alexander at the Company on (02) legal/ _22

8 Page 8 For personal use only 3 Explanatory Notes These explanatory notes have been prepared for the information of Shareholders in connection with the business to be conducted at the General Meeting to be held at PricewaterhouseCoopers, Freshwater Place, Lv 19, 2 Southbank Blvd, Southbank, Victoria 3006 on Thursday, 28 March 2013 at a.m. (AEDT). 3.1 Background As noted in previous market releases, the OPUS Group intends to reduce its overall net debt level beyond the current scheduled debt repayments over the FY2013 and FY2014. As announced on 25 January 2013, the OPUS Group in agreement with its senior financier (Commonwealth Bank) reset its Debt Facility structure. The reset Debt Facility structure is positioned to support the future growth and viability of the OPUS Group s core businesses and the implementation of the Net Debt reduction strategy with the support of its financiers. The variation deed related to the resetting of covenants requires additional debt repayments to be made before 30 June 2013 in order to reduce the leverage of the OPUS Group. These additional debt repayments will be funded through operating cash flows and a combination of potential further non-core asset disposals and the issue of new capital. In this regard, it is likely that the OPUS Group's Financial Report and the Auditors Review Report for the half year ended 31 December 2012 will include a note that refers to the required debt reduction and specifically the intended capital raising referred to above as uncertain events that may impact the going concern status of the Company. In considering the future issue of capital, on-going disposal of non-core assets and the OPUS Group s current financial projections, the Directors believe that they will be successful in implementing their initiatives and accordingly believe the Group is and will continue to be a going concern. General market conditions for the Australian Publishing division continue to be challenging with performance for November and December below expectations. Continuing reduced Government expenditure has had a direct impact on the performance of the OPUS Group s Publishing division both directly through trading with Government customers and at a macro level with overall softer market demand in the Publishing sector. As part of the OPUS Group's overall debt reduction strategy and to counteract market conditions, the OPUS Group has identified and implemented a number of cost reduction initiatives within the OPUS Group s Publishing Division during the first half of FY2013. One of these initiatives involved the consolidation of the Publishing Division s colour printing business facilities and closure of the McPherson's Printing's Mulgrave site, resulting in significant closure, relocation and restructuring costs being incurred. The equipment from the Mulgrave site has been relocated to the OPUS Group s Maryborough and Canberra facilities. In order to assist with the closure costs of the Mulgrave site and other working capital requirements, beyond the Company's available banking facilities, the Company entered into conditional short term loan transactions with: (a) Knox Fund IV NZD LP, Knox Fund IV AUD LP and Knox Limited Partnership (together, Original Knox Lenders) pursuant to which the Original Knox Lenders would collectively lend the Company up to $1.7 million (Knox Loan Facility); and (b) Richard Celarc as trustee for the Richard Celarc Family Trust and DMRA Property Pty Limited (together, Original Celarc Lenders) pursuant to which the Original Celarc Lenders would collectively lend the Company up to $1.7 million (Celarc Loan Facility). legal/ _22

9 Page 9 The relationships of each of the Original Knox Lenders and the Original Celarc Lenders to the Company are fully disclosed and explained in paragraph 3.5 below. The Knox Loan Facility and the Celarc Loan Facility were granted pursuant to separate Secured Short Term Loan Facility Agreements with the Original Knox Lenders and the Original Celarc Lenders, respectively. The key terms of those loan facilities are identical, as follows: (a) Maturity date is 31 March (b) (c) Subject to Shareholder approval, the loan amount will be converted into Convertible Notes, which in turn will be convertible into equity (in whole or in part at the option of the lender). Interest is payable at a rate of 15% per annum, or 24% per annum if Shareholders do not approve the conversion of the loan facility into a convertible note facility. Interest is to be capitalised until maturity unless it satisfies the "Permitted Distribution" criteria under the OPUS Group's facilities with its senior lender, Commonwealth Bank of Australia (see details below). (d) Facility fee of 4%. (e) (f) (g) The Company to pay the lender's costs and expenses associated with the loan facility. The loan facility is secured by way of a second ranking security over the assets and undertakings of the Company. The security interests granted by the Company in favour of the Commonwealth Bank of Australia rank ahead of the second ranking security. The loan facility is subordinated to the loans provided by the Commonwealth Bank of Australia. By Deed of Assignment and Amendment entered into by the Company, the Original Knox Lenders and the Original Celarc Lenders, at the request of the Original Knox Lenders and the Original Celarc Lenders, the following (amongst other things) occurred: (a) (b) (c) (d) the Original Knox Lenders assigned their interest in the Knox Loan Facility to Knox OPUS LP; the Original Celarc Lenders assigned to Knox OPUS LP $600,000 (in aggregate) of the principal debt owed by the Company to Original Celarc Lenders in consideration for the payment to the Original Celarc Lenders of $572,000 by Knox OPUS LP; Knox OPUS LP agreed to account to the Original Celarc Lenders for the interest on the $600,000 principal debt assigned by the Original Celarc Lenders in the form in which that interest is received by Knox OPUS LP from the Company (whether in cash or by transfer of Shares, as the case may be); and on and from the time of that assignment: (i) (ii) (iii) (iv) the Original Knox Lenders ceased to be parties to the Knox Loan Facility, and Knox OPUS LP is the only continuing lender under the Knox Loan Facility; Richard Celarc as trustee for the Richard Celarc Family Trust ceased to be a party to the Celarc Loan Facility, and DMRA Property Pty Limited is the only continuing lender under the Celarc Loan Facility; the Company owes Knox OPUS LP a net $2,100,000 plus interest under the Knox Loan Facility; and the Company owes DMRA Property Pty Limited a net $900,000 plus interest under the Celarc Loan Facility Agreement. It is noted the Company has applied to the ASX for a waiver of ASX Listing Rule 10.1 to enable all amounts under the Knox Loan Facility and the Celarc Loan Facility to be secured by the second ranking security over the assets and undertakings of the Company (ranking behind the security legal/ _22

10 Page 10 interests granted by the Company in favour of the Commonwealth Bank of Australia). The Company will inform the market of the outcome of this waiver application once it has received the ASX's finalised written decision in this regard, which is expected shortly. The Company has the option to: (a) (b) drawdown a further $300,000 under the Knox Loan Facility (as it is entitled to do under the Knox Loan facility), and then (if Resolution 1 is passed) the Company and Knox OPUS LP may potentially convert the loan amount under the Knox Loan Facility into Convertible Notes in the manner described in paragraph 3.2; and drawdown a further $100,000 under the Celarc Loan Facility (as it is entitled to do under the Celarc Loan facility), and then (if Resolution 2 is passed) the Company and DMRA Property Pty Limited may potentially convert the loan amount under the Celarc Loan Facility into Convertible Notes in the manner described in paragraph Proposed issue of Convertible Notes The terms of the loan facilities envisage the conversion of the loan amount into convertible notes in the Company (Convertible Notes) subject to Shareholder approval. The objective is to provide the Company further equity and less debt at a time when that is an objective of the Company and in the best interests of all Shareholders. The terms of issue of the Convertible Notes are summarised in Annexure A. It is proposed that, subject to the relevant Resolution being passed, the issue of the Convertible Notes are to occur after the General Meeting but by no later than 31 March 2013, as set out in the table below (Proposed Convertible Note Issue). (The passing of each Resolution is not conditional on the passing of the other Resolution.) Convertible Noteholder Knox OPUS LP (a New Zealand limited partnership) DMRA Property Pty Limited (ACN ) Number of Convertible Notes in lieu of Loan Facility 21,000 1 (Up to a maximum to 24,000 may be issued depending on the actual Principal outstanding) 9,000 2 (Up to a maximum to 10,000 may be issued depending on the actual Principal outstanding) Loan Facility amount to be converted by 31 March 2013 Principal Interest $2,100,000 1 Simultaneously with the first issue of Convertible Notes to Knox OPUS LP, all interest capitalised under the Knox Loan Facility will automatically become interest capitalised pro rata against each Convertible Note issued to Knox OPUS LP under the Knox Convertible Note facility. $900,000 2 Simultaneously with the first issue of Convertible Notes to DMRA Property Pty Limited, all interest capitalised under the Celarc Loan Facility will automatically become interest capitalised pro rata against each Convertible Note issued to DMRA Property Pty Limited under the Celarc Convertible Note facility. TOTAL 30,000 1,2 $3,000,000 1,2 (Up to a maximum of 34,000 may be issued depending on the actual Principal outstanding) legal/ _22

11 P a g e 11 Notes: 1 Assumes that the Company does not drawdown the additional $300,000 available under the Knox Loan Facility (as it is entitled to do under the Knox Loan facility). 2 Assumes that the Company does not drawdown the additional $100,000 available under the Celarc Loan Facility (as it is entitled to do under the Celarc Loan facility). For personal use only 3.3 Reasons for the entry into the loan facilities and the Proposed Convertible Note Issue As noted above the loan facilities were entered into to fund the closure costs associated with the Mulgrave site and other working capital requirements, beyond the Company's available banking facilities. The Company also had bank debt amortisation obligations on 31 December 2012 (as previously disclosed). Given the circumstances, the Board decided, after careful consideration of all the matters referred to below, that the best practical option was for the Company to seek support from its two largest Shareholders by way of loans proposed to be converted into Convertible Notes, subject to Shareholder approval. The decision was not taken lightly, and was arrived at after careful consideration of all relevant factors by a subcommittee of the Board comprising Directors independent to the transaction. By way of fulsome disclosure in this regard, the Board took into account the following: (a) The Company had been negotiating the sale and leaseback of its then owned building in Singapore which was expected to have been completed by 31 December This was planned to release significant funds to the Company for both debt reduction and working capital purposes. The Company had been receiving expert advice in this regard in Singapore throughout the latter half of Regrettably the signing of the sale was delayed (but has since been announced) such that none of the proceeds of sale were available by 31 December 2012; (b) The Company's senior financier (Commonwealth Bank) has been supportive of the Company's efforts, but were not willing to extend further facilities to the Company, beyond those it has already committed to provide; (c) The Company considered other external debt funding options such as mezzanine finance or the issuance of convertible notes to parties other than the associates of the Knox Group and Mr Celarc. Given that any such funding would need to be subordinated to the Commonwealth Bank of Australia s Debt Facility, the Independent Directors, after considering all options, determined that pursuing these options would not be possible given the timeframes and the circumstances and that it would be extremely difficult to negotiate terms which were commercially viable for and acceptable to the Company. In this regard, the Independent Directors determined that existing major shareholders would be the most likely counterparty who could to support the Company on acceptable terms and provide the funding in the given time frames; (d) A share placement to a limited number of new and/or existing Shareholders would be subject to the 15% limitation imposed by ASX Listing Rule 7.1 on raisings by way of placement and would therefore not have raised sufficient funds to meet the Company's requirements in the circumstances; (e) An underwritten rights issue to raise the requisite funds would have been the most attractive option but compliance with the timetable imposed by the ASX Listing Rules for implementing such an issue, and having it underwritten, would have taken too long and not been certain or soon enough to allow the Company to satisfy its cash flow requirements in the circumstances; and (f) The Independent Directors specifically debated the key commercial terms associated with the Knox and Celarc Loan Facilities including the interest rates, the conversion mechanism including the conversion discount and other material commercial terms which were applicable to ensure that they were reasonable given the circumstances and that they were commercially viable for the Company. When assessing the reasonableness of the terms, consideration was given to the fact that the funding would be subordinated to that provided by the Company s senior financier and that repayment of principal and interest could only be made under Permitted Distribution" criteria under the OPUS Group's Debt Facilities with its senior lender. The Independent Directors concluded that it legal/ _22

12 Page 12 was unlikely that other counterparties would provide funding on the same or more advantageous terms without undertaking extensive due diligence which would have not been possible given the time frames required for the funding to be in place. The Proposed Convertible Note Issue may potentially mean that the Company would not need to repay the principal amount borrowed nor any capitalised interest out of its cash reserves. This would enable the Company to preserve cash and avoid the need to make payment to redeem the Convertible Notes at their maturity. The Independent Directors of the Board negotiated and approved the terms of the loan facilities and the Convertible Notes with the lenders having considered other avenues for raising the funds required by other means, and given the facts as outlined above, determined those terms to be reasonable in the circumstances and as if they were dealing with lenders at arm's-length. 3.4 Effect of the Proposed Convertible Note Issue on OPG and the interests of existing Shareholders As set out in Annexure A, the Convertible Notes may be converted into Shares in the Company at the option of the lender. If the Resolutions are passed, and the lenders exercise their conversion rights under the Convertible Notes, the Convertible Notes will convert into Shares at a conversion price equal to 75% of the volume weighted average price of the Company's Shares calculated over the 5 trading days on which trades in the Company's Shares were recorded immediately before the date on which the conversion occurs. Accordingly, as the conversion price cannot be determined until the conversion date, it is not possible to set out the exact dilutionary effect that the Proposed Convertible Note Issue would have. Further, Knox OPUS LP is not related to DMRA Property Pty Limited and is not acting in concert with DMRA Property Pty Limited in relation to any Convertible Notes. If a lender chooses to convert its Convertible Notes, this does not mean that the other lender will also choose to convert its Convertible Notes. It is further noted that as part of the Commonwealth Bank reorganising the Company's major debt facilities at the Company's request the Company has given an undertaking to the Commonwealth Bank that additional debt repayments will made before 30 June 2013 in order to reduce the leverage of the OPUS Group. These additional debt repayments will be funded through operating cash flows and a combination of potential further non-core asset disposals and the issue of new capital (Intended Capital Raising). In that regard at the request of the Company: Each of Knox OPUS LP and DMRA Property Pty Limited has agreed to amend the terms of its respective Convertible Notes so that it cannot convert any of its Convertible Notes into Shares before the earlier of 30 June 2013 and the allotment of Shares pursuant to the Intended Capital Raising; and If any Convertible Notes are converted to Shares within 3 months after completion of the Intended Capital Raising or by 30 September 2013 (whichever is earlier), the conversion price will be the same as the issue price of Shares under the Intended Capital Raising. At this time, the Company has not decided or finalised the terms of the Intended Capital Raising. In all circumstances, it will seek to effect the Intended Capital Raising on the best possible terms for the Company, which will not preclude any party from being an underwriter to the Intended Capital Raising (whether it is the Knox Group or any other party prepared to undertake that role on terms acceptable to the Company). Details of the Knox Group's and Mr Celarc's intentions in relation to their respective investments in the Company are set out in paragraphs 3.9(c) and 3.10(c). legal/ _22

13 Page 13 To summarise, the maximum voting power of each of the Knox Group and Mr Celarc (each a Relevant Shareholder) is determined by applying the following formula: A = (B + C + D) E x 100 where: A means the Relevant Shareholder's voting power in the Company as at the relevant date (Relevant Date) expressed as a percentage. B means the number of Shares held by the Relevant Shareholder as at the date of this Notice of Meeting. C means the number of Shares issued to the Relevant Shareholder pursuant to the conversion of the Convertible Notes between the date of this Notice of Meeting and the Relevant Date, which depends on: (i) the number of Convertible Notes which the Relevant Shareholder wishes to convert during that period; (ii) the amount of principal outstanding and the amount of interest capitalised as at the Relevant Date under the relevant Convertible Note facility; (iii) if the interest on the $600,000 principal debt assigned by the Original Celarc Lenders to Knox OPUS LP (see paragraph 3.1 above) is satisfied by the Company in the form Shares issued to Knox OPUS LP (Shares for Interest on Assigned Loan), then those Shares will be transferred by Knox OPUS LP to the Original Celarc Lenders, such that: (A) the number of Shares held by Knox OPUS LP will decrease by the number of Shares for Interest on Assigned Loan; and (B) the number of Shares held by the Original Celarc Lenders will increase by the number of Shares for Interest on Assigned Loan; (iv) the applicable conversion price used in the "Conversion formula" set out in Annexure A, which in turn will depend on: (A) the trading price of OPG's Shares on the ASX in the 5 trading days before each conversion of Convertible Notes; and/or (B) the issue price of Shares under the Intended Capital Raising. D means the number of Shares that the Relevant Shareholder acquires other than by converting Convertible Notes between the date of this Notice of Meeting and the Relevant Date, which includes (if applicable): (i) the Relevant Shareholder participating in the Intended Capital Raising; (ii) the Relevant Shareholder underwriting the Intended Capital Raising, whether partially, as sub-underwriter or otherwise; or (iii) acquisitions of Shares permitted under item 9 (3% creep in 6 months) and/or item 11 (dividend reinvestment etc) of section 611 of the Corporations Act. E means the total number of Shares the Company has on issue as at the Relevant Date (on an expanded capital basis). In order to lay out for the Company s Shareholders the effect of the issue and conversion of the Convertible Notes, set out below is a series of tables showing the changes to Shareholdings in OPG as a result of that issue and conversion were they to be implemented under different conversion prices, without taking into account any changes to the Company's share capital resulting from any Intended Capital Raising or underwriting of that Intended Capital Raising. (For the avoidance of doubt, these tables show potential outcomes at differing conversion prices the actual voting power that each party will have will depend on the applicable circumstances.) legal/ _22

14 P a g e 14 Table 1: As at the date of this Notice of Meeting For personal use only Identity of Shareholder Before issue of Convertible Notes (Relevant interest in) No. of Shares Knox Investment Partners and its associates, comprising: Takatimu Investments Limited as trustee for the Takatimu Investment Trust2 Knox Investment Partners Fund III AUD 3 Limited Knox Investment Partners Fund III AUD 4 Limited Knox Investment Partners Fund III AUD 5 Limited Knox OPUS LP Richard Celarc and his associates, comprising: Richard Celarc Richard Celarc as trustee of Richard Celarc Family Trust Navigator Australia Limited as custodian for Richard Celarc DMRA Property Pty Limited All Shareholders other than the Knox Group and Richard Celarc TOTAL Notes: 1 Approximate figures and subject to rounding. 2 Related party to Bret Jackson. legal/ _22 18,772,623 % of total number of Shares on issue and voting power % 2,302, % 21, % 8,100, % 8,347, % 7,831, % 7,481, , % 0.50% 83, % 27,073, % 53,678, %

15 P a g e 15 Table 2: Potential outcomes at differing conversion prices If both Knox OPUS LP and DMRA Property Pty Limited convert their respective Convertible Notes into Shares For personal use only For the avoidance of doubt, this table shows potential outcomes at differing conversion prices the actual voting power that each party will have will depend on the applicable circumstances. Assumptions: All Resolutions are passed. Both facilities are drawn up to the facility limit and all interest is capitalised under both facilities. Immediately before the conversion, the Knox Group and Mr Celarc (and their respective associates) have the same number of Shares, and the Company has the same number of Shares on issue, as outlined in Table 1. Both Knox OPUS LP and DMRA Property Pty Limited seek to convert all of their respective Convertible Notes into Shares. The effects of the Intended Capital Raising and potential underwriting of that Intended Capital Raising, the transfer of Shares for Interest on Assigned Loan, and any other changes to Shareholdings (other than as a result of conversion of Convertible Notes), have not been taken into account. Identity of Shareholder Knox Investment Partners and its associates, comprising: Takatimu Investments Limited as trustee for the Takatimu Investment Trust2 Knox Investment Partners Fund III AUD 3 Limited Knox Investment Partners Fund III AUD 4 Limited Knox Investment Partners Fund III AUD 5 Limited Knox OPUS LP Richard Celarc and his associates, comprising: Richard Celarc Richard Celarc as trustee of Richard Celarc Family Trust Navigator Australia Limited as custodian for Richard Celarc DMRA Property Pty Limited All Shareholders other than the Knox Group and Richard Celarc TOTAL Conversion of Convertible Notes at a VWAP of $0.20 (conversion price of $0.15) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1 Conversion of Convertible Notes at a VWAP of $0.40 (conversion price of $0.30) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1 37,966, % 31,568, % 28,369, % 2,302, % 2,302, % 2,302, % 21, % 21, % 21, % 8,100, % 8,100, % 8,100, % 8,347, % 8,347, % 8,347, % 19,194, % 12,796, % 9,597, % 15,829, % 13,163, % 11,830, % 7,481, % 7,481, % 7,481, % 266, % 266, % 266, % 83, % 83, % 83, % 7,997, % 5,331, % 3,998, % 27,073, % 27,073, % 27,073, % 80,870, % 71,806, % 67,274, % Notes: 1 Approximate figures and subject to rounding. 2 Related party to Bret Jackson. legal/ _22 Conversion of Convertible Notes at a VWAP of $0.30 (conversion price of $0.225) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1

16 P a g e 16 Table 3: Potential outcomes at differing conversion prices If only Knox OPUS LP converts its Convertible Notes into Shares For personal use only For the avoidance of doubt, this table shows potential outcomes at differing conversion prices the actual voting power that each party will have will depend on the applicable circumstances. Assumptions: All Resolutions are passed. Both facilities are drawn up to the facility limit and all interest is capitalised under both facilities. Immediately before the conversion, the Knox Group and Mr Celarc (and their respective associates) have the same number of Shares, and the Company has the same number of Shares on issue, as outlined in Table 1. Knox OPUS LP seeks to convert all of its Convertible Notes into Shares. The effects of the Intended Capital Raising and potential underwriting of that Intended Capital Raising, the transfer of Shares for Interest on Assigned Loan, and any other changes to Shareholdings (other than as a result of conversion of Convertible Notes), have not been taken into account. Identity of Shareholder Knox Investment Partners and its associates, comprising: Takatimu Investments Limited as trustee for the Takatimu 2 Investment Trust Knox Investment Partners Fund III AUD 3 Limited Knox Investment Partners Fund III AUD 4 Limited Knox Investment Partners Fund III AUD 5 Limited Knox OPUS LP Richard Celarc and his associates, comprising: Richard Celarc Richard Celarc as trustee of Richard Celarc Family Trust Navigator Australia Limited as custodian for Richard Celarc DMRA Property Pty Limited All Shareholders other than the Knox Group and Richard Celarc TOTAL Conversion of Convertible Notes at a VWAP of $0.20 (conversion price of $0.15) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1 Conversion of Convertible Notes at a VWAP of $0.40 (conversion price of $0.30) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1 37,966, % 31,568, % 28,369, % 2,302, % 2,302, % 2,302, % 21, % 21, % 21, % 8,100, % 8,100, % 8,100, % 8,347, % 8,347, % 8,347, % 19,194, % 12,796, % 9,597, % 7,831, % 7,831, % 7,831, % 7,481, % 7,481, % 7,481, % 266, % 266, % 266, % 83, % 83, % 83, % % % % 27,073, % 27,073, % 27,073, % 72,872, % 66,474, % 63,275, % Notes: 1 Approximate figures and subject to rounding. 2 Related party to Bret Jackson. legal/ _22 Conversion of Convertible Notes at a VWAP of $0.30 (conversion price of $0.225) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1

17 P a g e 17 Table 4: Potential outcomes at differing conversion prices If only DMRA Property Pty Limited converts its Convertible Notes into Shares For personal use only For the avoidance of doubt, this table shows potential outcomes at differing conversion prices the actual voting power that each party will have will depend on the applicable circumstances. Assumptions: All Resolutions are passed. Both facilities are drawn up to the facility limit and all interest is capitalised under both facilities. Immediately before the conversion, the Knox Group and Mr Celarc (and their respective associates) have the same number of Shares, and the Company has the same number of Shares on issue, as outlined in Table 1. DMRA Property Pty Limited seeks to convert all of its Convertible Notes into Shares. The effects of the Intended Capital Raising and potential underwriting of that Intended Capital Raising, the transfer of Shares for Interest on Assigned Loan, and any other changes to Shareholdings (other than as a result of conversion of Convertible Notes), have not been taken into account. Identity of Shareholder Knox Investment Partners and its associates, comprising: Takatimu Investments Limited as trustee for the Takatimu 2 Investment Trust Knox Investment Partners Fund III AUD 3 Limited Knox Investment Partners Fund III AUD 4 Limited Knox Investment Partners Fund III AUD 5 Limited Knox OPUS LP Richard Celarc and his associates, comprising: Richard Celarc Richard Celarc as trustee of Richard Celarc Family Trust Navigator Australia Limited as custodian for Richard Celarc DMRA Property Pty Limited All Shareholders other than the Knox Group and Richard Celarc TOTAL Conversion of Convertible Notes at a VWAP of $0.20 (conversion price of $0.15) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1 Conversion of Convertible Notes at a VWAP of $0.40 (conversion price of $0.30) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1 18,772, % 18,772, % 18,772, % 2,302, % 2,302, % 2,302, % 21, % 21, % 21, % 8,100, % 8,100, % 8,100, % 8,347, % 8,347, % 8,347, % % % % 15,829, % 13,163, % 11,830, % 7,481, % 7,481, % 7,481, % 266, % 266, % 266, % 83, % 83, % 83, % 7,997, % 5,331, % 3,998, % 27,073, % 27,073, % 27,073, % 61,675, % 59,009, % 57,676, % Notes: 1 Approximate figures and subject to rounding. 2 Related party to Bret Jackson. legal/ _22 Conversion of Convertible Notes at a VWAP of $0.30 (conversion price of $0.225) (Relevant % of total interest in) number of No. of Shares on Shares issue and voting power1

18 P a g e 18 For personal use only 3.5 OPG Directors and participants in the Proposed Convertible Note Issue, and their respective interest in the outcome of the Resolutions voting exclusions In order to clearly identify the respective interests of the various participants in the Proposed Convertible Note Issue, set out below is a list of the relevant participants, their interests and, as applicable, which of them will be precluded from voting on the Resolutions pursuant to the relevant provisions of the Corporations Act: Name Nature of their current interests and interest in the Proposed Convertible Note Issue William Mackarell Richard Celarc Bret Jackson Matthew McGrath legal/ _22 Chairman and non-executive Director of OPG. Currently directly holds 60,000 issued Shares in the Company. Mr Mackarell has no interest in Knox OPUS LP or DMRA Property Pty Limited or their associates. Executive Director of OPG. Currently directly holds 7,481,751 issued Shares in the Company, holds 266,003 issued Shares in the Company as trustee of the Richard Celarc Family Trust and has a beneficial interest in 83,873 issued Shares in the Company registered in the name of Navigator Australia Limited (as custodian). Is the sole Director of DMRA Property Pty Limited, to which the Company will issue up to 10,000 Convertible Notes, if Resolution 2 is passed, as outlined in paragraph 3.2. Non-executive Director of OPG. Current has an indirect interest in 2,302,846 issued Shares in the Company held by a related entity (Takatimu Investments Limited as trustee for the Takatimu Investment Trust). Associated with Knox entities (Knox Investment Partners Fund III AUD 3 Limited, Knox Investment Partners Fund III AUD 4 Limited and Knox Investment Partners Fund III AUD 5 Limited) which currently hold 16,469,777 issued Shares in the Company. Associated with Knox OPUS LP to which the Company will issue up to 24,000 Convertible Notes as outlined in paragraph 3.2 if Resolution 1 is passed. Mr Jackson is a director of each of the above Knox entities, a director of the manager of each of these entities, and a director of the general partner of Knox OPUS LP. Non-executive Director of OPG. Currently holds 7,000 issued Shares in the Company directly, holds 17,000 issued Shares in the Company as a trustee of the McGrath Family Superannuation Fund, and controls 1,025 Shares in the Company held by Jack McGrath. Mr McGrath has no interest in Knox OPUS LP or DMRA Property Pty Limited or their associates. Is the party excluded from voting on a Resolution? No. Yes, Resolution 2. Yes, Resolution 1. No.

19 For personal use only P a g e 19 Name Nature of their current interests and interest in the Proposed Convertible Note Issue Simon Rowell James Sclater Knox OPUS LP (a New Zealand limited partnership) DMRA Property Pty Limited (ACN ) 3.6 Non-executive Director of OPG. Currently directly holds 1,786 issued Shares in the Company, and has an indirect interest in 52,595 issued Shares in the Company held by a related entity (Gatfield Pty Ltd as trustee for the Rowell Super Fund). Mr Rowell has no interest in Knox OPUS LP or DMRA Property Pty Limited or their associates. Non-executive Director of OPG. Currently directly holds 66,980 issued Shares in the Company. Mr Sclater has no interest in Knox OPUS LP or DMRA Property Pty Limited or their associates. Knox OPUS LP is not an existing Shareholder. Knox OPUS LP is not a related party of and is not acting in concert with DMRA Property Pty Limited. If Resolution 1 is passed, the Company will issue up to 24,000 Convertible Notes to Knox OPUS LP as outlined in paragraph 3.2. DMRA Property Pty Limited is not an existing Shareholder. Richard Celarc is a director of DMRA Property Pty Ltd. The Richard Celarc Family Trust and Richard Celarc s wife are the sole shareholders of DMRA Property Pty Ltd. DMRA Property Pty Ltd is landlord of the lease of Bonds Road, Riverwood, New South Wales, Australia under which Ligare Pty Ltd (an OPUS Group entity) is tenant. DMRA Property Pty Limited is not a related party of and is not acting in concert with Knox OPUS LP. The Company will issue up to 10,000 Convertible Notes to DMRA Property Pty Limited, if Resolution 2 is passed, as outlined in paragraph 3.2. Is the party excluded from voting on a Resolution? No. No. Yes, Resolution 1. Yes, Resolution 2. Independent Directors evaluation of the Proposed Convertible Note Issue In evaluating the advantages and disadvantages of the Proposed Convertible Note Issue, the Directors on the Board who are independent of Knox OPUS LP and DMRA Property Pty Limited (Independent Directors) considered the following factors: Advantages (a) Support of OPG's strategies and initiatives The granting of the loan facilities and the subscription of Convertible Notes by both Knox OPUS LP and DMRA Property Pty Limited indicates the Knox Group's and Mr Celarc's continued support of OPG's strategies and initiatives as major Shareholders, particularly in terms of the Company's debt reduction strategy. legal/ _22

20 Page 20 (b) Cash repayment If Knox OPUS LP and DMRA Property Pty Limited choose to convert their respective Convertible Notes to equity, then the Company would not need to repay the principal amount borrowed nor any capitalised interest out of its cash reserves. This would enable the Company to preserve cash and avoid the need to make payment to redeem the Convertible Notes at their maturity. (c) Reduced interest rate for borrowings from Knox OPUS LP and DMRA Property Pty Limited if Resolutions are approved If the Knox Loan Facility is not converted into a Convertible Note facility by 31 March 2013 (because, for example, if Resolution 1 is not passed), then the interest rate applicable under the Knox Loan Facility will be 24% per annum instead of 15% per annum for the life of that loan facility. The same applies for the Celarc Loan Facility (but in relation to Resolution 2). The interest rate applicable to the Convertible Notes is 15% per annum (or 24% per annum if an event of default occurs and subsists). Accordingly, by approving both Resolutions, the Proposed Convertible Note Issue will occur on or before 31 March 2013 and will result in the lower interest rate of 15% per annum being applied to the principal amount borrowed and all capitalised interest under the loan facilities and Convertible Note facilities granted by Knox OPUS LP and DMRA Property Pty Limited. (d) The OPUS Group Board is committed to reduce the current level of debt. The approval of the Convertible Note Facility provides an option for the loans to be converted to equity as part of the reorganisation of the Company s capital structure. Disadvantages (a) Dilution of the interests of Shareholders not associated with Knox OPUS LP and DMRA Property Pty Limited The issue of Shares to Knox OPUS LP and/or DMRA Property Pty Limited following conversion of their respective Convertible Notes will result in a dilution in the interests in the Company held by Shareholders who are not associated with Knox OPUS LP or DMRA Property Pty Limited. The actual dilutionary effect will depend on the applicable conversion price, as discussed in paragraph 3.4. However as noted above: Each of Knox OPUS LP and DMRA Property Pty Limited has agreed to amend the terms of the Convertible Notes so that it cannot convert any of its Convertible Notes into Shares before the earlier of 30 June 2013 and the allotment of Shares pursuant to the Intended Capital Raising; and If any Convertible Notes are converted to Shares within 3 months after the Intended Capital Raising or by 30 September 2013 (whichever is earlier), the conversion price will be the same as the issue price of Shares under the Intended Capital Raising. (b) Effect of increased Shareholding on control The Knox Group and its associates currently have a 34.97% interest (approximately) in the Shares of the Company. Mr Richard Celarc and his associates currently have a 14.59% interest (approximately) in the Shares of the Company. (Please see Table 1 of paragraph 3.4 for further information.) As explained in paragraph 3.4, the actual percentage Shareholding that the Knox Group and Mr Celarc and their respective associates will have following the Proposed legal/ _22

21 Page 21 Convertible Note Issue and the conversion of those Convertible Notes depends on the applicable conversion price and other factors. These increased Shareholdings may make a takeover of OPG more difficult unless the Knox Group and Mr Celarc and their respective associates are supportive of that offer and this may reduce the attractiveness of the Company to potential acquirers. If Mr Celarc's Shareholding increases such that he has over 25% interest in the Company, he would have the ability to block special resolutions proposed to Shareholders, given that a special resolution requires a 75% majority to be passed. Other considerations (a) Independent Expert s Report Shareholders are referred to paragraph 17 of the Independent Expert s Report for further possible advantages and disadvantages of the Proposed Acquisition. 3.7 Independent Directors Recommendations and Voting The Independent Directors unanimously approved the proposal to put the Resolutions to Shareholders and unanimously recommend that Shareholders vote in favour of the Resolutions at the forthcoming General Meeting. The Independent Directors consider that the advantages of the Proposed Convertible Note Issue as set out above clearly outweigh its disadvantages and therefore the Proposed Convertible Note Issue is in the best interests of the Company. They consider that the Proposed Convertible Note Issue is an opportunity for the Company to benefit from the already supportive relationship it has with its 2 major shareholders, the Knox Group and Richard Celarc. The Independent Directors have also considered the opinion of the Independent Expert (as set out in full in the Independent Expert s Report, see Annexure B), who has also concluded that the terms of conversion of the Convertible Notes are not fair but are reasonable to those Shareholders not associated with Knox OPUS LP or DMRA Property Pty Limited. It is noted that the words "fair" and "reasonable" have technical meanings please refer to Annexure B for further information in this regard. Other than as stated in these Explanatory Notes, the Independent Directors (being, Messrs Mackarell, McGrath, Rowell and Sclater) have no interest in the Resolutions. Mr Bret Jackson's association with Knox OPUS LP is described in paragraph 3.5 and, to that extent, has an interest in the outcome of Resolution 1. Mr Richard Celarc's association with DMRA Property Pty Limited is described in paragraph 3.5 and, to that extent, has an interest in the outcome of Resolution 2. In making their recommendations, the Independent Directors advise Shareholders to read this Notice of Meeting (including the Independent Expert s Report) in its entirety and to seek their own independent advice if they consider that necessary. In relation to voting on each Resolution: (a) (b) Resolution 1 (Proposed Convertible Note Issue to Knox OPUS LP): The Independent Directors and Mr Celarc each intend to vote in favour of Resolution 1 in respect of all their direct and indirect Shareholdings in the Company, representing a total of 8,038,013 Shares or approximately 15.96% of the Shares on issue as at the date of this Notice of Meeting. Resolution 2 (Proposed Convertible Note Issue to DMRA Property Pty Limited): The Independent Directors and Mr Jackson each intend to vote in favour of Resolution 2 in respect of all their direct and indirect Shareholdings in the Company, representing a total of 18,979,009 Shares or approximately 35.35% of the Shares on issue as at the date of this Notice of Meeting. Further details of the Directors interests in the Company s securities are set out in paragraph 3.5 above. legal/ _22

22 Page 22 For the avoidance of doubt, the reference to Messrs Mackarell, McGrath, Rowell and Sclater as Independent Directors throughout this Notice of Meeting is a reference to their independence from, and non-association with, the Proposed Convertible Note Issue, Knox OPUS LP and DMRA Property Pty Limited. The use of the phrase Independent Directors in that context is consistent with the use of that term in ASIC Regulatory Guide 74. (This is distinct from the meaning of independent within the meaning of the ASX Corporate Governance Council s Corporate Governance Principles and Recommendations). 3.8 Independent Expert s Report The Independent Expert has concluded that the terms of conversion of the Convertible Notes are not fair but are reasonable to Shareholders who are not associated with Knox OPUS LP or DMRA Property Pty Limited. Section 611 of the Corporations Act assumes that the directors of a company will provide shareholders of that company with proper and full disclosure to enable them to assess the merits of a proposal and to decide whether to agree by resolution to an acquisition of shares. ASIC Regulatory Guide 74 recommends that directors should ensure that all matters are disclosed that are material and necessary for shareholders to make an informed decision on the necessary resolutions required to be passed to put the proposal into effect, and that shareholders should be provided with an analysis of the proposals which they are being asked to approve under section 611 (item 7) of the Corporations Act. In accordance with ASIC Regulatory Guides 74 and 111, the Independent Directors appointed Lonergan Edwards & Associates Limited, as an independent expert, to examine the proposals and to provide an opinion as to whether the transactions referred to in the Resolutions are fair and reasonable from the perspective of those Shareholders who are not associated with Knox OPUS LP or DMRA Property Pty Limited. A copy of the Independent Expert s Report is attached as Annexure B to this Notice of Meeting. Lonergan Edwards & Associates Limited has consented to the inclusion of this report in the form and context it is included in this Notice of Meeting. 3.9 Additional information specific to Resolution 1 (Approval of proposed issue of Convertible Notes to Knox OPUS LP) (a) Introduction Resolution 1 proposes that Shareholders approve the conversion of the Knox Loan Facility into the Convertible Notes on the basis set out in paragraph 3.2 (Knox Convertible Notes). ASX Listing Rule prohibits the Company from issuing or agreeing to issue equity securities to a related party without the approval of ordinary shareholders, unless one of the exceptions in ASX Listing Rule applies. Finally, to be implemented, the Proposed Convertible Note Issue (and the subsequent issue of Shares on conversion of those Convertible Notes) to Knox OPUS LP requires the approval of the Company s Shareholders entitled to vote on that proposal in accordance with section 611 (item 7) of the Corporations Act. This provision expressly permits an acquisition of shares by a person which will result in that person s voting power in the Company increasing from a starting point that is above 20% to a point below 90% if the acquisition is approved by those Shareholders not associated with Knox OPUS LP. Given the associations of Knox OPUS LP as described in paragraph 3.5, the Company has undertaken in favour of Knox OPUS LP to seek Shareholder approval before 31 March 2013 for the Proposed Convertible Note Issue (and the subsequent issue of Shares on conversion of those Convertible Notes) to Knox OPUS LP. The passing of Resolution 1 is not conditional on the passing of the Resolution 2. legal/ _22

23 Page 23 (b) Information required by ASX Listing Rule In accordance with ASX Listing Rule 10.13, the Company provides the following information in relation to the issue of the Knox Convertible Notes: Names of the allottees or the basis on which allottees were determined: Maximum number of Convertible Notes to be issued: Formula for calculating the number of Shares to be issued on conversion of the Convertible Notes: The date by which the entity will issue the securities: Issue price of the securities: Knox OPUS LP (a New Zealand limited partnership) (or its nominees). 24,000 Convertible Notes, as specified in paragraph 3.2. Please refer to Annexure A. The Convertible Notes will be issued after the date of the General Meeting but by no later than 31 March $ per Convertible Note, to be satisfied by way of conversion of the Knox Loan Facility as specified in paragraph 3.2. Terms of issue: Please refer to Annexure A. Use (or intended use) of the funds raised: To fund the closure costs of the Mulgrave site and other short term working capital requirements. (c) Knox Group's intentions regarding the future of OPG if Resolution 1 is passed Given the Knox Group's support of OPG's management, the Knox Group does not currently intend to use its potentially increased Shareholding and voting power (if Resolution 1 is passed) to make any changes to the Company s Board, management, strategic direction, business and activities. In particular, other than as disclosed in these Explanatory Notes, the Knox Group's intention is to: (i) (ii) (iii) (iv) continue as a Shareholder to support the Company s current management team; support the continued operation of OPG s existing business and projects in substantially the same manner as they are currently being conducted; preserve the employment of the present employees; and retain the existing OPG Board. The Knox Group does not intend to seek the transfer of any of the Company s assets between the Company and the Knox Group (or any of its associates). In this regard, it is noted that the Company's obligations under the Knox Loan Facility and (if it is entered into) the Knox Convertible Note facility are secured by way of a second ranking General Security Deed granted by the Company over all of its assets in favour of Knox OPUS LP and DMRA Property Pty Limited. It is possible that the Company's assets may be transferred if the Company defaults and the second ranking security is enforced. Knox OPUS LP and DMRA Property Pty Limited have given an undertaking in favour of the Company that neither they nor their associates will acquire the Company's assets as a result of enforcement of the second ranking security without the Company first complying with any applicable listing rules, including ASX Listing Rule However, this would not legal/ _22

24 Page 24 prevent the Company's assets being transferred to an unrelated third party on arm's length commercial terms on enforcement of the second ranking security. The Knox Group does not intend to change the Company s dividend distribution policies. Further, the Knox Group does not have any present intention to inject further capital in the business or increase its relevant interest in OPG following the issue of the Knox Convertible Notes, other than as a participant in the Intended Capital Raising (including as a potential underwriter) or as permitted under item 9 (3% creep in 6 months) and/or item 11 (dividend reinvestment etc) of section 611 of the Corporations Act. Any future decisions in respect of the Knox Group's Shareholding and exercise of its voting power will be made based on all material information available and relevant circumstances at the relevant time. Accordingly, if the current circumstances change or new information becomes available, the Knox Group's intentions could also change. For the avoidance of doubt, the information in this paragraph 3.9(c) relates to the Knox Group's intentions as a Shareholder. The relationship between the Knox Group and Mr Bret Jackson is as described in paragraph 3.5. Mr Jackson is a Director of the Company, and the information in this paragraph 3.9(c) is not intended to fetter his discretion or otherwise affect his ability to vote in favour of, against, or abstain from voting on, any particular Board resolution. (d) Other relevant information (i) Exceptions 14 and 16 of ASX Listing Rule 7.2 ASX Listing Rule 7.1 provides that a listed entity must not issue equity securities that total more than 15% of its fully paid ordinary shares in a 12 month period without the approval of its shareholders, unless an exception applies. ASX Listing Rule 7.2 Exception 14 states that the restriction under ASX Listing Rule 7.1 will not apply to any issues made with the approval of Shareholders under ASX Listing Rule ASX Listing Rule 7.2 Exception 16 states that the restriction under ASX Listing Rule 7.1 will not apply to any issues made with the approval of Shareholders for the purposes of Item 7 of section 611 of the Corporations Act. Accordingly, if Resolution 1 is passed, then approval under ASX Listing Rule 7.1 is not required and the issue of the Knox Convertible Notes (and the issue of Shares pursuant to the conversion of those Convertible Notes) will not reduce the Company's capacity to issue equity securities under ASX Listing Rule 7.1. (ii) Chapter 2E of the Corporations Act The Company has determined that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in relation to the participation by Knox OPUS LP in the issue of the Knox Convertible Notes. Chapter 2E prohibits the giving of a financial benefit to a related party of a public company, unless the financial benefit has been approved by shareholders, or the giving of that benefit falls within the exceptions set out in Chapter 2E. Section 210 of the Corporations Act provides an exemption for transactions that are on terms that would be reasonable if the Company and the related party were dealing at arm s length. The Independent Directors negotiated and approved the terms of the Knox Loan Facility and the Convertible Notes with the Original Knox Lenders and Knox OPUS LP, and consider those terms to be commercial and of an arm's-length nature. legal/ _22

25 Page 25 Accordingly, the exemption in section 210 of the Corporations Act applies to the participation by Knox OPUS LP in the in the issue of the Knox Convertible Notes (including the issue of Shares to Knox OPUS LP on conversion of those Convertible Notes). (e) Directors' Recommendation The Independent Directors and Richard Celarc recommend that Shareholders vote in favour of this Resolution. The reasons those Directors make this recommendation are that: (i) (ii) having considered all of the circumstances, the advantages of the transaction outweigh the disadvantages (see paragraph 3.6); they consider the terms applicable to the Proposed Convertible Note Issue to Knox OPUS LP to be commercial, of an arm's-length nature, and in the best interests of the Company. Bret Jackson is associated with Knox OPUS LP (see paragraph 3.5) and, for that reason, has declined to make a recommendation on this Resolution. Other than as Shareholders (see paragraph 3.5), none of the Independent Directors nor Richard Celarc has an interest in the outcome of this Resolution Additional information specific to Resolution 2 (Approval of proposed issue of Convertible Notes to DMRA Property Pty Limited) (a) Introduction Resolution 2 proposes that Shareholders approve the conversion of the Celarc Loan Facility into the Celarc Convertible Notes on the basis set out in paragraph 3.2 (Celarc Convertible Notes). ASX Listing Rule prohibits the Company from issuing or agreeing to issue equity securities to a related party without the approval of ordinary shareholders, unless one of the exceptions in ASX Listing Rule applies. Finally, to be implemented, the Proposed Convertible Note Issue (and the subsequent issue of Shares on conversion of those Convertible Notes) to DMRA Property Pty Limited requires the approval of the Company s Shareholders entitled to vote on that proposal in accordance with section 611 (item 7) of the Corporations Act. This provision expressly permits an acquisition of shares by a person which will result in that person s voting power in the Company increasing from a starting point that is below 20% to a point between 20% and 90% if the acquisition is approved by those Shareholders not associated with DMRA Property Pty Limited. Given the associations of DMRA Property Pty Limited as described in paragraph 3.5, the Company has undertaken in favour of DMRA Property Pty Limited to seek Shareholder approval before 31 March 2013 for the Proposed Convertible Note Issue (and the subsequent issue of Shares on conversion of those Convertible Notes) to DMRA Property Pty Limited. The passing of Resolution 2 is not conditional on the passing of the Resolution 1. (b) Information required by ASX Listing Rule In accordance with ASX Listing Rule 10.13, the Company provides the following information in relation to the issue of the Celarc Convertible Notes: Names of the allottees or the basis on which allottees were determined: DMRA Property Pty Limited (ACN ) (or its nominees). legal/ _22

26 Page 26 Maximum number of Convertible Notes to be issued: Formula for calculating the number of Shares to be issued on conversion of the Convertible Notes: The date by which the entity will issue the securities: Issue price of the securities: 10,000 Convertible Notes, as specified in paragraph 3.2. Please refer to Annexure A. The Convertible Notes will be issued after the date of the General Meeting but by no later than 31 March $ per Convertible Note, to be satisfied by way of conversion of the Celarc Loan Facility as specified in paragraph 3.2. Terms of issue: Please refer to Annexure A. Use (or intended use) of the funds raised: To fund the closure costs of the Mulgrave site and other short term working capital requirements. (c) Mr Celarc's intentions regarding the future of OPG if Resolution 2 is passed Given Mr Celarc's support of OPG's management, Mr Celarc does not currently intend to use his potentially increased Shareholding and voting power (if Resolution 2 is passed) to make any changes to the Company s Board, management, strategic direction, business and activities. In particular, other than as disclosed in these Explanatory Notes, Mr Celarc's intention is to: (i) (ii) (iii) (iv) continue as a Shareholder to support the Company s current management team; support the continued operation of OPG s existing business and projects in substantially the same manner as they are currently being conducted; preserve the employment of the present employees; and retain the existing OPG Board. Mr Celarc does not intend to seek the transfer of any of the Company s assets between the Company and himself (or any of his associates). In this regard, it is noted that the Company's obligations under the Celarc Loan Facility and (if it is entered into) the Celarc Convertible Note facility are secured by way of a second ranking General Security Deed granted by the Company over all of its assets in favour of Knox OPUS LP and DMRA Property Pty Limited. It is possible that the Company's assets may be transferred if the Company defaults and the second ranking security is enforced. Knox OPUS LP and DMRA Property Pty Limited have given an undertaking in favour of the Company that neither they nor their associates will acquire the Company's assets as a result of enforcement of the second ranking security without the Company first complying with any applicable listing rules, including ASX Listing Rule However, this would not prevent the Company's assets being transferred to an unrelated third party on arm's length commercial terms on enforcement of the second ranking security. Mr Celarc does not intend to change the Company s dividend distribution policies. Further, Mr Celarc does not have any present intention to inject further capital in the business or increase his relevant interest in OPG following the issue of the Celarc Convertible Notes, other than as a participant in the Intended Capital Raising (including as legal/ _22

27 Page 27 a potential underwriter) or as permitted under item 9 (3% creep in 6 months) and item 11 (dividend reinvestment etc) of section 611 of the Corporations Act. Any future decisions in respect of the Shareholding of Mr Celarc and his associates and exercise of their voting power will be made based on all material information available and relevant circumstances at the relevant time. Accordingly, if the current circumstances change or new information becomes available, Mr Celarc's intentions could also change. For the avoidance of doubt, the information in this paragraph 3.10(c) relates to Mr Celarc's intentions as a Shareholder. Mr Celarc is also a Director of the Company, and the information in this paragraph 3.10(c) is not intended to fetter his discretion or otherwise affect his ability to vote in favour of, against, or abstain from voting on, any particular Board resolution. (d) Other relevant information (i) Exceptions 14 and 16 of ASX Listing Rule 7.2 ASX Listing Rule 7.1 provides that a listed entity must not issue equity securities that total more than 15% of its fully paid ordinary shares in a 12 month period without the approval of its shareholders, unless an exception applies. ASX Listing Rule 7.2 Exception 14 states that the restriction under ASX Listing Rule 7.1 will not apply to any issues made with the approval of Shareholders under ASX Listing Rule ASX Listing Rule 7.2 Exception 16 states that the restriction under ASX Listing Rule 7.1 will not apply to any issues made with the approval of Shareholders for the purposes of Item 7 of section 611 of the Corporations Act. Accordingly, if Resolution 2 is passed, then approval under ASX Listing Rule 7.1 is not required and the issue of the Celarc Convertible Notes (and the issue of Shares pursuant to the conversion of those Convertible Notes) will not reduce the Company's capacity to issue equity securities under ASX Listing Rule 7.1. (ii) Chapter 2E of the Corporations Act The Company has determined that Shareholder approval pursuant to Chapter 2E of the Corporations Act is not required in relation to the participation by DMRA Property Pty Limited in the issue of the Celarc Convertible Notes. Chapter 2E prohibits the giving of a financial benefit to a related party of a public company, unless the financial benefit has been approved by shareholders, or the giving of that benefit falls within the exceptions set out in Chapter 2E. Section 210 of the Corporations Act provides an exemption for transactions that are on terms that would be reasonable if the Company and the related party were dealing at arm s length. The Independent Directors negotiated and approved the terms of the Celarc Loan Facility and the Convertible Notes with the Original Celarc Lenders, and consider those terms to be commercial and of an arm's-length nature. Accordingly, the exemption in section 210 of the Corporations Act applies to the participation by DMRA Property Pty Limited in the in the issue of the Celarc Convertible Notes (including the issue of Shares to DMRA Property Pty Limited on conversion of those Convertible Notes). (e) Directors' Recommendation and Voting The Independent Directors and Bret Jackson recommend that Shareholders vote in favour of this Resolution. The reasons those Directors make this recommendation are that: legal/ _22

28 Page 28 (i) (ii) having considered all of the circumstances, the advantages of the transaction outweigh the disadvantages (see paragraph 3.6); they consider the terms applicable to the Proposed Convertible Note Issue to DMRA Property Pty Limited to be commercial, of an arm's-length nature, and in the best interests of the Company. Richard Celarc is associated with DMRA Property Pty Limited (see paragraph 3.5) and, for that reason, has declined to make a recommendation on this Resolution. Other than as Shareholders (see paragraph 3.5), none of the Independent Directors nor Bret Jackson has an interest in the outcome of this Resolution Provision of Information ASIC Regulatory Guide 74 indicates, by way of guidelines, the type of information that should be provided to shareholders when asking them to consider and vote on a resolution relating to section 611 (item 7) of the Corporations Act. To the best of the Directors knowledge, all matters that are material and reasonably required for Shareholders to make an informed decision on the Resolution set out in this Notice of Meeting have been provided to Shareholders in these Explanatory Notes and in the accompanying Independent Expert s Report. legal/ _22

29 P a g e 29 For personal use only 4 Glossary In this Notice of Meeting, unless the context or subject matter otherwise requires: ASX ASX Limited (ABN ). ASX Listing Rules The official listing rules of the ASX. Board The board of Directors of the Company. Celarc Convertible Notes The Convertible Notes to be issued by the Company to DMRA Property Pty Limited as outlined in paragraph 3.2. Celarc Loan Facility The loan facility granted by Mr Richard Celarc's associates to the Company on the terms set out in the Secured Short Term Loan Facility Agreement between the Company and the Original Celarc Lenders dated 3 January 2013 (as amended). For the avoidance of doubt, the current parties to the Celarc Loan Facility are the Company (as borrower) and DMRA Property Pty Limited (ACN ) (as the sole continuing lender). Company or OPG OPUS Group Limited (ACN ) Convertible Notes The convertible notes to be issued by the Company, the terms of which are summarised in Annexure A. Corporations Act Corporations Act 2001 (Cth) as amended from time to time. Debt Facility The debt facility made available by the Commonwealth Bank of Australia to the OPUS Group. Director A director of the Company. Explanatory Notes The explanatory notes to the notice of general meeting. General Meeting The extraordinary general meeting of the Company to be held at the time and place specified in the Notice of Meeting. Independent Directors Those Directors who are not associated with Knox OPUS LP (a New Zealand limited partnership) or DMRA Property Pty Limited (ACN ), being Messrs Mackarell, McGrath, Rowell and Sclater. Intended Capital Raising Has the meaning given to that term in paragraph 3.4. Knox Convertible Notes The Convertible Notes to be issued by the Company to Knox OPUS LP as outlined in paragraph 3.2. Knox Group Knox Investment Partners and its funds. Knox Loan Facility The loan facility granted by members of the Knox Group to the Company on the terms set out in the Secured Short Term Loan Facility Agreement between the Company and the Original Knox Lenders dated 3 January 2013 (as amended). For the avoidance of doubt, the current parties to the Knox Loan Facility are the Company (as borrower) and Knox OPUS LP (a New Zealand limited partnership) (as the sole continuing lender). Net Debt as used internally by the OPUS Group Board and Senior Management is calculated as total interest bearing liabilities less shareholder loans and cash and cash equivalent balances (net of bank overdrafts). This measure excludes bank guarantees, and letters of credit recognised off balance sheet. Interest bearing liabilities include finance leases. Net Debt Noteholder legal/ _22 A holder of Convertible Notes.

30 Page 30 Notice of Meeting OPUS Group Original Celarc Lenders Original Knox Lenders Proposed Convertible Note Issue Shareholder Shares Shares for Interest on Assigned Loan VWAP This document, comprising the notice of general meeting, the explanatory notes and all appendices. The Company and its subsidiaries. Richard Celarc as trustee for the Richard Celarc Family Trust and DMRA Property Pty Limited. Knox Fund IV NZD LP, Knox Fund IV AUD LP and Knox Limited Partnership. The proposed issue of Convertible Notes to Knox OPUS LP (a New Zealand limited partnership) and/or DMRA Property Pty Limited (ACN ) (as the case may be) as outlined in paragraph 3.2. Holder of Shares. A fully paid ordinary share in the capital of the Company. Has the meaning given to that term in paragraph 3.4. Volume weighted average price. legal/ _22

31 P a g e 31 For personal use only Annexure A: Terms of issue of Convertible Notes Issuer The Company. Issue Price $100 per Convertible Note. Issue Date After the General Meeting but on or before 31 March Maturity Date 31 March Interest Rate Until the Convertible Notes are converted into Shares or redeemed, the Convertible Notes will pay interest at 15% per annum. If an Event of Default occurs, then a default interest rate of 24% per annum applies. Interest will accrue from the Issue Date, and is automatically capitalised at the end of each calendar month unless the OPUS Group's bank (Commonwealth Bank of Australia) consents to the cash payment of interest. Simultaneously with the first issue of Convertible Notes, all interest capitalised* under the Celarc Loan Facility or the Knox Loan Facility (as the case may be) will automatically become interest capitalised pro rata against each Convertible Note issued to the relevant lenders. *Note: Under the terms of the Celarc Loan Facility and the Knox Loan Facility, interest is not payable and does not accrue until the business day after the General Meeting, at which time the interest provisions of the loan facility will apply as if they commenced operation as at the date of the loan facility and all interest which would have been payable between the date of the loan facility and the business day after the General Meeting are deemed to have been automatically capitalised. Redemption Rights The Convertible Notes will be redeemed on the Maturity Date unless the Noteholder elects to convert them into Shares. In addition, the Convertible Notes may be redeemed: at the election of the Noteholder in the event of a takeover bid, change in control of the Company or sale of a main undertaking of the Company; at the election of the Company at any time up to 14 days before the Maturity Date**; or at the election of the Noteholder if an Event of Default has occurred. **Note: The Noteholder will then have the right to issue a conversion notice within 10 days after receiving the redemption notice from the Company. Conversion Rights The Convertible Notes cannot be converted until the earlier of: 30 June 2013; or the allotment of Shares under the Intended Capital Raising. The Convertible Notes may be converted into Shares at the election of the Noteholder: legal/ _22 on or before the Maturity Date; within 10 days after receiving a redemption notice from the Company; or if an Event of Default has occurred.

32 Page 32 Conversion formula The number of Shares to be issued on conversion is calculated by applying the following formula: A = B/C where A = the number of Shares to be issued to a Noteholder. B = the principal amount of the number of Notes plus the aggregate amount of unpaid interest and other outstanding moneys notified by the Noteholder to be converted C = an amount equal to 75% of the volume weighted average price of Shares calculated over the 5 trading days on which trades in the Shares were recorded immediately before the date on which Conversion occurs, subject to the adjustments to the conversion formula referred to below. Adjustments to the conversion formula Before conversion, Noteholders are not entitled to participate in rights issues, bonus issue, placements or capital reconstruction. However: if any Convertible Notes are converted to Shares within 3 months after the Intended Capital Raising or by 30 September 2013 (whichever is earlier), the conversion price applicable to that conversion will be the same as the issue price of Shares under the Intended Capital Raising; and if the Noteholder converts Convertible Notes after the allotment of a bonus issue to Shareholders, the Company will issue such number of shares in the relevant class to the Noteholder as if the Noteholder had converted immediately prior to the allotment of the bonus issue. In the case of capital reconstructions, the Convertible Notes will be reconstructed in accordance with the ASX Listing Rules. If the Shares which are issued on conversion are subject to the 15% limit applicable under ASX Listing Rule 7.1, then: for all Shares issued on conversion up to the 15% limit, the conversion price will be an amount equal to 75% of the volume weighted average price of Shares calculated over the 5 trading days on which trades in the Shares were recorded immediately before the date on which Conversion occurs; and to the extent any Shares are issued on conversion over and above the 15% limit, the conversion price will be an amount equal to 80% of the volume weighted average price of Shares calculated over the 5 trading days on which trades in the Shares were recorded immediately before the date on which Conversion occurs. However, if Resolutions 1 and 2 are passed at the General Meeting, then Exceptions 14 and 16 of ASX Listing Rule 7.2 would apply and Shareholder approval under ASX Listing Rule 7.1 is not required (see paragraphs 3.9(d)(i) and 3.10(e)(i) of the Notice of Meeting for further information). This means the issue of Convertible Notes (and the issue of Shares pursuant to the conversion of those Convertible Notes) will not be subjected to the 15% limit applicable under ASX Listing Rule 7.1, and the 80% discount would never apply. Ranking on conversion Voting Rights Each Share issued upon conversion ranks equally in all respects with, and is on the same terms as, all other Shares on issue as at the date of conversion. Noteholders are not entitled to vote at general meetings unless provided for by the ASX Listing Rules or the Corporations Act. legal/ _22

33 P a g e 33 For personal use only Covenants The Company covenants with the Noteholder that: it will not require further approvals to issue any Convertible Notes or effect conversion of those Convertible Notes; it will ensure all Shares issued upon conversion will be duly and validly issued and fully paid; for so long as any Convertible Notes remain outstanding or may be issued, the Company will not issue or agree to issue any new equity securities without the approval of its Shareholders under ASX Listing Rule 7.1, except: o the issue of (or agreeing to issue) Shares to a Noteholder as a result of conversion of Convertible Notes; or o where the Company has obtained the prior written consent of the Noteholder to that issue or agreement to issue new equity securities.*** ***Note: This does not restrict the Company from raising capital where the issue or proposed issue of Shares falls within an exception to ASX Listing Rule 7.1 (such exceptions are set out in ASX Listing Rule 7.2). Events of Default The Company makes default in any payment of any outstanding monies and such default remains outstanding for a period of five (5) business days after receiving written demand for payment from a Noteholder. The Company commits a breach of a covenant, condition or obligation imposed by it under the Convertible Note facility and that breach has not been remedied within ten (10) business days of receiving notice of the breach from the Noteholder requiring the breach to be remedied. An order is made for the winding up of an OPUS Group entity which is not successfully appealed within 30 days or a resolution is passed for the winding up of a OPUS Group entity. An OPUS Group entity enters into any scheme of reconstruction or amalgamation that materially disadvantages the Noteholder without the prior written consent of the Noteholder. A receiver is appointed for or an encumbrancee takes possession of an OPUS Group entity undertaking or any part of it and such receiver is not removed or such encumbrancee does not deliver up possession within thirty (30) days. An OPUS Group entity is placed under external administration under the Corporations Act or under any other law applicable to it. An OPUS Group entity stops payment of all its debts or is unable to pay its debts as and when they fall due or, without the prior consent of the Noteholders, ceases to carry on its business or threatens to do so. Security, priority and subordination The Convertible Notes are secured by way of a second-ranking General Security Deed granted by the Company over all of its assets in favour of Knox OPUS LP and DMRA Property Pty Limited, ranking ahead of all other creditors (other than the OPUS Group's bank Commonwealth Bank of Australia). Quotation on ASX The Convertible Notes will not be quoted on the ASX. legal/ _22 The Company will seek quotation for Shares issued on conversion.

34 P a g e 34 For personal use only Annexure B: Independent Expert's Report See over page. legal/ _22

35 The Independent Directors OPUS Group Limited 12 Rachael Close Silverwater NSW February 2013 Subject: Proposed issue of Convertible Notes Dear Independent Directors Background 1 On 3 January 2013, OPUS Group Limited (OPUS) announced that Knox Investment Partners & Associates (Knox) and Mr Richard Celarc1 (both substantial shareholders in OPUS2) had agreed to advance OPUS up to $3.4 million3 (the Loans). As at the date of this report a total of $3.0 million had been drawn down by OPUS under the Loans. These Loans were required to fund closure costs at the Mulgrave site and to meet other short term funding requirements (which could not be drawn down under OPUS existing debt facilities). Terms of the Notes 2 Subject to OPUS shareholder approval, OPUS intends to issue Knox and Mr Celarc with Convertible Notes (the Notes) to discharge the Loans. The key terms of the Notes are as follows: (a) (b) the interest rate on the Notes is 15% per annum (but increases to 24% per annum in the event of default4). Interest will accrue from the issue date and will be automatically capitalised at the end of each month5 unless OPUS senior lender consents to interest being paid in cash the Notes rank behind the senior debt obligations of OPUS but ahead of shareholders 1 Hereinafter, all references to Knox and Mr Celarc also refer to their associates. 2 Knox and Mr Celarc have advised OPUS that they are not associated parties and act independently regarding their shareholdings in OPUS. 3 Knox and Mr Celarc (and/or their associates) will provide $2.4 million and $1.0 million of the Loans respectively. 4 The default interest rate of 24% per annum is the same as the interest rate on the Loans in the event shareholders do not approve the Note issue. 5 As interest accrues monthly the effective annual interest rate (allowing for interest on interest) is 16% per annum. Liability limited by a scheme approved under Professional Standards legislation

36 (c) (d) (e) the Notes may convert to ordinary shares in OPUS in whole or in part at the option of the Note holder at any time up to 31 March 2014, but not before the completion of a capital raising of new ordinary shares which OPUS intends to make prior to 30 June 2013 the conversion price will be equal to: (i) the capital raising price per share for the period up to three months following completion of the capital raising to be undertaken prior to 30 June 2013 (ii) for the period after this three month period to 31 March 2014, an amount equal to 75% of the volume weighted average price (VWAP) of OPUS shares calculated over the five trading days on which trades in the shares were recorded immediately before the date on which conversion occurs any Notes not converted by 31 March 2014 must be repaid in full. 3 Should OPUS shareholders not vote in favour of the Note issue the Loans will be due for repayment on 31 March However, the interest rate on the Loans will be 24% per annum. Scope 4 Depending on the conversion price, the potential conversion of the Notes is likely to result in Knox materially increasing its relevant interest in OPUS (from 30.7% currently). Further, Richard Celarc may increase his relevant interest in OPUS to more than 20% as a result of the conversion of the Notes. 5 Section 606 of the Corporations Act 2001 (Corporations Act) generally prohibits the acquisition of a relevant interest in issued voting securities of an entity if the acquisition results in a person s voting power in a company increasing from below 20% to more than 20%, or from a starting point between 20% and 90%, without making an offer to all securityholders of the entity 6. An exception to this general prohibition is set out in Section 611(7), whereby such an acquisition is allowed where the acquisition is approved by a majority of securityholders of the entity at a general meeting and no votes are cast in respect of securities held by the acquirer or any of its associates. 6 Regulatory Guide 111 (RG 111) sets out the view of ASIC on the operation of Section 611(7) of the Corporations Act. Section 611(7) of the Corporations Act allows shareholders to waive the prohibition in Section 606 and requires that shareholders approving a resolution pursuant to this section be provided with all material information in relation to the proposed transaction including an IER. 7 Consequently, the Independent Directors of OPUS have requested that Lonergan Edwards & Associates Limited (LEA) prepare an IER stating whether, in our opinion, the potential conversion of the Notes is fair and reasonable to the non-associated shareholders of OPUS (i.e. shareholders other than Knox and Mr Celarc and their associates). 6 Increases in relevant interests by a maximum of 3% every six months are exceptions to this general prohibition. 2

37 8 LEA is independent of OPUS, Knox and Mr Celarc and their associates, and has no involvement with or interest in the outcome of the proposed Note issue other than the preparation of this report. Summary of opinion 9 In our opinion, the conversion rights attached to the Notes are not fair but reasonable in the absence of a superior funding proposal. We are of this opinion for the reasons discussed below. Assessment of fairness 10 Under ASIC Regulatory Guide 111 the potential conversion of the Notes is fair if the conversion price is equal to or greater than the value of OPUS shares on a 100% controlling interest basis. 11 However, as noted above, the shares to be issued pursuant to the exercise of the conversion rights are to be priced at a significant discount to the VWAP of OPUS shares or at the capital raising price (if conversion occurs up to three months following the completion of the proposed capital raising), which is also likely to be a discount to the listed market price of OPUS shares. Under the agreed pricing formula therefore, the conversion price is less than the controlling interest value of the shares to be allotted on conversion. 12 Accordingly, in our opinion, the price at which the Notes convert into shares in OPUS is not fair when assessed under RG 111. Assessment of reasonableness 13 The potential conversion of the Notes is reasonable if, despite being not fair, in the opinion of the expert there are sufficient reasons for securityholders to approve the conversion rights attaching to the Notes. In this regard, Regulatory Guide 111 states that the expert should identify the advantages and disadvantages of the proposal to the shareholders not associated with the transaction, which are summarised below: Advantages Conversion of the Notes to OPUS shares will avoid the need to redeem the Notes on 31 March 2014, and will reduce debt and lower interest costs. As the interest rate on the Loans will increase to 24% per annum (with interest compounded monthly) if shareholders do not approve the Note issue the potential interest saving following conversion could be as high as $0.9 million per annum Disadvantages Note holders will have the right to acquire OPUS shares at a significant discount to the listed market price of OPUS shares (subject to the conversion price being equal to the price at which OPUS raises new equity capital prior to 30 June 2013 for a three month period following completion of the capital raising) Knox and Mr Richard Celarc combined interests in OPUS could increase from 49.6% to 66.5% (or higher) as a result of the Notes conversion. OPUS ownership interests will therefore be diluted upon conversion 3

38 Advantages While the price at which the Notes convert to shares represents a discount of up to 25% to the volume weighted average price (VWAP) of OPUS shares in the five days prior to conversion (subject to the conversion price being equal to the price at which OPUS raises new equity capital prior to 30 June 2013 for three months thereafter), this discount represents approximately only one year s interest on the Loans if shareholders do not approve the Note issue In our view OPUS is unlikely to be able to refinance the Loans in the short term (other than at very high interest rates) due to the high level of current senior debt. Given OPUS need to reduce debt, in our view, conversion of the Notes to equity is likely to be better than incurring interest of 24% per annum (compounded monthly) until the Loans can be repaid or refinanced. Disadvantages On a combined basis Knox and Mr Celarc (and their associates) would have sufficient voting power (potentially 66.5% or more) to pass ordinary resolutions, and could therefore control the day to day strategic direction and future dividend policy of OPUS should they agree to do so. However, we note that, as their combined shareholdings represent 49.6% of OPUS shares on issue, they are close to having the ability to control OPUS in any event (1). Note: 1 Knox and Mr Celarc have advised OPUS that they are not associated parties and act independently regarding their shareholdings in OPUS. 14 As indicated above there are a number of advantages and disadvantages associated with the conversion of the Notes to equity. However, in our opinion, the potential conversion of the Notes is reasonable to the non-associated shareholders of OPUS given that: (a) (b) (c) (d) OPUS needs to raise significant additional equity capital in order to reduce senior debt the interest rate payable on the Loans if shareholders do not approve the issue of Notes is high (24% per annum, compounded monthly) in our view, it is likely that the level of shareholder dilution implicit in the conversion price will occur in any event due to (a) above for three months following the completion of the upcoming capital raising (to be completed by 30 June 2013), the conversion price will be equal to the price at which this capital is raised. Further, the proposed capital raising will include a pro-rata entitlement issue to existing shareholders. Accordingly, OPUS shareholders will therefore be able to acquire further shares in OPUS at the same price as Note holders can convert the Notes to OPUS shares in the period up to three months following completion of the upcoming capital raising. 15 For the reasons set out above, in our opinion, the potential conversion of the Notes is therefore not fair but is reasonable to the non-associated shareholders in OPUS in the absence of a superior funding proposal. 4

39 General 16 In preparing this report we have considered the interests of OPUS shareholders not associated with Knox and Mr Celarc as a whole. Accordingly, this report only contains general financial advice and does not consider the personal objectives, financial situations or requirements of individual shareholders. 17 The ultimate decision whether to approve the Note issue should be based on each OPUS shareholder s assessment of their own circumstances. If OPUS shareholders are in doubt about the action they should take in relation to the proposed Note issue or matters dealt with in this report, OPUS shareholders should seek independent professional advice. For our full opinion on the proposed Note issue and the reasoning behind our opinion, we recommend that OPUS shareholders read the remainder of our report. Yours faithfully Craig Edwards Authorised Representative Martin Holt Authorised Representative 5

40 Table of contents Section Page I Basis of assessment 7 Limitations and reliance on information 8 II Profile of OPUS 9 Overview 9 Publishing division 10 Outdoor Media 10 Financial performance 10 Financial position 13 Net debt 14 Share capital 16 Share price since listing 17 Share liquidity 17 III Analysis of the proposed Notes issue 18 Terms of the Notes 18 The conversion price 18 Impact of Notes conversion on ownership interests 19 Implied EBITDA multiples 21 IV Evaluation of the Notes conversion rights 24 Assessment of fairness 24 Assessment of reasonableness 24 Advantages 24 Disadvantages 25 Alternatives to the Notes issue 25 Conclusion 26 Appendices A Financial Services Guide B C D E Qualifications, declarations and consents OPUS revised financial covenants under its senior debt facility Listed company descriptions Glossary 6

41 I Basis of assessment 18 In preparing our report we have had regard to Regulatory Guide 111 Content of Expert s Reports (RG 111). 19 RG 111 states that the potential conversion of the Notes is fair if the conversion price is equal to or greater than the value of OPUS shares on a 100% controlling interest basis. 20 The potential conversion of the Notes is reasonable if it is fair. It is also reasonable, despite being not fair, if in the opinion of the expert there are sufficient reasons for securityholders to approve the conversion rights attaching to the Notes. In this regard, Regulatory Guide 111 states that the expert should identify the advantages and disadvantages of the proposal to the shareholders not associated with the transaction, and should provide an opinion on whether the advantages of the proposal outweigh the disadvantages Our report has therefore considered whether the potential conversion of the Notes is fair and reasonable to OPUS shareholders, having regard to: Fairness (a) the conversion pricing mechanism of the Notes relative to the controlling interest value of OPUS shares Reasonableness (b) the recent financial performance of OPUS and its current financial position (including the reasons for the short term loans from Knox and Mr Celarc) (c) OPUS current debt levels, the terms and conditions of the debt facilities provided and the need to reduce debt (d) the conversion price of the Notes relative to the price at which OPUS could raise further equity capital in an alternative placement and/or rights issue (e) other funding alternatives available to the company (f) the impact of the potential conversion of the Notes on the ownership and control of OPUS (g) the potential benefits resulting from conversion of the Notes including, for example reductions in debt and interest costs (h) the implications for OPUS if shareholders do not approve the conversion rights (e.g. need to repay the loan on maturity) (i) share market trading in OPUS shares subsequent to the announcement of the funding arrangements (j) the position of non-associated OPUS shareholders before and after implementation of the potential conversion of the Notes 7 RG

42 (k) other qualitative and strategic issues associated with the potential conversion of the Notes and the extent to which, on balance, they may advantage or disadvantage existing OPUS shareholders other than Knox and Richard Celarc. Limitations and reliance on information 22 Our opinions are based on the economic, sharemarket, financial and other conditions and expectations prevailing at the date of this report. Such conditions can change significantly over relatively short periods of time. 23 Our report is also based upon financial and other information provided by OPUS and its advisers. We understand the accounting and other financial information that was provided to us has been prepared in accordance with the Australian equivalents to International Financial Reporting Standards (AIFRS). We have considered and relied upon this information and believe that the information provided is reliable, complete and not misleading and we have no reason to believe that material facts have been withheld. 24 The information provided was evaluated through analysis, enquiry and review to the extent considered appropriate for the purpose of forming an opinion on the proposed Notes issue from the perspective of OPUS shareholders not associated with the Notes issue. However, we do not warrant that our enquiries have identified or verified all of the matters which an audit, extensive examination or due diligence investigation might disclose. Whilst LEA has made what it considers to be appropriate enquiries for the purpose of forming its opinion, due diligence of the type undertaken by companies and their advisers in relation to (for example) prospectuses or profit forecasts is beyond the scope of an IER. 25 Accordingly, this report and the opinions expressed therein should be considered more in the nature of an overall review of the anticipated commercial and financial implications of the proposed transaction, rather than a comprehensive audit or investigation of detailed matters. 26 An important part of the information base used in forming an opinion of the kind expressed in this report is comprised of the opinions and judgement of management of the relevant companies. This type of information has also been evaluated through analysis, enquiry and review to the extent practical. However, it must be recognised that such information is not always capable of external verification or validation. 27 We in no way guarantee the achievability of budgets or forecasts of future profits. Budgets and forecasts are inherently uncertain. They are predictions by management of future events which cannot be assured and are necessarily based on assumptions of future events, many of which are beyond the control of management. Actual results may vary significantly from forecasts and budgets with consequential valuation impacts. 28 In forming our opinion, we have also assumed that: (a) (b) the information set out in the Notice of Meeting is complete, accurate and fairly presented in all material respects the terms of the Notes to be issued are consistent with the terms set out in this report. 8

43 II Profile of OPUS Overview 29 OPUS is an Asia Pacific, technology based (Australian headquartered) business services and communication group. The Company employs a flexible technology platform that allows it to produce and distribute published content to suit the timing and scale requirements of a range of customer segments. 30 Operating across Publishing and Outdoor Media, OPUS has expanded to become one of the leading specialist players in the Asia Pacific region. In addition, OPUS has significant global capability offering an end to end value chain through modern facilities in Singapore, Sydney, Maryborough, Canberra and Auckland and further global reach via strategic content distribution alliances in North America, the United Kingdom, Europe, Philippines and China. 31 OPUS was founded in 2007 with the acquisition of Ligare Pty Ltd. Since that date the company has acquired a number of other entities as summarised below: OPUS Transaction history Year Month Target 2007 May Acquires Ligare Australia August Acquires Omnigraphics New Zealand October Ligare Australia acquires Southwood Press November Acquires Cactus Imaging New Zealand 2008 February Acquires Cactus Imaging Australia 2009 February Acquires CanPrint, CanMail and Union Offset 2010 February Establishes Ligare New Zealand February Strategic alliance partner in China secured March Agrees to acquire COS September Settles COS acquisition 2011 March Two strategic alliance partners in the UK announced 2012 March Merger with MPG Printing. 32 OPUS listed on the Australian Securities Exchange (ASX) on 10 April 2012 following implementation of the merger between the OPUS Group and MPG Printing Limited8. 8 Prior to the merger MPG Printing Limited was part of McPherson s Limited. 9

44 Publishing division 33 The Publishing division is responsible for the production and distribution of published content including electronic delivery of online material, regional production of professional, educational and trade books, journals, loose leaf publications and manuals. 34 The operations are flexible to suit both short and medium run titles with rapid turnaround available for local customers, as well as providing print and fulfil-on-demand services. The Maryborough and Singapore facilities are also capable of producing medium to long run titles, with Singapore predominantly aimed at export customers. 35 The Publishing Division provides digital and offset printing as well as ancillary business services and communication solutions including digital asset management, content management, back-catalogue fulfilment, direct to consumer distribution and warehousing, variable data and intelligent mailing. 36 OPUS has also established strategic alliance partnerships with a number of printers in complementary geographies. These partnerships allow OPUS to offer print-on-demand and distribute and print services in these countries and to surrounding regions. The Singaporean operation is also able to fulfil larger and less time sensitive orders. 37 A strategic alliance agreement with Hung Hing Printers, a large publicly listed print company headquartered in Hong Kong with several print facilities in China, enables OPUS to quote competitively on very large run projects. Outdoor Media 38 The Outdoor Media division is the largest provider of grand and large format printing for outdoor advertising in Australasia. The division s production facilities can operate 24 hours a day, seven days a week to rapidly produce nationwide rollouts of advertising campaigns. This involves the creation, production and distribution of outdoor media advertising material and corporate signage, such as billboards, bus advertising, retail displays, building and vehicle wraps and trade exhibitions. 39 Outdoor advertising has traditionally been located outdoors, although increasingly it is also located inside high traffic buildings such as shopping centres and airports. The innovative nature of large format printing means the division prints on a wide variety of flexible and rigid materials including vinyl, mesh, paper, canvas, cloth, wood, glass and plastic. 40 The Outdoor Media division also offers a full range of in-house finishing services including joining, rope edging, hemming, eyeleting, sleeve finishing, installation and removal. 41 OPUS also remains at the forefront of industry development to offer new and exciting products and technologies. The Outdoor Media division was the first to offer both recyclable and bio-friendly substrates for mass billboard production in Australasia, and has developed innovative solutions for vehicle graphics, floor graphics and building wraps. Financial performance 42 We set out below the results of OPUS for the years ended 30 June 2011 and 2012, and the results for the six months ended 31 December 2011 and 2012: 10

45 OPUS Statement of financial performance Year to Year to 6 mths to 6 mths to 30 Jun Jun Dec Dec 12 Audited Audited Unaudited Unaudited A$m A$m A$m A$m Sales revenue Other income Operating expenses (74.4) (84.6) (37.2) (55.6) EBITDA Depreciation (5.7) (7.3) (3.1) (4.6) EBIT (0.1) (0.1) Net finance costs (5.5) (5.6) (2.5) (3.2) Profit before tax (5.6) (0.8) 3.0 (3.3) Income tax expense 0.4 (1.0) (0.6) (0.5) Profit (loss) after tax (5.2) (1.8) 2.4 (3.8) 43 It should be noted that the above results only reflect the full year earnings contribution from: (a) COS from 1 September 2010; and (b) MPG Printing9 from 1 April Consequently, the following pro-forma results summary has been prepared to show the revenue and profitability of all the businesses on an always owned basis. That is, the following table sets out what OPUS results would have been had the COS and MPG Printing businesses been owned throughout the whole period. In addition, the pro-forma results exclude the effects of certain significant or one-off items such as restructuring costs, material merger transaction costs, legal expenses and goodwill impairment charges: OPUS Summary of pro-forma segment results Year to Year to 6 mths to 6 mths to 30 Jun Jun Dec Dec 12 Audited Audited Unaudited Unaudited A$m A$m A$m A$m Revenue Publishing excluding MPG MPG Publishing division Outdoor Media division Adjusted revenue EBITDA before significant items Publishing excluding MPG MPG Publishing division Outdoor Media division Corporate (2.6) (2.9) (1.1) (2.0) Adjusted EBITDA While the merger of MPG Printing and the OPUS Group was implemented by MPG Printing acquiring the OPUS Group, the acquisition was accounted for as a reverse takeover. Consequently, the statutory results only reflect the earnings contribution from MPG Printing from 1 April

46 45 A reconciliation between the reported and pro-forma results is shown below: OPUS Reconciliation of reported to pro-forma adjusted results Year to Year to 6 mths to 6 mths to 30 Jun Jun Dec Dec 12 Audited Audited Unaudited Unaudited A$m A$m A$m A$m Reported revenue Adjustments: Revenue of COS prior to acquisition on 1 September Revenue of MPG Printing prior to acquisition on 1 April Adjusted revenue Reported EBITDA Adjustments: Transaction and listing related costs (1) Integration and restructuring costs (2) Impairment of goodwill (3) Other non-recurring items EBITDA of COS prior to acquisition on 1 September EBITDA of MPG Printing prior to acquisition on 1 April Adjusted EBITDA Note: 1 Costs related to the merger transaction and the costs of the initial ASX listing in The 2011 comparative includes costs related to the proposed listing on the New Zealand Stock Exchange which did not proceed. 2 Costs related to the activities undertaken to realise the integration (synergy) benefits from the merger and over the transition phase as the businesses become integrated including site consolidation and restructuring costs. 3 Impairment of goodwill related to the New Zealand group expensed in the 2011 financial year. Commentary on financial results 46 Pro-forma revenue and adjusted EBITDA of the Publishing division (excluding MPG Printing) increased by 5% and 3% respectively in FY12. This performance reflected increased market share, procurement savings and the benefits of restructuring initiatives, and was achieved despite difficult market conditions and pricing pressures. 47 In contrast, revenue and adjusted EBITDA of MPG Printing fell in FY12. As Australia s leading producer of paperback and casebound books, the MPG Printing business continues to be adversely impacted by the increased purchasing of books by consumers from overseas online retailers. Further, the FY12 result of MPG Printing was impacted by difficult trading conditions, particularly in the read for pleasure trade book sector. These soft conditions were exacerbated by the collapse of the large Red Group book retail chain (Angus & Robertson / Borders), which resulted in abnormally high levels of surplus stock in the market, lowering demand for book printing services. 12

47 48 The Outdoor Media division increased revenue by 5% in FY12. However, adjusted EBITDA was 7% below the prior year and was impacted by soft market conditions in the June 2012 quarter as a result of the uncertain economic outlook and weak advertising markets, which resulted in price competition. 49 Whilst there was some improvement in trading conditions for the Outdoor Media division in the first quarter of FY13, trading for the Outdoor Media division softened in December 2012 relative to year to date performance and the same time last year. This was consistent with general market conditions with the Australian Outdoor Media Association releasing December quarter revenues on 16 January 2013 highlighting a 4.6% reduction on the prior year period. 50 Trading conditions for the Publishing division in the six months to 31 December 2012 have been challenging. In particular, the Publishing operations in Australia have been impacted by reduced government spending on communications and services, with projected government expenditure under the Federal Budget at its lowest level since 1996 and OPUS strategy to focus on Asia11 and the expansion of non-print related services has provided a buffer for the softer local market conditions. However, total adjusted EBITDA in the six months to 31 December 2012 of $7.5 million was well down on the prior corresponding period ($12.0 million). 52 As stated in an ASX release dated 25 January 2013, OPUS management anticipate that results in the second half of FY13 will be stronger than the results in the first half12. The improved expected performance reflects: (a) (b) (c) the realisation of further cost savings following the integration of MPG Printing into the group a number of additional cost savings, specifically within the Publishing division, which were identified and implemented in the first quarter of FY13. In particular, the Publishing division s colour printing business facilities have been consolidated, which has resulted in the closure of the MPG Printing site at Mulgrave and the relocation of its printing equipment to the group s Maryborough and Canberra facilities more efficient utilisation of OPUS network of production facilities along with increased leverage from digital production. Financial position 53 OPUS financial position as at 30 June 2012 and 31 December 2012 is set out below: 10 Source: Chairman s address to OPUS AGM dated 22 November OPUS Singaporean operations continue to perform strongly. 12 No specific profit guidance for FY13 was provided. 13

48 OPUS statement of financial position 30 Jun Dec 12 (1) $m $m Cash and cash equivalents Trade and other receivables Inventories Assets classified as held for sale Income tax receivable Other current assets Total current assets Investments accounted for using the equity method Property, plant and equipment Deferred tax assets Intangible assets Total non-current assets Total assets Trade and other payables Interest bearing liabilities Derivative financial instruments Current tax liabilities Employee benefits Total current liabilities Derivative financial instruments Employee benefits Interest bearing liabilities Deferred tax liabilities Total non-current liabilities Total liabilities Net assets Net tangible assets (16.0) (19.8) Note: 1 Preliminary unaudited financial position. Net debt 54 The net debt position (including financial derivatives) of OPUS as at 30 June 2012 and 31 December 2012 is shown below: OPUS net interest bearing debt 30 Jun Dec 12 $m $m Cash and cash equivalents (4.4) (3.1) Interest bearing liabilities current Interest bearing liabilities non-current Derivative financial instruments current Derivative financial instruments non-current

49 Net debt as at 31 January As at 31 January 2013 OPUS had net debt of $66.6 million. This includes the Loans of $3.0 million advanced by Knox and Mr Celarc (and/or their associates) in January CBA facilities 56 As indicated above the Commonwealth Bank of Australia Limited (CBA) is the main debt provider to OPUS. The CBA facilities require compliance with an interest coverage ratio, leverage ratio, debt service cover ratio and place limits on OPUS capital expenditure. In January 2013 the CBA agreed to revised financial covenants13, conditional upon OPUS agreeing to make additional debt repayments by 30 June 2013 in order to reduce the leverage of the OPUS Group. 57 Specifically, the net debt14 of OPUS must be no higher than three times annual EBITDA15 adjusted for extraordinary and other items by 1 July As indicated below, this will require a significant debt reduction to occur by 1 July 2013 (depending on the level of EBITDA achieved): Potential debt repayments by 1 July 2013 sensitivity table $m $m $m $m EBITDA before extraordinary and other items (1) Leverage ratio (maximum from 1 July 2013 to 30 September 2013) 3.0x 3.0x 3.0x 3.0x Maximum debt at 1 July Net debt as at 31 January 2013 (2) Potential (minimum) debt repayment by 1 July Note: 1 EBITDA before extraordinary items in the 12 months to 31 December 2012 was $16.1 million. However, it should be noted that the leverage ratio is calculated based on EBITDA on a rolling last 12 months basis. 2 Excluding shareholder loans and derivatives, but including guarantees and letters of credit of $1.0 million (consistent with the basis upon which the leverage ratio is calculated pursuant to the senior debt covenants). 58 By 1 April 2014 (being one day after the maturity date of the Notes) the leverage ratio must be no more than 2.35:1. Thus, if EBITDA remains within the above range for the 12 month period to 31 March 2014 then the required debt reduction would be significantly greater, as shown below: 13 The revised financial covenants are set out in Appendix C. 14 For covenant purposes shareholder loans and financial derivatives are excluded from net debt. However, guarantees and letters of credit are included. 15 The EBITDA is assessed on a rolling last 12 months basis. 16 Further significant reductions in the leverage ratio (net debt to EBITDA adjusted for extraordinary and other items) to 1.5:1 must occur over the period to 1 January

50 Potential debt reduction by 31 March 2014 (if the EBITDA before extraordinary items in the preceding 12 months is the same as in above table) $m $m $m $m EBITDA before extraordinary and other items (1) Leverage ratio (maximum from 1 April 2014 to 30 June 2014) (2) 2.35x 2.35x 2.35x 2.35x Maximum debt by 31 March Net debt as at 31 January 2013 (3) Potential (minimum) debt repayment by 31 March Note: 1 EBITDA before extraordinary items in the 12 months to 31 December 2012 was $16.1 million. However, it should be noted that the leverage ratio is calculated based on EBITDA on a rolling last 12 months basis. 2 Further significant reductions in the leverage ratio to 1.5:1 must occur over the period to 1 January Excluding shareholder loans and derivatives, but including guarantees and letters of credit of $1.0 million (consistent with the basis upon which the leverage ratio is calculated pursuant to the senior debt covenants). 59 Thus, under the terms and conditions of the current CBA facility, total debt repayments of potentially more than $20 million17 will be required prior to the maturity of the Notes. Debt reduction initiatives 60 To assist OPUS achieve these debt reductions the company has announced the following noncore asset sales on 3 January 2013: (a) (b) the sale and leaseback of its Singapore owned building for approximately $7.2 million before tax (subject to exchange rate movements)18 the sale of surplus land and buildings at Maryborough, Victoria for $0.5 million (before tax). 61 In addition, as noted above, the Company intends to undertake a capital raising prior to 30 June At the date of this report the proposed terms of this capital raising (including the issue price) had yet to be determined. However, OPUS management and the Board of Directors have advised it will include a pro-rata entitlement issue to existing shareholders. Share capital 62 As at January 2013 OPUS had 53.7 million fully paid ordinary shares on issue. No other equity securities (or options) are on issue. 63 Knox and Mr Richard Celarc (together with their respective associates) are the two largest shareholders, holding 35.0% and 14.6% of the shares on issue respectively. 17 The illustrative debt repayment calculations set out above reflect compliance with loan covenants without any borrowing limit flexibility. In practice, most companies operate with some margin of safety relative to loan covenants to allow for inherent fluctuations in the business cash flows. 18 This sale is subject to a number of conditions, including approval by local Singaporean authorities. 16

51 Share price since listing 64 The following chart illustrates the movement in the share price of OPUS from 10 April 2012 (the day it first started trading on the ASX) to 24 January 2013: OPUS share price history 10 April 2012 to 24 January 2013 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 12 Nov 12 Dec 12 Jan 13 Source: Bloomberg, LEA analysis. 65 In our opinion, the fall in the OPUS share price since listing is likely to be due to, inter alia, concerns regarding its high debt level and lower reported earnings. Share liquidity 66 The level of trading in OPUS shares on the ASX over the period since listing up to 24 January 2013 is set out below: OPUS liquidity in shares Start date End date Value A$000 Volume 000 As a % of issued capital 1 month 25 Dec Jan months 25 Oct Jan , months 25 Jul Jan , Since listing 10 Apr Jan 13 3,516 6, Source: Bloomberg, LEA analysis. 67 As shown above only 12.1% of OPUS shares traded on the ASX in the period since listing to 24 January 2013, indicating a low level of share trading. In part, this reflects the significant shareholdings held by Knox (35.0%) and Mr Richard Celarc (14.6%) and their respective associates. 17

52 III Analysis of the proposed Notes issue Terms of the Notes 68 On 3 January 2013, OPUS announced that Knox and Mr Richard Celarc (both substantial shareholders in OPUS) had agreed to advance OPUS up to $3.4 million (the Loans)19. As at the date of this report a total of $3.0 million had been drawn down by OPUS. These Loans were required to fund closure costs at the Mulgrave site and to meet other short term funding requirements (which could not be drawn down under OPUS existing debt facilities). 69 Subject to OPUS shareholder approval, OPUS intends to issue Knox and Mr Celarc with Convertible Notes (the Notes) to discharge the Loans. The key terms of the Notes are as follows: (a) (b) (c) (d) (e) the interest rate on the Notes is 15% per annum (but increases to 24% per annum in the event of default20). Interest will accrue from the issue date and will be automatically capitalised at the end of each month unless OPUS senior lender consents to interest being paid in cash the Notes rank behind the senior debt obligations of OPUS but ahead of shareholders the Notes may convert to ordinary shares in OPUS in whole or in part at the option of the noteholder at any time up to 31 March 2014, but not before the completion of a capital raising of new ordinary shares which OPUS intends to make prior to 30 June 2013 the conversion price will be equal to: (i) the capital raising price per share for the period up to three months following completion of the capital raising to be undertaken prior to 30 June 2013 (ii) for the period after this three month period to 31 March 2014, an amount equal to 75% of the volume weighted average price (VWAP) of OPUS shares calculated over the five trading days on which trades in the shares were recorded immediately before the date on which conversion occurs any Notes not converted by 31 March 2014 must be repaid in full. The conversion price 70 As stated above the price at which the Notes convert to ordinary shares in OPUS depends on: (a) (b) the VWAP of OPUS shares over the five trading days on which trades in the shares were recorded immediately before the date on which conversion occurs; and for the period up to three months after completion of the proposed capital raising21, the price at which OPUS raises new equity capital prior to 30 June A facility fee equal to 4% of the maximum amount of the Loans has been paid by OPUS to the lenders. 20 The default interest rate of 24% per annum is the same as the interest rate on the Loans in the event shareholders do not approve the Note issue. 21 Which OPUS expects to be completed by 30 June

53 71 Neither the VWAP prior to conversion nor the price at which OPUS proposes to raise new equity capital is known at this time. 72 On 7 November 2012 OPUS announced that trading conditions were particularly subdued in the first quarter of FY13 and that Adjusted EBITDA22 (before significant items) for the six months to 31 December 2012 was expected to be well down on the prior corresponding period. The Adjusted EBITDA for the six months ended 31 December 2012 was further downgraded on 25 January Accordingly, we set out below a range of possible conversion prices having regard to the listed market price of OPUS shares over the period since the ASX announcement on 7 November 2012 up to 29 January During this period OPUS shares traded between 21 cents and 42 cents per share, and last traded on 31 January 2013 at 22.5 cents per share: Conversion prices based on selected VWAPs $ $ $ Assumed VWAP prior to conversion $0.200 $0.300 $0.400 Conversion price 25% discount (1) $0.150 $0.225 $0.300 Note: 1 As stated above, the conversion price will be equal to the price at which OPUS raises equity capital prior to 30 June 2013 in the period up to three months following completion of the capital raising. 73 In our opinion, OPUS intention to undertake a capital raising prior to 30 June 2013, together with the prevailing high level of debt, is likely to be reflected in an OPUS share price toward the low end of the above range, at least in the short term. Accordingly, in our view, any conversion of the Notes in the next six months is also likely to reflect a conversion price towards the low end of the above range. Impact of Notes conversion on ownership interests 74 Currently Knox and Mr Celarc (and their associates) own 35.0% and 14.6% respectively of the shares in OPUS. In the absence of further equity issues by OPUS these shareholdings will increase upon conversion of the Notes. The extent of the increase in voting power held by Knox and Mr Celarc (and associates) following conversion of the Notes will depend on: (a) (b) the amount outstanding under the Notes; and the conversion price. Amount outstanding under the Notes 75 As stated above, currently $3.0 million has been drawn down under the Loans. However, it has been agreed with Knox and Mr Celarc that up to $3.4 million can be borrowed by OPUS under the Loans (which OPUS has proposed to replace with the Notes, subject to shareholder approval). 22 Adjusted EBITDA excludes the effects of certain significant or one-off items such as restructuring costs and goodwill impairment charges. 19

54 76 If conversion does not occur until the maturity date of the Notes on 31 March 2014, interest at 15% per annum will also be payable on the Notes for approximately fifteen months23. As this interest will be capitalised24 the amount outstanding on the Notes at maturity will increase to approximately $4.1 million, assuming the full $3.4 million is drawn. Ownership interests 77 Based on the above we set out below the shareholdings of Knox and Mr Celarc (and their associates) subsequent to conversion of the Notes (but prior to taking into account the impact of future capital raisings which may dilute any increase in voting power): OPUS impact of Note conversion on ownership interests Assuming conversion occurs in 1 year and interest is capitalised (i.e. amount outstanding is $4.1m) Assumed VWAP prior to conversion $0.200 $0.300 $0.400 Assumed conversion price (25% discount) (1) $0.150 $0.225 $0.300 Total shares issued to Note holders on conversion Current shares on issue Shares on issue post conversion Change in shareholdings Knox Investment Partners & Associates: Current shareholding (2) Shares to be issued on conversion of Notes (3) Shareholding post conversion Richard Celarc: Current shareholding Shares to be issued on conversion of Notes (3) Shareholding post conversion Shareholdings prior to conversion Knox Investment Partners & Associates 35.0% 35.0% 35.0% Richard Celarc 14.6% 14.6% 14.6% Combined 49.6% 49.6% 49.6% Shareholdings post conversion Knox Investment Partners & Associates 46.9% 44.0% 42.2% Richard Celarc 19.6% 18.3% 17.6% Combined 66.5% 62.3% 59.7% Note: 1 As stated above, the conversion price will be equal to the price at which OPUS raises equity capital prior to 30 June 2013 in the period up to three months following completion of the capital raising. 2 This includes the shareholding of Mr Bret Jackson (a director of OPUS) who is an associate of Knox. 3 We understand that Knox and Richard Celarc (and/or their associates) will hold 70.6% and 29.4% of the Notes respectively (assuming the full $3.4 million is advanced). Rounding differences exist. 23 It is expected that the Loan will be fully drawn by 31 March Interest on $0.4 million will only be payable for approximately 12 months due to the projected timing of drawdowns. 24 As stated above interest accrues monthly and therefore the effective annual interest rate (allowing for interest on interest) is 16% per annum. 20

55 78 As indicated above, we note that: (a) (b) the shareholding of Knox and their associates in OPUS could increase from 35.0% to potentially 46.9%; and the shareholding of Mr Celarc and his associates could increase from 14.6% to potentially 19.6%. 79 Further, if the conversion price was lower than assumed (which could occur if the OPUS share price fell below the levels adopted above) then the ownership interest of Knox and Mr Celarc (and their associates) could increase above these levels On a combined basis Knox and Mr Celarc (and their associates) could have sufficient voting power (potentially 66.5% or more) to pass ordinary resolutions, and could therefore control the day to day strategic direction and future dividend policy of OPUS should they agree to do so26. However, we note that, as their combined shareholdings represent 49.6% of OPUS shares on issue, they are close to having the ability to control OPUS in any event. Implied EBITDA multiples 81 We have also considered the EBITDA multiples27 implied by the potential conversion prices adopted above. Enterprise value 82 The enterprise value (i.e. the value placed on the business before deducting amounts owed to lenders) of OPUS implied by each of the conversion prices is shown below: OPUS implied enterprise values at various conversion prices Assumed share price (VWAP) at conversion $ Assumed conversion price per share $ Shares on issue post conversion Million Implied market capitalisation at conversion price $m Net debt excluding Loans / Notes as at 31 January 2013 $m Surplus assets Singapore land and building $m Land and buildings at Maryborough, Victoria $m Less taxation liabilities on the above $m (0.5) (0.5) (0.5) Total surplus assets $m Enterprise value of core business at conversion price (1) $m Note: 1 Being implied market capitalisation plus net debt less surplus assets. 25 Prior to taking into account the impact of future capital raisings which may dilute any increase in voting power. 26 Knox and Mr Celarc have advised OPUS that they are not associated parties and act independently regarding their shareholdings in OPUS. 27 In our view the EBIT multiples for OPUS are likely to be less representative of earnings performance as depreciation costs are currently well above costs that reflect stay in business capital expenditure levels. 21

56 Earnings 83 Adjusted EBITDA (before significant items) for OPUS in the 12 months to 31 December 2012 was $16.1 million, comprising: Adjusted EBITDA $m Six months to 30 June Six months to 31 December months to 31 December 2012 (unaudited) Further, as stated above: (a) (b) OPUS management expect to realise further cost savings following the integration of MPG Printing into the group, and the closure of the MPG Printing site at Mulgrave in order to reduce debt, OPUS has announced the sale and leaseback of its Singapore owned building. Once completed the rentals payable pursuant to this transaction will increase annual operating expenses by approximately $0.8 million. 85 For the purpose of working out the EBITDA multiples implied by the various conversion prices we have therefore adopted EBITDA of $17.3 million, comprising: Adjusted EBITDA adopted for purposes of EBITDA multiple calculation $m Adjusted EBITDA achieved in the 12 months to 31 December Net integration benefits 2.0 Less additional operating expenses following sale and leaseback of Singapore site (0.8) Adjusted EBITDA adopted for purposes of EBITDA multiple calculation 17.3 EBITDA multiples 86 The enterprise values implied by the assumed conversion prices therefore represent the following EBITDA multiples: Implied EBITDA multiples Assumed share price (VWAP) at conversion $0.200 $0.300 $0.400 Enterprise value at conversion price (based on 25% discount to VWAP) $m Adopted EBITDA above $m Implied EBITDA multiple x

57 Comparison with listed company multiples and transaction evidence 87 In comparison, the EBITDA multiples of ASX listed companies operating in the same broad industry sectors as OPUS are shown below: Listed company multiples EV EBITDA multiple $m Historical Forecast Salmat n/m (2) 4.4 PMP (3) 2.8 (3) CSG n/m (4) 5.0 Wellcom Group Colorpak Note: 1 The listed multiples and enterprise values are calculated based on the listed market prices on 22 January They therefore do not include a (takeover) premium for control. 2 Salmat's historical EBITDA multiple was not meaningful due to the subsequent disposal of its Business Process Outsourcing division in August PMP s low multiple reflects a combination of weak print and media markets and its significant level of debt (some $155.5 million as at 30 June 2012). 4 CSG s historical EBITDA multiple was not meaningful due to the subsequent disposal of its Technology Service division in July n/m = not meaningful 88 A brief description of each company s activities is set out in Appendix C. While none of the listed companies are directly comparable with OPUS, we note that their EBITDA multiples are generally higher than those implied for OPUS based on the assumed conversion prices. 23

58 IV Evaluation of the Notes conversion rights 89 In our opinion, the conversion rights attached to the Notes are not fair but reasonable in the absence of a superior funding proposal. We are of this opinion for the following reasons. Assessment of fairness 90 Under ASIC Regulatory Guide 111 the potential conversion of the Notes is fair if the conversion price is equal to or greater than the value of OPUS shares on a 100% controlling interest basis. 91 However, as noted above, the shares to be issued pursuant to the exercise of the conversion rights are to be priced at a significant discount to the VWAP of OPUS shares or at the capital raising price (if conversion occurs up to three months following the completion of the proposed capital raising), which is also likely to be a discount to the listed market price of OPUS shares. Under the agreed pricing formula therefore, the conversion price is less than the controlling interest value of the shares to be allotted on conversion. 92 Accordingly, in our opinion, the price at which the Notes convert into shares in OPUS is not fair when assessed under RG 111. Assessment of reasonableness 93 The potential conversion of the Notes is reasonable if, despite being not fair, in the opinion of the expert there are sufficient reasons for securityholders to approve the conversion rights attaching to the Notes. In this regard, Regulatory Guide 111 states that the expert should identify the advantages and disadvantages of the proposal to the shareholders not associated with the transaction, and should provide an opinion on whether the advantages of the proposal outweigh the disadvantages 28. Advantages Avoids obligations to redeem at maturity 94 If the Notes are not converted to shares in OPUS the Notes will need to be redeemed on 31 March However, given OPUS prevailing high debt level and its ongoing obligations to significantly reduce senior debt in advance of any Notes repayment, OPUS may not be able to redeem the Notes at that time. As set out in Section II, OPUS current debt covenants suggest that the company will need to reduce debt by potentially $20 million (or more) by 1 April Should redemption not occur on the maturity date the default interest rate on the Notes will increase to 24% per annum. As interest compounds monthly, the effective annual interest rate in the event of default will therefore be nearly 27% per annum. 96 Conversion of the Notes would therefore avoid the need to redeem the Notes and would reduce OPUS debt level (albeit only marginally). As the interest rate on the Loans will increase to 24% per annum (with interest compounded monthly) if shareholders do not approve the Note issue, the potential interest saving following conversion could be as high as $0.9 million per annum. 28 RG

59 Disadvantages Dilution of ownership interests 97 As set out in Section III, Knox and Mr Richard Celarc combined interests in OPUS could increase from 49.6% to 66.5% (or higher) as a result of the Notes conversion. The ownership interests of other OPUS shareholders will therefore be diluted upon conversion. However, as stated above, we expect that some dilution is inevitable in any event given that OPUS need for further equity capital (for debt reduction purposes) is high relative to OPUS current market capitalisation. Discount to VWAP 98 The conversion price of the Notes is equal to: (a) the capital raising price per share for the period up to three months following completion of the capital raising to be undertaken prior to 30 June 2013 (b) for the period after this three month period to 31 March 2014, an amount equal to 75% of the volume weighted average price (VWAP) of OPUS shares calculated over the five trading days on which trades in the shares were recorded immediately before the date on which conversion occurs As noted above, given the size of the required capital raising, the price at which OPUS raises new equity capital prior to 30 June 2013 is likely to represent a discount to the listed market price of OPUS shares (prior to the announcement of the capital raising). 100 Note holders therefore have the right to acquire OPUS shares at a significant discount to the listed market price (subject to the conversion price being equal to the price at which OPUS raises new equity capital prior to 30 June 2013 for a three month period following completion of the capital raising). 101 While OPUS shareholders are not being given the same opportunity to acquire Notes, we understand that OPUS shareholders will be able to participate (on terms yet to be determined) in the planned capital raising which OPUS intends to undertake prior to 30 June OPUS shareholders will therefore have an opportunity to acquire further shares in OPUS at the same price as Note holders can convert the Notes to OPUS shares in the period up to three months following completion of the proposed capital raising. Alternatives to the Notes issue 102 If the Notes issue is not approved the interest rate on the Loans will be 24% per annum (compounded monthly). Further, as stated above, it is likely that OPUS will have difficulty repaying the Loans and/or Notes on maturity (31 March 2014) unless a significant equity capital raising is undertaken. 29 It should be noted that the Notes cannot be converted prior to the completion of the capital raising (which OPUS intends to complete by 30 June 2013). 25

60 103 We note that a pro-rata rights issue would not be dilutionary to OPUS existing shareholders (assuming shareholders have the financial capacity in the current economic climate to participate in any issue). However, as the size of the required capital raising is likely to be high (due to the size of required debt reductions30) relative to OPUS current market capitalisation (around $13.4 million), in our view, it is unlikely that the level of equity funding required could be achieved solely by means of a rights issue. As capital raisings are generally priced at a discount to the pre-announcement listed market price it is therefore likely that some level of shareholder dilution will occur in any event. 104 In our view OPUS is also unlikely to be able to refinance the Loans in the short term (other than at very high interest rates) due to the high level of current senior debt. Given OPUS need to reduce debt, in our view, conversion of the Notes to equity is likely to be better than incurring interest of 24% per annum (compounded monthly) until the Loans can be repaid or refinanced. Conclusion 105 As indicated above there are a number of advantages and disadvantages associated with the conversion of the Notes to equity. However, in our opinion, the potential conversion of the Notes is reasonable to the non-associated shareholders of OPUS given that: (a) (b) (c) (d) OPUS needs to raise significant additional equity capital in order to reduce senior debt the interest rate payable on the Loans if shareholders do not approve the issue of Notes is high (24% per annum, compounded monthly) in our view, it is likely that the level of shareholder dilution implicit in the conversion price formula will occur in any event due to (a) above for three months following the completion of the upcoming capital raising (to be completed by 30 June 2013) the conversion price will be equal to the price at which this capital is raised. Further, the proposed capital raising will include a pro-rata entitlement issue to existing shareholders. Accordingly, OPUS shareholders will therefore have an opportunity to acquire further shares in OPUS at the same price as Note holders can convert the Notes to OPUS shares in the period up to three months following completion of the upcoming capital raising. 106 For the reasons set out above, in our opinion, the potential conversion of the Notes is therefore not fair but is reasonable to the non-associated shareholders in OPUS in the absence of a superior funding proposal. 30 As set out in Section II, OPUS current debt covenants suggest that the company will need to reduce debt by potentially $20 million (or more) by 1 April

61 Appendix A Financial Services Guide Lonergan Edwards & Associates Limited 1 Lonergan Edwards & Associates Limited (ABN ) (LEA) is a specialist valuation firm which provides valuation advice, valuation reports and independent expert s reports (IER) in relation to takeovers and mergers, commercial litigation, tax and stamp duty matters, assessments of economic loss, commercial and regulatory disputes. 2 LEA holds Australian Financial Services Licence No Financial Services Guide 3 The Corporations Act 2001 authorises LEA to provide this Financial Services Guide (FSG) in connection with its preparation of an IER to accompany the Explanatory Memorandum to be sent to OPUS shareholders in connection with the proposed Note issue. 4 This FSG is designed to assist retail clients in their use of any general financial product advice contained in the IER. This FSG contains information about LEA generally, the financial services we are licensed to provide, the remuneration we may receive in connection with the preparation of the IER, and if complaints against us ever arise how they will be dealt with. Financial services we are licensed to provide 5 Our Australian Financial Services Licence allows us to provide a broad range of services to retail and wholesale clients, including providing financial product advice in relation to various financial products such as securities, derivatives, interests in managed investment schemes, superannuation products, debentures, stocks and bonds. General financial product advice 6 The IER contains only general financial product advice. It was prepared without taking into account your personal objectives, financial situation or needs. 7 You should consider your own objectives, financial situation and needs when assessing the suitability of the IER to your situation. You may wish to obtain personal financial product advice from the holder of an Australian Financial Services Licence to assist you in this assessment. Fees, commissions and other benefits we may receive 8 LEA charges fees to produce reports, including this IER. These fees are negotiated and agreed with the entity who engages LEA to provide a report. Fees are charged on an hourly basis or as a fixed amount depending on the terms of the agreement with the entity who engages us. In the preparation of this IER, LEA is entitled to receive a fee estimated at $36,000 plus GST. 9 Neither LEA nor its directors and officers receives any commissions or other benefits, except for the fees for services referred to above. 27

62 Appendix A 10 All of our employees receive a salary. Our employees are eligible for bonuses based on overall performance and the firm s profitability, and do not receive any commissions or other benefits arising directly from services provided to our clients. The remuneration paid to our directors reflects their individual contribution to the company and covers all aspects of performance. Our directors do not receive any commissions or other benefits arising directly from services provided to our clients. 11 We do not pay commissions or provide other benefits to other parties for referring prospective clients to us. Complaints 12 If you have a complaint, please raise it with us first, using the contact details listed below. We will endeavour to satisfactorily resolve your complaint in a timely manner. 13 If we are not able to resolve your complaint to your satisfaction within 45 days of your written notification, you are entitled to have your matter referred to the Financial Ombudsman Services Limited (FOS), an external complaints resolution service. You will not be charged for using the FOS service. Contact details 14 LEA can be contacted by sending a letter to the following address: Level George Street Sydney NSW 2000 (or GPO Box 1640, Sydney NSW 2001) 28

63 Appendix B Qualifications, declarations and consents Qualifications 1 LEA is a licensed investment adviser under the Corporations Act. LEA s authorised representatives have extensive experience in the field of corporate finance, particularly in relation to the valuation of shares and businesses and have prepared many hundred independent expert s reports. 2 This report was prepared by Mr Edwards and Mr Holt, who are each authorised representatives of LEA. Mr Edwards and Mr Holt have over 18 years and over 25 years experience respectively in the provision of valuation advice (and related advisory services). Declarations 3 This report has been prepared at the request of the Directors of OPUS to accompany the Notice of Meeting to be sent to OPUS shareholders. It is not intended that this report should serve any purpose other than as an expression of our opinion as to whether or not the potential conversion of the Notes is fair and reasonable to the non-associated shareholders of OPUS. Interests 4 At the date of this report, neither LEA, Mr Edwards nor Mr Holt have any interest in OPUS and comply with the independence guidelines set out in RG 112 Independence of experts. With the exception of the fee shown in Appendix A, LEA will not receive any other benefits, either directly or indirectly, for or in connection with the preparation of this report. Indemnification 5 As a condition of LEA s agreement to prepare this report, OPUS agrees to indemnify LEA in relation to any claim arising from or in connection with its reliance on information or documentation provided by or on behalf of OPUS which is false or misleading or omits material particulars or arising from any failure to supply relevant documents or information. Consents 6 LEA consents to the inclusion of this report in the form and context in which it is included in OPUS Notice of Meeting. 29

64 Appendix C OPUS revised financial covenants under its senior debt facility Debt service cover ratio Period Debt service cover ratio From 1 January 2014 to 31 March :1 From 1 April 2014 to 30 June :1 From 1 July 2015 to 30 September :1 From 1 October 2015 and thereafter 1.20:1 Calculation methodology The cash flow for OPUS Group Limited and its subsidiaries (adjusted for extraordinary and other items) before debt service costs (being the aggregate of the interest expense for the relevant period, scheduled principal repayments under the CBA Facilities and the capital element of all payments made under finance or capital leases) dividend by debt service costs during the relevant period. Interest cover ratio Period Interest cover ratio Calculation methodology From 1 October 2012 to 31 March 2013 From 1 April 2013 to 30 June :1 2.40:1 The EBITDA for OPUS Group Limited and its subsidiaries (adjusted for extraordinary and other items) dividend by all interest paid, payable or capitalised by OPUS Group Limited and/or its subsidiaries in the relevant From 1 July 2013 to 31 December :1 period after adjusting for any interest rate hedge transactions and capitalised interest expense under any shareholder From 1 January 2014 to 31 March :1 loans and cash interest received. From 1 April 2014 to 30 September :1 From 1 July 2014 to 30 September :1 From 1 October 2014 to 31 December :1 From 1 January 2015 and thereafter 5.00:1 30

65 Appendix C Leverage ratio Period Leverage ratio Calculation methodology From 1 January 2013 to 31 March :1 All present or future actual or contingent debt or other financial accommodation From 1 April 2013 to 30 June :1 (other than any hedge transaction, intercompany debt or shareholder loan) From 1 July 2013 to 30 September :1 less all uncommitted cash or cash equivalents dividend by the EBITDA From 1 October 2013 to 31 December :1 for OPUS Group Limited and its subsidiaries (adjusted for extraordinary From 1 January 2014 to 31 March :1 and other items). From 1 April 2014 to 30 June :1 From 1 July 2014 to 30 September :1 From 1 October 2014 to 31 December :1 From 1 January 2015 to 31 March :1 From 1 April 2015 to 30 June :1 From 1 July 2015 to 30 September :1 From October 2015 to 31 December :1 From 1 January 2015 and thereafter 1.50:1 31

66 Appendix D Listed company descriptions Salmat Limited 1 Salmat Limited is an Australia-based outsourced services provider with leadership in targeted customer communication solutions. The company facilitates client communication via a range of communication channel options, including voice, online, print, electronic and mobile. In Australia Salmat delivers more than 60% of all business to consumer communications, including more than five billion printed unaddressed items, and handles 25% of all outsourced phone calls. The company divested its Business Process Outsourcing division in August 2012 for $375 million. PMP Limited 2 PMP s is one of the largest commercial printing companies in Australia. In addition to printing it provides marketing and letter box distribution services, magazine distribution and digital pre-media services. The printing division operates eight plants across Australia and New Zealand and generally produces catalogues, magazines and periodicals, directories and books. PMP primarily uses heat-set web printing, but also has cold-set and sheet-fed printing capacity. Distribution services include letterbox delivery of newspapers and product samples, and magazine distribution to retailers. CSG Limited 3 CSG is print and communication solution specialist, with over 40,000 print devices under management. Following the sale of its Technology Solutions division in July 2011 for $227.5 million (which provided systems integration, development, consulting and managed services), the company is focused on supplying leading multi-function devices, photocopiers, printers, consumables and software solutions to maximise productivity and reduce costs. Wellcom Group Limited 4 With operations encompassing every aspect of the marketing supply chain, Wellcom Group provides a range of pre-media services, digital photography, digital asset management, digital printing and computer-to-plate production in Australia, New Zealand, the United Kingdom and Asia. The company also offers high quality, short to medium run printing including invitations, brochures, flyers, booklets, business cards and personal marketing documents. Colorpak Limited 5 Colorpak designs and produces folding cartons, printed leaflets, foils, self-adhesive labels and laminates, point of sale displays and other value added paperboard packaging products. The company has made six acquisitions since 1998, the most recent of which was Carter Holt Harvey Cartons in Colorpak has five manufacturing sites located in Sydney (two), Melbourne (two) and Auckland as well as a sales office in Brisbane. 32

67 Appendix E Glossary Term Adjusted EBITDA AIFRS ASIC ASX CBA Corporations Act DCF EBIT EBITA EBITDA FOS FSG FY IER Knox LEA Loans Notes NPV OPUS PE RG 111 VWAP Meaning EBITDA excluding the effects of certain significant or one-off items such as restructuring costs and goodwill impairment charges. Australian equivalent to International Financial Reporting Standards Australian Securities & Investments Commission Australian Securities Exchange Commonwealth Bank of Australia Limited Corporations Act 2001 (Cth) Discounted cash flow Earnings before interest and tax earnings before interest, tax and amortisation Earnings before interest, tax depreciation and amortisation Financial Ombudsman Services Limited Financial Services Guide Financial year Independent expert s report Knox Investment Partners & Associates (and their associates) Lonergan Edwards & Associates Limited Knox Investment Partners & Associates and Mr Richard Celarc had agreed to advance OPUS up to $3.4 million Convertible Notes Net present value Opus Group Limited Price earnings Regulatory Guide 111 Content of expert reports Volume weighted average trading price 33

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