OCEANUS GROUP LIMITED (Incorporated in the Republic of Singapore) Company Registration Number: 199805793D PROPOSED INVESTMENT OF S$73.5 MILLION BY OCEAN WONDER INTERNATIONAL LIMITED, HUPOMONE CAPITAL PARTNERS SINGAPORE PRIVATE LIMITED AND THE STRATEGIC INVESTORS IN THE OCEANUS GROUP 1. INTRODUCTION 1.1 Further to the announcements dated 26 March 2009 and 3 April 2009 in relation to the proposed investment in Oceanus Group Limited (the Company ) by Ocean Wonder International Limited ( Ocean Wonder ) and Hupomone Capital Partners ( Hupomone ), the board of directors of the Company (the Board ) is pleased to announce that the Group has entered into definitive agreements with Ocean Wonder, Hupomone and the Strategic Investors (as hereinafter defined) (collectively, the Investors ) for an investment of an aggregate value of S$73.5 million (the Financing Exercise ). 2. THE FINANCING EXERCISE 2.1 Structure: The Financing Exercise will be structured by way of: the grant of cash term loans amounting to S$73.5 million by the Investors to the Group (the Loans ); and the issuance by the Company of warrants, each carrying the right to subscribe for new ordinary share(s) in the share capital of the Company (the Shares ), with an aggregate Exercise Price (as defined herein) equivalent to the amount of the Loans (the Warrants ), to the Investors on a pro rata basis in the following proportions: Investor Loan Amount (S$) Warrants % Ocean Wonder 37,500,000 250,000,000 51.0 Hupomone 17,000,000 113,333,000 (2) 23.1 Ngan Tang Joo (1) 5,000,000 33,333,000 6.8 Cheong Sim Lam (1) 3,000,000 20,000,000 4.1 Leadwise Holdings Limited (1) 3,000,000 20,000,000 4.1 ICH Group Ltd (1) 2,950,000 19,667,000 4.0 GIT PRE-IPO Private Equity Fund SPC acting for the account of Nature Resources Segregated Portfolio (1) 1,500,000 10,000,000 2.0
Bobby Lim Chye Huat (1) 1,500,000 10,000,000 2.0 Toe Teow Heng (1) 1,050,000 7,000,000 1.4 Chua Keng Loy (1) 1,000,000 6,667,000 1.4 Total 73,500,000 490,000,000 100 (3) Notes: (1) Ngan Tang Joo, GIT PRE-IPO Private Equity Fund SPC acting for the account of Nature Resources Segregated Portfolio, Bobby Lim Chye Huat, Chua Keng Loy, ICH Group Ltd, Toe Teow Heng, Cheong Sim Lam and Leadwise Holdings Limited shall collectively be known as the Strategic Investors, and each a Strategic Investor. (2) Rounded down to the closest thousand. (3) Due to rounding. 2.2 Definitive Agreements: The following definitive agreements ( Definitive Agreements ) have been entered into in connection with the Financing Exercise: Loans: (i) (ii) (iii) (iv) loan agreement dated 16 May 2009 between Ocean Wonder and the Company for a cash term loan of S$37.5 million; loan agreement dated 16 May 2009 between Hupomone and Oceanus Aquaculture Group Pte. Ltd. ( Oceanus Aquaculture ), pursuant to which Hupomone will grant Oceanus Aquaculture a cash term loan of S$12.5 million; loan agreement dated 16 May 2009 between Hupomone and Oceanus Food Group Pte. Ltd. ( Oceanus Food ), pursuant to which Hupomone will grant Oceanus Food a cash term loan of S$4.5 million; and loan agreement dated 16 May 2009 between the Strategic Investors and the Company for a cash term loan of S$19.0 million, (collectively, the Loan Agreements and each, a Loan Agreement ). Warrants: (i) (ii) (iii) warrant subscription agreement dated 16 May 2009 between Ocean Wonder and the Company for 250,000,000 Warrants; warrant subscription agreement dated 16 May 2009 between Hupomone and the Company for 113,333,000 Warrants; and warrant subscription agreement dated 16 May 2009 between the Strategic Investors and the Company for 126,667,000 Warrants, (collectively, the Subscription Agreements and each, a Subscription Agreement ).
3. PRINCIPAL TERMS OF THE LOAN AGREEMENTS 3.1 The Loans: The Loans shall be denominated in Singapore dollars, repayable on the later of (i) 30 June 2012; or (ii) the third anniversary of the date of disbursement of the Loan (the Loan Maturity Date ). The Loan will bear interest at a rate of 9% per annum (the Loan Interest Rate ), payable semi-annually on 30 June and 30 December every year (exclusive of withholding taxes). The first interest repayment date shall be 30 December 2009. 3.2 Prepayment: Prepayment: Under their respective Loan Agreements, the Company, Oceanus Aquaculture and Oceanus Food shall have the right to prepay, in parts or in whole, the Loan (including any interest accrued thereon) at any time prior to the Loan Maturity Date. Deemed Prepayment: An exercise of any part of the Warrants by an Investor in accordance with the terms of the Warrants shall cause a deemed prepayment of the principal amount outstanding in respect of that Investor s Loan of up to an amount equivalent to the aggregate Exercise Price payable in respect of the exercise. 3.3 Ranking: The Loans will rank at least pari passu with all existing and future debts, and equities and equity-linked instruments, except for obligations mandatorily preferred by Singapore law applying to companies generally. 3.4 Conditions Precedent: Disbursement of the Loans under the respective Loan Agreements will be conditional upon, inter alia, the following occurring on or being confirmed, fulfilled or procured (as the case may be) on or before the date on which the Loans are drawn down: no material adverse change in the condition (financial or otherwise), results of operations, business or performance of the Group; and no material event of default or potential default in relation to any existing debt of any member of the Group. 4. SECURITY The Company, Oceanus Aquaculture, Oceanus Food and such other relevant members of the Group shall grant an independent third party appointed or to be appointed by the Company and the Investors to act as security trustee, a first charge on, and assignment of the present and future rights and interests in, all insurance policies of the Group (inclusive of assignment of insurance proceeds) relating to fixed and biological assets on a pro rata basis for and on behalf of the Investors for the payment by the Company, Oceanus Food and/or Oceanus Aquaculture of all amounts outstanding pursuant to the Loan and/or the Warrants (as the case may be) due to the Investors by executing an assignment of insurance and/or such other security documents as the security trustee may require from time to time.
5. PRINCIPAL TERMS OF THE WARRANTS 5.1 Warrants: The Warrants shall be denominated in Singapore dollars, exercisable at any time prior to the later of (i) 30 June 2012; or (ii) the third anniversary of the date of issuance of the Tranche A Warrants (the Warrant Maturity Date ) and shall not be listed on any stock exchange. The number of Warrants to be issued shall be equal to the aggregate amount under the Loans (in Singapore dollars) divided by the Exercise Price (as defined below). The number of Warrants and Exercise Price shall be subject to customary antidilutive adjustment provisions. 5.2 Issuance: The Company currently has in force a general shareholder s mandate ( General Mandate ) to issue shares up to 20% of its current issued share capital, granted by the shareholders of the Company ( Shareholders ) on 27 March 2009. In order to comply with the General Mandate, the Warrants Exercise shall be issued to the Investors in two tranches as follows: Tranche A The Company shall, on or about the date on which Ocean Wonder and Hupomone disburse their respective parts of the Loan, issue: (i) (ii) 250,000,000 Warrants to Ocean Wonder; and 100,000,000 Warrants to Hupomone, (the Tranche A Warrants ). Tranche B Within 90 days after the Tranche A Warrants are issued by the Company, the Company will use its best endeavours to convene an Extraordinary General Meeting ( EGM ) to obtain specific shareholders approval for, inter alia, the further issuance of the second tranche of the Warrants (the Tranche B Warrants ) in the following proportions: (i) (ii) 13,333,000 Warrants to Hupomone; and 126,667,000 Warrants to the Strategic Investors, on a pro rata basis. Subsequent to the EGM and subject to the satisfaction of the relevant conditions set out under the respective Subscription Agreements, the Company shall issue the Tranche B Warrants to the relevant Investors. 5.3 Compensation: In the event that the Company is unable to issue the Tranche B Warrants within 120 days after the issuance of the Tranche A Warrants, the Company shall: use its best endeavours to issue to Hupomone and the Strategic Investors such number of Shares as they would have been entitled to had the Tranche B Warrants been issued and exercised in full, at an issue price of S$0.15 per
Share (the Compensation Shares ). The consideration payable for the issuance of the Compensation Shares shall be satisfied by extinguishing such amount from the principal amount of the relevant Loans outstanding (and any interest accrued thereon); and be liable to make payment to Hupomone and the Strategic Investors a sum equivalent to 27% of the aggregate Exercise Price of the Tranche B Warrants on a pro rata basis (the Compensation Amount ). This amount shall be payable in six (6) equal installments on successive six (6) month intervals, each ending on 30 June and 30 December. The first of such installments shall become payable on 30 December 2009. If the Company, at any time and from time to time prior to the Warrant Maturity Date declares or pays any dividends, the right of the relevant Investor to receive future installments of the Compensation Amount shall automatically lapse unless the relevant Investor informs the Company in writing at least 10 Business Days prior to the date of payment of the dividend that it waives its entitlement to such dividends and elects to receive the Compensation Amount instead. 5.4 Exercise Price The holders of the Warrants shall be entitled, at any time and from time to time on or prior to the Warrant Maturity Date, to convert all or any of their Warrants into one new Share (the Conversion Share ) for every Warrant at an exercise price of S$0.15 per Share (the Exercise Price ). The Conversion Shares shall rank pari passu in all respects with all other existing Shares and shall be listed on the SGX-ST. 5.5 Exercise of Warrants and Repayment of the Loan Payment for the aggregate Exercise Price in respect of an exercise of any number of Warrants converted from time to time shall be satisfied by extinguishing an amount equivalent to the aggregate of the Exercise Price multiplied by the number of Warrants exercised by the Investors out of the Loan amount then outstanding. Such payment shall be treated as prepayment of the Loan (or part thereof). 5.6 Conditions to the Subscription of the Tranche A Warrants The issuance of the subscription of the Tranche A Warrants will be conditional upon, inter alia, the following occurring or being confirmed, fulfilled or procured (as the case may be): (c) (d) the Loan Agreements being duly executed; no material event of default or potential default in relation to any existing debt of any member of the Group; approval in-principle for the listing and quotation of the Conversion Shares to be issued in respect of exercise of the Tranche A Warrants being obtained from the SGX-ST; the issuance and subscription of the Tranche A Warrants and the
corresponding Conversion Shares not being prohibited by any statute, order, rule or regulation promulgated after the date of the Subscription Agreements by any applicable legislative, executive or regulatory body or authority of Singapore; (e) (f) (g) completion of all relevant legal documentation and the receipt of all necessary governmental and regulatory approval for the issuance of the Warrants; Ocean Wonder being satisfied with the results of its legal due diligence investigations of the Group; and; Ocean Wonder and Hupomone (the Institutional Investors ) having obtained all necessary external and internal consents and approvals for the transaction and all relevant regulatory, shareholders and government approvals, if necessary. 5.7 Conditions to the Subscription of the Tranche B Warrants. The issuance of the subscription of the Tranche B Warrants will be conditional upon, inter alia, the approval of the Shareholders being obtained for the issuance of the Tranche B Warrants. If the conditions are not met within 90 days of the issuance of the Tranche A Warrants, the Company shall be entitled to an additional 30 days to procure the fulfillment and issuance of the Tranche B Warrants. If the Company fails to issue the Tranche B Warrants after the 30 day extension period, the obligations of the Company and the Investors with regards to the Tranche B Warrants shall cease and determine thereafter, whereupon the compensation provisions described in paragraph 5.3 above shall apply. 6. KEY TERMS OF THE FINANCING EXERCISE Pursuant to their respective Subscription Agreements, the Institutional Investors have been granted the following rights set out below: 6.1 Performance Adjustment Clause In the event that the Group s: Adjusted Profits achieved in FY2009 is lower than the Adjusted Profits achieved in FY2008 (RMB 339 million); or Operating Cash Flow achieved in FY2009 is negative, the Company shall, at no cost to the Institutional Investors, allot and issue 50,000,000 and 22,667,000 additional new Shares to Ocean Wonder and Hupomone respectively no later than 15 days after the issuance of the Company s Accounts in respect of FY2009. Should the Company fail for any reason to issue the Accounts for FY2009 by 30 April 2010, the Adjusted Profits and the Operating Cash Flow shall for these purposes be deemed to be zero.
For the purposes of this paragraph 6: Accounts means the audited consolidated financial statements (comprising a balance sheet, profit and loss statement, notes to accounts and auditors certificate) prepared with respect to the Group in accordance with the Singapore Financial Reporting Standards for any financial year; Adjusted Profits means the audited consolidated net profits of the Group, less nonrecurring and extraordinary items, as reflected in its Accounts; FY2009 means the financial year ended 31 December 2009; and Operating Cash Flow means the audited consolidated net cash flow from operating activities less non-recurring items and financing costs of the Group, as reflected in its Accounts. 6.2 Warrant Redemption Premium The Institutional Investors shall each have the right to request that the Company redeem any unexercised Warrants held by them after the Warrant Maturity Date at a redemption premium of 68% of the amount of its respective Loan in proportion to the unexercised Warrants (exclusive of withholding taxes but inclusive of coupon payments received under Loans) ( Warrants Redemption Premium ). Any unexercised Warrants redeemed by the Company pursuant to the Warrants Redemption Premium shall lapse and cease to be valid for any purpose immediately after redemption. In the event that the Company achieves Adjusted Profits and Operating Cash Flow of at least RMB 1.5 billion and RMB 1.0 billion respectively in at least one financial year during the Exercise Period, the Warrants Redemption Premium shall be waived and will not be payable by the Company. 6.3 Terms Protection Where the Group proposes to enter into any further financing agreements (which shall expressly exclude the Financing Exercise), the Institutional Investors shall, from time to time, be entitled to review the terms and conditions of any further financing arrangements (the Third Party Terms and Conditions ). In the event that the Third Party Terms and Conditions are deemed by any of the Institutional Investors (in their sole discretion) to be more favourable than the terms and conditions of their respective investments, the relevant Institutional Investor may, by written notice to the Company, elect to adopt the Third Party Terms and Conditions. Upon receipt of such notice, the Company and the relevant Institutional Investor shall re-execute new definitive agreements in substitution (and replacement) of the relevant Loan Agreements, Subscription Agreements and/or other related documents, in order to render the investment terms enjoyed by the relevant Institutional Investor equal to the Third Party Terms and Conditions.
6.4 Board Representation Ocean Wonder Under the terms of its Subscription Agreement, Ocean Wonder shall be entitled to appoint one director to the Board of the Company, and one director to the boards of each of Oceanus Aquaculture, Oceanus Food Group, Long Ze Aquaculture Co., Ltd, Zhangzhou Oceanus Food Co., Ltd and Oceanus (Shanghai) Restaurant Management Co., Ltd and any other substantial Group Company that the Company may incorporate or acquire from time to time, and such director appointed by the Investor shall also be appointed to all of the subcommittees of each Group Company. This right of appointment shall cease if Ocean Wonder reduces its interest in the Company to less than 40% of the Conversion Shares to which they are entitled under the Investment (whether or not converted). Hupomone 7. USE OF PROCEEDS Under the terms of its Subscription Agreement, Hupomone shall be entitled to appoint one director to the board of Oceanus Aquaculture. This right of appointment shall cease if Hupomone reduces its interest in the Company to less than 40% of the Conversion Shares to which they are entitled under the Investment (whether or not converted). After deducting estimated expenses of approximately S$4.0 million, the estimated net proceeds of the Financing Exercise is expected to be approximately S$69.5 million. The Loans shall only be utilised for the purposes of (i) funding the Group s farm expansion activities or related acquisitions; (ii) the expansion of the activities of Ah Yi Tian Xia and the development of the Group s downstream activities; and (iii) the Group s general working capital, in the following proportions: Purpose Estimated Net Proceeds (S$) % of Net Proceeds Funding the Group s farm expansion activities or related acquisitions Expansion of the activities of Ah Yi Tian Xia and the development of the Group s downstream activities 37.5 million 54.0% 15.0 million 21.6% General working capital 17.0 million 24.4% Total 69.5 million 100% Pending the deployment of the net proceeds, such proceeds may be deposited with banks and/or financial institutions, invested in short-term money market instruments and/or marketable securities, or used for any other purpose on a short-term basis, as
the Directors may, in their absolute discretion, deem appropriate in the interest of the Group. 8. FINANCIAL EFFECTS Solely for illustration purpose only, the financial effects of the Financing Exercise on the share capital, earnings per share ( EPS ), net tangible assets ( NTA ) and gearing of the Group, based on the audited consolidated financial statements for the financial year ended 31 December 2008 ( FY2008 ) and an exchange rate of S$1 : RMB 4.7, are set out below: 8.1 Share Capital Before the Warrants are exercised After the Warrants are fully exercised Number of Shares 1,765,041,840 2,255,041,840 Issued share capital (S$'000) 332,659 402,159 8.2 Net Tangible Assets For the purpose of illustration only, assuming that the Loans were disbursed and the Warrants had been fully exercised on 31 December 2008 and based on the Group's audited consolidated financial statements for FY2008, the effects on the NTA of the Group as at 31 December 2008 would be as follows: Before the Financing Exercise After the Financing Exercise and assuming the Warrants are fully exercised NTA (RMB 000) 879,412 1,210,232 Number of Shares 1,765,041,840 2,255,041,840 NTA per share (RMB cents) 49.82 53.67 8.3 Earnings per Share For the purpose of illustration only, assuming that the Loans were disbursed and the Warrants had been fully exercised on 1 January 2008 and based on the Group's audited consolidated financial statements for FY2008, the effects on the EPS of the Group as at 31 December 2008 would be as follows: Before the Financing Exercise After the Financing Exercise and assuming the Warrants are fully exercised Profit after tax (RMB 000) 193,452 193,452 Weighted average number of 1,625,110,505 2,115,110,505
shares EPS based on the weighted average number of shares (RMB cents) 11.90 9.15 8.4 Gearing For the purpose of illustration only, assuming that the Loans were disbursed and the Warrants had been fully exercised on 31 December 2008 and based on the Group's audited consolidated financial statements for FY2008, the effects on the NTA of the Group as at 31 December 2008 would be as follows: Before the Financing Exercise After the Financing Exercise and assuming the Warrants are fully exercised Total borrowings (RMB 000) Nil Nil Shareholders' funds (RMB 000) 879,412 1,210,041 Gearing Nil Nil 9. CIRCULAR TO SHAREHOLDERS A circular to Shareholders containing, inter alia, the notice of the EGM, and details of the Tranche B Warrants (the Circular ) will be dispatched to the Shareholders in due course. 10. INTEREST OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS None of the directors (other than in his capacity as director or shareholder of the Company) or substantial shareholder of the Company has any interest, direct or indirect, in the Loan and Warrants Issue. None of the Investors are persons or groups of persons disallowed by the SGX-ST as set out under Rule 812 of the SGX-ST Listing Manual. 11. RESPONSIBILITY STATEMENT The Directors of the Company (including those who have been delegated supervision of this Announcement) collectively and individually accept full responsibility for the accuracy of the information given in this Announcement and confirm, after making all reasonable enquiries that to the best of their knowledge and belief, the facts stated and opinions expressed in this Announcement are fair and accurate in all material respects as at the date hereof, and that there are no material facts the omission of which would make this Announcement misleading in any material respect. 12. CAUTION IN TRADING
Shareholders are advised to refrain from taking any action in respect of their shares in the Company which may be prejudicial to their interest, and to exercise caution when dealing in the shares of the Company. The Company will make the necessary announcements when there are further developments on the Investment and other matters contemplated by this Announcement. Shareholders are advised to read this Announcement and any further announcements by the Company carefully. Shareholders should consult their stock brokers, bank managers, solicitors or other professional advisors if they have any doubt about the actions they should take. By order of the Board Ng Cher Yew Executive Chairman 16 May 2009 About Ocean Wonder and AIF Capital Asia III L.P. Ocean Wonder International Limited, incorporated in the British Virgin Islands, is a whollyowned subsidiary of AIF Capital Asia III L.P., which is an Asian private equity fund with the size of US$435 million focused on expansion capital, buyout and special situation investments in the middle market. About AIF Capital AIF Capital is one of the largest Asia-based independent private equity firms. Since its establishment in 1994, AIF Capital has received investor commitments for its funds, including co-investment, in excess of US$1.5 billion. Headquartered in Hong Kong, the firm oversees a broad-based portfolio of investments in sectors ranging from supply chain management, financial services, manufacturing, specialty steels and engineering services, to power generation, telecom and transportation. AIF Capital focuses on companies who are leaders in its respective market segments (or have the potential to be so) with competitive operational strengths. AIF Capital s investors in its funds include major corporate and government pension and investment funds, insurance companies and financial institutions from North America, Australia, Asia and the Middle East and Europe, as well as multilateral agencies. About Hupomone Capital Partners Singapore Pte. Ltd. Hupomone Capital Partners Singapore Pte Ltd ( Hupomone ) is an independent private equity fund manager supported by leading international financial institutions from Asia, Europe and North America. Hupomone manages a fund targeted primarily at mid-market companies in China and in other Asian companies expanding into China. Of particular interest are
companies that are sector leaders, exhibiting strong potential for domestic growth and/or have potential for rapid international expansion. Hupomone s management prefers to adopt significant hands-on approach towards its portfolio companies. Its management team has extensive experience in private equity and in operations and will work closely with individual companies to improve their performance.