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The exchange price for the first tranche of S$35.0 million is 93% of the Offering Price, which equates to
S$0.4743 per Share. The formula for determining the exchange price for the second tranche of S$35.0 million
is pegged to our earnings, calculated based on the audited consolidated financial statements of our Company
for FY2008 with certain adjustments as set out in the Exchangeable Loan Agreement (“Earnings”). In the case
where SCPEL has exchanged the first tranche of S$35.0 million (excluding accrued interest) at an exchange
price of S$0.4743 and where our Earnings for FY2008 are below approximately S$9.6 million, SCPEL may
acquire such number of Shares that may result in Yaw Chee Siew ceasing to be our majority Shareholder
(assuming that from the Listing Date up to the date of exchange for the second tranche of S$35.0 million
(i) there is no issue of Shares awarded under the Share Award Scheme; (ii) we have not undertaken any capital
actions that would change our share capital, including any reduction, bonus issue, stock split or capital
distribution or the creation, allotment, issue, acquisition, repayment or redemption of Shares or other securities
or the granting of options, warrants or other securities convertible into Shares; and (iii) we have not undertaken
any other acts that would dilute the interest of Business Companion Investments in our Company or vary the
rights attaching to any of the Shares.) Similarly, even if SCPEL does not exchange the Exchangeable Loan
into Shares, but if Business Companion Investments sells our Shares in order to finance the repayment of the
Exchangeable Loan, depending on the number of Shares that would be sold by Business Companion
Investments, Yaw Chee Siew could potentially cease to be our majority Shareholder. As a result of such a
change in control, SCPEL could have the ability to significantly influence or control actions that require the
vote of our Shareholders and could therefore make changes to our management and the direction of our
business.
In addition, our Controlling Shareholder may withdraw his financial support from us if there is a change
in control. Further, such a change in control could cause us to breach our undertaking to Caterpillar Financial
and UOB under loan facilities from the respective financial institution that Yaw Chee Siew will maintain a
minimum 30% interest in our Company. See “Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Borrowings” and “Risk Factors — Our business is dependent upon the availability
of financing”. A breach of these undertaking will result in an event of default under the vessel construction
loan from Caterpillar Financial. A default would permit lenders to accelerate the maturity of the debts and
demand payment under these agreements and to foreclose upon collateral securing the debts. Under these
circumstances, we may not have sufficient funds available to satisfy all of our obligations, including our
obligations under the outstanding debts. Any of the above developments could have a material adverse effect
on our operations, financial performance, financial condition and prospects.
Potential conflicts of interest may arise under the Exchangeable Loan Agreement with SCPEL.
Under the terms of the Exchangeable Loan Agreement, SCPEL has acquired certain indirect interests in
our Shares and may, in the future, acquire a significant direct interest in our Shares. See “Substantial
Shareholders and Vendors — Exchangeable Loan Agreement”. One of our Non-executive Directors, William
Edward Alastair Morrison, is also the managing director of SCPEL. See “Interested Person Transactions and
Conflicts of Interests — Potential Conflicts of Interest”.
The principal business of SCPEL is to undertake private equity investments, and SCPEL may from time
to time invest in ventures that carry on businesses that are similar to or compete with the businesses of our
Company. In the event SCPEL acquires a significant direct interest in our Company, there can be no assurance
that we will be able to take advantage of business opportunities and strategies at commercially favourable
terms or at all, in circumstances where our interests differ from other companies in which SCPEL has an
interest, which may have a material adverse effect on our business, results of operations and prospects.
Our future growth may be limited by our production capacity.
Our production capacity is limited by the size of our shipyard, the number, size and capacities of our
Syncrolift», slipways, berths, docks and equipment, as well as by the extent and possibility of outsourcing
operations to compatible third-party shipyards.
In the event that we are unable to increase our production capabilities to enable us to construct vessels to
meet the requirements of our existing and potential customers, some of them may charter or commission
vessels from our competitors and, as a result, we may lose business opportunities and our operations, results of
operation, financial condition and prospects may be adversely affected. To date, we have been able to
successfully secure adequate shipbuilding capacity in China to support our operations. If in the future we are
unable to secure such shipbuilding capacity upon terms acceptable to us, our shipbuilding capacity could be
affected. See “Our Business — Our Operations — Outsourcing”.
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