Retail Entitlement Offer Booklet and Covering Letter - AJ Lucas

Key Risks
1. Specific risks relating to investing in the Offer Shares
1.4 ANZ senior facilities
The failure by AJL to complete the Offer and repay the Senior Facilities could lead to enforcement or other actions which could have a material adverse
effect on AJL’s business, prospects or financial condition. The existing default under the Senior Facilities has also resulted in a default in the current Kerogen
mezzanine facilities.
ANZ is able to call its Senior Facilities at any time, and Kerogen is able to call its mezzanine facilities at any time, although each has not yet done so. For the
alternative Athena Facility announced to the market on 31 May 2013, ANZ agreed to extend the maturity date of the Senior Facilities to 26 July 2013
conditional on payment of an extension fee, shareholder approval of the resolutions relating to the Athena Facility (including a restructuring of the Kerogen
facilities) and AJL taking certain steps to progress that proposal. As a result of the Recapitalisation Plan, that proposal is unlikely to proceed to shareholder
approval. However, it is intended that, the Senior Facilities will be repaid in full from the proceeds of the Offer.
1.5 Not drawing down under Athena Facility
If the Athena facility is not drawn down, the obligation to pay the commitment fee may be accelerated and there is a risk that, should the Offer not
complete or if cornerstone commitments default, the alternative finance is unlikely to continue to be available. Note that the Offer is not fully underwritten
and, while cornerstone commitments have been made to cover (together with the partial underwriting) any anticipated shortfall, there is no settlement
support for the cornerstone commitments. Any default would reduce funds available for future funding and to pay down debt.
1.6 ATO liabilities
As at 31 May 2013, the amount owing to the ATO was approximately $25.7 million in current tax payable and approximately $14.0 million in accrued
general interest charges. AJL has entered into a payment arrangement with the ATO to repay this amount in agreed instalments over 4 years.
Under the payment arrangement, if AJL raises capital, it may be required to pay part of the proceeds to the ATO against the total liability.
While AJL considers that risk in relation to the ATO liabilities will be significantly reduced by the Recapitalisation Plan, a failure by AJL to comply with the
payment arrangements agreed with the ATO could lead to enforcement or other actions which could have a material adverse effect on AJL’s business,
prospects or financial condition.
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