KOTRA-Proposed ESOS.pdf - Kotra Pharma

(ii)any individual Eligible Employee, who, either singly or collectively throughpersons connected with him holds twenty percent (20%) or more of the issuedand paid-up share capital (excluding treasury shares) of the Company, is notallocated more than ten percent (10%) of the new Shares available under theProposed ESOS,provided always that it is in accordance with any prevailing guidelines issued by BursaMalaysia Securities Berhad (“Bursa Securities”), Main Market Listing Requirements ofBursa Securities or any other relevant authorities as amended from time to time.(c)EligibilitySubject to the determination and absolute discretion of the ESOS Committee, EligibleEmployees who fulfill the following criteria as at the date of the offer of the ESOS optionsshall be eligible to participate in the Proposed ESOS:-(i)(ii)(iii)(iv)(v)has attained the age of eighteen (18) years;is employed full time by and is on the payroll of the Kotra Group (other thanKotra’s subsidiaries which are dormant);has been confirmed in service and in the employment of the Kotra Group (otherthan Kotra’s subsidiaries which are dormant);for employees other than the Directors, under an employment contract, the offermay only be considered where the contract is for a duration of at least two (2)years. Any foreign employees of the Kotra Group who is serving on a full timecapacity and whose contribution is vital to the Kotra Group may be consideredfor participation in the Proposed ESOS, provided that no foreign employee who isserving under an employment contract may be considered for participation in theProposed ESOS unless the employment contract is for a duration of at least two(2) years or such other period as may be required by the relevant authorities;andhas fulfilled any other eligibility criteria as may be set by the Board/ESOSCommittee at any time and from time to time at its absolute discretion.Selection for participation in the Proposed ESOS shall be at the discretion of the ESOSCommittee. Subject to any adjustments in accordance to the Bylaws, the ESOSCommittee may at any time and from time to time after the ESOS options are granted,pursuant to the Bylaws, limit the exercise of the ESOS options to a maximum number ofnew Kotra Shares and/or such percentage of new Kotra Shares for each year within theoption period and impose any other terms and/or conditions deemed appropriate by theESOS Committee.No eligible person shall, at any one time, participate at any time in more than one (1)employee share option scheme (in any form or manner, and local or foreign)implemented by any company within the Kotra Group.2

(d)Duration of the Proposed ESOSThe Proposed ESOS shall come into force on the date of full compliance with all relevantrequirements to the Main Market Listing Requirements of Bursa Securities in relation tothe Proposed ESOS (“Effective Date”).The Proposed ESOS, when implemented, shall be in force for an initial period of five (5)years from the Effective Date, and may be extended for a further period of up to five (5)years at the discretion of the Board upon recommendation from the ESOS Committee,provided always that the Proposed ESOS shall not in aggregate exceed a duration of ten(10) years. For the avoidance of doubt, no further sanction, approval or authorisation ofthe shareholders of the Company in a general meeting is required for any suchextension.(e)Exercise Price of the ESOS optionsSubject to any adjustments in accordance to the Bylaws, the price at which an EligibleEmployee is entitled to subscribe for new Kotra Shares upon the exercise of the ESOSoptions granted under the Proposed ESOS (“Exercise Price”) shall be determined by theBoard upon recommendation of the ESOS Committee and shall be based on the higher ofthe following:-(i)(ii)the weighted average market price of Kotra Shares for five (5) preceding marketdays immediately prior to the date the offer is made to the Eligible Employees,provided that a discount of not more than ten percent (10%), or such otherpercentage of discount as may be permitted by any prevailing guidance issuedby Bursa Securities or any other relevant authorities as amended from time totime during the option period; orthe par value of the Kotra Shares.(f)Ranking of the new Kotra Shares to be issued under the Proposed ESOSThe new Kotra Shares to be allotted and issued upon any exercise of the ESOS optionsshall, upon allotment, will rank pari passu in all respects with the existing Kotra Sharesexcept that they will not be entitled to any dividends, rights, allotments and/ordistributions, which entitlement date is prior to the date of allotment and issuance of thenew Kotra Shares.Fractional entitlements under the Proposed ESOS (if any) will be disregarded and shall bedealt with in such manner as the Board shall in its absolute discretion thinks expedient inthe interest of the Company.The ESOS options shall not carry any voting rights at any general meeting of theCompany, or to participate in any dividends, rights, allotments or any other distributionsthat may be declared, made or paid, or offer of further securities in Kotra unless anduntil the grantee becomes a shareholder of Kotra by exercising the ESOS options.(g)Listing of and quotation for the new Kotra SharesThe Company will make the necessary application to Bursa Securities for the listing ofand quotation for the new Kotra Shares to be issued pursuant to the exercise of the3

ESOS options to be granted under the Proposed ESOS on the Main Market of BursaSecurities.(h)Termination of the ESOSSubject to compliance with the requirements of Bursa Securities and any other relevantauthorities, the Company may terminate the continuation of the Proposed ESOS at anytime and no further offers shall be made by the ESOS Committee.3.0 UTILISATION OF PROCEEDSThe Proposed ESOS is not expected to raise any immediate funds as the ESOS options will beissued at no cost to the Eligible Employees. The exact quantum of proceeds that may be raisedby Kotra arising from the exercise of the ESOS option would depend upon the actual number ofESOS options exercised and the exercise price of the ESOS options. The proceeds arising fromthe exercise of the ESOS options shall be utilised for the working capital requirements of theKotra Group which include operating expenses, business expansion and finance costs, as andwhen the ESOS options are exercised, within the tenure of the ESOS option. As such, the exacttimeframe for utilisation of the proceeds are not determinable at this juncture.4.0 RATIONALE FOR THE PROPOSED ESOSThe Kotra Group’s employees and Directors are key to maintaining its competitive advantage andcore competence. It is therefore vital for the Kotra Group to continually develop and expand itshuman capital. The Proposed ESOS will allow the Kotra Group to continue to align the long terminterests of Eligible Employees with those of the shareholders of the Company and help achievethe positive objectives as set out below:-(i)(ii)(iii)(iv)(v)(vi)to recognise the contribution of the Eligible Employees whose services are valued andconsidered vital to the operations and continued growth of the Kotra Group;to motivate the Eligible Employees towards improving performance though greaterproductivity and to assume greater responsibility for the performance of the businessesthat they manage;to reinforce the Eligible Employees’ sense of loyalty, belonging and dedication as they aregiven the opportunity to participate directly in the equity of the Company and therebyprovides an incentive for Eligible Employees to participate more actively in the operationsand future growth of the Kotra Group;make the total compensation and remuneration packages more competitive in order toattract, retain and motivate high calibre executives;to reward the Eligible Employees by allowing them to participate in the Kotra Group’sprofitability and eventually realise any capital gains arising from appreciation in the valueof the Kotra’s Shares; andto attract and retain high-caliber Eligible Employees, hence ensuring that the loss of keypersonnel is kept to a minimum level.4

The Proposed ESOS is also extended to the Non-Executive Directors of the Company, as theydischarge important functions and their services and contributions are valued by the Kotra Group(excluding dormant subsidiaries).5.0 EFFECTS OF THE PROPOSED ESOS5.1 Share CapitalThe Proposed ESOS is not expected to have an immediate effect on the existing totalissued and paid-up share capital of the Company until and unless the ESOS options to begranted, are exercised into new Kotra Shares. The total issued and paid-up share capitalof the Company will increase progressively depending on the number of the Kotra Sharesto be issued pursuant to the exercise of ESOS options that may be granted under theProposed ESOS.For illustration purposes, the proforma effects of the Proposed ESOS on the paid-upshare capital of Kotra are as follows:-No. of KotraSharesShare CapitalRMTotal issued and paid-up capital as at the 11 June 2013 124,125,563 62,062,782To be issued pursuant to the Proposed ESOS (1) 18,618,834 9,309,417After the Proposed ESOS 142,744,397 71,372,199Note:-(1) Assuming full exercise of the ESOS options under the Proposed ESOS, amounting up to fifteenpercent (15%) of the existing total issued and paid-up share capital of the Company (excludingtreasury shares).5.2 Earnings and Earnings per Share (“EPS”)The Proposed ESOS is not expected to have any immediate effect on the earnings of theKotra Group. Financial Reporting Standards 2 on Share Based Payment (“FRS2”) issuedby the Malaysian Accounting Standards Board requires the potential cost relating to thegranting of the ESOS options to be measured at the granting date and recognised as anexpense in the income statement. This would have an effect on the future earnings ofthe Kotra Group. The total potential cost of the ESOS options granted would depend on,amongst others, the number of ESOS options granted and the fair value of such ESOSoptions.The impact of the granting of the ESOS options on the earnings and EPS of the KotraGroup, as a consequence of the recognition of the expense at each date of granting ofthe ESOS options, cannot be determined at this juncture as it would depend on variousfactors that affect the fair value, such as volatility of the Kotra Shares, the Exercise Priceand the option period, as well as the utilisation of proceeds arising from the exercise ofthe ESOS options.The Board has taken note of the potential impact of FRS2 on the Kotra Group’s futureearnings and shall take into consideration of such impact in the allocation and granting ofthe ESOS options to Eligible Employees.5

As the proceeds from the exercise of the ESOS options will be utilised for the KotraGroup’s working capital purposes, the Proposed ESOS is expected to contribute positivelyto the future earnings of the Kotra Group.5.3 Net Assets (“NA”) and GearingThe Proposed ESOS is not expected to have any immediate effect on the NA, NA perShare and gearing of the Kotra Group until such a time when the ESOS options to begranted under the Proposed ESOS are exercised. The effect on the NA, NA per Share andgearing of the Kotra Group may increase or decrease depending on the Exercise Price, tobe determined at the time an offer is granted. The effects on the NA, NA per Share andthe gearing of the Kotra Group is also subject to the number of new Kotra Shares to beissued upon the exercise the ESOS options and the potential effect on the futureearnings of the Kotra Group arising from the adoption of FRS2.Whilst the granting of the ESOS options under the Proposed ESOS is expected to result inthe recognition of a charge to the income statement of the Kotra Group pursuant toFRS2, the recognition of such FRS2 charge would not have any material impact on theNA of the Kotra Group as the corresponding amount will be classified as an equityreserve, which forms part of the shareholders’ equity. In the event none of the ESOSoptions granted are exercised within the duration of the Proposed ESOS, the amountoutstanding in the said equity reserve would be transferred into the Company’s retainedearnings. On the other hand, if the ESOS options are exercised, the amount outstandingin the said equity reserve would be transferred into the Company’s share premiumaccount.The Board has taken note of the potential impact of FRS2 on the Kotra Group’s future NAand NA per Kotra Share and shall take into consideration of such impact in the allocationand granting of the ESOS options to Eligible Employees.5.4 Substantial Shareholders’ ShareholdingsThe Proposed ESOS is not expected to have any immediate effect on the substantialshareholders’ shareholdings until the ESOS options to be granted under the ProposedESOS are exercised. Any potential effect on the substantial shareholders’ shareholdingwould depend on the number of new Shares to be issued pursuant to the exercise of theESOS options granted at the relevant time.The substantial shareholders (who are also Directors of Kotra), namely YBhg. DatukPiong Teck Yen, Piong Teck Onn. Piong Teck Min and Chin Swee Chang are entitled toparticipate in the Proposed ESOS. As such, their shareholdings in the Company willincrease if they exercise the ESOS options that may be granted to them, if any5.5 DividendsBarring any unforeseen circumstances, the Board does not expect the Proposed ESOS tohave any material effect on the dividend policy of the Company. Any future dividend tobe declared and paid will depend on, among others, the actual financial results of theKotra Group, its cash reserves, capital commitments and future funding requirements.6

5.6 Convertible SecuritiesSave for the options under the Existing ESOS Scheme, Kotra does not have anyoutstanding convertible securities as at the date of this announcement.6.0 APPROVALS REQUIREDThe Proposed ESOS is subject to the following approvals being obtained:-(a)(b)(c)Bursa Securities, for the listing of and quotation for the new Kotra Shares to be issuedpursuant to the exercise of ESOS options granted under the Proposed ESOS on the MainMarket of Bursa Securities;shareholders at an extraordinary general meeting (“EGM”) to be convened for theProposed ESOS; andother relevant authorities (if required).The Proposed ESOS is not conditional upon any other corporate exercise of the Kotra Group. TheProposed ESOS shall only be implemented after the expiry of the Existing ESOS Scheme on 23July 2013.7.0 DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTSAll Directors of Kotra are entitled to participate in the Proposed ESOS and are therefore deemedinterested in the Proposed ESOS to the extent of their respective allocations under the ProposedESOS. Accordingly, the Directors have deliberated and voted on the Proposed ESOS as a whole atthe relevant Board meetings.The Directors have abstained and will continue to abstain from deliberating and voting on theresolutions pertaining to their respective allocations under the Proposed ESOS at the relevantBoard meetings.The Directors will also abstain from voting in respect of their direct and/or indirect shareholdingsin the Company, if any, on resolutions pertaining to their respective allocations and allocations topersons connected to them under the Proposed ESOS to be tabled at the forthcoming EGM of theCompany. The Directors have undertaken to ensure that persons connected to them, if any, willabstain from voting on the resolutions pertaining to their respective allocations under theProposed ESOS to be tabled at the forthcoming EGM of the Company.Save as disclosed above, none of the other Directors, major shareholders of the Company,and/or persons connected to them have interest, direct or indirect, in the Proposed ESOS.8.0 DIRECTORS’ STATEMENTIn view that all the Directors of Kotra are interested in the Proposed ESOS, they have abstainedfrom giving any opinion or recommendation on the Proposed ESOS and their respectiveentitlements under the Proposed ESOS.7

9.0 ADVISERM&A Securities has been appointed as the Adviser to the Company for the Proposed ESOS.10.0 ESTIMATED TIMREFRAME FOR SUBMISSION TO THE RELEVANT AUTHORITIESThe application to Bursa Securities for the listing of and quotation for the new Kotra Shares to beissued pursuant to the Proposed ESOS is expected to be made within two (2) months from thedate of this announcement.11.0 TENTATIVE TIMELINEBarring any unforeseen circumstances, the Proposed ESOS is expected to be completed in thethird quarter of 2013.This announcement is dated 13 June 2013.8