SILVER BIRD GROUP BERHAD ( SBGB OR COMPANY )

Transcription

1 SILVER BIRD GROUP BERHAD ( SBGB OR COMPANY ) (1) PROPOSED CAPITAL REDUCTION INVOLVING THE REDUCTION OF THE PAR VALUE OF EACH EXISTING ORDINARY SHARE OF SBGB FROM RM0.50 EACH TO RM0.01 EACH BY WAY OF CANCELLATION OF RM0.49 OF THE PAR VALUE OF EACH EXISTING ORDINARY SHARE OF SBGB PURSUANT TO SECTION 64(1) OF THE COMPANIES ACT, 1965 ( COMPANIES ACT ) ( PROPOSED CAPITAL REDUCTION ); (2) PROPOSED CONSOLIDATION INVOLVING THE CONSOLIDATION OF EVERY TEN (10) ORDINARY SHARES OF RM0.01 EACH IN SBGB AFTER THE PROPOSED CAPITAL REDUCTION INTO ONE (1) NEW SHARE IN SBGB OF RM0.10 PAR VALUE EACH ( SBGB SHARE(S) ) ( PROPOSED CONSOLIDATION ); (3) PROPOSED REDUCTION OF THE BALANCE ACCUMULATED LOSSES IN THE COMPANY AFTER THE PROPOSED CAPITAL REDUCTION AND PROPOSED CONSOLIDATION BY WAY OF SETTING OFF THE ACCUMULATED LOSSES AGAINST THE CREDIT ARISING FROM THE CANCELLATION OF THE SHARE PREMIUM ACCOUNT PURSUANT TO SECTIONS 60(2) AND 64(1) OF THE COMPANIES ACT ( PROPOSED SHARE PREMIUM REDUCTION ); (4) PROPOSED SETTLEMENT OF THE DEBTS OWING TO SCHEME CREDITORS OF SBGB, STANDARD CONFECTIONERY SDN BHD AND STANSON MARKETING SDN BHD UNDER A DEBT RESTRUCTURING EXERCISE PURSUANT TO SECTION 176 OF THE COMPANIES ACT ( PROPOSED DEBT SETTLEMENT ); (5) PROPOSED RENOUNCEABLE RIGHTS ISSUE OF 626,289,820 NEW RIGHTS SHARES ON THE BASIS OF ONE HUNDRED FIFTY-FOUR (154) RIGHTS SHARES FOR EVERY TEN (10) SBGB SHARES HELD AFTER THE PROPOSED CAPITAL REDUCTION AND THE PROPOSED CONSOLIDATION, TOGETHER WITH 626,289,820 FREE DETACHABLE WARRANTS ( RIGHTS WARRANTS ) ON THE BASIS OF ONE (1) RIGHTS WARRANT FOR EVERY ONE (1) RIGHTS SHARE SUBSCRIBED, ON AN ENTITLEMENT DATE TO BE DETERMINED LATER ( PROPOSED RIGHTS ISSUE WITH WARRANTS ); (6) PROPOSED ISSUANCE OF UP TO 172,800,000 NEW SBGB SHARES TOGETHER WITH UP TO 345,600,000 FREE DETACHABLE WARRANTS IN EXCHANGE FOR REDEEMABLE PREFERENCE SHARES IN IVORY OVERPOWER SDN BHD ( IOSB ) ( RPS ) AND ISSUANCE OF UP TO 500,344,703 NEW SBGB SHARES TOGETHER WITH UP TO 500,344,703 FREE DETACHABLE WARRANTS PURSUANT TO THE EXERCISE OF THE PROPOSED OPTIONS GRANTED PURSUANT TO THE INTERIM FUNDING AGREEMENT ( PROPOSED ISSUANCE OF SECURITIES PURSUANT TO THE INTERIM FUNDING ); (7) PROPOSED AMENDMENTS TO THE MEMORANDUM & ARTICLES OF ASSOCIATION OF SBGB TO FACILITATE THE CHANGE IN THE PAR VALUE OF SBGB SHARES PURSUANT TO THE PROPOSED CAPITAL REDUCTION AND THE PROPOSED CONSOLIDATION ( PROPOSED M&A AMENDMENTS ); (8) PROPOSED WINDING UP AND/OR STRIKING OFF THE REGISTER AND DISSOLUTION OF INFORAIRE SDN BHD, STANSON DISTRIBUTION SDN BHD, STANSON GROUP SDN BHD, STANSON MULTICOM SDN BHD, MADELEINE

2 CAFE SDN BHD, MADELEINE FOODS SDN BHD, MADELEINE BAKERY SDN BHD AND MADELEINE PROPERTY SDN BHD ( PROPOSED LIQUIDATION OF SUBSIDIARY COMPANIES ); AND (9) PROPOSED EMPLOYEES SHARE OPTION SCHEME ( ESOS ) FOR THE ELIGIBLE DIRECTORS AND EMPLOYEES OF SBGB AND ITS SUBSIDIARIES ( SBGB GROUP OR GROUP ) ( PROPOSED ESOS ) (COLLECTIVELY REFERRED TO AS THE PROPOSED REGULARISATION PLAN ) 1. INTRODUCTION We refer to the Company s announcement to Bursa Malaysia Securities Berhad ( Bursa Securities ) dated 29 February 2012 whereby SBGB was classified as a PN17 company pursuant to Paragraphs 2.1(d) and 2.1(f) of Practice Note 17 ( PN17 ) of the Main Market Listing Requirements of Bursa Securities ( Main Market LR ) and to the Company s further announcements of 2 April 2012, 2 May 2012, 29 May 2012, 1 June 2012, 2 July 2012, 1 August 2012, 3 September 2012, 6 September 2012, 1 October 2012, 1 November 2012, 3 December 2012, 2 January 2013, 4 February 2013, 1 March 2013, 1 April 2013, 2 May 2013, 3 June 2013, 1 July 2013, 23 July 2013, 25 July 2013, 29 July 2013, 1 August 2013, 2 September 2013, 12 September 2013 and 1 October 2013, in relation to the Company s PN17 status. The PN17 criteria was triggered due to SBGB s auditors expressing a disclaimer of opinion on the Company s latest audited accounts for the financial year ended 31 October 2011 and a default in payment by major subsidiary companies of the Company as announced by the Company on 29 February 2012 pursuant to Practice Note 1 of the Main Market LR and the Company was not able to provide a solvency declaration to Bursa Securities. Pursuant to Paragraph 3 of PN17 of the Main Market LR, the Company must regularise its condition by undertaking a regularisation plan and must ensure that the regularisation plan: (i) (ii) (iii) is sufficiently comprehensive and capable of resolving all problems, financial or otherwise that had caused the Company to trigger the prescribed criteria pursuant to PN17; enables the Company to regularise its financial condition and level of operations, such that the Company no longer triggers any of the prescribed criteria pursuant to PN17; and is fair and reasonable to the Company and its shareholders and will increase shareholder value. On 6 September 2012, KAF Investment Bank Berhad ( KAF IB ) on behalf of the board of directors of the Company ( Board ) had announced the details of a proposed regularisation plan to regularise the financial position of the Company. Further, on 27 February 2013, KAF IB had announced that the Company proposed to vary certain terms of the earlier announced proposed regularisation plan, particularly, the proposed reserves reduction, proposed debt settlement, proposed rights issue with warrants, proposed amendments and proposed liquidation of subsidiary companies. On 14 February 2013, KAF IB had announced the submission of an application for an extension of time of two (2) months up to 30 April 2013 for the Company to submit a proposed regularisation plan to Bursa Securities. On 28 February 2013, KAF IB had 2

3 announced that the applications in relation to the proposed regularisation plan had been submitted to Bursa Securities. In view thereof, on 1 March 2013, KAF IB had announced on behalf of the Company that the abovementioned application to Bursa Securities for an extension of time has been retracted. Further, SBGB and IOSB had entered into an investment agreement and supplemental investment agreement dated 22 July 2013 and 23 July 2013 respectively with Suncsi Holdings Sdn Bhd ( Suncsi ) and Covenant Equity Consulting Sdn Bhd ( Covenant ) (collectively referred to as the Investors ) whereby the Investors had agreed to participate in the proposed interim funding of SBGB by providing RM16,000,000 via the subscription of the RPS issued by IOSB, a wholly owned subsidiary of SCSB ( Interim Funding Agreement ). The proceeds from the proposed interim funding is intended to fund the repair and maintenance of its plant and machinery, the possible relocation of the Group s factory and the working capital of the Group. Further details and salient terms of the Interim Funding Agreement are set out in Section 2.6 of this announcement. On 29 July 2013, Inter-Pacific Securities Sdn Bhd ( IPS ) had announced on behalf of the Company that by mutual consent, KAF IB has ceased its engagement as the principal adviser of the Company for the then proposed regularisation plan and that IPS has been appointed as the principal adviser for the proposed regularisation plan. Concurrently, the Company has submitted an application on even date to withdraw the earlier announced proposed regularisation plan and request for an extension of time of four (4) months from the date of this announcement to submit its revised proposals. On 12 September 2013, IPS on behalf of the Company announced that Bursa Securities had vide its letter dated 12 September 2013 approved an extension of time of up to 30 November 2013 for the Company to submit a regularisation plan to the regulatory authorities, subject to the requisite announcement being made by 15 October On 8 October 2013, the Company had announced that SBGB Shares will be reclassified as a non-syariah compliant counter on 29 November 2013 as the Securities Commission has determined that the Company s total conventional loans exceed 33% of its total assets as at 31 October On behalf of the Board, IPS is pleased to announce that the Company proposes to undertake the Proposed Regularisation Plan to regularise the financial position of the Company which comprises the following: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Proposed Capital Reduction; Proposed Consolidation; Proposed Share Premium Reduction; Proposed Debt Settlement; Proposed Rights Issue with Warrants; Proposed Issuance of Securities pursuant to the Interim Funding; Proposed M&A Amendments; Proposed Liquidation of Subsidiary Companies; and Proposed ESOS. 3

4 Details of the above proposals are in the ensuing sections of this announcement. 2. DETAILS OF THE PROPOSED REGULARISATION PLAN The details of the Proposed Regularisation Plan are as set out below. 2.1 Proposed Capital Reduction The Proposed Capital Reduction entails reduction of the par value of each existing ordinary share of SBGB from RM0.50 to RM0.01 via the cancellation of RM0.49 of the par value of each existing ordinary share of RM0.50 each pursuant to Section 64(1) of the Companies Act, giving rise to a credit of RM199,274,035 that will be used to reduce the accumulated losses of the Company. As at 1 October 2013, the issued and paid-up share capital of the Company before the Proposed Capital Reduction was RM203,340,852 comprising 406,681,704 ordinary shares of SBGB of RM0.50 each. The issued and paid-up share capital of the Company after the Proposed Capital Reduction will be reduced by RM199,274,035 to RM4,066,817 comprising 406,681,704 ordinary shares of SBGB of RM0.01 each. Details of the issued and paid-up share capital of the Company before and after the Proposed Capital Reduction are as illustrated in the table below: Par value of ordinary shares RM Number of ordinary shares Issued and paidup share capital RM As at 1 October ,681, ,340,852 Upon implementation of the ,681,704 4,066,817 Proposed Capital Reduction 2.2 Proposed Consolidation Upon implementation of the Proposed Capital Reduction, the issued and paid-up share capital of SBGB of RM4,066,817 comprising 406,681,704 ordinary shares of SBGB of RM0.01 each is proposed to be consolidated such that every ten (10) ordinary shares of RM0.01 each in SBGB be consolidated into one (1) ordinary share of RM0.10 each. The issued and paid-up share capital of the Company after the Proposed Capital Reduction but before the Proposed Consolidation will be RM4,066,817 comprising 406,681,704 ordinary shares of SBGB of RM0.01 each. The issued and paid-up share capital of the Company after the Proposed Capital Reduction and the Proposed Consolidation will be RM4,066,817 comprising 40,668,170 ordinary shares of SBGB of RM0.10 each. Details of the issued and paid-up share capital of the Company before and after the implementation of the Proposed Consolidation will be as illustrated in the table below: 4

5 Upon implementation of the Proposed Capital Reduction Upon implementation of the Proposed Consolidation Par value of ordinary shares RM Number of ordinary shares Issued and paidup share capital RM ,681,704 4,066, ,668,170 4,066,817 The new SBGB Shares arising from the Proposed Consolidation will rank pari passu in all respects. 2.3 Proposed Share Premium Reduction To further reduce the accumulated losses remaining in SBGB after the Proposed Capital Reduction, it is proposed that a credit of RM53,622,000 arising from the cancellation of the share premium account pursuant to Sections 60(2) and 64(1) of the Companies Act be set-off against the accumulated losses of SBGB as follows: Group Accumulated losses RM 000 Company Accumulated losses RM 000 Accumulated losses as at 31 October , ,296 Less: Reversal of warrants reserve account due to 6,059 6,059 expiry of warrants * Less: Credit arising from the implementation of the 199, ,274 Proposed Capital Reduction Balance of accumulated losses after setting off the 172,964 83,963 credit arising from the implementation of the Proposed Capital Reduction Less: Credit arising from the cancellation of the share 53,622 53,622 premium account Balance 119,342 30,341 Note: * Reversal of warrants reserve amount of RM6,059,00 due to the expiry of SBGB s warrants B 2008/2013 on 24 February Proposed Debt Settlement It is proposed that a debt restructuring exercise be carried out by SBGB, as well as two of its principal operating subsidiary companies namely Standard Confectionery Sdn Bhd ( SCSB ) and Stanson Marketing Sdn Bhd ( SMSB ), pursuant to Section 176 of the Companies Act. The Company, SCSB and SMSB had sought restraining orders pursuant to Section 176 of the Companies Act and also extensions of the said restraining orders. The status of the restraining order for SMSB is as follows: 5

6 Date of announcement Commencement date for the restraining orders and extensions thereof granted by High Court of Malaya Period of days granted 12 April April Days 13 July July Days 12 October October Days 8 January January Days 8 March March Days 13 May May Days 5 July July Days 8 October October Days The status of the restraining orders for SBGB and SCSB are as follows: Date of announcement Commencement date for the Period of days granted restraining orders and extensions thereof granted by High Court of Malaya 14 August August Days 8 November November Days 7 February February Days 11 April April Days 4 July July Days 8 October October Days For the purposes of the Proposed Debt Settlement, Scheme Creditors are defined as all proven secured and unsecured creditors of SBGB, SCSB and SMSB, including such liabilities known, presently unknown, contingent or otherwise, of SBGB, SCSB and SMSB as at 29 February 2012 ( the Cut-off Date ). All references to the amount owing to Scheme Creditors as at the Cut-off Date shall mean the amount outstanding to the Scheme Creditors as at 29 February 2012, with agreed interest and penalty accrued up to 28 February As at the Cut-off Date, the aggregate outstanding liabilities comprising all secured and unsecured financial institution creditors and corporate guarantee creditors, secured creditors and unsecured creditors of the SBGB Group, including amounts owed to companies within the SBGB Group ("Inter-Company Creditors") to be settled pursuant to the Proposed Debt Settlement was RM431,949,000 comprising the following: SBGB RM 000 SCSB RM 000 SMSB RM 000 Total RM 000 Secured - 20,705 65,788 86,493 Creditors HP Creditors - 10, ,199 Unsecured 25, , , ,257 creditors* Total 25, , , ,949 6

7 Note: * Including the amount owing to the Inter-Company Creditors as follows:- SBGB RM'000 SCSB RM'000 SMSB RM'000 Total RM'000 Amount Owing to the Inter-Company Creditors 9,993 61, , , Details of the Proposed Debt Settlement The Proposed Debt Settlement consists of scheme of arrangements of SBGB, SCSB and SMSB as at the Cut-off Date. As part of the schemes of arrangement, it is proposed that the outstanding debts owing to the Scheme Creditors be settled by a combination of the following: SBGB SCSB SMSB Total Cash from the proceeds of the Proposed Rights Issue with Warrants (RM) Issuance of new SBGB Shares at par value ( Debt Settlement Shares ) Issuance of free detachable warrants accompanying the Debt Settlement Shares ( Debt Settlement Warrants ) Restructuring of debt into term loans (RM) 7,666,735 26,597,579 5,186,416 39,450, ,066, ,649, ,387, ,103,770 51,533,365 90,324,580 63,693, ,551,885 5,057,659 17,852,121 3,398,331 26,308,111 The remaining amount not considered for settlement in the manner as stated above is to be waived by the Scheme Creditors. The basic principles of the Proposed Debt Settlement include the following: (i) (ii) Save for SBGB, SCSB and SMSB, the other companies in the SBGB Group shall either be liquidated or have their liabilities owing to creditors other than Inter- Company Creditors settled in the ordinary course of business after the completion of the implementation of the Proposed Regularisation Plan; Inter-Company Creditors of SBGB, SCSB and SMSB, are considered as Scheme Creditors, which are entitled to vote under each of their respective scheme of arrangement but shall not claim for their respective entitlements pursuant to the Proposed Debt Settlement, i.e. the settlement entitlements of the Inter-Company 7

8 Creditors under the Proposed Debt Settlement, save for Inforaire Sdn Bhd ( Inforaire ) which has a non-related 49% shareholder, shall be deemed settled even though no actual distribution is made to such Inter-Company Creditors (and the said entitlement shall be redistributed amongst the creditors other than the Inter-Company Creditors of that company). In respect of Inforaire, which is to be liquidated, the net amount outstanding to Inforaire, after setting off Inter-Company Creditors, shall be settled in the ordinary course of business; and (iii) Hire-purchase creditors with claims on existing hire purchase assets that are currently used in the operations of SBGB Group ("HP Creditors") shall be settled in full from proceeds raised from the Proposed Rights Issue with Warrants. However, in relation to corporate guarantee creditors, it is proposed that such creditors shall rank for settlement under the proposed scheme of arrangement for SBGB (the provider of the corporate guarantee) to the extent of the balance owing after deducting the settlement received under the respective proposed schemes of arrangement for SMSB or SCSB as the case may be. Details of the schemes of arrangement involving SBGB, SCSB and SMSB are as stated in the following sections Proposed scheme of arrangement for SBGB As at the Cut-off Date, total liabilities of SBGB including the amount owing by SBGB in relation to the corporate guarantees provided by SBGB amounted to RM121,840,000. Details of the unsecured creditors and amounts owing are as follows: Scheme Creditors RM 000 Unsecured Creditors Other payables and accruals 446 Commercial papers 15,557 Inter-Company Creditors 9,993 Corporate guarantees SMSB 45,785 Corporate guarantees SCSB 50,059 Total 121,840 It is proposed that a fixed sum of RM23,031,067 ( SBGB Settlement Sum ) be used as the settlement amount to the Scheme Creditors of SBGB. The SBGB Settlement Sum is arrived at after taking into consideration the estimated net book value ( NBV ) of SBGB s assets as at the Cut-off Date and SBGB s continuing to incur losses since the Cut-off Date up to 28 February 2013, and in view of continuing losses after that.the SBGB Settlement Sum is proposed to be apportioned towards settlement of the Scheme Creditors of SBGB as follows: (i) 44.75% of the SBGB Settlement Sum or RM10,306,673 is proposed to be settled by SBGB through the issuance of 103,066,730 Debt Settlement Shares to the Scheme Creditors of SBGB, together with 51,533,365 Debt Settlement Warrants on the basis of one (1) Debt Settlement Warrant for every two (2) new Debt Settlement Shares issued; 8

9 (ii) (iii) 33.29% of the SBGB Settlement Sum or RM7,666,735 is proposed to be paid in cash from the proceeds of the Proposed Rights Issue with Warrants to the Scheme Creditors of SBGB; and 21.96% of the SBGB Settlement Sum or RM5,057,659 will be restructured into a seven (7) year term loan with the Scheme Creditors of SBGB, with only interest payable in the first (1st) and second (2nd) years, and principal payable annually in equal instalments, together with interest, over the remaining five (5) years. The term loan shall be in a syndicated form and be secured against new debentures to be created over all the remaining present unencumbered fixed assets of SCSB and IOSB, a second debenture over the fixed assets of SCSB charged to MBSB, and a second debenture over all assets of SMSB ( New Debenture ) on a pari passu basis with the other term loans secured by the New Debenture under this Proposed Debt Settlement. It is to be noted that upon approval of the Proposed Debt Settlement by the Scheme Creditors, the Scheme Creditors shall be deemed to have consented to the New Debenture ranking after any security that may be created in favour of the future creditors of the Company, SCSB and SMSB to enable the Group to raise such additional borrowings which require such security that ranks higher than the New Debenture to be created for the new borrowings. The total sum to be paid out to the unsecured Scheme Creditors of SBGB shall be up to the SBGB Settlement Sum and distributed on a pari passu basis to the unsecured Scheme Creditors of SBGB as at the Cut-off Date. The above settlement shall tantamount to a full and final settlement of SBGB s obligation in relation to the amounts owing to the Scheme Creditors of SBGB. The remaining amount owing to the Scheme Creditors of SBGB after the above settlement plus any interest, penalty or charges accruing to the Scheme Creditors of SBGB after the Cut-off Date shall be waived Proposed scheme of arrangement for SCSB As at the Cut-off Date, the total liabilities of SCSB amounted to RM202,881,000 as follows: Scheme Creditors RM 000 Secured Creditors Term loan 20,705 Hire Purchase HP Creditors 10,164 Unsecured Creditors Trade payables 25,744 Other payables 6,985 Bank overdrafts 17,034 Bankers acceptance 51,892 Bank guarantee (1) 1,216 Bank guarantee (2) 7,300 9

10 Inter-company creditors (3) 61,841 Subtotal 172,012 Total 202,881 Note: (1) (2) (3) As announced by the Company on 12 June 2012, SBGB had defaulted in its rental payment on the lease of the factory complex and therefore, CIMB Islamic Trustee Berhad had called on the entire guaranteed sum under the bank guarantee issued by RHB Bank Berhad for the sum of RM7,296,000. This amount of RM1,216,000 relates to rental expenses in arrears up to the Cut-off Date that was settled by way of the bank guarantee now owing to RHB Bank Berhad. This relates to the bank guarantee from MBB. The entitlements of the Inter-Company Creditors shall be deemed as distributed and fully settled even though no actual distribution will be made. Secured Creditor The only secured creditor of SCSB is Malaysia Building Society Berhad ( MBSB ) with a term loan outstanding of RM20,705,000 as at the Cut-Off Date secured by a debenture over specific assets of SCSB ( the MBSB Debenture ). It is proposed that the amount represented by the net book value ( NBV ) of the assets of SCSB charged to MBSB under the MBSB Debenture as at 28 February 2013 reduced by the interest charged by MBSB for the period from the Cut-off Date until 28 February 2013 (of approximately RM2,321,000) of RM11,983,150 be apportioned towards settlement of the amount owing to MBSB as follows: (i) (ii) (iii) an amount equivalent to 25% of the NBV of the assets of SCSB charged to MBSB or RM2,995,788 shall be paid in cash as partial settlement to MBSB from the proceeds of the Proposed Rights Issue with Warrants; an amount equivalent to 75% of the NBV of the assets of SCSB charged to MBSB or RM8,987,362 of the amount owing to MBSB will be restructured into a seven (7) year term loan with only interest payable in the first (1st) and second (2nd) years, and principal payable annually in equal instalments, together with interest, over the remaining five (5) years. The term loan shall be secured by the existing MBSB Debenture. It is to be noted that upon approval of the Proposed Debt Settlement by the Scheme Creditors, the Scheme Creditors shall be deemed to have consented to the MBSB Debenture ranking after any security that may be created in favour of the future creditors of the Company, SCSB and SMSB to enable the Group to raise such additional borrowings which require such security that ranks higher than the MBSB Debenture to be created for the new borrowings; and the balance owing to MBSB as at the Cut-off Date of RM8,721,850 after the above settlements ( the Unsecured Debt - MBSB ), shall be ranked and settled as part of the unsecured creditors of SCSB as described below and concurrently ranked for settlement under the proposed scheme of arrangement of SBGB, pursuant to the corporate guarantee issued by SBGB in favour of MBSB. 10

11 HP Creditors It is proposed that the amounts owing to the HP Creditors of SCSB with claims on existing hire purchase assets that are currently used in the operations of SBGB Group shall be settled in full from proceeds raised from the Proposed Rights Issue with Warrants. Unsecured Creditors It is proposed that a fixed sum of RM40,367,466 ( SCSB Settlement Sum ) be used as the settlement amount to the unsecured Scheme Creditors of SCSB. The SCSB Settlement Sum is arrived at after taking into consideration the estimated NBV of SCSB s assets as at the Cut-off Date (excluding the assets charged to MBSB and SCSB s HP Creditors) and SCSB s continuing losses since the Cut-off Date up to 28 February 2013, and in view of continuing losses after that. The SCSB Settlement Sum is proposed to be apportioned towards settlement of the unsecured Scheme Creditors of SCSB (including the Unsecured Debt MBSB but excluding Inter-Company Creditors) as follows: (i) (ii) (iii) 44.75% of the SCSB Settlement Sum or RM18,064,916 is proposed to be settled by SCSB through the issuance of 180,649,160 Debt Settlement Shares to the unsecured Scheme Creditors of SCSB, together with 90,324,580 Debt Settlement Warrants on the basis of one (1) Debt Settlement Warrant for every two (2) Debt Settlement Shares to be issued; 33.29% of the SCSB Settlement Sum or RM13,437,791, is proposed to be paid in cash from the proceeds from Proposed Rights Issue with Warrants to the unsecured Scheme Creditors of SCSB; 21.96% of the SCSB Settlement Sum or RM8,864,759 will be restructured into a seven (7) year term loan with the unsecured Scheme Creditors of SCSB with only interest payable in the first (1st) and second (2nd) years, and principal payable annually in equal instalments, together with interest, over the remaining five (5) years. The term loan shall be in a syndicated form and secured against the New Debenture. It is to be noted that upon approval of the Proposed Debt Settlement by the Scheme Creditors, the Scheme Creditors shall be deemed to have consented to the New Debenture ranking after any security that may be created in favour of the future creditors of the Company, SCSB and SMSB to enable the Group to raise such additional borrowings which require such security that ranks higher than the New Debenture to be created for the new borrowings. The total sum to be paid out to the unsecured Scheme Creditors of SCSB shall be up to the SCSB Settlement Sum and shall be distributed on a pari passu basis to the unsecured Scheme Creditors of SCSB as at the Cut-off Date. The above settlement shall tantamount to a full and final settlement of SCSB s obligation in relation to the amounts owing to the unsecured Scheme Creditors of SCSB. The remaining amount owing to the unsecured Scheme Creditors of SCSB, except for those with a corporate guarantee from SBGB which shall be entitled to rank for settlement as an unsecured creditor of SBGB to the extent of amounts not settled above, plus any interest, penalty or charges accruing to the unsecured Scheme Creditors of SCSB shall be waived. 11

12 Proposed scheme of arrangement for SMSB As at the Cut-off Date, total liabilities of SMSB amounted to RM203,072,000 which are as follows: Scheme Creditors RM 000 Secured Creditors Overdraft 65,161 Bank guarantee 627 Subtotal 65,788 Hire Purchase HP Creditors 35 Unsecured Creditors Trade payables 1,573 Other payables and accruals 12,709 Inter-company Creditors (1) 122,967 Subtotal 137,249 Total 203,072 Note: (1) The entitlements of the Inter-Company Creditors shall be deemed as distributed and fully settled even though no actual distribution will be made. Secured Creditor The only secured creditor of SMSB is Malayan Banking Berhad ( MBB ), with outstanding bank guarantee, overdraft and bankers acceptance of RM65,788,000 as at the Cut-off Date secured by a fixed and floating debenture over all the present and future assets of SMSB ( MBB Debenture ). It is proposed that a fixed sum of RM15,474,984 ( SMSB Secured Settlement Sum ) be used as the settlement amount to MBB. The SMSB Secured Settlement Sum is arrived at after taking into consideration the estimated NBV of SMSB s assets as at the Cut-off Date (on the basis that the amounts owing from companies within the SBGB Group of RM30,525,000 are set-off against the amounts owing to companies within the SBGB Group of RM122,967,000) and SMSB s continuing losses since the Cut-off Date up to 28 February 2013, and in view of continuing losses after that. The SMSB Secured Settlement Sum is proposed to be apportioned towards settlement of the amount owing to MBB as follows: (i) 44.75% of the SMSB Secured Settlement Sum or RM6,925,237 is proposed to be settled by SMSB through the issuance of 69,252,370 Debt Settlement Shares to the secured Scheme Creditors of SMSB, together with 34,626,185 Debt Settlement Warrants on the basis of one (1) Debt Settlement Warrant for every two (2) Debt Settlement Shares to be issued; 12

13 (ii) (iii) (iv) 33.29% of the SMSB Settlement Sum or RM5,151,416, is proposed to be paid in cash from the proceeds from Proposed Rights Issue with Warrants to the secured Scheme Creditors of SMSB; 21.96% of the SMSB Settlement Sum or RM3,398,331 will be restructured into a seven (7) year term loan with the secured Scheme Creditors of SMSB with only interest payable in the first (1st) and second (2nd) years, and principal payable annually in equal instalments, together with interest, over the remaining five (5) years. The term loan shall be secured against the existing MBB Debenture and the New Debenture. It is to be noted that upon approval of the Proposed Debt Settlement by the Scheme Creditors, the Scheme Creditors shall be deemed to have consented to the existing MBB Debenture and the New Debenture ranking after any security that may be created in favour of the future creditors of the Company, SCSB and SMSB to enable the Group to raise such additional borrowings which require such security that ranks higher than the existing MBB Debenture and the New Debenture to be created for the new borrowings. The balance owing to MBB as at the Cut-off Date after the above settlement ( Unsecured Debt-MBB ) amounting to RM50,313,016, shall be ranked and settled as part of the unsecured creditors of SMSB as described below and concurrently ranked for settlement under the proposed scheme of arrangement of SBGB pursuant to the corporate guarantee issued by SBGB in favour of MBB. HP Creditors It is proposed that the amounts owing to the HP Creditors of SMSB with claims on existing hire purchase assets that are currently used in the operations of SBGB Group shall be settled in full from proceeds raised from the Proposed Rights Issue with Warrants. Unsecured Creditors It is proposed that a fixed sum of RM5,813,551 ( SMSB Unsecured Settlement Sum ) be used as the settlement amount to the unsecured Scheme Creditors of SMSB. The SMSB Unsecured Settlement Sum is proposed to be apportioned towards the settlement of the unsecured Scheme Creditors of SMSB (including the Unsecured Debt MBB but excluding Inter-Company Creditors) and is proposed to be settled via the issuance of 58,135,510 Debt Settlement Shares to the unsecured Scheme Creditors of SMSB, together with 29,067,755 Debt Settlement Warrants on the basis of one (1) Debt Settlement Warrant for every two (2) Debt Settlement Shares to be issued. The remaining amount owing to the unsecured Scheme Creditors of SMSB (including the Unsecured Debt MBB), except for those with a corporate guarantee from SBGB which shall be entitled to rank their remaining amounts after the SMSB Unsecured Settlement Sum for settlement as an unsecured creditor of SBGB to the extent of amounts not settled above, plus any interest, penalty or charges accruing to the unsecured Scheme Creditors of SMSB shall be waived. The total sum to be paid out to the unsecured Scheme Creditors of SMSB shall be up to the SMSB Unsecured Settlement Sum and shall be distributed on a pari passu basis to the unsecured Scheme Creditors of SMSB as at the Cut-off Date. 13

14 2.4.2 Ranking of the Debt Settlement Shares and the new SBGB Shares to be issued arising from the exercise of the Debt Settlement Warrants The Debt Settlement Shares shall, upon issue and allotment, rank pari passu in all respects with the then existing SBGB Shares except that they will not be entitled to any dividends, rights, allotments and/or distributions which may be declared, made or paid, for which the entitlement date of which is before the allotment of the Debt Settlement Shares. The new SBGB Shares arising from the exercise of the Debt Settlement Warrants shall, upon issue and allotment, rank pari passu in all respects with the then existing SBGB Shares except that they will not be entitled to any dividends, rights, allotments and/or distributions which may be declared, made or paid, for which the entitlement date of which is before the allotment of the new SBGB Shares arising from the exercise of the Debt Settlement Warrants Indicative salient terms of the Debt Settlement Warrants The indicative salient terms of the Debt Settlement Warrants are as set out in Appendix I of this announcement Listing of the Debt Settlement Shares, Debt Settlement Warrants and the new SBGB Shares to be issued arising from the exercise of the Debt Settlement Warrants An application will be made to Bursa Securities for the listing of and quotation for the Debt Settlement Shares, Debt Settlement Warrants and the new SBGB Shares to be issued arising from the exercise of the Debt Settlement Warrants on the Main Market of Bursa Securities. 2.5 Proposed Rights Issue with Warrants Details of the Proposed Rights Issue with Warrants The Proposed Rights Issue with Warrants will be implemented upon completion of the Proposed Capital Reduction, the Proposed Consolidation and the Proposed Share Premium Reduction. The Proposed Rights Issue with Warrants will entail the issuance of 626,289,820 Rights Shares at an indicative issue price of RM0.10 per Rights Share on a renounceable basis of one hundred fifty-four (154) Rights Shares for every ten (10) SBGB Share held after the Proposed Capital Reduction and the Proposed Consolidation, together with 626,289,820 free detachable Rights Warrants on the basis of one (1) Rights Warrant for every one (1) Rights Share subscribed by the entitled shareholders of SBGB ("Entitled Shareholders"), on an entitlement date to be determined and announced later ( Entitlement Date ). The Entitlement Date will be determined by the Board after obtaining the approvals for the Proposed Rights Issue with Warrants from all relevant authorities and the shareholders of the Company. The Proposed Rights Issue with Warrants is renounceable in full or in part. Accordingly, Entitled Shareholders can subscribe for and/or renounce their entitlements to the Rights Shares in full or in part. The Warrants will be immediately detached from the Rights Shares upon issuance and will be traded separately. The renunciation of the Rights Shares by the Entitled Shareholders will accordingly entail the renunciation of the Warrants to be issued together with the Rights Shares pursuant to the Proposed Rights Issue with Warrants. If the Entitled Shareholders decide to subscribe for only part of their Rights Shares entitlements, they shall be entitled to the Warrants in proportion of their subscription of their Rights Shares entitlements. The Rights Shares which are not validly taken up shall be made available for 14

15 excess application by the Entitled Shareholders and/or their renouncee(s). It is the intention of the Board to allocate the excess Rights Shares in a fair and equitable manner on a basis to be determined by the Board and announced later by the Company. Any fractional entitlements under the Proposed Rights Issue With Warrants will be disregarded and shall be dealt with in such manner as the Board shall in their absolute discretion think expedient or to be in the best interests of the Company Rationale for the Proposed Rights Issue with Warrants After due consideration of the various methods of fund raising such as private placement, issuance of debt instruments and bank borrowings, the Board is of the view that the Proposed Rights Issue with Warrants is the most appropriate method of fund raising after taking into consideration the following: (i) (ii) (iii) the Proposed Rights Issue with Warrants will enable the Company to raise funds to regularise its financial condition; the Proposed Rights Issue with Warrants will involve the issuance of new SBGB Shares with minimal dilution to existing shareholders equity interest, assuming all the entitled shareholders fully subscribe for their respective entitlements as compared with a private placement exercise; and the Proposed Rights Issue with Warrants will provide an opportunity for the existing shareholders to further participate in the equity of the Company and its prospects and future growth Undertakings by substantial shareholders and underwriting arrangement The Proposed Rights Issue with Warrants will not be undertaken on a minimum subscription basis. The Company is in the midst of procuring certain shareholders to provide written irrevocable undertakings to subscribe for their entitlements to the Rights Shares. Underwriting arrangements will be made by the Company in relation to the Proposed Rights Issue with Warrants. The said underwriting arrangements are expected to be in place prior to the announcement of the entitlement date and the underwriting commission to be borne by the Company will be based on commercial terms which are expected to be in line with underwriting fees charged in recent rights issues. Details of the underwriting arrangements will be disclosed in the abridged prospectus to be issued in relation to the Proposed Rights Issue with Warrants Basis of determination of the issue price of the Proposed Rights Issue with Warrants The indicative issue price for the Rights Shares of RM0.10 each, was determined using market based pricing principles after taking into consideration the prevailing market price of SBGB Shares, future business prospect of the SBGB Group as well as the par value of the SBGB Shares. Due consideration was also given to the fact that the Rights Warrants will be issued for free to the subscribers of the Rights Shares. 15

16 2.5.5 Basis of determination of the exercise price of the Warrants The final exercise price of the Warrants shall be determined by the Board after receipt of all relevant approvals but before the Entitlement Date, after taking into consideration, inter-alia, the market demand for SBGB Shares, prevailing market conditions and market price of SBGB Shares preceding the price-fixing date to be determined by the Board, but will not be lower than the par value of SBGB Shares. The Board may fix the final exercise price of the Warrants at a level that is in the best interests of the Company Ranking of the Rights Shares and new SBGB Shares arising from the exercise of the Rights Warrants The Rights Shares shall, upon issue and allotment, rank pari passu in all respects with the then existing SBGB Shares except that they will not be entitled to any dividends, rights, allotments and/or distributions which may be declared, made or paid, for which the entitlement date of which is before the allotment of the Rights Shares. The new SBGB Shares arising from the exercise of the Rights Warrants shall, upon issue and allotment, rank pari passu in all respects with the then existing SBGB Shares except that they will not be entitled to any dividends, rights, allotments and/or distributions which may be declared, made or paid, for which the entitlement date of which is before the allotment of the new SBGB Shares arising from the exercise of the Rights Warrants Listing of the Rights Shares and Rights Warrants An application will be made to Bursa Securities for the listing of and quotation for the Rights Shares and Rights Warrants to be issued pursuant to the Proposed Rights Issue with Warrants and the new SBGB Shares to be issued arising from the exercise of the Rights Warrants on the Main Market of Bursa Securities Indicative salient terms of the Rights Warrants The indicative salient terms of the Rights Warrants are as set out in Appendix I of this announcement Utilisation of proceeds from the Proposed Rights Issue with Warrants For illustrative purposes, based on the indicative issue price of RM0.10 per Rights Share, the Proposed Rights Issue with Warrants is expected to raise gross proceeds of RM62,628,982. The gross proceeds from the Proposed Rights Issue with Warrants will be utilised to repay creditors pursuant to the Proposed Debt Settlement, to finance the working capital requirements of the SBGB Group (which are expected to regularise the financial condition of the Group and contribute positively towards the earnings potential of the SBGB Group in the future) and to defray the estimated expenses for the Proposed Regularisation Plan. The utilisation of proceeds to be raised from the Proposed Rights Issue with Warrants is set out below: 16

17 Details of utilisation Estimated timeframe for utilisation of proceeds Gross Proceeds RM 000 Proposed Debt Settlement (1) Within two (2) months 39,451 Repayment of liabilities post 29 February Within two (2) months 11, Working capital (2) Within three (3) months 6,874 Estimated expenses in relation to the Within three (3) months 4,708 Proposed Regularisation Plan (3) Total utilisation 62,629 Note: (1) The Company has estimated the following breakdown of proceeds from the Proposed Rights Issue with Warrants to be utilised for the Proposed Debt Settlement: No. Items RM SBGB - unsecured creditors 7, SCSB - secured creditor 2,996 - HP Creditors 10,164 - unsecured creditors 13, SMSB - secured creditor 5,151 - HP Creditors 35 39,451 (2) (3) General operating expenses of the Group including but not limited to production cost, advertising & promotion, administration expenses and selling & distribution cost. The estimated expenses of approximately RM4.708 million consists of estimated professional fees, fees payable to authorities, underwriting fees and printing costs. Any surplus or shortfall of funds for the payment of expenses in relation to the Proposed Regularisation Plan will be adjusted accordingly from or to the working capital, as the case may be. Pending utilisation of proceeds from the Proposed Rights Issue with Warrants for the above working capital purposes, the proceeds would be placed in deposits with financial institutions or short-term money market instruments. The proceeds raised from the exercise of the Rights Warrants are dependent on the exercise price to be determined later and on the total number of Rights Warrants to be exercised during the tenure of the Rights Warrants. The proceeds from the exercise of the Rights Warrants will be received on an as and when basis over the exercise period of the Rights Warrants. The proceeds to be raised upon full exercise of the Right Warrants based on the indicative exercise price of RM0.10 per Rights Warrants is approximately RM62,629,000. Such proceeds will be utilised for the working capital requirements or repayment of liabilities of the SBGB Group. 17

18 2.6 Proposed Issuance of Securities pursuant to the Interim Funding Details of Proposed Issuance of Securities pursuant to the Interim Funding The Company and IOSB had entered into the Interim Funding Agreement with the Investors to obtain funding of RM16.0 million to SBGB Group ( Interim Funding ) to immediately start to implement its business turnaround plans pending the approval and implementation of the Proposed Regularisation Plan under PN17 of the Main Market Listing Requirements of Bursa Securities. The salient terms of the Interim Funding Agreement are as follows: a) The Interim Funding will be raised via the issuance of RM16.0 million RPS by IOSB, a wholly-owned subsidiary company of SCSB. The indicative salient terms of the RPS are disclosed in Appendix II of this announcement; b) IOSB had purchased unencumbered machinery and equipment of SCSB valued at RM51,840,400, in consideration for the issuance of 1,000 new ordinary shares of IOSB to SCSB; c) The proceeds of the Interim Funding will be utilised to carry out urgent repairs and maintenance to the machinery and equipment of the Group, to fund a relocation exercise (if and when it is appropriate to do so), and as additional working capital for the Group; d) Upon implementation of the Proposed Regularisation Plan, the RPS (including the accumulated dividends) will be exchangeable for the new SBGB Shares together with free detachable warrants, on the basis of RM1.00 of outstanding RPS (plus dividend) for ten (10) new SBGB shares of RM0.10 each with twenty (20) free detachable warrants; e) At the same time as the exchange in (d) above, the Investors which had provided the Interim Funding shall be given options to subscribe for up to approximately 40% of the enlarged share capital of the Company over the next three (3) years (together with free detachable warrants), at a price equal to the par value of the SBGB Shares. The Investors shall be granted the options to subscribe for:- (i) (ii) (iii) (iv) 10% of the prevailing enlarged share capital of the Company upon approval of the Proposed Regularisation Plan by Bursa Securities; 10% of the prevailing enlarged share capital of the Company within the next twelve (12) months thereafter; 10% of the prevailing enlarged share capital of the Company within the twelve (12) months to twenty-four (24) months after the said approval; and the remaining 10% of the prevailing enlarged share capital of the Company within twenty-four (24) and thirty-six (36) months after the said approval; f) In the event that exchange of the RPS with new SBGB Shares together with free warrants on the basis of one (1) outstanding RPS (plus dividend) for ten (10) SBGB Shares (or such equivalent ratio if there is a change in the par value of ordinary shares of SBGB after the Proposed Regularisation Plan) together with twenty (20) free 18

19 Warrants, is not approved by the shareholders of the Company or the Scheme Creditors as may be required, the Investors shall have the option to require SBGB to purchase all the RPS at the cash price of RM2.50 per RPS, within sixty (60) days after the Investors deliver such notice of exercise to the Company; g) A new management team comprising the existing management team of the Group, new recruits and the representatives of the Investors shall be tasked with spearheading the turnaround efforts, and incentivised by, inter alia, 20% of the SBGB Shares (and free warrants) entitlements of the Investors in (e) above; h) As further incentive for the new management team, the management team will be entitled to a performance incentive. Pursuant to an agreement dated 22 July 2013 between SBGB, IOSB, Covenant and various employees of the SBGB Group, namely Lim Teik Ee, Chong Heng Loon, Annie N Ingkian and George Tan Geok Tang ("Management Team Agreement"), the Management Team (comprising the abovenamed employees and the Investors) would be entitled to a profit share equivalent to 10% of the audited profit before tax if the Group is able to achieve a consolidated audited profit before tax for any financial year of at least RM5,000,000 (or such proportion thereof in the first financial year of the Management Team Agreement) plus an additional 5% of the consolidated audited profit before tax in excess of RM10,000,000; and i) An employee share option scheme will also be implemented as an added measure to motivate and drive performance amongst the employees. Hence, as part of the Proposed Issuance of Securities pursuant to the Interim Funding, it is proposed that pursuant to the Proposed Regularisation Plan, the Company carries out the following: (a) An issuance of up to 172,800,000 new SBGB Shares of RM0.10 each with 345,600,000 free detachable warrants to the Investors in exchange for the RM16 million RPS and RM1.28 million of cumulative dividend payable assuming that the 8% dividend payable per annum for the RPS have been accumulated for 1 year, from the Investors on the basis of ten (10) new SBGB Shares with twenty (20) free detachable warrants for every RM1.00 of the par value of RPS and accrued dividend outstanding on the RPS ( Proposed Exchange of RPS ); (b) Issuance of up to 500,344,703 new SBGB Shares together with up to 500,344,703 Warrants, representing up to approximately 40% of the enlarged share capital of the Company pursuant to the exercise of the proposed options granted pursuant to the Interim Funding Agreement in the following tranches as follows: (i) (ii) (iii) (iv) 10% of the enlarged issued and paid-up share capital of SBGB upon approval of the Proposed Regularisation Plan by Bursa Securities ( Proposed 1 st Tranche Option ); 10% of the enlarged issued and paid-up share capital of SBGB within the next twelve (12) months thereafter; 10% of the enlarged issued and paid-up share capital of SBGB within the twelve (12) months to twenty-four (24) months after the said approval, and the remaining 10% of the enlarged issued and paid-up share capital of SBGB within twenty-four (24) and thirty-six (36) months after the said approval. 19

20 ((ii), (iii) and (iv) above shall be known as the Proposed Later Tranches Options ) Each of the tranches above is estimated to comprise the issuance of 125,086,176 new SBGB Shares with 125,086,176 free detachable warrants. (iii) An employee share option scheme of up to 10% of the enlarged share capital of the Company, to the employees of the SBGB Group ( the Proposed ESOS ) Background information of IOSB and the Investors in relation to the Interim Funding IOSB IOSB, a wholly-owned subsidiary of SCSB, was incorporated on 28 November 2012 as a private limited company under the Companies Act. The company is dormant since the date of incorporation. The authorised share capital is RM100,000 comprising 100,000 ordinary shares of RM1.00 each. The total issued and paid- up capital is RM1, Covenant Suncsi Covenant was incorporated on 5 April 2005 as a private limited company under the Companies Act. It is principally engaged in the provision of business consultancy, management services and other related services. The authorised share capital of Covenant is RM1,000,000 comprising 950,000 ordinary shares of RM1.00 each and 50,000 redeemable non cumulative non convertible preference shares of RM1.00 each. The total issued and paid-up capital is RM500,000 comprising 500,000 ordinary shares of RM1.00 each. The shareholders of Covenant are as follows: Direct Indirect Shareholders Nationality No of shares held % No of shares held % Chew Chong Eu Malaysian 460, Dawin Tang Keng Wai Malaysian 40, The directors of Covenant are Dawin Tang Keng Wai and Sharinah Binti Mohamed Iqbal.. Covenant was initially engaged as the corporate adviser of SBGB and later appointed to assist in managing the operations of SBGB. Suncsi was incorporated on 6 July 1992 as a private limited company under the Companies Act. The company is principally involved in investment holding. The authorised share capital is RM25,000 comprising 25,000 ordinary shares of RM1.00 each. The total issued and paid-up share capital is RM20,006 comprising 20,006 ordinary shares of RM1.00 each. 20

21 The shareholders and directors of Suncsi are as follows: Shareholders and Directors Direct No of shares held % Indirect No of shares held % Nationality Loke Choon Jin Malaysian 20, Gan Kam Ling Malaysian Basis of determining the issue price for the issuance of new SBGB Shares The issue price for the issuance of new SBGB Shares pursuant to the Proposed Issuance of Securities pursuant to the Interim Funding will be RM0.10 each and was determined based on the par value of the SBGB Shares and as agreed pursuant to the terms of Interim Funding Agreement Basis of determining the exercise price of the Warrants The final exercise price of the Warrants shall be determined by the Board after receipt of all relevant approvals, after taking into consideration, inter-alia, the market demand for SBGB Shares, prevailing market conditions and market price of SBGB Shares preceding the pricefixing date to be determined by the Board, but will not be lower than the par value of SBGB Shares. The Board may fix the final exercise price of the Warrants at a level that is in the best interests of the Company Ranking of the new SBGB Shares The new SBGB Shares shall, upon issue and allotment, rank pari passu in all respects with the then existing SBGB Shares except that they will not be entitled to any dividends, rights, allotments and/or distributions which may be declared, made or paid, for which the entitlement date of which is before the allotment of the new SBGB Shares. The new SBGB Shares arising from the exercise of the Warrants shall, upon issue and allotment, rank pari passu in all respects with the then existing SBGB Shares except that they will not be entitled to any dividends, rights, allotments and/or distributions which may be declared, made or paid, for which the entitlement date of which is before the allotment of new SBGB Shares arising from the exercise of the Warrants Indicative salient terms of the Warrants The indicative salient terms of the Warrants are as set out in Appendix I of this announcement Listing of the new SBGB Shares and Warrants An application will be made for the admission of the Warrants to the Official List of Bursa Securities as well as the listing of and quotation for the new SBGB Shares and Warrants to be issued pursuant to the Proposed Issuance of Securities pursuant to the Interim Funding and new SBGB Shares to be issued pursuant to the exercise of the Warrants on the Main Market of Bursa Securities. 21

22 2.7 Proposed ESOS Details of the Proposed ESOS The Company proposes to establish and implement an ESOS of up to 125,086,176 new SBGB Shares, based on ten percent (10%) of the enlarged issued and paid-up share capital of the Company after the Proposed Regularisation Plan (but before the Proposed Later Tranches Options and the Proposed ESOS), for eligible employees of the Group, which includes any person under a contract of service or for service of the Group, including the executive directors and non-executive directors of SBGB ( the Eligible Employees ), in accordance with the by-laws of the Proposed ESOS ( By-Laws ) Eligibility The Proposed ESOS will involve the granting of options to the Eligible Employees who meet the criteria of eligibility for participation in the Proposed ESOS to subscribe for new SBGB Shares in accordance with the by-laws of the Proposed ESOS and/or any other conditions contained in the offer letters pursuant to the offers to the Eligible Employees. The Proposed ESOS will be administered by an ESOS committee to be duly appointed and authorised by the Board. Further details of the eligibility to participate in the Proposed ESOS will be set out in the circular to shareholders of SBGB, which will be dispatched in due course Maximum allowable allotment and basis of allocation The aggregate number of new SBGB Shares that may be offered under the ESOS to the Eligible Employees shall take into consideration, amongst other factors, the Eligible Employees length of service, seniority and performance in SBGB Group subject to the following:- (i) (ii) not more than 50% of the total number of SBGB Shares to be issued under the Proposed ESOS shall be allocated, in aggregate, to directors and senior management of SBGB Group; and not more than 10% of the total number of SBGB Shares to be issued under the Proposed ESOS would be allocated to any Eligible Employees, who either singly or collectively through persons connected with them holds 20% or more of the issued and paid-up share capital of SBGB, provided always that it is in accordance with any prevailing guidelines, the Main Market LR or any other relevant authorities and as amended from time to time Duration of the Proposed ESOS The Proposed ESOS shall come into force on the date of full compliance with all relevant requirements pursuant to the Main Market LR ( Effective Date ). The Proposed ESOS shall be in force for duration of five (5) years from the Effective Date subject however to any extension for a further period of up to five (5) years at the discretion of the Board upon the recommendation of the ESOS committee. 22

23 2.7.5 Exercise Price The price payable for the SBGB Shares upon the exercise of any ESOS options granted pursuant to the Proposed ESOS shall be based on the higher of the following:- (i) (ii) the five (5)-day VWAMP of SBGB Shares immediately preceding the date of the option is offered, with a discount of not more than 10% of the said VWAMP; or the par value of the SBGB Shares. The exercise price shall be subject to adjustments in accordance with the By-Laws Ranking of the SBGB Shares arising from the Proposed ESOS The new SBGB Shares to be allotted and issued upon any exercise of the ESOS option shall, upon allotment and issue, rank pari passu in all respects with the then existing SBGB Shares in issue, save and except that they will not be entitled to any dividends, rights, allotments and/or other distributions, that may be declared, made or paid prior to the allotment and issue of the new SBGB Shares Listing of and quotation for the new SBGB Shares The Company will make the necessary application to Bursa Securities for the listing of and quotation for the new SBGB Shares to be issued pursuant to the exercise of the ESOS options to be granted under the Proposed ESOS on the Main Market of Bursa Securities Termination Subject to compliance with the requirements of Bursa Securities and any other relevant authorities, the Company may terminate the continuation of the Proposed ESOS at any time and no further offers shall be made by the ESOS committee. 2.8 Proposed M&A Amendments It is proposed that the Memorandum & Articles of Association of SBGB be amended to facilitate the change in par value of each ordinary share in SBGB from RM0.50 to RM0.10 each pursuant to the Proposed Capital Reduction and the Proposed Consolidation. 2.9 Proposed Liquidation of Subsidiary Companies It is proposed that the Company winds-up and/or causes the following subsidiary companies to be struck of the register and dissolved: (i) (ii) (iii) (iv) (v) (vi) Inforaire Sdn Bhd; Stanson Distribution Sdn Bhd; Stanson Group Sdn Bhd; Stanson Multicom Sdn Bhd; Madeleine Cafe Sdn Bhd; Madeleine Foods Sdn Bhd; 23

24 (vii) (viii) Madelaine Bakery Sdn Bhd; and Madeleine Property Sdn Bhd. The rationale for the liquidation of the abovementioned subsidiary companies of the Company is based on the fact that these companies are not essential for the future business operations of the Group and with the implementation of the Proposed Liquidation of Subsidiary Companies, the Group can focus wholly on its essential operating subsidiary companies. It should be noted that currently, the Group s turnaround plans may include utilising the Madeleine Cafe brand of which a trademark has been registered under Madeleine Foods Sdn Bhd ( MFSB ). If required, Proposed Liquidation of Subsidiary Companies may be amended to exclude the liquidation of MFSB. 3. RATIONALE FOR THE PROPOSED REGULARISATION PLAN SBGB had, on 29 February 2012, announced that it is classified as a PN17 Company pursuant to PN17 of the Main Market LR. Pursuant to the requirements under PN17 of the Main Market LR, the Company has an obligation to undertake a regularisation plan which: (i) (ii) (iii) is sufficiently comprehensive and capable of resolving all problems, financial or otherwise that had caused the Company to trigger the prescribed PN17 criteria; enables the Company to regularise its financial condition and level of operations, such that the Company no longer triggers any of the PN17 prescribed criteria; and is fair and reasonable to the Company and its shareholders and will increase shareholders' value. The Proposed Capital Reduction and the Proposed Share Premium Reduction are to facilitate the reduction and elimination of the accumulated losses of the Company. The Proposed Debt Settlement will enable the Group to resolve its debt obligations to the Scheme Creditors. The Proposed Rights Issue with Warrants will enable the Group to repay its creditors pursuant to the Proposed Debt Settlement as well as provide funds for working capital purposes and to defray the estimated expenses of the Proposed Regularisation Plan. The Proposed Issuance of Securities pursuant to the Interim Funding is to allow SBGB to exchange the RPS issued by IOSB, a wholly-owned subsidiary of its subsidiary, SCSB in order to redeem and cancel the RPS and extinguish the debt owing to the Investors via the issuance of SBGB Shares and Warrants as well as to provide the Investors with options to subscribe for further SBGB Shares in the future. The Proposed M&A Amendments will enable the Company to facilitate the Proposed Capital Reduction and the Proposed Consolidation. The Proposed Liquidation of Subsidiary Companies will enable the Group to focus wholly on its essential operating subsidiary companies. The Proposed ESOS is established to encourage Eligible Employees as the Proposed ESOS will allow them to participate directly in the equity of SBGB and to reward and retain the 24

25 Eligible Employees whose services are deemed essential to the continued growth of SBGB Group. 25

26 4. EFFECTS OF THE PROPOSED REGULARISATION PLAN The Proposed M&A Amendments will not have any effect on the issued and paid-up share capital and substantial shareholders shareholdings of the Company, and the NA per Share, gearing, earnings and EPS of SBGB Group. 4.1 Share capital The effects on the issued and paid-up share capital of SBGB pursuant to the Proposed Regularisation Plan are as follows: Number of Par Value Amount shares RM RM Issued and paid-up as at 1 October ,681, ,340,852 After the Proposed Capital Reduction, Proposed Consolidation and Proposed Share Premium Reduction 40,668, ,066,817 Pursuant to the Proposed Debt Settlement 411,103, ,110,377 Pursuant to the Proposed Rights Issue with Warrants 626,289, ,628,982 Pursuant to the Proposed Exchange of RPS 172,800, ,280,000 1,250,861, ,086,176 Pursuant to the Proposed 1st Tranche Option 125,086, ,508,618 1,375,947, ,594,793 Pursuant to the Proposed Later Tranches Options 375,258, ,525,853 1,751,206, ,120,646 Pursuant to the exercise of the Debt Settlement Warrants from the Proposed Debt Settlement 205,551, ,555,189 Pursuant to the exercise of the Rights Warrants from the Proposed Rights Issue with Warrants 626,289, ,628,982 Pursuant to the exercise of warrants from the Proposed Exchange of RPS and Proposed 1st Tranche Option 470,686, ,068,618 Pursuant to the exercise of ESOS Options 125,086, ,508,618 3,178,820, ,882,052 Pursuant to the exercise of warrants from the Proposed Later Tranches Options 375,258, ,525,853 Fully enlarged share capital 3,554,079, ,407,905 26

27 4.2 Net Asset ( NA ) and gearing The proforma effects on the consolidated NA, NA per share and gearing of SBGB pursuant to the Proposed Regularisation Plan are as follows: 4.3 Earnings The Proposed Capital Reduction, Proposed Consolidation, Proposed Share Premium Reduction and Proposed M&A Amendments are not expected to have any effect on the earnings and EPS of SBGB Group. 27