RHB Investment Bank Berhad (Company No P) (A Participating Organisation of Bursa Malaysia Securities Berhad)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action you should take, please consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. (Company No A) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE PROPOSED ESTABLISHMENT OF NEW EMPLOYEES SHARE OPTION SCHEME ( ESOS ) OF UP TO 15% OF THE ISSUED AND PAID-UP SHARE CAPITAL (EXCLUDING TREASURY SHARES) OF KOBAY TECHNOLOGY BHD. ( KOBAY ) TO ELIGIBLE DIRECTORS AND EMPLOYEES OF KOBAY, AND ITS SUBSIDIARIES AND NOTICE OF EXTRAORDINARY GENERAL MEETING Adviser RHB Investment Bank Berhad (Company No P) (A Participating Organisation of Bursa Malaysia Securities Berhad) The Notice of the Extraordinary General Meeting ("EGM") of Kobay to be held at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, Bayan Lepas, Penang, on Wednesday, 9 December 2015 at 2.45 p.m. or immediately following the conclusion or adjournment of the 21 st Annual General Meeting ("AGM") of the Company, scheduled to be held at the same venue and on the same date at 2.30 p.m., whichever shall be later, together with the accompanying Form of Proxy are enclosed herewith. The Form of Proxy should be completed and lodged at the Registered Office of the Company at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, Bayan Lepas, Penang, not less than 48 hours before the time set for holding the EGM or at any adjournment thereof, as indicated below. The lodging of the Form of Proxy shall not preclude you from attending, speaking and voting in person at the EGM should you subsequently wish to do so. Last date and time for lodging the Form of Proxy... : Monday, 7 December 2015 at 2.45 p.m. Date and time of the EGM... : Wednesday, 9 December 2015 at 2.45 p.m. or immediately following the conclusion or adjournment of the AGM, whichever shall be later This Circular is dated 17 November 2015

2 DEFINITIONS Except where the context otherwise requires, the following definitions shall apply throughout this Circular: "Act" : Companies Act, 1965 "Board" "Bursa Depository" "Bursa Securities" "By-Laws" "Circular" "Director" Effective Date "EGM" "Eligible Employee" Employee "EPS" "ESOS Committee" GST "Grantee" "Kobay" or the "Company" "Kobay Group" or the "Group" "Listing Requirements" : Board of Directors of Kobay : Bursa Malaysia Depository Sdn Bhd ( W) : Bursa Malaysia Securities Berhad ( W) : The terms and conditions governing the Proposed ESOS as may be amended, modified and supplemented from time to time : This circular to shareholders dated 17 November 2015 in relation to the Proposed ESOS : A natural person who holds a directorship in the Company, whether in an executive or non-executive capacity, and shall have the meaning given in Section 4 of the Act and Section 2(1) of the Capital Markets & Services Act 2007 : The date the Scheme takes effect, being the date on which the last of the approvals and/or conditions referred to in Section 2.2(iv) of this Circular have been obtained and/or complied with : Extraordinary General Meeting : An Employee or Director of Kobay Group (excluding subsidiaries which are dormant) who meet the criteria of eligibility for participation in the Scheme as set out in Section 2.2(iii) of this Circular : Any person who is employed by any corporation of Kobay Group (excluding subsidiaries which are dormant) and is on the payroll of Kobay Group (excluding subsidiaries which are dormant) : Earnings per share : The committee comprising such persons as may be appointed and authorised by the Board to administer the Scheme in accordance with the provisions of the By-Laws : Goods and Services Tax : Any Eligible Employee who has accepted the Offer by the Company in accordance with the terms of the Scheme : Kobay Technology Bhd. ( A) : Kobay and its subsidiary companies : Main Market Listing Requirements of Bursa Securities i

3 DEFINITIONS (CONT D) "LPD" Market Day Maximum Scenario "MFRS 2" Minimum Scenario "NA" "Offer" Offer Date "Option(s)" Option Period "Option Price" Persons Connected "Proposed ESOS" "RHBIB" or the Adviser "RM" and "sen" Scheme "Share(s)" : 30 October 2015, being the latest practicable date prior to the printing of this Circular : A day on which Bursa Securities is open for trading in securities : Assuming that all of the treasury shares held by the Company have been resold in the open market as at the LPD : Malaysian Financial Reporting Standard no. 2 Share Based Payments : Assuming that none of the treasury shares held by the Company have been resold in the open market as at the LPD : Net assets : An offer made in writing by the ESOS Committee to a selected Eligible Employee in the manner provided under the By-Laws : The date on which an Offer is made to a selected Eligible Employee to participate in the Scheme by the ESOS Committee : The right of a Grantee to subscribe for new Shares pursuant to the contract constituted by the selected Eligible Employee s acceptance of an Offer in the manner indicated in the By-Laws : A period commencing from the date an Offer is accepted and expiring on the last day of the period referred to in Section 2.2(iv) of this Circular, subject always to early termination in accordance with the provisions of Section 2.2(iv) of this Circular : The price at which a Grantee shall be entitled to subscribe for new Shares pursuant to the exercise of an Option as set out in the By- Laws : Has the same meaning as that assigned to Person Connected in paragraph 1.01 of the Listing Requirements : Proposed establishment of a new employees share option scheme of up to fifteen percent (15%) of the issued and paid-up share capital (excluding treasury shares) of the Company at any one time over the duration of the scheme for the Eligible Employees : RHB Investment Bank Berhad (19663-P) : Ringgit Malaysia and sen, respectively The employees share option scheme for the grant of Options to selected Eligible Employees to subscribe for new Shares on the terms as set in the By-Laws : Ordinary share(s) of RM1.00 each in Kobay ii

4 DEFINITIONS (CONT D) Unless specifically referred to, words denoting the singular shall include the plural and vice versa and words denoting the masculine gender shall include the feminine and neuter genders and vice versa. References to persons shall include corporations. Any discrepancies in the tables included in this Circular between the amounts listed, actual figures and the totals thereof are due to rounding. Any reference to time of day in this Circular is a reference to Malaysian time, unless otherwise stated. Any reference in this Circular to any enactment or guidelines is a reference to that enactment or guidelines as for the time being amended or re-enacted. Certain statements in this Circular may be forward-looking in nature, which are subject to uncertainties and contingencies. Forward-looking statements may contain estimates and assumptions made by the Board after due enquiry, which are nevertheless subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in such forward-looking statements. In light of these and other uncertainties, the inclusion of a forward-looking statement in this Circular should not be regarded as a representation or warranty that Kobay s plans and objectives will be achieved. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK iii

5 TABLE OF CONTENTS LETTER TO THE SHAREHOLDERS OF KOBAY IN RELATION TO THE PROPOSED ESOS SECTION PAGE 1. INTRODUCTION 1 2. DETAILS OF THE PROPOSED ESOS 2 3. UTILISATION OF PROCEEDS 8 4. RATIONALE FOR THE PROPOSED ESOS 8 5. EFFECTS OF THE PROPOSED ESOS 9 6. HISTORICAL SHARE PRICES APPROVALS REQUIRED INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM DIRECTORS' RECOMMENDATION CORPORATE PROPOSALS ANNOUNCED BUT NOT YET COMPLETED ESTIMATED TIME FRAME FOR COMPLETION EGM FURTHER INFORMATION 16 APPENDICES I. DRAFT BY-LAWS OF THE PROPOSED ESOS 17 II. FURTHER INFORMATION 42 NOTICE OF THE EGM ENCLOSED FORM OF PROXY ENCLOSED iv

6 (Company No: A) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office Plot 30, Hilir Sungai Kluang 1 Bayan Lepas Industrial Park Phase 4, Bayan Lepas Penang 17 November 2015 Board of Directors Dr. Mohamad Zabdi Bin Zamrod (Chairman / Independent and Non-Executive Director) Dato Koay Hean Eng (Managing Director / Chief Executive Officer) Koay Cheng Lye (Executive Director / Chief Administrative Officer) Lim Swee Chuan (Executive Director / Chief Financial Officer) Koay Ah Koay Cheng Hock (Non-Independent and Non-Executive Director) Khaw Eng Peng (Senior Independent and Non-Executive Director) To: The Shareholders of Kobay Technology Bhd. Dear Sir/Madam, PROPOSED ESTABLISHMENT OF NEW EMPLOYEES SHARE OPTION SCHEME OF UP TO 15% OF THE ISSUED AND PAID-UP SHARE CAPITAL (EXCLUDING TREASURY SHARES) OF KOBAY TO ELIGIBLE DIRECTORS AND EMPLOYEES OF KOBAY, AND ITS SUBSIDIARIES 1. INTRODUCTION On 15 September 2015, RHBIB had, on behalf of the Board, announced that the Company proposes to undertake the Proposed ESOS. On 28 October 2015, RHBIB had, on behalf of the Board, announced that Bursa Securities had, vide its letter dated 27 October 2015, approved the listing of and quotation for such number of additional new Shares, representing up to fifteen percent (15%) of the issued and paid-up share capital of the Company, to be issued pursuant to the exercise of the Options under the Proposed ESOS, subject to the conditions as set out in Section 7 of this Circular. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE THE SHAREHOLDERS OF KOBAY WITH THE DETAILS OF THE PROPOSED ESOS AS WELL AS TO SEEK THE APPROVAL FROM THE SHAREHOLDERS OF KOBAY ON THE RELEVANT ORDINARY RESOLUTIONS PERTAINING TO THE PROPOSED ESOS TO BE TABLED AT THE COMPANY'S FORTHCOMING EGM. THE NOTICE OF THE FORTHCOMING EGM AND THE FORM OF PROXY FOR THE EGM ARE ENCLOSED TOGETHER WITH THIS CIRCULAR. 1

7 SHAREHOLDERS OF KOBAY ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES CONTAINED HEREIN BEFORE VOTING ON THE ORDINARY RESOLUTIONS PERTAINING TO THE PROPOSED ESOS TO BE TABLED AT THE FORTHCOMING EGM. 2. DETAILS OF THE PROPOSED ESOS 2.1. Proposed ESOS The Company proposes to establish and implement the Scheme which will involve the granting of Options to selected Eligible Employees to subscribe for new Shares at a predetermined price, in accordance with the By-Laws. The Scheme will be administered in accordance with the By-Laws by the ESOS Committee. 2.2 Salient terms of the By-Laws The salient terms of the By-Laws are set out below: (i) Maximum number of new Shares available under the Scheme The total number of new Shares which may be made available under the Scheme shall not exceed fifteen percent (15%) of the total issued and paid-up share capital comprising ordinary shares of the Company (excluding treasury shares) at any point of time during the duration of the Scheme when an Offer is made. The Company will for the duration of the Scheme keep available sufficient number of new Shares in the authorised share capital of the Company to satisfy all outstanding Options which may be exercisable from time to time. Notwithstanding the above or any other provision in the By-Laws, in the event the maximum number of new Shares comprised in the Options granted under the Scheme exceeds the aggregate of fifteen percent (15%) of the issued and paidup share capital of the Company (excluding treasury shares) as a result of the Company purchasing its own Shares in accordance with the provisions of Section 67A of the Act or any other corporate proposal and thereby diminishing its issued and paid-up share capital, then no further Options shall be offered until the total number of new Shares to be issued under the Scheme falls below fifteen percent (15%) of the Company s issued and paid-up share capital (excluding treasury shares). Any Options granted prior to the adjustment of the issued and paid-up share capital of Kobay shall remain valid and exercisable in accordance with the provisions of the Scheme. Notwithstanding the above, the Company may implement more than one (1) employees share option scheme provided that the aggregate number of Shares available under all the schemes implemented by the Company is not more than fifteen percent (15%) of its issued and paid-up share capital (excluding treasury shares) at any one time or such lower or higher limit in accordance with any prevailing guideline issued by Bursa Securities or any other relevant authorities as amended from time to time. 2

8 (ii) Basis of allotment and maximum allowable allotment of Options Subject to any adjustments which may be made under the By-Laws, the aggregate number of Options that may be offered to an Eligible Employee shall always be subject to the following main parameters and provided always that the Proposed ESOS is in accordance with the Listing Requirements, any prevailing guidelines, rules, regulations or requirements issued by Bursa Securities or any relevant authority, as amended from time to time: (a) (b) (c) (d) the total number of new Shares to be made available under the Scheme shall not exceed in aggregate the amount stipulated in Section 2.2(i) above; the number of Shares allocated, in aggregate, to the eligible Directors and senior management of Kobay Group shall not exceed 70% of the total Shares available under the Scheme, which in the opinion of the Board is sufficient to remunerate the eligible Directors and senior management for their contribution to Kobay; the number of Shares allocated to any Eligible Employee who, either singly or collectively through Persons Connected with him, holds twenty percent (20%) or more of the issued and paid-up share capital (excluding treasury shares) of the Company, shall not exceed ten percent (10%) of the total Shares available under the Scheme; and no Directors and Employees shall participate in the deliberation or discussion of the number of Options to be offered to them under the Scheme. In addition and subject always to Section 2.2(ii) above, the basis for determining the aggregate number of new Shares that may be offered under the Scheme shall be at the sole and absolute discretion of the ESOS Committee after taking into consideration, inter-alia, the position, ranking, performance, seniority and length of service of the Eligible Employee or such other matters which the ESOS Committee may in its sole and absolute discretion deem fit. The maximum allowable allocation of Shares (including Shares already issued under the Scheme) comprised in the Options granted under the Scheme to an Eligible Employee shall be based on the group of employees as decided by the ESOS Committee. For the avoidance of doubt, the ESOS Committee shall have sole and absolute discretion in determining whether the Options available for vesting under the Scheme are to be offered to the selected Eligible Employees via: (a) (b) one single grant at a time determined by the ESOS Committee; or several grants where the vesting of Options is staggered or made in several tranches at such times and on terms determined by the ESOS Committee. In the event the ESOS Committee decides that the vesting of Options is to be staggered, the number of Options to be offered pursuant to each vesting of Options and the timing for the vesting of the same shall be decided by the ESOS Committee at its sole and absolute discretion and each vesting of Options shall be separate and independent from the others. There are performance targets which are required to be met before the Options can be granted and/or exercised by a Grantee, unless otherwise stated in a written offer made by the ESOS Committee from time to time in the manner indicated in the By-Laws. 3

9 (iii) Eligibility Any Employee or Director of Kobay Group (excluding subsidiaries which are dormant) who meets the following criteria as at the Offer Date shall be eligible for consideration by the ESOS Committee to participate in the Scheme: (a) such Employee or Director has attained the age of at least eighteen (18) years on the Offer Date and is not an undischarged bankrupt; (b) such Employee (including Executive Director): (aa) (bb) is employed on a full time basis and is on the payroll of at least one (1) company in Kobay Group (excluding subsidiaries which are dormant) and has been in the employment of Kobay Group (excluding subsidiaries which are dormant) for a period of at least three (3) months of continuous service prior to and up to the Offer Date and his employment must have been confirmed in writing on or prior to the Offer Date; or is an employee serving under a fixed term contract of employment on a full time basis. For such employees, the contract of employment must be for a duration of at least one (1) year, unless otherwise decided by the ESOS Committee in its absolute discretion; (c) (d) if the Employee is employed by a company which is acquired, and becomes a subsidiary of the Company (as defined in Section 5 of the Act but excludes dormant subsidiaries) ( Subsidiary ) upon such acquisition during the duration of the Scheme, the Employee must have completed service for a continuous period of at least three (3) months in that Subsidiary following the date that such company becomes or is deemed to be a Subsidiary of Kobay Group; and if he fulfils any other criteria as may be set out by the ESOS Committee from time to time, provided always that nothing shall invalidate any selection of any Eligible Employee which may have been made by the Board prior to the Effective Date of the Scheme and that the selection of any Eligible Employee for participation in the Scheme shall be at the discretion of the ESOS Committee and the decision of the ESOS Committee shall be final and binding. Eligibility under the Scheme does not confer on an Eligible Employee a claim or right to participate in or any rights whatsoever under the Scheme and an Eligible Employee does not acquire or have any rights to over or in connection with the Options or new Shares comprised herein unless an Offer has been made by the ESOS Committee pursuant to the By-Laws to the Eligible Employee and the Eligible Employee has accepted the Offer in accordance with the terms of the Offer and the provisions of the By-Laws. Any allocation of Options under the Scheme to any person who is a Director, or a Person Connected to such Director, major shareholder or Chief Executive Officer of the Company shall require the prior approval of the shareholders of the Company in a general meeting and provided always that the Director, major shareholder, Chief Executive Officer of the Company, or a Person Connected with them shall not have voted on the resolution approving their respective allocations. 4

10 (iv) Duration and Termination of the Scheme The Effective Date of the launch or implementation of the Scheme shall be the date the last of the following approvals and/or conditions have been obtained and/or complied with: (a) (b) (c) (d) (e) submission to Bursa Securities of the final copy of the By-Laws together with a letter of compliance pursuant to Paragraph 6.42 of the Listing Requirements and the checklist showing compliance with Appendix 6E of the Listing Requirements; receipt of approval or approval in-principle, as the case may be, from Bursa Securities for the listing of and quotation for the new Shares to be issued pursuant to the exercise of the Options granted under the Scheme; shareholders approval for the Proposed ESOS at an EGM of the Company to be convened; approval of any other relevant authorities for the Proposed ESOS, if any; and fulfillment of all conditions attached to the above approvals, if any. Unless otherwise terminated and subject to the compliance of the terms of the By-Laws, the Scheme shall be in force for a period of ten (10) years commencing from the Effective Date. The Scheme may be terminated by the Company upon the recommendation of the ESOS Committee at any time during the continuance of the Scheme provided always that prior to the termination of the Scheme, the following conditions must have been satisfied by the Company: (a) (b) that the consent from the Company s shareholders at a general meeting has been obtained wherein at least a majority of the shareholders present must have voted in favour of the termination; and that the written consents from all Grantees who have yet to exercise their Options either in part or in whole have been obtained, whereupon such termination: (a) (b) the Options unexercised or partially exercised shall be deemed to have been terminated and be null and void on the date on which the last of the abovementioned conditions is fulfilled; and the Company shall immediately announce to Bursa Security the: (aa) (bb) (cc) effective date of the termination of the Scheme; number of Options exercised or Shares vested; and reasons for termination of the Scheme. 5

11 (v) Option Price Subject to any adjustments in accordance with the By-Laws, the Option Price shall be determined based on the volume weighted average market price of the Shares for the five (5) Market Days immediately preceding the Offer Date, with a discount of not more than 10% (or such other discount as may be permitted by Bursa Securities). In any event, the Option Price shall not be lower than the par value of the Shares. The Option Price as determined by the ESOS Committee shall be conclusive and binding on the Grantees. (vi) Ranking attaching to New Shares and Rights of a Grantee The new Shares to be allotted and issued upon any exercise of the Options shall, upon such allotment and issue, rank pari passu in all respects with the existing Shares in issue, save and except that the new Shares will not be entitled to any dividends, rights, allotment and/or distributions of which the entitlement date precedes the date of allotment of the said new Shares. For the purpose hereof, entitlement date means the date as at the close of business on which shareholders must be registered on the Register of Depositors in order to participate in any dividends, rights, allotment and/or other distributions. The new Shares will be subject to all the provisions of the memorandum and articles of association of the Company relating to voting, transfer, transmission and/or otherwise of the Shares. The Option shall not carry any right to vote at any general meeting of the Company and the Grantee shall not be entitled to any dividends, rights, allotment and/or other distributions on his unexercised Options. The new Shares allotted and credited into the Grantee s central depository system account upon the exercise of the Options would carry rights to vote at any general meeting of the Company, provided that the shareholder is registered on the Register of Depositors on the entitlement date as at the close of business to be entitled to attend and vote at the general meeting. (vii) Amendment and/or modification to the Scheme Any amendments/modifications to the Scheme shall not contravene any of the provisions of the guidelines on employee share option schemes as stipulated under the Listing Requirements and/or any other relevant regulatory authority in relation to the Scheme. Subject to the above the Scheme may from time to time be modified and/or amended, partly or wholly, by a resolution of the Board without the approval of the Company s shareholders in a general meeting provided that no such amendment shall be made which would either materially prejudice the rights then accrued to any Grantee without his prior consent or sanction of that Grantee as if the provisions of the variation of class rights contained in the Articles of Association of the Company for the time being are applicable mutatis mutandis to the Grantees, alter to the advantage of any Grantee, or in respect of any matters prescribed under Appendix 6E of the Listing Requirements save and except for the tenure of the Scheme as set out in Section 2.2(iv) of this Circular. The ESOS Committee shall, within ten (10) Market Days of any additions, amendments, modifications and/or deletions made pursuant to the By-Laws, notify the Grantee in writing of any additions, amendments, modifications and/or deletions made pursuant to the By-Laws. 6

12 (viii) Listing of and quotation for the new Shares If at the time of allotment of the new Shares pursuant to the exercise of an Option, the existing issued ordinary shares of the Company are quoted on Bursa Securities, the Company shall make an application to Bursa Securities for the listing of and quotation for the new Shares so allotted. The new Shares to be allotted to the Grantee will not be listed or quoted on Bursa Securities until the Option is exercised in accordance with the provisions of the By-Laws whereupon the Company shall, subject to the provisions of the memorandum and articles of association of the Company, the Securities Industry (Central Depositories) Act, 1991 and the rules of Bursa Depository: (a) (b) (c) issue and/or allot the Shares; despatch a notice of allotment for the relevant number of Shares to the Grantee; and apply for the quotation of such Shares, within eight (8) Market Days or such period as Bursa Securities may prescribe, after the receipt of a valid notice in such form and manner as the ESOS Committee may prescribe or approve by the Grantee to notify the Company of his intention to exercise an Option ( Notice of Exercise ) and remittance from the Grantee for the full amount of the subscription monies in relation to the number of Shares set out in the Notice of Exercise given by the Grantee. The new Shares to be issued pursuant to the exercise of Options will be credited directly into the central depository system account and no physical share certificates will be delivered to the Grantee. (ix) Retention period The new Shares to be allotted and issued to the Grantee pursuant to the exercise of any Option under the Scheme will not be subjected to any retention period or restriction on transfer. However, the Grantee is encouraged to hold the new Shares as an investment rather than to realise immediate gains from disposal. Notwithstanding the above, a Grantee who is a Non-Executive Director in the Kobay Group (excluding subsidiaries which are dormant) must not sell, transfer or assign the Shares obtained through the exercise of Options offered to him within one (1) year from the Offer Date or such other period as may be prescribed by the Listing Requirements or other prevailing applicable guidelines, regulations or law. (x) Alteration of share capital and adjustment In the event of any alteration in the capital structure of the Company during the Option Period, whether by way of a rights issue, bonus issue or other capitalisation issue, consolidation or subdivision of Shares or reduction of capital or any other variation of capital (but excluding any cancellation of capital which is lost or unrepresented by available assets), the Company shall cause such adjustment to be made to: (a) (b) the number of new Shares which a Grantee shall be entitled to subscribe for upon the exercise of each Option (excluding Options already exercised); and/or the Option Price. 7

13 (xi) Winding Up All outstanding Options shall automatically be terminated in the event that a resolution is passed or a court order is made for the winding up of the Company. (xii) Exercise Period An Option can be exercised by the Grantee by notice in the prescribed form to the Company during the Option Period in respect of all or any part of the Shares comprised in the Option, such part being in multiples of one hundred (100) Shares. Any partial exercise of an Option shall not preclude the Grantee from exercising the Option in respect of the balance of the Shares comprised in the Option. Subject to all other provisions relevant to the exercise of an Option, an Option granted to an Eligible Employee is exercisable by a Grantee during his lifetime within the Option Period stipulated in the Offer documents. 3. UTILISATION OF PROCEEDS The actual proceeds to be received from the Proposed ESOS will depend on the number of the Options granted and exercised at the relevant point in time and the Option Price payable upon the exercise of the Options. As such, the exact amount of proceeds to be received and timeframe for the utilisation of proceeds are not determinable at this juncture. The proceeds to be received by the Company from the exercise of the Options is intended to be utilised for Kobay Group s working capital requirements. The estimated expenses for the Proposed ESOS amount to approximately RM120,000, which would be funded vide internally generated funds of Kobay Group. 4. RATIONALE FOR THE PROPOSED ESOS The Proposed ESOS serves to align the interests of the Eligible Employees to the corporate goals of Kobay Group. The Proposed ESOS will provide the Eligible Employees an opportunity to have equity participation in the Company and help achieve the positive objectives as set out below: (i) (ii) (iii) (iv) (v) to recognise the contributions and/or services of the Eligible Employees which are considered vital to the operations and continued growth of Kobay Group; to motivate the Eligible Employees towards better performance through greater productivity and loyalty; stimulate a greater sense of belonging and dedication since Eligible Employees are given the opportunity to participate directly in the equity stake of the Company; encourage employees to remain with Kobay Group, thus ensuring that the loss of key personnel is kept to a minimum; and reward Eligible Employees by allowing them to participate in the Company s profitability and eventually realise capital gains arising from any appreciation on the value of the Shares. The Proposed ESOS is also extended to the Non-Executive Directors of Kobay Group in recognition of their contribution to the growth and performance of Kobay Group. The Proposed ESOS is also expected to incentivise these Non-Executive Directors to continue providing strategic direction to Kobay Group by allowing their equity participation in the growth and profits of Kobay Group. 8

14 5. EFFECTS OF THE PROPOSED ESOS 5.1 Issued and paid-up share capital The Proposed ESOS will not have an immediate effect on the existing issued and paid-up ordinary share capital of the Company. The issued and paid-up share capital of the Company will increase progressively depending on the quantum of Options granted and exercised and the number of new Shares issued pursuant thereto. For illustration purposes, the proforma effects of the Proposed ESOS on the issued and paid-up share capital of Kobay as at the LPD are set out below: Minimum Scenario Maximum Scenario No. of Shares RM No. of Shares RM Issued and paid-up share capital as at the LPD 67,352,550 67,352,550 67,352,550 67,352,550 Add: Treasury shares , ,200 Adjusted issued and paid-up share capital To be issued pursuant to the full exercise of the Options to be granted under the Proposed ESOS^ Enlarged issued and paid-up share capital 67,352,550 67,352,550 68,080,750 68,080,750 10,102,882 10,102,882 10,212,112 10,212,112 77,455,432 77,455,432 78,292,862 78,292,862 Note: ^ Assuming that the aggregate Shares to be issued pursuant to the exercise of the Options amount to fifteen percent (15%) of the issued and paid-up share capital of the Company then. 5.2 NA per Share and gearing The Proposed ESOS will not have any immediate effect on the consolidated NA per Share and the gearing of Kobay until such a time when the Options granted under the Proposed ESOS are exercised. The proforma effects will depend on, amongst others, the number of new Shares to be issued upon the exercise of the Options and the Option Price. The consolidated NA per Share following the exercise of the Options will increase if the Option Price exceeds the consolidated NA per Share at the point of exercise of the Options and conversely will decrease if the Option Price is below the consolidated NA per Share at the point of the exercise of the Options. Whilst the granting of the Options under the Proposed ESOS is expected to result in recognition of a charge in the statement of comprehensive income of Kobay Group pursuant to MFRS 2, the recognition of such MFRS 2 charge would not have any impact on the NA of Kobay Group as the corresponding amount will be classified as an equity compensation reserve which forms part of the shareholders equity. In the event none of the granted Options are exercised within the duration of the Proposed ESOS, the amount outstanding in the said equity reserve would be transferred into the Company s retained earnings. On the other hand, if the granted Options are exercised, the amount outstanding in the said equity reserve would be transferred into the share premium account of the Company. 9

15 The Proposed ESOS is not expected to have an immediate effect on the Group s gearing level until such a time when the Options granted are being exercised. The effect on the gearing will depend on the change in the NA, which in turn will depend on the actual number of new Shares to be issued pursuant to the exercise of the Options as well as the Option Price payable upon the exercise of the Options. 5.3 Earnings and EPS The Proposed ESOS is not expected to have any immediate effect on the earnings of Kobay Group for the financial year ending 30 June 2016, save for the possible impact of MFRS 2. However, any potential effect on the EPS of Kobay Group in the future would depend on the impact of MFRS 2, the number of Options exercised as well as utilisation of the proceeds raised from the Options exercised. Under MFRS 2, the potential cost arising from the issuance of the Options, which is measured by the fair value of the Options after taking into account, inter-alia, the number of Options granted and vested and the Option Price payable upon the exercise of the Options, will need to be measured at the grant date and to be recognised as an expense over the vesting period, and therefore may affect the future earnings of Kobay Group, the quantum of which can be determined only at the grant date. However, the Company has taken note of the potential impact of MFRS 2 on Kobay Group s future earnings and shall take into consideration such impact in the allocation and granting of Options to the Eligible Employees. It should be noted that the estimated cost does not represent a cash outflow by Kobay as it is merely an accounting treatment. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 10

16 5.4 Substantial shareholders' shareholdings The effects of the Proposed ESOS on the shareholdings of the substantial shareholders are as follows. Minimum Scenario Proforma I As at the LPD After the full exercise of the Options Direct Indirect Direct Indirect No. of Shares No. of Shares % % % % Shareholders Kobay Holdings Sdn. Bhd. 17,523, ,523, Norinv Kapital Sdn. Bhd. 13,269, ,269, Dato Koay Hean Eng 1,654, ,523,007(1) ,664,442 (2) ,523,007 (1) Koay Cheng Lye 1,058, ,523,007(1) ,069,283 (2) ,523,007 (1) Koay Ah Koay Cheng Hock 884, ,523,007 (1) ,894,953 (2) ,523,007 (1) No. of Shares No. of Shares Notes: (1) Deemed interest by virtue of their direct interest in Kobay Holdings Sdn. Bhd., pursuant to Section 6A of the Act. (2) Assuming that they exercise up to 1,010,288 Options, being the maximum amount of Options allowed to be granted to them based on their shareholdings as at the LPD. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 11

17 Maximum Scenario Proforma I As at the LPD Assuming all the treasury shares are resold into the open market Direct Indirect Direct Indirect No. of Shares No. of Shares Shareholders % % % % Kobay Holdings Sdn. Bhd. 17,523, ,523, Norinv Kapital Sdn. Bhd. 13,269, ,269, Dato Koay Hean Eng 1,654, ,523,007 (1) ,654, ,523,007(1) Koay Cheng Lye 1,058, ,523,007 (1) ,058, ,523,007(1) Koay Ah Koay Cheng Hock 884, ,523,007 (1) , ,523,007(1) No. of Shares No. of Shares Proforma II After the full exercise of the Options Direct Indirect No. of No. of % Shareholders Shares Shares % Kobay Holdings Sdn. Bhd. 17,523, Norinv Kapital Sdn. Bhd. 13,269, Dato Koay Hean Eng 2,675,365 (2) ,523,007 (1) Koay Cheng Lye 2,080,206 (2) ,523,007 (1) Koay Ah Koay Cheng Hock 1,905,876 (2) ,523,007 (1) Notes: (1) Deemed interest by virtue of their direct interest in Kobay Holdings Sdn. Bhd. pursuant to Section 6A of the Act. (2) Assuming that they exercise up to 1,021,211 Options, being the maximum amount of Options allowed to be granted to them based on their shareholdings as at the LPD. 12

18 5.5 EXISTING CONVERTIBLE SECURITIES Kobay does not have any existing convertible securities as at LPD. 6. HISTORICAL SHARE PRICES The monthly high and low closing market prices of Shares for the past twelve (12) months from November 2014 to October 2015 (up to the LPD) are as follows: 2014 November December High RM Low RM 2015 January February March April May June July August September October Last transacted market price on 14 September 2015 (being the day prior to the announcement on the Proposed ESOS) 1.01 Last transacted market price on 30 October 2015 (being the LPD prior to the printing of this Circular) 1.50 (Source: Bloomberg) THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK 13

19 7. APPROVALS REQUIRED The Proposed ESOS is conditional upon the following approvals being obtained: (i) Bursa Securities, for which the approval for the listing of and quotation for the new Shares to be issued pursuant to the exercise of the Options granted under the Proposed ESOS, was obtained on 27 October 2015, subject to the following conditions: (a) Condition(s) RHBIB is required to submit a confirmation to Bursa Securities of full compliance of the Proposed ESOS pursuant to paragraph 6.43(1) of the Listing Requirements and stating the effective date of implementation together with a certified true copy of the resolution passed by the shareholders in general meeting approving the Proposed ESOS; and Status of compliance To be complied (b) Kobay is required to furnish Bursa Securities on a quarterly basis a summary of the total number of shares listed pursuant to the exercise of options under the Proposed ESOS as at the end of each quarter together with a detailed computation of listing fees payable. To be complied (ii) the shareholders of Kobay at an EGM of the Company to be convened. 8. INTERESTS OF DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM The Company proposes to seek Kobay s shareholders approval for authority to grant Options to the Directors of Kobay and to the Persons Connected with the Directors, namely, Koay Zee Ee (son of Dato Koay Hean Eng), Koay Way Sheong (son of Koay Cheng Lye), Koay Wooi Tatt (son of Koay Ah Koay Cheng Hock), Koay Suat Hong and Koay Suat Lean (daughters of Koay Ah Koay Cheng Hock). As such, all Directors of Kobay, by virtue of their eligibility to participate in the Proposed ESOS, are deemed interested in respect of their respective allocations, if any ( Interested Directors ), as well as allocations to Persons Connected with them. The Interested Directors have abstained and will continue to abstain from deliberating and voting in respect of their direct and/or indirect shareholdings in Kobay on the resolutions in respect of their respective allocation as well as the allocations to the Persons Connected with them under the Proposed ESOS, if any. The Interested Directors of Kobay have also undertaken to ensure that Persons Connected with them will abstain from voting, in respect of their direct and indirect shareholdings in Kobay, on the resolutions pertaining to their respective allocations as well as the allocations to the persons connected to them under the Proposed ESOS, if any, to be tabled at an EGM to be convened. 14

20 The direct and/or indirect shareholdings of the Directors and major shareholders as at the LPD are as follows: < Direct > < Indirect > No of Shares % (2) No of Shares % (2) Directors Dato Koay Hean Eng 1,654, ,523,007 (1) Koay Cheng Lye 1,058, ,523,007 (1) Koay Ah Koay Cheng Hock 884, ,523,007 (1) Lim Swee Chuan Dr. Mohamad Zabdi Bin Zamrod Khaw Eng Peng Major Shareholders Kobay Holding Sdn. Bhd. 17,523, Norinv Kapital Sdn. Bhd. 13,269, Dato Koay Hean Eng 1,654, ,523,007 (1) Koay Cheng Lye 1,058, ,523,007 (1) Koay Ah Koay Cheng Hock 884, ,523,007 (1) Notes: (1) Deemed interest by virtue of their direct interest in Kobay Holdings Sdn. Bhd. pursuant to Section 6A of the Act. (2) The percentage of shareholding is calculated based on 67,352,550 shares after deducting 728,200 treasury shares (retained by the Company as per Record of Depositors on 16 October 2015) from the fully issued and paid-up capital of the Company. Save as disclosed above, none of the directors, major shareholders of the Company and/or Persons Connected with them has any interest, directly or indirectly, in the Proposed ESOS. 9. DIRECTORS' RECOMMENDATION The Board (save for the Interested Directors who have abstained from expressing any opinion in relation to their respective allocations and/or Persons Connected with them under the Proposed ESOS), after having considered all aspects of the Proposed ESOS (including but not limited to the rationale and effects in respect of the Proposed ESOS) and after careful deliberation, is of the opinion that the Proposed ESOS is in the best interests of the Company. As such, the Board (save for the Interested Directors who have abstained from expressing any opinion in relation to their respective allocations and/or Persons Connected with them under the Proposed ESOS) recommends that you vote in favour of the resolutions pertaining to the Proposed ESOS to be tabled at the forthcoming EGM. 10. CORPORATE PROPOSALS ANNOUNCED BUT NOT YET COMPLETED Save for the Proposed ESOS (which is the subject matter of this Circular), the Board confirms that there is no other outstanding corporate exercise which has been announced but pending completion by the Company as at the date of this Circular. 11. ESTIMATED TIME FRAME FOR COMPLETION Barring any unforeseen circumstances, the Proposed ESOS is expected to be completed by the first quarter of

21 12. EGM The EGM, the notice of which is set out in this Circular, will be held at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, Bayan Lepas, Penang, on Wednesday, 9 December 2015 at 2.45 p.m., or immediately following the conclusion or adjournment of the 21 st AGM of the Company scheduled to be held at the same venue and on the same date at 2.30 p.m., whichever shall be later, for the purpose of considering and, if thought fit, passing the relevant ordinary resolutions to give effect to the Proposed ESOS. If you are unable to attend and vote in person at the EGM, you should complete, sign and return the enclosed Form of Proxy in accordance with the instructions therein so as to arrive at the Registered Office of the Company at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, Bayan Lepas, Penang, not less than forty-eight (48) hours before the time set for holding the EGM, or at any adjournment thereof. The lodging of the Form of Proxy will not, however, preclude you from attending and voting in person at the EGM, should you subsequently wish to do so. 13. FURTHER INFORMATION Shareholders are advised to refer to the appendices as set out in this Circular for further information. Yours faithfully, For and on behalf of the Board of Directors of KOBAY TECHNOLOGY BHD. DATO KOAY HEAN ENG MANAGING DIRECTOR / CHIEF EXECUTIVE OFFICER 16

22 APPENDIX I DRAFT BY-LAWS OF THE PROPOSED ESOS BY-LAWS OF THE KOBAY EMPLOYEES SHARE OPTION SCHEME DEFINITIONS AND INTERPRETATIONS 1.1 Except where the context otherwise requires, the following expression in these By-Laws shall have the following meanings: Act : The Companies Act, 1965, as amended from time to time and any re-enactment thereof; Available Balance : Unissued share capital of the Company which is available for offer subject to the maximum limit as set out in Clause 3.1 and after deducting all Shares under Options which have been granted; Board : Board of Directors of Kobay; Bursa Depository : Bursa Malaysia Depository Sdn Bhd ( W); Bursa Securities : Bursa Malaysia Securities Berhad ( W); By-Laws : The rules, terms and conditions of the Scheme as set out herein, and shall include any amendments or variations made thereto from time to time; CDS : Central Depository System; Central Depositories Act : The Securities Industry (Central Depositories) Act 1991; Daily Official List : A list specifying all securities which have been admitted for listing on Bursa Securities and which have not been removed; Director : An executive or non-executive director of Kobay Group; Effective Date : The date the last of the approvals and/or conditions referred to in Clause 4.1 have been obtained and/or complied with; Eligible Employee : An employee or Director of Kobay Group (excluding subsidiaries which are dormant) who meets the criteria of eligibility for participation in the Scheme as set out in Clause 6 hereof; ESOS : Employees share option scheme; ESOS Committee : The committee appointed by the Board pursuant to Clause 16 to administer the Scheme; Exercise Price : The price at which the Grantee shall be entitled to subscribe for every new Kobay Share by exercising his Option as determined in accordance with Clause 9 hereof; Grantee : Any Eligible Employee who has accepted the Offer by the Company in accordance with the terms of the Scheme; 17 1

23 APPENDIX I DRAFT BY-LAWS OF THE PROPOSED ESOS (CONT D) Kobay or Company : Kobay Technology Bhd (Company No A); Kobay Group or Group Kobay Shares or Shares : Kobay and its subsidiaries; : Ordinary shares of RM1.00 each in the Company; Listing Requirements : The Main Market Listing Requirements of Bursa Securities including any amendment thereto that may be made from time to time; Market Day : A day on which Bursa Securities is open for securities trading; Maximum Allowable Allotment : The maximum number of new Kobay Shares that can be offered to an Eligible Employee falling within a particular category of Eligible Employee as stipulated in Clause 7 hereof; Offer : An offer made in writing by the ESOS Committee to a selected Eligible Employee in the manner indicated in Clause 5 hereof; Offer Date : The date on which an Offer is made to a selected Eligible Employee to participate in the Scheme by the ESOS Committee; Option : The right of a Grantee to subscribe for new Kobay Shares pursuant to the contract constituted by the selected Eligible Employee s acceptance of an Offer in the manner indicated in Clause 8 hereof; Option Period : A period commencing from the date an Offer is accepted in accordance with Clause 8 and expiring on the last day of the period referred to in Clause 4 hereof; Registered office : The registered address of Kobay being Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, Bayan Lepas, Penang; Rules of Bursa Depository : The Rules of Bursa Depository as issued pursuant to the Central Depositories Act; Scheme : The ESOS for the grant of Options to selected Eligible Employees to subscribe for new Kobay Shares on the terms as set out herein; and Senior Management : An employee of Kobay Group holding the position of senior general manager and above. 1.2 In these By-Laws: (I) any reference to a statutory provision shall include any subordinate legislation made from time to time under the provision and any listing requirements, policies and/or guidelines of Bursa Securities and/or any other relevant regulatory authority (whether or not having the force of law but, if not having the force of law, the compliance with which is in accordance with the reasonable commercial practice of persons to whom such requirements, policies and/or guidelines are addressed to by Bursa Securities and/or any relevant regulatory authority); 18 2

24 APPENDIX I DRAFT BY-LAWS OF THE PROPOSED ESOS (CONT D) (II) (III) (IV) (V) (VI) any reference to a statutory provision shall include that provision as from time to time modified or re-enacted whether before or after the date of these by-laws so far as such modification or re-enactment applies or is capable of applying to any options offered and accepted prior to the expiry of the scheme and shall include also any past statutory provision (as from time to time modified or re-enacted) which such provision has directly or indirectly been replaced; words denoting the singular shall include the plural and references to gender shall include both genders and the neuter; any liberty or power which may be exercised or any determination which may be made hereunder by the ESOS Committee may be exercised at the ESOS Committee s discretion; the heading in these By-Laws are for convenience only and shall not be taken into account in the interpretation of these By-Laws; and if an event occurs on a stipulated day which is not a Market Day, then the stipulated day will be taken to be the first Market Day after that day PROVIDED ALWAYS THAT if such date shall fall beyond the duration of the Scheme, then the stipulated day shall be taken to be the preceding Market Day. 2. NAME OF SCHEME This ESOS will be called the Kobay Employees Share Option Scheme MAXIMUM NUMBER OF SHARES AVAILABLE UNDER THE SCHEME 3.1 The total number of new Kobay Shares which may be made available under the Scheme shall not exceed fifteen per cent (15%) of the total issued and paid-up share capital comprising ordinary shares of the Company (excluding treasury shares) at any point of time during the duration of the Scheme when an Offer is made. The Company will for the duration of the Scheme keep available sufficient number of new Kobay Shares in the authorised share capital of the Company to satisfy all outstanding Options which may be exercisable from time to time. 3.2 Notwithstanding the provision of Clause 3.1 above or any other provisions contained herein, in the event the maximum number of new Kobay Shares comprised in the Option granted under the Scheme exceeds the aggregate of fifteen per centum (15%) of the issued and paid-up share capital of Kobay (excluding treasury shares) as a result of Kobay purchasing its own shares in accordance with the provisions of Section 67A of the Act or any other corporate proposal and thereby diminishing its issued and paid-up share capital, then no further Options shall be offered until the total number of new Kobay Shares to be issued under the Scheme falls below fifteen per centum (15%) of the Company s issued and paid-up share capital (excluding treasury shares). Any Options granted prior to the adjustment of the issued and paid-up share capital of Kobay shall remain valid and exercisable in accordance with the provisions of this Scheme. 3.3 Notwithstanding the above, the Company may implement more than one (1) ESOS, provided that the aggregate number of Kobay Shares available under all the schemes implemented by the Company is not more than fifteen per cent (15%) of its issued and paid-up share capital (excluding treasury shares) at any one time or such lower or higher limit in accordance with any prevailing guideline issued by Bursa Securities or any other relevant authorities as amended from time to time. 19 3