EXECUTION OF AGREEMENTS BETWEEN IRIS LAND SDN.BHD. (“ILSB”), A SUBSIDIARY OF IRIS CORPORATION BERHAD (“ICB”) AND UK INVESTMENT HOLDINGS LIMITED (“UKIHL”) FOR THE SUBSCRIPTION OF 2,000,007 ORDINARY SHARES FOR A PURCHASE CONSIDERATION OF USD2,000,007 IN PALAU PELELIU RESORTS LIMITED (“PPRL”) AND FOR THE DEVELOPMENT OF A RESORT ON ORANGE BEACH AND BOSOAL LAND, REPUBLIC OF PALAU ALL DATED 15THFEBRUARY 2014
This Announcement is pursuant to 10.05 (2) of the ACE Listing Requirements
1. INTRODUCTION
The Board of Directors of IRIS Corporation Berhad (“ICB”) is pleased to announce that its subsidiary, IRIS Land Sdn. Bhd. (“ILSB) had entered into a Share Sales Agreement (“SSA”), Shareholders’ Agreement (“SA”), Development Rights Agreement (“DRA”) and an Assignment of Lease Agreement (“Deed”) (hereinafter collectively referred to as the “Agreements”) with UK Investment Holdings Limited (“UKIHL”) for the acquisition of 2,000,007 ordinary shares representing 30% of the issued and allotted shares in Palau Peleliu Resorts Limited (“PPRL”) a wholly owned private limited company of UKIHL incorporated in the Cayman Island at the price of USD1 per share for a total purchase consideration of United States Dollars Two Million and Seven (USD 2,000,007) equivalent to Ringgit Malaysia Six Million Five Hundred Ninety Seven Thousand Two Hundred Twenty Three (RM6,597,223) only at the rate of [USD1: RM3.2986 ].
ILSB shall pursuant to the subscription of shares under the SSA and via the DRA, have all the development rights to develop land known as Orange Beach containing 75 hectares and Bosoal Land containing 21 hectares both situated in the Palau District (collectively known as “Development Land- Lease A”) to develop a resort and villas in accordance to the Development Plan duly submitted and subject to the terms and conditions of the DRA (“Palau Project”).
2. INFORMATION ON PALAU PELELIU RESORTS LIMITED (PPRL)
PALAU PELELIU RESORTS LIMITED (Company No: 275642) (PPRL) is a private limited company incorporated under the laws Cayman Islands and has its registered address at 1st Floor Windward 1, Regatta Office Park, P O Box 10338, Grand Cayman KY-1-1003, Cayman Islands.
UKIHL is the legal and beneficial owner of 100% of PPRL totalling to 6,666,690 shares with a present share capital of USD6,666.690 (United States Dollars Six Million Six Hundred Sixty Six Thousand Six Hundred Ninety) only. The business of PPRL is development, management and construction of resorts, villas, residential and commercial buildings on the Republic of Palau.
Pursuant to the DRA, PPRL has transferred the lease on the Development Land (Lease A) and another lease on property known as Scarlet Beach (property known as Cadastral lot No: 055 R01 containing 372,656 square meter, Palau Island- Lease B) to ILSB as the Developer to carry out the development in accordance to the terms and conditions of the DRA and to successfully implement the Palau Project in phases.
3. THE AGREEMENTS
The Agreements executed by and amongst ILSB, UKIHL and PPRL on 15th February 2014 for the implementation of the Palau Project are as follows:-
The Share Sales Agreement (SSA)
The Shareholders’ Agreement (SA)
The Development Rights Agreement (DRA)
The Assignment of Leases Agreement (Deed)
The salient terms of each agreement are as follows:
Share Sales Agreement (SSA)
The SSA stipulates that ILSB shall acquire 2,000,007 ordinary shares in PPRL from UKIHL for a total purchase consideration of USD2,000,007 at the price of USD1 each equivalent to RM6,597,223only . ILSB paid a deposit of USD 200,007 equivalent to RM659,722.30 [at the rate of USD1: 3.2986] to UKIHL before the execution of the SSA. ILSB has paid the balance purchase consideration in full pursuant to Clause 3 of the SSA and the SSA is deemed completed.
The SSA is conditional upon the assignment of Lease A and Lease B in favour of PPRL free from all encumbrances and with all rights attached to it
Shareholders Agreement (SA)
The SA was executed to regulate the relationship of ILSB and UKIHL as shareholders.
Clause 3 stipulates that the agreed proportion of shareholding shall be UKIHL- 4,666,683 shares (representing 70% of the total issued and allotted shares of PPRL) and ILSB – 2,000,007 shares (representing 30% of the total issued and allotted shares of PPRL).
The Board of PPRL shall consists of 4 Directors wherein 2 directors will be appointed by each Shareholder and the Chairman shall be one of the directors of UKIHL as the majority shareholder. The senior management positions of Managing Director/ Chief Executive Officer and Chief Financial Officer shall be appointed by ILSB with the consent of the Board.
The day to day management of PPRL shall be controlled by ILSB and parties agreed that ILSB shall provide all the financing required for the operations of PPRL and the implementation and financing for the Palau Project. Parties acknowledge and agree that all funding of PPRL’s operations provided by ILSB shall be by way of shareholder’s loan to PPRL and shall be repayable from profits gained by PPRL.
Assignment of Lease A and Lease B (Deed)
UKIHL being the legal and beneficial owner of the Lease A and Lease B, assigned both leases under this Deed to PPRL. The consideration of this assignment is the sum of USD6,666,690 which is satisfied by PPRL issuing 6,666,690 ordinary shares of PPRL to UKIHL.
In consideration of the aforesaid share issuance PPRL shall be entitled to all rights of UKIHL under the said leases.
Development Rights Agreement (DRA)
Pursuant to the execution of the Deed, UKIHL has transferred the said Lease A and Lease B to PPRL and PPRL accepted the transfer. Under the DRA, PPRL is agreeable to transfer or sub-lease Lease A and Lease B to ILSB and appoint ILSB as the Developer to carry out the development of the Development Land into a resort and villas in accordance to the terms and conditions of the DRA.
The Conditions Precedent under the DRA is that PPRL grants sole, exclusive and full right to commence development in respect of the Development Land –Lease A to ILSB.
PPRL covenants that there is no agreement that prohibits the grant to ILSB of the right to carry out the development on the Development Land-Lease A and that it shall not enter into any agreement of any nature whatsoever with any person other than ILSB which may affect the Development Land or any part thereof.
4. RATIONALE OF THE AGREEMENT
The subscription of shares in PPRL and the development project in the Republic of Palau is an investment to enable the Company to expand its business in realty development utilizing its IRIS-Koto Industrialised Building System (IBS) to an international level.
5. RISK FACTORS
Like all business entities, risk factors involved include but are not limited to execution risks, such as business expansion, prudent financial management, changes in price materials, and changes in political environment, economics and regulatory conditions. In addition there is also no assurance that the anticipated benefits from the subscription or the development project will be realized and that ICB will be able to generate sufficient revenue from the agreement to off-set the associated cost.
Nevertheless the Board of Directors has and will continue to exercise due care in considering the risks and benefits associated with the Agreements and will take appropriate measures in planning the successful implementation of the development of the resort in the Republic of Palau with its current business operations. Further, ICB Group is committed towards the close monitoring of the development of the Palau Project.
6. FINANCIAL EFFECTS ON THE AGREEMENT
The Palau Project is not expected to have any effect on the issued and paid-up capital, substantial shareholders’ shareholding, net assets per share and gearing of the ICB Group for the financial year ending on 31st March 2014. Barring unforeseen circumstances, the Board is of the opinion that the Project will contribute positively to the earnings of the ICB Group in the future.
7. APPROVALS REQUIRED
This Palau Project does not require the approval of ICB shareholders or any relevant government authority.
8. DIRECTORS AND MAJOR SHARE HOLDERS INTERESTS
None of the directors, major shareholders, persons connected with the directors or major shareholders of ICB or any of its subsidiaries have any interest, direct or indirect, in the Project.
9. STATEMENT OF THE BOARD OF DIRECTORS
The Board of Directors of ICB, after taking into consideration all aspects of the Agreements executed for the purpose of implementing the Palau Project (including but not limited to the rationale, prospects and financial effects of the Agreements) is of the opinion that the Agreements are equitable, reasonable and is in the best interest of the ICB group.
10. DOCUMENT FOR INSPECTION
The Agreements shall be available for inspection at the registered office of ICB during office hours at Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur for q period of three (3) months from the date of this announcement.
This announcement is dated 20th February 2014.
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