Based on your many posts on this issue it is evident that you do not understand how these schemes work. Saying I have made an error does not make it so, particularly where you provide no evidence to support your case.
All the answers to your questions are contained in my previous post or in the Notice of Meeting. I suggest you read 3.2 of the Explanatory Memorandum of the Notice of Meeting and the attached Schedules 2, 3 and 4 as this would correct many of your incorrect assertions and misunderstandings in your many posts. You appear to have a highly emotive response that supersedes any ability to rationally consider the facts.
For the sake of clarity, I have answered your specific questions as follows:
- How is the loan being reapid? The loan will have a maturity date (generally 5 years) when repayment is required. The loan is repayable earlier if the holder wishes to sell any of the shares or if he or she ceases to be employed by the company. Failure to repay the loan results in forfeiture of the shares. In this particular share loan plan (which is not always required) the holder must also apply 50% of any dividends received towards reduction in the loan balance. As the holder is presumably on the top income tax bracket (and will be assessable for income tax on the full value of the dividend received) this effectively directs the majority of any net dividend payments received to be used to pay down the loan.
- How are the options being exercised? The structure does have the effect of an economic option with an exercise price. The exercise price is the 23c. When the 23c loan is repaid is when the share becomes unencumbered and the Holding Lock is removed. This is technically when the "economic option" would be considered exercised. The exercise price of the option is effectively the 23c which was borrowed. Very simple concept.
- How is the finance contract being serviced? It is an interest free loan which is cash neutral to the company. As such there is no service cost or burden to either party. The loan is interest free and limited recourse. The loan is serviced by repayment which occurs as explained above either at maturity, by voluntary payment, or when the shares are sold, or through dividend payments applied to the loan.
- Where is the capital coming from for loan service/repayment? Ultimately the holder will repay the loan or the shares will be forfeited. The loan repayment may come from any sources as explained. The dividend repayments are the most obvious source of loan repayment. If this confuses you or makes you consider the scheme is inappropriate, recall that the loan is simply finance and that the holder legally acquired the shares when subscribed. This is like legally buying an investment property from an owner who vendor finances the purchase and then uses the rent received to pay back the loan balance over time. The buyer is the legal owner of the property and the holder of the loan and is motivated to collect the rent as quickly as possible and to ensure the property is well maintained and appreciates in value to the maximum extent possible. This is one significant advantage of share loan plans in that it motivates senior executives to focus on delivering both key elements of shareholder return - capital appreciation and dividend payments. Recall that shareholders have approved this arrangement to recruit, retain, and incentivize the performance of the executive. The plan appears well constructed to do so.
- What actual direct cost has/is John Welborn incurring for the share placement? The legal cost base of the shares in 23c. This is a fact. This is the actual cost that will have been incurred when the loan is repaid.
FEX Price at posting:
27.0¢ Sentiment: None Disclosure: Not Held
(20min delay)