PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSAL

Transcription

1 PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSAL MATANG HIGHWAY SDN BHD Proposed Issue of, Offer for Subscription or Purchase of, or Invitation to Subscribe for or Purchase of the Sukuk Musharakah of up to RM70.0 Million ( Proposal ). (Information required under paragraph 4.01 of the Guidelines on Offering of Islamic Securities issued on 26 July 2004). 1. BACKGROUND INFORMATION (a) Issuer (i) Name Matang Highway Sdn Bhd ( the Issuer ) (ii) Address 8 th Floor, Menara Zecon No. 92 Lot 393, Section 5 KTLD Jalan Satok Kuching Sarawak (iii) Business Registration No U (iv) Date/Place of Incorporation (v) Date of Listing (in case of a public listed company) 14 March 2008/ Malaysia Not applicable (vi) Status (vii) Principal Activities (viii) Board of Directors a) Resident-controlled company b) Bumiputera-controlled company The Issuer is a single purpose company established to undertake the issuance of the Sukuk Musharakah and accordingly provide financing to Zecon Berhad (formerly known as Zecon Engineering Berhad (Company No: X) ( Zecon ) with respect to the agreed scope of investment. i. Murad bin Bujang ii. Ong Kian Lim 1

2 (ix) Structure of Shareholdings and Names of Shareholders As at 18 March 2008, the shareholding structure of the Issuer is as follows: Shareholder Shares % Zecon RM (x) Authorised and paid-up capital Authorised capital as at 18 March 2008 RM100,000 divided into 100,000 ordinary shares of RM 1.00 each Paid-up capital as at 18 March 2008 RM2.00 divided into 2 ordinary shares of RM 1.00 each [ The remaining of this page is intentionally left blank ] 2

3 2. PRINCIPAL TERMS AND CONDITIONS (a) Names of parties involved in the proposed transaction (where applicable) (i) Principal Adviser(s) / Lead Arranger(s) (ii) Arranger(s) Not Applicable KAF Investment Bank Berhad (Company No: W) ( KAF ) (iii) Valuers Not Applicable (iv) Solicitors Messrs Hisham Sobri & Kadir (v) Financial Adviser Not Applicable (vi) Technical Adviser (vii) Guarantor (viii) Trustee (ix) Facility Agent Not Applicable Not applicable KAF Trustee Berhad (Company No: U) ( KAF Trustee ) KAF (x) Primary Subscriber(s) and Amount Subscribed Not applicable as the Sukuk Musharakah shall be issued on a private placement basis. (xi) Underwriter(s) and Amount Underwritten (xii) Shariah Adviser (xiii) Central Depository (xiv) Paying Agent (xv) Reporting Accountant (xvi) Others Security Trustee Share Trustee Tax Advisor Not Applicable Dr. Mohd Daud Bakar Bank Negara Malaysia ( BNM ) BNM Wan Nadzir & Co. [AF1234] KAF Trustee KAF Trustee Wan Nadzir & Co. 3

4 (b) Islamic principle used Musharakah & Mudarabah Musharakah is a partnership arrangement entered into by two (2) or more Investors to finance a business venture whereby all parties contribute capital either in the form of cash or in kind for the purpose of financing a business venture. Any profit derived from the venture will be distributed based on a pre-agreed profit sharing ratio, but losses shall be shared on the basis of equity participation. Mudarabah is a contract which is made between two (2) parties to finance a business venture wherein one party, the investor (rabb al-mal), will solely provide capital and the other party, the entrepreneur (mudarib) shall solely manage the project. If the venture is profitable, the profit shall be distributed based on a pre-agreed ratio. In the event of a business loss, it shall be borne solely by the capital provider. (c) Facility description The Issuer shall issue Sukuk Musharakah of RM70.0 million to the Investors in consideration of their capital contribution. Musharakah Venture Under the Proposal, a Musharakah Venture comprising at least two (2) Investors shall be formed and carried out through the Issuer in its capacity as the agent and initial trustee for the Investors. The Investors capital contribution for the Musharakah Venture ( Capital Contribution ) shall be utilized by the Issuer to finance specific business venture undertaken by Zecon, as the obligor ( Obligor ). In this respect, Zecon has been awarded a contract by the Government of Malaysia ( Government or Awarder, where applicable) via Jabatan Kerja Raya, Sarawak ( JKR Sarawak ) to design and build a 25 km two-lane double carriageway from the city of Kuching, Sarawak to the Federal Administrative Complex, near Matang, Sarawak ( Original Matang Route ) as per the main contract dated 10 March 2003 between the Government and Zecon ( Main Contract ) under the reference number PWD/HO/B068/2002 for a fixed sum of RM314,608,

5 Subsequently, the Awarder has, vide a letter of acceptance dated 23 August 2007 under the reference number PWD/HO/B068/2002(S) from JKR Sarawak, varied and substituted the terms, provisions, design, scope of work, specifications and other details of the Main Contract, which resulted in:- (i) the Original Matang Route being shortened by 7 km, from 25 km to 18 km; and (ii) the remaining 7 km two-lane dual carriageway, being replaced by a revised access route ( Revised Matang Route ). (The Original Matang Route and the Revised Matang Route shall hereinafter collectively be referred to as the Project ). Pursuant to the above and subject to variations in accordance with the terms and conditions of the Main Contract, the total contract sum of the Original Matang Route has been revised to RM201,241, whereas, the cost of the Revised Matang Route has been agreed to be a sum of RM124,148,000. Accordingly, the total contract sum of the Project is RM325,389, In return for the Investors Capital Contribution under the Musharakah Venture, the Issuer shall issue Sukuk Musharakah to the Investors representing the Investors undivided proportionate interest in the Musharakah Venture (which shall include the undivided beneficial interest in the Trust Assets) and their rights to receive profits thereon. The Trust Assets shall include all of the Issuer s rights, titles, benefits and interests in, to and under:- 1. the Mudarabah Venture as described below; 2. the Designated Accounts; and 3. permitted investments in which the Issuer may have rights, titles, benefit or interests including all profits accruing from time to time. Profits from the Musharakah Venture shall be distributed to the respective Investors based on the profit sharing ratio pre-agreed amongst the Investors in accordance with the amount of each Investor s Capital Contribution. Excess of the expected profits from the Musharakah Venture, if any, shall be retained by the Issuer as reward for its agency role. 5

6 At the same time, losses incurred in the Musharakah Venture shall also be shared based on the sharing ratios in accordance with the amount of each Investor s Capital Contribution. The Musharakah Venture shall be structured on a periodic redemption basis whereby it permits a gradual return of capital to the Investors based on the predetermined diminishing participation schedule which would mirror the scheduled maturity of the Sukuk Musharakah as stated in Item 2(f) hereunder. Mudarabah Arrangement Immediately following the formation of the Musharakah Venture, the Issuer, acting as the agent for the Investors, shall enter into a Mudarabah arrangement with Zecon whereby the Issuer shall be the capital provider (Rabb Al-mal) while Zecon shall be the entrepreneur (Mudarib). In this respect, the Rabb Al-mal shall utilize the proceeds raised from the issuance of the above Sukuk Musharakah to provide capital for the venture with the Mudarib for the purpose of undertaking the Project. For avoidance of doubt, the funds shall be utilized for the purposes as set out in Item 2(k) hereunder. The Mudarabah arrangement under this proposal is essentially Mudarabah Muqayyadah or restricted Mudarabah as described below:- 1. the venture is on a specific business wherein in this instance, the undertaking of the Project by Zecon; 2. the venture is for a specific tenure; and 3. the profit sharing amount shall be limited to the respective entitlements as stated herein. Profits from the Mudarabah arrangement shall be shared according to a fixed profit sharing ratio of 1:99 (Mudarib:Rabb Al-mal). The Rabb Al-mal shall agree upfront that its entitlement to the refund of capital shall not exceed the aggregate amount stated in Item 2(f) hereunder (to mirror the redemption schedule of the Sukuk Musharakah) and its entitlement to the expected profit sharing amount shall not exceed the relevant profit sharing amounts due as per the rates to be determined under Item 2(g) hereunder (also to mirror the expected profit rate of the Sukuk Musharakah). However, pursuant to a tanazul (waiver) granted from the onset, the Mudarib shall agree to waive any profits due to it from the Mudarabah arrangement. 6

7 The Mudarabah arrangement shall survive throughout the tenure of the Sukuk Musharakah. The transactional diagram of the Sukuk Musharakah is set out in the Appendix attached herein. (d) Issue size (RM) RM70.0 million nominal value Sukuk Musharakah with the following Series:- Series Face Value (RM million) (e) Issue price RM70.0 million as the Sukuk Musharakah shall be issued at par. (f) Tenure of the facility/issue Up to three (3) years from the issue date. The Sukuk Musharakah shall be issued in three (3) series as follows:- Sukuk Musharakah Series Face Value of Sukuk Musharakah (RM million) Maturity (Years from Issue Date) (g) Coupon/profit or equivalent rate (%) (please specify) The expected profit rate for each of the Sukuk Musharakah Series shall be determined prior to the issue date and the Securities Commission ( SC ) shall be informed accordingly. (h) Coupon/profit payment frequency and basis Payment Frequency Semi-annually in arrears with the first profit payment payable six (6) months from the date of the issue Payment Basis Actual/actual day count basis. (i) Yield to maturity (%) The expected yield to maturity for each of the Sukuk Musharakah Series shall be determined prior to the issue date and the SC shall be informed accordingly. 7

8 (j) (k) Security/Collateral (if any) Details on Utilisation of Proceeds a) Memorandum of Charge over the Designated Accounts (as defined hereunder); b) Assignment of Zecon s contractual rights, interest, title and benefit in the Project including all proceeds arising there from ( Assignment of the Project ); and c) First ranking debenture comprising fixed and floating charge over the Trust Assets. The proceeds from the Sukuk Musharakah shall be utilized for the following purposes which are Shariah compliant:- Item Utilisation RM Million 1(a). To refinance the Term Loan ( TL ) Facility under KAF Banking Facilities granted to Zecon (a) 1(b). To provide cash collateral to secure the Bank Guarantee ( BG ) Facility issued by KAF Investment under KAF Banking Facilities, equivalent to 100.0% of the guaranteed amount (a) 2. To pre-fund the initial balance of the Finance Service Reserve Account Up to 21.0 Up to 16.3 Up to To defray the cost and expenses in relation to the Sukuk Musharakah (b) Up to For working capital requirement for the Project (c) The balance of the proceeds Total 70.0 [ The remaining of this page is intentionally left blank ] 8

9 (a) KAF has approved banking facilities of up to RM37.3 million comprising BG Facility of up to RM16.3 million and TL Facility of up to RM21.0 million to Zecon ( KAF Banking Facilities ), proceeds of which shall be utilised as follows: Facility BG Facility As a performance bond on behalf of Zecon under the Main Contract comprising the Original Matang Route and the Revised Matang Route in favour of JKR Sarawak (on behalf of the Awarder), partly as replacement to the BG for the Original Matang Route provided by AmInvestment Bank Berhad ( AmInvestment ) under AmInvestment Banking Facilities # TL Facility To refinance Zecon s Revolving Credit ( RC ) Facility granted by AmInvestment under AmInvestment Banking Facilities # Working capital requirement for the Revised Matang Route RM Million Up to 16.3 Up to 10.0 Up to 11.0 Total 37.3 # AmInvestment had, on 8 July 2002 and 14 August 2003, granted RM81.0 million banking facilities comprising RM16.0 million BG Facility and RM65.0 million RC Facility to finance the Original Matang Route ( AmInvestment Banking Facilities ). As at to date, the amount issued under the BG Facility is RM15,730, whilst the amount outstanding under the RC Facility is RM9.6 million As at the date of this application, all the legal documents related to KAF Banking Facilities have been duly executed by the parties and are pending stamping. The drawdown of KAF Banking Facilities is expected to be made upon compliance of conditions precedent as stipulated under the legal documents. (b) The cost and expenses incurred during the first year of the Sukuk Musharakah only. (c) For avoidance of doubt, any amount unutilised under items (1) to (3) may be channelled to item (4). (l) Sinking fund (if any) Please refer to Item (z) A. (m) Rating 1. Credit rating assigned 2. Name of rating agency Indicative long term rating of AA- IS Malaysian Rating Corporation Berhad (Company No: V) ( MARC ) 9

10 (n) Form and Denomination Form The Sukuk Musharakah will be represented by global certificates to be deposited with BNM and shall be issued in bearer form and are exchangeable for definitive certificates only in certain circumstances set out in the Transaction Documents. No physical delivery of the Sukuk Musharakah shall be allowed. The Sukuk Musharakah shall be issued accordance with: 1. the Code of Conduct and Market Practices for the Malaysian Corporate Bonds Market issued by the Institut Peniaga Bon Malaysia and approved by BNM; and 2. the Rules on the Scripless Securities under the Real Time Electronic Transfer of Funds And Securities ( RENTAS System ) issued by BNM; and 3. the Rules on Fully Automated System For Issuing/Tendering issued by BNM ( FAST Rules ); or 4. their replacement thereof or other applicable guidelines from time to time, (collectively, the Code of Conduct ). Denomination The Sukuk Musharakah shall be issued in the denomination of RM1.0 million each and in multiples of RM1.0 million each or such other denomination as agreed between Issuer and Facility Agent and approved by the SC in accordance with the FAST Rules. (o) Mode of issue The Sukuk Musharakah will be issued without prospectus by way of private placement basis. (p) Selling restrictions The Sukuk Musharakah may neither be offered nor sold, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia, other than to categories of persons specified in Section 4(6) of the Companies Act, 1965 of Malaysia (as amended) ( Companies Act 1965 ) subject to any law, order, regulation or official directive of BNM, SC, and/or any other regulatory authority from time to time. (q) Listing status The Sukuk Musharakah shall not be listed on the Bursa Malaysia Securities Berhad or any other stock exchange. (r) Minimum level of subscription (RM or %) 100% of the nominal amount of the Sukuk Musharakah to be issued. 10

11 (s) Other regulatory approvals required in relation to the issue, offer or invitation and whether or not obtained (please specify) No other approvals sought. (t) Identified Assets Not applicable (u) Purchase and selling price/rental (where applicable) (v) Conditions Precedent Not applicable Shall include but not limited to the following: Main Documentation 1. All necessary legal documentation shall have been completed and executed in form and substance acceptable to the Facility Agent and the Solicitors; 2. The Transaction Documents as advised by the Solicitors shall have been signed and executed and endorsed as exempted from stamp duty (where applicable) and presented for registration with the relevant agencies. 3. The Solicitors shall have confirmed that:- i) the Sukuk Musharakah and the creation of the Transaction Documents will not constitute a breach by the Issuer of any limit imposed by its Memorandum and Articles of Association on its borrowing powers; ii) the Transaction Documents and other relevant documents pertaining to the Sukuk Musharakah have been executed and are in order, enforceable and binding on all parties; and iii) all the conditions precedent as may be advised by the Solicitors have been fulfilled. 11

12 Issuer 1. Receipt by Facility Agent of the following: - (i) certified true copy of the Issuer s Memorandum & Articles of Association, Forms 24, 44 and 49 and other statutory forms as may be required; (ii) certified true copy of the Issuer s Board of Directors Resolution authorising (1) the acceptance of the Sukuk Musharakah, (2) the carrying out of all its obligations under the legal documents in connection with the Transaction Documents, (3) the opening of the Designated Accounts and (4) the appointment of authorised signatory(ies) to accept and to operate the accounts referred to above; (iii) specimen signatures of the Issuer s respective authorised signatories; and (iv) documentary evidence on the establishment of the Designated Accounts. Others 1. The Sukuk Musharakah shall have been approved by the SC and other relevant authorities (if any) having jurisdiction over matters pertaining to the Sukuk Musharakah. 2. All required approvals and licences for the Issuer and/or the Obligor have been obtained. 3. Confirmation from MARC that the Sukuk Musharakah has been accorded a minimum long term credit rating of AA- IS. 4. Receipt of confirmation from the Shariah Adviser that the Sukuk Musharakah and the Transaction Documents in relation thereto are Shariah compliant. 5. Receipt of satisfactory legal opinion from the Solicitors advising on, among others, the legality, validity and enforceability of the Transaction Documents and that all Security Documents are duly perfected and the confirmation that all conditions precedent have been met. 6. Confirmation that no event of default/dissolution has occurred or shall occur as a result of the issuance of the Sukuk Musharakah. 7. A report of the winding up search conducted at the office of the Director-General of Insolvency confirming that the Issuer and the Obligor have not been wound up. 8. The Security Trustee shall have received satisfactory evidence that the power of attorney granted by the Issuer under the Security Documents (where applicable) have been lodged for registration with the High Court of the States of Malaya. 12

13 9. The Facility Agent shall have received evidence that Form 34 of the Companies Act 1965 in respect of the Security Documents (where applicable) have been lodged with the Companies Commission of Malaysia for registration pursuant to Section 108 of the Companies Act 1965 and a search has been made by the Solicitors at the time of such lodgement confirming that save as disclosed earlier no encumbrances have been registered in the Companies Commission of Malaysia which would adversely affect the security of the Investors. 10. Receipt of the relevant notices of assignment issued to the Awarder and the duly executed acknowledgement of the notices of assignment from such parties pursuant to the Assignment of the Project. 11. Receipt of the relevant notices of charge issued to the relevant financial institutions where the Designated Accounts are being maintained and the duly executed acknowledgement of the notices of charge from such financial institutions pursuant to the Memorandum of Charge over the Designated Accounts. 12. Receipt of the letter of redemption cum undertaking from the existing financier(s) of the Obligor in the form and content acceptable to the Facility Agent. 13. The Obligor shall issue a Letter of Payment Instruction to the Awarder to remit the payment into the Revenue Account. 14. All representations and warranties remain true and correct. 15. Such other terms and conditions as may be advised by the Solicitors to be mutually agreed by the Facility Agent and the Issuer. (w) Representations and Warranties Representations and warranties, usual and customary for such transactions and such other representations as may be advised by the Solicitors including but not limited to the following:- (a) Status: the Issuer is a company duly incorporated with limited liability and validly existing under the laws of Malaysia. (b) Authorisations: the memorandum and articles of association of the Issuer incorporate provisions which authorise, and all necessary corporate action has been taken to authorise, and all authorisations of any governmental or other authority have been duly and unconditionally obtained and are in full force and effect to authorise the Issuer to own its assets, carry on its business as it is being conducted, and sign and deliver, and exercise its rights and perform the transactions contemplated in the Transaction Documents, to issue the Sukuk Musharakah and to perform its obligations specified therein and under the Sukuk Musharakah and in accordance with its terms. 13

14 (c) Non-violation: neither the execution and delivery of the Transaction Documents nor the performance of any of the transactions contemplated in the Transaction Documents does or will: (i) (ii) (iii) contravene or constitute a default under any provision contained in any contract, undertaking, agreement, instrument, law, judgement, order, licence, permit or consent by which the Issuer or any of its assets is bound or affected; or cause any limitation on the Issuer or the powers of its directors, whether imposed by or contained in its memorandum and articles of association or in any other law, order, judgement, agreement, instrument or otherwise, to be exceeded; or result in the creation or imposition of, or any obligation to create or impose, any mortgage, lien, pledge, charge or other security interest or any of its assets pursuant to the provisions of any other contract, undertaking or instrument. (d) (e) (f) Registration: all authorisations, approval, consent, licence, exemption, registration, recording, filing or notarisation of the Transaction Documents and payment of all duty and all other action whatsoever which is necessary to ensure the legality, validity or enforceability or priority of the liabilities and obligations of the Issuer or the rights of the Trustee and the Sukuk Musharakah holders under the Transaction Documents to the extent that it is necessary for the Issuer to obtain and/or renew and/or deliver such authorisations, approval, consent, licence, exemption, registration, recording, filing or notarisation have been duly and unconditionally obtained, made or taken. Default: no event has occurred which constitutes, or which with the giving of notice and/or the lapse of time and/or a relevant determination would constitute, a contravention of, or default under, any agreement or instrument by which the Issuer or any of its assets is bound or affected, being a contravention or default which might either have an effect on the business, assets or financial condition of the Issuer or affect the Issuer's ability to perform its obligations under the Transaction Documents in accordance with their respective terms. Litigation: no litigation, arbitration or administrative proceeding or claim. 14

15 (g) (h) (i) Tax: all necessary returns have been delivered by or on behalf of the Issuer to the relevant taxation authorities and the Issuer is not in default of the payment of any taxes of a material amount and no claim is being asserted with respect to taxes which is not disclosed in the financial statements referred to in paragraph (h) hereof which would materially and adversely effect the Issuer s ability to perform its obligations under the Transaction Documents with respect to any taxes. Financial statements: the audited financial statements (including the income statement and balance sheet) of the Issuer for its financial period shall be prepared on a basis consistently applied in accordance with applicable approved accounting standards in Malaysia and give a true and fair view of the results of its operations for that financial period and the state of its financial affairs at that date and in particular disclose or make provision against all the liabilities (actual or contingent) of the Issuer to the extent such disclosure or provision is required by the applicable approved accounting standards in Malaysia applicable at the relevant time and there has been no material adverse change in the Issuer s financial position since the date of the latest audited financial statement which would materially and adversely affect the Issuer s ability to perform its obligations under the Transaction Documents. Security Interests: none of the assets of the Issuer is affected by any Security Interest, and the Issuer is not a party to, nor is it or any of its assets bound by any order, agreement or instrument under which the Issuer is, or in certain events may be required to create, assume or permit to arise any Security Interest save and except for the following:- (i) (ii) (iii) those permitted under the Trust Deed including the creation of Security Interest for the purpose of covering the obligations of the Issuer and/or the Obligor in the case of non-performance of any of their duties under the Transaction Documents and to pay for whatever loss incurred as a result of such non-performance; matters disclosed by the Issuer in writing to the Trustee prior to the execution of the Transaction Documents; and the relevant Transaction Documents. 15

16 (j) (k) Information Memorandum: the Information Memorandum and the written information furnished by the Issuer in connection with the Transaction Documents do not contain any untrue statement or omit to state any fact the omission of which makes the statements therein, in the light of the circumstances under which they were made, misleading, and all expressions of expectation, intention, belief and opinion contained therein were honestly made on reasonable grounds after due and careful enquiry by the Issuer. Disclosure: the Issuer has fully and accurately disclosed in writing to the Trustee facts relating to the Issuer which the Issuer knows or should reasonably know and which are material (both actual and contingent) in the context of the Transaction Documents. (l) Transaction Documents: each of the Transaction Documents is in full force and effect and constitutes valid, binding and enforceable obligations on the Issuer. (m) (n) (o) (p) (q) (r) Compliance: the Issuer is in compliance and will comply with any applicable laws and regulations. Material Adverse Change: there has been no material adverse change in the business, financial condition operations or prospects of the Issuer since the date of the Issuer s last audited financial statements. Appointment of receiver, legal process: no steps have been taken by the Issuer nor, to the best of its knowledge, have any legal proceedings been started or threatened for the dissolution or winding up of the Issuer or for the appointment of a receiver or similar officer in respect of all or any part of the business or assets of the Issuer and no demand under Section 218(2) of the Companies Act 1965 have been received by the Issuer. Lawsuits: no lawsuits by a governmental agency, body or other regulatory authority are pending against the Issuer or, to the best of its knowledge, threatened to be instituted against the Issuer which will materially and adversely affect the Issuer s ability to discharge its obligations under the Transaction Documents. Title: the Issuer is the beneficial owner or has title to all its assets. Information: no information or documents have been withheld from the Lead Arranger or the Facility Agent (as the case may be) or the Sukuk Musharakah holders which may materially and adversely affect their decision to subscribe for the Sukuk Musharakah or enter into and perform their obligations under the Transaction Documents. 16

17 (s) (t) Activities: the Issuer has not engaged in any activities since its incorporation other than those contemplated by the Transaction Documents. Compliance: the Issuer has complied with all undertakings, covenants and other obligations under the Transaction Documents to which it is a party or affecting it. (u) Certificates: the Sukuk Musharakah constitutes proportionate beneficial ownership over the Musharakah Venture and the Trust Assets. (x) Events of Default Including but not limited to: a) Non-payment: The Issuer fails to pay any amount due from it under any of the Transaction Documents on the due date or on demand, if so applicable. The non-payment above shall be an automatic event of default, unless so decided otherwise by the Sukuk Musharakah holders by way of Extraordinary Resolution. The Sukuk Musharakah holders shall, by way of Extraordinary Resolution of 75% of those present and voting at a meeting, have the right to declare Events of Default if one (1) or more of the following events shall occur:- b) Breach of obligations: The Issuer and/or the Obligor fails to observe or perform any of its obligations under the Transaction Documents or under any undertaking or arrangement entered into in connection therewith, and if the failure is in the reasonable opinion of the Trustee, capable of remedy, but not remedied to the satisfaction of the Trustee, within the period stated under the Transaction Documents; or c) Breach by Obligor: the Obligor fails to honour its obligations under the Project; or d) Misrepresentation: any representation, warranty, covenant or statement which is made (or acknowledged to have been made) by the Issuer in the Transaction Documents or which is contained in any certificate, statement, legal opinion or notice provided under or in connection herewith or therewith proves to be untrue, inaccurate or incorrect in any material respect, or if repeated at any time with reference to the facts and circumstances subsisting at such time would not be accurate in all material respects; or e) Breach of Covenants: any covenants which is made by the Issuer in the Transaction Documents is, in the reasonable opinion of the Trustee, being breached and such breach is not remedied within the period stated under the Transaction Documents; or 17

18 f) Cessation of Business: The Issuer and/or the Obligor changes the nature or scope of its business, suspends a substantial part of the present business operations which it now conducts directly or indirectly, or any governmental authority expropriates or threatens to expropriate all or part of its assets and the result of any of the foregoing; or g) Disposal of Substantial Assets: the Issuer and/or the Obligor transfers or disposes of, or threatens to transfer or dispose of substantial part of its assets related to the Project (other than for purposes of upgrading and replacements or writing off in the normal course of business), if such transfer or disposal would have material adverse effect on the Project; or h) Invalidity: any provision of the Transaction Documents is or becomes, for any reason, ineffective, invalid or unenforceable and in the opinion of the Trustee such event is materially prejudicial to the interests of the Investors; or i) Illegality: it becomes unlawful at any time for the Issuer and/or the Obligor to perform all or any of its obligations under the Transaction Documents or due to the fault or omission of the Issuer and/or the Obligor, all or any of the Transaction Documents become unenforceable against the Issuer, as the case may be; or j) Repudiation: the Issuer and/or the Obligor repudiates or terminates all or any of the Transaction Documents; or k) Nationalisation of Asset: all or a material part of the undertaking(s), assets, rights or revenues of, or shares or other ownership interests in, the Issuer and/or the Obligor is seized, nationalised, expropriated or compulsorily acquired by or under the authority of any governmental body save where adequate compensation has been paid; or l) Attachment: a warrant of attachment or execution or similar process against any substantial part of the Issuer s and/or the Obligor assets is issued which in the reasonable opinion of the Trustee will affect the Issuer s and/or the Obligor ability to perform any of its obligations under the Transaction Documents; or m) Appointment of receiver, legal process: an encumbrancer takes possession of, or a trustee, receiver or similar officer is appointed in respect of, all or any substantial part of the business or assets of the Issuer and/or Obligor; or 18

19 n) Insolvency: the Issuer becomes insolvent or is unable to pay its debts as they fall due, stops or suspends payment of all or a material part of its debts, begins negotiations or takes any proceeding or other step with a view to readjustment, rescheduling or deferral of all of its borrowed money (or of any part of its borrowings which it will or might otherwise be unable to pay when due) or proposes to make a general assignment or an arrangement or composition with or for the benefit of its creditors or a moratorium is agreed or declared in respect of or affecting all or a part of the borrowings money of the Issuer; or o) Winding-Up: any party takes any action or any legal proceedings are started or other steps taken for (aa) the Issuer and/or the Obligor to be adjudicated or found insolvent, (bb) the winding-up, dissolution of the Issuer and/or the Obligor either by an order of a Court of competent jurisdiction or by way of voluntary winding-up save and except to effect a reorganisation of the business of the Issuer and/or the Obligor (cc) the appointment of a liquidator, trustee receiver or similar officer of the Issuer and/or the Obligor over the whole or any part of the Issuer s and/or the Obligor or any of its respective undertaking(s), concession, rights or revenues other than a winding-up of the Issuer and/or the Obligor for the purpose of amalgamation or reconstruction ; or p) Section 176: the commencement of any proceedings pursuant to Section 176 of the Companies Act, 1965 in relation to the Issuer (except for the purpose of and followed by reconstruction, amalgamation or reorganisation which does not in the opinion of the Trustee have a material adverse effect); or q) Legal Process: any legal proceedings, suits, actions or investigations of any kind whatsoever shall be instituted against the Issuer and/or the Obligor, which in the reasonable opinion of the Trustee, will have a material adverse effect upon the ability of the Issuer to perform its obligations under the Transaction Documents; or r) Authorisations: revocation, withholding or modification of any relevant licence, consent, authorisation or approval which materially and adversely impairs the Issuer s and/or the Obligor ability to comply with the terms and conditions of the Sukuk Musharakah and/or any of the Transaction Documents; or s) Others: any other event occurs or circumstance arises which, in the reasonable opinion of the Trustee, is likely to materially and adversely affect the ability of the Issuer and/or the Obligor, to perform all or substantial parts of its obligations under or otherwise to comply with the terms of the Transaction Documents and which in the reasonable opinion of the Trustee is capable of being remedied but is not remedied to the satisfaction of the Trustee, within twenty-one (21) days from the date of a written notice from the Trustee to the Issuer and/or the Obligor specifying the event; or 19

20 (y) Principal terms and conditions for warrants (where applicable) t) any other Events of Default as may be advised by the Solicitors; then, the Trustee may, without prejudice to any other rights of the Sukuk Musharakah holders, at any time after the happening of an Event of Default by notice to the Issuer declare that all outstanding amounts under the Sukuk Musharakah and all other sums payable under the Transaction Documents shall, have become immediately due and payable or have become due and payable on demand, whereupon the same shall, immediately or in accordance with the terms of such notice, become so due and payable. Not Applicable (z) Other principal terms and conditions for the issue A. Designated Accounts The Obligor and/or the Issuer is required to establish and maintain the following Shariah compliant Designated Accounts with a licensed bank (or banks) in Malaysia acceptable to the Lead Arranger:- 1. Disbursement Account ( DA ); 2. Revenue Account ( RA ); 3. Finance Service Reserve Account ( FSRA ); 4. Finance Service Account ( FSA ); and 5. Sinking Fund Account ( SFA ). Any withdrawal/transfer of funds from the Designated Accounts shall require the sole signature of the Trustee. 1. Disbursement Account ( DA ) The Issuer shall maintain a Shariah compliant DA, wherein the DA shall capture the proceeds from issuance of Sukuk Musharakah after the deductions of the followings:- (a) payment of fees and expenses in relation to the Sukuk Musharakah; (b) payment for the redemption of the existing bank borrowings of the Obligor; and (c) payment towards the requirement of the FSRA. Withdrawals from the DA shall be made against the approved budget submitted to the Facility Agent and the relevant supporting documents, evidencing the utilisation of proceeds. 20

21 The monies kept in the DA shall be allowed for making Permitted Investments. For avoidance of doubt, the remaining credit balance in the DA at the end of the Sukuk Musharakah tenure, if any, shall be transferred into the SFA for the repayment of the Sukuk Musharakah capital. 2. Revenue Account ( RA ) The Obligor shall maintain a Shariah compliant RA, wherein all revenues/proceeds due from the Project and such other amounts due to the Issuer shall be credited into. Monies in the RA shall be utilized for the following purposes:- (a) payment of taxes and other charges as imposed by the Government; (b) financing the FSRA in the event the amount in the FSRA is utilised to finance the FSA; (c) financing the FSA to ensure that the Minimum Required Balance is met on the relevant period as stated in item (4) below; (d) financing the SFA in the event the Minimum Required Balance is not met on the relevant period as stated in item (5) below; (e) payment for the Issuer s operating expenses including the fees and expenses in relation to the Sukuk Musharakah; and (f) payment for the Obligor s operating expenses with respect to the Project based on approved budget to be submitted to the Trustee and/or for any immediate use by way of an ad hoc budget to be approved at the sole and absolute discretion of the Trustee. The monies kept in the RA shall be allowed for making Permitted Investments. [ The remaining of this page is intentionally left blank ] 21

22 3. Finance Service Reserve Account ( FSRA ) The Issuer will open a Shariah compliant FSRA for the purpose of depositing an amount equivalent to two (2) semi annual profit payments due to the Investors. The funds in this account shall only be utilised during the tenure of the Sukuk Musharakah to cover any shortfall in the FSA and the sum shall be replenished by the Issuer within a remedy period of fourteen (14) days. At the end of the Sukuk Musharakah period, the remaining credit balance in the FSRA shall be transferred into the SFA for the repayment of the Sukuk Musharakah capital. The monies kept in the FSRA shall be allowed for making Permitted Investments. 4. Finance Service Account ( FSA ) The Issuer will open a Shariah compliant FSA for the purpose of capturing the progressive monthly remittance of funds from the Revenue Account. Funds in the FSA shall be utilised towards the payment of the of the semi annual profit amounts due to the Investors. The Issuer shall maintain the following Minimum Required Balance in the FSA for the following periods:- Period Five (5) months before the next profit payment date Four (4) months before the next profit payment date Three (3) months before the next profit payment date Two (2) months before the next profit payment date One (1) month before the next profit payment date Minimum Required Balance 20% of the next profit amount due 40% of the next profit amount due 60% of the next profit amount due 80% of the next profit amount due 100% of the next profit amount due For avoidance of doubt, the funds in the FSA shall not be withdrawn at any time and for any other purposes except for those specifically stated above. The monies kept in the FSA shall be allowed for making Permitted Investments. 22

23 5. Sinking Fund Account ( SFA ) The Issuer will open a Shariah compliant SFA for the purpose of capturing the progressive monthly remittance of funds from the Revenue Account. Funds in the SFA shall be utilized towards the repayment of the capital due to the Investors. The Issuer shall maintain the following Minimum Required Balance in the SFA for the following periods:- Period Ten (10) months before the next capital repayment date Nine (9) months before the next capital repayment date Eight (8) months before the next capital repayment date Seven (7) months before the next capital repayment date Six (6) months before the next capital repayment date Minimum Required Balance 20% of the next capital amount due 40% of the next capital amount due 60% of the next capital amount due 80% of the next capital amount due 100% of the next capital amount due For avoidance of doubt, the funds in the SFA shall not be withdrawn at any times and for any other purposes except for those specifically stated above. The monies kept in the SFA shall be allowed for making Permitted Investments. B. Application of Enforcement Proceeds In the Events of Default, the following application of enforcement proceeds will apply: (i) first, for payment of the remuneration, cost and expenses of any receiver appointed and the Trustee and Facility Agent; (ii) second, for payment of taxes and other charges imposed by the Government; (iii) third, for all professional fees and expenses; (iv) fourth, for the pro-rata distribution of profit on the Sukuk Musharakah, if available, up to the agreed amount; (v) fifth, for the return of capital invested in the Sukuk Musharakah until cancellation and return of the capital invested on all of the Sukuk Musharakah and all other amounts payable to the Investors have been paid in full; and (vi) sixth, any balance remaining after the above, to the Issuer. 23

24 C. Positive Covenants So long as any commitment under the Sukuk Musharakah remains outstanding, the Issuer and/or the Obligor shall: i) comply with all provisions of the Transaction Documents; ii) enter only into such activities as allowed under its Memorandum and Articles of Association; iii) maintain a proper accounting system and keep adequate records in compliance with applicable statutory requirements; iv) deliver to the Trustee within one hundred eighty (180) days of the end of each financial year its audited financial statements; and within ninety (90) days of each half year period its unaudited financial statements for that period together with a certificate signed by two (2) of its directors, to the effect that such financial statements present a true and fair view, and on an annual basis certificate that it has complied with its duties and obligations under the Trust Deed and the terms and conditions of the Sukuk Musharakah and that there did not exist or had existed from the date of issue of the Sukuk Musharakah or the date of the previous certificate, as the case may be, any event of default and if such is not the case, to specify the same; v) deliver to the Facility Agent and the Trustee within thirty (30) days prior to the end of each current financial year, a monthly/quarterly operating/capital expenditure budget of the Obligor with respect to the Project for the next financial year in the form and substance satisfactory to the Facility Agent and the Trustee, approved by the Board of Directors of the Obligor; vi) as soon as practicable, deliver to the Trustee a certified copy of each supplementary contract entered into subsequent to the Transaction Documents in connection with the Sukuk Musharakah; vii) perform and carry out all its obligations under the Transaction Documents (including but not limited to), the obligation to redeem the Sukuk Musharakah on the relevant maturity date or such other date as the Sukuk Musharakah becomes due and payable; viii) subordinate any advances or loans to the obligations arising from the Sukuk Musharakah ; ix) exercise reasonable diligence in carrying out its business in a proper and efficient manner which should ensure, amongst others, that all necessary approvals or relevant licences are obtained; x) make payment of all taxes, fees and other dues to the relevant authorities; xi) open and maintain each of the required Designated Accounts and pay all amounts into such accounts and make all payments from such accounts, only as permitted under the Sukuk Musharakah; 24

25 xii) ensure that the Obligor shall undertake that all proceeds due from the Project shall be remitted by the Awarder into the Revenue Account; xiii) take such steps as may be required by the Trustee following the occurrence of an Event of Default to remedy or mitigate the effect of the Event of Default; xiv) comply with such provisions of the Securities Commission Act 1993, Capital Market Services Act 2007, the guidelines issued by the SC from time to time, including but not limited to the SC s Guidelines on the Offering of Islamic Securities (dated 26 July 2004) and such other provisions by other regulatory authorities, where applicable; and xv) such other covenants as advised by the Solicitors and mutually agreed by the Issuer and Lead Arranger. E. Negative Covenants The Issuer shall not without the prior written consent of the Sukuk Musharakah holders: i) Indebtedness: incur, assume or permit to exist any indebtedness other than for the purpose of covering the obligations of the Issuer and/or the Obligor in the case of non-performance of any of their duties under the Musharakah Transaction Documents and to pay for whatever loss incurred as a result of such non-performance. ii) Negative Pledge: create or permit to subsist any other security interests other than the security interests arising out of any agreements entered by the Issuer for the provision of performance and maintenance of the Sukuk Musharakah; iii) Share Capital: reduce its authorised and issued paid-up capital; iv) Loan stock/advances: Make any principal repayment or interest payment in respect of any subordinated advances/loan stocks or make or permit to exist any loans or advances to any person or entity (including shareholders and directors) prior to the full repayment of the Sukuk Musharakah; v) Dissolution: dissolve its affairs or enter into any amalgamation, consolidation, merger of reconstruction with any other entity which may materially affect its ability to perform its obligation; vi) Surrender rights etc: surrender, assign, relinquish or otherwise dispose any of its rights and interest under the Transaction Documents (except as permitted or required under the Transaction Documents) vii) Render void: do or suffer to be done any act, matter or thing whereby any takaful/insurance may be rendered void, voidable or incapable of being effected, maintained or renewed; 25

26 viii) Restricted payment: declare or make any payment of any dividend on share capital or service any subordinated advances or loan stocks or notes; ix) Voluntary winding-up: Voluntarily wind up or take action pursuant to Section 176 of the Companies Act, 1965; and x) such other covenants as advised by Solicitors and mutually agreed by the Issuer and Lead Arranger. F. Financial Covenants (i) The Issuer shall maintain a minimum Annual Finance Service Cover Ratio ( FSCR ) of 1.50 times at all times effective one full financial year from the issue date. (ii) Annual FSCR is defined as the ratio of cumulative Available Cash Flow to the aggregate of all financing costs incurred by the Issuer and any principal amounts repaid or cost portion paid under any of the indebtedness arising from borrowed moneys or financing facilities of the Issuer, each during the previous twelve (12) months period, duly audited by the Issuer s auditors at the end of each financial year. Available Cashflow In any relevant period, the sum of:- (a) all income received and receivable by the Issuer in cash and any other receipts of a capital or revenue nature under any Agreements; (b) income received on cash balances of the Designated Accounts and Permitted Investments; (c) Takaful/Insurance proceeds received by the Issuer during such period (if applicable); and (d) all credit balances and amounts standing to the credit of the Designated Accounts at the beginning of the financial year prior to the relevant date on which the FSCR is to be calculated, Less: (a) tax paid in cash (if any); and (b) the total amount spent on management, administration and other operating activities, during that period to be duly audited by the Issuer s auditors. 26

27 G. Permitted Investments The Trustee may from time to time utilise funds held in the Designated Accounts to make Permitted Investments or to make other investments based on the request by the Issuer, provided that such funds utilised for Permitted Investments shall be remitted to the relevant Designated Accounts in a timely manner to meet any payment obligations of the Issuer when due and payable. The Permitted Investments shall have an earlier maturity date by at least five (5) days prior to the date when monies will be needed for payments. Such Permitted Investments are to be held and not traded. Provided that no Permitted Investments shall be made if an Event of Default has occurred or would occur following the making of such Permitted Investments. Permitted Investments shall be Shariah compliant investments as approved by the relevant Shariah Council. Permitted Investments mean: (a) (b) (c) (d) (e) (f) (g) Mudarabah Bankers Acceptances, bills, money market instruments issued by licensed financial institutions with a short term rating of P1 or its equivalent; money market funds which are principal guaranteed and are approved by the SC; principal guaranteed structured investments approved by BNM and issued by licensed financial institutions with a short term rating of MARC-1 or its equivalent or their local or foreign equivalents; Wadiah and other deposits under Shariah principles with licensed financial institutions; treasury bills, money market instruments, and any other debt instruments issued by BNM or the Government; private debt securities issued by corporations, financial institutions, or guaranteed by licensed financial institutions with a short term rating of MARC-1 or its equivalent; and such other investments approved by the Trustee, provided that the rating agency confirms that such investments do not adversely impact the then current rating of the Sukuk Musharakah. H. Availability Period Upon completion of documentation and compliance of all relevant conditions to the satisfaction of the Lead Arranger, the Sukuk Musharakah shall be issued within six (6) months from the date of the SC s approval. 27