Injaz AsiaEquity Property Berhad Proposed Secured Bonds of up to RM198 million in Nominal Value Appendix 1

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1 Principal Terms and Conditions of the Proposal BACKGROUND INFORMATION (a) Issuer (i) Name : Injaz AsiaEquity Property Berhad ( IAEPB or Issuer ) (ii) Address : Registered Address: 22nd Floor, Menara EON Bank, 288, Jalan Raja Laut, Kuala Lumpur Business Address: 22nd Floor, Menara EON Bank, 288, Jalan Raja Laut, Kuala Lumpur (iii) Business Registration No. (iv) Date/Place of Incorporation : U : 14 September 2006/ Malaysia (v) Date of Listing (in case of a public listed company) : Not applicable (vi) Status : Resident controlled company Non- Bumiputera controlled company* * as defined in Guidance Note 6 of the Issues Guidelines (vii) Principal Activities (viii) Board of Directors : To issue Bonds arising from the securitisation of Kenanga International Building. : Board of Directors as at 20 November 2006 i) En. Abdul Aziz Bin Meor Ngah ii) En. Wan Nadhri Bin Mohd. Wan Fauzi 1

2 (ix) Structure of shareholdings and names of shareholders : As at 20 November 2006 Shareholder BHLB Trustee Berhad, as the share trustee for the benefit of charitable organisations. No. of Equity Shares Interest 2 100% (x) Authorised and paid up capital : Authorised capital as at 20 November 2006 RM100,000 comprising 100,000 ordinary shares of RM1.00 each Paid-up capital as at 20 November 2006 RM2 comprising 2 ordinary shares of RM1.00 each (b) Originator (i) Name : Kenanga Management & Services Sdn Bhd ( KMS ) (ii) Address : Registered Address: 8 th Floor, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur. Business Address: Tingkat 2, Kenanga International, Jalan Sultan Ismail, Kuala Lumpur. (iii) (iv) (v) Business Registration No. Date/Place of Incorporation Date of Listing (in case of a public listed company) : V : 7 August 1980/ Malaysia : Not applicable (vi) Status : Resident controlled company Bumiputera controlled company* * as defined in Guidance Note 6 of the Issues Guidelines 2

3 (vii) Principal Activities : The principal activities of KMS are property holding and management. (viii) Board of Directors : Board of Directors as at 20 November 2006 i) YM Tengku Dato Paduka Noor Zakiah Bte Tengku Ismail ii) En. Abdul Aziz Bin Hashim iii) iv) En. Megat Mizan Nicholas Denney En. Mohd Sheridan Bin Dato Ramli v) Dato Ramli Bin Ismail (alternate to En. Mohd Sheridan Bin Dato Ramli) (ix) Structure of shareholdings and names of shareholders : As at 20 November 2006 Shareholder K & N Kenanga Holdings Berhad No. of Equity Shares Interest 30,000, % (x) Authorised and paid up capital : Authorised capital as at 20 November 2006 RM50,000,000 comprising 50,000,000 ordinary shares of RM1.00 each Paid-up capital as at 20 November 2006 RM30,000,000 comprising 30,000,000 ordinary shares of RM1.00 each PRINCIPAL TERMS AND CONDITIONS (a) Names of the parties involved in the proposed transaction (where applicable) (i) Principal Adviser(s)/Lead Arranger(s) : OCBC Bank (Malaysia) Berhad ( OCBC ) (ii) Arranger(s) : Not applicable (iii) Valuers : Colliers, Jordan Lee & Jaafar Sdn Bhd (iv) Solicitors : Messrs. Adnan Sundra & Low (v) Financial Adviser : Not applicable 3

4 (vi) Technical Adviser : Not applicable (vii) Guarantor : Not applicable (viii) Trustee : Malaysian Trustees Berhad ( MTB ) (ix) Facility Agent : OCBC (x) Primary Subscriber(s) and Amount subscribed (where applicable) : Facility Senior Bonds (as defined below) Primary Subscriber OCBC Amount Subscribed (RM) 78.0 million (xi) Underwriter(s) and amount underwritten (xii) Central Depository : Not applicable : Bank Negara Malaysia ( BNM ) (xiii) Paying Agent : BNM (xiv) Reporting Accountant (xv) Others (please specify) : Ernst & Young : (1) Security Trustee MTB (2) Share Trustee BHLB Trustee Berhad (Co. No A) (3) Tax adviser Ernst & Young Tax Consultants Sdn. Bhd. (Co. No K) (4) Lessee Kenanga Investment Bank Berhad (formerly known as K & N Kenanga Bhd) (Co. No H) ( KIBB ) (5) Servicer AsiaEquity Partners Sdn Bhd (Co. No H) Note: The role of the Servicer is as defined in Appendix A. (6) Administrator Symphony Corporatehouse Sdn Bhd (Co. No A) (formerly known as Corporatehouse Services Sdn Bhd) 4

5 (7) Investor for Subordinated Bond (8) Investor for Mezzanine Bond (9) Investor for Junior Bond (10) Call Option Holder (b) Facility description OCBC OCBC Capital Investment (Asia) Limited Injaz Mena Investment Company PSC. Injaz AsiaEquity Property Fund I, L.P. : Proposed Secured Bonds of up to RM198 million in nominal value ( Bonds ) arising from the securitisation of Kenanga International Building ( Property )* (hereinafter referred to as Bonds or Transaction ). The Bonds shall comprise Senior Bond rated AAA to A, unrated Subordinated Bond, unrated Mezzanine Bond, rated Junior Bond and unrated Junior Bond. * Note: The Transaction will involve the disposal by KMS to the Issuer of all that piece of freehold land measuring approximately 6,804 square meters held under Geran No , No. Lot 1215, Seksyen 57, Bandar Kuala Lumpur, Daerah Kuala Lumpur, Negeri Wilayah Persekutuan ( the Land ) together with a 22-storey commercial building inclusive of a 3 1/2 storey annexed podium block and a 6- split level car park decks with net lettable area of approximately 297,511 square feet (subject to survey) known as Kenanga International Building ( Building ) and bearing postal address of Kenanga International, Jalan Sultan Ismail, Kuala Lumpur (collectively the Property which expression shall include, unless repugnant to the context thereto, reference to either the Land or Building) together with the existing and new machineries, equipment (including all generators (save and except for the 350kVA generator belonging to KIBB), air conditioners, lifts) fixtures and fittings thereon ( the Plant and Equipment ) and the rights and benefits of all existing tenancy agreements and new tenancy agreements ( Tenancy Agreements ) and all warranties and guarantees pertaining to the Property and the Plant and Equipment (collectively Kenanga International Building ), for a cash consideration of RM165 million. Pursuant to the Transaction, IAEPB shall also enter into a 5

6 lease agreement with KIBB ( Lease Agreement ) for a period of ten (10) years with an option to renew for a further period of five (5) years in respect of the 4 th to 20 th floors of the Property (both floors inclusive) at an annual rental rate of approximately RM10.75 million (excluding service charge) and on the basis of lease rent review upward on 3 yearly basis in accordance with the indexed inflation rate based on the official inflation rate issued by the Ministry of Finance Malaysia or any other relevant authority. A diagrammatic description of the Transaction is illustrated as follow:- Property KMS (Originator) Trustee AsiaEquity (Servicer) (1) True Sale of Property (5a) Appoint Servicer (5b) Appoint Property Manager IAEPB (Issuer) (6) Lease Agreement (4) Purchase Consideration (2) Issues Bonds (3) Cash proceeds Senior Bond Investors Subordinated Bond Investors Mezzanine Bond Investors Junior Bond Investors Property Manager KIBB (Lessee) 6

7 (c) Issue size (RM) : The Bonds will be issued in the following classes: Class Issue Size Nominal Value (Up to RM million) Senior Bonds: Class A 55 Class B 10 Class C 10 Class D 3 78 Subordinated Bond: Class E 22 Mezzanine Bond: Class F 20 Junior Bond: Class G* 29 Class H Total 198 * In respect of the Class G Bond, the Class G Bondholder shall have the obligation to subscribe at least RM19 million of the Class G Bonds whilst in respect of the remaining sum of RM10 million, the Class G Bondholder shall have the right but NOT the obligation to subscribe for additional bonds to finance any additional refurbishment cost of the Property. (d) Issue price (RM) : The Senior Bond shall be issued at par or at a discount to nominal value and the issue price shall be as agreed between the Issuer and the Primary Subscriber. The Subordinated Bond, Mezzanine Bond and Junior Bond shall be issued at par or at a discount to nominal value and the issue price shall be as agreed between the Issuer and the respective investors of the Subordinated Bond, Mezzanine Bond and Junior Bond. 7

8 (e) Tenor of the facility/ issue : Unless otherwise redeemed or cancelled, the Bonds can be redeemed in full at their respective nominal value and on the respective Expected Maturity as follows:- Class Expected Maturity (years from date of issuance) Legal Maturity (years from date of issuance) Class A Class B Class C Class D Class E Class F Class G Class H Note: Expected Maturity is the date earmarked for the Issuer to fully redeem the Bonds before the Legal Maturity date. In the event the Issuer does not fully redeem the Bonds on the Expected Maturity date, it will trigger the sale of the Property via sale in open market for the purposes of raising funds to fully redeem the Bonds on the Legal Maturity date. Legal Maturity is the final maturity date of which the Bonds must be fully redeemed. Otherwise, it will be an Event of Default. Proceedings pursuant to the Event of Default shall be enforced. Notwithstanding the above, the tenure of the Bonds shall be as per the Legal Maturity of the respective Class. Accordingly, the non-payment of the Bonds on the respective Expected Maturity will not in itself constitute an Event of Default under the Bonds, but a Trigger Event is deemed to have occurred. The non-payment of the Bonds on Legal Maturity will be an Event of Default. The date of issuance of the Bonds shall not be later than six (6) months from the date of the Securities Commission s ( SC ) approval. (f) Interest/Coupon (%) (please specify) : Coupon on Class A, B, C, D, E, F and H Bonds issued shall be based on a fixed rate ( fixed coupon payment ) to be determined at the point of issuance. We shall inform the SC of the actual coupon rate accordingly. 8

9 Upon redemption, Class F Bonds shall be entitled to additional coupon payment ( additional coupon payment ) subject to the total fixed and additional coupon payment due to the Class F Bonds being equivalent to a minimum Internal Rate of Return ( IRR ) to be agreed between the Issuer and Class F Bondholders. Upon redemption, Class G Bonds shall be entitled to a variable coupon payment being equivalent to an IRR to be agreed between the Issuer and Class G Bondholders. In addition to the fixed coupon payment, Class H Bonds shall also be entitled to variable coupon payment to be determined by the Security Trustee 6 months prior to each coupon payment date based on the following computation: Net Available Cash less all the obligations of the Issuer under the Bonds (other than obligations under Class H Bonds) for the next 6 months and all taxes and other statutory obligations, operating expenditure, fees and expenses of the Issuer for the next 6 months where Net Available Cash means the aggregate balance standing to the credit of the Designated Accounts (save for the amount in the Rental Deposits Account and monies earmarked for refurbishment cost in the Revenue Account) on the day of calculation of the variable coupon on Class H Bonds and shall include funds invested in Permitted Investments including all investment income to be earned thereon and rentals receivable for the next 6 months. In satisfaction of the additional coupon payment and variable coupon payment, the Class F and H Bonds holders would have the sole option of deciding to receive the shares of or units in a Real Estate Investment Trust ( REIT ) or other listed company in the event the purchase consideration of the Property (upon an onward sale by the Issuer or the Trustee) are settled partially through swap of shares in a REIT or other listed company. The number of shares/units and the subscription price shall be determined subject to meeting the abovementioned IRR for the Class F and H Bonds up the point of full redemption of the 9

10 Bonds. In such event, the Class F and H Bonds can have the sole right to request for part cash and part shares/units. (g) Interest/Coupon Payment frequency and basis : The coupon payments shall be payable semi-annually in arrears from the date of issue of each class of the Bonds on actual number of days over 365 days basis save and except for Class G and H Bonds. The fixed coupon payment in respect of the Class H Bonds shall be paid semi-annually in arrears on actual number of days over 365 days basis but subject to the following conditions: No Trigger Event (s) or Event of Default (s) has occurred and is continuing under the Transaction; The Debt Service Cover Ratio ( DSCR ) is above 1.5 times following the said payments; The first payment can only be made 12 months after the first issuance of the Bonds. However, in the event the Issuer has insufficient funds to pay fixed coupon payment on the Class F and H Bonds on the coupon payment date, the coupon payable on that date shall be deferred and be payable on the next coupon payment date, and so on (i.e. on a cumulative basis). Such unpaid coupon shall be subject to the Penalty Interest on a compounded basis for Class F Bonds and there will be no Penalty Interest or additional coupon to be charged on the Class H Bonds. Any Penalty Interest charged on the Class F Bonds shall be excluded from the IRR computation in the determination of the additional coupon payment. The additional coupon payment for the Class F Bonds will be paid only upon redemption of the Bonds in accordance with the cashflow waterfall in the Designated Accounts and Priority of Payment & Application of Transfer for the Revenue Account clauses herein. The variable coupon payment of Class G and H Bonds will be paid only upon redemption of the Bonds subject to availability of cashflow in accordance with the cashflow waterfall in the Designated Accounts and Priority of Payment & Application of Transfer for the Revenue Account clauses. 10

11 The DSCR for this purpose is the ratio ofthe balances in the Designated Accounts (save for outstanding monies earmarked for refurbishment and amount in the Rental Deposits Account) including any Permitted Investment, before total debt service obligations for the preceding twelve (12) months less the coupon to be paid to Class H Bondholder, to the amount of IAEPB s total debt service obligations (fixed coupon payment and outstanding nominal value of the Class A, B, C, D, E and F Bonds) for the preceding twelve (12) months. For the avoidance of doubt, the outstanding nominal value of the Class A, B, C, D, E and F Bonds for the above computation shall only be applicable within the period of 12 months prior to the Expected Maturity date. (h) Yield to Maturity (%) : Shall be determined at the point of issuance. We shall inform the SC of the actual yield to maturity accordingly. (i) Security/Collateral (if any) : To secure the Bonds, IAEPB will grant and/or cause to be granted in favour of the Security Trustee the following security:- i. A first legal charge over the Property together with the Plant and Equipment thereon; ii. A first legal assignment over all of IAEPB s present and future rights, title, interest and benefits in and under such Tenancy Agreements in respect of the Property including but not limited to the Lease Agreement with KIBB and all warranties and guarantees pertaining to the Property and the Plant and Equipment; iii. A first legal assignment over all of IAEPB s present and future rights, title, interest and benefits in and under such insurance policies procured in respect of the Property; iv. A first legal assignment of the Issuer s rights under the Sale and Ancillary Documents (as defined below); v. A first legal assignment of the Issuer s rights under the Call Option (referred to in paragraph titled Call Option below); 11

12 vi. A first legal assignment to be created over all of IAEPB s present and future rights, title, interest and benefits in and towards all the cashflow of the Property including the rental deposits, after deducting operational expenses; vii. A power of attorney (the Power of Attorney ) to be granted by IAEPB in favor of the Security Trustee for the sale of the Property in the event of a declaration of a Trigger Event and/or Event of Default; viii. A first legal assignment of the designated accounts (as defined below) to be opened by IAEPB and first fixed charge over the credit balances therein; and ix. A first party first ranking fixed and floating charge to be created by IAEPB by way of debenture over all the present and future assets and undertakings of IAEPB. (j) Details on utilisation of proceeds : IAEPB IAEPB shall use the Class A, B, C, D, E, F and H Bonds proceeds of RM169.0 million for the following purposes:- i) To settle the consideration for the purchase of the Property from KMS. ii) To meet all expenses in relation to the acquisition and refurbishment planning of the Property and upfront expenses to be incurred on the issuance of the Bonds which shall include reimbursement of cost incurred by the Transaction parties. Amount (RM million) Up to 4.0 (1) Total Note: (1) Actual amount may vary depending on actual expenses incurred. In the event that the actual amount shall be less than RM4.0 million, the difference shall be utilised to finance the refurbishment cost. 12

13 The Class G Bonds proceeds of RM29.0 million shall be utilised to finance the refurbishment cost of RM19.0 million to be incurred by the Issuer (upon the advice of the Servicer) on the Property and with additional RM10.0 million as contingency for any additional refurbishment cost as may be decided by the Servicer. Originator Originator shall use the entire Bonds proceeds of RM165.0 million to: Amount (RM million) i) To redeem and discharge and Up to 30.0 (1) procure the release of the Property from the existing encumbrances created in favour of Public Bank Berhad ii) To increase the issued and paid-up share capital of KIBB, a whollyowned subsidiary of KNK Holdings, from RM460.0 million to up to RM580.0 million. iii) Working capital requirements of the KNK Holdings Group and to defray expenses incurred by KNK Holdings which are associated with the disposal of the Property to IAEPB (2) 15.0 Total Notes:- (1) Actual amount may vary depending on actual settlement date. In the event that the actual amount shall be less than RM30.0 million, the difference shall be utilised as working capital for the KNK Holdings Group. (2) KNK Holdings announced on 18 January 2007 that it had subscribed for 120 million new ordinary shares of RM1.00 each fully paid at par for cash in the capital of KIBB. The subscription of shares had been funded using capital injection by external short term debt financing, which will be repaid via the proceeds as set out in (ii) above. 13

14 (k) Sinking Fund (if any) : None. (l) Rating : Credit rating assigned All the Bonds save and except for Class E Bonds, Class F Bonds and Class H Bonds will be rated. Indicative ratings are as follows: Class Amount (RM million) Rating Senior Bond Class A 55 AAA Class B 10 AA2 Class C 10 A2 Class D 3 A3 78 Junior Bond Class G 29 C2 Total 107 Name of rating agency Rating Agency Malaysia Berhad ( RAM ) (m) Form and Denomination : The Bonds will be represented by a Global Certificate to be deposited with BNM and will be prescribed in bearer form (exchangeable for definitive certificates only in limited circumstances) under the Scripless Securities Trading System ( SSTS ) maintained by BNM. The Bonds will be in the denomination of RM1,000,000 or in multiples of RM1,000,000 at the time of issuance. (n) Mode of Issue : The Class A to D Bonds will be issued on a bought deal basis to the Primary Subscriber whilst the Class E to H Bonds will be issued on a private placement basis without prospectus and shall be reported on the Fully Automated System for Issuing/Tendering ( FAST ) and issued through the Real Time Electronic Transfer of Funds and Securities ( RENTAS ) system. 14

15 (o) Selling Restriction : The Bonds may not be offered, sold or disposed of, directly or indirectly, nor may any documents or other material in connection therewith be distributed in Malaysia or anywhere else, other than to persons who are within the categories set out in Schedule 2, 3 and 5 of the Securities Commission Act, 1993 (as amended from time to time) and subject to any law, order, regulation or official directive of either the SC, BNM or any other regulatory authority from time to time. (p) Listing Status : The Bonds shall not be listed on the Bursa Malaysia Securities Berhad or on any other stock exchange. (q) Minimum Level of Subscription (RM or %) : Class A, B, C, D, E, F and H Bonds - 100%. Class G Bonds - 100% for the first issuance of the RM19 million - 0% for the subsequent issuance of the RM10 million. (r) Other regulatory approvals required in relation to the issue, offer or invitation and whether or not obtained (please specify) : None (s) Conditions Precedent : The issuance of the Bonds shall be subject to amongst others the following conditions:- Main Documentation Satisfactory completion and execution of all relevant legal documentation in relation to the issuance of the Bonds (subject however that the fixed legal charge over the Property and the assignment over the Issuer's present and future rights, title, interest and benefits in and under the tenancy agreements and Lease Agreement and all warranties and guarantees pertaining to the Property and the Plant and Equipment will only be perfected after redemption of the Property from the Existing Chargee) and all relevant legal documentation shall have been duly endorsed as exempted under the Stamp Duty Exemption (No 12) Order

16 IAEPB i. Certified true copies of the Certificate of Incorporation, and the Memorandum and Articles of Association, of the Issuer; ii. iii. iv. Certified true copies of the Forms 24, 44 and 49 of the Issuer; A certified true copy of board resolution of the Issuer authorising, among others, the execution of the Transaction Documents; A list of the Issuer s authorised signatories and their respective specimen signatures; v. A report of the relevant company search of the Issuer; and vi. A report of the relevant winding up search or the relevant statutory declaration of the Issuer. General i. Evidence of the approval of the SC shall have been obtained and the Issuer s compliance with all conditions of such approval; ii. iii. Confirmation from the appointed Rating Agency of the minimum rating of AAA for Class A Bonds, AA2 for Class B Bonds, A2 for Class C Bonds, A3 for Class D Bonds and C2 for Class G Bonds; Representations and warranties of IAEPB remain true and correct in all material respects and no Event of Default or potential Event of Default has occurred and is continuing; iv. Documentary evidence that the Designated Accounts shall have been established with at least A1/P1 rated bank acceptable to the Trustee; v. Satisfactory legal opinion from the Solicitors as to the validity and enforceability of all legal documentation and that all conditions precedent have been duly fulfilled or waived; 16

17 vi. vii. viii. ix. Receipt of redemption statements cum undertaking from the existing lender of KMS (i) stating the amount payable to the relevant lender to redeem the Property, (ii) undertaking to release the Property free of their security interests immediately upon receipt of the redemption sum and (iii) undertaking to refund the redemption sum in the event the discharge cannot be registered; Valuation report on the Property to be furnished by a professional valuer acceptable to the Lead Arranger, undertaken for the purposes of financing confirming a valuation of at least RM165.0 million; Lodgement of a private caveat over the Property at the land registry; and Any other conditions as may be advised by the Solicitors. (t) Representations and Warranties : The representations and warranties typical and customary for similar financings at the recommendation of the Lead Arranger or Solicitors, which shall not be limited to the following: i. IAEPB is company duly established and validly existing under the laws of Malaysia and has the power to carry on the business in which it is engaged; ii. IAEPB has the power to enter into, exercise its rights under and perform its obligations under the Transaction Documents; iii. The Transaction Documents are in full force and effect and constitute the valid, binding and enforceable obligations of IAEPB; and iv. Any other representation and warranty which may be advised by the Solicitors. (u) Events of Default : The events of default typical and customary for similar financings at the recommendation of the Lead Arranger or Solicitors, which shall be limited to the following: i. the Issuer fails to pay any amount due on the Bonds under any of the Facility Agreements on the due date, subject to the following: 17

18 (a) non payment of the outstanding nominal value of the Class A, B, C, D, E and F Bonds on Expected Maturity is a Trigger Event(s) but not an Event of Default(s). However, non payment of the outstanding nominal value of the Class A, B, C, D, E and F Bonds on Legal Maturity is an Event of Default(s); (b) non payment of the coupon payment of the Class A, B, C, D, E Bonds is an Event of Default(s); (c) non payment of the coupon payment of the Class F Bonds is not a Trigger Event(s) or an Event of Default(s); (d) non payment of the coupon/outstanding nominal value of Class G and H Bonds on Expected or Legal Maturity would not be a Trigger Event or an Event of Default(s); ii. If the Issuer fails to observe or perform any of its obligations or covenants under any of the Issue Documents or under any undertaking or arrangement entered into in connection therewith other than an obligation of the type referred to in paragraphs (i) above, and in the case of a failure which in the opinion of the Trustee is capable of being remedied, the Issuer does not remedy the failure within a period of thirty (30) days after receipt by the Issuer of a written notification from the Trustee of the failure; iii. Any representation, warranty, covenant or undertaking made or given by the Issuer under the Issue Documents or which is contained in any certificate, document or statement furnished at any time pursuant to the terms of the Issue Documents proves to have been incorrect in any material respect on or as of the date made or deemed made and in the case of a breach which in the opinion of the Trustee is capable of being remedied, the Issuer does not remedy such breach within a period of thirty (30) days after receipt by the Issuer of a written notification from the Trustee of such breach; 18

19 v. Where any other indebtedness for borrowed moneys or guarantee of the Issuer becomes due and payable prior to its stated maturity or is not discharged at maturity or where the security created for such indebtedness for borrowed moneys becomes immediately enforceable; vi. The Issuer fails to obtain, renew, maintain or comply in any material respect with all governmental approvals, licences and/or permits which are necessary for the performance by the Issuer of its obligations under the Issue Documents and such failure continues for thirty (30) days or more after written notice is delivered to the Issuer; vii. Any corporate action is taken or any legal proceedings are commenced for the winding-up of the Issuer, except where any such step is of a vexatious or frivolous nature and the Issuer has taken action in good faith to set aside such proceedings within thirty (30) days from the date of service thereof; and viii. Where a scheme of arrangement under Section 176 of the Companies Act 1965 (as amended) has been instituted against the Issuer. viii. Insolvency - the Issuer:- (a) is deemed unable to pay its debts within the meaning of Section 218(2) of the Companies Act 1965 (as amended) or becomes unable to pay its debts as they fall due; or (b) suspends or threatens to suspend making payments (whether of outstanding nominal value or coupon or otherwise) with respect to all or any class of its debts arising from borrowed moneys or a moratorium is agreed or declared in respect of or affecting all or any substantial part of the borrowed moneys of the Issuer or any security party; ix. At any time any of the provisions of the Issue Documents is or becomes illegal, void, voidable or unenforceable; 19

20 x. The Issuer repudiates any of the Issue Documents or the Issuer does or causes to be done any act or thing evidencing an intention to repudiate any of the Issue Documents; xi. A receiver or a manager or a receiver/manager has been appointed over the whole or any substantial part of the assets of the Issuer; and xii. Such other events of default as are prescribed by the SC s Guidelines on the Minimum Contents Requirements for Trust Deeds and such other events of default stipulated by the Lead Arranger and/or the Solicitors. Upon the occurrence of an Event of Default, the Trustee may, and shall if so requested in writing by more than 60% of the holders of the most senior Bonds then outstanding or via the passing of a special resolution of the holders of the most senior Bonds then outstanding declare that the Bonds immediately due and payable. (v) Principal terms and conditions for warrants (where applicable) : Not applicable (w) Other principal terms and conditions for the issue w(i) Designated Accounts : IAEPB shall be required to open and maintain the following accounts with a financial institution with a credit rating of at least A1/P1 by RAM to be determined by the Trustee: i. Revenue Account; ii. Operation Account; iii. Rental Deposits Account; and iv. Debt Service Reserve Account ( DSRA ). Revenue Account IAEPB shall open a Revenue Account for the purpose of depositing the following to the Revenue Account:- a. proceeds from the issuance of Bonds; b. all rental amounts received from tenant(s) of Property; c. proceeds from sale of the Property; 20

21 d. all insurance claims; e. all other amounts received in respect of the Property; f. the proceeds from the exercise of the Call Option; g. Excess funds from DSRA; and h. all proceeds from Permitted Investments (as defined below) including earnings therefrom. The Revenue Account shall be operated solely by the Security Trustee. On Transaction Closing:- Proceeds of up to RM169 million from the issuance of the Class A, B, C, D, E, F and H Bonds shall be utilised towards settlement of the consideration for the purchase of the Property from KMS and towards meeting all expenses relating to the acquisition/refurbishment planning of the Property and to settle upfront all expenses in connection with the issuance of the Bonds. Within 6 months after SC approval: Proceeds of RM29 million from the issuance of the Class G Bonds shall be drawndown and kept in the Revenue Account and to be drawndown progressively and transferred into the Operation Account to finance the refurbishment cost against delivery of documentation by the Servicer in the form of Architect s certificate or other documentary evidence acceptable to the Trustee. On-going After Transaction Closing (other than Trigger Event or Event of Default):- Funds in this account will be applied to meet the following permitted expenditure in order of priority:- i. Taxes and other statutory obligations; ii. Contributions to the Operation Account to meet the operating expenditure (as defined in Operation Account below); 21

22 iii. fees and expenses of the Issuer (other than fees and expenses set out in the Operation Account) including fees, costs, charges, expenses and liabilities incurred by, and all other amounts then due to the Trustee, rating agency, Facility Agent, Administrator, Servicer, directors fees and expenses of the Issuer, tax agent s and audit fees of the Issuer and all other fees and expenses incurred by IAEPB pursuant to the securitisation transaction; iv. Obligations under the Bonds as follows:- a. fixed coupon payment of Class A Bonds; b. fixed coupon payment of Class B Bonds; c. fixed coupon payment of Class C Bonds; d. fixed coupon payment of Class D Bonds; e. fixed coupon payment of Class E Bonds; f. contributions into the DSRA in the event of a shortfall in the said account; and g. fixed coupon payment of Class F Bonds. v. Obligations under the Bonds as follows: a. additional coupon payment of Class F Bonds; b. fixed coupon payment of Class H Bonds (subject to the condition set out in the Coupon Payment Frequency & Basis clause); c. outstanding nominal value of Class A Bonds; d. outstanding nominal value of Class B Bonds; e. outstanding nominal value of Class C Bonds; f. outstanding nominal value of Class D Bonds; g. outstanding nominal value of Class E Bonds; h. outstanding nominal value of Class F Bonds; i. variable coupon payment of Class G Bonds; j. outstanding nominal value of Class G Bonds; and k. accrued and unpaid fixed coupon payment, variable coupon payment and outstanding nominal value of Class H Bonds and repayment of the loan granted by Servicer (if any) as detailed herein. The priority of payment set out above will only be applicable up to the time before the occurrence of a Trigger Event(s) and/or Event of Default under the Bonds. 22

23 Servicer may grant an interest-free loan ( Loan ) to the Issuer to support any shortfall in the cashflow in the Revenue Account to meet the permitted expenditure of the IAEPB as detailed above, subject to the repayment of the Loan being in compliance of the conditions as detailed in cashflow waterfall in the Designated Accounts and Priority of Payment & Application of Transfer for the Revenue Account Clause. Operation Account Funds in this account are to be applied to meet all operating, management, maintenance, refurbishment cost and capital expenses on the Property including Servicer/property management fees and insurance premiums ( operating expenditure). The Operation Account will be funded from the Revenue Account every six (6) months or such periodic contributions as may be agreed with the Trustee as per the budget report from the Servicer which are approved by the Trustee/Facility Agent. The budget report is to be furnished to the Trustee/Facility Agent and the Rating Agency, half yearly in advance. Subject to the order of priority as set out in the Revenue Account, any shortfall in the Operation Account, subject to a maximum of 10% of the operating expenditure for the same corresponding period (excess beyond the above amount shall require the Trustee s approval, the approval of which shall not be unreasonably withheld), shall be topped up from the Revenue Account within 5 business days from the date of the written request by the Servicer. The Operation Account shall be operated solely by the Servicer on behalf of the Issuer and the Security Trustee. Upon occurrence of Trigger Event and/or Event of Default(s), the Security Trustee shall be operating the account solely and the sum standing in the Operation Account shall be transferred to the Revenue Account. Rental Deposits Account IAEPB shall open a Rental Deposits Account for the purpose of managing the rental deposits from the Property. The Rental Deposits Account shall be operated solely by the Servicer on behalf of the Issuer and the Security Trustee. 23

24 All rental deposit save and except for the rental deposit from KIBB as described in the Debt Service Reserve Account ( DSRA ) shall be deposited into the Rental Deposit Account. The funds in this account will be applied to meet any refund of the rental deposits to the Property. Upon occurrence of Trigger Event and/or Event of Default(s), the Security Trustee shall be operating the account solely. Debt Service Reserve Account ( DSRA ) IAEPB shall open and maintain a DSRA for the purpose of meeting the Bonds obligations as and when due and the DSRA shall be operated solely by the Security Trustee. IAEPB shall maintain an amount equivalent to six-monthly fixed coupon payment obligations of the Class A to Class E Bonds at the start of issuance date and thereafter maintain at all times an amount equivalent to the next projected six-monthly fixed coupon payment service obligations at the start of the Coupon Payment period in the DSRA. The said amount can be in the form of rental deposit of equivalent value in cash from KIBB, subject always to a top up by withdrawal from the Revenue Account in the event the rental deposit is required to be refunded. However, pending for the full release of the purchase consideration to KMS, the rental deposit to be held in compliance of this provision would be through the agreement from KIBB or KMS to remit the rental deposit into the DSRA upon receipt of the full purchase consideration. The funds in this account shall be applied to meet any shortfall in the Coupon Payment as and when due in the following manner until the occurrence of Event of Default(s):- i. fixed coupon payment of Class A Bonds; ii. fixed coupon payment of Class B Bonds; iii. fixed coupon payment of Class C Bonds; iv. fixed coupon payment of Class D Bonds; and v. fixed coupon payment of Class E Bonds. 24

25 Any amount withdrawn from the DSRA shall be replenished at least three months before the next Coupon Payment Date. In the event that the monies standing in the DSRA is more than the required amount, the excess monies shall be deposited into the Revenue Account. Upon occurrence of Event of Default(s), the sum standing in the DSRA shall be transferred to the Revenue Account. w(ii) Rights to make Permitted Investment : Funds held in the Designated Accounts can be utilized to make Permitted Investments unless otherwise directed by the Trustee, provided always that such funds utilised for such investments must have a maturity date that is at least 5 days before the next coupon date of the Bonds. The Permitted Investments shall have no penalty clause should there be an early withdrawal of funds on deposits and to be denominated in RM. Permitted Investments shall mean:- i. Deposits in accounts, negotiable certificates of deposits or any principal protected structured deposits issued by licensed financial institutions with at least an A1/P1 rating by RAM or AA-/MARC-1 rating by MARC; ii. Promissory bonds and similar instruments issued by licensed financial institutions with at least an A1/P1 rating by RAM or AA-/MARC-1 rating by MARC; iii. Bonds, treasury bills or financial instruments issued or guaranteed by the Government of Malaysia; and iv. Other financial or capital market instruments of private entities subject to a minimum rating of AA3 or P1 by RAM or AA+/MARC-1 rating by MARC. (The rest of this page has been left blank intentionally) 25

26 w(iii) Total Loss : Upon the occurrence of actual or constructive total loss of the Property, the loss, theft or destruction of the Property, damage to the Property to such extent as shall make repair thereof uneconomical, or shall render the Property permanently unfit for normal use, or any condemnation, confiscation, requisition, seizure, forfeiture or other taking of title to or use of the Property, during the term of the leases, IAEPB shall give prompt notice to the Security Trustee and a Trigger Event shall have occurred. w(iv) Trigger Events : The occurrence of any of the following events will constitute a Trigger Event(s):- i) failure to redeem the Bonds (save and except the Class G and H Bonds) on the respective Expected Maturity dates; ii) failure to top up the DSRA; and iii) A Total Loss event occurring on the Property. Upon the occurrence of a Trigger Event(s) save and except for (iii) above, the Security Trustee shall proceed with the disposal of the Property by exercising the Power of Attorney. The proceeds from the disposal of Property shall be deposited in the Revenue Account and shall be applied in accordance with the Priority of Payment & Application of Transfer for the Revenue Account defined below. In respect of the Trigger Event under (iii) above, the insurance proceeds shall be deposited into the Revenue Account and shall be applied in accordance with the Priority of Payment & Application of Transfer for the Revenue Account defined below. For the avoidance of doubt, the occurrence of any Trigger Event(s) will not constitute an Event of Default(s) under the Bonds. (The rest of this page has been left blank intentionally) 26

27 w(v) Ranking of the Bonds : The ranking of the Bonds are in the following priority of payment:- Rank Bonds 1 Class A Bonds 2 Class B Bonds 3 Class C Bonds 4 Class D Bonds 5 Class E Bonds 6 Class F Bonds 7 Class G Bonds 8 Class H Bonds w(vi) Status of the Bonds : The Class A Bonds will constitute direct, unconditional and secured obligations of IAEPB ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. The Class B Bonds will constitute direct, unconditional and secured obligations of IAEPB, subordinated to the Class A Bonds ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. The Class C Bonds will constitute direct, unconditional and secured obligations of IAEPB, subordinated to the Class A Bonds and Class B Bonds, ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. The Class D Bonds will constitute direct, unconditional and secured obligations of IAEPB, subordinated to the Class A Bonds, Class B Bonds and Class C Bonds, ranking paripassu without any preference or priority among themselves, save and except for those obligations preferred by law. The Class E Bonds will constitute direct, unconditional and secured obligations of IAEPB, subordinated to the Class A Bonds, Class B Bonds, Class C Bonds and Class D Bonds, ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. 27

28 The Class F Bonds will constitute direct, unconditional and secured obligations of IAEPB, subordinated to the Class A Bonds, Class B Bonds, Class C Bonds, Class D Bonds and Class E Bonds, ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. The Class G Bonds will constitute direct, unconditional and secured obligations of IAEPB, subordinated to the Class A Bonds, Class B Bonds, Class C Bonds, Class D Bonds, Class E Bonds and Class F Bonds, ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. The Class H Bonds will constitute direct, unconditional and secured obligations of IAEPB, subordinated to the Class A Bonds, Class B Bonds, Class C Bonds, Class D Bonds, Class E Bonds, Class F Bonds and Class G Bonds, ranking pari-passu without any preference or priority among themselves, save and except for those obligations preferred by law. w(vii) Priority of Payment & Application of Transfer for the Revenue Account : The following priority of payment shall be applicable upon occurrence of a Trigger Event(s) or a declaration of an Event of Default(s):- Cashflow allocation upon declaration of a Trigger Event(s) but prior to an Event of Default(s) i. taxes and other statutory obligations; ii. payment to or provision for fees, expenses and liabilities incurred by IAEPB including the operating expenditure; iii. payment to or provision for fees, expenses and liabilities incurred by the Trustee, Security Trustee, Agents or Rating Agency; iv. payment of fixed coupon payment, sequentially on the Class A Bonds, Class B Bonds, Class C Bonds, Class D Bonds and finally on Class E Bonds; v. payment of outstanding nominal value of the Bonds, sequentially on the Class A Bonds, Class B Bonds, Class C Bonds, Class D Bonds and finally on Class E Bonds; 28

29 vi. payment of accrued and unpaid fixed and additional coupon payment and outstanding nominal value on the Class F Bonds; vii. to pay all fees, costs and expenses incurred or to be incurred in connection with or incidental to the winding up of the Issuer; viii. payment of variable coupon payment and outstanding nominal value on the Class G Bonds; ix. payment of accrued and unpaid fixed coupon payment on the Class H Bonds; x. payment of outstanding nominal value of the Class H Bonds; and xi. the remainder on the Class H Bonds as variable coupon payment and to repay the Loan. Cashflow allocation upon declaration of an Event of Default(s) i. taxes and other statutory obligations; ii. payment to or provision for fees, expenses and liabilities incurred by IAEPB including the operating expenditure; iii. payment to or provision for fees, expenses and liabilities incurred by the Trustee, Security Trustee, Agents, Rating Agency or Receiver and Manager; iv. payment of accrued and unpaid fixed coupon payment and outstanding nominal value of the Bonds, sequentially on the Class A Bonds, Class B Bonds, Class C Bonds, Class D Bond, Class E Bonds and finally Class F Bonds; v. payment of accrued and unpaid additional coupon payment on the Class F Bonds; vi. payment of all fees, costs and expenses incurred or to be incurred in connection with or incidental to the winding up of the Issuer; 29

30 vii. payment of variable coupon payment and outstanding nominal value of Class G Bonds; viii. payment of accrued and unpaid coupon payment and outstanding nominal value on the Class H Bonds; and ix. the remainder on the Class H Bonds as variable coupon payment and to repay the Loan. w(viii) Redemption : Redemption of the Bonds shall be at 100% of the stated nominal amount on the respective Expected Maturity Date and to be paid in cash save and except for the Class F and H Bonds, for which in replacement of the outstanding nominal to be paid in cash, the Class F and H Bondholders would have the sole option of deciding to receive the shares/units of a Real Estate Investment Trust ( REIT ) or other listed company in the event the purchase consideration of the Property are settled partially through swap of shares/units in a REIT or other listed company. The Class F and H Bonds can have the sole right to request for part cash and part shares/units in the REIT. w(ix) Call Option : Call Option to be granted by the Issuer in favour of Injaz AsiaEquity Property Fund I, L.P. ( Call Option Party ) or its nominated party and exercisable 2 years after the date of first issuance of the Bonds ( Call Option Commencement Date ). Subject matter of Call Option: the Property. Call Option Period: Commencing from the Call Option Commencement Date and expiring on the earlier of the following:- (a) on day of the Expected Maturity of the Bonds; and (b) on day of satisfaction in full of all Bonds. Call Option Price: Then prevailing market value of the Property or an amount as shall be equivalent to the summation of the Redemption Value at Termination Event (as defined herein) of all the outstanding Bonds, the unpaid and accrued fixed coupon payment, the additional coupon payment and variable coupon payment on outstanding Bonds save and except the Class H Bonds and all the outstanding fees and expenses due to all the parties to the Transaction and/or being incurred by IAEPB, whichever is the higher. (The rest of this page has been left blank intentionally) 30

31 Unconditional Date: The date of procurement of all relevant regulatory approval(s) by the Call Option Party or its nominated party for the acquisition of the property (including without limitation the approval of the Foreign Investment Committee and the approval of the State Authority under the provisions of Section 433B of the National Land Code 1965, if required) and fulfillment of all other conditions precedent for completion as may be stipulated by the Solicitors. Mechanism: The Call Option Party or its nominated party may at any time after the second year from the date of first issue of the Bonds, exercise the Call Option by serving a notice ( Call Option Notice ) on the Trustee informing the Trustee that it wishes to acquire the Property at the Call Option Price. Payment of the Call Option Price is to be made to the Trustee within two (2) months ( Completion Period ) from the Unconditional Date with an automatic extension of 1 month in the event at the expiry of the Completion Period, the memorandum of transfer executed over the Property is still pending adjudication at the stamp office. Proceeds from the sale of the Property shall be deposited to the Revenue Account. The above is subject to the condition that in the event it is the nominated party of the Call Option Party that will be exercising the Call Option, the Call Option Party shall provide the written confirmation to the Trustee on the details of the nominated party. Termination Event: Upon the Call Option Party or its nominated party exercising the Call Option: i. all Bonds shall be subject to mandatory redemption; and ii. the amounts to the credit of the designated accounts and shall be applied in the manner in accordance with the cashflow waterfall in the Designated Accounts clause. 31

32 Redemption Value at Termination Event: For Class A, B, C, D, E and F Bonds The amount payable on redemption of the Class A, B, C, D, E and F Bonds on the occurrence of Termination Event shall be at an amount governed by the following formula: Amount payable = (PB x ERP) 100 where: PB = aggregate nominal value of the Bonds to be redeemed ERP = early redemption price per RM100 of the nominal value of the Class A, B, C, D, E and F Bonds to be redeemed (rounded to the nearest 5 decimal places) subject to a minimum of RM100 calculated based on the formula set out below. ERP = (YTM/2) (N-1) + N 100 x (Coupon/2) k=1 1 + (YTM/2) (k-1) For the purposes of calculating the ERP, the following variables are used:- (i) Coupon = the fixed coupon rate of the Class A, B, C, D, E and F Bonds. (ii) YTM = the lower of (a) the fixed coupon rate of the Class A, B, C, D, E and F Bonds or (b) the yield to maturity of Reference Malaysian Government Securities + X%*. 32