APPENDIX I PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSAL

Transcription

1 APPENDIX I PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSAL 14

2 BACKGROUND INFORMATION 1. Issuer (i) Name : Kuala Lumpur Sentral Sdn Bhd ( KLSSB ) (ii) Address : Correspondence Address Unit 3A, Level 3A Blok 3A, Plaza Sentral Kuala Lumpur Sentral Kuala Lumpur Registered Address Aras 10, Menara MRCB No. 2, Jalan Majlis 14/10, Seksyen Shah Alam Selangor Darul Ehsan (iii) Business Registration No. (iv) Date /Place of Incorporation (v) Date of Listing (in case of a public listed company) : X : 7 November 1994/Malaysia : Not applicable (vi) Status : Resident controlled company Bumiputra controlled company (vii) Principal Activities : Investment holding and property development (viii) Board of Directors (as at 31 August 2006 ]) : Chan Chee Meng Hj. Hilmi Bin Mohamad Azman Bin Ahmad Shaharbi Datuk Dr. Haji Noordin Bin Haji Abd Razak Ahmayuddin Bin Ahmad Mohd Nor Bin Abdul Karim Shahril Ridza Bin Ridzuan Dato Dr. Mohd Shahari Ahmad Jabar Dr. Roslan A. Ghaffar

3 Mohd Nasir Bin Noordin (viii) Structure of shareholding and name of shareholder or, in the case of public company, names of all major shareholders (as at 31 August 2006 ]) : Shareholder Pembinaan Redzai Sdn Bhd Malaysian Resources Corporation Berhad ( MRCB ) No. of Ordinary Shares <---Direct---> % 4,810, ,190, Keretapi Tanah Melayu Berhad 13,000, (ix) Authorised share capital (as at 31 August 2006 ) Paid-up share capital (as at 31 August 2006 ) : RM50,000, divided into 50,000,000 Ordinary Shares of RM1.00 each and 1 Preference Share of RM1.00 : RM50,000, divided into 50,000,000 Ordinary Shares of RM1.00 each and 1 Preference Share of RM1.00 PRINCIPAL TERMS AND CONDITIONS 2. Names of parties involved in the proposed transaction (where applicable) (i) Principal Adviser(s)/ Lead Arranger(s) : HSBC Bank Malaysia Berhad ( HSBC ) and Kuwait Finance House (Malaysia) Berhad ( KFHM ) (collectively, Joint Lead Arrangers ) (ii) Arranger(s) : Not applicable (iii) Valuers : CH Williams Talhar & Wong Sdn Bhd (the responsibility of the Valuers in this respect is only in relation to the valuation of the Project Lands (as defined below), the subject matter for the Musharakah Venture) (iv) Solicitors : Messrs. Zaid Ibrahim & Co. 16

4 (v) Financial Adviser : Newfields Advisors Sdn Bhd (vi) Technical Adviser : Not applicable (vii) Guarantor : Not applicable (viii) Trustee : Malaysian Trustees Berhad (ix) Facility Agent : KFHM (x) Primary Subscribers and amount subscribed (where applicable) (xi) Underwriter(s) and amount underwritten (xii) Syariah Adviser (where applicable) : The Primary Subscribers and the amount subscribed will be identified and determined prior to the issuance of the Sukuk. : Not applicable : KFHM (xiii) Central Depository : Bank Negara Malaysia ( BNM ) (xiv) Paying Agent : BNM (xv) Reporting Accountant : Not applicable (xvi) Others (please specify) : Joint Lead Managers - HSBC and KFHM Security Trustee Malaysian Trustees Berhad An international firm of public accountants has been appointed by the Issuer for itself in relation to the reasonableness of the assumptions and the calculations involved in respect of the Issuer s cash flow projections. 3. Islamic Principle Used : Musharakah (profit and loss sharing) 4. Facility Description : The structure of the Proposal is based on the approved Syariah principle of Musharakah as listed in Appendix 1 of the Guidelines on the Offering of Islamic Securities which has been approved by SC s Syariah Advisory Council. KLSSB will enter into a Musharakah agreement for the purpose of undertaking a Musharakah Venture (as described below) with eligible investors ( Investors ) invited to provide capital contribution through subscription of the Sukuk. In this respect, interests of the Investors in the Musharakah Venture are represented by KLSSB in its capacity as agent (wakeel) and initial trustee for the Investors. 17

5 (a) (b) The Musharakah Venture is a business venture entered into between KLSSB and the Investors (through the Issuer). The Musharakah Venture involves the acquisition of part of the Project Lands (as described below) from KLSSB, of up to RM720 million; and the sale of all the Project Lands (those purchased from KLSSB and those contributed by KLSSB to the Musharakah Venture). This arrangement is effected via the Syariah approved financing concept of Musharakah whereby the Investors will provide the capital required of up to RM720 million in cash and KLSSB will contribute capital in kind to the Musharakah Venture. Contribution in kind from KLSSB is in respect of such part of the Project Lands valued at RM254 million to the Musharakah Venture whilst capital contribution from the Investors (of up to RM720 million in cash) will be utilised by the Musharakah Venture to purchase the Project Lands valued at up to RM720 million. The Project Lands for the purpose of the contribution in kind from KLSSB to the Musharakah Venture shall be identified prior to issuance of the Sukuk. The purchase price of the Project Lands of up to RM720 million by the Musharakah Venture will be based on market price as valued by CH Williams Tahar & Wong (the Valuers ). The purchase price is therefore in compliance with the the Securities Commission s Syariah Advisory Council Pricing Guidelines issued on 31 st December 2003 and 30 April 2004 (as may be substituted or revised from time to time). The respective stakes of KLSSB and the Investors in the Musharakah Venture based on their respective capital contribution ( Musharakah Capital ) are as follows: (a) (b) KLSSB 26% in kind (RM254 million) Investors 74% (RM720 million) The ratio above is referred to as the Capital Contribution Ratio. For the purpose of the Musharakah Venture, Project Lands and its respective market values are undeveloped vacant lands located within the Kuala Lumpur Sentral Development: (i) Lot Nos. 69, 70, 71, 72, 73 and 74, all 18

6 (ii) (iii) located within Section 70, Town of Kuala Lumpur; Part of Lot No. 77, Section 70, Town of Kuala Lumpur; and Part of Lot No. 364, Section 72, Town of Kuala Lumpur; as valued by the Valuers to have an aggregate market value of RM974 million as at 3 October Simultaneously with the execution of the Musharakah agreement, KLSSB as agent of the Investors will issue Sukuk to the Investors (in such capacity, Sukukholders ). The Sukuk represent the Investors undivided proportionate interest in the Musharakah Venture. The Sukukholders will be entitled to the proceeds of the Musharakah Venture. The term Issuer refers to KLSSB in its capacity as the agent (wakeel) of the Investors and issuer of the Sukuk. The Issuer shall declare a trust ( Declaration of Trust ) in favour of the Sukukholders over all of the Issuer s interest in the Musharakah Venture (including not limited to the Issuer s rights under all agreements relating to the Musharakah Venture) ( Sukuk Assets ). The Trust Deed for the Sukuk will provide that the Sukukholders appoint the Trustee as the trustee of each Sukukholder for the purposes of holding and administering the Sukuk Assets. KLSSB will be appointed as the project manager ( Project Manager ) for the Musharakah Venture pursuant to a Management Agreement. As Project Manager, KLSSB is responsible for, among others, managing the sale of the Project Lands, opening and maintaining the bank accounts designated for the Musharakah Venture and procuring the payment of all income, damages, compensation or any other sums received by it from the Musharakah Venture to be paid into a revenue account, and shall undertake to pay all transaction expenses incurred/to be incurred in relation to the Musharakah Venture. Distributable Profits (as defined below) generated by the Musharakah Venture shall be calculated and distributed at the end of every 6-month intervals commencing from the issue date of the Sukuk ( Distributable Profit Determination Date ). Any monies received as Distributable Profits from the Musharakah Venture prior to the Distributable Profit 19

7 Determination Date shall be accumulated and held in the Profit Distribution Account (as described in paragraph 27.4 of the Principal Terms and Conditions of the Proposal ). Distributable Profits shall be shared between the Musharakah partners on the following basis ( Profit Sharing Ratio ): (i) Sukukholders : 1% (to be capped at RM1,000 p.a.) (ii) KLSSB : 99%. Pursuant to the Profit Sharing Ratio, the Sukukholders agree to waive any Distributable Profits in excess of RM1,000 (pursuant to Syariah principle of Tanazul) and agree that such surplus shall be payable to KLSSB. Distributable Profits refer to the sum of all revenues received by the Musharakah Venture including all monies received from the sale of any of the Project Lands, the credit balances in the Profit Distribution Account as described in paragraph 27.4 of this Appendix I) LESS: 1) any amount required to top-up the FSRA (as described in paragraph 27.4 of this Appendix I); 2) any fees or costs associated with maintaining the Musharakah Venture transferred to the Operating Account (as described in paragraph 27.4 of this Appendix I); and 3) tax paid in cash (if any), during the 6-month period preceding each Distributable Profit Determination Date. KLSSB will then use its portion of the Distributable Profits and/or repayment proceeds of its advances to the Musharakah Venture to purchase the Sukukholders share in the Musharakah Venture in accordance with a pre-agreed 6 monthly schedule (each instalment payable by KLSSB is referred to as a Share Instalment ). Such obligation of KLSSB will be evidenced by a deed of undertaking to be executed by KLSSB in favour of the Issuer and Trustee ( Purchase Undertaking ). If losses are incurred, the loss shall be allocated in accordance with the outstanding Capital Contribution Ratio which is on a diminishing basis pursuant to the Share Instalment schedule. 20

8 Nevertheless, any losses incurred by the Musharakah Venture, does not remove KLSSB s obligation to pay the Share Instalments The transaction structure is illustrated in Schedule 2. 5 Issue Size (RM) : Up to RM720.0 million in nominal value to be issued in 7 series as follows: Series Nominal Value (RM 000) Tenor From Issue Date (Year) 1 100, , , , , , ,000 7 Total 720,000 6 Issue Price : The Sukuk shall be issued at par and is calculated in accordance with the FAST rules. 7 Tenor of the Facility /Issue : The Sukuk will be issued in series with tenors ranging from 1 to 7 years from the issue date. 8 Coupon/profit or equivalent rate (%) (please specify) : To be determined and agreed to prior to each issuance of Sukuk. The applicable rate for the Sukuk shall be referred as the Sukuk Rate of Return. 9 Coupon/profit Payment frequency and basis : Payment Frequency Semi-annual Payment Basis actual/actual 10 Yield to Maturity (%) : To be determined at the time of issuance. 11 Security /Collateral (if any) : The following: (i) legal assignment and charge by the Issuer of all transaction documents to which the Issuer is a party (other than the security documents and other documents pertaining only to the issuance of the Sukuk) as security for the Sukuk; 21

9 (ii) (iii) (iv) legal assignment by KLSSB of all its rights, title and interest under the Put Option (as described in paragraph 27.6 of this Appendix I) as security for the Sukuk; the following security to be created by KLSSB for the benefit of the Sukukholders to secure KLSSB s obligation to pay the Share Instalments: 1) Assignment incorporating power of attorney over: i) all of KLSSB s rights, title and interest in the Designated Accounts (as described in paragraph 27.4 of this Appendix 1), the credit balances and all permitted investments made utilising moneys from such accounts; and ii) proceeds from the sale of the Project Land. The power of attorney shall only be exercisable upon the occurrence of a Dissolution Event (as described in paragraph 25 of this Appendix 1); a first legal charge by KLSSB over the Project Lands (other than those already sold which has its own separate title) in favour of the Security Agent. 12 Details on utilisation of proceeds : The issue proceeds from the Sukuk (of up to RM720 million) shall be utilised as the Investors capital contribution to the Musharakah Venture and used to purchase the Project Lands from KLSSB. In turn, KLSSB will utilise the proceeds from the sale of part of the Project Lands to the Musharakah Venture of up to RM720 million to repurchase and cancel KLSSB s outstanding BaIDS. BaIDS is defined as the Al-Bai Bithaman Ajil Islamic Debt Securities of up to RM920 million in nominal value issued by KLSSB on 6 and 25 April 2001 pursuant to a trust deed dated 2 March 2001 as supplemented by a supplemental trust deed dated 27 August 2003 ( BaIDS Trust Deed ) executed between KLSSB and Malaysian Trustees 22

10 13 Sinking Fund (if any) : Not applicable 14 Rating Berhad ( BaIDS Trustee ). - Credit Rating Assigned : Indicative rating of AA2(s) The nominal value of the BAIDS outstanding as at 31 August 2006 is RM720 million. - Name of Rating Agency : Rating Agency Malaysia Berhad ( RAM ) 15 Form and Denomination : Each series of the Sukuk shall initially be represented by a global certificate to be deposited with BNM, and is exchanged for definitive bearer form only in certain limited circumstances. The denomination of the Sukuk shall be RM1,000 or in multiples of RM1,000 at the time of issuance. 16 Mode of Issue : The Sukuk will be issued by way of private placement without prospectus. The Sukuk shall be issued in bearer form and prescribed under the Rules on Fully Automated System for Tendering ( FAST ) and/or the Malaysian Scripless Securities Market under the Real Time Electronic Transfer of Funds and Securities ( RENTAS ) system and/or any other guidelines issued by the relevant authorities. The Sukuk shall be tradeable in the secondary market on a willing-buyer willing-seller basis under RENTAS. 17 Selling Restrictions : The Sukuk may not be offered, sold, transferred or otherwise disposed directly or indirectly, other than to persons, whether principal or agent, falling within any one of the categories or persons specified in Section 4(6) of the Companies Act, 1965 (as amended). 18 Listing Status : The Sukuk will not be listed on Bursa Malaysia Securities Berhad or any other stock exchange. 19 Minimum Level of Subscription (RM or %) 20 Other regulatory approvals required in relation to the : 100% of the issue size. Unless otherwise allowed in writing by the SC, if the issue of the Sukuk are under-subscribed and cannot meet the minimum level of subscription, the proposed issue must be aborted. : Approval from the SC in relation to the variations to the terms and conditions of the BaIDS to enable 23

11 issue, offer or invitation and whether or not obtained (please specify) 21 Identified Assets : Not applicable early redemption of the BaIDS, is being sought simultaneously with this application. Save for the above, there are no other regulatory approvals required. 22 Purchase and Selling Price/Rental (where applicable) : Purchase and selling price are not relevant in a Musharakah transaction. 23 Conditions Precedent : Conditions precedent to the first issuance shall include customary conditions precedent for transactions of this nature, including, but not limited to, the following (all in form and substance satisfactory and acceptable to the Joint Lead Arrangers/Joint Lead Managers): A. Main Documentation 1) The transaction documents and the Put Option (as described in paragraph 27.6 of this Appendix 1) have been executed and, where applicable, stamped. B. KLSSB 1) Certified true copies of the Certificate of Incorporation, and the Memorandum and Articles of Association, of KLSSB. 2) Certified true copies of the latest Forms 24 and 49 of KLSSB. 3) A certified true copy of board resolutions of KLSSB authorising, among others, the execution of the transaction documents. 4) A list of KLSSB s authorised signatories and their respective specimen signatures. 5) A satisfactory report of the company search of KLSSB. 6) A winding up search conducted on KLSSB wherein the Official Receiver confirms that KLSSB has not been wound up or the relevant statutory declaration from a director of KLSSB confirming that no winding-up petition has been presented against KLSSB. C. General 24

12 1) The approval from the Securities Commission ( SC ) and, where applicable, all other regulatory authorities. 2) The Sukuk has received approval of the Syariah Adviser. 3) Evidence that all transaction fees, costs and expenses due by KLSSB have been/will be paid in full. 4) The Joint Lead Arrangers/Joint Lead Managers have received from their legal counsel a favourable legal opinion addressed to them and the Trustee advising with respect to, among others, the legality, validity and enforceability of the transaction documents and the Put Option Agreement and a confirmation addressed to the Joint Lead Arrangers that all the conditions precedent have been fulfilled. 5) The conditions precedent for the Put Option have been met. 6) Receipt of acceptable documentary evidence from the Valuers in respect of the valuation of Project Lands of RM974 million which shall form the basis to determine the capital contribution of Investors and KLSSB in the Musharakah Venture; 7) Confirmation and evidence to the effect that the Designated Accounts have been opened by KLSSB; 8) Receipt of approval(s) from the SC and the requisite BaIDSholders for the early redemption of the BaIDS; 9) A letter of undertaking from the BaIDS Security Agent that it will upon redemption of the outstanding BaIDS, release its charges on the Project Lands; 10) Sale and purchase agreement between KLSSB and the identified purchasers for certain lots of the Project Lands with an aggregate sale value of not less than RM380 million (such sales which shall be collectively referred to Confirmed Sales ), have been duly executed and the deposit amounting to 5% of the 25

13 purchase price of the said lands has been paid by the purchasers; 11) In the case of Confirmed Sales for which Malaysian Resources Corporation Berhad ( MRCB ) is the purchaser, receipt of an undertaking from MRCB to procure funding line for the balance purchase price of such Confirmed Sales, and receipt of evidence of the availability of such funding lines. In the case of Confirmed Sales for which the purchaser is a party other than MRCB, if so required by the Rating Agency, receipt of an undertaking from such party that it has sufficient funds to complete the relevant Confirmed Sales or any other documentation evidencing the same as may be acceptable to the Rating Agency; 12)Receipt of an undertaking from MRCB to exclude KLSSB from filing of voluntary bankruptcy protection under section 176 of the Companies Act and a legal opinion thereof from Messrs Zaid Ibrahim & Co confirming the legality, validity and binding effect of the undertaking against MRCB; and 24 Representations and Warranties 13) Such other conditions precedent as advised by the legal counsel of the Joint Lead Arrangers/ Joint Lead Managers. : The Proposal shall be subject to certain representations and warranties to be given by the Issuer and KLSSB which includes but is not limited to the following: (i) The Issuer/KLSSB is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, has full power to carry on its business and to own its property and assets, and has full beneficial ownership of all its assets; (ii) the memorandum and articles of association of the Issuer/KLSSB incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise, the 26

14 Issuer/KLSSB to execute and deliver and perform the transactions contemplated in the transaction documents in accordance with their terms; (iii) (iv) (v) neither the execution and delivery of any of the transaction documents nor the performance of any of the transactions contemplated by the transaction documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Issuer or any of its assets is bound or which is applicable to the Issuer/KLSSB or any of its assets, (b) cause any limitation on the Issuer/KLSSB or the powers of its directors, whether imposed by or contained in its memorandum and articles of association or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any the Issuer s assets; each of the transaction documents is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Issuer/KLSSB enforceable in accordance with its terms; and any other representations and warranties as advised by the legal counsel of the Joint Lead Arrangers and mutually agreed by the Issuer/KLSSB and the Joint Lead Arrangers. 25 Events of Default : The Proposal will have the benefit of customary events of default (to be referred to as Dissolution Events ), which include but not limited to the following: i. the Issuer/KLSSB fails to pay any amount due from it under any of the transaction documents on the due date or, if so payable, 27

15 on demand; ii. iii. any representation or warranty made or given by the Issuer/KLSSB under the transaction documents or which is contained in any certificate, document or statement furnished at any time pursuant to the terms of the Sukuk and/or any of the transaction documents proves to have been incorrect or misleading in any material respect on or as of the date made or given or deemed made or given, and in the case of a failure which in the opinion of the Trustee is capable of being remedied, the Issuer/KLSSB does not remedy the failure within a period of thirty (30) days after the Issuer/KLSSB became aware or having been notified by the Trustee or the Security Trustee of the failure; the Issuer/KLSSB fails to observe or perform its obligations under any of the transaction documents or the Sukuk or under any undertaking or arrangement entered into in connection therewith other than an obligation of the type referred to in paragraph (i) above, and in the case of a failure which in the opinion of the Trustee is capable of being remedied, the Issuer/KLSSB does not remedy the failure within a period of thirty (30) days after the Issuer/KLSSB became aware or having been notified by the Trustee or the Security Trustee of the failure; iv. there has been a breach by the Issuer/KLSSB of any obligation under any of the Issuer/KLSSB s existing contractual obligations which has a Material Adverse Effect (as defined below) and, if in the opinion of the Trustee it is capable of being remedied, the Issuer/KLSSB does not remedy the breach within a period of thirty (30) days after the Issuer/KLSSB became aware or having been notified by the Trustee or the Security Trustee of the breach; v. any indebtedness for borrowed moneys of 28

16 the Issuer/KLSSB becomes due or payable or capable of being declared due or payable prior to its stated maturity or any guarantee or similar obligations of the Issuer/KLSSB is not discharged at maturity or when called and such declaration of indebtedness being due or payable or such call on the guarantee or similar obligations is not discharged or disputed in good faith by the Issuer/KLSSB in a court of competent jurisdiction within thirty (30) days from the date of such declaration or call, or the Issuer/KLSSB goes into default under, or commits a breach of, any agreement or instrument relating to any such indebtedness, guarantee or other obligations, or any security created to secure such indebtedness becomes enforceable; vi. vii. viii. ix. KLSSB fails to pay any Share Instalment; an encumbrancer takes possession of, or a trustee, receiver, receiver and manager or similar officer is appointed in respect of the whole or substantial part of the business or assets of the Issuer/KLSSB, or distress, legal process, sequestration or any form of execution is levied or enforced or sued out against the Issuer/KLSSB which may have a Material Adverse Effect on the Issuer/KLSSB, or any security interest over any of its assets becomes enforceable; the Issuer/KLSSB fails to satisfy any judgement passed against it by any court of competent jurisdiction and no appeal against such judgement or no application for a stay of execution has been made to any appropriate appellate court within the time prescribed by law or such appeal or application for a stay of execution has been dismissed; any step is taken for the winding up, dissolution or liquidation of the Issuer/KLSSB or a resolution is passed for the winding up of the Issuer/KLSSB or a petition for winding up is presented against the Issuer/KLSSB save 29

17 where the Issuer/KLSSB has contested it in good faith and with due diligence and such steps taken to wind up, dissolve or liquidate the Issuer/KLSSB is frivolous or vexatious or discharged or struck out within thirty (30) days from the date of service of such winding up petition or a winding up order has been made against the Issuer/KLSSB; x. the Issuer/KLSSB convenes a meeting of its creditors or proposes or makes any arrangement including any scheme of arrangement or composition or begins negotiations with its creditors, or takes any proceedings or other steps, with a view to a rescheduling or deferral of all or any part of its indebtedness or a moratorium is agreed or declared by a court of competent jurisdiction in respect of or affecting all or any part of its indebtedness or any assignment for the benefit of its creditors (other than for the purposes of and followed by a reconstruction previously approved in writing by the Trustee, unless during or following such reconstruction the Issuer/KLSSB becomes or is declared to be insolvent) or where a scheme of arrangement under section 176 of the Companies Act 1965 has been instituted against the Issuer/KLSSB; xi. xii. xiii. where there is a revocation, withholding or modification of any license, authorisation, approval or consent which in the opinion of the Trustee may have a Material Adverse Effect; the Issuer/KLSSB is deemed unable to pay any of its debts within the meaning of Section 218(2) of the Companies Act 1965 or becomes unable to pay any of its debts as they fall due or suspend or threaten to suspend making payments with respect to all or any class of its debts; the Issuer/KLSSB changes or threatens to change the nature or scope of a substantial 30

18 part its business, or suspends or threatens to suspend or cease or threatens to cease the operation of a substantial part of its business which it now conducts directly or indirectly and such change or suspension or cessation in the opinion of the Trustee may have a Material Adverse Effect on the Issuer/KLSSB; xiv. xv. xvi. xvii. at any time any of the material provisions of the transaction documents is or becomes illegal, void, voidable or unenforceable; the Issuer/KLSSB repudiates any of the transaction documents or the Issuer/KLSSB does or causes to be done any act or thing evidencing an intention to repudiate any of the transaction documents; any of the assets, undertakings, rights or revenue of the Issuer/KLSSB are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any governmental body which in the reasonable opinion of the Trustee may have a Material Adverse Effect on the Issuer/KLSSB; any event or events has or have occurred or a situation exists which in the reasonable opinion of the Trustee may have a Material Adverse Effect on the Issuer/KLSSB, and in the case of the occurrence of such event or situation which in the opinion of the Trustee is capable of being remedied, the Issuer/KLSSB does not remedy it within a period of thirty (30) days after the Issuer/KLSSB became aware or having been notified by the Trustee or the Security Trustee of the event or situation; xviii. any other events as required under the Guidelines on The Minimum Contents Requirements for Trust Deeds issued by SC dated 1 July 2000 and the Securities Commission Act and such other event as may be advised by the legal counsel of the Joint Lead Arrangers and agreed upon by the 31

19 Issuer/KLSSB. On and from the occurrence of a Dissolution Event, the Issuer may not deal with the Sukuk Assets unless so directed by the Trustee (acting on the instructions of the Sukukholders). The Trustee will give notice of such Dissolution Event to the Sukukholders and request the Sukukholders to indicate if they wish the Sukuk Assets to be realised (including enforcement of the Security). In doing so, the Trustee may seek instructions as to whether an administrator, or receiver and manager (or any similar officer) be appointed to any of the Sukuk Assets. On realisation of the Sukuk Assets the Trustee may, if so requested in writing by the requisite number of Sukukholders as set out in the transaction documents, give notice to all the Sukukholders in accordance to the terms under the transaction documents, that each Sukuk is to be redeemed for an amount equivalent to the face amount of all primary Sukuk and the face amount of the secondary Sukuk maturing within 6 months of the date of redemption of the Sukuk. Material Adverse Effect means any event which may materially and adversely affect (a) the ability of the Issuer/KLSSB (where relevant) to perform any of its obligations under any of the transaction documents or the Sukuk (b) the business, operations, property, condition (financial or otherwise) or prospects of the Issuer/KLSSB and/or (c) the rights of or benefits available to the Trustee and/or the Sukukholders under any provision of the transaction documents. 26 Principal terms and conditions for warrants (where applicable) : Not applicable 27 Other principal terms and conditions for the issue 27.1 Information Covenants : As required under the Guidelines on the Minimum Contents Requirements for Trust Deeds and the Securities Commission Act 1993 ( SCA ) and such covenants as may be deemed standard for a facility of this nature. These shall include but are not limited to the following: i. The Issuer/KLSSB shall provide to the Trustee at least on an annual basis, a 32

20 certificate confirming that it has complied with all its obligations under the transaction documents and the terms and conditions of the Sukuk and that there does not exist or had not existed, from the date the Sukuk were issued or the date of the last certificate, as the case may be, any Dissolution Event or a Potential Dissolution Event and if such is not the case, to specify the same; ii. The Issuer/KLSSB shall deliver to the Trustee the following: (a) as soon as they become available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its consolidated financial statements for that year which shall contain the income statements and balance sheets of the Issuer/KLSSB and which are audited and certified without qualification by a firm of independent certified public accountants acceptable to the Trustee; (b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of its financial year) copies of its unaudited half yearly consolidated financial statements for that period which shall contain the income statements and balance sheets of the Issuer/KLSSB which are duly certified by any one of its directors; (c) promptly, quarterly transaction reports to the Facility Agent (who shall forward such report to the rating agency) with details relating to the operating performance of the Issuer/KLSSB (including details of revenue and operating expenses), designated account balances and confirmation that the Issuer/KLSSB has complied with all their respective obligations under the 33

21 transaction documents; (d) promptly, such additional financial or other information relating to the Issuer/KLSSB s business and its operations as the Trustee may from time to time reasonably request in order to discharge its duties and obligations as Trustee under the transaction documents to the extent permitted by law; and (e) promptly, all notices or other documents received by the Issuer/KLSSB from any of its shareholders or its creditors which contents may materially and adversely affect the interests of the Sukuk Holders, and a copy of all documents dispatched by the Issuer/KLSSB to its shareholders (or any class of them) in their capacity as shareholders or its creditors generally at the same time as these documents are dispatched to these shareholders or creditors, (f) the Issuer/KLSSB shall promptly notify the Trustee of any change in its board of directors; (g) the Issuer/KLSSB shall promptly notify the Trustee of any change in its condition (financial or otherwise) and of any litigation or other proceedings of any nature whatsoever being threatened or initiated against the Issuer/KLSSB before any court or tribunal or administrative agency which may have a Material Adverse Effect; (h) the Issuer/KLSSB shall promptly give notice to the Trustee of the occurrence of any Dissolution Event, or Potential Dissolution Event or Event of Default under the respective documents forthwith upon becoming aware thereof, and it shall take all reasonable steps 34

22 and/or such other steps as may reasonably be requested by the Trustee to remedy and/or mitigate the effect of the Dissolution Event or the Potential Dissolution Event; and (i) the Issuer shall deliver to the Facility Agent, the Budget for the tenor of the Musharakah Venture. (iii) any other covenants as advised by the legal counsel of the Joint Lead Arrangers and mutually agreed by the Issuer/KLSSB and the Joint Lead Arrangers. Budget means the budget of KLSSB, prepared and analysed based on quarterly basis for the sale of the Project Land and itemized costs of KLSSB. The Budget will be the basis for the transfer of monies into the Operating Account for the purpose of Permitted Expenditure (as defined in paragraph 27.4(iii) of this Appendix I) Positive Covenants : As required under the Guidelines on the Minimum Contents Requirements for Trust Deeds and the SCA and such covenants as may be deemed standard for a facility of this nature. These shall include but are not limited to the following: i. the Issuer/KLSSB shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which is or may become necessary to enable it to own its assets, to carry on its business or for the Issuer/KLSSB to enter into or perform its obligations under the transaction documents or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Issuer/KLSSB or the priority or rights of the Sukukholders under the transaction documents and the Issuer/KLSSB shall comply with the same; 35

23 ii. iii. iv. the Issuer/KLSSB shall at all times on demand execute all such further documents and do all such further acts reasonably necessary at any time or times to give further effect to the terms and conditions of the transaction documents; the Issuer/KLSSB shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices; the Issuer/KLSSB shall promptly perform and carry out all its obligations under all the transaction documents and ensure that it shall immediately notify the Trustee in the event that the Issuer/KLSSB is unable to fulfil or comply with any of the provisions of the transaction documents; v. the Issuer/KLSSB shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Issuer/KLSSB for the period to which the financial statements are made up and shall disclose or provide against all liabilities (actual or contingent) of the Issuer/KLSSB; vi. vii. viii. the Issuer/KLSSB shall promptly comply with all applicable laws including the provisions of the SCA and/or the notes, circulars, conditions or guidelines issued by SC from time to time; the Issuer/KLSSB shall subordinate all advances and loans to it from its shareholders and related companies save for payments permitted under paragraph 27.3 (ix) below; and such other undertakings as may be advised by the legal counsel of the Joint Lead 36

24 Arrangers and mutually agreed by the Issuer/KLSSB and the Joint Lead Arrangers Negative Covenants : As required under the Guidelines on the Minimum Contents Requirements for Trust Deeds and the SCA and such covenants as may be deemed standard for a facility of this nature. These shall includes but not limited to the following: i. The Issuer/KLSSB shall not incur, create, assume or permit to exist any indebtedness, contingent or direct, other than indebtedness and/or financing arrangements disclosed to and approved by the Joint Lead Arrangers prior to the signing of the transaction documents; ii. The Issuer/KLSSB shall not create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purpose of providing security or other security interest of any kind including, without limitation, title transfer and/or retention arrangements having a similar effect or any agreement to create any of the foregoing, except for those permitted and to be agreed upon prior to signing of the transaction documents, and liens arising in the ordinary course of operations and by operation of law and not by way of contract; iii. The Issuer/KLSSB shall not add, delete, amend or substitute its Memorandum or Articles of Association in a manner inconsistent with the provisions of the transaction documents; iv. The Issuer/KLSSB shall not undertake any other activities or development apart from (a) selling of land and (b) managing of properties to comply with guidelines issued by or conditions imposed by the Multimedia Development Corporation Sdn Bhd in granting the MSC Cybercentre Status to KLSSB; v. The Issuer/KLSSB shall not provide any financial support to any of its subsidiaries (if any) throughout the tenure of the Musharakah Venture; vi. Save as those inter co advances as disclosed to 37

25 and approved by the Joint Lead Arrangers and payments permitted under paragraph 27.3 (ix) below prior to the signing of the transaction documents, the Issuer/KLSSB shall not obtain or permit to exist any loans or advances from its shareholders, subsidiaries or associated companies unless these loans and advances are subordinated to the Proposal ; vii. The Issuer/KLSSB shall not terminate or materially amend any material agreement or license which may have a Material Adverse Effect on the Issuer/KLSSB; viii. The Issuer/KLSSB shall not use the proceeds of the Proposal except for the purposes set out in this submission; ix. The Issuer/KLSSB shall not declare, pay or make any dividend or bonus issue or other distribution whether of an income or capital nature or make any advances to its shareholders or other parties (if applicable) or repay any interest in respect of its loans or advances from shareholders or related parties (including under the irredeemable cumulative unsecured loan stock previously issued to its shareholders) from cash balances in the PDA unless; (a) (b) (c) (d) (e) the Minimum Required Balance (as defined in paragraph 27.4(ii) of this Appendix I) requirements with respect to the FSRA are met; and the first Sukuk redemption would have been made; and as a result of such distribution the Asset Coverage Ratio will not be less than 1.0x; and the distribution amount is capped at RM30 million per annum; and No Dissolution Event has occurred and is continuing or will occur as a result of the distribution. For this purpose Asset Coverage Ratio is the ratio of Asset to Outstanding Obligations. Asset shall mean the aggregate of all monies standing to the credit of all Designated Accounts and the value of Project Land(s) 38

26 (based on value of the Project Lands as at the issue date of the Sukuk) of which KLSSB has remaining ownership interest. Outstanding Obligations shall mean the aggregate face amount of all outstanding Sukuk (primary and secondary), coupon/profit for the entire tenure of the Sukuk and estimated transaction costs plus operating expenses as presented in the cashflow (for the tenure of the Sukuk) as contained in the Budget for the tenor of the Musharakah Venture. x. Such other undertakings as may be advised by the legal counsel of the Joint Lead Arrangers and mutually agreed by the Issuer/KLSSB and the Joint Lead Arrangers Designated Accounts : i) Revenue Account KLSSB will be required to open and maintain a Syariah-compliant account designated as the Revenue Account ( RA ) on behalf of the Musharakah Venture, with Facility Agent as sole signatory. KLSSB shall undertake to deposit all proceeds from the sale of the Project Lands (including any damages from purchasers for aborted sales) and excess amount from the FSRA into the RA. Any credit balance in the RA shall be applied in accordance with the order of priority as per Application of Funds below. ii) Finance Service Reserve Account KLSSB, on behalf of the Musharakah Venture, shall open and maintain a Syariah-compliant account designated as the Finance Service Reserve Account ( FSRA ) and ensure that funds are deposited into the FSRA as follows: No later than three (3) months after the issue date of the Sukuk, as advances to the Musharakah Venture, an amount equivalent to the Periodic Distribution Amount under the Sukuk for the next Periodic Distribution Date plus RM1,000 ( Minimum Required Balance ); Thereafter, upon receipt of proceeds from any sale of Project Lands, transfer from the 39

27 Revenue Account, if applicable, so that the balance held in the FSRA is equivalent to the Minimum Required Balance. KLSSB, on behalf of the Musharakah Venture, may withdraw sums from the FSRA for the following: (1) to transfer to the PDA (as defined below) to pay to each of the Musharakah partners Distributable Profits in accordance with the Profit Sharing Ratio, if on any Distributable Profit Determination Date, no actual sales of Project Lands were completed during the period preceding that Distributable Profit Determination Date and at the same time, there are insufficient funds in the PDA to enable KLSSB to satisfy its obligations to pay any Share Instalment; or (2) to transfer the sum back to the RA should the credit balance in the FSRA exceed the Minimum Required Balance. Periodic Distribution Amount shall mean an amount equal to the product of the Sukuk Rate of Return and the aggregate of the outstanding principal amounts of all Sukuk held by such Sukuk holders, calculated based on the actual/actual basis. Periodic Distribution Date shall mean the date falling every 6-monthly intervals from the issue date. KLSSB, on behalf of the Musharakah Venture is to top up any shortfalls arising from such withdrawals from the FSRA under (1) above within 60 days from and including the date of the withdrawal until the balance is equivalent to the Minimum Required Balance. The funding of the Minimum Required Balance (including any top-up) by KLSSB shall constitute advances by KLSSB to the Musharakah Venture, such advances which shall be deemed repaid by amounts transferred directly from the RA to the PDA arising from proceeds of the next sale of Project Lands (if any). Non-compliance of the obligation to maintain the Minimum Required Balance shall constitute a Dissolution Event subject to further provisions of the relevant Dissolution Event. The FSRA shall be solely controlled by the Facility Agent. 40

28 iii) Operating Account KLSSB shall open and maintain a Syariahcompliant account designated as the Operating Account ( OA ) To be operated solely by KLSSB as Project Manager. OA to capture all transfer of funds from the RA to meet the payment of the operating and transaction costs of the Musharakah Venture budgeted for that year. The funds in this account shall be utilised to meet Permitted Expenditure for the 12 month period, based on the Budget (as defined above) provided by KLSSB to the Facility Agent. Permitted Expenditure shall be defined as capital expenditures or costs related to the infrastructure on the Project Lands, business taxes (if any), administrative and operating cost and all associated financing costs and fees during the Musharakah Venture and all other incidental costs in respect of the Musharakah Venture, which has been provided for in the Budget, as follows: (a) (b) (c) (d) (e) the infrastructure costs which shall include payments to trade creditors of up to RM20 million expected to be incurred, taxation expenses of up to RM8.7 million to be paid by KLSSB; the Transaction Costs (as defined below) to be incurred in connection with maintaining the Sukuk; payment of cost related to the sale of Project Lands which shall be capped at 2% of the sale proceeds of the Project Lands; and other Permitted Expenditure of up to the limit of RM1 million per annum. If the said RM1 million per annum allowed under the Permitted Expenditure is not utilised in whole or in part in any year, such unutilised amount is accumulated to the following year(s). Transaction Costs refers to Rating Agency s fees, Facility Agent s fees, Put Option fees, Trustee fees, professional fees incurred in undertaking the legal and financial due diligence exercise, Valuer s fees, Advisors fees and other professional fees which are necessary in undertaking the Musharakah Venture. 41

29 iv) Profit Distribution Account KLSSB shall establish and maintain a Syariahcompliant account designated as the Profit Distribution Account ( PDA ) with the Facility Agent as the sole signatory, on behalf of the Musharakah Venture into which the monies from the RA shall be transferred after meeting the required remittance/deductions pursuant to the Application of Funds of the RA. Upon determination of the Distributable Profits at Distributable Profit Determination Date, the Distributable Profits shall be distributed from the credit balance of the PDA in accordance with the Profit Sharing Ratio. KLSSB shall also furnish the Facility Agent on the date of Financial Close an unconditional and irrevocable standing instruction to transfer its profit portion of the Distributable Profits to the Redemption Account to fulfil its obligations to pay the Share Instalments. The PDA shall be solely controlled by the Facility Agent. v) Redemption Account KLSSB shall open and maintain a Syariahcompliant account designated as the Redemption Account ( Redemption Account ) with the Facility Agent as the sole signatory, to deposit the Sukukholders profit portion of the Distributable Profits, payments received from KLSSB in respect of the Share Instalment and monies received by KLSSB under the Put Option (as defined below). Monies received by KLSSB under the Put Option pursuant to the Compulsory Trigger Event (as defined under the Put Option terms in Schedule 1) shall be deposited into the Redemption Account one (1) day before the maturity date of the Sukuk for redemption of the Outstanding Sukuk. In the case where the Put Option is exercised not pursuant to the Compulsory Trigger Event, monies received by KLSSB under the Put Option shall be deposited into the Redemption Account immediately upon KLSSB s receipt of the same from KFHM. The Redemption Account shall be solely controlled by the Facility Agent. The 6-monthly payments to the Sukukholders arising from the Share Instalments payment by KLSSB from the balances in the PDA will be credited from this account. 42

30 27.5 Application of Funds : Revenue Account Proceeds from the sale of the Project Lands (including any damages from purchasers for aborted sales) and excess amount from the FSRA shall be remitted into the RA. Payment and distribution from the RA from time to time shall be subject to the following order of priority: First: To the FSRA the amount required for the purpose of maintaining the Minimum Required Balance in the FSRA (including to replace the Minimum Required Balance initially deposited into the FSRA by KLSSB 3 months after issuance of the Sukuk); Second: To the Operating Account the amount required for the Permitted Expenditure (as described in paragraph 27.4(iii) above) for the succeeding 12 months period based on the Budget. The balance of any remittances after payment of the above ( Balance ) shall be transferred to the PDA to capture in escrow the Distributable Profit to be determined and distributed to the Musharakah partners based on the Profit Sharing Ratio. Profit Distribution Account Monies standing to the credit of the PDA shall on every Distributable Profit Determination Date be applied towards distribution of the Distributable Profits among the Musharakah partners in accordance with the Profit Sharing Ratio. Monies representing KLSSB s portion of the Distributable Profits shall be applied in the following order of priority: i. towards payment of the Share Instalment; ii. iii. towards early payment of the scheduled Share Instalment, if so elected by KLSSB; and towards distributions or other payments permitted under paragraph 27.3 Negative Covenant Item (ix), subject to compliance of the conditions set out in paragraph 27.3 Negative Covenant Item (ix) paragraphs (a) to (e) and/or release to KLSSB subject to compliance of the conditions set out in paragraph 27.3 Negative Covenant Item (ix) paragraphs (a) to (e) provided that the 43