VSOLAR GROUP BERHAD ( VGB ) PROPOSED INVESTMENT AND SHAREHOLDERS AGREEMENT ENTERED INTO BETWEEN VGB, KRU ENERGY ASIA PTE LTD ( KRU ), RANGKAIAN ILTIZAM SDN BHD ("RI"), KENNETH LEE WAI TONG ( KL ) AND VSOLAR ENGINEERING SDN BHD ( VESB ) 1.0 INTRODUCTION The Board of Directors of VGB ( Board ) wishes to announce that VGB had on 8 August 2017 entered into a Investment and Shareholders Agreement ( Agreement ) with KRU, RI, KL and VESB for joint development of a 10 Megawatts BioMass/BioGas Energy Generation Plant ( Project ). 2.0 INFORMATION ON VESB, KRU AND RI KRU KRU (Company Registration 201502139E), a company incorporated in Singapore and having its registered address at 2 Woodlands Sector 1 #01-07 Woodlands Spectrum 1 Singapore 738068. KRU provides expertise in supplying all the major equipment and engineering to the Project. RI RI (Company Registration 439985-D), a company incorporated in Malaysia under the Companies Act, 1965, a subsidiary of KRU and is the entity nominated by KRU from within the KRU Energy group of Companies to participate in the Project. RI is principally involved in the business of renewable energy. KL KL (Malaysian Identity No. 560202-10-5659), a citizen of Malaysia with residential address at No. 5 Jalan SS2/66, 47300 Petaling Jaya, Selangor, Malaysia. VESB VESB (Company Registration 1146618-M), a company incorporated in Malaysia under the Companies Act, 1965, a wholly-owned subsidiary of VGB and is currently dormant. VESB will be the joint venture vehicle for the Project ( JV Company ). 3.0 SALIENT TERMS OF THE AGREEMENT 3.1 Business of the JV Company 3.1.1 The JV Company shall be in the business of:- 3.1.1.1 building, owning and operating the Project; 3.1.1.2 subject always to Clause 9 of the Agreement, such other businesses as the Shareholders may approve from time to time; and 1
3.1.1.3 generally, to perform all acts, matters and things as may be consistent with, necessary for and incidental to the attainment of any and all of the foregoing objects. 3.1.2 The Business of the JV Company shall be conducted in the best interests of the JV Company on sound commercial profit-making principles so as to generate the maximum achievable profits available for distribution and each of the Shareholders covenant and undertake to use all reasonable endeavors to promote the Business of the JV Company. 3.2 Other Commercial Terms 3.2.1 Office Space for the JV Company 3.2.2 VGB shall lease to the JV Company up to 1,000 square feet of office space (the Office Lease ) at the following address: 12th Floor, Menara Lien Hoe No. 8 Persiaran Tropicana Tropicana Golf & Country Resort 47410 Petaling Jaya, Selangor, Malaysia 3.2.3 The Office Lease shall commence on 17 July 2017, and shall subsist for the duration of this Agreement. 3.2.4 The rental charges under the Office Lease shall be calculated at the rate of MYR3.50 (Malaysian Ringgit Three Dollars and Fifty Sen) per square foot per month. For the avoidance of doubt, the rent accrued in any given month under the Office Lease shall be calculated based on the actual amount of office space used by the JV Company in that month. 3.2.5 The rental charges under the Office Lease shall not be immediately payable and shall instead accrue as a shareholder s loan from VGB to the JV Company ( Shareholder Loan ). The JV Company shall at its sole discretion decide when to repay the Shareholder Loan, PROVIDED that the full amount of the Shareholder Loan shall become immediately due and repayable upon the termination of this Agreement. 3.3 Microbes from Artisan Semesta Sdn Bhd ( Artisan Semesta ) 3.3.1 The Parties agree to test the unique microbe technologies and products of Artisan Semesta for suitability for use in the Business. 3.3.2 Should the tests of the microbe technologies and products of Artisan Semesta show positive results, RI shall consider using the said microbe technologies and products in its facilities in Malaysia. 3.4 Capital of the JV Company Paid Up Capital Subscription for Ordinary Shares by RI and KL 3.4.1 In reliance upon the representations and warranties given by VGB and the JV Company only as set out in Clause 3.4.2 below, and conditional upon the fulfillment of the condition precedent set out in Clause 3.4.3 below:- 2
RI shall subscribe for 3,100 (three thousand one hundred) Ordinary Shares at an issue price of MYR1.00 per Ordinary Share, for a total subscription amount of MYR3,100.00 (Malaysian Ringgit Three Thousand One Hundred); and KL shall subscribe for 900 (nine hundred) Ordinary Shares at an issue price of MYR1.00 per Ordinary Share, for a total subscription amount of MYR900.00 (Malaysian Ringgit Nine Hundred). 3.4.2 Each of VGB and the JV Company represents and warrants to each of KRU, RI and KL that each of the following representations and warranties is true and accurate in all respects and is not misleading in any respect: (iii) (iv) As of the date of this Agreement, VGB holds 2 (two) Ordinary Shares with paid up capital of MYR1.00 per Ordinary Share, such that the JV Company has total paid up capital of MYR2.00 (Malaysian Ringgit Two); As of the date of this Agreement, the JV Company has never had, and currently does not have, any shareholder(s) other than VGB; Immediately prior to the execution of this Agreement, the JV Company has never been a party to, and is not a party to, any contracts, agreements and/or arrangements of any nature whatsoever; and As of the date of this Agreement, the JV Company has no accrued or potential liabilities or other exposures of any nature whatsoever. 3.4.3 The obligations of RI and KL to subscribe for Ordinary Shares pursuant to Clause 3.4.1 above are conditional upon VGB first subscribing for 5,998 (five thousand nine hundred and ninety-eight) Ordinary Shares at an issue price of MYR1.00 per Ordinary Share, for a total subscription amount of MYR5,998.00 (Malaysian Ringgit Five Thousand Nine Hundred and Ninety-Eight), such that the JV Company has total paid up capital of MYR6,000.00 (Malaysian Ringgit Six Thousand). 3.4.4 After the completion of the issuances of Ordinary Shares pursuant to Clauses 3.4.1 and 3.4.3 above, the total issued Ordinary Share capital of the JV Company and the shareholdings of the respective shareholders shall be as follows:- Shareholder Paid Up Capital No. of Ordinary Shares Percentage Shareholding VGB MYR 6,000 6,000 60% RI MYR 3,500 3,500 35% KL MYR 500 500 5% Total MYR 10,000 10,000 100% 3.5 Working Capital Subscription for Redeemable Preference Shares ( RPS ) by VGB 3.5.1 Within thirty (30) Business Days after the completion of the issuance of Ordinary Shares to RI and KL pursuant to Clause 3.4.1 above, VGB shall subscribe for 683,000 (six hundred eighty three thousand) RPS at an issue price of MYR1.00 per RPS, for a total subscription amount of MYR683,000 (Malaysian Ringgit Six Hundred Eighty Three Thousand). 3
3.6 Construction Capital 3.6.1 Upon the issuance of a SEDA Certificate, ST Certificate or other approval from a relevant authority permitting the JV Company to sell electricity (whether to Tenaga Nasional Berhad or otherwise), VGB shall, on a best effort basis, provide and/or procure the provision to the JV Company of all financing required for the construction of the Project. 3.6.2 All financing provided and/or procured by VGB pursuant to Clause 3.6.1 above shall be in the form of debt owed by the JV Company only. 3.6.3 For the avoidance of doubt, the obligation provided for under Clause 3.6.1 above shall not arise unless and until the SEDA Certificate and/or ST Certificate for the Project has been issued. 3.7 Certain Options Granted by VGB and RI 3.7.1 Call Option Granted by VGB to KRU 3.7.1.1 Subject to Clause 3.7.1.2 below, VGB hereby irrevocably and exclusively grants to KRU a call option with no expiration date to purchase from VGB Shares constituting up to 30% of the total paid up capital in the JV Company at a valuation to be calculated using the formula set out in Agreement. 3.7.1.2 The call option provided for under Clause 3.7.1.1 above may only be exercised by KRU upon the fulfillment of the following conditions precedent:- (iii) (iv) (v) all Preferential Dividends accrued in relation to the RPS have been paid in full by the JV Company; the RPS have been redeemed in full by the JV Company; the Shareholder Loan has been repaid in full by the JV Company; all other debts owed to VGB and/or any Shareholder by the JV Company have been repaid in full; and the Project has been successfully commissioned. 3.7.2 Call Option Granted by RI to VGB 3.7.2.1 Subject to Clause 3.7.2.2 below, RI hereby irrevocably and exclusively grants to VGB a call option with no expiration date to purchase from RI all the Shares held by RI at a nominal consideration of MYR1.00. 3.7.2.2 The call option provided for under Clause 3.7.2.1 above may only be exercised by VGB IN THE EVENT THAT either:- the Project is not successfully commissioned within 2 years from the date of this Agreement; or 4
the Project is not successfully commissioned before the termination of this Agreement, PROVIDED THAT this Clause 3.7.2.2 shall cease to have effect from the moment that VGB no longer holds any RPS for any reason whatsoever (including but not limited to as a result of the exercise of the call option provided VGB hereby irrevocably and exclusively grants to RI a call option with no expiration date to at any time purchase from VGB all (but not some) of the RPS held by VGB upon payment to VGB of the issue price of the RPS plus all Preferential Dividends accrued in relation to the RPS, or as a result of the full redemption of the RPS by the JV Company). 3.8 Management of the JV Company 3.8.1 Operations and Project Development Project Implementation and engagement of all staffs, employees, agents and consultants to be determined and managed by RI for the purposes of facilitating the Business of JV Company. 3.8.2 Financial Management Financial Management and Accounting functions including all payments and receipts to be determined and managed by VGB for the purpose of the business operations of JV Company. For the avoidance of doubt, VGB agrees that all the payments and expenditures included in the budget submitted by RI and KRU are approved and the said budget is limited to the amount of RPS issued to VGB amounted to MYR683,000. 3.9 Composition of the Board 3.9.1 Constitution of the Board 3.9.1.1 The Board shall at all times consist of three (3) Directors. 3.9.1.2 Whilst VGB holds the majority of Shares in the JV Company, the Board shall comprise of:- two (2) persons nominated by VGB; and one (1) person nominated by KRU. 3.9.1.3 Once VGB no longer holds the majority of Shares in the JV Company (whether as a result of the exercise of the Call Option provided for under Clause 3.8.1 or otherwise), the Board shall comprise of:- two (2) persons nominated by KRU; and one (1) person nominated by VGB. 3.10 Decision Making in JV Company Subject always to the Companies Act 2016, all decision making in JV Company, whether by the Board or the shareholders shall be by the way of majority save for the reserved matters in the Agreement. 5
3.11 Special Covenants 3.11.1 Redemption of the RPS (a) (b) The RPS is to be redeemed in Full inclusive of all accrued Capital Annual Growth Rate before any distribution of dividends by JV Company. The RPS may only be redeemed out of distributable profits of JV Company. 3.11.2 Settlements of Accruals All the accruals including rental payable for the office space provided by VGB is to be settled in full by JV Company before any distribution of dividends by JV Company. 3.11.3 Engineering, Procurement and Construction The engineering, Procurement and Construction is to be taken by JV Company who will serve as the main contractor to build and construct the BioMass/BioGas Energy Generation plant and facilities. However, KRU shall supply to JV Company all major equipment and engineering. 3.12 Others Terms & Conditions 3.12.1 In consideration for VGB subscribing to the RPS, RI undertakes to pledge ten percent (10%) of the paid up capital of RI as security deposit for the RPS issued to VGB. In the event the RPS is not redeemable before the expiry of the Agreement or before the termination of Agreement, RI undertakes to cause the transfer of the above said ten percent (10%) paid up capital of RI to VGB and/or its nominees. 3.12.2 RI and KL undertakes to transfer their forty percent (40%) stake in JV Company at a nominal value of RM1-00 in the event the BioMass/BioGas Energy Generation facility is not successfully commissioned within a reasonable time function in the Agreement or upon expiry and/or termination of the Agreement. 3.13. Duration 3.13.1 Duration This Agreement shall take effect from the date hereof and shall remain in full force and effect between the Parties so long as the Shareholders continue to hold shares in the JV Company. 4.0 FINANCIAL EFFECTS This Agreement will not have any material impact on the issued and paid-up capital of VGB and the earnings and net assets of the Group for financial year ending 30 June 2017. 5.0 APPROVAL REQUIRED This Agreement does not require approval from any authority or shareholders. 6
6.0 DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors and/or major shareholders of VGB and/or persons connected to them, has any interest, direct or indirect in this Agreement. 7.0 DIRECTORS STATEMENT The Board of Directors of VGB is of the opinion that the Agreement is the best interest of VGB. 8.0 DOCUMENT FOR INSPECTION The Agreement will be made available for inspection at the registered office of VGB at No. 2-1, Jalan Sri Hartamas 8, Sri Hartamas, 50480 Kuala Lumpur, Wilayah Persekutuan (KL) during the normal working hours from Mondays to Fridays (except public holidays) for a period of three months from the date of this announcement. This announcement is dated 9 August 2017. 7