PRINCIPAL TERMS AND CONDITIONS OF THE RIGHTS ISSUE

PRINCIPAL TERMS AND CONDITIONS OF THE RIGHTS ISSUE

PRINCIPAL TERMS AND CONDITIONS OF THE RIGHTS ISSUE 1. BACKGROUND INFORMATION (a) Issuer: (i) Name : REDtone International Berhad ( REDtone or Company ) (ii) Address : Level 18, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur (iii) (iv) Company registration no. Date/place of incorporation : 596364-U : REDtone was incorporated in Malaysia as a private limited company under the Companies Act, 1965 ( Act ) on 22 October 2002 under the name of REDtone International Sdn Bhd. It was subsequently converted into a public limited company and assumed its present name on 3 January 2003. (v) Date of listing : REDtone was listed on the MESDAQ Market (now known as ACE Market) of Bursa Malaysia Securities Berhad ( Bursa Securities ) on 9 January 2004. (vi) Status : As at 20 November 2009, REDtone is a resident-controlled company, and is not a Bumiputera-controlled company within the context of Practice Note 4 (Section 2) of the Guidelines on the Offering Of Equity And Equity-Linked Securities. (vii) Principal activities: REDtone is principally an investment holding company and is involved in the provision of management services. The present core business of REDtone Group and its subsidiaries ( REDtone Group or Group ) is the provision of broadband and data, provision of discounted calls services, namely, being an alternative telecommunications services provider to corporate and other organisations, small and medium enterprises, home/shops/small offices, prepaid cards and wholesale to other Application Service Provider licensees. 2

(viii) Board of Directors : As at 20 November 2009, the Board of Directors of REDtone are as follows: (i) Wei Chuan Beng (Managing Director) (ii) Zainal Amanshah bin Zainal Arshad (Group Chief Executive Officer) (iii) Lau Bik Soon (Executive Director) (iv) Mathew Thomas A/L Vargis Mathews (Independent Non- Executive Director) (v) Shaifubahrim bin Mohd Saleh (Independent Non-Executive Director) (vi) Dato Suriah Abd Rahman (Independent Non-Executive Director) (vii) Dato Ibrahim bin Che Mat (Independent Non-Executive Director) (ix) Structure of shareholdings and names of shareholders or, in the case of a public company, names of all substantial shareholders: The substantial shareholders of REDtone and their respective shareholdings in the Company according to the Register of Substantial Shareholders as at 20 November 2009 are as follows: <-------Direct-----> <-----Indirect----> No. of ordinary shares of RM0.10 000 % No. of ordinary shares of RM0.10 000 % Warisan Jutamas Sdn Bhd 37,800 9.61 - - Indah Pusaka Sdn Bhd 93,602 23.80 - - Zainal Amanshah bin Zainal Arshad 2,202 0.56 (1) 94,027 23.91 Mohamed Shah bin Kadir - - Abdul Karim bin Abdul Kadir - - Juara Sejati Sdn Bhd 3,825 0.97 Berjaya Capital Berhad - - (2) 37,800 9.61 (2) 37,800 9.61 (3) 41,426 10.53 (4) 22,226 5.65 3

<-------Direct-----> <-----Indirect----> No. of ordinary shares of RM0.10 000 % No. of ordinary shares of RM0.10 000 % Bizurai Bijak (M) Sdn Bhd - - Berjaya Group Berhad - - Berjaya Corporation Berhad - - (5) 22,226 5.65 (6) 45,251 11.50 (7) 45,251 11.50 Hotel Resort Enterprise Sdn Bhd Tan Sri Dato Seri Vincent Tan Chee Yioun Notes: - - - - (8) 45,251 11.50 (8) 45,251 11.50 (1) Deemed interested by virtue of the direct shareholdings of his spouse and his interest in Indah Pusaka Sdn Bhd. (2) Deemed interested by virtue of their interests in Warisan Jutamas Sdn Bhd pursuant to Section 6A of the Act. (3) Deemed interested by virtue of its (i) deemed interest in Berjaya Capital Berhad, the holding company of Berjaya Sompo Insurance Berhad ( BSIB ) and Prime Credit Leasing Sdn Bhd and (ii) interest in Berjaya Land Berhad, the holding company of Selat Makmur Sdn Bhd ( SMSB ). (4) Deemed interested by virtue of its interest in BSIB and Prime Credit Leasing Sdn Bhd. (5) Deemed interested by virtue of its interest in Berjaya Capital Berhad, the holding company of BSIB and Prime Credit Leasing Sdn Bhd. (6) Deemed interested by virtue of its interest in Juara Sejati Sdn Bhd, BSIB, Prime Credit Leasing Sdn Bhd and SMSB. (7) Deemed interested by virtue of its interest in Berjaya Group Berhad. (8) Deemed interested by virtue of their interests in Berjaya Corporation Berhad. 4

(x) Authorised and paid-up capital : As at 20 November 2009, Authorised : RM100,000,000 Paid Up : RM39,333,582 2. PRINCIPAL TERMS AND CONDITIONS (a) Name of parties involved in the transaction (where applicable): (i) Principal adviser : CIMB Investment Bank Berhad (ii) Arranger(s) : Not applicable (iii) Valuers : Not applicable (iv) Solicitors : Messrs C.S. Hee & Co (v) Financial adviser : Not applicable (vi) Technical adviser : Not applicable (vii) Guarantor : Not applicable (viii) Trustee : Pacific Trustees Berhad (ix) Facility agent : Not applicable (x) (xi) (xii) Primary subscriber(s) and amount subscribed (where applicable) Underwriter(s) and amount underwritten Central Depository : Not applicable : There will not be any underwriting for the balance nominal value of 10-year 2.75% irredeemable convertible unsecured loan stocks ( ICULS ) where irrevocable written undertakings from certain shareholders of REDtone, namely BSIB, SMSB and Wei Chuan Beng ( Shareholders Undertaking ) have not been provided. : Bursa Malaysia Depository Sdn Bhd (xiii) Paying Agent : Tricor Investor Services Sdn Bhd (formerly known as Tenaga Koperat Sdn Bhd) 5

(xiv) (xv) Reporting Accountant Others (please specify) : Messrs Crowe Horwath : Holder of ICULS A person who is registered as a shareholder of REDtone, and his name appears in the Record of Depositors of REDtone at 5.00 p.m. on 4 February 2010, shall be entitled to the ICULS under the Rights Issue Undertaking shareholders to meet the Minimum Subscription Level (i) BSIB; (ii) SMSB; and (iii) Wei Chuan Beng (collectively referred to as Undertaking Shareholders ). The Undertaking Shareholders have undertaken to subscribe for their respective entitlements to the ICULS with free detachable warrants ( Warrants ) pursuant to the renounceable rights issue of up to RM41,522,330 nominal value of ICULS at 100% of its nominal value together with up to 166,089,321 Warrants on the basis of 10 RM0.10 nominal value of ICULS together with 4 Warrants for every 10 REDtone Shares held at 5.00 p.m. on 4 February 2010 ( Rights Issue ). (b) Facility description : 10-year 2.75% ICULS (c) Issue size (RM) : RM40,611,633 nominal value of ICULS of RM0.10 each (d) Issue price (RM) : At 100% of the nominal value of the ICULS of RM0.10 each (e) Tenor of the facility/issue : 10 years from and inclusive of the date of issuance of the ICULS (f) Interest/coupon (%) (please specify) : 2.75% p.a. on the nominal value (g) (h) Interest/coupon payment frequency Interest/coupon payment basis : The coupon shall be payable annually in arrears : Actual/365 days or 366 days (whichever is applicable) (i) Yield to maturity (%) : 2.75% 6

(j) Security/collateral (if any) : The ICULS shall constitute direct, unsecured and unconditional obligations of REDtone ranking pari passu among themselves and with all other present or future unsecured obligations of REDtone, subject only to those preferred by mandatory provisions of law (k) Details on utilisation of proceeds: The details of the proposed utilisation of gross proceeds raised from the Rights Issue are as follows: Note *Minimum **Maximum Scenario Scenario RM 000 RM 000 #Expected timeframe for full utilisation of proceeds Capital expenditure 1 3,665 39,120 Within 3 years Working capital 2 1,074 1,802 Within 1 year Estimated expenses for the Rights Issue 3 600 600 Within 1 year Total 5,339 41,522 Notes: # Pending utilisation, the Company intends to place the proceeds raised from the Rights Issue (including accrued interest, if any) or the balance thereof in interest-bearing fixed deposit accounts of REDtone with licenced financial institution(s) or in short-term money market instruments. Designated bank accounts will be opened, maintained and principally operated by REDtone for the purpose of capturing the proceeds from the acceptance by entitled shareholders and excess application and annual coupon payments. * Minimum Scenario assumes that none of the outstanding options granted under the Company s employees share option scheme as at 20 November 2009 to subscribe for 21,887,485 new ordinary shares of RM0.10 each in REDtone ( REDtone Shares ) ( Existing Options ) are exercised into new REDtone Shares and the Rights Issue was subscribed based on the Minimum Subscription Level. ** Maximum Scenario assumes that all of the Existing Options are exercised into new REDtone Shares prior to the entitlement date, and full subscription of the ICULS by entitled shareholders and/or their renouncees under the Rights Issue. 7

(1) The Company proposes to utilise up to RM39.12 million of the gross proceeds raised from the Rights Issue for the Group s capital expenditure as follows: Intended month of commissioning Minimum Scenario RM 000 Maximum Scenario RM 000 Communications and information technology infrastructure for wireless infrastructure, network operation centre, data centre and related equipments March 2010 3,665 39,120 (2) The Company proposes to utilise up to RM1.80 million of the gross proceeds raised from the Rights Issue for the Group s working capital purposes as follows: Minimum Maximum Scenario Scenario RM 000 RM 000 Marketing expenses for REDtone Group 1,000 1,000 Expenses for REDtone s mobile services - 500 Others 74 302 Total 1,074 1,802 (3) The estimated expenses for the Rights Issue (under the Minimum Scenario and Maximum Scenario) are as follows: RM000 Professional fees 425 Regulatory authorities fees 35 Printing and advertisement 45 Miscellaneous expenditure and contingencies 95 Total 600 8

Any shortfall or excess in funds allocated for estimated expenses will be funded from or used for the working capital of the Company. (l) Sinking fund (if any) : Not applicable (m) Credit rating assigned and name of rating agency : The ICULS will not be rated by any rating agency (n) Form and denomination : The ICULS will be issued in registered form in denomination of RM0.10 and multiples thereof, and constituted by the Trust Deed (o) Mode of issue : The ICULS will be issued with the issuance of an abridged prospectus to entitled shareholders of REDtone pursuant the Rights Issue. (p) Selling restriction : The ICULS are renounceable and will be transferable in multiples of board lots of RM10 nominal value (q) Listing status : To be listed on Bursa Securities (r) Minimum level of subscription (RM or %) : RM5,338,620 million nominal value of ICULS 9

(s) Other regulatory approvals required in relation to the issue, offer or invitation and whether or not obtained (please specify) : Other than the approval of the Securities Commission ( SC ), the proposed issuance of ICULS together with Warrants is subject to the following regulatory approvals being obtained: (i) Bank Negara Malaysia ( BNM ), for the issue of the Warrants to entitled shareholders, including to nonresidents; and (ii) Bursa Securities, for the listing of and quotation for the ICULS and Warrants to be issued and the new REDtone Shares to be issued upon conversion of the ICULS and exercise of the Warrants on Bursa Securities. On 17 November 2009, BNM has approved the issuance of the Warrants to entitled shareholders of REDtone, who may be non-residents under Exchange Control Notice No. 12. On 3 December 2009, Bursa Securities has approved the listing of and quotation for the ICULS and Warrants to be issued and the new REDtone Shares to be issued upon conversion of the ICULS and exercise of the Warrants on Bursa Securities. (t) Conditions precedent : The proposed issuance of ICULS together with Warrants is subject to and conditional upon the following approvals being obtained: (i) SC, for the issuance of the ICULS together with the Warrants under the Guidelines on the Offering of Private Debt Securities, which was obtained on 22 December 2009; (ii) BNM, for the issue of the Warrants to entitled shareholders, including to nonresidents, which was obtained on 17 November 2009; 10

(u) Representations and warranties (iii) Bursa Securities, for the listing of and quotation for the ICULS and Warrants to be issued and the new REDtone Shares to be issued upon conversion of the ICULS and exercise of the Warrants on Bursa Securities, which was obtained on 3 December 2009; (iv) shareholders of REDtone, for the Rights Issue, which was obtained at REDtone s Extraordinary General Meeting held on 28 October 2009; and (v) any other relevant authority (if required). : Undertakings as regards to issue of shares: Where any of the ICULS remains outstanding, the Company shall not without the consent of the Trustee: (a) reduce its equity share capital or any un-called liability in respect thereof or any share premium account or capital redemption reserve fund, except for the purposes of capitalisation of reserves and allotment of fully paid REDtone Shares as a bonus distribution to shareholders; (b) modify the rights attaching to its share capital or create or issue any share which as regards rights to voting, dividends or capital has more favourable rights than those attached to the REDtone Shares in issue on the date of the Trust Deed; and (c) allot any REDtone Shares, otherwise than by way of capitalisation of profits or reserves and allotment of fully paid REDtone Shares to the Shareholders, or as permitted under the Trust Deed. 11

The Company will and until the relevant ICULS shall have been converted upon exercise of the Conversion Right in accordance with the Trust Deed, or otherwise satisfied, maintain sufficient authorised share capital for the purposes of enabling the Company to fulfil its obligations to all ICULS holders who exercise their Conversion Rights pursuant to the terms of the Trust Deed. The Company agrees with the Trustee that it will duly perform and observe the obligations imposed on it by the Trust Deed and the terms and conditions of the ICULS. (v) Events of default Standard events of default shall apply, including but not limited to the following: (i) Non-payment: Default in payment of interest by the Company in respect of the ICULS for at least 30 days after the due date; (ii) Cross default: Any other indebtedness of the Company becomes due and payable prior to its stated maturity or any guarantee or indemnity given by the Company in respect of such borrowed money is not honoured when due and calledupon or where the security created for any other indebtedness of the Company becomes enforceable and the aggregate amount of such borrowed money which is not paid and the amount under such guarantee or indemnity which is not honoured (both of which have occurred and is continuing) equals or exceeds 25% of the net assets of the REDtone Group and such event has a material adverse effect; 12

(v) Events of default (Cont d) : (iii) Breach of obligation: The Company fails to perform or observe any of its obligations under the Trust Deed, the terms and conditions of the issue of the ICULS or any other document relating to the issue, offer or invitation in respect of the ICULS; (iv) Section 176 of the Act: A scheme of arrangement under Section 176 of the Act has been instituted against the Company except where it is instituted for the purposes of or pursuant to a consolidation, amalgamation, merger or reconstruction carried out in accordance with the terms of the Trust Deed or where the Company has obtained or intends to seek the approval or consent of the ICULS holders in accordance with the terms of the Trust Deed; (v) Composition, winding up: An effective resolution is passed by the Company or an order of a court of competent jurisdiction is made for the winding-up of the Company and such resolution or order is certified by the Trustee to be in its reasonable opinion materially prejudicial to the interests of the ICULS holders, except where it is made for the purposes of or pursuant to a consolidation, amalgamation, merger or reconstruction or is otherwise approved or consented to by the ICULS holders in accordance with the terms of the Trust Deed; (vi) Receiver: An encumbrancer takes possession or receiver is appointed in respect of the whole or any substantial part of the assets of the Company and such possession or appointment is certified by the Trustee to be in its reasonable opinion materially prejudicial to the interests of the ICULS holders; 13

(v) Events of default (Cont d) (vii) Licence, authorisation or approval: There is a revocation, withholding or modification of a licence, authorisation or approval that impairs or prejudices the Company s ability to comply with the Conditions or the provisions of the Trust Deed or any other document relating to the issue, offer or invitation in respect of the ICULS; and (viii) Ineffective or invalid provision: It is or will become unlawful for the Company to perform or comply with any one or more of its obligations under the Trust Deed. Upon the occurrence of an event of default, including, any of the events stated above, the Trustee may, and if so directed by a special resolution, shall, declare (by giving a written notice to the Company) that the ICULS then outstanding shall thereupon become immediately due and repayable at their nominal amounts of RM0.10 each together with accrued interest up to and including the date of repayment. (w) Principal terms and conditions for warrants (where applicable): Issue size : 162,446,534 new Warrants to subscribe for 162,446,534 new REDtone Shares to the entitled shareholders of REDtone Form and Denomination : The Warrants will be issued in registered form and constituted by the Deed Poll executed by REDtone Tenure : 5 years from and inclusive of the date of issuance of the Warrants Exercise Rights : Each Warrant entitles the holder to subscribe for 1 new REDtone Share at the Exercise Price, subject to adjustments in accordance with the provisions of the Deed Poll Exercise Price : RM0.25 per REDtone Share The Exercise Price is subject to adjustments under certain circumstances in accordance with the provisions of the Deed Poll 14

Exercise Period Status of new REDtone Shares Arising from the Exercise of the Warrants Adjustment in the Exercise Price and/or Number of Warrants Held Warrant Holders Rights to Participate in any Distribution and/or Offer of Further Securities in the Company Modification of Rights of Warrant Holder Rights in the event of Winding Up, Liquidation, Compromise and/or Arrangement : The Warrants shall be exercisable into new REDtone Shares on any market day within a period from the date of issue of the Warrants up to and including the day at the close of business day on the date falling 5 years from the date of issue of the Warrants : The new REDtone Shares to be issued upon exercise of the Warrants shall, upon allotment and issue, rank pari passu in all respects with the then existing REDtone Shares, save and except that they shall not be entitled to any dividends, rights, allotments and/or other distributions, the entitlement date of which is prior to the allotment date of the new REDtone Shares to be issued pursuant to the exercise of the Warrants : Subject to the provisions of the Deed Poll, the Exercise Price and/or number of Warrants held by each Warrant holder may from time to time be adjusted, calculated or determined by the Board of Directors of REDtone in consultation with an approved investment bank or the auditors appointed by REDtone, in the event of alteration to the share capital of the Company in accordance with the provisions as set out in the Deed Poll : The Warrant holders are not entitled to participate in any distribution and/or offer of securities in the Company until and unless such Warrant holders exercise the Warrants into REDtone Shares : Save as otherwise provided in the Deed Poll, a special resolution of the Warrant holders is required to sanction any modification, alteration or abrogation in respect of the rights of the Warrant holders : Where a resolution has been passed for a members voluntary winding up of the Company, or where there is a compromise or arrangement, whether or not for the purpose of or in connection with a scheme for the reconstruction of the Company or the amalgamation of the Company with one or more companies, then every Warrant holder shall be entitled upon and subject to the provisions of the Deed Poll at any time within 6 weeks after the 15

Rights in the event of Winding Up, Liquidation, Compromise and/or Arrangement (Cont d) passing of such resolution for a members voluntary winding up, of the Company or 6 weeks after the granting of the court order approving the compromise or arrangement, by the irrevocable surrender of his Warrants to the Company, together with the payment of the relevant exercise price, elect to be treated as if he had immediately prior to the commencement of such winding up, compromise or arrangement, exercised the Exercise Rights represented by his Warrants to the extent specified in the relevant subscription forms and be entitled to receive out of the assets of the Company which would be available in liquidation as if he had on such date been the holder of the new REDtone Shares to which he would have been entitled pursuant to such exercise Listing : An application will be made to Bursa Securities for the listing of and quotation for the Warrants and new REDtone Shares to be issued pursuant to the exercise of the Warrants on Bursa Securities Board Lot : The Warrants shall be tradable upon listing in board lots of 100 Warrants, or such denomination as may be determined by Bursa Securities Deed Poll : The Warrants shall be constituted by a Deed Poll executed by REDtone Governing Law : Laws and regulations of Malaysia (x) Other principal terms and conditions for the issue: Redemption Maturity Date Conversion Price Conversion Rights : There will not be any redemption of the ICULS. All ICULS remaining immediately after the Maturity Date shall be mandatorily converted into new REDtone Shares at the Conversion Price : At 5.00 p.m. on the date which is the 10 th anniversary of the date of issuance of the ICULS : RM0.25 per REDtone Share The Conversion Price is subject to adjustments under certain circumstances in accordance with the provision of the Trust Deed : Each registered holder of the ICULS shall have the right at any time during the Conversion Period to convert such nominal value of ICULS held into fully paid new REDtone Shares at the Conversion Price 16

Conversion Rights (Cont d) Conversion Period Governing Law Covenant Unless previously converted, all outstanding ICULS will be mandatorily converted by the Company into new REDtone Shares at the Conversion Price on the day falling immediately after the Maturity Date : The ICULS shall be convertible into new REDtone Shares on any market day within a period from the date of issue of the ICULS up to and including the Maturity Date : Laws and regulations of Malaysia : Covenants usual and customary and such other covenants as may be advised by the Solicitors for an issue of such nature shall apply including, but not limited to, the following: (i) (ii) (iii) (iv) exercise reasonable diligence in carrying out its business in a proper and efficient manner which should ensure, among others, that all necessary approvals or relevant licences are obtained; give to the Trustee any information relating to the Company s affairs which the Trustee may require in order to discharge its duties and obligations as trustee under the Trust Deed; use all reasonable endeavours to maintain the listing of the ICULS on Bursa Securities and procure that there will at all times be furnished to Bursa Securities such information as Bursa Securities may require to be furnished in accordance with any arrangement for the time being made; immediately notify the Trustee in the event that the Company becomes aware (a) of any event of default or that such other right or remedy under the terms, provisions and covenants of the ICULS and the Trust Deed have become immediately enforceable; (b) of any circumstances that has occurred that would materially prejudice the Company or the Trust Deed; (c) of any substantial change in the nature of the business of the Company; (d) of any change in withholding tax position or taxing jurisdiction of the Company (where applicable); (e) of any change in the utilisation of proceeds 17

Covenant (Cont d) from the ICULS where documents relating to the issue, offer or invitation sets out a specific purpose for which proceeds are to be utilised; (f) of any other matter that may materially prejudice the interests of ICULS holders; (v) not enter into a transaction, whether directly or indirectly with interested persons (including a Director, substantial shareholder or persons connected with them) unless: (a) (b) such transaction shall be on terms that are no less favourable to the Company than those which could have been obtained in a comparable transaction from persons who are not interested persons; and with respect to transactions involving a percentage ratio (as determined in accordance with the provisions of Paragraph 10.02 of the Listing Requirements) which is equivalent to or exceeds 25%, the Company obtains certification from an independent advisor that the transaction is carried out in fair and reasonable terms; and provided that the Company certifies to the Trustee that the transaction complies with (a) above, that the Company has received the certification referred to in (b) above (where applicable) and that the transaction has been approved by the majority of the Directors or shareholders in general meeting, as the case may require. 18