Alpha Circle Sdn Bhd Sukuk RM595 Million (Senior Sukuk RM540 Million and Junior Sukuk RM55 Million) - Principal Terms and Conditions

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1. ALPHA CIRCLE SDN BHD (961190-U) SUKUK MUSHARAKAH PROGRAMME OF UP TO RM595.0 MILLION PRINCIPAL TERMS AND CONDITIONS APPENDIX 1 1. (a) BACKGROUND INFORMATION OF THE ISSUER (i) Name : Alpha Circle Sdn Bhd ("ACSB" or the "Issuer"). (ii) Address : 14-2, Jalan 4A/27A Section 2, Wangsa Maju 53300 Kuala Lumpur. (iii) Business Registration No. : 961190-U. (iv) Date and Place of : 22 September 2011 / Malaysia. Incorporation (v) Date of Listing : Not applicable. (vi) Status : Resident controlled company. (Please indicate either resident controlled company or non-resident controlled company) (vii) Principal Activities : The Issuer is incorporated for the purpose of raising funds. (viii) Board of Directors : The Board of Directors of the Issuer as at 29 August 2013 are as follows: (i) (ii) (iii) Name Nationality Safuddin bin Malaysian Mohd Yunus Mansoor bin Malaysian Saat Adam Malaysian Radlan bin Adam Muhammad NRIC No. 620130-01-6025 540112-01-5731 810422-71-5159 1
2. (ix) Structure of : The shareholders and shareholding structure of the shareholdings and Issuer as at 29 August 2013 are as follows: names of shareholders or, in No. of Percentage of Shareholders the case of a public Ordinary Shareholding company, names of Shares (%) all substantial NERS Sdn Bhd 2 100 shareholders ("NERS") (x) Authorised, issued and paid up capital : Authorised, issued and paid-up capital of the Issuer as at 29 August 2013 are as follows: Authorised Capital RM100,000.00 comprising 100,000 ordinary shares of RM1.00 each. Issued and Paid-up Capital RM2.00 comprising 2 ordinary shares of RM1.00 each fully paid up. (xi) Disclosure following: of the : • If the issuer or its board members have been convicted or charged with any offence under the securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, for the past five years prior to the date of application; and No. • If the issuer has been subjected to any action by the stock exchange for any breach of the listing requirements or rules issued by the stock exchange, for the past five years prior to the date of application. Not applicable. 2
3. Where the issuer is a special purpose vehicle and is a conduit to another entity which receives proceeds from the proposed issue or offer , the information as set out in subparagraph 2.01(a) must also be provided on the said entity. (b) BACKGROUND INFORMATION OF THE OBLIGOR (i) Name : NERS Sdn Bhd (“NERS” or the "Obligor"). (ii) Address : 14-2 Jalan 4A/27A Section 2 Wangsa Maju 53300 Kuala Lumpur. (iii) Business Registration No. : 924488-X. (iv) Date and Place of : 6 December 2010 / Malaysia. Incorporation (v) Date of Listing : Not applicable. (vi) Status : Resident controlled company. (Please indicate either resident controlled company or non-resident controlled company) (vii) Principal Activities : The principal activities of NERS are provision of security solutions and related information technology security software services. 3
4. (viii) Board of Directors : The Board of Directors of NERS as at 29 August 2013 is as follows: (i) (ii) (iii) (iv) Name Dato’ Sri Johann Young Safuddin bin Mohd Yunus Mansoor bin Saat Adam Radlan bin Adam Muhammad Nationality Malaysian NRIC No. 650813-10-7193 Malaysian 620130-01-6025 Malaysian 540112-01-5731 Malaysian 810422-71-5159 (ix) Structure of : The shareholders and shareholding structure of shareholdings and NERS as at 29 August 2013 are as follows: names of shareholders or, in No. of Percentage of Shareholders the case of a public Ordinary Shareholding company, names of Shares (%) all substantial Akrab Makmur 5,000,000 100 shareholders Sdn Bhd (x) Authorised, issued and paid up capital : Authorised, issued and paid-up capital of NERS as at 29 August 2013 are as follows: Authorised Capital RM5,000,000.00 comprising shares of RM1.00 each. (xi) Disclosure following: of the : 5,000,000 ordinary Issued and Paid-up Capital RM5,000,000.00 comprising 5,000,000 shares of RM1.00 each fully paid up. ordinary No. • If the obligor or its board members have been convicted or charged with any offence under the securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, for the past five years prior to the date of application; and 4
5. • If the obligor has been subjected to any action by the stock exchange for any breach of the listing requirements or rules issued by the stock exchange, for the past five years prior to the date of application. Not applicable. The remainder of this page has been intentionally left blank. 5
6. 2 . (a) PRINCIPAL TERMS AND CONDITIONS Names of parties involved in the proposed transaction, (where applicable) (i) Principal Adviser : RHB Investment Bank Investment Bank"). (ii) Lead Arranger : RHB Investment Bank. (iii) Co-Arranger : Not applicable. (iv) Solicitor : Messrs Shook Lin & Bok. (v) Financial Adviser : ZJ Advisory Sdn Bhd (645449-V). (vi) Technical Adviser Sukuk Trustee : Not applicable. : TMF Trustees Malaysia Berhad ("TMF"). (viii) Shariah Adviser : RHB Islamic Bank Berhad (680329-V). (ix) Guarantor : Not applicable. (x) Valuer : Not applicable. (xi) Facility Agent : RHB Investment Bank. (xii) Primary : Subscriber (under a bought-deal arrangement) and amount subscribed In the event the Sukuk Musharakah (as defined below) are issued on a bought deal basis, at least two primary subscribers will be identified prior to such issuance. (xiii) Underwriter : and amount underwritten To be determined, if any, prior to each issuance of the Sukuk Musharakah. (xiv) Central Depository : Bank Negara Malaysia ("BNM"). (xv) Paying Agent : BNM. (vii) Berhad (19663-P) ("RHB 6
7. (xvi) Reporting Accountant : Messrs UHY (a member of Urbach Hacker Young International Limited). (xvii) Calculation Agent Others (please specify) : Not applicable. : Lead Manager RHB Investment Bank (xviii) Security Trustee TMF (b) Islamic used principles : (c) Facility description : The Sukuk Musharakah Programme (as defined below) shall be issued under the Islamic principle of Musharakah being one of the Shariah principles and concepts approved by the Securities Commision Malaysia ("SC")’s Shariah Advisory Council ("SAC"). An Islamic medium term notes programme ("Sukuk Musharakah Programme") for the issuance of Islamic medium term notes of up to RM595.0 million in nominal value under the Shariah principle of Musharakah comprising: i. Senior Sukuk Musharakah ("Senior Sukuk") of up to RM540.0 million in nominal value. ii. Junior Sukuk Musharakah ("Junior Sukuk") of up to RM55.0 million in nominal value. Collectively, the Senior Sukuk and the Junior Sukuk shall be referred to as the "Sukuk Musharakah". The Senior Sukuk shall rank in priority to the Junior Sukuk in terms of payment and security. Underlying Transaction Pursuant to a trust deed, on behalf of the holders of the Sukuk Musharakah ("Sukukholders"), the Sukuk Trustee shall appoint the Issuer as its agent (wakeel), acting on trust for the Sukuk Trustee and the Sukukholders in respect of the Sukuk Musharakah to be issued. The Obligor will from time to time identify the Shariah-compliant business undertaken by the Obligor (the "Business") for the purpose of investment by the potential investors. 7
8. Pursuant to a Musharakah Agreement , the Sukukholders shall form a Musharakah from time to time, which is a partnership amongst the Sukukholders to invest directly into the Business ("Musharakah Venture"). The capital contribution ratio of the Musharakah Partners in the Musharakah Venture shall be based on the nominal value of the Sukuk Musharakah subscribed by each Sukukholder. The Junior Sukuk holders shall agree upfront to waive (Tanazul) their rights in respect of priority of payment out of the income generated by the Musharakah Venture and shall be ranked after the Senior Sukuk holders in terms of payment and security. The Issuer will issue Sukuk Musharakah to Sukukholders from time to time, and the proceeds received from the Sukukholders arising from the subscription of the Sukuk Musharakah ("Musharakah Capital") shall be invested into the Musharakah Venture. The Obligor shall simultaneously make a declaration that it holds on trust the Business for the benefit of the Sukukholders. The Sukuk Musharakah shall represent, amongst others, the Sukukholders’ undivided proportionate interest in the Musharakah Venture. Pursuant to the management agreement to be entered into between the Obligor and the Issuer (acting on behalf of the Sukukholders) ("Management Agreement"), the Issuer shall appoint the Obligor as the manager ("Manager") of the Musharakah Venture. The return expected by the Sukukholders from the Musharakah Venture ("Expected Return") shall be the yield for the Sukuk Musharakah up to the Maturity Date (as defined below) or the date of declaration of any Dissolution Event ("Dissolution Date"), whichever is earlier. In accordance with the Musharakah Agreement and the Management Agreement, in respect of the Sukuk Musharakah Programme, income from the Musharakah Venture of up to an amount equal to a certain percentage of the face value of the Sukuk Musharakah per annum, calculated on the basis of the actual number of days in the relevant period ("Expected Periodic Distribution") shall be distributed by the Manager periodically in the form of periodic distribution ("Periodic Distribution") to the Issuer. The Periodic Distribution shall be made semi-annually or such period to be determined between the Issuer and the Lead Arranger (each such date for distribution, a "Periodic 8
9. Distribution Date "). The Issuer shall apply such income to distribute the Periodic Distribution on each Periodic Distribution Date to the Sukukholders. In the event of any shortfall between the Periodic Distribution and the Expected Periodic Distribution for such relevant period, the Obligor shall make advance part payments ("Advance Part Payment") to make good the difference (as determined in accordance with the formula set out below). For avoidance of doubt, the Advance Part Payment will be set-off against the Exercise Price (as defined below) pursuant to the relevant Purchase Undertaking or Sale Undertaking (as defined below), as the case may be. Any income in excess of the Expected Periodic Distribution shall be retained by the Manager as an incentive fee. Any profit or losses derived from the Musharakah Venture will be distributed or borne by the Musharakah Partners in proportion to each Partner’s respective capital contribution of the Musharakah Capital. However, subject to the availability of profit and based on the priority of ranking in accordance with the Tanazul arrangement, the Senior Sukuk investors are expected to receive their Expected Periodic Distribution first, and if there remains sufficient profit, the Junior Sukuk investors will be able to receive their Expected Periodic Distribution subsequently. Purchase Undertaking Pursuant to the purchase undertaking for the Sukuk Musharakah Programme granted by the Obligor in favour of the Sukuk Trustee (acting on behalf of the Sukukholders) ("Purchase Undertaking"), the Obligor shall irrevocably and unconditionally undertake to purchase the Sukukholders’ interest in the Musharakah Venture at the Exercise Price on the Maturity Date of the Sukuk Musharakah or the Dissolution Date, whichever is the earlier. The Exercise Price shall be determined based on the following formula:The nominal value of the Sukuk Musharakah plus all Expected Periodic Distributions less the aggregate Periodic Distributions made and received and less the Unearned Periodic Distribution (as defined below). On any payment of the Exercise Price, the Issuer will be entitled to set off the Exercise Price with any Advance Part Payment(s) made by the Obligor. 9
10. Unearned Periodic Distribution The aggregate of all Expected Periodic Distributions in respect of the period from (and including) the Periodic Distribution Date falling immediately after the date of declaration of any Dissolution Event up to (but excluding) the Maturity Date. Sale Undertaking Pursuant to the Sale Undertaking declared and issued by the Sukuk Trustee (for and on behalf of the Sukukholders) to the Obligor, the Sukuk Trustee (for and on behalf of the Sukukholders) undertakes to sell the Sukukholders’ interest in the Musharakah Venture to the Obligor at the relevant Exercise Price upon early redemption of the Sukuk Musharakah pursuant to the terms and conditions of the Sukuk Musharakah Programme. The Exercise Price shall be determined based on the following formula:The nominal value of the Sukuk Musharakah plus all Expected Periodic Distributions less the aggregate Periodic Distributions made and received. On any payment of the Exercise Price, the Issuer will be entitled to set off the Exercise Price with any Advance Part Payment(s) made by the Obligor. Musharakah Capital The proceeds received from the Sukukholders pursuant to their subscription of the Sukuk Musharakah for the purpose of participating in the relevant Musharakah Venture. Musharakah Partners At least two (2) investors forming a Musharakah. Manager The Obligor will be appointed by the Issuer to manage the Musharakah Venture on the Sukukholders’ behalf for incentive fees and on other terms and conditions to be documented under a management agreement to be entered into between the Obligor and the Issuer (“Management Agreement”). 10
11. Maturity Date The date specified as the Maturity Date on the relevant global certificate or definitive certificate (as the case may be) of the Sukuk Musharakah for payment of the nominal value of the Sukuk Musharakah, provided that it is construed in accordance with MyClear Procedures and/or MyClear Rules (as defined under Item 2(x)(3) herein). Dissolution Date In relation to any Sukuk Musharakah, the date of declaration of a Dissolution Event. Issue Date In relation to any Sukuk Musharakah, the date on which such Sukuk Musharakah is issued. Please refer to Annexure 1 for the illustrative diagram of the Sukuk Musharakah transaction structure. (d) Identified Assets (e) Purchase and : selling price/rental (where applicable) Not applicable. (f) Issue / Programme : size (RM) Up to RM595.0 million in nominal value ("Sukuk Musharakah Programme Limit") comprising:- : The underlying assets for each issue of Sukuk Musharakah under the Sukuk Musharakah Programme will be the entire Shariah-compliant business provided by the Obligor. i. Senior Sukuk of up to RM540.0 million in nominal value ("Senior Sukuk Limit"); and ii. Junior Sukuk of up to RM55.0 million in nominal value ("Junior Sukuk Limit"). 11
12. The Sukuk Musharakah Programme Limit , Senior Sukuk Limit and Junior Sukuk Limit shall be subject to the following amortization schedule ("Amortisation Schedule"):At the end of year from 1st Issue Date* Reduction in Senior Sukuk Limit Reduction in Junior Sukuk Limit 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 30.0 35.0 50.0 60.0 65.0 70.0 70.0 75.0 85.0 - 55.0 Sukuk Musharakah Programme Available Limit^ 565 .0 530.0 480.0 420.0 355.0 285.0 215.0 140.0 55.0 - * First Issue Date being the date of the first issuance of Sukuk Musharakah made under the Sukuk Musharakah Programme. ^ Revised limit/issue size under the Sukuk Musharakah Programme at the end of that year. The Issuer may issue new Sukuk Musharakah for up to the available limit of the respective period to be issued. However, Sukuk Musharakah that are purchased or redeemed by the Issuer shall be cancelled and cannot be reissued or resold. (g) Tenure of Issue / : Sukuk Musharakah (or facility) Sukuk Musharakah Programme Up to ten (10) years from the First Issue Date. Senior Sukuk More than one (1) year and up to nine (9) years as the Issuer may decide, provided that the Senior Sukuk shall mature prior to the expiry of the Sukuk Musharakah Programme or the expiry of the concession period under the Concession Agreement (as defined below), whichever is the earlier. Junior Sukuk All Junior Sukuk shall irrespective of issue date(s) have a Maturity Date falling on the expiry of the Sukuk Musharakah Programme provided always that the Junior Sukuk shall mature prior to the expiry of the concession period under the Concession Agreement (as defined below). 12
13. The first issue of the Senior Sukuk and the first issue of the Junior Sukuk shall be made on the same day . (h) Availability period : of Sukuk Musharakah (or facility) The period from the completion of documentation and unless waived by the Lead Arranger, compliance of all conditions precedent and other applicable conditions to the satisfaction of the Lead Arranger up to the maturity of the Sukuk Musharakah Programme. The first issuance shall be made within two (2) years from the date of approval by the SC. (i) Profit / coupon / : rental rate The expected profit rate for the Senior Sukuk and Junior Sukuk shall be determined at the point of each issuance of the respective Senior Sukuk and Junior Sukuk. (j) Profit / coupon / : rental payment frequency Expected profit for the Senior Sukuk and Junior Sukuk shall be payable semi-annually in arrears, with the first payment being made six (6) months from the Issue Date of the Senior Sukuk and Junior Sukuk respectively or such other frequency to be mutually agreed by the Issuer and Lead Arranger. The Senior Sukuk shall rank in priority to the Junior Sukuk in terms of payment. (k) Profit / rental basis coupon / : payment (l) Security / collateral : (if any) Actual/365 days basis. The proposed security arrangements for the Sukuk Musharakah Programme are as follows:(i) Deed of Assignment of the rights of NERS to the income to be received from the Government of Malaysia (the "Government") under the concession agreement entered into by the Government with NERS dated 20 July 2011 ("Concession Agreement"); (ii) A debenture comprising fixed and floating charges over all present and future assets of the Issuer and NERS (which will rank first after the discharge of the existing debenture); (iii) First legal charges or assignments over the Shariah compliant Designated Accounts (as defined in Item 2(n) hereunder) and moneys standing therein; and (iv) Such other security as may be determined by the Lead Arranger and/or the Solicitors. 13
14. The Senior Sukuk shall rank in priority to the Junior Sukuk in terms of security . Note: The Junior Sukuk investors shall agree upfront to waive (Tanazul) their rights in respect of priority of payment to proceeds from the security and shall be ranked after the Senior Sukuk investors in terms of priority and security. (m) Details on : utilisation of proceeds by issuer/obligor and originator (in the case of ABS). If proceeds are to be utilised for project or capital expenditure, description of the project or capital expenditure, where applicable The proceeds raised from the Sukuk Musharakah Programme shall be utilised by NERS and the Issuer for the following purposes:Senior Sukuk Purpose Amount Up to (RM ‘million) 335.0 (i) To redeem the Issuer’s existing Senior Musharakah medium term notes ("Senior MMTNs") including additional payments arising from the redemption of the Senior MMTNs; (ii) To finance NERS’ payment obligations under the Supplemental Support & Maintenance Services Agreement between NERS and S5 Systems Sdn Bhd; 160.0 (iii) To pay fees, expenses and all other amounts payable in relation to the Sukuk Musharakah Programme; and 5.0 (iv) For working capital and future capital expenditure requirements of NERS under the Project. 40.0 Total Senior Sukuk 540.0 Note:In the event that the amount allocated for purposes set out in any of the items (i) to (iii) above is not utilized in whole or in part for such purposes, the Issuer may utilise such unutilised amount for the purpose set out in (iv) above. In any case, all funds from the issuance of the Senior Sukuk shall be utilised for Shariah compliant purposes only. 14
15. Junior Sukuk Purpose (i) To redeem the Issuer’s existing Junior Musharakah medium term notes ("Junior MMTNs") including additional payments arising from the redemption of the Junior MMTNs; and (ii) For working capital and future capital expenditure requirements of NERS under the Project. Total Junior Sukuk Amount Up to (RM ‘million) 45.0 10.0 55.0 Note:In the event that the amount allocated for purposes set out in item (i) above is not utilized in whole or in part for such purposes, the Issuer may utilise such unutilised amount for the purposes set out in (ii) above. In any case, all funds from the issuance of the Junior Sukuk shall be utilised for Shariah compliant purposes only. Sukuk Musharakah Once the Sukuk Musharakah have been issued for any of the purposes set out above, the Issuer may issue new Sukuk Musharakah to either redeem the outstanding Sukuk Musharakah or to finance the working capital requirements of NERS. (n) Sinking fund and : designated accounts (if any) The Issuer/NERS shall be required to open and maintain the following Shariah compliant accounts with a licensed financial institution acceptable to the Facility Agent:(i) (ii) (iii) (iv) (v) Project Account ("PA"); Disbursement Account ("DA"); Finance Service Account ("FSA"); Operations Account ("OA"); and Infrastructure Refresh Account (“IRA”) (collectively the "Designated Accounts") or such other accounts as may be advised by the Lead Arranger. 15
16. (i) PA (a) NERS shall open and maintain a PA to capture all proceeds to be received from the Government in relation to the Concession Agreement; (b) Moneys standing to the credit of the PA shall be applied in the following order of priority: (i) 80% shall be paid into the FSA to be utilised in accordance with the provision hereunder; and (ii) 20% shall be paid into the OA to be utilised in accordance with the provision hereunder. (c) Notwithstanding the above, the amount to be transferred to the FSA shall not be less than RM5.0 million per month for the period commencing from the First (1st) Issue Date to the date falling five (5) years thereafter. (d) The PA shall be solely operated by the Security Trustee. (ii) DA (a) The Issuer shall open and maintain a DA for the purpose of depositing all proceeds from the issuance of the Sukuk Musharakah. (b) Moneys standing to the credit of the DA shall be utilised for the purpose listed under item 2(m) herein. (c) The utilisation or withdrawal of funds from the DA shall be supported by relevant documentary evidence in the form and substance acceptable to the Facility Agent, where applicable. (d) Available funds in the DA may be invested by the Facility Agent (at the instruction of the Issuer) in Permitted Investments provided that such investments shall have maturity dates to match the utilisation of the moneys to meet any payment obligations of the Issuer herein. (e) Any income received from the Permitted Investments shall be retained in the DA. 16
17. (f) The DA shall be solely operated by the Facility Agent. Upon the occurrence of a Dissolution Event, the Facility Agent's right to operate the DA shall forthwith cease and thereafter the Security Trustee shall have the sole right to operate and deal with the DA. (iii) FSA (a) The Issuer shall open and maintain a FSA to capture funds transferred from the PA in the manner provided herein. (b) The funds in the FSA shall be applied in the following order of priority: (i) the expected periodic profit payments for the Senior Sukuk; (ii) the principal payments for the Senior Sukuk; (iii) the expected periodic profit payments for the Junior Sukuk; and (iv) the principal payments for the Junior Sukuk. (c) In respect of the principal and profit payments for the Senior Sukuk, the Issuer shall according to order of priority, ensure that such amounts equivalent to:(i) the next principal payment due; and (ii) next profit payment due, respectively (collectively referred to as the "Senior Sukuk Minimum Required Balance") shall be built up and deposited in the FSA in the following manner, and at the following times:Senior Sukuk Minimum Required Balance 50% 100% No later than the following number of month(s) prior to the relevant due dates 3 1 17
18. For the avoidance of doubt , any failure to meet the Senior Sukuk Minimum Required Balance shall constitute a Dissolution Event if failure to meet such obligation is not remedied within fourteen (14) days from the relevant date(s) on which the Senior Sukuk Minimum Required Balance is to be deposited. (d) In respect of the principal and profit payments for the Junior Sukuk, the Issuer shall according to order of priority, ensure that such amounts equivalent to:(i) the next principal payment due; and (ii) next profit payment due, respectively (collectively referred to as the "Junior Sukuk Minimum Required Balance") shall be built up and deposited in the FSA in the following manner, and at the following times:Junior Sukuk Minimum Required Balance 50% 100% No later than the following number of month(s) prior to the relevant due dates 3 1 For the avoidance of doubt, any failure to meet the Junior Sukuk Minimum Required Balance shall constitute a Dissolution Event if failure to meet such obligation is not remedied within fourteen (14) days from the relevant date(s) on which the Junior Sukuk Minimum Required Balance is to be deposited, provided that the Junior Sukuk investors may only declare a Dissolution Event after the Senior Sukuk investors have declared a Dissolution Event or if all the Senior Sukuk have been fully redeemed. (e) In the event that the balance held in the FSA is less than the Senior Sukuk Minimum Required Balance and/or Junior Sukuk Minimum Required Balance, the shortfall shall be topped up from the OA. For the avoidance of doubt, no transfer of funds into the OA is allowed. 18
19. (f) Available funds in the FSA may be invested by the Security Trustee (at the instruction of the Issuer) in Permitted Investments provided that such investments shall have maturity dates to match the utilization of the moneys to meet any payment obligations of the Issuer herein. (g) Any income received from the Permitted Investments shall be retained in the FSA. (h) The FSA shall be operated solely by the Security Trustee. (iv) OA (a) NERS shall open and maintain an OA to deposit funds transferred from the PA. Moneys standing to the credit of the OA shall be used for the maintenance, upkeep, taxes, other related operating and capital expenditure in relation to the Project (as defined below) and dividend or other payment to shareholder. (b) In the event of any shortfall in the FSA, moneys in the OA shall be transferred into the FSA for the payment of profit and principal of the Sukuk Musharakah. (c) The OA shall be solely operated by NERS. Upon the occurrence of a Dissolution Event, the right of NERS to operate the OA shall forthwith cease and thereafter the Security Trustee shall have the sole right to operate and deal with the OA. (v) IRA (a) NERS shall open and maintain an IRA to capture funds for infrastructure refresh in the sixth (6th) year of the concession period. (b) The IRA shall be built up and deposited in the following manner: Amount to be deposited RM5.0 million RM5.0 million RM5.0 million RM5.0 million No later than the following number of month(s) prior to the infrastructure refresh due date 18 12 6 3 19
20. (c) The utilisation or withdrawal of funds from the IRA shall be supported by relevant documentary evidence in the form and substance acceptable to the Security Trustee, where applicable. (d) After the sixth (6th) year of the concession period, all moneys standing to the credit of the IRA may be transferred to the OA. (e) The IRA shall be operated solely by the Security Trustee. • Credit rating : assigned (Please specify if this is an indicative rating or if the credit rating is not assigned for the full amount in the case of sukuk Musharakah, adequate disclosures under paragraph 10.02 of these guidelines to be made) Senior Sukuk AA-IS (final). • Name of rating agency : Malaysian Rating Corporation Berhad ("MARC"). (o) Mode of Issue : The Sukuk Musharakah may be issued via direct placement on a best effort basis, bookbuilding on a best effort basis or bought deal basis. (p) Selling restriction, : including tradability (i.e. tradable or nontradable) The Sukuk Musharakah shall not be offered, sold or delivered, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia, other than to persons falling within the following:- Junior Sukuk AIS (final). (i) At the point of issuance of the Sukuk Musharakah, Schedule 6 (or Section 229(1)(b)) and Schedule 7 (or Section 230(1)(b)) read together with Schedule 9 (or Section 257(3)) of the Capital Markets and Services Act, 2007 as amended from time to time ("CMSA"); (ii) After the issuance of the Sukuk Musharakah, Schedule 6 (or Section 229(1)(b)) read together with Schedule 9 (or Section 257(3)) of the CMSA; 20
21. and to whom any issue , offer or invitation to subscribe for or purchase the Sukuk Musharakah does not constitute an offer to the public within the categories set out in Section 4(6) of the Companies Act, 1965 (as amended from time to time). The Sukuk Musharakah are tradable and transferable subject to the Selling Restriction above. (q) Listed status and : types of listing The Sukuk Musharakah will not be listed on Bursa Malaysia Securities Berhad or any stock exchange. (r) Other regulatory : approvals required in relation to the issue, offer or invitation and whether or not obtained (please specify) Not applicable. (s) Conditions precedent Conditions precedent for the issuance of the Sukuk Musharakah shall include but not be limited to the following:- : A. Main Documentation (i) Satisfactory completion and execution of all legal documentation including but not limited to the Transaction Documents (as defined in Item 2(x)(11) hereunder) and, where applicable, duly endorsed as exempted under Stamp Duty Exemption (No. 23) Order 2000 [P.U.(A) 241/2000] (as amended by Stamp Duty (Exemption) (No. 3) (Amendment) Order 2005 [P.U.(A) 313/2005]) and presented for registration; and (ii) All relevant notices and acknowledgements (where applicable) in relation to the Transaction Documents shall have been made or received as the case may be. B. Issuer and NERS Receipt by the Lead Arranger of the following: (i) Certified true copies of the Certificate of Incorporation and the latest Memorandum and Articles of Association of the Issuer and NERS, respectively; 21
22. (ii) Certified true copies of the latest Forms 24, 44 and 49 and latest Annual Return of the Issuer and NERS, respectively; (iii) Certified true copy of board resolution(s) of the Issuer authorising, among others, the issuance of the Sukuk Musharakah and the execution of the Transaction Documents; (iv) Certified true copy of board resolution(s) of NERS authorising, among others, the execution of the Transaction Documents to which NERS is a party; (v) The list of the authorised signatories of the Issuer and NERS, respectively, and their respective specimen signatures; (vi) Satisfactory result of the relevant company search conducted on the Issuer and NERS, respectively; and (vii) Satisfactory winding-up search report conducted on the Issuer and NERS, respectively, with confirmation from the Official Receiver that the Issuer and NERS, respectively, has not been wound up; or a statutory declaration by the Issuer and NERS, respectively, to the same effect. C. General Receipt by the Lead Arranger of the following: (i) Evidence that the SC approval in respect of the Sukuk Musharakah Programme has been obtained; (ii) Confirmation from MARC in writing that the Senior Sukuk and Junior Sukuk been accorded minimum long term rating of AA-IS & AIS respectively; (iii) Evidence that all transaction fees, costs and expenses due and payable have been paid in full; (iv) Satisfactory legal opinion from the Solicitors advising on, among others, the legality, validity and enforceability of the Transaction Documents and that all relevant security documents are duly perfected and a confirmation that all the conditions precedent have been fulfilled; 22
23. (v) An endorsement/approval from the Shariah Adviser that the structure and mechanism and transaction documents in respect of the Sukuk Musharakah Programme are in compliance with Shariah principles; (vi) The requisite consent and/or indulgence from the holders of the existing Senior MMTNs and Junior MMTNs; and the existing financiers/lenders of NERS (where applicable) which would be in form and substance acceptable to the Lead Arranger and the legal counsel of the Lead Arranger for the following:(a) redemption of the existing Senior MMTNs and Junior MMTNs; (b) amendment of the Issuer's Memorandum of Association to allow for the implementation of the Sukuk Musharakah Programme and the transactions contemplated thereunder, including the creation or the provision of collateral as prescribed in item 2(l) above; and (c) to open, operate and Designated Accounts. maintain the (vii) Letter of undertaking from NERS undertaking to meet the cash shortfall in the Issuer's payment obligations towards the principals and profits of the Sukuk Musharakah and to meet the financial covenants; (viii) Satisfactory evidence that the Designated Accounts have been opened; (ix) Consent from the Government on the assignment of rights of NERS to the revenue and income to be received from the Government under the Concession Agreement; (x) Amendment of the Issuer's Memorandum of Association to allow for the implementation of the Sukuk Musharakah Programme and the transactions contemplated thereunder, including the provision of the security for the Sukuk Musharakah Programme; and (xi) Any other conditions as may be advised by the Solicitors to be mutually agreed by the Issuer and the Lead Arranger. 23
24. Conditions precedent for subsequent issuance (s) of the Sukuk Musharakah:(i) Evidence that the long term rating of the Senior Sukuk and Junior Sukuk has been maintained at AA-IS & AIS respectively based on the latest prevailing rating available from MARC; (ii) Certification by the Issuer and NERS, respectively, that it is in compliance with all Representations and Warranties and Covenants under the Transaction Documents (as defined below) to which it is a party; (iii) No Dissolution Event has occurred or shall occur if the relevant issuance is made; (iv) There is no material adverse change to the financial condition of the Issuer and NERS, respectively; (v) Evidence of confirmation by the Shariah Adviser that the issuance of the Sukuk Musharakah is Shariah compliant; and (vi) Any other conditions as may be advised by the Solicitors to be mutually agreed by the Issuer and the Lead Arranger. (t) Representation and : warranties Representations and warranties will be included in the relevant Transaction Documents to the Sukuk Musharakah Programme, and will include such representations and warranties customary and standard for a facility of this nature. Unless otherwise stated to the contrary, such representations and warranties shall be repeated on the closing date and the issue date. The representations and warranties shall include, but not be limited to the following: (i) the Issuer and NERS, respectively 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 property and assets; (ii) the memorandum and articles of association of the Issuer and NERS, respectively, 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 24
25. required to authorise , the Issuer and NERS, respectively to execute and deliver and perform the transactions contemplated in the relevant Transaction Documents in accordance with their terms; (iii) 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, license, permit or consent by which the Issuer or NERS or any of its/their assets is bound or which is applicable to the Issuer or NERS or any of its/their assets, (b) cause any limitation on the Issuer or NERS, as the case may be, 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 of the assets of the Issuer and NERS, respectively, save as provided in the Transaction Documents; (iv) the Concession Agreement, Maintenance Agreements (as defined below) and the relevant 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 and NERS, as the case may be, and enforceable in accordance with its terms; (v) no litigation, arbitration or administrative proceeding or claim which might by itself or together with any other such proceedings or claims which would reasonably be expected to have a Material Adverse Effect (as defined in Item (2)(x)(1) hereunder) is presently in progress or pending or threatened against the Issuer or NERS or any of its or their assets; (vi) the Issuer and NERS, respectively, is unaware and has no reason to believe that an event has occurred which constitutes, or which with the giving of notice and/or the lapse of time and/or a relevant determination would constitute, a contravention of, or default under, any agreement or instrument by 25
26. which the Issuer or NERS or any of its /their assets are bound or affected, being a contravention or default which would reasonably be expected to have a Material Adverse Effect; (vii) the Issuer and NERS, respectively, has disclosed in writing or through such disclosures which have been documented or minuted prior to the date of the Sukuk Musharakah Programme Agreement to the Lead Arranger and/or the Facility Agent all facts relating to the Issuer and NERS, respectively, which the Issuer and NERS, respectively, knows or should reasonably know and which are material for disclosure to the Lead Arranger, the Lead Manager, the Facility Agent and the Sukuk Trustee in the context of the Transaction Documents and the Concession Agreement; and (viii) any other representations and warranties as advised by the Solicitors and mutually agreed between the Issuer and the Lead Arranger. (u) Events of default (or : enforcement event, where applicable) The events of default for the Sukuk Musharakah Programme shall include but not be limited to the following (to be referred to as "Dissolution Events"): (i) Non-Payment: the Issuer fails to pay any amount due from it under any of the Transaction Documents; (ii) Misrepresentation: any representation, warranty or statement which is made or given by the Issuer or NERS under the Transaction Documents or which is contained in any specific certificate, document or statement furnished at any time pursuant to the terms of the Transaction Documents proves to be 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 Sukuk Trustee is capable of being remedied, the Issuer or NERS, as the case may be, does not remedy the failure within a period of thirty (30) days upon the Issuer or NERS, as the case may be, becoming aware or having been notified by the Sukuk Trustee of the failure; (iii) Breach of obligations: the Issuer or NERS, as the case may be, fails to observe or perform its obligations under any of the Transaction Documents or under any undertaking or arrangement entered into in connection therewith other than the obligation of the type referred to in paragraph (i) above, and in the case of a failure 26
27. which in the opinion of the Sukuk Trustee is capable of being remedied , the Issuer or NERS, as the case may be, does not remedy the failure within a period of thirty (30) days upon the Issuer or NERS, as the case may be, becoming aware or having been notified by the Sukuk Trustee of the failure; (iv) Invalidity: any provision of the Transaction Documents and/or the Concession Agreement becomes, for any reason, invalid, illegal, void or unenforceable which would prevent the Issuer and/or NERS, respectively, from performing any of its obligations thereunder; (v) Appointment of receiver, legal process: an encumbrancer takes possession of, or a trustee, liquidator, receiver or similar officer is appointed in respect of, all or any part of the business or assets of the Issuer or NERS, as the case may be; (vi) Judgment Passed: the Issuer or NERS, as the case may be, fails to satisfy any judgment passed against it by any court of competent jurisdiction which in the reasonable opinion of the Sukuk Trustee would have a Material Adverse Effect and no action has been taken in good faith to set aside or to appeal against such judgment within thirty (30) days from the date of the judgment; (vii) Composition, winding up: the Issuer or NERS, as the case may be, convenes a meeting of its creditors or proposes or makes any arrangement or composition with, or any assignment for the benefit of its creditors, or a petition is presented for the winding up of the Issuer or NERS, as the case may be, and no action is taken to set aside the petition for winding up within thirty (30) days from the date of service of such winding up petition or if a winding up order has been made against the Issuer or NERS, as the case may be, or if a resolution to wind up the Issuer or NERS, as the case may be, has been passed; (viii) Insolvency and Rescheduling: the Issuer or NERS, as the case may be, is deemed unable to pay its debts within the meaning of Section 218(2) of the Companies Act 1965 or commences negotiations with any one or more of its creditors with a view to the general readjustment or rescheduling of its indebtedness which would have a Material Adverse Effect or makes a general assignment for the benefit of or a composition with its creditors or a 27
28. moratorium shall be declared on any of its indebtedness or a scheme of arrangement has been instituted against the Issuer or NERS , as the case may be, pursuant to Section 176 of the Companies Act 1965; (ix) Assets: all or a material part of the property or assets of the Issuer or NERS, as the case may be, shall be condemned, seized or otherwise appropriated or nationalised by any person acting under the authority of the Government which in the reasonable opinion of the Sukuk Trustee may have a Material Adverse Effect; (x) Cessation of business: the Issuer or NERS, as the case may be, changes the nature or scope of its business, suspends or ceases a substantial part of its present business operations and such change, suspension or cessation in the reasonable opinion of the Sukuk Trustee may have a Material Adverse Effect; (xi) Concession Agreement: If (1) NERS commits a breach of the terms of the Concession Agreement except where such a breach is not materially prejudicial to the interest of the Sukuk Musharakah investors and is remedied by NERS within the period specified in the notice of such breach from the Government requiring such remedy; or (2) the Concession Agreement is terminated; (xii) Material Adverse Change: there is a material adverse change in the business, financial position and operations of the Issuer or NERS, as the case may be, which in the reasonable opinion of the Sukuk Trustee, may have a Material Adverse Effect; or (xiii) such other event as may be advised by the Solicitors and mutually agreed between the Issuer and the Lead Arranger. Upon declaration of a Dissolution Event, the Security Trustee shall be entitled to exercise all rights available to it under the Transaction Documents to recover the amounts payable, including but not limited to taking such proceedings against the Issuer and/or NERS as it may deem fit to enforce the Transaction Documents and the security created pursuant thereto, the Exercise Price under the Purchase Undertaking shall become immediately due and payable and the Issuer will reimburse all Sukuk Musharakah investors all reasonable losses and expenses incurred by the Sukuk 28
29. Musharakah investors as a result of the Dissolution Event and /or of the acceleration of the Sukuk Musharakah, including those incurred in liquidating or employing deposits from third parties acquired to effect or maintain the Sukuk Musharakah or any part of it. Upon the declaration of a Dissolution Event, the Musharakah Venture will be dissolved. For avoidance of doubts, the holders of the Junior Sukuk may only declare a Dissolution Event after the holders of Senior Sukuk have declared a Dissolution Event or if all the Senior Sukuk have been fully redeemed. (v) Covenants : A. Financial Covenants (i) Finance Service Cover Ratio ("FSCR") During the tenure of the Senior Sukuk, the Issuer shall maintain a FSCR of at least 1.75 times. The FSCR is the ratio of Available Cash Flow (as defined hereunder) to the aggregate of: (a) all principal obligations paid by the Issuer under the Sukuk Musharakah for the preceding twelve (12) months; plus (b) all principal obligations paid by the Issuer under any other financing/ borrowing for the preceding twelve (12) months; plus (c) all coupon/profit/mark up payments paid under the Sukuk Musharakah and such financings/ borrowings of the Issuer for the preceding twelve (12) months. The FSCR calculations shall be duly confirmed by the Issuer’s external auditors and based on the Available Cash Flow as per the latest audited accounts of the Issuer on an annual basis. For the avoidance of doubt, any double counting shall be disregarded. The Issuer shall submit a compliance certificate to the Sukuk Trustee, the Rating Agency and the Facility Agent, which certificate shall be signed by a director of the Issuer and an external auditor certifying the compliance of the FSCR. 29
30. Available Cash Flow In any annual period , the sum of: (a) all revenue and income received by the Issuer and any other receipts of a capital or revenue nature under any contract or agreement; (b) all distribution, returns and realised gains received by the Issuer; and (c) all credit balances in the Designated Accounts including accrued profit payments retained by or on behalf of the Issuer and the amount utilised from the Designated Accounts for Permitted Investments at the beginning of the relevant twelve (12) month period;. less: (d) taxes paid or such other contributions paid by the Issuer; and (e) the total amount spent on operating expenses of the Issuer. (ii) Financing to Equity Ratio The Issuer shall ensure that it maintains a Financing to Equity ratio not exceeding a ratio of 90:10 during the tenure of the Senior Sukuk. "Financing" is defined as the sum of all outstanding Senior Sukuk. "Equity" is defined as the shareholders’ funds of the Issuer including, if any, preference equity, subordinated shareholders’ advances, reserves and retained earnings and the Junior Sukuk. In the event the FSCR falls below 1.75 times, or the Financing to Equity Ratio exceeds 90:10, the Issuer shall remedy the breach within thirty (30) days from the date of receipt of a written notice from the Sukuk Trustee on the said breach. The FSCR and Financing to Equity Ratio shall be calculated for each financial year during the tenure of the Sukuk Musharakah based on the Issuer's latest audited financial statements and duly confirmed by the Issuer's appointed external auditor. The Issuer shall arrange for the external auditor's confirmation to be 30
31. forwarded to the Facility Agent for its distribution to the Sukuk Trustee and Rating Agency within thirty (30) days after the Issuer's audited accounts are finalized (i.e. signed by the external auditor and the Issuer). For the avoidance of doubt, any double counting shall be disregarded. B. Information Covenants The Issuer shall provide to the Sukuk Trustee the documents which shall include but not be limited to the following:(a) An annual certificate confirming that the Issuer is in compliance with its obligations under the Trust Deed and the terms and conditions of the Sukuk Musharakah Programme and that there did not exist or had existed, from the date the Sukuk Musharakah were first issued or the date of the previous certificate, as the case may be, any Dissolution Event, and if such is not the case, to specify the same, within thirty (30) days after the Issuer's audited financial statements are finalised (i.e. signed by the external auditors and the Issuer); (b) Its annual audited financial statements not later than one hundred eighty (180) days after the end of each financial year; (c) Its half yearly unaudited financial statements within ninety (90) days after the end of the said financial period; (d) Notification of any material changes of its board of directors/substantial shareholders and any other changes that may affect its business condition (financial or otherwise); (e) All notices or other documents in relation to the proposed Sukuk Musharakah Programme, dispatched to its shareholders or its creditors generally; (f) Such additional financial or other information as the Sukuk Trustee may from time to time reasonably request or may require in order to discharge its duties and obligations as Sukuk Trustee under the Trust Deed, to the extent permitted by law; and (g) Notification of occurrence of any Dissolution Event. 31
32. C . Positive Covenants Positive covenants of the Sukuk Programme shall include the following:(i) Musharakah The Issuer and NERS shall comply at all times with the terms and conditions of the Sukuk Musharakah Programme (where applicable); (ii) The Issuer and NERS shall comply with all applicable laws and regulations; (iii) The Issuer and NERS shall maintain their corporate and legal existence and their right to carry on operations; (iv) The Issuer and NERS shall maintain and ensure that NERS maintains all relevant authorisations, consents, rights, licenses, approvals and permits (governmental and otherwise) necessary to carry on its operations and perform its obligations under the Transaction Documents and the Concession Agreement (where applicable); (v) The Issuer and NERS shall execute all such further documents (including but not limited to execution of such relevant agreements as required by the Sukuk Trustee to secure payment obligations of the Issuer under the Sukuk Musharakah) and do all such further acts reasonably necessary at any time or times to give further effect to the terms and conditions of the Sukuk Musharakah Programme; (vi) NERS shall maintain insurance/takaful policies that are in full force and effect at all times and that all premiums are paid when due; (vii) The Issuer and NERS shall exercise reasonable diligence in carrying out their business and affairs and performing all their obligations under all the Transaction Documents and the Concession Agreement (where applicable); (viii) The Issuer and NERS shall prepare their financial statements on a basis that is consistently applied in accordance with approved accounting standards in Malaysia and ensure that those financial statements shall give a true and fair view of the results of their operations; 32
33. (ix) The Issuer and NERS shall notify the Sukuk Trustee as soon as they become aware of any of the following circumstances: (a) any Dissolution Event or any right or remedy under any of the Transaction Documents which has become immediately enforceable; or (b) any significant change in the nature of the core business of the Issuer and/or NERS; or (c) any substantial change in the withholding tax position or tax jurisdiction of the Issuer /NERS; or (d) any change in the utilisation of proceeds arising from the issuance of the Sukuk Musharakah as disclosed in the information memorandum and Transaction Documents; or (e) any circumstances which may materially prejudice the Issuer, NERS, the Sukuk Musharakah investors or any of the securities created pursuant to the Transaction Documents or the ability of the Issuer and/or NERS, respectively to perform its/their obligations under the Transaction Documents and/or the Concession Agreement (where applicable); (x) The Issuer and NERS shall pay all taxes and other liabilities when due unless the same are being contested in good faith pursuant to legal proceedings and in relation to taxes being contested, adequate reserves with respect thereto have been established; (xi) The Issuer and NERS shall comply with all applicable provisions of the CMSA and/or the notes, circulars, conditions or guidelines issued by the SC from time to time; (xii) The Issuer and NERS shall utilise the proceeds raised from the issuance of the Sukuk Musharakah solely for the purposes set out under Item 2(m) herein; (xiii) The Issuer and NERS shall ensure that any loans or advances obtained by them from their holding company (if any) or other shareholders are made on arm's length basis and commercial terms; 33
34. (xiv) The Issuer shall maintain a Paying Agent in Malaysia; (xv) The Issuer shall procure that the Paying Agent shall notify the Sukuk Trustee, through the Facility Agent, in the event that the Paying Agent does not receive payment from the Issuer on the due dates as required under the Trust Deed and the terms and conditions of the Sukuk Musharakah; and (xvi) Such other covenants as may be advised by the Solicitors to be mutually agreed between the Lead Arranger and the Issuer. D. Negative Covenants Negative covenants of the Sukuk Programme shall include the following:- Musharakah (i) Assets: The Issuer and NERS shall not dispose of assets that will materially and adversely affect their business operations; (ii) Negative pledge: The Issuer and NERS shall not create or permit to subsist any mortgage, charge, pledge, assignment or other security interest over the whole or any part of their undertakings, assets, property or revenues, present or future, except for: (a) security interests arising out of liabilities which are preferred solely by law; (b) security interests arising under the Sukuk Musharakah; (c) in the case of NERS only, security interests having an aggregate value of not more than RM20.0 million to secure future borrowings of NERS; and (d) in the case of NERS only, security interests created for hire purchase facilities in the ordinary course of NERS’ business. (iii) Other Businesses: The Issuer and NERS shall not substantially change their business operations in a manner that may have a Material Adverse Effect; (iv) Indebtedness: The Issuer and NERS shall not incur, assume or permit to exist any indebtedness save and except for financings arising from the Sukuk Musharakah and in the case of NERS only, 34
35. any such indebtedness , whether funded or unfunded (including but not limited to hire purchase, leasing arrangements, performance bonds and maintenance bonds), up to an aggregate limit of RM20.0 million. (v) Memorandum and Articles of Association: The Issuer and NERS shall not add to, delete, vary or amend their Memorandum and/or Articles of Association in a manner inconsistent with the provisions of the Transaction Documents and the Concession Agreement (where applicable); (vi) Share Capital: The Issuer and NERS shall not reduce their authorised and issued paid-up capital; (vii) Dividends: The Issuer and NERS shall not declare or pay any dividend or make any distributions whether income or capital in nature to their shareholders, unless the following conditions are met:(a) All financial covenants and obligations in relation to the Sukuk Musharakah Programme are complied with; (b) The terms and conditions of the FSA are complied with; (c) The FSCR of the Issuer is at least 2.25 times (post-dividend payment); and (d) No Dissolution Event has occurred or is occurring; (viii) Dissolution: The Issuer and NERS shall not dissolve their affairs or consolidate with or merge with any other person, or transfer all or substantially all their assets to another entity which would have a Material Adverse Effect; (ix) Surrender rights: The Issuer and NERS shall not surrender, transfer, assign, relinquish or otherwise dispose of any of their rights and interest under the Transaction Documents and the Concession Agreement (where applicable); (x) Insurance: The Issuer and NERS shall not do or suffer to be done any act, matter or thing whereby any insurance may be rendered void, voidable or incapable of being effected, maintained or renewed; 35
36. (xi) Loans: The Issuer and NERS shall not grant any loan or advance or provide or extend any credit or accommodation or give any guarantee, indemnity or assurance against loss to or for the benefit of any person or act as surety or voluntarily assume any liability, whether actual or contingent save and except for loans or advances extended to employees of NERS under the terms of the employment or contemplated under the Transaction Documents; (xii) Other businesses: The Issuer and NERS shall not carry on any other business other than their authorised businesses in accordance with its obligations under its Memorandum and Articles of Association; (xiii) Others: The Issuer and/or NERS shall not unreasonably terminate any material support and maintenance services agreements ("Maintenance Agreements") other than: (a) at the expiry of the term of the Maintenance Agreements; (b) where such other party commits a material breach of the Maintenance Agreements; or (c) such termination with the prior written consent of the Sukuk Musharakah investors (whose consent shall not be unreasonably withheld). (xiv) Such other covenants as may be advised by the Solicitors and mutually agreed between the Lead Arranger and the Issuer. (w) Provisions on buy- : The Issuer may redeem in whole (and not in part) any back and early particular series of the Senior Sukuk before its Maturity redemption of Date at a price or prices and on such terms as may be sukuk agreed between the Issuer and Senior Sukuk investors subject to the following conditions: (i) the Issuer shall have issued a notice to the Sukuk Trustee (the "Early Redemption Notice") not less than 21 days and not more than 60 days before the date of the proposed redemption (the "Early Redemption Date"). The Early Redemption Notice must specify the Early Redemption Date, and the particulars of the series of the Senior Sukuk that the Issuer wishes to cancel; 36
37. (ii) The relevant Senior Sukuk investors together with the Issuer have agreed on the early redemption price via an Early Redemption Price Acceptance Letter issued by the Sukuk Trustee on behalf of the relevant Senior Sukuk investors duly accepted by the Issuer within three (3) business days before the Early Redemption Date; and (iii) The Early Redemption Date must fall on a Periodic Distribution Date. Provided that all the issued Senior Sukuk have been fully redeemed and cancelled, the Issuer may redeem in whole (and not in part) any particular series of the Junior Sukuk before its Maturity Date at a price and on such terms as may be agreed between the Issuer and the relevant Junior Sukuk investors. All Sukuk Musharakah redeemed by the Issuer shall be cancelled and cannot be reissued or resold. (x) Other principal terms and conditions for the issue (1) Material Adverse Effect : Means any material adverse effect on the business or condition (financial or otherwise) or results of the operations of the Issuer and/or NERS, or the ability of the Issuer and/or NERS to perform any of its/their obligations under any of the Transaction Documents and the Concession Agreement (where applicable), and "materially and adversely affect" shall be construed accordingly. (2) Permitted Investments : For the purposes of the Sukuk Musharakah Programme, Permitted Investments are the Shariah Compliant investments / products listed below: (i) deposits with licensed Islamic financial institutions in Malaysia; or (ii) Islamic bankers acceptances, Islamic bills and other Islamic money market instruments by licensed financial institutions with a short term rating of MARC-1/P1 and a minimum long term rating of AA1/AA+ or their equivalent; or (iii) Islamic treasury bills, Islamic money market instruments, and other sukuk issued by BNM or the Government; or 37
38. (iv) sukuk issued by quasi government or government related corporations with a short term rating of MARC-1/P1 and a minimum long term rating of AA1/AA+ or their equivalent or Islamic securities / sukuk guaranteed by the Government; or (v) sukuk issued by corporations with a short term rating of MARC-1/P1 and a minimum long term rating of AA1/AA+ or their equivalent, or by financial institutions or guaranteed by licensed financial institutions with a short term rating of MARC-1/P1 or a minimum long term rating of AA1/AA+ or their equivalent. For the avoidance of doubt, the Issuer shall at all times ensure that the funds held in the DA and FSA are invested in Shariah approved investments having maturity dates to match the utilisation of the moneys to meet any payment obligations of the Issuer under the Sukuk Musharakah and being denominated in Ringgit Malaysia. (3) Form and Denomination : The Sukuk Musharakah shall be issued in accordance with: (i) (ii) (iii) the "Code of Conduct and Market Practices for the Malaysian Corporate Bond Market" issued by the Institut Peniaga Bon Malaysia and approved by BNM ("IPBM Code"); the "Operational Procedures for Real Time Electronic Transfer of Funds and Securities" ("RENTAS"), as amended or substituted from time to time ("Operational Procedures for RENTAS"); and the "Operational Procedures for Securities Services" issued by Malaysian Electronic Clearing Corporation Sdn Bhd ("MyClear"). or their replacement thereof (collectively referred to as the "Codes of Conduct" and "Operational Procedures" respectively) applicable from time to time. The Operational Procedures for RENTAS shall prevail to the extent of any inconsistency between the Operational Procedures for RENTAS and the IPBM Code. 38
39. The Sukuk Musharakah shall be represented by global certificates to be deposited with BNM , and the global certificate are exchangeable for definitive certificates in bearer form only in certain limited circumstances to be set out in the trust deed for the Sukuk Musharakah Programme ("Trust Deed"). The Sukuk Musharakah shall be issued in bearer form in the minimum denomination of RM1,000.00 each or such other denomination as determined/allowed by BNM. (4) Status : Senior Sukuk The Senior Sukuk shall constitute direct, unconditional and secured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and in priority to the Junior Sukuk and all other present and future unsecured and unsubordinated obligations of the Issuer, subject to those preferred by law. Junior Sukuk The Junior Sukuk shall constitute direct, unconditional and secured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and in priority to other present and future unsecured and unsubordinated obligations of the Issuer but are subordinated to the Senior Sukuk in terms of security and priority of payments. (5) Subordination : The Junior Sukuk shall be subordinated to the Senior Sukuk in terms of security and priority of payments. For so long as the Senior Sukuk remain outstanding, the Junior Sukuk investors shall not be able to declare a Dissolution Event ahead of the Senior Sukuk investors. (6) Redemption, Repurchase and Cancellation : Unless previously purchased, redeemed and cancelled, the Sukuk Musharakah issued under the Sukuk Musharakah Programme will be redeemed at their face value on their respective Maturity Dates. The Issuer or any of its interested persons may at any time purchase the Sukuk Musharakah at any price in the open market or by private treaty, but these repurchased Sukuk Musharakah shall, if 39
40. purchased by the Issuer , be cancelled and cannot be resold/reissued or, if purchased by the Issuer's interested person(s), not entitle the holder(s) to vote at any meeting of the holders of the Sukuk Musharakah. (8) Trustee's Reimbursement : The Sukuk Trustee shall open and maintain, Account throughout the tenure of the Sukuk Musharakah Programme, an account to be named the "Trustee's Reimbursement Account for Sukukholders' Actions" (the "Account") with a bank which is acceptable to the Lead Arranger with a sum of Ringgit Malaysia Thirty Thousand (RM30,000.00). The Account shall be operated solely by the Sukuk Trustee and the money shall be used strictly by the Sukuk Trustee in carrying out its duties in relation to the declaration of a Dissolution Event in the manner as provided in the Trust Deed. The moneys in the Account may be invested in Permitted Investments in the manner provided in the Trust Deed, with profit from the investment to be accrued to the Issuer. The moneys in the Account shall be returned to the Issuer upon full redemption of the Sukuk Musharakah in the event there is no declaration of a Dissolution Event. (9) Taxation : All payments by the Issuer shall be made without withholding or deductions for or on account of any present or future taxes, duties or charges of whatsoever nature imposed by the Government or any political sub-division or tax authority, unless such withholding or deduction is required by the laws of Malaysia, in which event, the Issuer shall be required to make such additional payments as are necessary so that the participating institutions would receive the full amount which they would have received if no such withholding or deductions are made. (10) Other Expenses : All costs, charges and expenses including the Sukuk Trustee and Security Trustee fee, legal and other professional fees, abortive fees, rating fees, stamp duties (if any), penalties, SC and BNM fees, and other incidental costs, charges and expenses shall be borne by the Issuer, even if the Sukuk Musharakah Programme is subsequently aborted for any reason whatsoever. 40
41. (11) Description of Project (12) Transaction Documents NERS is the company undertaking the implementation of the National Enforcement and Registration (Biometrics) System for the Government, which is a system for the registration and management of all foreigners entering and residing in Malaysia ("Project"). : The Sukuk Musharakah Programme shall be subject to the negotiation and execution of documentation satisfactory to all parties incorporating clauses customary for transactions of this nature as advised by the Solicitors and agreed by the Issuer. Such documentation shall include, but not be limited to, the following: (i) (ii) (iii) (iv) Sukuk Musharakah Programme Agreement; Subscription Agreement; Trust Deed; Securities lodgement form pursuant to the Central Securities Depository and Paying Agency Rules issued by BNM; (v) Agency Agreement; (vi) Management Agreement; (vii) Musharakah Agreement; (viii) Purchase Undertaking; (ix) Sale Undertaking; (x) the Security Documents under item 2(l) herein; and (xi) Any other relevant documents agreed between the parties that may be required to complete the Sukuk Musharakah Programme as advised by the Solicitors and agreed by the Issuer. (13) Other Conditions : The Sukuk Musharakah Programme shall at all times be governed by the guidelines issued and to be issued from time to time by the SC and/or BNM, having jurisdiction over matters pertaining to the Sukuk Musharakah Programme or the Codes of Conduct. (14) Jurisdiction : The Issuer shall unconditionally and irrevocably submit to the non-exclusive jurisdiction of the courts of Malaysia. (15) Governing law : Laws of Malaysia 41
42. Annexure 1 : Musharakah Transaction Structure 4 Purchase and Sale Undertaking via Sukuk Trustee ACSB (Issuer/Agent) 3 Appoints as Manager NERS (Obligor/Manager) 2 Issues Sukuk Musharakah among the investors / Sukukholders Senior Sukukholders 1 Identifies Business 2 Musharakah Capital Proceeds Junior Sukukholders Musharakah Venture 2 Invests in venture 3. Periodic Distributions via Issuer Step 1 Pursuant to a trust deed, on behalf of the holders of the Sukuk Musharakah ("Sukukholders"), the Sukuk Trustee shall appoint the Issuer as its agent (wakeel), acting on trust for the Sukuk Trustee and the Sukukholders in respect of the Sukuk Musharakah to be issued. The Obligor will from time to time identify the Shariahcompliant business undertaken by the Obligor (the "Business") for the purpose of investment by the potential investors. Step 2 Pursuant to a Musharakah Agreement, the Sukukholders shall form a Musharakah from time to time, which is a partnership amongst the Sukukholders to invest directly into the Business ("Musharakah Venture"). The capital contribution ratio of the Musharakah Partners in the Musharakah Venture shall be based on the nominal value of the Sukuk Musharakah subscribed by each Sukukholder. The Junior Sukuk holders shall agree upfront to waive (Tanazul) their rights in respect of priority of payment out of the income generated by the Musharakah Venture and shall be ranked after the Senior Sukuk holders in terms of payment and security. The Issuer will issue Sukuk Musharakah to Sukukholders from time to time, and the proceeds received from the Sukukholders arising from the subscription of the Sukuk Musharakah ("Musharakah Capital") shall be invested into the Musharakah Venture. The Obligor shall simultaneously make a declaration that it holds on trust the Business for the benefit of the Sukukholders. The Sukuk Musharakah shall represent, amongst others, the Sukukholders’ undivided proportionate interest in the Musharakah Venture. 42
43. Step 3 Pursuant to the management agreement to be entered into between the Obligor and the Issuer (acting on behalf of the Sukukholders) ("Management Agreement"), the Issuer shall appoint the Obligor as the manager ("Manager") of the Musharakah Venture. The return expected by the Sukukholders from the Musharakah Venture ("Expected Return") shall be the yield for the Sukuk Musharakah up to the Maturity Date or the date of declaration of any Dissolution Event ("Dissolution Date"), whichever is the earlier. In accordance with the Musharakah Agreement and the Management Agreement, in respect of the Sukuk Musharakah Programme, income from the Musharakah Venture of up to an amount equal to a certain percentage of the face value of the Sukuk Musharakah per annum, calculated on the basis of the actual number of days in the relevant period ("Expected Periodic Distribution") shall be distributed by the Manager periodically in the form of periodic distribution ("Periodic Distribution") to the Issuer. The Periodic Distribution shall be made semi-annually or such period to be determined between the Issuer and the Lead Arranger (each such date for distribution, a "Periodic Distribution Date"). The Issuer shall apply such income to distribute the Periodic Distribution on each Periodic Distribution Date to the Sukukholders. In the event of any shortfall between the Periodic Distribution and the Expected Periodic Distribution for such relevant period, the Obligor shall make advance part payments ("Advance Part Payment") to make good the difference (as determined in accordance with the formula set out below). For avoidance of doubt, the Advance Part Payment will be set-off against the Exercise Price (as defined below) pursuant to the relevant Purchase Undertaking or Sale Undertaking (as defined below), as the case may be. Any income in excess of the Expected Periodic Distribution shall be retained by the Manager as an incentive fee. Any profit or losses derived from the Musharakah Venture will be distributed or borne by the Musharakah Partners in proportion to each Partner’s respective capital contribution of the Musharakah Capital. However, subject to the availability of profit and based on the priority of ranking in accordance with the Tanazul arrangement, the Senior Sukuk investors are expected to receive their Expected Periodic Distribution first, and if there remains sufficient profit, the Junior Sukuk investors will be able to receive their Expected Periodic Distribution subsequently. Step 4 Pursuant to the purchase undertaking for the Sukuk Musharakah Programme granted by the Obligor in favour of the Sukuk Trustee (acting on behalf of the Sukukholders) ("Purchase Undertaking"), the Obligor shall irrevocably and unconditionally undertake to purchase the Sukukholders’ interest in the Musharakah Venture at the Exercise Price on the Maturity Date of the Sukuk Musharakah or the Dissolution Date, whichever is the earlier. Pursuant to a sale undertaking ("Sale Undertaking") declared and issued by the Sukuk Trustee (for and on behalf of the Sukukholders) to the Obligor, the Sukuk Trustee (for and on behalf of the Sukukholders) undertakes to sell the Sukukholders' interest in the Musharakah Venture to the Obligor at the relevant Exercise Price upon early redemption of the Sukuk Musharakah pursuant to the terms and conditions of the Sukuk Musharakah Programme. 43