Principal Terms and Conditions of the Redeemable Convertible Secured Loan Stocks ( RCSLS ) Pilecon Engineering Berhad ( Pilecon or Company )

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1 Principal Terms and Conditions of the Redeemable Convertible Secured Loan Stocks ( RCSLS ) Background Information 1. Issuer (i) Name Pilecon Engineering Berhad ( Pilecon or Company ) (ii) Address No. 2, Jalan U1/26, Seksyen U1, Hicom-Glenmarie Industrial Park, Shah Alam, Selangor Darul Ehsan (iii) Business registration no P (iv) Date and place of incorporation Pilecon was incorporated in Malaysia on 13 September (v) Date of listing Pilecon was listed on the Main Board of Bursa Malaysia Securities Berhad ( Securities Exchange ) on 27 December (vi) Status Resident-controlled company Non-Bumiputera-controlled company (vii) Principal activities The principal activities of the Pilecon Group comprise foundation engineering, civil engineering, building contracting works, property development, electrical and electronic engineering, renting of plant and machinery for foundation works and ancillary functions. (viii) Board of directors The Board of Directors of Pilecon comprises the following: (a) (b) (c) Pee Ban Hock (Non-Independent Executive Director) Yoon Kwok Ching (Independent Non-Executive Director) Dato Haji Ahmad bin Abdullah (Independent Non-Executive Director) 1

2 (ix) Shareholding structure and names of substantial shareholders The shareholding structure of Pilecon as at 25 August 2006 is as follows: No. of Pilecon Shares % MALAYSIAN Bumiputera 24,383, Non-Bumiputera 123,361, ,745, FOREIGN 52,075, TOTAL 199,821, The substantial shareholders (holding 5% or more of the issued and paid-up share capital) of Pilecon and their shareholdings based on the Register of Substantial Shareholders as at 25 August 2006 are as follows: Name Tradefast Properties Limited < Direct------> <-----Indirect-----> No. of % No. of % shares held shares held 41,121,163* Notes : * Held through Ke-Zan Nominees (Asing) Sdn Bhd. (x) Authorised and paid-up capital As at 25 August 2006, the authorised and issued and paid-up share capital of Pilecon are as follows: No. of Pilecon shares Amount (RM) Authorised: Ordinary shares of RM0.50 each 1,000,000, ,000,000 Issued and fully paid-up: Ordinary shares of RM0.50 each 199,821,007 99,910,503 2

3 2. Names of parties involved in the proposed transaction (i) Principal adviser/ Lead Arranger Alliance Investment Bank Berhad (formerly known as Alliance Merchant Bank Berhad). (ii) Arranger(s) Not applicable. (iii) Valuers Khong & Jaafar Sdn Bhd. (iv) Solicitors Messrs Kadir, Andri & Partners. (v) Financial Adviser Not applicable. (vi) Technical Adviser Not applicable. (vii) Guarantor Not applicable. (viii) Trustee Malaysian Trustees Berhad. (ix) Facility Agent Alliance Investment Bank Berhad (formerly known as Alliance Merchant Bank Berhad). (x) Primary Subscriber(s) and Amount Subscribed Not applicable. (xi) Underwriter(s) and amount underwritten Not applicable. (xii) Syariah Adviser Not applicable. 3

4 (xiii) Central Depository Bank Negara Malaysia ( BNM ). (xiv) Paying Agent BNM. (xv) Reporting Accountant 3. Principal Conventional. Messrs Ernst & Young. 4. Facility description Fixed rate 5.00% redeemable convertible secured loan stocks. 5. Issue size (RM) RM120,000,000 nominal value. 6. Issue price (RM) 100% of the nominal amount of RCSLS. 7. Tenure of the issue Pilecon and its creditors participating in the Proposed SOA (as defined herein) ( the Unsecured Creditors ) have agreed to fix the tenure as follows: Series RM 000 Maturity date Tenure First series 10,000 The first business day falling 3 months RCSLS three (3) months from issue date Second series RCSLS Third series RCSLS Fourth series RCSLS 8. Coupon rate (%) 25,000 The first business day falling 15 months from issue date 40,000 The first business day falling 27 months from issue date 45,000 The first business day falling 39 months from issue date 120,000 The RCSLS will bear a coupon rate of 5.00% per annum. 15 months 27 months 39 months 4

5 9. Coupon payment frequency Payable semi-annually in arrears. 10. Coupon payment basis On the basis of three hundred and sixty-five (365) days and on the actual number of days elapsed from and including the issue date or the previous interest payment date up to but excluding the current interest payment date and will be rounded down to the nearest sen. The first interest payment date shall fall on the expiry of three (3) months from the issue date and subsequent interest payment dates shall fall on the expiry of six months from the previous interest payment date. If any such interest payment date is not a business day, the date of payment shall be on the business day immediately preceding that date. The last interest payment date shall be the last conversion date. 11. Yield to maturity 5.00% per annum (assuming no conversion). 5

6 12. Security/Collateral The RCSLS shall be secured by assets of Pilecon (both strategic and nonstrategic assets). However, only the non-strategic assets shall be disposed of, the proceeds of which shall be utilised to redeem the RCSLS. The schedule of the strategic and non-strategic assets is as follows: SCHEDULE OF ASSETS TO BE PLEDGED TO THE UNSECURED CREDITORS FOR THE PROPOSED ISSUE OF RCSLS NON-STRATEGIC ASSETS (TO BE PLEDGED AND DISPOSED OF) Description of Non-Strategic Assets to be Pledged hectares of freehold agricultural land held under Geran Lot 5858, Mukim of Senai-Kulai, District of Johor Bahru, Johor acres of freehold residential land held under HS(M) 1640 PT 2120, HS(M) 1641 PT 2121, HS(M) 1643 PT 2123, Mukim of Mentakab, District of Temerloh, Pahang Freehold commercial office space, workshop and warehouse with land area of 86,697 square feet at Hicom-Glenmarie Industrial Park, held under Lots 38 and 49 at Lot 29, Geran 24238, Mukim of Damansara, District of Petaling, Selangor 11,022 square feet of freehold commercial office space known as Parcels , 20th Floor, Tower 1, Faber Towers, Taman Desa, Wilayah Persekutuan Unsold leasehold retail units at Lot 1, JB Waterfront City held under HS(D) Lot PTB 20214, Bandar Johor Bahru, District of Johor Bahru, Johor with a floor area of 237,241 square feet of retail space and 946 car parking bays ( Lot 1 ) Fifty-nine (59) units of leasehold resort apartments with a total land area of 42,656 square feet at Pine Resort in Fraser s Hill held under PN 434 Lot 3544, Mukim of Teras, District of Raub, Pahang Three (3) freehold condominiums with a total floor area of 3,821 square feet at Parcel UBIA 73 within Casa Vista Condominium on Lots 40410, and 40412, Mukim of Kuala Lumpur, Wilayah Persekutuan Five (5) freehold apartments with a total floor area of 5,165 square feet at , 4-3-4, 4-3-5, 4-3-7, 3 rd Floor and 4-7-4, 7 th Floor, Block H, Aquarius Apartments, Jalan Low Yat, Penang 26,272,500 ordinary shares of RM0.50 each representing approximately 29% equity interest in Industronics Berhad (Market = RM0.50) Market Value (RM) 3,000, ,000 8,600,000 2,200,000 53,480,796 ^ 14,920,000 1,190, ,000 13,136,250 Freehold four (4)-storey office block and single storey factory with land area of 99,285 square feet at Hicom-Glenmarie Industrial Park, held at Lots 64 & 65 at Lot 29, Geran 24238, Mukim of Damansara, District of Petaling, Selangor 19,000,000 TOTAL 117,242,046 Note: ^ Market value of units to be pledged to the Unsecured Creditors. Total market value of Lot 1 as ascribed by valuers is RM69.7 million. 6

7 STRATEGIC ASSETS (TO BE PLEDGED BUT NOT DISPOSED OF) Description of Strategic Assets to be Pledged 5,100,000 ordinary shares of RM1.00 each and 20,400,000 preference shares of RM1.00 each representing 25.5% equity interest in Equiventures Sdn Bhd 52,500 ordinary shares of RM1.00 each representing 35% equity interest in Strategi Tegas (M) Sdn Bhd 127,500 ordinary shares of RM1.00 each representing 51% equity interest in Corroless (M) Sdn Bhd Estimated Value (RM)* 73,560,346 6,452,585 (3,172,000) TOTAL 76,840,931 Note: * Based on net tangible assets as at 31 December

8 Asset disposal programme No. Location / Title Particulars Independent Valuation Market Value Within 3 months from issue date Disposal Programme Within 15 Within 27 months from months from issue date issue date Within 39 months from issue date hectares of freehold agricultural land held under title number Geran Lot No. 5858, Mukim of Senai-Kulai, District of Johor Bahru, State of Johor acres of freehold residential land held under title numbers HS(M) 1640 PT No. 2120, HS(M) 1641 PT No. 2121, HS(M) 1643 PT No. 2123, all in Mukim of Mentakab, District of Temerloh, Pahang Darul Makmur 3,000,000 3,000, , , Freehold commercial office space, workshop and warehouse (held under Lots 38 and 49 at Lot 29, Geran Mukim Damansara, District of Petaling) at Hicom-Glenmarie Industrial Park, Selangor with land area of 86,697 sq. ft. No 3 Jalan U1/26 (Lot 38) (40,961 sq. ft.) 3,700,000 3,700, No 1 Jalan U1/25 (Lot 49) (45,736 sq. ft.) 4,900, ,900,000 4 Freehold commercial office space known as Parcel Nos , 20th floor, Tower 1, Faber Towers, Taman Desa, Wilayah Persekutuan with floor area of 11,022 sq. ft. 5 Unsold leasehold retail units at Lot 1, Johor Bahru Waterfront City ( JBWC ) (together with anchor tenant, food court, entertainment space and car park) at Lot 1, JBWC located at HS(D) Lot PTB no , Bandar Johor Bahru, District of Johor Bahru, Johor with a floor area of 237,241 square feet of retail space and 946 car parking bays 6 Fifty-nine (59) units of leasehold resort apartments at Pine Resort, Frasers Hill held under title number PN 434 Lot No. 3544, Mukim Teras, District of Raub, Pahang with a total land area of 42,656 sq. ft. 2,200,000 2,200, ,480,796-9,449,284 32,545,812 11,485,700 14,920, ,920,000 7 Three (3) freehold condominiums at Parcel No. UBIA 73 within Casa Vista Condominium standing on Lot Nos 40410, and 40412, Mukim of Kuala Lumpur, Wilayah Persekutuan Unit 17A-2-1(Parcel A1/A2/1) (1,324 sq ft ) 400, ,000 - Unit 17A-4-1(Parcel A3/A1/1) (1,249 sq ft ) 395, , Unit 17A-4-2(Parcel A3/A1/2) (1,249 sq ft ) 395, , Five (5) freehold apartments with a total floor area of 5,165 square feet at Block H, Aquarius Apartment, Jalan Low Yat, Penang 9 Freehold four (4)-storey office block and single storey factory with land area of 99,285 sq. ft. at Hicom-Glenmarie Industrial Park, held at Lots 64 & 65 at Lot 29, Geran 24238, Mukim of Damansara, District of Petaling, Selangor 10 26,272,500 shares in Industronics Berhad (Market = RM0.50)^ 765, , ,000, ,000,000 13,136,250-13,136, Total Value 117,242,046 9,665,000 24,325,534 37,845,812 45,405,700 Proposed Redemption Sum 120,000,000 10,000,000 25,000,000 40,000,000 45,000,000 (Deficit)/Surplus of Redemption Sum (2,757,954) (335,000) (674,466) (2,154,188) 405,700 Internally generated funds from future projects and investments of Pilecon Group 3,163, , ,466 2,154,188 - Net Surplus of Redemption Sum 405, ,700 Note: ^ Based on closing market price 8

9 The Unsecured Creditors which will receive RCSLS will have: (i) (ii) first charge over the non-strategic assets of Pilecon Group; and second charge over the strategic assets of Pilecon Group. However, the non-strategic assets at Lot 1, Johor Baru Waterfront City, Bandar Johor Baru, District of Johor Bahru, will not be charged to the Unsecured Creditors as the assets are currently pledged as security to Public Bank, a secured creditor of Transbay, for the amount of indebtedness owing to Public Bank. Pilecon has proposed that Transbay render a negative pledge on the said asset to the Unsecured Creditors under the PDRS (as defined herein). Pilecon had, earlier on, proposed that the Unsecured Creditors provide the Pilecon Group with new banking facilities amounting to RM50 million for certain project financing requirements of the Group. Pilecon did not receive unanimous consent from the Unsecured Creditors. Taking this into consideration, Pilecon proposes that only the lenders which provide the Pilecon Group with the new banking facilities up to RM50 million would have a first charge over the strategic assets of the Pilecon Group. If Pilecon does not require the banking facilities prior to the implementation of the PDRS, the Unsecured Creditors who will receive the RCSLS will, upon issuance of the RCSLS, have a first charge over the strategic assets. In the event Pilecon wishes to utilise the banking facilities to be provided by the new lenders, the Unsecured Creditorscum-RCSLS holders would discharge the securities in favour of the new lenders who will be providing the banking facilities to Pilecon. Consequently, the Unsecured Creditors-cum-RCSLS holders who do not wish to participate in the provision of banking facilities will have a second charge over the strategic assets. The Unsecured Creditors should note the perfection of the charge on the non-strategic assets and strategic assets for the RCSLS depends on, inter-alia, the relevant regulatory authorities consents (if required). Pilecon may, subject to the consent of the relevant regulatory authorities (if required), issue the RCSLS to the Unsecured Creditors without perfecting the charge, but shall ensure that the charge shall be perfected accordingly in due course. Some of the non-strategic assets to be pledged in favour of the Unsecured Creditors as securities for the RCSLS are currently charged while some of them have several caveats attached to them. Pilecon is aware of such encumbrances on these assets and it will take the necessary actions to remove the existing charges and caveats prior to the perfection of the security documents for the RCSLS. 13. Details on utilisation of proceeds The issuance of the RCSLS will not result in any fund raising as they will be issued to the Unsecured Creditors as part of the PDRS. 9

10 14. Sinking fund 15. Rating No sinking fund will be established. Based on the PDS Guidelines, a rating is not required for any issue of private debt securities: (a) (b) Which are non-transferable and non-tradable; and Whose investors do not require a rating. Save for the one-off assignment/transfer by Danaharta to a third party(ies) which shall be identified in due course in view of the expected cessation of Danaharta in 2005, the RCSLS to be issued to the Unsecured Creditors will be non-transferable and non-tradable and will not be listed on any stock exchange. The Securities Commission ( SC ) had vide its letter dated 26 April 2004, granted Pilecon an exemption from rating for the proposed issue of the RCSLS subject to certain conditions which Pilecon has complied with, where applicable. 16. Form and denomination The RCSLS will be issued in registered form in denominations of RM0.50 and multiples thereof. The global certificate for the RCSLS will be deposited with BNM. 17. Mode of issue Non-tender, and private placement to a class of the Unsecured Creditors, via the following systems: (a) (b) Fully Automated System for Issuing/ Tendering System ( FAST ); and Real Time Electronic Transfer of Funds and Securities System ( RENTAS ). 18. Selling restriction The RCSLS are neither transferable nor tradable, save for the one-off assignment/transfer by Danaharta to a third party(ies) which shall be identified in due course in view of the expected cessation of Danaharta in Listing status The RCSLS will not be listed on any stock exchange. 10

11 20. Minimum level of subscription (RM or %) The RM120,000,000 nominal value of RCSLS will be fully issued to the Unsecured Creditors as part settlement of the outstanding indebtedness of Pilecon to the Unsecured Creditors under a proposed debtrestructuring scheme ( PDRS ). The PDRS is part of a proposed scheme of arrangement ( Proposed SOA ) undertaken by Pilecon pursuant to Sections 64 and 176 of the Companies Act, 1965 ( Act ). 21. Other regulatory approvals required in relation to the issue, offer or invitation and whether or not obtained The issue of the RCSLS is part of the Proposed SOA which is subject to and conditional upon approvals being obtained from the following: Authorities SC Foreign Investment Committee ( FIC ) via the SC High Court of Malaya at Kuala Lumpur ( High Court ) Securities Exchange Subject matter for Approval Proposed SOA Proposed SOA Sanction of the Proposed SOA pursuant to Sections 64 and 176 of the Act The admission to the Official List and the listing and quotation of the irredeemable convertible unsecured loan stocks ( ICULS ) to be issued pursuant to the Proposed SOA and the listing and quotation of the new Pilecon Shares to be issued pursuant to the Proposed SOA and upon conversion of the RCSLS and the ICULS The approvals from the SC and FIC via SC were obtained vide the SC s letter dated 13 May 2005 and 25 August The sanction of the High Court for the Proposed SOA pursuant to Sections 64 and 176 of the Act was obtained on 12 January The approval required from the Securities Exchange was obtained vide its letter dated 3 March No other regulatory authorities approval is required for the issuance of RCSLS. 22. Additional information for Islamic PDS Not applicable. 11

12 23. Conditions precedent The proposed issuance of the RCSLS is subject to the regulatory approvals being obtained as set out in item 21 above and approval being obtained from the following: Others Unsecured Creditors Pilecon shareholders The Proposed SOA The Proposed SOA On 3 August 2005, a Court Convened Meeting ( CCM ) was held for the Unsecured Creditors to approve the Proposed SOA which was approved without modifications by a majority of the Unsecured Creditors with the support of 93.33% in number of the Unsecured Creditors present and voting representing 97.82% in value of the total indebtedness of Pilecon admitted for purposes of voting at the Court Convened Meeting amounting to RM354,493,783. Subsequent to the CCM, the shareholders of Pilecon approved the Proposed SOA at an extraordinary general meeting ( EGM ) held by Pilecon on 11 November The proposed issuance of the RCSLS is also subject to the execution of the trust deed constituting the RCSLS ( Trust Deed ), relevant security documents, Depository and Paying Agency Agreement and other relevant documents in connection with the RCSLS. The proposed issuance of RCSLS is inter-conditional with the other proposals within the Proposed SOA. 24. Representations and Warranties To include but not limited to the following representations and warranties: (i) (ii) it is a company duly incorporated and validly existing under the laws of Malaysia and has the power and authority to own its assets and to conduct the business which it conducts and/or proposes to conduct and has complied in all material respects with all legal requirements relative to its business; the Memorandum and Articles of Association of the Company include provisions which give power, and all necessary corporate authority has been obtained and action taken, and all consents of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect for the Company to issue the RCSLS and to execute and perform the terms and conditions contemplated in the Trust Deed; 12

13 (iii) neither the execution and delivery of the Trust Deed nor the performance of any of the transactions contemplated by the Trust Deed did or does as at the date this representation and warranty is made or repeated: (a) (b) (c) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Company or any of its assets is bound or which is applicable to the Company or any of its assets, cause any limitation on the Company 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 cause the creation or imposition of any security interest or restriction of any nature on any of the Company s assets save as set out in the security documents; (iv) (v) (vi) its entry into, exercise of its rights and/or performance of or compliance with its obligations under the Trust Deed do not, and the issuance of the RCSLS and performance of and compliance with its obligations thereunder will not violate, or exceed any borrowing or other power or restriction granted or imposed by, (i) any law to which it or its assets is subject, (ii) any provision of its Memorandum and Articles of Association or (iii) any agreement to which it is a party or which is binding on it or its assets, and do not and will not result in the creation of, or oblige it to create, any security over those assets; its obligations under the Trust Deed are valid, binding and enforceable in accordance with their respective terms, and its obligations under the RCSLS when issued in accordance with the Trust Deed, will be valid, binding and enforceable in accordance with their respective terms; no event of default or potential event of default has occurred or will occur as a result of the issue of any RCSLS and it is not in breach of or default under any agreement nor to an extent or in a manner which has or could reasonably be expected to have a material adverse effect on the financial condition, business, operations or assets of the Company or its ability to perform any of its obligations under the RCSLS or the Trust Deed and further no event of default has occurred and is continuing under any other agreement evidencing a debt owing by the Company exceeding an amount of Ringgit Malaysia Twenty Million (RM20,000,000-00) only; 13

14 (vii) (viii) (ix) (x) (xi) (xii) no steps have been taken or intended to be taken by it or its shareholders nor have any legal proceedings been started or threatened for the dissolution or for the appointment of a receiver, trustee, judicial manager or similar officer of it, its assets or any of them; there has not occurred any event of default nor any contravention of, or default under, any agreement or instrument by which the Company or any of its assets is bound or which is applicable to the Company or any of its assets; the execution and delivery of Trust Deed to which the Company is a party, and the performance of the Trust Deed s respective terms, by and on behalf of the Company, will be duly authorised by the Company and that the same constitute, or upon due execution will constitute legal, valid and binding obligations of the Company enforceable in accordance with the respective terms; the financial statements and other financial information (both audited and non audited) of the Company were and will be prepared in accordance with the accounting principles described therein consistently applied, and that they present fairly the financial position of the Company and the changes in the financial position of the Company for the periods and as at the dates in respect of which they have been prepared; each of the representations and warranties stated above shall survive and continue to have full force and effect after the execution of the Trust Deed and the Company after making due and careful enquiries, hereby warrants that to the best of its knowledge the above representations and warranties will be true and correct and fully observed as though made on each demand under the Trust Deed for so long as any of the RCSLS remains outstanding; and each of the Company s aforesaid representations, warranties and agreements are separate and distinct from one another and shall not be affected or limited by reference to or the existence of the other representations, warranties and agreements or any other provisions in the Trust Deed. 25. Events of Default To include but not limited to the following events:- (a) default being made by the Company for a period of seven (7) business days in the payment of interest or any monies due in respect of any of the RCSLS as and when the same ought to be paid in accordance with the terms and conditions of the Trust Deed; 14

15 (b) the Company failing to perform or observe any of its other obligations under the RCSLS, the terms and conditions of the RCSLS or the Trust Deed and such failure continuing for a period of twenty-one (21) business days (or such longer period as the Trustee may permit) following the day of service by the Trustee on the Company of a written notice of such failure and requiring the same to be remedied; (c) an order being made or a resolution being passed to wind up the Company or similar proceedings, which are in the reasonable opinion of the Trustee analogous in effect being instituted otherwise than for the purposes of an amalgamation, consolidation, merger, reorganisation or reconstruction, the terms of which have been approved by the Trustee, such approval not to be unreasonably withheld; (d) any indebtedness of the Company for borrowed monies exceeding in the aggregate Ringgit Malaysia Twenty Million (RM20,000,000-00) (or its equivalent in any other currency or currencies), being accelerated prior to its stated maturity or becomes due and payable prior to its stated maturity or any security therefore being enforced or any such indebtedness of the Company not being paid at its stated maturity (or by expiry of any applicable grace period as originally provided); (e) any default by the Company in making any payment due under any guarantee or any indemnity given by the Company in respect of any obligation or indebtedness for borrowed monies having an aggregate outstanding principal amount exceeding Ringgit Malaysia Twenty Million (RM20,000,000-00) (or the respective equivalent in any other currency or currencies); (f) other than as set out in item (c) above, the Company becoming insolvent or unable to pay its debts within the meaning of Section 218(2) of the Act; (g) any resolution being passed by the Company to apply for judicial composition proceedings with its creditors subject to item (i) below, any order being made by any competent court for the appointment of a receiver, judicial manager, administrator or other similar official in relation to the Company or in relation to a substantial part of assets of the Company being served on the Company save for such order being made pertaining to the Company s Hong Kong and Singapore creditors unless such order is enforced in Malaysia; 15

16 (h) a distress, execution or other process being levied or enforced upon or sued out against a substantial part of the assets of the Company save where (i) the Company has initiated action to defend, contest, challenge or other alternative actions within thirty (30) days of the levy, enforcement upon or service of suit or (ii) where such distress, execution or process is frivolous or vexatious or (iii) such distress, execution or process is by the Company's Hong Kong and Singapore creditors and in respect of assets of the Company outside Malaysia; (i) save and except for the Proposed SOA and any compromise, composition or arrangement with its Hong Kong and Singapore creditors which shall not be on terms more favourable than those offered to the Unsecured Creditors under the Proposed SOA, the Company entering into any compromise, composition or arrangement with its creditors and/or shareholders including, without limitation, a scheme of arrangement under section 176 of the Act other than for the purposes of an amalgamation, merger or reconstruction the terms of which have been approved by the Trustee, (such approval not to be unreasonably withheld) or a moratorium is agreed or declared in respect of or affecting all or any substantial part of (or a particular type of) the debts of the Company; (j) any occurrence of insolvency, placing under administration or winding up of the Company or a court judgment is obtained against the Company which may result in the insolvency or placement under administration or winding up of the Company or similar proceedings which are determined by the Trustee to be analogous in effect being instituted (other than for the purposes of an amalgamation, merger or reconstruction the terms of which have been approved by the Trustee, such approval not to be unreasonably withheld) and no stay of execution was made in respect of such judgment or if it is a judgment in default, no application was made to set aside such judgment within thirty (30) days thereof; (k) the Company commits a breach of any of the covenants under the security documents or any other document relation to the issue, offer or invitation in respect of the RCSLS and which is likely to have a material adverse effect on the ability of the Company to perform its obligations under the security documents which, if capable of remedy, is not remedied within thirty (30) days; (l) any consent, authorisation, licence, approval or registration with or declaration to governmental or public bodies or authorities or courts (if any) required by the Company in connection with the execution, issue, sale, delivery, validity, enforceability or admissibility in evidence of the Trust Deed or the RCSLS or the performance by the Company of its obligations under the Trust Deed is modified to such a degree as would be prejudicial to the interest of the holders or is not granted or revoked or terminated or expired and is not renewed or otherwise ceases to be in full force and effect or any consent, authorisation, license or approval from the relevant authorities granted to the Company, for the purpose of its business is revoked, 16

17 withheld, expires, modified, is not renewed or is suspended for any reason whatsoever and such revocation, expiration or suspension has a material adverse effect on the Company; (m) the Company failing to pay any fees and charges of the Trustee in connection with the RCSLS when the same is due and after expiration of fourteen (14) days from receiving written notification from the Trustee; (n) the Company being notified in writing that (i) a default has been declared by the Trustee for the ICULS or (ii) a default has been declared by the lenders who provided the Company with new banking facilities upon completion and implementation of the Scheme; (o) an encumbrancer takes possession or a receiver, liquidator or similar officer is appointed over the whole or a substantial part of the assets or undertaking of the Company; and (p) the Company suspends or ceases or threatens to suspend or cease to carry on a material part of its business (other than for the purposes of an amalgamation, consolidation, merger, reorganisation or reconstruction not involving insolvency, the terms of which have been approved by the Trustee, such approval not to be unreasonably withheld). Recourse available in the occurrence of events of default: (a) (b) At any time after the declaration of an Event of Default or after the RCSLS shall have become due and repayable, the Trustee, subject to item (c) below, may at its discretion and without further notice to the Company or the holders institute such proceedings and take such steps including issuing an enforcement notice to the security trustee requesting the security trustee to take proceedings for the realisation of their security under any of the security documents as it may think fit against the Company to enforce payment of all amounts due and payable under the Trust Deed and the security documents. Should the Trustee (or any holder, where entitled under the Trust Deed to do so) take legal proceedings against the Company to enforce any obligations under the Trust Deed or under the RCSLS, proof therein that as regards any specific holder, default has been made by the Company in paying any moneys payable in respect of the RCSLS or any part thereof to any specific holder on the relevant due date, shall (unless the contrary be proved) be sufficient evidence that a like default has been made as regards all other holders in respect of whose payments are due and payable. 17

18 (c) (d) (e) The Trustee shall not be bound to take any step (including, without limitation, giving notice that the RCSLS are due and repayable in accordance with Condition 22 of the Trust Deed or issuing an enforcement notice) to enforce the performance by the Company of any of the provisions of the Trust Deed or of the RCSLS unless it shall have been directed to do so by a Special Resolution*; or it shall have been indemnified to its satisfaction against all actions, proceedings, claims, demands and liabilities to which it may thereby become liable and all costs (including solicitors costs on solicitor and client basis), charges, damages and expenses which may be incurred by it in connection therewith. Only the Trustee may pursue the remedies available under the general law or under the Trust Deed or the RCSLS to enforce the rights of the holders or the provisions of the Trust Deed or the RCSLS. No holder shall be entitled to proceed directly against the Company to enforce the performance of any of the provisions of the Trust Deed or of the RCSLS unless the Trustee, having become bound as aforesaid to take proceedings, fails or neglects to do so within a period of thirty (30) business days from such failure and such failure or neglect is continuing. At any time after the occurrence of an Event of Default or after the RCSLS shall have become due and repayable pursuant to the Trust Deed and the Conditions of the Trust Deed or at any time with the written consent of the Company, the Trustee may: (i) by notice in writing to the Company, the central depository and/or the paying agent, require the central depository and/or paying agent pursuant to the depository and paying agency agreement:- (1) to act thereafter as the paying agent of the Trustee in relation to payments to be made by or on behalf of the Trustee under the provisions of the Trust Deed mutatis mutandis on the terms provided in the depository and paying agency agreement (save that the Trustee s liability under any provisions thereof for the indemnification of the paying agent shall be limited to the amount of the time being held by the Trustee on the trusts of the Trust Deed) and thereafter to hold all RCSLS and all sums, documents and records held by them in respect of RCSLS on behalf of the Trustee; and/or (2) to deliver up all RCSLS and all sums, documents and records held by it in respect of the RCSLS to the Trustee or as the Trustee shall direct in such notice, provided that such notice shall be deemed not to apply to any documents or records which the central depository is obliged not to release by any law or regulation; 18

19 (ii) require it to make all subsequent payments in respect of the RCSLS to or to the order of the Trustee and not to the paying agent and with effect from the issue of any such notice to the Company and until such notice is withdrawn, the provisions of sub-clause (e)(i)(1) above shall cease to have effect. (f) Without prejudice to any of the powers, rights or remedies of the Trustee under the Trust Deed, the RCSLS or the Conditions in the Trust Deed or under any applicable law, the Trustee may at any time after any of these presents becomes enforceable in accordance with the terms hereof apply to the court for an order that the powers and trusts of the Trust Deed be exercised or carried into execution under the direction of the court and for any other order in relation to the execution and administration of the powers and trusts of the Trust Deed as the Trustee shall deem expedient and it may assent to or approve any application to the court made at the instance of any of the holders and shall be indemnified by the Company against all the costs (including solicitors costs on solicitor and client basis), charges and expenses incurred by and in relation to any such application or proceedings. Note: * means a resolution passed at a meeting of holders duly convened and held in accordance with the Trust Deed at which a majority representing not less than three fourths (¾) of those present and voting thereat by a show of hands, or if a poll is demanded, by a majority consisting of not less than three fourths (¾) of the votes cast on a poll. If a poll is held, the auditors of the Company shall act as the scrutineer Principal terms and conditions for warrants Not applicable. 27. Other principal terms and conditions for the issue Conversion price : The nominal value of the RCSLS required, in respect of each new ordinary share of RM0.50 each in Pilecon ( Pilecon Shares ), for the conversion of the RCSLS into new Pilecon Shares, which as at the date hereof, shall be Fifty sen (RM0.50) nominal value of the RCSLS for one (1) new Pilecon Share, or such adjusted price as may for the time being be applicable in accordance with the conditions of the Trust Deed. 19

20 Conversion/Redemption Schedule : Conversion Period means the period during which a holder shall be at liberty to exercise the conversion rights attached to the RCSLS, which period shall (a) in respect of the First Series RCSLS, commence on the issue date and expire on the maturity date of the First Series RCSLS; (b) in respect of the Second Series RCSLS, commence on the business day immediately after the maturity date of the First Series RCSLS and expire on the maturity date of the Second Series RCSLS; (c) in respect of the Third Series RCSLS, commence on the business day immediately after the maturity date of the Second Series RCSLS and expire on the maturity date of the Third Series RCSLS; and (d) in respect of the Fourth Series RCSLS, commence on the business day immediately after the maturity date of the Third Series RCSLS and expire on the maturity date of the Fourth Series RCSLS. 20

21 Redemption Date means, in relation to each Series of RCSLS the date set out in the table below except (a) in the case where the Company has redeemed any RCSLS earlier in accordance with Condition 4 of the Trust Deed (in which event, the Redemption Date shall be the date the Company redeems such RCSLS) and (b) in the case where there is an Event of Default whereupon the Redemption Date for all Series shall be accelerated to the date the Trustee issues a notice to the Company declaring a default:- Series First series RCSLS Second series RCSLS Third series RCSLS Fourth series RCSLS Redemption Date The first business day falling three (3) months from the issue date The first business day falling 15 months from the issue date The first business day falling 27 months from the issue date The first business day falling 39 months from the issue date Redemption rate : Each RCSLS will entitle its holder to redeem 100% of the nominal value of the RCSLS Redemption : The RCSLS would be redeemed via proceeds from the disposal of the non-strategic assets and internally generated funds. The RCSLS may be redeemed by the Company at any time and from time to time in whole or in part (but always equally or in the same proportion in relation to each holder) and all redemption shall be made in direct order of maturity of each Series of RCSLS. All RCSLS which are still outstanding and have not been converted or redeemed in accordance with the Conditions of the Trust Deed on or before the maturity date shall be compulsorily redeemed by the Company in accordance with the Conditions of the Trust Deed. 21

22 On the relevant maturity date, the Company shall redeem all outstanding RCSLS for each series of RCSLS. Any failure to redeem a particular series of RCSLS on the due date shall be an event of default triggering the acceleration of maturity date of any later series of RCSLS. Cross default : A cross default situation would only arise in the following circumstances: (a) any indebtedness of the Company for borrowed monies exceeding in the aggregate Ringgit Malaysia Twenty Million (RM20,000,000-00) (or its equivalent in any other currency or currencies), being accelerated prior to its stated maturity or becomes due and payable prior to its stated maturity or any security therefore being enforced or any such indebtedness of the Company not being paid at its stated maturity (or by expiry of any applicable grace period as originally provided); (b) any default by the Company in making any payment due under any guarantee or any indemnity given by the Company in respect of any obligation or indebtedness for borrowed monies having an aggregate outstanding principal amount exceeding Ringgit Malaysia Twenty Million (RM20,000,000-00) (or the respective equivalent in any other currency or currencies) Ranking of new Pilecon Shares to be issued pursuant to conversion of RCSLS : The new Pilecon Shares to be issued upon conversion of RCSLS shall, upon allotment and issue, rank pari passu in all respects with the then existing Pilecon Shares except that the new Pilecon Shares upon conversion will not be entitled to participate in the Proposed Rights Issue and dividends, rights, allotments and/or distributions declared by the Company which entitlement date thereof precedes the allotment date of the new Pilecon Shares allotted pursuant to the conversion of RCSLS Trust deed : The RCSLS will be constituted under a trust deed to be executed by Pilecon and Malaysian Trustees Berhad for the benefit of the Unsecured Creditors 22

23 Security Trustee : Malaysian Trustees Berhad will hold and deal with the non-strategic assets and strategic assets for the RCSLS, pursuant to a security trust deed to be executed between Pilecon and Malaysian Trustees Berhad, who shall act for the benefit of the Unsecured Creditors Early redemption : In the event Pilecon decides to make an early redemption of the RCSLS, Pilecon shall give notice to the RCSLS holders as well as the facility agent of the redemption at least ten (10) business days before any early redemption date Notice of redemption : Ten (10) business days before the redemption dates, Pilecon shall give notice to the RCSLS holders as well as the facility agent of the redemption Transferability/ Tradability : Save for the one-off assignment/transfer by Danaharta to a third party(ies) which shall be identified in due course in view of the expected cessation of Danaharta in 2005, the RCSLS will be non-transferable and nontradable. Following the transfer, the new RCSLS holders will be subject to the same terms and conditions mentioned herein. Governing Law : Malaysian Law Subscribers The Unsecured Creditors shall be the subscribers of the RM120,000,000 nominal value of RCSLS to be issued by Pilecon as part settlement of the outstanding indebtedness of Pilecon under the PDRS. Other parties involved Save as disclosed in this term sheet, there are no other parties involved in the proposed issuance of the RM120,000,000 nominal value of RCSLS. 23