PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSALS (Information required under paragraph 4.01 of the Guidelines on the Offering of Private Debt Securities - 26 July 2004 Edition) BACKGROUND INFORMATION 1 Issuer (i) Name : Tesco Stores (Malaysia) Sdn Bhd ( Issuer or Tesco Malaysia ) (ii) Address : Registered Office 10 th Floor, Wisma Havela Thakardas, No. 1, Jalan Tiong Nam, Off Jalan Raja Laut, 50350 Kuala Lumpur Business Office Tesco Stores (Malaysia) Sdn Bhd, Mezzanine Floor No. 8 Jalan PJU 7/4, Mutiara Damansara 47800 Petaling Jaya Selangor Darul Ehsan (iii) (iv) (v) Business registration no. Date/place of incorporation Date of listing (in the case of a public listed company) : 521419 K : 24 July 2000 / Malaysia : Not applicable (vi) Status resident/non-resident controlled company Bumiputera/non- Bumiputera controlled company : Non-resident controlled company : Non-Bumiputera (vii) Principal activities : Tesco Malaysia is principally engaged in the development, management and operation of retail outlets. (viii) Board of directors : The Board of Directors of Tesco Malaysia as at 30 September 2007 are as follows:- 1. Christopher Bryan Bush 2. David Fraser Hobbs 3. Graham Edward Johnson 4. Dato K. Sekhar A/L S. Krishnan 5. Lucy Jeanne Packer @ Lucy Jeanne Neville- Rolfe 6. Mohamad Hishammudin Bin Hamdan 1
Tesco Stores (Malaysia) Sdn Bhd 7. Ng Hoong Kee 8. Philip Andrew Clarke 9. William Patrick O Neill (Alternate director to David Fraser Hobbs) 10. Azliza Baizura Binti Azmel (Alternate director to Graham Edward Johnson) 11. Yeoh Poh Yew (Alternate director to Dato K. Sekhar A/L S. Krishnan) 12. Azlam Shah Bin Alias (Alternate director to Lucy Jeanne Packer @ Lucy Jeanne Neville-Rolfe (ix) Structure of shareholdings and names of shareholders or, in the case of a public company, names of all substantial shareholders (x) Authorised and paid-up capital : As at 30 September 2007 the list of shareholders of Tesco Malaysia is as follows: - Name No. of Shares Held Shareholding (%) Tesco Holdings 1 B.V. Sime Malaysia Region Berhad 2 39,200,000 Class A ordinary shares of RM1.00 each 16,800,000 Class B ordinary shares of RM1.00 each : Authorised Share Capital as at 30 September 2007 RM100,000,000.00 comprising: 70 30 70,000,000.00 Class A ordinary shares of RM1.00 each; and 30,000,000.00 Class B ordinary shares of RM1.00 each. : Issued and Fully Paid-up Share Capital as at 30 September 2007 RM56,000,000.00 comprising: 39,200,000 Class A ordinary shares of RM1.00 each; and 16,800,000 Class B ordinary shares of RM1.00 each 1 Tesco Holdings B.V. is wholly owned by Tesco Overseas Investment Ltd of Tesco House, Delamare Road, Cheshunt, Herts EN8 9SL, England. Tesco Overseas Investment Ltd is in turn wholly owned by Tesco PLC. 2 Sime Malaysia Region Berhad is wholly owned by SD Holdings Berhad. SD Holdings Berhad is in turn wholly owned by Sime Darby Berhad. 2
PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSALS 2 Names of parties involved in the proposed transaction (where applicable) (i) Joint Principal Adviser(s)/ Joint Lead Arranger(s) : 1. CIMB Investment Bank Berhad (18417-M) ( CIMB ); and 2. Standard Chartered Bank Malaysia Berhad (115793-P)( SCB ), (collectively the JLAs ). (ii) Arranger(s) : Not applicable. (iii) Valuers : Not applicable. (iv) Solicitors : Zaid Ibrahim & Co. acting for the JLAs Shearn Delamore & Co. acting for the Issuer (v) Financial Adviser : Not applicable. (vi) Technical Adviser : Not applicable. (vii) Guarantor : Tesco PLC. (viii) Trustee : CIMB Trustee Berhad (formerly known as Bumiputra-Commerce Trustee Berhad). (ix) Facility Agent : SCB. (x) (xi) Primary Subscriber(s) and amount subscribed (where applicable) Underwriter(s) and amount underwritten : If applicable, the Primary Subscribers will be determined prior to each issuance. : Not applicable. (xii) Central Depository : Bank Negara Malaysia ( BNM ). (xiii) Paying Agent : BNM. (xiv) (xv) Reporting Accountant Others (please specify) : None. : Joint Lead Managers CIMB and SCB. Tender Panel Members ( TPMs ) The tender panel members ( TPMs ) shall comprise persons falling within any one of the 3
categories of persons specified in Section 4(6) of the Companies Act, 1965 of Malaysia, subject to any law, order, regulation or official directive of BNM, SC and/or any other regulatory authority from time to time. Security Agent SCB The Security Agent shall hold the Corporate Guarantee for the benefit of the holders of the Notes (as defined below) and shall effect the necessary steps in enforcing the Corporate Guarantee upon the instructions of the Trustee after the declaration of an Event of Default. 3 Facility Description : A Commercial Papers ( CPs ) Programme ( CP Programme ) and a Medium Term Notes ( MTNs ) Programme ( MTN Programme ). Collectively, the CPs and MTNs shall be referred to as Notes and the CP Programme and the MTN Programme shall be referred to as the Conventional Programmes. 4 Issue Size (RM) : The outstanding nominal value of the Notes issued under the Conventional Programmes (plus the outstanding nominal value of any Islamic commercial papers and Islamic medium term notes issued under the Islamic programmes of the Issuer which are concurrently arranged by the JLAs) at any point in time shall not exceed RM3.50 billion. 5 Issue Price (RM) : CPs The CPs shall be issued at a discount to face value and the price payable for each CP shall be calculated in accordance with the formula as set out in the Rules on Fully Automated System for Issuing/Tendering ( FAST Rules ) issued by BNM, as amended or substituted from time to time. MTNs The MTNs are to be issued at par or at a discount to face value and the price payable for each MTNs shall be calculated in accordance with the FAST Rules. 6 Tenor of the Facility/Issue : CP Programme 7 years from the date of the first issue under the CP Programme, provided that the first issue of CPs under the CP Programme shall not be later than 2 years from the date of the Securities Commission s ( SC ) approval. 4
MTN Programme 15 years from the date of the first issue under the MTN Programme, provided that the first issue of MTNs under the MTN Programme shall not be later than 2 years from the date of the SC s approval. The tenor of the Notes are as follows:- CPs - up to 12 months as the Issuer may select, provided that the CPs mature prior to the expiry of the CP Programme. MTNs - more than 1 year and up to 15 years as the Issuer may select, provided that the MTNs mature prior to the expiry of the MTN Programme. 7 Interest / Coupon Rate (%) : The coupon rate (if applicable) will be determined at the point of each issuance under the Conventional Programmes. 8 Interest / Coupon Payment Frequency and Basis : CPs Not applicable. The CPs shall be issued on a zero- coupon basis. MTNs Zero-coupon MTNs: Not applicable Coupon-bearing MTNs: Semi-annual or such other period as the Issuer and the Joint Lead Managers may agree, if the MTNs of a particular issuance are issued with coupons, with the first coupon payment commencing 6 months or such other period, as the case may be, from the relevant date of issuance. The coupon rate (if applicable) shall be calculated based on the actual number of days elapsed and 365 days basis (actual/365) 9 Yield to Maturity (%) : The yield to maturity will be determined at the point of each issuance under the Conventional Programmes and agreed between the Issuer and the investors/primary Subscribers. 10 Security/Collateral (if any) : Nil. 11 Details on Utilisation of Proceeds : Proceeds from the Conventional Programmes shall be utilised by the Issuer for the following purposes: - (i) up to RM410 million, to refinance the existing external borrowings of Tesco Malaysia; and 5
(ii) the remaining, for Tesco Malaysia s general corporate purposes including the repayment of future external borrowings and the repayment of any inter-company loans made or to be made to Tesco Malaysia by Tesco PLC and/or any other entity within the Tesco PLC group of companies ( Tesco Group ). 12 Sinking Fund (if any) : None. 13 Rating Credit rating assigned : The ratings for the CPs and MTNs are MARC- 1(cg) and AAA(cg), respectively. Name of rating agency : Malaysian Rating Corporation Berhad ( MARC ) 14 Form and Denomination : CPs The CPs shall be issued in accordance with (1) 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 ) and (2) the Rules on the Scripless Securities under the Real Time Electronic Transfer of Funds and Securities ( Rentas ) system issued by BNM ( Rentas Rules ) and (3) the FAST Rules, or their replacement thereof (collectively the Codes of Conduct ) applicable from time to time. The Rentas Rules shall prevail to the extent of any inconsistency between the Rentas Rules and the IPBM Code. Each tranche of the CPs shall be represented by a global certificate in bearer form to be deposited with BNM, and is exchanged for definitive bearer form only in certain limited circumstances. The denomination of the CPs shall be RM1,000 or in multiples of RM1,000 at the time of issuance. MTNs The MTNs shall be issued in accordance with the Codes of Conduct applicable from time to time. The Rentas Rules shall prevail to the extent of any inconsistency between the Rentas Rules and the IPBM Code. Each tranche of the MTNs shall be represented by a global certificate in bearer form to be deposited with BNM, and is exchanged for definitive bearer form only in certain limited circumstances. The denomination of the MTNs shall be RM1,000 or in multiples of RM1,000 at the time of issuance. 6
15 Mode of Issue : CPs Via competitive tender by the TPMs or direct placement on a best effort basis or on a bought deal basis without prospectus. Tender basis: The Facility Agent, subject to the Selling Restrictions, will, subject to agreement by the Issuer, invite a selection of financial institutions and investors to participate as TPMs to bid competitively for the CPs to be issued under the Conventional Programmes. The composition of the tender panel may be varied from time to time by the Issuer or, as the case may be, the Facility Agent as directed by the Issuer. Allocation of the CPs to the bidders shall be in order of descending price bids. Notwithstanding this, the Issuer shall have the right to reject any or all bids or accept any or all bids received from TPMs, including any oversubscription provided that it is within the lssue Size of the Conventional Programmes, without assigning any reasons therefor. Direct Placement: Alternatively, the CPs could be directly placed via the Facility Agent on a best effort basis to selected investors, subject to the Selling Restrictions, at a yield and subject to such terms agreeable to the Issuer. Bought Deal Basis: The CPs may also be issued via a bought deal basis at a yield and subject to such terms agreeable to the Issuer. MTNs Via direct placement on a best effort basis or on a bought deal basis or book running on a best effort basis without prospectus. Direct Placement/Book running The MTNs could be directly placed via the Facility Agent on a best effort basis to selected investors, subject to the Selling Restrictions, at a yield acceptable to the Issuer. The MTNs can also be placed out on a book running basis. Such direct placement and book running shall be subject to terms and conditions acceptable to the Issuer. 7
The MTNs may also be issued via a bought deal basis based on terms and conditions acceptable to the Issuer. Issuance of the Notes under the Conventional Programmes shall be in accordance with the FAST Rules, subject to such exemptions (if any) granted from time to time. The Notes may be issued in multiples of RM1,000 but subject to the FAST Rules and other standard conditions including, without limitation, the following: (i) a minimum issue size of RM10,000,000 for each issue; (ii) the issue notice shall be given to the Facility Agent at least 7 business days (for the first issue) or 5 business days (for subsequent issues) prior to and excluding the date of proposed issue; (iii) the Notes have received the respective requisite ratings as stated in this termsheet; and (iv) any amount redeemed may be re-issued. 16 Selling Restrictions : The Notes may 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 specified in Section 4(6) of the Companies Act, 1965 of Malaysia, subject to any law, order, regulation or official directive of BNM, SC and/or any other regulatory authority from time to time. 17 Listing Status : The Notes will not be listed on any exchange. 18 Minimum Level of Subscription (RM or %) 19 Other regulatory approvals required in relation to the issue, offer or invitation and whether or not obtained (please specify) : The minimum level of subscription for each issue of the Notes that is not issued on a bought deal basis or via direct placement (both of which shall be fully subscribed) shall be 5% of the size of a particular issue. : None. 20 Conditions Precedent : 1. Execution of all necessary transaction documents ; 8
2. Confirmation and delivery of all required corporate, governmental and other approvals, including but not limited to the approval of the SC ; 3. Satisfactory due diligence as required under the SC s Guidelines on the Offering of Private Debt Securities in respect of the submission to the SC and the establishment of the Conventional Programmes (including the preparation of an Information Memorandum, which is acceptable to the JLAs); 4. Receipt of legal opinion issued by the Legal Counsel of the JLAs and addressed to the JLAs and the Trustee in form and substance acceptable to the JLAs, with respect to, the legality, validity and enforceability of the transaction documents; 5. Receipt of the legal opinion issued by a foreign counsel qualified to practice English law as counsel of the Corporate Guarantor and addressed to the JLAs and the Trustee, with respect to the validity, legality and enforceability of the Corporate Guarantee; 6. The Notes have received their respective requisite rating as stated herein; and 7. Such other conditions precedent to be mutually agreed by the Facility Agent and the Issuer. 21 Representations and Warranties : In relation to the Issuer: 1. Ranking: The Notes have been duly authorised and, when issued and delivered and authenticated as provided in the Agency Agreement and paid for, will be duly and validly issued and delivered and will constitute legal, valid and binding obligations of the Issuer in accordance with their terms and the payment obligations of the Issuer under the transaction documents (including the Notes) will rank pari passu as to priority of payment with all other unsecured and unsubordinated indebtedness for borrowed money incurred by the Issuer subject to laws affecting creditors rights generally; 2. Authorisation: The Issuer is incorporated 9
under the laws of Malaysia and has all requisite power and authority to execute, deliver and perform its obligations under the Notes and the transaction documents to which it is a party; 3. Validity: Each of the transaction documents to which it is a party has been duly authorised, executed and delivered by, and constitute legal, valid and binding obligations of, the Issuer in accordance with their terms; 4. No other consents: There are no consents, authorisations or approvals of, or filings with, any governmental authority required in connection with the issue or sale by the Issuer of the Notes or the performance of the Issuer s obligations thereunder or under the transaction documents, except those which have been duly obtained and are in full force and effect; 5. No breach: The execution and delivery of, and the performance of its obligations under the Notes and the transaction documents to which it is a party by the Issuer will not result in a breach or violation of, conflict with, or constitute a default under the constitutional documents of the Issuer or any law, regulation, order, judgment, agreement or instrument to which the Issuer is a party or by which it or any of its property is bound. 6. Information Memorandum: As of the date of issue thereof, the information contained in the Information Memorandum is true and accurate in all material respects and is not misleading and the Information Memorandum does not contain any untrue statements of a material fact with regard to the Issuer or the Notes and does not omit to state any material fact necessary to make the statements therein (with regard to the Issuer and the Notes) not misleading. 7. No Material Adverse Change: Save as disclosed in the Information Memorandum, since the end of the most recent financial period of the Issuer for which the Issuer has 10
issued its audited accounts there has not occurred and there is no litigation or governmental proceeding pending, or to the knowledge of the Issuer threatened, against or affecting the Issuer (or any of its properties) which might result in a material adverse change in the condition (financial or otherwise), results of operations, business or properties of the Issuer which might impair the ability of the Issuer to perform its obligations under the Notes or the transaction documents to which it is a party. In relation to the Corporate Guarantor: 1. Authorisation: The Guarantor is incorporated under the laws of England and has all requisite corporate power and authority to execute, deliver and perform its obligations under the Corporate Guarantee; 2. Validity: The Corporate Guarantee has been duly authorised, executed and delivered by, and constitutes legal, valid and binding obligations of, the Guarantor in accordance with its terms; 3. No other consents: There are no consents, authorisations or approvals of, or filings with, any governmental authority of the United Kingdom required in connection with the Corporate Guarantee or the performance of the Guarantor s obligations thereunder, except those which have been duly obtained and are in full force and effect; and 4. No breach: The execution and delivery of, and the performance of the Guarantor s obligations under the Corporate Guarantee by the Guarantor will not result in a breach or violation of, conflict with, or constitute a default under (i) the constitutional documents of the Guarantor; or (ii) any law, regulation; or order of any governmental authority of the United Kingdom; or (iii) any judgment, agreement or instrument to which the Guarantor is a party or by 11
22 Events of Default : which it or any of its property is bound. Events of Default are as follows: 1. Non-payment: if default is made for a period of seven (7) days or more in any payment of any principal in respect of the CPs and/or MTNs or any of them or for any period of fourteen (14) days or more in the payment of any interest in respect of the MTNs or any of them; 2. Winding up: if an order is made or an effective resolution passed for winding-up the Issuer or the Guarantor, except for the purposes of or pursuant to and followed by a consolidation, amalgamation, merger or reconstruction of the Issuer or the Guarantor, as the case may be, which has been approved by the Trustee; 3. Scheme of Arrangement: where a scheme of arrangement under section 176 of the Companies Act 1965 has been instituted against the Issuer, or if any kind of composition, scheme of arrangement, compromise or other similar arrangement involving the Guarantor and its creditors generally (or any class of such creditors) is entered into or made (other than for the purposes of and followed by a reconstruction previously approved by the holders of Notes pursuant to an extraordinary resolution unless during or following such reconstruction the Issuer or the Guarantor, as the case may be, becomes or is declared to be insolvent); or 4. Appointment of receiver: if a receiver is appointed over the whole or a substantial part of the undertaking or assets of the Issuer or the Guarantor and is not discharged within sixty (60) days of such appointment; 5. Breach of obligations: if there is a breach by the Issuer and/or the Guarantor in the performance or observance of any obligation, condition or provision binding on it under the Notes or the transaction documents (other than any obligation for the payment of any 12
principal or interest in respect of the Notes) and, except where, in the opinion of the Trustee, such default is not capable of remedy (in which case the Notes will become due and repayable subject to, and immediately upon, the Trustee certifying and giving notice as aforesaid), such default is not remedied within thirty (30) days after the Issuer and/or the Guarantor became aware or having been notified of the breach by the Trustee in writing; 6. Cross default: if any indebtedness for Moneys Borrowed (as defined below) having an aggregate outstanding principal amount of at least Ringgit Malaysia Eighty Five Million (RM85,000,000) in the case of the Issuer, or Pounds Sterling Twenty Five Million ( 25,000,000) (or its equivalent in any other currency or currencies at the date declared due) in the case of the Guarantor, shall be or be declared due and payable prior to the date on which the same would otherwise become due and payable by reason of the occurrence of an event of default (howsoever described) in relation thereto or the Issuer or the Guarantor defaults in the repayment of any indebtedness for Moneys Borrowed having an aggregate outstanding principal amount of at least Ringgit Malaysia Eighty Five Million (RM85,000,000) in the case of the Issuer, or Pounds Sterling Twenty Five Million ( 25,000,000) (or its equivalent in any other currency or currencies at the date of maturity) in the case of the Guarantor, at the maturity thereof or at the expiry of any applicable grace period or any security created by the Issuer or the Guarantor for any such indebtedness becomes enforceable PROVIDED THAT nothing in this paragraph shall constitute an Event of Default if the Trustee is of the reasonable opinion that the Issuer or the Guarantor, as the case may be, has a bona fide dispute as to whether such indebtedness shall be due and payable or be declared due and payable prior to its relevant due date for payment and that such dispute is capable of being expeditiously resolved; 13
7. Revocation of Licence: a licence, authorisation or approval is revoked, withheld or modified which materially impairs or prejudices the Issuer s ability to comply with the terms and conditions of the Notes or the provisions of the trust deed or the transaction documents to which it is a party; and 8. Shareholdings: the Guarantor ceases to have majority and controlling shareholdings whether directly or indirectly in the Issuer. Upon the occurrence of an Event of Default and if such Event of Default is continuing, the Trustee may at its discretion or shall upon receipt of the relevant instructions from the holders of the Notes as required under the trust deed, declare that the outstanding Notes are immediately due and repayable, and exercise all its rights of enforcement in accordance with the provisions available under the transaction documents (including but not limited to instructing the Security Agent to enforce the Corporate Guarantee). Moneys Borrowed means (a) borrowed moneys, and (b) liabilities under any note, bond, bill, debenture, loan stock or other security in each case issued for cash or in respect of acceptance credit facilities or as consideration for assets or services but excluding such liabilities incurred in relation to the acquisition of goods or services in the ordinary course of trading. 23 Principal terms and conditions for warrants (where applicable) 24 Other principal terms and conditions for the issue : Not applicable. I. Redemption Unless previously redeemed or cancelled, the Notes shall be redeemed on their respective maturity dates. II. Repurchase and Cancellation The Issuer or any of its related corporations may at any time purchase the Notes at any price in the open market or by private treaty, but these Notes so purchased and which are then held by the Issuer or its related 14
corporations shall not be counted for the purposes of voting. Any such Notes which are purchased and held by the Issuer or any of its related corporations may, at the election of the Issuer be cancelled. Notwithstanding such cancellation, the Issue Size of the Conventional Programmes shall not be reduced accordingly and further Notes may thereafter be issued. III. Transferability Transferable, but subject to the Selling Restrictions. IV. Positive Covenants So long as any of the Notes remain outstanding, the Issuer hereby covenants and undertakes, that it shall: 1. give to the Trustee any information which the Trustee may require in order to discharge its duties and obligations as trustee under the trust deed relating to the Issuer s affairs to the extent permitted by law; 2. exercise reasonable diligence in carrying out its business in a proper and efficient manner which should ensure, amongst other things, that all necessary approvals or relevant licences are obtained; 3. maintain a paying agent in Malaysia; 4. procure the Paying Agent to notify the Trustee in the event that the Paying Agent does not receive payment from the Issuer by the due date for any payment in respect of the Notes or any of them as required under the trust deed and terms and conditions of the Notes; 5. keep proper books and accounts at all times and it shall allow the Trustee and any person appointed by it to whom the Issuer has no reasonable objection, access to such books and accounts at reasonable times during normal business hours on reasonable notice; 15
6. immediately notify the Trustee in the event that the Issuer becomes aware of any Event of Default or that such other right or remedy under the terms, provisions and covenants of the Notes and the transaction documents have become immediately enforceable; 7. immediately notify the Trustee in the event that the Issuer becomes aware of any event or circumstance that has occurred that would materially prejudice the ability of the Issuer to perform its obligations under the Notes or the ability of the Guarantor to perform its obligations under the Corporate Guarantee; 8. immediately notify the Trustee in the event that the Issuer becomes aware of any substantial change in the nature of the business of the Issuer or the Guarantor; 9. immediately notify the Trustee in the event that the Issuer becomes aware of a change in the name of the Guarantor; 10. immediately notify the Trustee in the event that the Issuer becomes aware of any cessation of liability of the Guarantor for the payment of the whole or any material part of the moneys for which it is liable under the Corporate Guarantee; 11. immediately notify the Trustee in the event that the Issuer becomes aware of any change in the withholding tax position applicable to payments by the Issuer under the Notes or if the Issuer becomes subject to a taxing jurisdiction in addition to Malaysia; 12. immediately notify the Trustee in the event that the Issuer becomes aware of any change in the proposed utilisation of the proceeds from the issue of the Notes as compared with that set out in the transaction documents; 13. immediately notify the Trustee in the event that the Issuer becomes aware of any other matter that may materially prejudice the interests of holders of the 16
Notes; 14. send to the Trustee a copy of the annual audited accounts of the Issuer within 180 days from the end of its financial year and a copy of the semiannual unaudited accounts of the Issuer within 90 days from the end of its financial half-year; and 15. deliver to the Trustee promptly after publication of its audited accounts in respect of each year commencing from the date of the trust deed and in any event not later than 180 days after the end of each financial year, a certificate of the Issuer to the effect that the Issuer has complied with its obligations under the trust deed and the Notes and that there did not exist and had not existed since the relevant date of the previous certificate (or in the case of the first such certificate the date hereof) any Event of Default (or if such exists or existed specifying the same). V. Negative Covenants 1. the Issuer shall not enter into a transaction, whether directly or indirectly with interested persons (including a director, substantial shareholder or persons connected with them) unless- (i) such transaction shall be on terms that are not materially less favourable to the Issuer than those which could have been obtained in a comparable transaction from persons who are not interested persons; and (ii) with respect to transactions involving an aggregate payment or value equal to or greater than Ringgit Malaysia Eighty Five Million (RM85,000,000), the Issuer obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms; PROVIDED that (i) in the case of (i) above, the Issuer certifies to the 17
Trustee that the transaction complies with paragraph (i); (ii) in the case of (ii) above, the Issuer has received the certification referred to in paragraph (ii) (where applicable); and (iii) in the case of (i) or (ii) above, the transaction has been approved by the majority of the board of directors or shareholders in a general meeting as the case may require and provided that any inter company loans provided by Tesco PLC and/or by any other entities within Tesco Group to the Issuer (and any subsequent transfer of any such inter company loans between entities within the Tesco Group) will not be considered as transactions falling within the scope of this paragraph 27(V). 2. Negative Pledge: not create any mortgage, charge, pledge, lien or other security interest on any of its present or future undertaking or assets or enter into any arrangement, the practical effect of which is to grant similar security, in either case in respect of (i) any Obligation (defined below) of the Issuer or any other person or (ii) any guarantee or indemnity in respect of any Obligation of the Issuer or any other person, without at the same time securing the Notes and all amounts payable under the trust deed equally and rateably therewith or providing such other security therefor which in the reasonable opinion of the Trustee is not materially less beneficial to the holders of the Notes or as shall be approved by an extraordinary resolution of the holders of the Notes. "Obligation" means any present or future indebtedness evidenced by debentures (as defined in Securities Commission Act, 1993) which, except where it is the intention of the Issuer that such securities will not be so quoted or traded, are, at the request or with the concurrence of the Issuer, quoted or traded for the time being on any stock exchange or other generally recognised market for securities. 18
VI. Corporate Guarantee An irrevocable and unconditional guarantee will be provided by the Guarantor in respect of all sums owing by the Issuer under the transaction documents provided that: 1) the Guarantor shall not have any liability under the Corporate Guarantee in respect of Notes issued at any point in time after the Guarantor shall have notified the Security Agent that neither the Guarantor nor any of its subsidiaries is the majority or controlling shareholder in and of the Issuer; 2) the Guarantor shall make any payment due under the Corporate Guarantee in Ringgit, in Pounds Sterling or Euro ( Foreign Currency ) and any payment in Foreign Currency to the Security Agent shall constitute pro tanto satisfaction on the date of payment of the Foreign Currency to the Security Agent of such amount in Ringgit as is equal to the amount of Ringgit which would be or would have been obtained if the relevant amount of Foreign Currency paid to the Security Agent were converted into Ringgit at the spot rate of exchange of Standard Chartered Bank Malaysia Berhad (or such other bank as the Guarantor may specify to the Security Agent) for the purchase of Ringgit with the relevant Foreign Currency at or about 11.00 a.m. (Kuala Lumpur time) on the date of payment of the Foreign Currency to the Security Agent; and 3) the Guarantor will not be liable to pay any amount pursuant to the Corporate Guarantee to the extent that the Issuer s failure to pay such amount has resulted from: (i) the expropriation or nationalisation by any governmental agency of Malaysia of any of the assets of the Issuer or its subsidiaries where:- the aggregate value of the fixed assets so expropriated or nationalised equals or exceeds: ten per cent (10%) of the 19
aggregate value of the fixed assets of the Issuer or (if the Issuer has subsidiaries which are consolidated) the consolidated fixed assets of the Issuer and its subsidiaries, such value and such assets being determined by reference to the then latest audited financial statements of the Issuer (or, as applicable, consolidated financial statements of the Issuer and its subsidiaries); or if such financial statements are not available, RM20,000,000 (or its equivalent in any other currency or currencies); or the expropriation or nationalisation has the effect of preventing the Issuer and its subsidiaries (taken as a whole) from carrying on business; or (ii) the intervention of, or any action by or against, any governmental agency of Malaysia which prevents such payment by causing the Issuer to be unable to transfer monies to the Paying Agent or the Trustee or the Security Agent or the holders of the Notes or to convert foreign currency to Ringgit Malaysia; or (iii) the transfer, by reason of the intervention of any governmental agency of Malaysia, to an entity which is not the Guarantor or one of its subsidiaries of any shares in the Issuer if as a result of such transfer the Guarantor or one of its subsidiaries shall cease to be the majority shareholder in the Issuer or shall cease to have control over the Issuer or any of its subsidiaries. All payments made or to be made on behalf of the Guarantor to the Security Agent 20
under the Corporate Guarantee shall be made without withholding or deductions for or on account of any tax imposed or levied on behalf of the United Kingdom or any authority thereof or therein having power to tax unless such withholding or deduction is required by the law. In such event, the Guarantor shall pay such additional amounts as shall be necessary in order that the net amounts payable to the Security Agent after such withholding or deduction shall be equal to the amounts which would otherwise have been payable to the Security Agent under the Corporate Guarantee had no such withholding or deduction been required except that no such additional amounts shall be payable (i) with respect to any Notes presented for payment by or on behalf of a noteholder who is liable for such tax by reason of having some connection with the United Kingdom other than the mere holding of the Notes (or any other notes issued by the Issuer); or (ii) with respect to any Notespresented for payment more than 30 days after the date on which demand may first be made under the Corporate Guarantee except to the extent that the holder thereof would have been entitled to such additional amount on presenting the same for payment on such 30 th day; or (iii) to, or to a 3 rd party on behalf of, a noteholder, if such withholding or deduction may be avoided by complying with any statutory requirement or by making a declaration of non-residence or other similar claim for exemption to any authority of or in the United Kingdom; or (iv) in the United Kingdom. VII. Taxation All payments by the Issuer under the Notes and other transaction documents shall be made without withholding or deduction for or on account of any present and future taxes, duties or charges of whatsoever nature imposed by the Government of Malaysia or any tax authority thereof, unless such withholding or deduction is required by the laws of Malaysia, in which event, the Issuer shall not be required to gross up for any such deductions or withholdings. 21
VIII. Governing Law (for the Notes) Laws of Malaysia Governing Law (for the Corporate Guarantee) English Law IX. Jurisdiction The Issuer shall unconditionally and irrevocably submit to the non-exclusive jurisdiction of the courts of Malaysia. The Guarantor shall unconditionally and irrevocably submit to the non-exclusive jurisdiction of the English courts. X. Default Interest Interest on overdue amounts shall be payable at 1% per annum plus the following: (a) in the case of a noteholder who is a commercial bank, the base lending rate of such bank prevailing at that time; (b) in the case of a noteholder who is an investment bank, the cost of funds of such bank prevailing at that time; or (c) in the case of a noteholder who is neither a commercial bank or an investment bank, the cost of funds of Standard Chartered Bank Malaysia Berhad prevailing at that time, calculated from and including the relevant due date but excluding the date of actual payment, calculated based on the actual number of days elapsed and a year of 365 days. 22