IKHMAS JAYA GROUP BERHAD ( IJGB OR THE COMPANY ) SETTLEMENT AGREEMENT BETWEEN D.J. DESIGN SUPPLIERS SDN. BHD., SOLID PROMENADE SDN. BHD. AND IKHMAS JAYA SDN. BHD., A WHOLLY OWNED SUBSIDIARY OF IJGB 1. INTRODUCTION The Company wishes to announce that Ikhmas Jaya Sdn. Bhd. (IJSB), a wholly owned subsidiary of IJGB had on 17 April 2017 entered into a Settlement Agreement (the Agreement) with D.J. Design & Suppliers Sdn Bhd (109264-A) (Employer/Debtor) and Solid Promenade Sdn. Bhd. (649150-A) (the Proprietor) in respect of the settlement of the amount due by the Debtor to IJSB (the Contractor/Creditor) (as at 31 December 2016) amounting to RM75,000,000 (Liabilities). The settlement of the Liabilities will be made partly in cash for an amount of RM28,746,000.00 and in kind by a transfer of equivalent of 30,836 square feet service apartments units in Damai 88 ( Contra Units ) valued at RM1,500.00 per square foot for an amount of RM46,254,000.00 (the Transaction). 2. BACKGROUND INFORMATION (a) By a Letter of Award and Acceptance dated 7 March 2012, the Contractor/Creditor was awarded the Piling and Substructure Works (until Ground Floor Slab) by the Employer/Debtor for the project known as Cadangan Pembangunan 1 Blok Pangsapuri Servis 20 tingkat (150 unit) Damai 88 Di Atas Lot 83, Seksyen 88, Jalan Damai, Off Jalan Ampang, Bandar Kuala Lumpur, Wilayah Persekutuan untuk Tetuan D.J. Design & Suppliers Sdn Bhd (the Substructure Works). (b) By a Letter of Award and Acceptance dated 1 April 2013, the Contractor/Creditor was awarded the Superstructure and Finishes Works (including M&E Works and ID Works) by the Employer/Debtor for the project known as Cadangan Pembangunan 1 Blok Pangsapuri Servis 20 tingkat (150 unit) Di Atas Lot 83, Seksyen 88, Jalan Damai, Off Jalan Ampang, Bandar Kuala Lumpur, Wilayah Persekutuan untuk Tetuan D.J. Design & Suppliers Sdn Bhd (the Superstructure Works). (c) The Proprietor is the registered and beneficial owner of the piece of land held under Master Title GRN76768 Lot 20003, Seksyen 88 (formerly known as GRN12914 Lot 83, Seksyen 0088), Bandar and District of Kuala Lumpur, State of Wilayah Persekutuan where the 20 storey service apartments Damai 88 project are being built upon (the Property). (d) The Contractor/Creditor had in the course of its ordinary business satisfactorily completed the Substructure Works via the issuance of the Certificate of Practical Completion (the CPC) dated 25 July 2013 and the Defect Liability Period (the DLP) ended on 24 July 2015. However, the Employer/Debtor have not fully settled the payment for the Substructure Works which is now due and payable to the Contractor/Creditor for a sum of RM4,219,499.68 only as per Certificate No. 19 (the Outstanding Payment for Substructure Works). (e) The Contractor/Creditor had in the course of its ordinary business satisfactorily completed the Superstructure Works via the issuance of the Certificate of Practical Completion (the CPC) dated 30 June 2016.
(f) The Final Account for the Superstructure Works is RM130,018,565.96 only (inclusive GST) out of which a total payment of RM49,391,807.01 has been paid as at 8 November 2016, leaving an outstanding sum payable of RM80,626,758.95 only. However, by two (2) contra payment agreement between IJSB and two subcontractors for the aggregate sum of RM2,249,088.88 only, the above outstanding sum of RM80,626,758.95 has been further reduced to RM78,377,670.07 only and is the sum that remains unpaid by the Employer/Debtor. (g) It is mutually agreed by the Parties that work done by all the Nominated Sub- Contractors (the NSC) and Stone Empire Marketing Sdn Bhd which totals RM7,597,169.75 only shall be paid directly by the Employer/Debtor to such NSC. After deduction of this amount to be directly paid by the Employer/Debtor to the NSC, the outstanding sum for the Superstructure Works has been further reduced to RM70,780,500.32 only as per Certificate No. 36 (the Outstanding Payment for Superstructure Works). (h) Thus the Total Outstanding Payment due and payable to the Contractor/Creditor for the Substructure Works of RM4,219,499.68 and the Superstructure Works of RM70,780,500.32 only up to the Final Account, which remains unpaid by the Employer/Debtor now stands at RM75,000,000 only as at 31 December 2016 attached (the Total Settlement Sum). 2.1 Information on the Parties a) D.J. Design & Suppliers Sdn Bhd (109264-A) D.J. Design & Suppliers Sdn Bhd (109264-A) is a company incorporated in Malaysia with a share capital of RM1,000,000.00 comprising 1,000,000 ordinary shares with its registered office at 2-3-11 (3 rd Floor), Menara KLH Business Centre, 2 Jalan Kasipillay, Off Jalan Ipoh, 51200 Kuala Lumpur and is the Employer/Debtor. The principal activity of D.J. Design & Suppliers Sdn Bhd is property investment and development. b) Solid Promenade Sdn. Bhd. (649150-A) Solid Promenade Sdn. Bhd. (649150-A) is a company incorporated in Malaysia with a share capital of RM5,000,000.00 comprising 5,000,000 ordinary shares with its registered office at 2-3-11 (3 rd Floor), Menara KLH Business Centre, 2 Jalan Kasipillay, Off Jalan Ipoh, 51200 Kuala Lumpur and is the Proprietor of the Property. The principal activity of Solid Promenade Sdn. Bhd. (649150-A) is building construction and renovation works. c) IJSB IJSB is a wholly owned subsidiary of Ikhmas Jaya Group Berhad and incorporated in Malaysia with a share capital of RM30,000,000 comprising 30,000,000 ordinary shares with its registered office at No. 34B, Jalan USJ 10/1B, 47620 Subang Jaya, Selangor and is the Contractor/Creditor. The Company is principally engaged in piling and foundation works, construction of bridges and buildings and other civil works.
2.2 Salient Terms and Conditions of the Agreement (a) The Parties agree that the repayment of the Total Settlement Sum in kind and in cash as follows:- (i) (ii) RM46,254,000.00 only (equivalent to 30,836 sqft) shall be paid to the Contractor/Creditor by contra of 23 units (deemed fully paid units) in Damai 88 free from encumbrances ( Settlement in Kind ) which shall be immediately transferred by the Employer/Debtor upon signing of this Agreement to the Contractor/Creditor or to Exofield Property Management Sdn Bhd (Company No. 1202472-D) (a wholly owned subsidiary of Ikhmas Jaya Group Berhad) or any other party nominated and/or appointed by the Contractor/Creditor. The Balance Settlement Sum of RM28,746,000.00 only shall be paid by Four (4) equal instalments of RM7,186,500.00 only within the period starting from 30 th June 2017 to 31 st December 2017. (b) For the benefit of debtors, the payment in kind as per Clause (a)(i) shall be in the form of completed units in Damai 88 service apartment valued at RM1,500 per square foot. (c) In consideration of the settlement of the Total Settlement Sum in the manner set out in clauses (i) and (ii) above, the Contractor/Creditor shall withhold any legal action against the other pending the settlement of the Balance Settlement Sum due to the Contractor/Creditor on or before the due date on 31 December 2017. (d) Simultaneous with the execution of the Agreement, the Employer/Debtor irrevocably undertakes to and shall cause the Proprietor and itself to execute the Sale and Purchase Agreement and all related documents needed for the successful registration of the said Transfer in favour of the Contractor/Creditor. (e) In the event the Employer/Debtor fails, refuses, neglects or could not complete the full payment of the Balance Settlement Sum of RM28,746,000.00 on or before the due date of 31 December 2017, the Contractor/Creditor shall be at liberty to take legal action to recover the sum due and an agreed and genuine pre-estimate of the loss suffered without any proof of actual loss at the rate of one point five per centum (1.5%) per month of the Purchase Price. 3. BASIS OF ARRIVING AT THE VALUE OF THE SERVICE APARTMENT The Purchase Price was arrived after taking into consideration the market value of similar properties transacted in the vicinity. The contra price for the service apartment is RM1,500.00 per square foot. 4. RATIONALE The execution of the Agreement will allow the Employer / Debtor to settle the long outstanding amount owing to IJSB by offsetting them against the transfer of the Contra Units to Exofield Property Management Sdn Bhd, a wholly owned subsidiary of IJGB or any other party nominated and/or appointed by IJSB.
5. LIABILITIES TO BE ASSUMED There is no liability, including contingent liability and guarantee to be assumed by IJGB with regards to the Transaction. 6. FINANCIAL EFFECTS OF THE TRANSACTION The transaction is not expected to have a material effect on the net assets per share, earnings per share and gearing of IJGB for the financial year ending 31 December 2017. It is also expected not to have any impact on the share capital and substantial shareholders shareholding in IJGB. 7. RISK FACTORS 7.1 Non-Completion Of The Transfer / Failure To Give Vacant Possession Of The Contra Units In the event the Employer/Debtor fails, refuses, neglects or could not complete the transfer of the Contra Units and/or fails to give vacant possession of all the Contra Units on or before 31 st May 2017 then an agreed and genuine pre-estimate of the loss suffered without any proof of actual loss at the rate of one point five per centum (1.5%) per month of the Purchase Price (hereinafter called the Agreed Loss ) shall be charged to the Employer/Debtor until such date as the transfer is completed and vacant possession is given and the Contractor/Creditor shall be at liberty to take legal action to recover the sum equivalent to the sum that is to be settled by the Settlement in Kind and the Agreed Loss. 7.2 Failure to complete the full payment of the Balance Settlement Sum In the event the Employer/Debtor fails, refuses, neglects or could not complete the full payment of the Balance Settlement Sum of RM28,746,000.00 on or before the due date of 31/12/2017, the Contractor/Creditor shall be at liberty to take legal action to recover the sum due and an agreed and genuine pre-estimate of the loss suffered without any proof of actual loss at the rate of one point five per centum (1.5%) per month of Purchase Price (hereinafter called Agreed Loss ) 8. APPROVALS REQUIRED The Transaction is not subject to the approvals of the shareholders of IJGB and any other regulatory authorities. 9. ESTIMATED TIMEFRAME FOR COMPLETION Barring any unforeseen circumstances, the Transaction is expected to be completed on or by 30 December 2017. 10. DIRECTORS AND MAJOR SHAREHOLDERS INTEREST None of the Directors and/or Major Shareholders of IJGB and/or persons connected to them, has any direct or indirect interest in the Transaction. 11. STATEMENT BY THE AUDIT AND RISK MANAGEMENT COMMITTEE (ARMC) The ARMC of IJGB, having considered all relevant aspects of the Transaction is of the view that the Transaction is in the best interest of IJGB, fair and reasonable, and on
normal commercial terms and are not detrimental to the interests of the minority shareholders of the Company. 12. STATEMENT BY THE BOARD OF DIRECTORS The Board of Directors of IJGB are of the opinion unanimously that the Transaction is in the best interest of IJGB and not detrimental to the interest of the minority shareholders. 13. HIGHEST PERCENTAGE RATIO Based on Ikhmas s audited consolidated financial statements for the financial year ended 31 December 2015 and Paragraph 10.02(g) of the Main Market Listing Requirements, the highest percentage ratio applicable to the Transaction is 24.43%. 14. DOCUMENT AVAILABLE FOR INSPECTION The Agreement will be available for inspection during normal business hours from Mondays to Fridays (except public holidays) at the registered office of IJGB at Unit 621, 6 th Floor, Block A, Kelana Centre Point, No. 3 Jalan SS7/19, Kelana Jaya, 47301 Petaling Jaya, Selangor Darul Ehsan for a period of three (3) months from the date of this announcement. This announcement is dated 17 April 2017.