MC-3380

Iris prep brief attached inline for Elmar/CDH/legal review prep. Local note: /home/lucienne/.hermes/kanban/boards/mc-internal/workspaces/t_71dd1ddd/heron_pssa_review_brief.md # Project Heron / Elysium PSSA pack — Iris prep brief for MC-3380 Scope: high-level review only for Elmar/CDH/legal prep. No external message sent and no MC ticket status change made. Files inspected - Located the working attachment set under `/home/lucienne/workspace/attachments/ticket-MC-3380/`. - The task body’s `/home/lucienne/workspace/attachments/ticket-pending-heron-viwe/...` paths are stale/missing, but matching files were present under `ticket-MC-3380`. - Extracted successfully: - `PSSA_Redline.pdf` via `pdftotext` - `PSSA_Pledge_and_Cession_Redline.pdf` via `pdftotext` - `Project_Heron_PSSA_2026.05.13_cln.docx` via DOCX XML extraction - `PSSA_Pledge_and_Cession_2026.05.13_cln.docx` via DOCX XML extraction - `Project_Heron_PSSA_FINAL_tracked_ENS_responses_2026.05.13.docx` via DOCX XML extraction High-level file comparison 1. PSSA clean DOCX appears to be the cleaner ENS draft with 11 residual ENS comments. It keeps the preference-share structure in a relatively orthodox form: issue price at ZAR100 in the clean extraction, 20% dividend rate until reduced-rate date, prime-linked rate thereafter, 3 years + 1 day restricted period, 10 years + 1 day final redemption date, collection/redemption reserve mechanics, and open commercial placeholders. 2. PSSA final tracked/ENS responses DOCX contains substantial proposed mark-up and 45 comments. It is not safe to treat the tracked text as agreed: several inserted commercial/economic constructs are accompanied by ENS comments saying the change cannot be incorporated or requires Harith confirmation. 3. The redline PDF appears to be a rendered redline of the PSSA; the important commercial movement aligns with the tracked DOCX: issue price/number-of-shares changes, dividend/recalculation mechanics, restricted-period/payment-window mechanics, and cross-default/residual drafting issues. 4. Pledge and Cession clean/redline: no comments in the clean DOCX. It is a security document over Elysium’s shares and shareholder claims in Harith Aviation, with perfection steps such as delivery of share certificates/blank transfer forms, notice/acknowledgement mechanics, and enforcement rights after a Redemption Event. Remaining items are mostly execution/perfection blanks rather than commercial calculations. Key unresolved / legal-review issues to raise with CDH/ENS 1. Preference-share economics vs “loan-like” outstanding principal. - Tracked PSSA introduces concepts such as `Outstanding Principal`, `Dividend-Sourced Cash`, `Non-Dividend-Sourced Cash`, payment waterfall language, and recalculation mechanics intended to mimic reduction of a capital balance. - ENS comments repeatedly say this cannot be incorporated because a preference share has an issue price and each preference share must be redeemed for its full issue price; it does not have a loan-style balance that reduces over time. - Pieter’s comment gives the commercial example: if roughly R88m of excess interest has been paid at 20% vs prime-less-tax, outstanding pref capital should reduce illustratively from about R80m to R40m. ENS responds this is not legally possible for a preference share. - This is the main commercial/legal tension. Elmar should be ready to confirm whether the commercial ask is truly “reduce pref capital/outstanding balance” or whether CDH/ENS must implement the economics through a different lawful mechanism. 2. Initial high-rate period and economic reset. - Base economics: 20% per annum until the Reduced Rate Effective Date, then a Dividend Rate Percentage of Prime Rate. - Clean draft has Reduced Rate Effective Date at 5 years + 1 day after Initial Subscription Date; tracked version brackets `[5] years + 1 day` and adds detailed recalculation mechanics. - ENS comment says Harith confirmed all cash used to redeem preference shares during the first five years should sweep dividends at the 20% rate, with agreed economic adjustment at the five-year mark; it rejects splitting redemption cash into dividend-sourced/non-dividend-sourced categories. - Elmar/CDH should settle whether the five-year commercial period, source-of-cash distinction, and reset methodology are accepted or need revised drafting. 3. Restricted period / no mandatory redemption before 3 years + 1 day. - ENS states the Restricted Period is required so there is no mandatory redemption for 3 years + 1 day from issue date, because mandatory redemption within three years can have significant tax implications. - Tracked drafting adds First Permitted Payment Date, Voluntary Payment Window, and deferrals of redemption obligations before that date. - Legal review should confirm tax/reportable-arrangement constraints and how they interact with early redemption, illegality, dividend non-payment, and Redemption Events. 4. Final Redemption Date. - Clean: 10 years + 1 day after Subscription Date. - Tracked/ENS response: 10 years + 1 day after Initial Subscription Date; same date for all tranches and not reset by deferred issues. - ENS says 10 years + 1 day is required for SARS/reportable-arrangement reasons. CDH should confirm this is compatible with any deferred tranche mechanics. 5. Cross-default clause drafting defect. - Tracked text has a clear residual placeholder: `[ANTECEDENT TO BE SUPPLIED — word "Default" suggests a generic cross-default limb was half-deleted] remedied within 5 Business Days...`. - ENS says the cross-default limb from 17 April should be retained: creditor entitled to accelerate Financial Indebtedness because of an event of default, not remedied within the notice period. - This needs cleanup before signing. 6. Costs/enforcement costs. - Clean PSSA comment says management requested each party bears its own costs for preparing/settling transaction documents. - ENS/Harith distinguish own prep costs from enforcement/preservation costs; ENS says lender enforcement/preservation costs should remain recoverable and is market standard. - Elmar should confirm the commercial position on enforcement cost recovery. 7. Pledge and Cession security package. - Pledge document gives secured parties recourse to Elysium’s shares/shareholder claims in Harith Aviation after a Redemption Event. - Practical/perfection items remain: share certificates, undated blank transfer forms, notices to Harith Aviation, signed acknowledgements, and final dated execution copies. - CDH should check whether the security package gives the intended direct recourse and whether any company-law/MOI consents are needed for enforcement/transfers. Commercial inputs / calculations Elmar or Harith likely needs to provide/confirm 1. Subscription economics / figures: - Tracked figures change Issue Price from ZAR100 to ZAR1 and share counts from hundreds of thousands to tens of millions. - Tracked total initial subscription amounts are: - PAIDF2: ZAR26,462,806 - HGP: ZAR4,077,475 - InfraCo: ZAR26,462,806 - Lebashe: ZAR7,094,803 - Zungu: ZAR14,189,611 - Total: ZAR78,287,501 - Clean draft comments say no changes were required to figures per Pieter’s 13 May 2026 11:13 email except a minor correction, and ask Harith to confirm comfort. The one-rand/share tracked numbers increase share counts by 100x and shift the total by +R1 vs the clean rounded total; this should be reconciled before sign-off. 2. Subscription Bank Account details: account name, bank, account number, branch name/code, SWIFT are blank in the clean PSSA. 3. Redemption Reserve Account evidence/details: CP requires evidence the account has been opened and details provided. 4. Administration Costs cap: clean terms show `ZAR[] (Indexed)` — amount must be supplied/confirmed. 5. Reduced Rate Effective Date / time period: confirm `[5] years + 1 day` and the time period inserted per management request. 6. Prohibited Transferees: ENS asks HGP/Harith to confirm comfort with the list. 7. Bank account schedules for Lebashe and Zungu: ENS comment asks for details; tracked version appears to delete previously visible bank-account lines, so confirm whether schedules are intentionally removed or still required. 8. Corporate approvals/CPs: ENS added/retained board/shareholder resolutions for the Company and possibly subscribers; confirm which subscriber resolutions are actually required. 9. Pledge/perfection deliverables: dates, notices/acknowledgements, share certificates, blank transfer forms, director signatures, and any Harith Aviation acknowledgement/consent. Suggested prep stance for Elmar - Treat the pack as not yet clean for sign-off. - The key question is not formatting; it is whether the commercial bargain expects a loan-style declining capital balance/economic reset and, if so, how that can be implemented within preference-share/company-law/tax constraints. - Ask CDH to focus first on: (a) lawful implementation of the five-year reset/excess-return adjustment, (b) mandatory redemption tax/reportable-arrangement guardrails, (c) cross-default cleanup, and (d) security/perfection mechanics. Local extraction notes/artifacts in this workspace - `/home/lucienne/.hermes/kanban/boards/mc-internal/workspaces/t_71dd1ddd/extracted/` - `/home/lucienne/.hermes/kanban/boards/mc-internal/workspaces/t_71dd1ddd/heron_pssa_review_brief.md`

Controller action (2026-06-06T21:01:56+00:00): routed this document/review prep through Hermes Kanban mc-internal as t_71dd1ddd assigned to iris. MC remains visibility-only; no MC runtime/pickup/claim/send endpoint was used. Scope: prepare a brief/blocker from the listed attachment(s), append it back here, and take no external action/submission. Final decision/sign-off remains with Elmar.

Controller gate: Kanban prep t_71dd1ddd completed and Iris filed the Project Heron PSSA pack brief above. I moved this from `in_progress`/`kanban_active` to `waiting` because the remaining blocker is legal/commercial sign-off. CTA: take the brief into CDH/ENS review and decide the preference-share economics issue (loan-like balance reduction vs lawful preference-share mechanism), five-year reset/source-of-cash mechanics, restricted-period tax constraints, and pledge/perfection blanks.

Marked done from board — handled externally (was waiting).