THIS CIRCULAR IS IMPORTANT AND REQUIRES ... - TOM Group

LETTER FROM THE BOARDAssets acquired50% of the equity interest in Hong Xiang New Co. (of which 1% has been acquired by TOMNominee (designated by TOM Solutions) and 49% has been acquired by TOM Solutions throughthe Equity Transfer and the Share Acquisition respectively).Major terms of the Agreement(1) Establishment of Hong Xiang New Co.Hong Xiang New Co. (known as (Guangzhou HongXiang Audio-Video Co., Ltd.)) has been established in the PRC pursuant to the Agreement.The corporate structure of Hong Xiang New Co. is as follows:(a) Registered capital: RMB1,380,000 (approximately HKD1,301,887)(all of which were contributed by the PRC Shareholder andthe BVI Shareholder in cash)(b) Shareholders: (i) PRC Shareholder (50%)(ii) BVI Shareholder (49%)(iii) TOM Nominee (1%)(c) Scope of business: wholesale, retail and rental of audio and video products(2) Restructuring of Hong Xiang New Co.shall:Pursuant to the Agreement, upon the establishment of Hong Xiang New Co., Mr. Zhang(a)procure that:(i)(ii)the shareholders of Hong Xiang (i.e., Mr. Zhang and Ms. Zhang) shall transferall the business/assets in relation to the making of (including manufacturingthrough outsourcing), sale and distribution of audio and video products ownedby Hong Xiang as at the date of the Agreement to Hong Xiang New Co.; andeach member of the management team and other essential staff members(comprising at least 3 persons including Mr. Zhang (as general manager) andMs. Zhang (as manager)) of Hong Xiang shall enter into a labour servicecontract (in such form and substance satisfactory to TOM Solutions) withHong Xiang New Co. prior to Completion.(b)subject to TOM Solutions having been satisfied with the results of the due diligenceexercise on the assets and liabilities, business and prospects of the Retailers, Mr.– 9 –