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

LETTER FROM THE BOARDZhang and TOM Solutions will enter into a separate agreement whereby Mr. Zhangwill transfer all of the equity interest that he directly or indirectly owns in each of theRetailers to Hong Xiang New Co.; and(c)if TOM Solutions is not satisfied with the results of the due diligence exercise on theRetailers, TOM Solutions may, at its sole discretion, either (i) acquire Hong XiangNew Co. only and not the Retailers; or (ii) acquire none of the Retailers or HongXiang New Co., and in the latter case, the Agreement will be terminated.As at the date of the Supplemental Agreement, the Asset Acquisition referred to in item(a)(i) above has been completed and the labour service contracts referred to item (a)(ii) above havebeen entered into.As disclosed in TOM’s announcement dated 8th April, 2004, TOM Solutions has decidednot to acquire any of the Retailers as the results of the due diligence exercise on the Retailers arenot satisfactory.(3) Equity TransferTOM Nominee has acquired 1% of the equity interest in Hong Xiang New Co. from thePRC Shareholder. As a result, Hong Xiang New Co. is owned as to 50% by the PRC Shareholder,as to 49% by the BVI Shareholder and as to 1% by the TOM Nominee.(4) Share AcquisitionTOM Solutions has acquired the entire issued share capital of the BVI Shareholder from Mr.Zhang. Upon Completion, the board of directors of Hong Xiang New Co. consists of 5 members,of which 3 are indirectly nominated by TOM Solutions and the remaining 2 are nominated byHong Xiang.– 10 –