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

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LETTER FROM THE BOARDShareholding structure of Hong Xiang New Co. immediately after CompletionTOM100%100%option andpledgeTOM Solutions100%Mr. Zhang100%TOMNomineeBVI SharehholderPRC Shareholder1% 49%50%Hong Xiang New Co.ConsiderationThe aggregate consideration for the Equity Transfer and the Share Acquisition is RMB110,131,730(approximately HKD103,897,858). As at the Latest Practicable Date, the Consideration has been fullypaid. Of the Consideration:(a)RMB45,000,000 (approximately HKD42,452,830), being approximately 41% of theConsideration, has been paid in cash. The Cash Consideration is funded by internal resourcesof TOM.The Cash Consideration has been paid to Mr. Zhang in the following manner:(a) RMB5,000,000 (approximately HKD4,716,981) has been paid on 5th March, 2002;and(b) RMB40,000,000 (approximately HKD37,735,849) has been paid on 28th March, 2002.(b)RMB65,131,730 (approximately HKD61,445,028), being approximately 59% of theConsideration, has been satisfied by the issuance and allotment of 11,151,548 ConsiderationShares (representing approximately 0.29% of the Existing Capital) (credited as fully paid)at HKD5.51 per TOM Share to Mr. Zhang on 19th April, 2004.– 11 –
LETTER FROM THE BOARDThe price per Consideration Share represents a premium of approximately 168.8% to theMarket Price and a premium of approximately 193.1% to the 10-day Average Price. Theprice per TOM Share was arrived at after arm’s length negotiations between the parties andbeing a price being acceptable to Mr. Zhang and TOM Solutions.The issuance and allotment of the Consideration Shares will not result in a change incontrol of TOM.The Consideration was arrived at after arm’s length negotiations between the parties andbased on TOM’s internal evaluation of the current size of the business and future prospects (i.e.,revenue growth and profit growth) of Hong Xiang New Co..Earn-out PaymentPursuant to the Agreement, if the amount of the audited after-tax profits made by HongXiang New Co. prepared in accordance with HKGAAP for the year ended 31st December, 2002 isequal to or more than RMB30,000,000 (approximately HKD28,301,887), Mr. Zhang will be entitledto the Earn-out Payment for an amount of RMB15,000,000 (approximately HKD14,150,943).The Earn-out Payment will be satisfied by the issuance and allotment of 2,568,229 IncentiveShares (representing approximately 0.07% of the Existing Capital and approximately 0.07% of theEnlarged Capital) (credited as fully paid) at HKD5.51 per TOM Share to Mr. Zhang and/or hisnominee(s) within 15 days from the later of (i) the date of issuance of the proforma auditedaccounts of Hong Xiang New Co. for the year ended 31st December, 2002 (which audited accountsis expected to be issued within 2004); and (ii) the date of Completion.The price per Incentive Share represents a premium of approximately 168.8% to the MarketPrice and a premium of approximately 193.1% to the 10-day Average Price.The issuance and allotment of Incentive Shares will not result in a change in control ofTOM.As at the Latest Practicable Date, the audited accounts of Hong Xiang New Co. for the yearended 31st December, 2002 has not yet been issued (which accounts is expected to be issuedwithin 2004 as extra time is required to finalise such accounts), and therefore the issuance ofIncentive Shares has not yet been determined.Before the issuance of the Incentive Shares, the above amount will be reviewed by theindependent Directors and TOM will disclose in an announcement and in TOM’s annual report thedetails of whether the aforesaid amount is met or not and accordingly whether the Earn-outPayment is required to be made.– 12 –
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