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

LETTER FROM THE BOARDMajor terms of the Supplemental AgreementSubject to the terms and conditions of the Supplemental Agreement, Mr. Zhang has grantedTOM Solutions a right at nil consideration to require him (or his nominee(s)) to purchase:(1) the entire issued share capital of the BVI Shareholder held by TOM Solutions; and(2) 1% of the equity interest in Hong Xiang New Co. held by TOM Nominee.(which together represent 50% of the equity interest in Hong Xiang New Co.) at theconsideration of RMB45,000,000 (which is equivalent to the Cash Consideration under theAgreement).Pursuant to the terms of the Supplemental Agreement, the Put Option may be exercised byTOM Solutions in the event that all of the outstanding receivables of Hong Xiang as at 31stMarch, 2004, being RMB103,682,224 (“Receivables”), are not collected by Hong Xiang by 8thApril, 2006.Under the Supplemental Agreement, in the event that Hong Xiang fails to collect at least90% of all of the Receivables (which is equal to RMB93,585,728) by 8th October, 2004:(1) TOM Solutions may sell such number of the Consideration Shares such that the netamount of the proceeds of sale thereof (“Sale Proceeds”) will be equal to the differencebetween RMB93,585,728 and the amount of the Receivables actually collected byHong Xiang as at 8th October, 2004 (“Shortfall”); and(2) TOM Solutions will be entitled to keep the Sale Proceeds.It is anticipated that if the Put Option becomes exercisable in accordance with the terms ofthe Supplemental Agreement, all of the Consideration Shares would probably already have beensold in accordance with the above by 8th April, 2006 to cover the Shortfall.If TOM Solutions exercises the Put Option, TOM Group will cease to have any interest inHong Xiang New Co. and the board members of Hong Xiang New Co. nominated by TOMSolutions will then resign.The transfer of the Option Interests by TOM Solutions to Mr. Zhang will be classified inaccordance with the GEM Listing Rules at the time of exercise of the Put Option by TOMSolutions and TOM will comply with the relevant requirements of the GEM Listing Rules whetheror not the Put Option is exercised by TOM Solutions.– 16 –