C&D Property Management Group Co., Ltd — M&A Activity 2000

Feb 10, 2000

Listed Company Information

GOOD FELLOW GP<0910> - Announcement The Stock Exchange of Hong Kong Limited takes no responsibility for the contents of this announcement, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement. Good Fellow Group Limited (incorporated in Bermuda with limited liability) PROPOSED DISCLOSEABLE TRANSACTION * Further to the announcement of the Company dated 28th January, 2000, the Company has on 9th February, 2000 entered into the Letter of Intent with Upwell Profits, Clear Winner and Hua Jian for the set up of the JV for the purpose of establishing an investment company incorporated in the BVI to provide online translation and related services through Internet in Hong Kong and Macau. * The Letter of Intent is subject to the execution of the Formal Agreements and other conditions. * The transaction contemplated under the Letter of Intent constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. Further to the announcement dated 28th January, 2000 made by Good Fellow Group Limited (the "Company", together with its subsidiaries, the "Group") relating to, among other things, the discussions by the Company with an independent third party relating to the possible investment in a joint venture to develop an online translation software system, the directors of the Company (the "Directors") wish to announce that a letter of intent has been entered into by the Company with 3 independent third parties on 9th February, 2000 relating to the aforesaid investment. LETTER OF INTENT DATED 9TH FEBRUARY, 2000 (THE "LETTER OF INTENT") Parties (1) the Company; (2) Upwell Profits Limited ("Upwell Profits"), a company incorporated in the British Virgin Islands ("BVI") which is an independent third party not connected with the chief executive, substantial shareholders or directors of the Company or any of its subsidiaries or any of their respective associates (as defined in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules")). Upwell Profits is newly formed for the purpose of the investment in the JV (as defined below) and it does not have any other material assets or operations; (3) Clear Winner Enterprise Inc. ("Clear Winner"), a company incorporated in the BVI which is an independent third party not connected with the chief executive, substantial shareholders or directors of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules); and (4) (Hua Jian Electronics Translation Company Limited) ("Hua Jian"), a limited liability company incorporated in the People's Republic of China (the "PRC"), the substantial shareholder of which is (The Science Institute of the PRC). Hua Jian is an independent third party not connected with the chief executive, substantial shareholders or directors of the Company or any of its subsidiaries or any of their respective associates (as defined in the Listing Rules). Hua Jian has developed and owns the technology of an online translation and integrated software system to be applied on Internet (the "System"). The System is also equipped with a web-based information bank and a bilingual search engine. Clear Winner is the exclusive agent of Hua Jian which has the right to use the technology of the System in Hong Kong and Macau only (the "Exclusive Right"). Terms of the Letter of Intent (1) It has been agreed that the Company and Upwell Profits will set up an investment company (the "Invesco") to be registered in the BVI for the purpose of investing in the JV (as defined below). The Invesco will be owned as to 51% by the Company and as to 49% by Upwell Profits. The total registered and paid up capital of Invesco will be HK$48 million, which will be contributed in cash by the Company and Upwell Profits according to their respective percentage shareholding in Invesco (i.e. HK$24.48 million by the Company and HK$23.52 million by Upwell Profits respectively) within 10 days after the incorporation of the JV (as defined below). (2) It has further been agreed that Invesco, Clear Winner and Hua Jian will set up a joint venture (the "JV") to be registered in the BVI for the purpose of providing online translation software system and related services through a web-site developed on Internet in Hong Kong and Macau only. The JV will be owned as to 60% by the Invesco, 26% by Clear Winner and 14% by Hua Jian. The registered and paid up capital of the JV will be HK$80 million which will be contributed as to (a) HK$48 million in cash by Invesco; (b) HK$20.8 million by the assignment of the Exclusive Right to the JV by Clear Winner; and (c) HK$11.2 million by Hua Jian by the provision of the technology relating to the set up of the System for the JV. (3) The board of directors of the JV will initially consist of 7 members, of which 4 will be appointed by the Company, and 1 from each of Upwell Profits, Clear Winner and Hua Jian. The Chairman of the board will be nominated by the Company. The terms of the Letter of Intent have been arrived at after arm's length negotiations between the parties. Conditions of the Letter of Intent The Letter of Intent is conditional on the following conditions being satisfied (or waived by the Company) by 5:00 p.m. (Hong Kong time) on 31st March, 2000: (1) the Company being satisfied with the result of a due diligence to be performed on the functioning of the System and relevant documents in connection with the aforesaid investment; (2) all relevant approvals relating to the set up of the JV and the transaction contemplated under the Formal Agreements (including but not limited to the approvals by the Stock Exchange, the shareholders of the Company and relevant government authority, where applicable) being obtained by the parties; and (3) a legal opinion being issued by a PRC lawyer acceptable to the Company and Hua Jian relating to the legality and enforceability of the Formal Agreements (as defined below). Exclusivity Clear Winner and Hua Jian have confirmed with the Company that, within a period of two months from the date of the Letter of Intent, they will not directly or indirectly negotiate any agreement with any other parties relating to the set up of the System in Hong Kong or Macau. The Letter of Intent is non-legally binding, except for this clause relating to exclusivity and the sharing of legal expenses relating to the preparation of the Letter of Intent and any other related matters. Formal Agreements After the fulfilment of the above conditions, the parties will propose to execute the following formal agreements (the "Formal Agreements") to formalise the terms of the Letter of Intent: (1) a shareholder agreement between the Company and Upwell Profits relating to Invesco; (2) a joint venture agreement between Invesco, Clear Winner and Hua Jian relating to the formation of the JV; (3) an agreement for the assignment of the Exclusive Right by Clear Winner to the JV. Such agreement is required to be confirmed in writing by Hua Jian; and (4) a system development and technical support agreement between Hua Jian and the JV relating to the establishment of the System and provision of the necessary continuing technical support for the operation of the System in Hong Kong and Macau for the JV. In consideration of Hua Jian providing continuing technical support to the System, 5% of the profit to be generated by the JV will be paid to Hua Jian. It is expected that the Formal Agreements will be executed within two months from the date of the Letter of Intent, failing which all parties will be released from the liabilities to each other relating to the exclusivity term as stated above. Reasons for the Letter of Intent The Group is principally engaged in the design, manufacture and sale of men's suits under the Group's own Good Fellow brand name as well as other renowned private labels of the Group's customers. The Directors believe that the Internet business offers immense commercial potential in future. The Directors consider that the proposed investment in the JV will provide an opportunity for the Group to diversify its business scope into high-tech business and broaden its income base. The capital of HK$24.48 million to be contributed by the Group to the JV will be from internal resources of the Group. General The transaction contemplated under the Letter of Intent constitutes a discloseable transaction of the Company under Chapter 14 of the Listing Rules. A further announcement will be made and a circular containing details of the Formal Agreements will be despatched to the shareholders of the Company as soon as practicable after the execution of the Formal Agreements. Shareholders and investors should note that the Letter of Intent is non-legally binding (except for the clause relating to exclusivity and sharing of legal expenses) and is conditional. The transaction contemplated under the Letter of Intent may or may not proceed. Shareholders and investors should exercise caution in dealing in the securities of the Company. By Order of the Board Ng Leung Ho Chairman Hong Kong, 9th February, 2000