CHINA STATE CONSTRUCTION DEVELOPMENT HOLDINGS LIMITED — M&A Activity 1999

Jul 12, 1999

Listed Company Information

DVB (HOLDINGS><0500> & UNIVERSAL APPLI<0419> - Joint Announcement DVB (Holdings) Limited Universal Appliances Limited (Incorporated in Bermuda with (Incorporated in Hong Kong with limited liability) limited liability) Announcement Further to the announcements (the "Announcements") jointly made by DVB (Holdings) Limited ("DVB") and Universal Appliances Limited ("UAL") on 4th June, 1999 and 11th June, 1999 in respect of, inter alia, certain discloseable and connected transactions and connected transactions, the directors of DVB and UAL are pleased to announce further details of such transactions (the "Transactions"). Terms used herein shall have the same meanings as those used in the respective Announcements unless otherwise defined. The Licensing Agreement and the Distribution Agreement constitute connected transactions for both DVB and UAL under the Listing Rules and will be of an ongoing nature (the "Ongoing Connected Transactions"). Both DVB and UAL have made applications to the Stock Exchange for the grant of waivers from strict compliance with relevant requirements under the Listing Rules in respect of the Ongoing Connected Transactions. The Stock Exchange has indicated that it will grant the waivers on the basis of the conditions set out below. Circulars containing further details of, inter alia, the Share Swap Agreement, the Sale and Purchase Agreement, the Licensing Agreement and the Distribution Agreement (as the case may be) and letters from the independent board committees and independent financial advisers together with the notices of the general meetings will be sent to the shareholders of DVB and UAL on 12th July, 1999. The respective general meetings of DVB and UAL will be held on 4th August, 1999. LICENSING AGREEMENT Particulars of the ongoing connected transactions The UAL Group has certain knowledge and proprietary materials in respect of set top boxes and has developed certain intelligent network and data transmission technology. Set top boxes comprise essential hardware for the EDT business of DVB. DVB does not itself possess the technical know-how for, inter alia, designing set top boxes. Furthermore, implementation of DVB's EDT business also requires the utilisation of broadcasting centre platform technologies and telephone banking system technologies. UAL has agreed, inter alia, to grant DVB (BVI) a licence to exploit the relevant technology in respect of set top boxes and other systems to be agreed from time to time. DVB (BVI) will be granted the right to design and to authorise the manufacture of set top boxes based on UAL's technology and to install, operate, and use other agreed systems. UAL has also agreed to provide certain broadcasting centre, telephone banking and subscriber management services to DVB (BVI) (collectively the "Licensing Transactions"). The Licensing Transactions constitute connected transactions for both DVB and UAL. The Licensing Transactions will continue to be entered into on normal commercial terms and in the ordinary and usual course of business of both DVB and its subsidiaries (the "DVB Group") and the UAL Group. The consideration to be paid by DVB (BVI) to UAL for the grant of licences and the provision of services will comprise the development fee, royalty and other payments as detailed in the Announcements. Waiver application The board of directors of DVB and UAL expect that the annual aggregate value of the Licensing Transactions will in future exceed the higher of (i) HK$10 million; or (ii) 3% of the latest published audited book value of the respective net tangible assets of the DVB Group and the UAL Group (subject to adjustments allowed under Rule 14.04(6) of the Listing Rules). Since the Licensing Transactions will be of an ongoing nature, the board of directors of DVB and UAL consider that it would not be practicable to make disclosure of or, if necessary, obtain shareholders' approval on each occasion the Licensing Transactions arise. Accordingly, the directors of DVB and UAL decided to seek approval from the independent shareholders at the respective general meetings of DVB and UAL to authorise DVB and UAL to continue to enter into the Licensing Transactions on such terms as may be agreed between DVB (BVI) and UAL from time to time subject to the following annual aggregate amount of the Licensing Transactions: - HK$40,000,000 for the financial year ending 31st December, 1999 (the "First Licensing Threshold"); and - HK$140,000,000 for the financial year ending 31st December, 2000 and subsequent financial years (the "Second Licensing Threshold"). The Stock Exchange has indicated that it will grant the waivers to DVB and UAL from strict compliance with the relevant requirements under the Listing Rules in respect of the Licensing Transactions on the following conditions: 1. the First Licensing Threshold and the Second Licensing Threshold are approved by the independent shareholders of DVB and UAL at the respective general meetings of DVB and UAL, which will also be subject to their respective independent shareholders' review and approval every three years after their initial approval; 2. the Licensing Transactions are carried out: (a) in the ordinary and usual course of business of the DVB Group and the UAL Group and are on normal commercial terms and are fair and reasonable as far as the shareholders of DVB and UAL are concerned; and (b) in accordance with the terms of Licensing Agreement; 3. the annual aggregate value of the Licensing Transactions for each of DVB and UAL for the year ending 31st December, 1999 shall not exceed the First Licensing Threshold; 4. the annual aggregate value of the Licensing Transactions for each of DVB and UAL for the year ending 31st December, 2000 and subsequent financial years shall not exceed the Second Licensing Threshold; 5. the Licensing Transactions shall be reviewed annually by the respective independent non-executive directors of DVB and UAL who shall confirm in the directors' reports attached to the respective annual reports of DVB and UAL that the Licensing Transactions are carried out in the manner stated in conditions (2) and (3) or (4) above; 6. details of the Licensing Transactions as set out in Rule 14.25(1)(A) to (D) of the Listing Rules shall be disclosed in the respective annual reports of DVB and UAL for the relevant year; 7. the respective auditors of DVB and UAL shall be engaged to review the Licensing Transactions annually and confirm in a letter to the respective directors of DVB and UAL (a copy of which shall be provided to the Listing Division of the Stock Exchange) stating whether: (a) the Licensing Transactions received the approval of the respective boards of directors of DVB and UAL; (b) the Licensing Transactions have been entered into in accordance with the terms of the Licensing Agreement or, where there is no formal written agreement, on terms which are no less favourable than terms available to (or from, as appropriate) independent third parties; and (c) the aggregate value of the relevant transactions does not exceed the limit set out in condition (3) or (4) above; and 8. DVB and UAL shall provide their respective auditors with full access to their respective relevant records for the purpose of the auditors' review of the Licensing Transactions. DISTRIBUTION AGREEMENT Particulars of the ongoing connected transactions (collectively the "Distribution Transactions") Pursuant to the Distribution Agreement, (1) China Star will license to and appoint DVB (BVI) the sole and exclusive distributor of certain rights in the Licensed Contents in mainland China; (2) DVB (BVI) will undertake to procure the obtaining of import approval from the PRC Ministry of Culture for the Rights in Selected Contents each Contract Year during the term of the Distribution Agreement; and (3) DVB (BVI) will also grant to China Star a sub-licence to exploit all Rights in the Licensed Content (other than those relating to pay per view, video on demand, and near video on demand rights) in mainland China together with all attendant import approvals from the PRC Ministry of Culture. DVB (BVI) will appoint China Star as its sole agent in respect of the obtaining of Rights in Contents which are produced in Hong Kong, for mainland China. China Star will appoint DVB (BVI) as its sole agent in respect of the distribution of Rights in any China Star Productions, in mainland China. The Distribution Transactions constitute connected transactions for both DVB and UAL. The Distribution Transactions will continue to be entered into on normal commercial terms and in the ordinary and usual course of business of the DVB Group and the UAL Group. The consideration to be paid by DVB (BVI) to China Star under the Distribution Agreement will comprise the distribution fee, prepayment and minimum guarantee as detailed in the Announcements. Waiver application The boards of directors of DVB and UAL expect that the annual aggregate value of the Distribution Transactions will in future exceed the higher of (i) HK$10 million; or (ii) 3% of the latest published audited book value of the respective net tangible assets of the DVB Group and the UAL Group (subject to adjustments allowed under Rule 14.04(6) of the Listing Rules). Since the Distribution Transactions will be of an ongoing nature, the board of directors of DVB and UAL consider that it would not be practicable to make disclosure of or, if necessary, obtain shareholders' approval on each occasion the Distribution Transactions arise. Accordingly, the directors of DVB and UAL decided to seek approval from the independent shareholders at the respective general meetings of DVB and UAL to authorise DVB and UAL to continue to enter into the Distribution Transactions on such terms as may be agreed between DVB (BVI) and China Star from time to time subject to the following annual aggregate amount of the Distribution Transactions: - HK$30,000,000 for the financial year ending 31st December, 1999 (the "First Distribution Threshold"); and - the higher of HK$40,000,000 or 30% of the audited consolidated turnover of DVB's EDT business for the year ending 31st December, 2000 and subsequent financial years (the "Second Distribution Threshold"). The Stock Exchange has indicated that it will grant the waivers to DVB and UAL from strict compliance with the relevant requirements under the Listing Rules in respect of the Distribution Transactions on the following conditions: 1. the First Distribution Threshold and the Second Distribution Threshold are approved by the independent shareholders of DVB and UAL at the respective general meetings of DVB and UAL, which will also be subject to their respective independent shareholders' review and approval every three years after their initial approval; 2. the Distribution Transactions are carried out: (a) in the ordinary and usual course of business of the DVB Group and the UAL Group and are on normal commercial terms and are fair and reasonable as far as the shareholders of DVB and UAL are concerned; and (b) in accordance with the terms of the Distribution Agreement; 3. the annual aggregate value of the Distribution Transactions for the year ending 31st December, 1999 shall not exceed the First Distribution Threshold; 4. the annual aggregate value of the Distribution Transactions for the year ending 31st December, 2000 and subsequent financial years shall not exceed the Second Distribution Threshold; 5. the Distribution Transactions shall be reviewed annually by the respective independent non-executive directors of DVB and UAL who shall confirm in the directors' reports attached to the respective annual reports of DVB and UAL that the Distribution Transactions are carried out in the manner stated in conditions (2) and (3) or (4) above; 6. details of the Distribution Transactions as set out in Rule 14.25(1)(A) to (D) of the Listing Rules shall be disclosed in the annual reports of DVB and UAL for the relevant year; 7. the respective auditors of DVB and UAL shall be engaged to review the Distribution Transactions annually and confirm in a letter to the respective directors of DVB and UAL (a copy of which shall be provided to the Listing Division of the Stock Exchange) stating whether: (a) the Distribution Transactions received the approval of the respective boards of directors of DVB and UAL; and (b) the Distribution Transactions have been entered into in accordance with the terms of the Distribution Agreement or, where there is no formal written agreement, on terms which are no less favourable than terms available from independent third parties; and (c) the aggregate value of the relevant transactions does not exceed the limit set out in condition (3) or (4) above; and 8. DVB and UAL shall provide their respective auditors with full access to their respective relevant records for the purpose of the auditors' review of the Distribution Transactions. GENERAL As stated in the joint announcement issued by DVB and UAL dated 25th June, 1999, the deadline for the despatch of the respective circulars was extended to 9th July, 1999. Applications have been made by the directors of DVB and UAL to the Stock Exchange for a further extension of the deadline for the despatch of the respective circulars in order to allow more time for the finalisation of information to be included in the circulars which will be despatched on 12th July, 1999. Circulars containing further details of, inter alia, the Share Swap Agreement, the Sale and Purchase Agreement, the Licensing Agreement and the Distribution Agreement (as the case may be) and letters from the independent board committees and independent financial advisers together with the notices of the general meetings will be sent to the shareholders of DVB and UAL on 12th July, 1999. The circular of UAL will also contain further details of the increase in authorised share capital and the proposed new share option scheme. The respective general meetings of DVB and UAL will be held on 4th August, 1999. Mr. Ko and his associates (as defined under the Listing Rules) will abstain from voting in respect of the resolutions to be proposed at the extraordinary general meeting of UAL to approve the Sale and Purchase Agreement and the Licensing Agreement. Mr. Ko, UAL and their respective associates (as defined under the Listing Rules) will abstain from voting in respect of the resolutions to be proposed at the special general meeting of DVB to approve the Sale and Purchase Agreement and the Licensing Agreement. Ms. Chen and her associates (as defined under the Listing Rules) will abstain from voting in respect of the resolution to be proposed at the special general meeting of DVB to approve the Distribution Agreement. It is stated in the Distribution Agreement that, in the event the conditions precedent to the Distribution Agreement are not fulfilled on or before 1st August, 1999 or such later date as the parties may agree in writing, the Distribution Agreement will lapse. Parties to the Distribution Agreement have agreed to extend the completion date of the Distribution Agreement to on or before 1st September, 1999 by the execution of a supplemental agreement dated 5th July, 1999. By Order of the Board By Order of the Board DVB (Holdings) Limited Universal Appliances Limited Wu Zheng, Bruno Ko Chun Shun, Johnson Executive Director Chairman Hong Kong, 10th July, 1999