Crypto Flow Technology Limited - M&A Activity 2017

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this joint announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this joint announcement.

This joint announcement appears for information purpose only and does not constitute an invitation or offer to acquire, purchase or subscribe for securities of MelcoLot Limited.

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500.com Limited

(Incorporated in the Cayman Islands with limited liability)

(NYSE stock code: WBAI)

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MelcoLot Limited

(Incorporated in the Cayman Islands with limited liability) (Stock Exchange Stock Code: 8198)

JOINT ANNOUNCEMENT

(1) CONDITIONAL AGREEMENT IN RELATION TO THE ACQUISITION OF THE SALE SHARES BY THE OFFEROR

AND

(2) POSSIBLE CONDITIONAL MANDATORY CASH OFFERS BY CCB INTERNATIONAL CAPITAL LIMITED FOR AND ON BEHALF OF THE OFFEROR TO ACQUIRE ALL THE ISSUED SHARES OF, AND CANCEL ALL OUTSTANDING OPTIONS OF, MELCOLOT LIMITED

(OTHER THAN THOSE ALREADY OWNED BY OR AGREED TO BE ACQUIRED BY THE OFFEROR AND THE PARTIES ACTING IN CONCERT WITH IT)

Financial adviser to the Offeror

SHARE PURCHASE AGREEMENT

The Company has been informed that on 29 May 2017 (after trading hours), the Offeror, the Vendor and the Guarantor entered into the Share Purchase Agreement, pursuant to which the Vendor has conditionally agreed to sell and the Offeror has conditionally agreed to purchase, in aggregate, the Sale Shares, representing approximately 40.65% of the existing issued share capital of the Company as at the date of this joint announcement. The total consideration for the Sale Shares is HK$322,236,010.91, equivalent to HK$0.252 per Sale Share.

Completion is subject to certain conditions precedent described in the section headed “Conditions precedent to Completion” in this joint announcement.

POSSIBLE CONDITIONAL MANDATORY CASH OFFERS

As at the date of this joint announcement, the Offeror and parties acting in concert with it do not hold any Shares or voting rights of the Company. Immediately following Completion, the Offeror and parties acting in concert with it will be interested in a total of 1,278,714,329 Shares, representing (i) approximately 40.65% of the issued share capital of the Company as at the date of this joint announcement; and (ii) approximately 39.20% of the enlarged issued share capital of the Company (assuming all the Options have been exercised at or prior to Completion).

Pursuant to Rule 26.1 of the Takeovers Code, the Offeror will be required to make the Share Offer to acquire all the Offer Shares. Pursuant to Rule 13.5 of the Takeovers Code, the Option Offer will be made to cancel all the Options.

As at the date of this joint announcement, the Company has (i) 3,145,656,900 Shares in issue; and (ii) 116,730,406 Options conferring rights to subscribe for 116,730,406 new Shares which are exercisable at an exercise price ranging from HK$0.109 to HK$0.638 per Option. Save for the Options, the Company has no other outstanding convertible securities, warrants, options or derivatives in issue which may confer any rights to subscribe for, convert or exchange into Shares as at the date of this joint announcement. Subject to and upon Completion, the Offeror will be required to make the Share Offer in accordance with Rule 26.1 of the Takeovers Code and the Option Offer in accordance with Rule 13.5 of the Takeovers Code. It is the intention of the Offeror that CCB International will make the Offers on behalf of the Offeror on the terms to be set out in the Composite Document to be issued in accordance with the Takeovers Code on the following basis:

The Share Offer

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.252 in cash

The Share Offer Price of HK$0.252 per Offer Share is the same as the purchase price per Sale Share under the Share Purchase Agreement which was arrived at after arm’s length negotiations between the Offeror and the Vendor.

The Option Offer

For cancellation of each Option with an exercise price of: HK$0.263 (390,510 Options in total) . . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash HK$0.109 (446,297 Options in total) . . . . . . . . . . . . . . . . . . . . . . . HK$0.143 in cash HK$0.638 (2,850,728 Options in total) . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash HK$0.511 (31,334,871 Options in total) . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash HK$0.465 (81,708,000 Options in total) . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash The Option Offer Price represents the amount by which the Share Offer Price exceeds the exercise price of the relevant Option. In respect of Option with an exercise price higher than the Share Offer Price, the Option Offer Price is at a nominal amount of HK$0.0001. The Option Offer will be extended to all Optionholders in accordance with the Takeovers Code. The Share Offer, if and when made, will be conditional upon the Offeror having received valid acceptances of the Offer Shares which, together with the Shares acquired or agreed to be acquired by the Offeror and the parties acting in concert with it before or during the Offer Period, will result in the Offeror and parties acting in concert with it holding more than 50% of the voting rights of the Company. The Option Offer will be conditional upon the Share Offer becoming or being declared unconditional in all respects. The Offeror intends to maintain the listing of the Shares on the Stock Exchange after the close of the Offers.

The Offeror intends to finance the consideration payable under the Offers and the consideration under the Share Purchase Agreement by internal resources of the Offeror. CCB International, as the financial adviser to the Offeror, is satisfied that sufficient resources are available to the Offeror to (i) complete the Share Purchase Agreement; and (ii) satisfy the amount of funds required for full acceptance of the Offers.

WARNING: THE OFFERS WILL ONLY BE MADE IF COMPLETION TAKES PLACE. COMPLETION IS SUBJECT TO FULFILLMENT AND/OR WAIVER, AS APPLICABLE, OF THE CONDITIONS, CONTAINED IN THE SHARE PURCHASE AGREEMENT. ACCORDINGLY, THE OFFERS MAY OR MAY NOT BE MADE. THE ISSUE OF THIS JOINT ANNOUNCEMENT DOES NOT I N A N Y W A Y I M P L Y T H A T T H E O F F E R S W I L L B E M A D E . SHAREHOLDERS, OPTIONHOLDERS AND POTENTIAL INVESTORS OF THE COMPANY ARE ADVISED TO EXERCISE EXTREME CAUTION WHEN DEALING IN THE RELEVANT SECURITIES OF THE COMPANY. PERSONS WHO ARE IN DOUBT AS TO THE ACTION THEY SHOULD TAKE SHOULD CONSULT A LICENSED SECURITIES DEALER OR REGISTERED INSTITUTION IN SECURITIES, BANK MANAGER, SOLICITOR, PROFESSIONAL ACCOUNTANT OR OTHER PROFESSIONAL ADVISERS.

INDEPENDENT BOARD COMMITTEE

The Independent Board Committee comprising Mr. Tsui Che Yin, Frank, Mr. Tsoi, David, Mr. Pang Hing Chung, Alfred and Ms. Chan Po Yi, Patsy, being non-executive directors of the Company, has been established by the Company pursuant to Rule 2.1 of the Takeovers Code to advise the Independent Shareholders and the Optionholders in respect of the Offers, as to whether the terms of the Offers are fair and reasonable and as to the acceptance of the Offers.

INDEPENDENT FINANCIAL ADVISER

An independent financial adviser will be appointed by the Company (with approval from the Independent Board Committee) to advise the Independent Board Committee in relation to the Offers and, in particular, as to whether the Offers are fair and reasonable and as to the acceptance of the Offers pursuant to Rule 2.1 of the Takeovers Code. Further announcement will be made by the Company as soon as possible after the appointment of the independent financial adviser.

COMPOSITE DOCUMENT

Subject to Completion, the Offeror and the Company intend that the offer document from the Offeror and the board circular from the Company be combined in the Composite Document.

Pursuant to Rule 8.2 of the Takeovers Code, the Composite Document setting out, among other things, (i) details of the Offers (including the expected timetable and terms and conditions of the Offers); (ii) financial information of the Group; (iii) a letter of recommendation from the Independent Board Committee to the Independent Shareholders in relation to the Offers; and (iv) a letter of advice from the independent financial adviser to the Independent Board Committee and the Independent Shareholders in relation to the Offers, together with the relevant Form(s) of Acceptance, will be despatched by the Offeror and the Company jointly to the Shareholders and the Optionholders in accordance with the Takeovers Code, within 21 days after the date of this joint announcement or such later date as may be permitted by the Takeovers Code and agreed by the Executive and in compliance with the requirements of the Takeovers Code and other applicable regulations.

A letter containing details of the Option Offer will also be despatched to the Optionholders at or around the same time as the despatch of the Composite Document.

SHARE PURCHASE AGREEMENT

On 29 May 2017 (after trading hours), the Offeror, the Vendor and the Guarantor entered into the Share Purchase Agreement. A summary of the major terms of the Share Purchase Agreement is set out below.

Date 29 May 2017

Parties (i) the Vendor (as the vendor of the Sale Shares); (ii) the Offeror (as the purchaser of the Sale Shares); and

(iii) the Guarantor (as the guarantor of the Vendor).

To the best of the Directors’ knowledge, information and belief, having made all reasonable enquiries, the Offeror and its ultimate beneficial owners are Independent Third Parties.

Subject matter

Subject to the terms and conditions of the Share Purchase Agreement, the Vendor shall sell the Sale Shares to the Offeror on Completion at the Consideration, free from all encumbrances at Completion and together with all rights attaching to them (including all rights to any dividend or other distribution declared, made or paid on the Sale Shares at any time on or after the date of the Share Purchase Agreement and up to the Completion Date), and the Offeror shall purchase the Sale Shares from the Vendor.

Consideration for the Sale Shares

The total consideration for the Sale Shares is HK$322,236,010.91, equivalent to approximately HK$0.252 per Sale Share, which was determined after arm’s length negotiations between the Offeror and the Vendor. A Deposit was paid by the Offeror in cash upon the entering into of the MOU. The Deposit, together with all interest (if any) accrued on it, shall be applied on Completion towards payment of the Consideration. The remaining balance of the consideration will be paid by the Offeror in cash on the Completion Date.

Conditions precedent to Completion

The obligation of the Offeror to complete the sale and purchase of the Sale Shares is conditional upon:

(A) there not having come to the attention of the Offeror at any time prior to Completion (i) any material breach of, or any event rendering untrue, incorrect, misleading or breached in any material respect, any of the vendor warranties provided in the Share Purchase Agreement which are not qualified by materiality, or (ii) any breach of, or any event rendering untrue, incorrect, misleading or breached any of the vendor warranties provided in the Share Purchase Agreement which are qualified by materiality, or (iii) any material breach of, or failure to perform, any of the other obligations of the Vendor under the Share Purchase Agreement which are required to be performed at or before Completion; and
(B) (i) the current listing of the Shares not having been withdrawn, (ii) the Shares continuing to be traded on the Stock Exchange prior to Completion (save for (1) any temporary suspension for no longer than seven consecutive trading days or such other period as the Offeror may agree in writing and/or (2) any temporary suspension in connection with the transaction contemplated under the Share Purchase Agreement (regardless of the period of that suspension) and (iii) neither the Stock Exchange nor the SFC having indicated before Completion that it will object to such continued listing for reasons related to or arising from the transaction contemplated under the Share Purchase Agreement for any reason other than a reason relating to the Offeror, its Affiliates or the directors, officers or employees of any of them (an objection for a reason relating to the Offeror, its Affiliates or the directors, officers or employees of any of them shall not amount to a failure to fulfil this condition).

The obligation of the Vendor to complete the sale and purchase of the Sale Shares is conditional upon:

(C) there not having come to the attention of the Vendor at any time prior to Completion (i) any material breach of, or any event rendering untrue, incorrect, misleading or breached in any material respect, any of the representations or warranties of the Offeror set forth in the Share Purchase Agreement or (ii) any breach of, or any event rendering untrue, incorrect, misleading or breached any of the representations or warranties of the Offeror set forth in the Share Purchase Agreement which are qualified by materiality, or (iii) any material breach of, or failure to perform, any of the other obligations of the Offeror under the Share Purchase Agreement which are required to be performed at or before Completion.

Completion

Completion is subject to the Conditions having been satisfied (or waived by the Offeror or the Vendor, as the case may be) on or before 6 June 2017. Completion is expected to take place on 6 June 2017 unless the Conditions have not been satisfied (or waived, as the case may be) on or before that date, in which event the Completion Date shall be any other date as mutually agreed in writing by the Offeror and the Vendor (or their respective successors and permitted assigns).

On Completion, the Vendor shall deliver to the Offeror irrevocable undertakings addressed to the Offeror from the Directors (excluding the independent non-executive Directors) (1) to accept the Share Offer in respect of the Shares and/or the Option Offer in respect of options granted pursuant to the 2012 Share Option Scheme held by them; and (2) to agree to the forfeiture of such outstanding options granted pursuant to the 2012 Share Option Scheme should the Share Offer not become or is not declared unconditional at the close of the Offers.

Resignation of the CEO and head of human resources of the Group

The Offeror acknowledges and agrees and the Vendor shall procure that the CEO will give his termination notice for his service agreement as the CEO with the Group on Completion and he will cease to be an employee of the Company upon the expiry of six months after Completion (please also see the section headed “Proposed change of Board composition” for further information on his intended resignation as Director). The Offeror acknowledges and agrees the head of human resources of the Group will cease to be employed by the Group on or before Completion.

Retention bonus and loyalty bonus

The Share Purchase Agreement includes a provision for the payment by the Company of a retention bonus, in an aggregate amount of HK$800,000, to certain employees of the Group specified in an agreed allocation list, in the respective amounts specified in that allocation list. The retention bonus is payable not earlier than six months and not later than nine months after Completion. The purpose of the retention bonus is to incentivise the recipients to remain with the Group for a period after Completion, in the interests of maintaining continuity of the Group’s business. The employees eligible for the retention bonus include the CEO, who has agreed to remain with the Group for a period of six months after Completion, but do not include any other Director.

Separately, as an exception to the restrictions under the Share Purchase Agreement which apply during the period from signing of the Share Purchase Agreement up to Completion, the Company is permitted, in addition to paying its suppliers and other creditors in the ordinary course, to make permitted payments not exceeding an aggregate amount of HK$5,800,000 prior to Completion. There is no obligation under the Share Purchase Agreement for the Company to make any such permitted payments, but the Company is considering payment of a loyalty bonus to certain of the Group’s officers, employees and consultants, to recognise their contributions to the Group during the stewardship of the Guarantor and to reflect the fact that a portion of the incentive awards in respect of the financial year completed on 31 December 2016 which those individuals could have expected to have received (which, in accordance with the Group’s past practice, could have been expected to be awarded in the third quarter or early fourth quarter of this year) will not now be received, as a result of the sale of the Sale Shares pursuant to the Share Purchase Agreement.

The retention bonus and the loyalty bonus will only be released to non-Shareholders. The Company will require each proposed recipient of a retention bonus or loyalty bonus, as a condition to receiving the relevant payment, to provide a written confirmation that he or she is not a Shareholder at the time of the relevant payment.

POSSIBLE CONDITIONAL MANDATORY CASH OFFERS

The Share Offer and the Option Offer

As at the date of this joint announcement, the Offeror and parties acting in concert with it do not hold any Shares or voting rights of the Company.

Immediately following Completion, the Offeror and parties acting in concert with it will be interested in a total of 1,278,714,329 Shares, representing (i) approximately 40.65% of the issued share capital of the Company as at the date of this joint announcement; and (ii) approximately 39.20% of the enlarged issued share capital of the Company (assuming all the Options have been exercised at or prior to Completion).

Subject to and upon Completion, the Offeror will be required to make the Share Offer in accordance with Rule 26.1 of the Takeovers Code and the Option Offer in accordance with Rule 13.5 of the Takeovers Code. It is the intention of the Offeror that CCB International will make the Offers on behalf of the Offeror on the terms to be set out in the Composite Document to be issued in accordance with the Takeovers Code on the following basis:

The Share Offer

For each Offer Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.252 in cash

The Option Offer

For cancellation of each Option with an exercise price of:

HK$0.263 (390,510 Options in total) . . . . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash

HK$0.109 (446,297 Options in total) . . . . . . . . . . . . . . . . . . . . . . . . . HK$0.143 in cash HK$0.638 (2,850,728 Options in total) . . . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash HK$0.511 (31,334,871 Options in total) . . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash HK$0.465 (81,708,000 Options in total) . . . . . . . . . . . . . . . . . . . . . . HK$0.0001 in cash

The Option Offer Price represents the amount by which the Share Offer Price exceeds the exercise price of the relevant Option. In respect of Option with an exercise price higher than the Share Offer Price, the Option Offer Price is at a nominal amount of HK$0.0001.

The Option Offer will be extended to all Optionholders in accordance with the Takeovers Code.

The Share Offer, if and when made, will be conditional upon the Offeror having received valid acceptances of the Offer Shares which, together with the Shares acquired or agreed to be acquired by the Offeror and the parties acting in concert with it before or during the Offer Period, will result in the Offeror and parties acting in concert with it holding more than 50% of the voting rights of the Company. The Option Offer will be conditional upon the Share Offer becoming or being declared unconditional in all respects.

Comparisons of value

The Share Offer Price of HK$0.252 represents:

(i) a discount of approximately 42.7% to the closing price of HK$0.44 per Share as quoted on the Stock Exchange on the Last Trading Day;
(ii) a discount of approximately 35.7% to the average closing price of HK$0.392 per Share as quoted on the Stock Exchange for the last five consecutive trading days up to and including the Last Trading Day;
(iii) a discount of approximately 26.4% to the average closing price of HK$0.3425 per Share as quoted on the Stock Exchange for the last 10 consecutive trading days up to and including the Last Trading Day;
(iv) a discount of approximately 15.6% to the average closing price of HK$0.2985 per Share as quoted on the Stock Exchange for the last 30 consecutive trading days up to and including the Last Trading Day;
(v) a premium of approximately 96.9% over the unaudited consolidated net asset value of the Company of approximately HK$0.128 per Share as at 30 June 2016; and
(vi) a premium of approximately 92.4% over the audited consolidated net asset value of the Company of approximately HK$0.131 per Share as at 31 December 2016.

Highest and lowest Share prices

During the six-month period prior to commencement of the Offer Period and up to and including the Last Trading Day, the highest closing price of the Shares was HK$0.44 per Share as quoted on the Stock Exchange on the Last Trading Day and the lowest closing price of the Shares was HK$0.255 per Share as quoted on the Stock Exchange on 11 May 2017.

Value of the Offers

As at the date of this joint announcement, there were 3,145,656,900 Shares in issue and 116,730,406 Options. Assuming that there is no change in the issued share capital of the Company and none of the outstanding Options is exercised prior to the making of the Offers and on the basis of the Share Offer Price at HK$0.252 per Share, the entire issued share capital of the Company is valued at approximately HK$792,705,539.

Assuming that all the 116,730,406 outstanding Options are fully exercised prior to the making of the Offers, there will be 3,262,387,306 Shares in issue and, on the basis of the Offer Price at HK$0.252 per Share, the entire issued share capital of the Company is valued at approximately HK$822,121,601.

Based on the foregoing, the aggregate cash consideration payable by the Offeror under the Offers (assuming no Options are exercised and full acceptances under the Offers) will be approximately HK$470,544,977. The aggregate cash consideration payable by the Offeror under the Offers (assuming all Options are exercised and full acceptances under the Offers) will be approximately HK$499,885,590.

Confirmation of financial resources

Dealing and interest in the Company’s securities

Save for the non-discretionary dealings in the Shares for and on behalf of its individual clients by China Construction Bank Macau Branch, the Offeror and parties acting in concert with it have not dealt in the Shares, options, derivatives, warrants or other securities convertible into Shares during the six-month period prior to the date of this joint announcement up to the date of this joint announcement.

Other arrangements

The Offeror confirms that, save for the Share Purchase Agreement, as at the date of this joint announcement:

(i) none of the Offeror and/or parties acting in concert with it owns or has control or direction over any voting rights or rights over the Shares or convertible securities, warrants, options or derivatives of the Company;
(ii) save as disclosed in the section headed “Share Purchase Agreement – Completion”, the Offeror and/or parties acting in concert with it have not received any irrevocable commitment to accept the Offers;
(iii) there is no outstanding derivative in respect of the securities in the Company which has been entered into by the Offeror and/or any person acting in concert with it;
(iv) there is no arrangement (whether by way of option, indemnity or otherwise) of any kind referred to in Note 8 to Rule 22 of the Takeovers Code in relation to the shares of the Offeror or the Shares and which might be material to the Offers;

(v) there is no agreement or arrangement to which the Offeror and/or parties acting in concert with it is a party which relates to circumstances in which it may or may not invoke or seek to invoke a pre-condition or a condition to the Offers;
(vi) there are no relevant securities (as defined in Note 4 to Rule 22 of the Takeovers Code) in the Company which the Offeror and/or parties acting in concert with it has borrowed or lent;
(vii) save for the Consideration under the Share Purchase Agreement, there is no (i) other consideration in any form paid or payable by the Offeror to the Vendor and (ii) no special deal between (a) the Vendor and its concert parties on the one hand, and (b) the Offeror and its concert parties on the other hand; and
(viii) there is no other agreement, arrangement or understanding (including any compensation arrangement) existing between the Offeror or its concert parties and (i) the Company, (ii) any Shareholders or recent Shareholders nor (iii) any Directors or recent Directors.

Effect of accepting the Offers

By accepting the Share Offer, subject to the Share Offer becoming unconditional, the Shareholders will sell their tendered Shares to the Offeror free from all encumbrances and together with all rights attaching to them including the right to receive in full all dividends and other distributions, if any, declared, made or paid on or after the date on which the Share Offer is made, being the date of despatch of the Composite Document.

By accepting the Option Offer, Optionholders will agree to the cancellation of their tendered Options and all rights attached thereto with effect from the date on which the Option Offer is made, that is, the date of posting of the offer document by or on behalf of the Offeror in respect of the Offers or, as the case may be, the Composite Document.

Optionholders should note that the Board intends to exercise its absolute discretion provided under the terms of the 2002 Share Option Scheme to cancel the Options granted under such scheme but not exercised pursuant thereto should the relevant Optionholders not accept the Option Offer. Pursuant to the 2012 Share Option Scheme, if the Share Offer becomes or is declared unconditional, the Optionholders of the 2012 Share Option Scheme shall be entitled to exercise their Options (to the extent not already exercised) at any time thereafter and up to the close of such offer and after which the Options shall lapse automatically.

Acceptance of the Offers will be irrevocable and not capable of being withdrawn, except as permitted under the Takeovers Code.

Hong Kong stamp duty

Seller’s Hong Kong ad valorem stamp duty arising in connection with acceptances of the Share Offer will be payable by the relevant Shareholders at a rate of 0.1% of (i) the market value of the Offer Shares; or (ii) the consideration payable by the Offeror in respect of the relevant acceptances of the Share Offer, whichever is higher, and the amount of such duty will be deducted from the cash amount payable by the Offeror to the relevant Shareholders accepting the Share Offer. The Offeror will arrange for payment of the seller’s Hong Kong ad valorem stamp duty on behalf of the relevant Shareholders accepting the Share Offer and will pay the buyer’s Hong Kong ad valorem stamp duty in connection with the acceptance of the Share Offer and the transfer of the Shares in accordance with the Stamp Duty Ordinance (Chapter 117 of the Laws of Hong Kong).

No stamp duty is payable in connection with the acceptances of the Option Offer.

Payment

Payment (after deducting the accepting Shareholders’ share of stamp duty) in cash in respect of acceptances of the Offers will be made as soon as possible but in any event within seven (7) business days following the later of the date on which the Offers become or are declared unconditional and the date on which duly completed form(s) of acceptance and the relevant documents of title of Shares or the Options (as the case may be) are received by the Offeror to render each such acceptance complete and valid.

Taxation advice

Shareholders and Optionholders are recommended to consult their own professional advisers if they are in any doubt as to the taxation implications of accepting or rejecting the Offers. None of the Offeror and/or parties acting in concert, the Company, CCB International and their respective directors, officers, agents or associates or any other person involved in the Offers accepts any responsibility for any taxation effects on, or liabilities of, any persons as a result of their acceptance or rejection of the Offers.

Overseas Shareholders and Overseas Optionholders

The Overseas Shareholders and the Overseas Optionholders should observe any applicable legal or regulatory requirements and, where necessary, seek legal advice. It is the responsibilities of the Overseas Shareholders and the Overseas Optionholders who wish to accept the Offers to satisfy themselves as to the full observance of the laws and regulations of the relevant jurisdictions in connection with the acceptance of the Offers (including the obtaining of any governmental or other consent which may be required or the compliance with other necessary formalities and the payment of any transfer or other taxes due by such Overseas Shareholders and Overseas Optionholders in respect of such jurisdictions).

SHAREHOLDING STRUCTURE OF THE COMPANY

The table below sets out the shareholding structure of the Company (i) as at the date of this joint announcement; (ii) immediately upon Completion but before the Offers are made (assuming none of the Options have been exercised at or prior to Completion); and (iii) immediately upon Completion but before the Offers are made (assuming all of the Options have been exercised at or prior to Completion):

			Immediately upon Completion	Immediately upon Completion	Immediately upon Completion	Immediately upon Completion	Immediately upon Completion	Immediately upon Completion
			but before the Offers are made			but before the	Offers are made
			(assuming none of the Options			(assuming all	of the Options
	As at the date	of this joint	have been exercised at		or	have been exercised at		or
Shareholders	announcement		prior to Completion)			prior to Completion)
	Number	(approximately)	Number	(approximately)		Number	(approximately)
	of Shares	%	of Shares		%	of Shares		%
*Directors*
Mr. Tsoi, David	430,806	0.01	430,806		0.01	1,678,806		0.05
Mr. Pang Hing Chung, Alfred	1,586,000	0.05	1,586,000		0.05	3,391,872		0.10
Mr. Tsui Che Yin, Frank	–	–	–		–	20,881,400		0.64
Mr. Ko Chun Fung, Henry	–	–	–		–	17,688,200		0.54
Mr. Tsang Yuen Wai, Samuel	–	–	–		–	20,881,400		0.64
Mr. Tam Chi Wai, Dennis	–	–	–		–	20,881,400		0.64
Ms. Chan Po Yi, Patsy	–	–	–		–	1,248,000		0.04
*Substantial Shareholder(s)*
The Vendor	1,278,714,329	40.65	–		–	–		–
*The Offeror and parties acting in concert with it*
The Offeror	–	–	1,278,714,329		40.65	1,278,714,329		39.20
Other public Shareholders	1,864,925,765	59.29	1,864,925,765		59.29	1,897,021,899		58.15
Total	3,145,656,900	100.00	3,145,656,900	100.00		3,262,387,306	100.00

INFORMATION ON THE PARTIES

The Group

The Company is a company incorporated in the Cayman Islands with limited liability and the Shares of which are listed on the Stock Exchange. The Group is principally engaged in the provision of lottery-related technologies, systems and solutions to two state-run lottery operators in the PRC, namely the China Welfare Lottery Issuance Centre and China Sports Lottery Administration Centre (“ CSLA ”). The Group is a distributor of high quality, versatile lottery terminals and parts for CSLA, which is the exclusive sports lottery operator in the PRC. The Group provides game upgrading technology and system maintenance service for the rapid-draw game, “Shi Shi Cai” in Chongqing Municipality. The Group has also established a wide presence by managing a network of retail outlets in the PRC.

The Offeror

The Offeror is a company incorporated in the Cayman Islands with limited liability and the shares of which are traded on the New York Stock Exchange under the ticker symbol “WBAI” since 2013.

As at the date of this joint announcement, Mr. Man San Law, the ultimate owner of Delite Limited, owns 24.4% of voting rights of the Offeror. Ms. Ping Yuan, the wife of Mr. Law and the ultimate owner of Smart Mega Holdings Limited, owns 19.04% of voting rights of the Offeror. Mr. and Mrs. Law together own 43.44% of voting rights of the Offeror.

The Offeror is a leading online sports lottery service provider in the PRC. The Offeror offers a comprehensive and integrated suite of online lottery services, information, user tools and virtual community venues to its users. The Offeror was among the first companies to provide online lottery services in the PRC, and is one of the two entities that is authorised by the PRC Ministry of Finance to provide online lottery sales services on behalf of China Sports Lottery Administration Centre, the government authority in charge of the issuance and sale of sports lottery products in the PRC. As of 26 May 2017, the Offeror’s market capitalisation was approximately US$393 million.

The audited consolidated financial information of the Offeror is as follows:

	Year ended 31	December
	2015	2016
	RMB’000	RMB’000
Net revenue	99,552	10,928
Income (loss) before income tax	(282,240)	(206,195)
Net (loss)	(324,209)	(209,252)

	As at 31	December
	2015	2016
	RMB’000	RMB’000
Total assets	2,084,497	2,076,892
Total liabilities	218,161	268,849
Total shareholders’ equity	1,866,336	1,808,043

FUTURE INTENTIONS OF THE OFFEROR REGARDING THE GROUP

The Offeror intends to continue with the Group’s existing principal business. The Offeror reserves the right to make any changes it deems necessary or appropriate to the Group’s business and operations to increase the value of the Group. As at the date of this joint announcement, the Offeror has no intention to discontinue the employment of the employees (save for the proposed changes to the composition of the Board as detailed below and the resignation of the CEO and head of human resources of the Group as detailed in the sub-paragraph headed “Share Purchase Agreement – Resignation of the CEO and head of human resources of the Group”) or to dispose of or re-deploy the assets of the Group.

Proposed change of Board composition

The Board is currently made up of three executive Directors, being Mr. Ko Chun Fung, Henry, Mr. Tsang Yuen Wai, Samuel and Mr. Tam Chi Wai, Dennis; three independent non-executive Directors, being Mr. Tsoi, David, Mr. Pang Hing Chung, Alfred and Ms. Chan Po Yi, Patsy; and one non-executive Director, being Mr. Tsui Che Yin, Frank.

Pursuant to the Share Purchase Agreement, each of Mr. Ko Chun Fung, Henry, Mr. Tsang Yuen Wai, Samuel, Mr. Tam Chi Wai, Dennis and Mr. Tsui Che Yin, Frank will resign with effect from a date which is no earlier than such date as permitted under Rule 7 of the Takeovers Code. The Offeror intends to nominate new Directors to the Board for appointment with effect from a date which is no earlier than such date as permitted under Rule 26.4 of the Takeovers Code. As at the date of this joint announcement, the Offeror has not reached any final decision as to who will be nominated as new Directors. Any changes to the Board composition will be announced by the Company and made in compliance with the Takeovers Code and the GEM Listing Rules.

Public float and maintaining the listing status of the Company

The Offeror intends to maintain the listing of the Shares on the GEM after the close of the Offers. The directors of the Offeror and the new directors to be appointed to the Board will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists in the Company’s shares.

The Stock Exchange has stated that if, at the close of the Offers, less than the minimum prescribed percentage applicable to the listed issuer, being 25% of the issued Shares, are held by the public, or if the Stock Exchange believes that:

(a) a false market exists or may exist in the trading of the Shares; or
(b) there are insufficient Shares in public hands to maintain an orderly market,

it will consider exercising its discretion to suspend dealing in the Shares.

GENERAL

Independent financial adviser

An independent financial adviser will be appointed by the Company (with approval from the Independent Board Committee) to advise the Independent Board Committee and the Independent Shareholders in relation to the Offers and in particular as to whether the Offers are fair and reasonable and as to the acceptance of the Offers. Further announcement will be published in accordance with the Takeovers Code when the independent financial adviser is appointed.

Independent Board Committee

The Independent Board Committee comprising of Mr. Tsui Che Yin, Frank, Mr. Tsoi, David, Mr. Pang Hing Chung, Alfred and Ms. Chan Po Yi, Patsy, being non-executive directors of the Company, has been established by the Company pursuant to Rule 2.1 of the Takeovers Code to advise the Independent Shareholders and the Optionholders in respect of the Offers and, in particular, as to whether the Offers are fair and reasonable and as to the acceptance of the Offers pursuant to Rule 2.1 of the Takeovers Code.

Despatch of the Composite Document

Subject to Completion, the Offeror and the Company intend that the offer document from the Offeror and the board circular from the Company be combined in the Composite Document.

A letter containing details of the Option Offer will also be despatched to the Optionholders at or around the same time as the despatch of the Composite Document.

Disclosure of dealings

In accordance with Rule 3.8 of the Takeovers Code, associates of the Company and the Offeror (including but not limited to a person who owns or controls 5% or more of any class of relevant securities (as defined in paragraphs (a) to (d) in Note 4 to Rule 22 of the Takeovers Code) of the Company or the Offeror) are hereby reminded to disclose their dealings in any securities of the Company pursuant to the requirements of the Takeovers Code.

The full text of Note 11 of Rule 22 of the Takeovers Code is reproduced below pursuant to Rule 3.8 of the Takeovers Code:

“Responsibilities of stockbrokers, banks and other intermediaries

Stockbrokers, banks and others who deal in relevant securities on behalf of clients have a general duty to ensure, so far as they are able, that those clients are aware of the disclosure obligations attaching to associates and other persons under Rule 22 and that those clients are willing to comply with them. Principal traders and dealers who deal directly with investors should, in appropriate cases, likewise draw attention to the relevant Rules. However, this does not apply when the total value of dealings (excluding stamp duty and commission) in any relevant security undertaken for a client during any 7 day period is less than HK$1 million.

This dispensation does not alter the obligation of principals, associates and other persons themselves to initiate disclosure of their own dealings, whatever total value is involved.

Intermediaries are expected to co-operate with the Executive in its dealings enquiries. Therefore, those who deal in relevant securities should appreciate that stockbrokers and other intermediaries will supply the Executive with relevant information as to those dealings, including identities of clients, as part of that co-operation.”

WARNING: THE OFFERS WILL ONLY BE MADE IF THE COMPLETION TAKES PLACE. COMPLETION IS SUBJECT TO FULFILLMENT AND/OR WAIVER, AS APPLICABLE, OF THE CONDITIONS CONTAINED IN THE SHARE PURCHASE AGREEMENT. ACCORDINGLY, THE OFFERS MAY OR MAY NOT BE MADE. THE ISSUE OF THIS JOINT ANNOUNCEMENT DOES NOT IN ANY WAY IMPLY THAT THE OFFERS WILL BE MADE. SHAREHOLDERS, OPTIONHOLDERS AND POTENTIAL INVESTORS OF THE COMPANY ARE ADVISED TO EXERCISE EXTREME CAUTION WHEN DEALING IN THE RELEVANT SECURITIES OF THE COMPANY. PERSONS WHO ARE IN DOUBT AS TO THE ACTION THEY SHOULD TAKE SHOULD CONSULT A LICENSED SECURITIES DEALER OR REGISTERED I N S T I T U T I O N I N S E C U R I T I E S , B A N K M A N A G E R , S O L I C I T O R , PROFESSIONAL ACCOUNTANT OR OTHER PROFESSIONAL ADVISERS.

DEFINITIONS

In this joint announcement, the following expressions have the meanings set out below unless the context otherwise requires:

“2002 Share Option Scheme” the share option scheme adopted by the Company on 20 April 2002
“2012 Share Option Scheme” the share option scheme adopted by the Company on 18 May 2012
“acting in concert” has the meaning ascribed to it in the Takeovers Code
“Affiliates” any holding company or subsidiary of the parties to the Share Purchase Agreement (including their respective successors and permitted assigns) and any subsidiary of any such holding company
“associate(s)” has the meaning ascribed to it under the GEM Listing Rules
“Board” the board of Directors
“Business Day(s)” any day (excluding Saturdays and Sundays) on which banks generally are open for business in Hong Kong
“CCB International” CCB International Capital Limited, a corporation licensed to carry on type 1 (dealing in securities), type 4 (advising on securities) and type 6 (advising on corporate finance) regulated activities under the SFO
“CEO” the chief executive officer of the Company, Mr. Ko Chun Fung, Henry
“Company” MelcoLot Limited, a company incorporated in the Cayman Islands with limited liability, whose shares are listed on the GEM (stock code: 8198)
“Completion” completion of the sale and purchase of the Sale Shares in accordance with the terms and conditions of the Share Purchase Agreement
“Company” MelcoLot Limited, a company incorporated in the Cayman Islands with limited liability, whose shares are listed on the GEM (stock code: 8198)

“Completion Date”
6 June 2017 unless the Conditions have not been satisfied (or waived by the Offeror or the Vendor, as the case may be) on or before that date, in which event the Completion Date shall be any other date as mutually agreed in writing by the Vendor and the Offeror (or their respective successors and permitted assigns)
“Composite Document” the composite offer and response document to be jointly issued by the Offeror and the Company to the Shareholders and the Optionholders in connection with the Offers in accordance with the Takeovers Code
“Conditions”
the conditions set out in sub-paragraphs (A) to (C) in the section headed “Conditions Precedent to Completion”
“Consideration” the sum of HK$322,236,010.91, being the aggregate consideration of the Sale Shares
“Deposit”
the deposit in the amount of US$2,000,000 paid by the Offeror to the Vendor on 30 March 2017 in accordance with the MOU
“Director(s)”
the director(s) of the Company
“Executive”
the Executive Director of the Corporate Finance Division of the SFC or any delegate of the Executive Director
“GEM”`
the Growth Enterprise Market of the Stock Exchange
“GEM Listing Rules”
the Rules Governing the Listing of Securities on GEM
“Group”
the Company and its subsidiaries
“Guarantor”
Melco International Development Limited, a company incorporated in Hong Kong with limited liability, whose shares are listed on the Main Board of the Stock Exchange (stock code: 200)
“HK$”
Hong Kong dollar, the lawful currency of Hong Kong
“Hong Kong” the Hong Kong Special Administrative Region of the PRC

“Independent Board Committee”
the independent board committee of the Board, comprising Mr. Tsui Che Yin, Frank, Mr. Tsoi, David, Mr. Pang Hing Chung, Alfred and Ms. Chan Po Yi, Patsy, being non-executive directors of the Company, formed for the purpose of advising the Independent Shareholders and the Optionholders in respect of the Offers
“Independent Shareholder(s)” Shareholders other than the Vendor, the Offeror and parties acting in concert with each of them
“Independent Third Parties”
person(s) or company(s) who/which is/are not connected with the directors, CEO or substantial shareholders (as defined under the GEM Listing Rules) of the Company or any of its subsidiaries, or any of their respective associates
“Last Trading Day”
29 May 2017, the last trading day for the Shares prior to the publication of this joint announcement
“MOU”
the memorandum of understanding dated 29 March 2017 entered into between the Offeror, the Vendor and the Guarantor in respect of the sale and purchase of the Sale Shares (as amended by a supplemental memorandum of understanding dated 8 May 2017 and a second supplemental memorandum of understanding dated 26 May 2017)
“Offers”
the Share Offer and the Option Offer
“Offer Period”
22 May 2017 until the latest of (i) the date when the Offers close for acceptances; (ii) the date when the Offers lapse; or (iii) the time when the Offeror announces that the Offers will not proceed (if Completion does not take place as a result of the Conditions not having been satisfied (or waived by the Offeror or the Vendor, as the case may be) on or before 6 June 2017 (or any other date as mutually agreed by the Offeror and the Vendor (or their respective successors and permitted assigns) in writing)
“Offer Share(s)”
all the Share(s) in issue, other than those already owned or agreed to be acquired by the Offeror and parties acting in concert with it

“Offeror”
500.com Limited, a company incorporated in the Cayman Islands with limited liability and the shares of which are listed on the New York Stock Exchange under the ticker symbol “WBAI”
“Options”
the outstanding options granted by the Company pursuant to the 2002 Share Option Scheme and the 2012 Share Option Scheme
“Optionholder(s)”
holder(s) of the Options
“Option Offer”
the possible conditional mandatory cash offer to be made by CCB International on behalf of the Offeror for the cancellation of the Options in accordance with the Takeovers Code
“Option Offer Price”
the price at which the Option Offer will be made, which is (i) the “see-through” price, being the amount by which the Share Offer Price exceeds the relevant exercise price of the relevant Option, or (ii) a nominal amount of HK$0.0001 in respect of Options the exercise price of which is higher than the Share Offer Price, for the cancellation of each Option held by the Optionholders
“Overseas Optionholders” Option holder(s) whose addresses, as shown on the register of option holders of the Company, are outside Hong Kong
“Overseas Shareholders” Shareholder(s) whose addresses, as shown on the register of members of the Company, are outside Hong Kong
“RMB”
Renminbi, the lawful currency of the PRC
“PRC”
the People’s Republic of China (excluding Hong Kong, Macau Special Administrative Region and Taiwan)
“Sale Share(s)”
1,278,714,329 Shares to be sold by the Vendor to the Offeror under the Share Purchase Agreement
“SFC”
the Securities and Futures Commission of Hong Kong
“SFO”
the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

“Share(s)”

ordinary shares of HK$0.01 each in the issued share capital of the Company
“Shareholder(s)”
holder(s) of the Shares
“Share Offer”
the possible conditional mandatory cash offer for the Offer Shares to be made by CCB International on behalf of the Offeror in accordance with the Takeovers Code
“Share Offer Price”
HK$0.252 per Offer Share in respect of the Share Offer
“Share Purchase Agreement”
the conditional agreement dated 29 May 2017 entered into between the Vendor, the Offeror and the Guarantor in respect of the sale and purchase of the Sale Shares
“Stock Exchange”
The Stock Exchange of Hong Kong Limited
“subsidiaries” has the meaning ascribed to it under the GEM Listing Rules
“Takeovers Code” the Hong Kong Code on Takeovers and Mergers
“US$” United States Dollars, the lawful currency of the United States of America
“Vendor”

Melco LottVentures Holdings Limited, a company incorporated in the British Virgin Islands, and is the beneficial owner of the Sale Shares, representing 40.65% of the issued share capital of the Company. The Vendor is an indirect wholly-owned subsidiary of the Guarantor

“%”

per cent

By order of the board of By order of the Board of 500.com Limited MelcoLot Limited Pan Zhengming Ko Chun Fung, Henry Director Executive Director and Chief Executive Officer

Hong Kong, 29 May 2017

As at the date of this joint announcement, the Board comprises the following Directors:

Executive Directors:

Mr. Ko Chun Fung, Henry Mr. Tsang Yuen Wai, Samuel Mr. Tam Chi Wai, Dennis

Non-executive Director:

Mr. Tsui Che Yin, Frank

Independent non-executive Directors:

Mr. Tsoi, David Mr. Pang Hing Chung, Alfred Ms. Chan Po Yi, Patsy

This joint announcement, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the GEM Listing Rules for the purpose of giving information with regard to the Company. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief the information contained in this joint announcement (other than the information relating to the Offeror and parties acting in concert with it and the future intention of the Offeror regarding the Group) is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this joint announcement misleading.

The Directors jointly and severally accept full responsibility for the accuracy of the information contained in this joint announcement (other than information relating to the Offeror and parties acting in concert with it and the future intention of the Offeror regarding the Group) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this joint announcement (other than those expressed by the Offeror and parties acting in concert with it) have been arrived at after due and careful consideration and there are no other facts not contained in this joint announcement, the omission of which would make any statement in this joint announcement misleading.

As at the date of this joint announcement, the directors of the Offeror are Lian Qi, Bo Yu, and Zhengming Pan; the independent directors are Honghui Deng, Yu Wei, Qian Sun and Angel Yan Ki Wong. All directors of the Offeror jointly and severally accept full responsibility for the accuracy of the information contained in this joint announcement including the information on the Offerors’ intention towards the Group (other than information relating to the Group) and confirm, having made all reasonable inquiries, that to the best of their knowledge, opinions expressed in this joint announcement (other than those expressed by the Group) have been arrived at after due and careful consideration and there are no other facts not contained in this joint announcement, the omission of which would make any statement in this joint announcement misleading.

This joint announcement will remain on the “Latest Company Announcements” page of the GEM website at www.hkgem.com for at least seven days from the date of its posting and on the website of the Company at www.melcolot.com.

Unless otherwise specified, conversions of US$ into HK$ in this joint announcement are based on the exchange rate of US$1.00 = HK$7.75 for illustration purpose only. No representation is made that any amounts in US$ or HK$ can be or could have been converted at the relevant dates at the above rate or any other rates or at all.

In the case of inconsistency, the English text of this joint announcement shall prevail over the Chinese text.

AI assistant

Crypto Flow Technology Limited — M&A Activity 2017

51323_rns_2017-05-29_5df9f1a7-2b35-4aa9-8f81-b5b9fb8b64e0.pdf

JOINT ANNOUNCEMENT

AND

Financial adviser to the Offeror

SHARE PURCHASE AGREEMENT

POSSIBLE CONDITIONAL MANDATORY CASH OFFERS

The Share Offer

The Option Offer

INDEPENDENT BOARD COMMITTEE

INDEPENDENT FINANCIAL ADVISER

COMPOSITE DOCUMENT

SHARE PURCHASE AGREEMENT

Subject matter

Consideration for the Sale Shares

Conditions precedent to Completion

Completion

Resignation of the CEO and head of human resources of the Group

Retention bonus and loyalty bonus

POSSIBLE CONDITIONAL MANDATORY CASH OFFERS

The Share Offer and the Option Offer

The Share Offer

The Option Offer

Comparisons of value

Highest and lowest Share prices

Value of the Offers

Confirmation of financial resources

Dealing and interest in the Company’s securities

Other arrangements

Effect of accepting the Offers

Hong Kong stamp duty

Payment

Taxation advice

Overseas Shareholders and Overseas Optionholders

SHAREHOLDING STRUCTURE OF THE COMPANY

INFORMATION ON THE PARTIES

The Group

The Offeror

FUTURE INTENTIONS OF THE OFFEROR REGARDING THE GROUP

Proposed change of Board composition

Public float and maintaining the listing status of the Company

GENERAL

Independent financial adviser

Independent Board Committee

Despatch of the Composite Document

Disclosure of dealings

“Responsibilities of stockbrokers, banks and other intermediaries

DEFINITIONS

Executive Directors:

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Crypto Flow Technology Limited M&A Activity 2017