Esprit Holdings Limited — Capital/Financing Update 2000

Feb 3, 2000

Listed Company Information

AKAI HOLDINGS<0448>,TOYO HOLDINGS<0094> & GRANDE HOLDINGS<0186> - Joint 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. Akai Holdings Limited (incorporated in Bermuda with limited liability) Toyo Holdings Limited (incorporated in Bermuda with limited liability) The Grande Holdings Limited (incorporated in Bermuda with limited liability) PROPOSED OPEN OFFER OF SECURED CONVERTIBLE BONDS TO EXISTING SHAREHOLDERS OF AKAI HOLDINGS LIMITED ON THE BASIS OF CONVERTIBLE BONDS IN THE PRINCIPAL AMOUNT OF HK$0.20 FOR EVERY SHARE HELD BY ELIGIBLE SHAREHOLDERS AND MAJOR TRANSACTION FOR TOYO HOLDINGS LIMITED AND DISCLOSEABLE TRANSACTION FOR THE GRANDE HOLDINGS LIMITED Financial Advisers to Akai Holdings Limited PACIFIC CHALLENGE CAPITAL LIMITED The previous underwriting agreement dated 15th November, 1999 entered into between the Company and Toyo for the underwriting by Toyo of the Company's open offer of convertible bonds in the principal amount of HK$0.30 for every two Shares held by the Eligible Shareholders has lapsed since 12:00 a.m. on 1st February, 2000. After arm's length negotiation between the Company and Toyo, the Company proposes to raise up to approximately HK$335 million by issuing Convertible Bonds in an aggregate principal amount of up to approximately HK$335 million by way of an open offer to Eligible Shareholders, in the proportion of Convertible Bonds in the principal amount of HK$0.20 for every Share then held as at the Record Date, and being fully underwritten by Toyo. The pro forma unaudited consolidated net tangible assets value of the Company as at 31st December, 1999 was approximately HK$101 million. The Convertible Bonds will be issued at an issue price equal to 75% of the principal amount of the Convertible Bonds. Bondholders may convert the Convertible Bonds at the Conversion Price at any time between the date of issue to five years thereafter. The Convertible Bonds are only repayable after the first year following the issue, in whole or in part at the option of the Company at a price equal to the principal amount of the Convertible Bonds to be redeemed, together with accrued interest, provided that the closing price of the Shares in the Company is 500% or more of the Conversion Price for twenty consecutive trading days the last of which shall occur no more than five days prior to the date on which the notice of such redemption is published. Unless previously converted, redeemed or purchased and cancelled, the Convertible Bonds will be redeemed on the Maturity Date. Toyo will have the option, under the Underwriting Agreement, to require the Company to allot and issue to it or its nominee further Convertible Bonds up to a principal amount of not more than 100% of the principal amount of the Convertible Bonds subscribed for under the Open Offer by Shareholders other than Toyo or its associates (as defined in the Listing Rules). It is a term of the Underwriting Agreement that if Toyo exercises such option, it will exercise such right to subscribe for a minimum of 25% of such principal amount subscribed by Shareholders other than Toyo or its associates. The entering into of the Underwriting Agreement by Toyo, a subsidiary of Grande, constitutes a discloseable transaction for Grande. A circular in respect of the Underwriting Agreement will be despatched to shareholders of Grande as soon as possible. The entering into of the Underwriting Agreement constitutes a major transaction for Toyo. However, Grande, the major shareholder holding approximately 56.39% interests of Toyo, has approved the entering into of the Underwriting Agreement by Toyo with the Company by way of written certificate in lieu of a resolution to be passed at a shareholders' meeting. Grande has no material interest in the transaction. A circular in respect of the Underwriting Agreement will be despatched to shareholders of Toyo as soon as possible. The Company will send a circular giving details of the Open Offer and, if the Open Offer is approved by the Shareholders, the Offering Circular together with provisional allotment letters and forms of application of excess Convertible Bonds to all Eligible Shareholders. To qualify for the Open Offer, all transfers of Shares accompanied by relevant share certificates must be lodged for registration by 4:00 p.m. on 22nd March, 2000. The net proceeds from the Open Offer is estimated to be ranging from HK$319 million (assuming no subscription by Shareholders and full underwriting by the Underwriter) to HK$660 million (assuming full subscription of the Shareholders and full subscription of the Optional Bonds), after deducting the underwriting commission and the expenses relating to the Open Offer. The net proceeds from the Open Offer will be used as general working capital for the Company. Such net proceeds will not be applied for the settlement of any outstanding bank indebtedness. The proposed Open Offer is subject to the fulfillment of the conditions set out under the section headed "Conditions of the Underwriting Agreement" below. Accordingly, the proposed Open Offer may or may not be proceeded. BACKGROUND The previous underwriting agreement dated 15th November, 1999 entered into between the Company and Toyo for the underwriting by Toyo of the Company's open offer of convertible bonds in the principal amount of HK$0.30 for every two Shares held by the Eligible Shareholders has lapsed since 12:00 a.m. on 1st February, 2000. After arm's length negotiation between the Company and Toyo, the Company proposes to raise up to approximately HK$335 million by issuing the Convertible Bonds in an aggregate principal amount of up to approximately HK$335 million by way of the Open Offer to the Eligible Shareholders. The Open Offer, being fully underwritten by Toyo, will be in the proportion of Convertible Bonds in the principal amount of HK$0.20 for every Share then held as at the Record Date at the Issue Price (as defined below) payable in full upon acceptance. The existing issued share capital of the Company is 2,191,302,089 Shares. As at the date of the announcement, the Company also has outstanding Options to subscribe for 43,604,000 Shares. The Company has entered into an Underwriting Agreement with Toyo, an independent third party to the Company, to underwrite the Open Offer on 2nd February, 2000. The pro forma unaudited consolidated net tangible assets value of the Company as at 31st December, 1999 was approximately HK$101 million. The Company has appointed Pacific Challenge Capital Limited as its financial advisers in respect of the proposed Open Offer. THE CONVERTIBLE BONDS The principal terms of the Convertible Bonds Issuer : The Company Issue size : An aggregate principal amount of not less than HK$328,695,313.35 (assuming no Options will be exercised) and not more than HK$335,235,913.35 (assuming all Options having been exercised) Maturity : Five years after the date of issue Issue price : 75% of the principal amount of the Convertible Bonds Interest : 3% per annum payable semi annually in arrears Redemption price : 100% of the principal amount of the Convertible Bonds Conversion price : The conversion price is HK$0.10 per share in the Company as at the date hereof. The conversion price will be subject to adjustment for, amongst other things, subdivision or consolidation of the Shares, bonus issues, right issues and other dilutive events. In the event of such adjustment, an announcement will be issued Conversion : The Convertible Bonds will be convertible in whole or in part at any time at the option of the holders Redemption at the option of the Issuer : The Convertible Bonds are not repayable at the option of the Issuer for the first year following the issue. The Convertible Bonds are repayable in whole or in part at the option of the Issuer at a price equal to the principal amount of the Convertible Bonds to be redeemed, together with accrued interest, provided that the closing price of the Shares in the Company is 500% or more of the conversion price for twenty consecutive trading days the last of which shall occur not more than five days prior to the date on which the notice of such redemption is published Form : The Convertible Bonds will be in registered form only. Each Convertible Bond will be in the denomination of HK$0.10 or such other denomination as the Underwriter and the Company may agree Taxation : Interest payments to be made free of withholding tax or other deductions. The Issuer may redeem all, but not some only, of the Convertible Bonds at a price equal to the principal amount of the Convertible Bonds to be redeemed, together with accrued interest in the event of certain changes in Bermuda or Hong Kong taxation Status of the Convertible Bonds : senior secured, direct and unconditional obligations of the Issuer Events of default : Standard provisions to be agreed between the Company and the Underwriter and set out in the instrument constituting the Convertible Bonds Listing and transferability : No application will be made for a listing of, or permission to deal in, the Convertible Bonds on any exchange. Subject to the approval of the Bermuda Monetary Authority, the Convertible Bonds are freely transferable. Application will be made for the listing of the Shares upon conversion Governing law : Hong Kong Law. On the basis that no further Shares are issued prior to the Record Date and assuming all the Convertible Bonds are fully subscribed and are converted immediately, 4,382,604,178 New Shares would fall to be issued by the Company, representing approximately 200% of the Company's existing issued share capital, or approximately 66.67% of the Company's issued share capital as enlarged by the New Shares. On the basis that the Options are exercised and 43,604,000 Shares are issued in full prior to the Record Date and assuming all the Convertible Bonds are fully subscribed and are converted immediately, a maximum number of 4,469,812,178 New Shares would fall to be issued by the Company, representing approximately 200% of the Company's issued share capital after exercise of Options but before conversion of the Convertible Bonds, or approximately 66.67% of the Company's issued share capital as enlarged by the exercise of the New Shares. As at the date hereof, two connected persons of the Company are eligible for the subscription of the Convertible Bonds. Mr. James Henry Ting, director of the Company having a 5% interest in the Company has indicated that he will subscribe for the Convertible Bonds. Mr. Chuck Cheuk Hung Tam, a director of the Company having a 0.50% interest in the Company has not indicated whether he will subscribe for the Convertible Bonds. Certificates Certificates for the Convertible Bonds are expected to be posted to subscribers as soon as practicable after the Final Acceptance Date. THE OPEN OFFER The Open Offer (a) the Company shall provisionally allot the Convertible Bonds to the Eligible Shareholders in the proportion of Convertible Bonds in the principal amount of HK$0.20 for every Share then held as at the Record Date; (b) the Company shall offer the Convertible Bonds to the Eligible Shareholders at the Issue Price by posting the Open Offer Documents to such Eligible Shareholders on the Posting Date, on the basis that payment for each Convertible Bond shall be made in full on acceptance not later than 4:00 p.m. on the Final Acceptance Date; and (c) the Convertible Bonds provisionally allotted but not accepted shall be available for subscription by the Eligible Shareholders through the Excess Application Form. The Convertible Bonds will not be offered to the Overseas Shareholders as the Offering Circular will not be registered nor filed in countries other than Hong Kong and Bermuda. The Issue The Company shall duly issue the Convertible Bonds validly accepted or validly applied for as soon as practicable after the Final Acceptance Date and shall issue certificates for the Convertible Bonds to the respective subscribers in accordance with the terms of the Open Offer Documents. The Optional Bonds shall be duly issued and certificates in respect thereof shall be issued in such names and in such denominations as the Underwriter may require and the same shall be delivered to the Underwriter or as it may direct, as soon as is reasonable practicable following receipt by the Company of payment of the aggregate Issue Price of the Optional Bonds less any amounts to be set-off against any debts owed by the Company to the Underwriter pursuant to the Loan Agreement and, against such payment and/or set-off. The Conversion Price The Conversion Price of the Convertible Bond is initially HK$0.10 per Share. The closing price on 2nd February, 2000, the date of this announcement, was quoted as HK$0.235 per Share, and the 10 day average closing price up to and including the date of this announcement was HK$0.1868 per Share. Accordingly, the Conversion Price represents a discount of approximately 57.45% with respect to the closing price on the date of this announcement and a discount of approximately 46.47% with respect to the 10 day average closing price up to and including the date of this announcement. UNDERTAKING OF THE COMPANY (a) Pursuant to the Underwriting Agreement, the Company undertakes with the Underwriter that for so long as the Underwriter and any of its associates have an aggregate interests of not less than 25% in the capital of the Company (inclusive of outstanding Convertible Bonds held by the Underwriter and its nominee) as enlarged by assuming that all the outstanding Options are fully exercised and all the outstanding Convertible Bonds are fully converted, the Company shall procure that the Directors nominated by the Underwriter from time to time shall constitute the majority of the members of the Board from time to time. (b) Pursuant to the Underwriting Agreement, the Underwriter is entitled to assign all its rights and obligations under the Underwriting Agreement to any person as the Underwriter may appoint and the Company has undertaken and convenanted with the Underwriter that the Company shall execute such further documents instruments and deeds and do such further acts to validly assign all the rights and obligations of the Underwriter under the Underwriting Agreement to such person. Further announcement will be made by Toyo if Toyo assigns its rights and obligations under the Underwriting Agreement to any person. UNDERWRITING AGREEMENT The Underwriter Toyo, being the Underwriter of the Open Offer, is independent of and not connected with the Company, any of the directors, chief executives, substantial shareholders of the Company or any of its subsidiaries or any of their respective associates. As at the date of this announcement, Toyo does not hold any shareholding interest in the Company. The Underwriting As at the date of this announcement, Toyo has agreed to underwrite the Open Offer the Convertible Bonds in an aggregate amount of not less than HK$328,695,313.35 and not more than HK$335,235,913.35. The Company shall keep the Underwriter regularly informed of the respective amounts of the Convertible Bonds validly accepted and validly applied for during the period up to 4:00 p.m. on the Final Acceptance Date and shall notify the Underwriter in writing as soon as practicable thereafter (and in any event not later than 4:00 p.m. on the business day after the Final Acceptance Date) of the total number of the Convertible Bonds for which the Underwriter is called upon to subscribe. Subject to the provisions set out in the section headed "Termination" below, if and to the extent that at 4:00 p.m. on the Final Acceptance Date there shall remain any of the Convertible Bonds under the Open Offer which have not been duly accepted by the Eligible Shareholders by the Company, the Underwriter shall subscribe or procure subscribers for the same on the terms of the Open Offer Documents and shall pay or procure to be paid to the Company at 5:00 p.m. on the Settlement Date the amount due in respect thereof (less the amount of fees and underwriting commission payable to the Underwriter in accordance with the schedule set forth under the section headed "The Underwriting Commission" and any amounts to be set-off against any debts owed by the Company to the Underwriter at the Settlement Date pursuant to the Loan Agreement). The Underwriting Commission (a) an underwriting commission of 2.5 per cent. of the Issue Price of the Convertible Bonds; and (b) all such reasonable fees and expenses (including legal expenses) as may have been properly incurred by the Underwriter in connection with the Open Offer and its associated transactions. Conditions of the Underwriting Agreement (a) the passing at the SGM (or any adjournment thereof) by Shareholders of the necessary resolution(s) to implement the Open Offer and the issue of the Optional Bonds; (b) the Bermuda Monetary Authority granting permission for the issue of the Convertible Bonds and the Optional Bonds and the allotment and issue of the New Shares (if necessary); (c) the Listing Committee of the Stock Exchange granting listing of, and permission to deal in the New Shares; (d) registration of all documents relating to the Open Offer by the Registrar of Companies in Hong Kong and the due filing of all documents relating to the Open Offer at the Registrar of Companies in Bermuda as required by the relevant laws of Hong Kong and Bermuda, respectively; (e) the obtaining of any approval as required by any regulatory authority; (f) each of the Winding-up Petitions having been withdrawn or dismissed in a manner that is to the satisfaction of the Underwriter in its absolute discretion and no creditor having applied for or been substituted as petitioners and that no other winding-up petition having been presented to the court in any jurisdiction in respect of the Company or any member of the Group; (g) valid securities having been provided by the Company in favour of the holders of the Convertible Bonds in a form that is to the satisfaction of the Underwriter in its absolute discretion and is also sufficient in the Underwriter's absolute discretion to secure the due performance of all the Company's obligations under the Convertible Bonds; and (h) the Underwriter notifying the Company in writing that it is satisfied in all respects in its absolute discretion with the progress of the debt restructuring arrangement for the Group. The securities for the Convertible Bonds will be created over certain assets of the Company insofar as the validity of such securities will not be adversely affected by any winding-up petitions. In the event of any of such conditions not being fulfilled on or before 31 March, 2000 (or such later date as the Underwriter may agree with the Company) all liabilities of the parties under the Underwriting Agreement shall cease and determine and no party shall have any claim against the others save that the Company shall pay to the Underwriter the fees and expenses incurred by the Underwriter in connection with the Open Offer and its associated transactions pursuant to the Underwriting Agreement. The Company shall exercise its reasonable endeavours to procure fulfillment of all the conditions mentioned in (a) to (d) and (f) to (h) above by the time specified on the above paragraph. The Company and the Underwriter shall exercise their reasonable endeavours to procure fulfillment of the conditions mentioned in (e) above by the time specified in the above paragraph. The Company undertakes that it will disclose to the Stock Exchange any dealings in the Convertible Bonds by any of the substantial shareholders or directors of the Company or any of its subsidiaries or their respective associates from time to time immediately upon the Company becoming aware of such dealings. The Company has approached approximately 20 to 25 of its bankers on 31st January, 2000, and the Company has verbally indicated that a proposed debt restructuring arrangement, including the withdrawal or dismissal of the Winding-up Petitions, will be forthcoming. The Company estimates that a written draft debt restructuring proposal will be available within one month's time. Termination If at any time prior to 5:00 p.m. on the Settlement Date, any of the conditions (f), (g) and (h) under the section headed "Conditions of the Underwriting Agreement" cannot be satisfied again, then the Underwriter may in its absolute discretion by notice in writing to the Company at any time prior to 5:00 p.m. on the Settlement Date rescind (save as specified below) the Underwriting Agreement and thereupon all obligations of the Underwriter shall cease and determine, in which event the Company shall not have any claim against the Underwriter for compensation, costs, damages or otherwise, provided always that the Company and the Underwriter shall thereupon forthwith give instructions to the registrar of the Company to return all monies received from subscribers of the Convertible Bonds and provided further that all costs, charges and expenses which have been properly incurred by the Underwriter in connection with the Open Offer and its associated transactions will be borne by the Company. Issue of the Optional Bonds Under the Underwriting Agreement, the Underwriter is granted the right to require the Company to allot and issue to it or its nominee further Convertible Bonds up to a principal amount of not more than the principal amount of the Convertible Bonds subscribed for under the Open Offer by Shareholders other than the Underwriter or its associates. The further Convertible Bonds will be issued at the Issue Price payable in full on application. The Underwriter's Option shall be exercisable only during the period between the Final Acceptance Date and the Settlement Date (both dates inclusive). It is a term of the Underwriting Agreement that the Underwriter's Option must be exercised in respect of not less than 25% of the total principal amount of the Optional Bonds. Completion of the allotment of the Optional Bonds shall take place at 5:00 p.m. on the Settlement Date when the Underwriter shall pay the aggregate Issue Price less any amounts to be set- off against any debts owed by the Company to the Underwriter pursuant to the Loan Agreement and, against such payment and/or set-off, the Company shall deliver to the Underwriter definitive certificates for the Optional Bonds. (a) (b) (c) (d) (e) (f) (g) (h) Existing Shares Number of Number of Number of Total number Shareholding Shareholding number of issued upon Shares Shares Shares of Shares after of Toyo on of Toyo on Shares exercise of converted by converted by converted by dilution original share enlarged Options Eligible Toyo under its Toyo upon capital share capital Shareholders underwriting conversion of (d+e)/(a+b) (d+e)/(f) commitment Optional Bonds 1. 2,191,302,089 0 0 4,382,604,178 0 6,573,906,267 200% 66.67% 2. 2,191,302,089 43,604,000 0 4,469,812,178 0 6,704,718,267 200% 66.67% 3. 2,191,302,089 0 4,382,604,178 0 1.095.651.044 7,669,557,311 50% 14.29% 4. 2,191,302,089 43,604,000 4,469,812,178 0 1,117,453,044 7,822,171,311 50% 14.29% 5. 2,191,302,089 0 4,382,604,178 0 4,382,604,178 10,956,510,445 200% 40% 6. 2,191,302,089 43,604,000 4,469,812,178 0 4,469,812,178 11,174,530,445 200% 40% Notes: 1. No Options exercised, no subscription by Eligible Shareholders, Underwriter fully underwrite and convert; 2. All Options exercised, no subscription by Eligible Shareholders, Underwriter fully underwrite and convert; 3. No Options exercised, full subscription by Eligible Shareholders, no underwriting commitment arisen, and Underwriter exercise 25% of the Underwriter's Options; 4. All Options exercised, full subscription by Eligible Shareholders, no underwriting commitment arisen, and Underwriter exercise 25% of the Underwriter's Options; 5. No Options exercised, full subscription by Eligible Shareholders, no underwriting commitment arisen, and Underwriter exercise 100% of the Underwriter's Options; 6. All Options exercised, full subscription by Eligible Shareholders, no underwriting commitment arisen, and Underwriter exercise 100% of the Underwriter's Options; As set out in the preceding table, the maximum shareholding of Toyo under the scenarios presented above based on the enlarged share capital of the Company is 66.67%. Therefore the Company will be able to comply with the public float requirement under the Listing Rules upon full conversion of the Convertible Bonds. TIMETABLE FOR THE OPEN OFFER Signing of the Underwriting Agreement 2nd February, 2000 Date of announcement to notify open offer and the proposed special general meeting to approve increase in authorized share capital and creation of Convertible Bonds 2nd February, 2000 Date of despatch of circular 28th February, 2000 Last day of dealings in Shares on a cum-entitlement basis 20th March, 2000 First day of dealings in Shares on an ex-entitlement basis 21st March, 2000 Latest time for Shareholders to lodge transfer of the Shares with the registrar in order to qualify for the proposed Open Offer 22nd March, 2000 (4:00 p.m.) Register of members closed to determine eligibility for the Open Offer 23rd March, 2000 Record Date 24th March, 2000 Latest time for lodging the proxy forms 25th March, 2000 (10:00 a.m.) Date of SGM 27th March, 2000 (10:00 a.m.) Register of members re-open 28th March, 2000 Despatch of the Offering Circular for the Open Offer, form of acceptance and form for Excess Application Form 29th March, 2000 Latest time for acceptance of the Open Offer and payment 13th April, 2000 Announcement of results of the Open Offer 17th April, 2000 Despatch of refund cheques for wholly or partially unsuccessful excess applications 18th April, 2000 Despatch of certificates for the Convertible Bonds 18th April, 2000 USE OF PROCEEDS OF THE OPEN OFFER The net proceeds from the Open Offer is estimated to be ranging from HK$319 million to HK$660 million, after deducting the underwriting commission and the expenses relating to the Open Offer. The minimum amount of such proceeds is arrived at by assuming (i) no Option will have been exercised on or before the Record Date so that the number of Shares in issue at the Record Date is 2,191,302,089 Shares; (ii) the Underwriter has taken up the whole issuance of Convertible Bonds, namely in the principle amount of HK$328,695,313.35. The gross proceeds amounts to HK$328,695,313.35. The maximum amount of proceeds is arrived at by assuming (i) all Options will have been exercised before the Record Date, leading to an increase in the issued share capital to 2,234,906,089 Shares at the Record Date; (ii) all Convertible Bonds issued in accordance with the Open Offer, namely in the principal amount of HK$335,235,913.35, have been fully subscribed for by the Eligible Shareholders; (iii) the Underwriter fully exercise its Underwriter's Option to subscribe for further Convertible Bonds of a principal amount equal to the aggregate principal amount of the Convertible Bonds subscribed for by the Eligible Shareholders, namely in the principal amount of HK$335,235,913.35. The gross proceeds amounts to HK$670,471,826.70. The net proceeds from the Open Offer will be used as general working capital for the Company. Such net proceeds will not be applied for the settlement of any outstanding bank indebtedness. The Company does not intend to utilize such proceeds for any material acquisition or realization of assets. REASONS AND BENEFITS OF THE UNDERWRITING AGREEMENT The Company was formerly a substantial shareholder of Toyo. Up to May, 1999, Toyo was an associated company of the Company. The Company gradually disposed of its shareholding interest in Toyo to the public during the months between June to August, 1999, and as of the middle of September, 1999, it has disposed of its entire shareholding interest in Toyo. As from the middle of September, 1999, Toyo is independent of and not connected with the Company, any of the directors, chief executives, substantial shareholders of the Company or any of its subsidiaries or any of their respective associates. At present, the Company is one of the sub-contractors of Toyo. The principal businesses of Toyo and its subsidiaries include the design, manufacture and sale of popular priced consumer audio and video products, components and other consumer products. The principal businesses of the Company and its subsidiaries are the manufacture, distribution and retail of consumer durables and consumer electronics products. The Company is equipped with advanced production facilities. Due to the similar but non-competitive nature of the business of Toyo and the Company, the directors of Toyo and Grande believe that the underwriting of the Open Offer will serve to build a strategic alliance between Toyo and the Company. Toyo will further secure its sub-contracting resources to capture more share of its customers, while the Company will increase its production facility utilization and enjoy a better profitability. The alliance will facilitate technology transfer between Toyo and the Company and consolidate their production facilities which are both principally located in Zhong Shan, the PRC. GENERAL A circular containing further details of the Open Offer, the letter from the independent board committee, the letter of advice of the independent financial adviser and the notice of the SGM will be despatched to the Shareholders on or before 28th February, 2000. An independent financial adviser will be appointed as soon as possible. The entering into of the Underwriting Agreement by Toyo constitutes a discloseable transaction for Grande. A circular in respect of the Underwriting Agreement will be despatched to shareholders of Grande as soon as possible. The entering into of the Underwriting Agreement constitutes a major transaction for Toyo. Grande, a major shareholder holding approximately 56.39% interest of Toyo and an independent third party not connected with the Company under the Listing Rules, has approved the entering into of the Underwriting Agreement by way of written certificate. A circular in respect of the Underwriting Agreement will be despatched to shareholders of Toyo as soon as possible. It is the intention of the Directors to maintain the listing of the Shares on the Stock Exchange. Accordingly, the Directors and the Company will jointly and severally undertake to the Stock Exchange to take appropriate steps to ensure that sufficient public float exists for the Shares. The Stock Exchange has stated that it will closely monitor trading in the Shares if less than 25 per cent. of the Shares are held by the public. The Directors are aware of the possibility of the Company's public float falling below 25 per cent. and will address this issue accordingly. The Stock Exchange will closely monitor all acquisitions or disposals of assets by the Group. It has the discretion to require the Company to issue a circular to its shareholders irrespective of the size of the proposed transaction, particularly when such proposed transaction represents a departure from the principal activities of the Group, or which would result in a change in the largest substantial shareholder. The Stock Exchange also has the power to aggregate a series of transactions, and any such transaction that may result in the Company being treated as if it were a new listing applicant. If the Stock Exchange believes that: - a false market exists or may exist in the Shares; or - there are too few Shares in public hands to maintain an orderly market, it will consider exercising its discretion to suspend trading in the Shares. The Open Offer may or may not be proceeded. Shareholders and potential investors are advised to exercise caution when dealing in the shares of the Company and Toyo. The following statements are made at the request of the Stock Exchange. The directors of the Company have noted the recent movement in the price and trading volume of the Shares and wish to state that they are not aware of any reasons for such changes. Other than those disclosed in this announcement and the announcement published on 2nd February, 2000, the directors of the Company also confirm that there is no negotiation or agreement relating to intended acquisition or realization which are discloseable under paragraph 3 of the Listing Agreement, neither is the board of Directors aware of any matter discloseable under the general obligation imposed by paragraph 2 of the Listing Agreement which is or may be of a price-sensitive nature. The directors of Toyo have noted the recent movement in the price and trading volume of the shares of Toyo and wish to state that they are not aware of any reasons for such changes. Other than those disclosed in this announcement and the announcement published on 2nd February, 2000, the directors of Toyo also confirm that there is no negotiation or agreement relating to intended acquisition or realization which are discloseable under paragraph 3 of the Listing Agreement, neither is the board of directors of Toyo aware of any matter discloseable under the general obligation imposed by paragraph 2 of the Listing Agreement which is or may be of a price-sensitive nature. TERMS AND DEFINITIONS "Allotment Letter" the provisional allotment letter representing the Convertible Bonds proposed to be issued, being in such form as may be agreed between the Company and the Underwriter, both acting reasonably "associates" having the same meaning as set out in the Listing Rules "Bondholders" holders of the Convertible Bonds "Akai", "Company" or "Issuer" Akai Holdings Limited, a company incorporated in Bermuda with limited liability, the securities of which are listed on the Stock Exchange "Conversion Price" the conversion price of HK$0.10 per New Share of the Convertible Bonds as at the date hereof (subject to adjustment pursuant to the terms of the deed poll constituting the Convertible Bonds) "Convertible Bond(s)" 3% convertible bonds, including the Optional Bonds, in the denomination of HK$0.10 each or such other denomination as the Underwriter and the Company may agree to be constituted by a deed poll to be executed by the Company in a form to be agreed between the Company and the Underwriter "Eligible Shareholders" Shareholders, other than Overseas Shareholders, whose names appear on the register of members of the Company on the Record Date "Excess Application Form" the form of application for excess Convertible Bonds proposed to be issued under the Open Offer "Final Acceptance Date" the last day for acceptance of the Open Offer, being 13th April, 2000 or such other date as the Underwriter may approve "Grande" The Grande Holdings Limited, a company incorporated in Bermuda with limited liability, the securities of which are listed on the Stock Exchange "Group" the Company and its subsidiaries "Issue Price" 75% of the principal amount of the Convertible Bonds "Listing Rules" the Rules Governing the Listing of Securities on the Stock Exchange "Loan" any outstanding indebtedness owing by the Company to Toyo under the Loan Agreement "Loan Agreement" the loan agreement constituted by the on demand revolving loan facility letter issued by the Underwriter to the Company on 15th November, 1999 relating to a credit facility of a maximum principal amount of HK$630 million "Maturity Date" the date on which each outstanding Convertible Bond will be redeemed, being the fifth anniversary of its date of issue "New Shares" shares to be allotted and issued by the Company in fulfillment of any conversion of the Convertible Bonds and the Optional Bonds "Offering Circular" an offering circular relating to the Open Offer to be prepared by the Company and approved by the Underwriter (such approval not to be unreasonably withheld or delayed) and despatched to the Eligible Shareholders and, for information only, to the Overseas Shareholders and holders of Options "Open Offer" the Open Offer to the Eligible Shareholders of Convertible Bonds in an aggregate amount of not less than HK$328,695,313.35 and not more than HK$335,235,913.35 to be issued at the Issue Price on and subject to the principal terms and conditions set out in the Underwriting Agreement "Open Offer Documents" the Offering Circular, the Allotment Letter and the Excess Application Form "Options" the options granted under the share option scheme adopted by the Company conferring the holders thereof rights to subscribe for 43,604,000 Shares at a subscription price determined in accordance with such scheme and which are outstanding on the date of this Announcement "Optional Bonds" the Convertible Bonds falling to be allotted and issued to the Underwriter upon the exercise of the Underwriter's Option "Overseas Shareholders" Shareholders whose addresses, as shown in the register of members of the Company on the Record Date, are outside of Hong Kong "Posting Date" the date of posting of the Open Offer Documents to such Eligible Shareholders, being 29th March, 2000 or such other date as the Underwriter may approve "Record Date" the date by reference to which entitlements of the Eligible Shareholders to the Open Offer will be determined, being 24th March, 2000 or such other date as the Company and the Underwriter may agree "Settlement Date" the day being the third business day following the Final Acceptance Date "SGM" the special general meeting of the Company to be convened on or about 27th March, 2000 or such other date as the Underwriter may agree in writing with the Company "Shares" shares of HK$0.10 each in the share capital of the Company, of which 2,191,302,089 Shares are in issue "Shareholders" holders of Shares "Stock Exchange" The Stock Exchange of Hong Kong Limited "Toyo" or "Underwriter" Toyo Holdings Limited, a company incorporated in Bermuda with limited liability, the securities of which are listed on the Stock Exchange "Underwriter's Option" the option granted to the Underwriter under the Underwriting Agreement giving the Underwriter or its nominee the right to subscribe further Convertible Bonds of an amount not less than 25% and not more than 100% of the aggregate principal amount of the Convertible Bonds subscribed for under the Open Offer by the Eligible Shareholders "Underwriting Agreement" the agreement dated 2nd February, 2000 between the Company and the Underwriter relating to the underwriting of the Open Offer "Winding-up Petitions" the winding-up petitions (Companies (Winding-up) No. HCCW 49 of 2000 and No. HCCW 50 of 2000) presented to the Hong Kong Court both on 13th January, 2000 against each of the Company and Kong Wah Holdings Limited, an indirect non-wholly owned subsidiary of the Company "HK$", "dollar" or "cents" Hong Kong dollars and cents, respectively, the lawful currency of Hong Kong By Order of the Board Akai Holdings Limited James Henry Ting Chairman and Chief Executive By Order of the Board Toyo Holdings Limited Christopher W. Ho Executive Chairman By order of the Board The Grande Holdings Limited Christopher W. Ho President and Chief Executive Hong Kong, 2nd February, 2000