Hang Lung Group Limited — M&A Activity 1999

Oct 14, 1999

Listed Company Information

PAC CENT CYBER<1186>-Announcement & Resumption of Trading 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. PACIFIC CENTURY CYBERWORKS LIMITED (Incorporated in Hong Kong with limited liability) ANNOUNCEMENT ACQUISITION OF INTEREST IN SOFTNET (Discloseable Transaction) AND PLACING OF EXISTING SHARES AND SUBSCRIPTION OF NEW SHARES On 12th October, 1999, the Company entered into an Acquisition Agreement with SoftNet for the subscription by the Company of 5,000,000 SoftNet Shares, representing approximately 22.5% of the enlarged issued share capital of SoftNet. The aggregate consideration for the Acquisition shall be about US$129 million (about HK$998 million), which will be fully satisfied in cash subject to the fulfillment or waiver (as applicable) of certain conditions as set out below. On 12th October, 1999, PCG and PCRD entered into a Placing and Underwriting Agreement with the Placing Agents, pursuant to which, the Placing Agents will acquire or procure purchasers to acquire, and PCG and PCRD will sell, an aggregate of 635,000,000 existing Shares at a price of HK$6.10 per Share. On the same day, PCG and PCRD entered into a Subscription Agreement with the Company for the subscription of an aggregate of 635,000,000 new Shares at the Placing Price. The Placing Price represents a discount of about 8.3% to the closing price of HK$6.65 per Share as quoted on the Stock Exchange on 12th October, 1999 (being the last day of trading of the Shares prior to suspension). Under the Placing and Underwriting Agreement, BNP Prime Peregrine has been granted the Option to acquire or procure purchasers to acquire from PCRD up to an additional 95,250,000 Shares at the Placing Price. Pursuant to the Subscription Agreement, PCG and PCRD have conditionally agreed to subscribe for an aggregae of 635,000,000 new Shares at HK$6.10 per Share, which is equivalent to the Placing Price (net of expenses). Should BNP Prime Peregrine exercise the Option, PCRD will, in addition to the 199,516,000 new Shares, subscribe for such number of new Shares, which is equal to the total number of Shares placed by BNP Prime Peregrine under the Option. As at the date of this announcement, Mr. Richard Li Tzar-Kai and his Associates including PCRD, PCG, and PCD, together with Intel, a connected person of the Company, together are interested in 5,668,812,268 Shares, representing about 73.7% of the issued share capital of the Company and about 68.0% of the enlarged issued share capital of the Company upon completion of the Placing and the Subscription and assuming the Option is not exercised. The Acquisition constitutes a discloseable transaction for the Company pursuant to Chapter 14 of the Listing Rules. A circular containing, amongst other things, details of the Acquisition will be despatched to shareholders of the Company as soon as practicable. Trading in the Shares was suspended at the request of the Company with effect from 10:00 a.m. on 13th October, 1999, pending the issue of this announcement. The Company has applied to the Stock Exchange for the resumption of trading in the Shares with effect from 10:00 a.m. on 14th October, 1999. Capitalised terms used herein are defined at the end of this announcement. THE ACQUISITION AGREEMENT Date 12th October, 1999 Parties Vendor : SoftNet, a public company incorporated in Delaware, the shares of which are listed on Nasdaq Purchaser : The Company SoftNet is independent of, and not connected with, the Company, the directors, chief executive or substantial shareholders of the Company, any of its subsidiaries or their respective Associates. SoftNet Shares to be subscribed 5,000,000 new SoftNet Shares, representing approximately 29% of the existing issued share capital of SoftNet and approximately 22.5% of the enlarged issued share capital of SoftNet. The Company intends to hold these SoftNet Shares as long term strategic investment. Consideration The consideration for the Acquisition shall be US$25.75 (about HK$199.6) per SoftNet Share, equal to the closing price of the SoftNet Shares as at 11th October, 1999. The aggregate consideration for the Acquisition amounting to US$129 million (about HK$998 million) will be fully satisfied in cash subject to the fulfillment or waiver (as applicable) of the conditions as set out in the section headed `Conditions precedent' below. The consideration was arrived at after arm's length negotiation between the parties to the Acquisition Agreement. The consideration of US$129 million (about HK$998 million) values SoftNet at about US$433.6 million (about HK$3,360.7 million), representing a premium of approximately 3,609% to the audited net asset value of SoftNet as at 30th September, 1998 of about US$12,016,000 (about HK$93,124,000). The Directors consider that the terms of the Acquisition Agreement are fair and reasonable and are beneficial to the Company and its shareholders taken as a whole. Conditions precedent Completion of the Acquisition is subject to the fulfillment or waiver (as applicable) by the Company of, inter alia, the following conditions: (i) the performance of all obligations contained in the Acquisition Agreement that are required to be performed by SoftNet; (ii) the performance of all obligations contained in the Acquisition Agreement that are required to be performed by the Company; and (iii) the expiration of the prescribed period under the US' Hart-Scott-Rodino Antitrust Improvements Act of 1976 and there being no provision of any applicable law or regulation and no judgement, injunction, order or decree which shall prohibit the consummation of the completion. The Acquisition Agreement is not conditional upon completion of the Placing. In the event that the Placing cannot become unconditional, the consideration for the Acquisition will be financed by the internal resources of the Company. Completion In accordance with the terms of the Acquisition Agreement, completion of the Acquisition Agreement shall take place no later than the fifth business day following the date of satisfaction of condition (iii) above (or such other time as the Company and SoftNet may agree) on or before 15th February, 2000. Board representation The Company shall be entitled to designate two directors to the board of directors of SoftNet for so long as the Company owns the SoftNet Shares to be issued pursuant to the Acquisition Agreement. In the event the Company sells or disposes of the SoftNet Shares, it shall be entitled to a number of directors that is pro rata to its ownership of the outstanding shares of the common stock of SoftNet (rounded down to the nearest whole number of directors). THE PLACING AND UNDERWRITING AGREEMENT Date 12th October, 1999 Parties Vendors : PCG (as to 435,484,000 Shares) PCRD (as to 199,516,000 Shares and up to an additional 95,250,000 Shares under the Option) Lead Manager and Placing Agent : BNP Prime Peregrine Placing Agents : HSBC Investment Bank Asia Limited Jardine Fleming Securities Limited Number of Shares to be placed If Option is not exercised: 635,000,000 Shares, representing about 8.3% of the existing issued share capital of the Company. The Shares to be placed also represents about 7.6% of the issued share capital of the Company as enlarged by the Placing of 635,000,000 Shares and about 4.9% of the issued share capital of the Company as enlarged by the Placing and assuming completion of the CMGI Transaction, the Star East Transaction and the SilkRoute Transaction and full conversion of the Convertible Bonds and exercise of Intel Option. If Option is fully exercised: 730,250,000 Shares, representing about 9.5% of the existing issued share capital of the Company. The Shares to be placed also represents about 8.7% of the issued share capital of the Company as enlarged by the Placing of 730,250,000 Shares and about 5.6% of the issued share capital of the Company as enlarged by the Placing and assuming completion of the CMGI Transaction, the Star East Transaction and the SilkRoute Transaction and full conversion of the Convertible Bonds and exercise of Intel Option. The Option BNP Prime Peregrine has been granted an option to acquire or procure purchasers to acquire from PCRD up to 95,250,000 additional Shares. Such additional Shares represent about 1.2% of the existing issued share capital of the Company. The Option is exercisable by BNP Prime Peregrine at any time up to and including 5:00 p.m. on the day trading of the Shares on the Stock Exchange is resumed, which is expected to be 14th October, 1999. A further announcement will be made by the Company if and when BNP Prime Peregrine has exercised the Option. The Placing Price HK$6.10 per Share, which represents a discount of approximately 8.3% to the closing price of HK$6.65 per Share as quoted on the Stock Exchange on 12th October, 1999 (being the last day of trading of the Shares prior to suspension). Such price also represents a discount of approximately 6.2% to the 10-day average closing price of HK$6.505 on and immediately preceding 12th October, 1999. Shares to be issued under the Option The Shares to be placed under the Placing and pursuant to the exercise of the Option (if applicable) will be sold free from all liens, charges, encumbrances, claims, options or any third party rights and together with all rights attaching thereto as at the date of this announcement, including the right to all dividends or other distributions which may be declared, paid or made after the date of the Placing and Underwriting Agreement. Independence of placees and the Placing Agents The placees are independent institutional, professional and other investors which are third parties who are independent of the Company, the directors, chief executive or substantial shareholders of the Company, any of its subsidiaries or their respective Associates. The Placing Agents are third party independent of the Company, the directors, chief executive or substantial shareholders of the Company, any of its subsidiaries or their respective Associates. Conditions and completion of the Placing The Authorised Agents have the right jointly to terminate the Placing and Underwriting Agreement if at any time prior to 9:30 a.m. on the second trading day after the resumption of trading of the Shares on the Stock Exchange (or such other date and time as may be agreed between PCG, PCRD and the Authorised Agents) should there be any occurrence of certain force majeure events including a change in national, international, financial, political, exchange control, industrial, legal, economic or market conditions in Hong Kong or the PRC as in the reasonable opinion of the Authorised Agents is or could reasonably be expected to be materially adverse to the business of the Company or in the context of the Placing; and any material breach of certain undertakings, representations and warranties set out in the Placing and Underwriting Agreement. THE SUBSCRIPTION AGREEMENT Date 12th October, 1999 Parties Issuer : The Company Subscribers : PCG (as to 435,484,000 Shares) PCRD (as to 199,516,000 Shares and up to an additional 95,250,000 Shares under the Option) Number of new Shares to be subscribed for 635,000,000 new Shares, representing about 8.3% of the existing issued share capital of the Company and about 7.6% of the issued share capital of the Company as enlarged by the issue of new Shares pursuant to the Subscription. Should BNP Prime Peregrine exercise the Option, PCRD will, in addition to the 199,516,000 new Shares, subscribe for such number of new Shares, which is equal to the total number of Shares placed by BNP Prime Peregrine under the Option. The new Shares will be issued pursuant to the general mandate granted to the Directors at the extraordinary general meeting of the Company held on 7th September, 1999. The Subscription price HK$6.10 per Share, which is equivalent to the Placing Price. Pursuant to the Subscription Agreement, the Company shall bear the costs and expenses of this transaction so that the proceeds received by the Company will be net of such costs and expenses. Ranking of new Shares The new Shares, when fully paid, will rank pari passu in all respects with the existing Shares. Conditions and completion of the Subscription The Subscription is conditional upon: -completion of the Placing pursuant to the terms of the Placing and Underwriting Agreement; and -the listing of, and permission to deal in, all the new Shares to be issued pursuant to the Subscription being granted by the Listing Committee of the Stock Exchange (and such permission and listing not subsequently being revoked prior to the delivery of definitive Share certificate(s) representing such new Shares). Completion of the Subscription and the issue of Shares under the Option shall take place on the second business day following the satisfaction of the conditions stated above has been fulfilled and in any event not later than 14 days after the date of the Placing and Underwriting Agreement (which is 12th October, 1999), or such other date as the Company and PCG and PCRD may agree in writing. If the Subscription is not completed within the aforesaid 14-day period, being on or before 26th October 1999, shareholders' approval from the independent shareholders of the Company will be required. Use of proceeds The net proceeds from the Subscription are estimated to amount to about HK$3,790 million, or about HK$4,359 million if the Option is exercised in full. It is intended that about US$129 million (about HK$998 million) will be used to satisfy the consideration of the Acquisition; US$100 million (about HK$775 million) will be applied towards funding the investment requirements of CyberWorks Ventures; and US$271 million (about HK$2,100 million) will be used for other strategic acquisitions of businesses that are synergistic to the business of PCC and as additional working capital of the Company and its subsidaries. Currently, the Company is in discussions with a number of parties in relation to such potential acquisitions. However, such discussions may or may not materialise. INFORMATION ON SOFTNET SoftNet is a public company incorporated in Delaware, US whose shares are listed on the Nasdaq. SoftNet, in conjunction with its two subsidiaries, ISP Channel and Intellicom, is a leading high speed broadband Internet access and content services company focused on partnering with small to mid-sized cable operators. Through ISP Channel, SoftNet provides a complete turnkey Internet service to partnering cable operators. ISP Channel's services to partnering cable operators include cable head-end equipment and integration, Internet backbone connectivity, and technical support and customer care. ISP Channel offers its customers high speed Internet access at speeds up to 500 KB per second when downloading files, graphics, audio and video. Additional ISP Channel services include e-mail, personal web pages, news groups, and full multi-media capabilities. ISP Channel also provides access to Microsoftr Internet Explorer and Netscape Navigator browsers. Through SoftNet's Intellicom subsidiary, SoftNet markets a satellite-based commercial Internet link. SoftNet's cost-saving technology infrastructure includes Intellicom's VSAT satellite links to its network operations center, which replace more expensive terrestrial telecommunications data lines. A summary of the audited results of SoftNet for the two years ended 30th September, 1998 is set out below. For the year ended 30th September 1998 1997 US$'000 US$'000 Turnover 14,060 21,338 Operating (16,929) (2,884) profit/(loss) before taxation Taxation 0 0 Loss for the year (17,345) (2,631) As at 30th September, 1998, the audited net asset value of SoftNet amounted to about US$12,016,000 (about HK$93,124,000). The audited results of SoftNet for the year ended 30th September, 1998 and the audited net asset value of SoftNet as at 30th September, 1998 were prepared in accordance with U.S. GAAP. INFORMATION ON THE COMPANY Business The principal activities of the Company are (i) property development in Hong Kong and the PRC; (ii) investment and development of the Cyber-Port Project subject to entering into a binding contract with the Government of the Hong Kong; and (iii) investment in and development of technology-related businesses. The Company will be involved primarily in technology businesses related to the Internet and the delivery of broadband Internet service through an innovative satellite to cable distribution system. It will soon launch a highly complementary combination of businesses that together will form an interactive broadband platform for offering and enabling a wide variety of consumer services through the Internet and television. It will also provide broadband Internet connectivity services, offer interactive and compelling content through the Internet and television and enable e-commerce. Shareholding structure Set out below is the shareholding structure of the Company before and upon completion of the Placing and the Subscription, assuming that the Option is not exercised and that the CMGI Transaction, the Star East transaction and the SilkRoute Transaction are completed and that the Convertible Bonds are fully converted and the Intel Options are fully exercised: Shareholder Before Upon Upon Upon completion completion completion completion of the of the of the of the Placing Placing Placing and Placing and the the Subscription Subscription and assuming completion of CMGI Transaction, Star East Transaction and SilkRoute Transaction and full conversion of the Convertible Bonds and exercise of the Intel Options Shares Shares Shares Shares PCRD 4,403,226,00 4,203,710,00 4,403,226,00 7,221,290,32 0 57.2 0 54.6 0 52.9 3 55.9 PCG 435,484,000 0 0.0 435,484,000 714,193,548 5.7 5.2 5.5 PCD 752,302,268 752,302,268 752,302,268 752,302,268 9.8 9.8 9.0 5.8 Intel 77,800,000 77,800,000 77,800,000 1,080,870,00 1.0 1.0 1.0 0 8.4 CMGI 0 0.0 0 0.0 0 0.0 448,347,107 3.5 ITC 0 0.0 0 0.0 0 0.0 3,515,998 * A company 0 0.0 0 0.0 0 0.0 8,203,996 owned by a 0.1 group of entertainers SilkRoute 0 0.0 0 0.0 0 0.0 24,976,603 0.2 Public shareholders - Placees 0 0.0 635,000,000 635,000,000 635,000,000 under the 8.3 7.6 4.9 Placing - Existing 2,027,488,00 2,027,488,00 2,027,488,00 2,027,488,00 shareholders 0 26.3 0 26.3 0 24.3 0 15.7 TOTAL 7,696,300,26 7,696,300,26 8,331,300,26 12,916,187,8 8 100.0 8 100.0 8 100.0 43 100.0 * represents less than 0.1% Set out below is the shareholding structure of the Company immediately before and upon completion of the Placing and the Subscription, assuming that the Option is exercised in full and that the CMGI Transaction, the Star East Transaction and the SilkRoute Transaction are completed and that the Convertible Bonds are fully converted and the Intel Options are fully exercised: Shareholder Before Upon Upon Upon completion completion completion completion of the of the of the of the Placing Placing Placing and Placing and the the Subscription Subscription and assuming completion of CMGI Transaction, Star East Transaction and SilkRoute Transaction and full conversion of the Convertible Bonds and exercise of Intel Option Shares Shares Shares Shares PCRD 4,403,226,00 4,108,460,00 4,403,226,00 7,221,290,32 0 57.2 0 53.4 0 52.2 3 55.5 PCG 435,484,000 0 0.0 435,484,000 714,193,548 5.7 5.2 5.5 PCD 752,302,268 752,302,268 752,302,268 752,302,268 9.8 9.8 8.9 5.8 Intel 77,800,000 77,800,000 77,800,000 1,080,870,00 1.0 1.0 1.0 0 8.3 CMGI 0 0.0 0 0.0 0 0.0 448,347,107 3.4 ITC 0 0.0 0 0.0 0 0.0 3,515,998 0* A company 0 0.0 0 0.0 0 0.0 8,203,996 owned by a 0.1 group of entertainers SilkRoute 0 0.0 0 0.0 0 0.0 24,976,603 0.2 Public shareholders - Placees 0 0.0 730,250,000 730,250,000 730,250,000 under the 9.5 8.7 5.6 Placing - Existing 2,027,488,00 2,027,488,00 2,027,488,00 2,027,488,00 shareholders 0 26.3 0 26.3 0 24.0 0 15.6 TOTAL 7,696,300,26 7,696,300,26 8,426,550,26 13,011,437,8 8 100.0 8 100.0 8 100.0 43 100.0 * represents less than 0.1% REASONS FOR AND BENEFITS OF THE ACQUISITION AND THE PLACING AND SUBSCRIPTION The Directors believe that the Acquisition of SoftNet will add value to the Company and accelerate the growth of the Company's business. The technology model of SoftNet is very close and parallel to that of the Company, thus significant synergy is expected to generate from the Acquisition. SoftNet already has experience in implementing broadband connectivity in over 50 cable franchises in the US and this unique experience will assist in jump-starting the Company's rollout in Asia and accelerate the globalisation of the Company's brand and its broadband service. SoftNet also produces broadband content in a manner that fits well with the Company's content production processes. It can complement the Company's content requirements by enabling local content to be produced more quickly. In addition, the Acquisition would give the Company a US presence immediately and allow the distribution of the Company's content beyond Asia. It is expected that the synergies from bringing together the businesses of SoftNet and the Company are significant across all the important elements of the Company's broadband strategy including technology, connectivity, content and marketing. The Company has been successful in identifying investment opportunities, particularly in relation to Internet start-ups and other operations that are likely to supply content or otherwise advance the Company's broadband Internet business. Currently, the Company has invested through its ventures fund, CyberWorks Ventures, in ten internet related ventures with an aggregate value of approximately US$100 million. Given the range of opportunities available, the Directors consider that it is appropriate to increase the size of CyberWorks Ventures to US$200 million. FURTHER POSSIBLE CO-OPERATION OPPORTUNITIES WITH SOFTNET The Company is currently in discussion with SoftNet regarding the establishment of a joint venture to collaborate on broadband internet, cable modem and satellite projects using technologies, products and services of both the Company and SoftNet. The joint venture will market products and services of the two companies, targeting the 110 million cable households covered by the Company's satellite footprint and its converged Internet and video service which will soon be marketed to cable operators and subscribers throughout 63 countries. The joint venture will leverage on SoftNet's experience in the US to accelerate the build out of the Company's targeted cable operators. In addition, the joint venture will explore the delivery of the Company's converged Internet and video service for SoftNet's existing 2.4 million homes passed and to other MSO's throughout the US. The joint venture will also market Intellicom's VSAT capability to MSO's, ISP's and businesses in the 63 countries of the Company's service area. However, details of such joint venture are still under negotiation and no agreement has yet been reached. Such discussions may or may not conclude successfully. GENERAL The Acquisition constitutes a discloseable transaction for the Company under Chapter 14 of the Listing Rules. A circular containing, amongst other things, details of the Acquisition will be despatched to shareholders of the Company as soon as practicable. An application will be made to the Listing Committee of the Stock Exchange for the listing of, and permission to deal in, the new Shares to be issued pursuant to the Subscription and the Option. Trading in the Shares was suspended at the request of the Company with effect from 10:00 a.m. on 13th October, 1999, pending the issue of this announcement. The Company has applied to the Stock Exchange for the resumption of trading in the Shares with effect from 10:00 a.m. on 14th October, 1999. In this announcement, the following expressions have the meanings set out below unless the context requires otherwise. `Acquisition' the acquisition of 5,000,000 new shares in SoftNet by the Company pursuant to the Acquisition Agreement `Acquisition Agreement' the conditional acquisition agreement dated 12th October, 1999 entered into between SoftNet and the Company relating to the Acquisition `Associate(s)' has the meaning ascribed thereto under the Listing Rules `Authorised Agents' any two of the three Placing Agents `BNP Prime Peregrine' BNP Prime Peregrine Securities Limited, a securities dealer registered under the Securities Ordinance (Chapter 333 of Laws of Hong Kong) `CMGI' CMGI, Inc. a public company incorporated in Delaware, US, the shares of which are listed on Nasdaq `CMGI Transaction' the very substantial acquisition as announced on 23rd September, 1999 in which the Company had entered into a conditional agreement with CMGI in respect of the proposed acquisition of interests in CMGI for a consideration of about US$350 million (approximately HK$2,712.5 million) by the Company through a share swap transaction, pursuant to which the Company would issue 448,347,107 new Shares at HK$6.05 per Share to CMGI `Company' Pacific Century Cyberworks Limited, a public company incorporated in Hong Kong with limited liability, the shares of which are listed on the Stock Exchange `Convertible Bonds' (i) the convertible bond in the principal amount of HK$86,399,960 issued by the Company to PCG; and (ii) the convertible bond in the principal amount of HK$873,599,940 issued by the Company to PCRD `CyberWorks Ventures' the venture capital arm of the Company, the principal activity of which is to invest in Internet-related companies that can effectively leverage the Company's broadband platform to provide content, context, commence, connectivity and community `Directors' directors of the Company `HK$' Hong Kong dollars `Hong Kong' the Hong Kong Special Administrative Region of the PRC `Intel' Intel Pacific Inc., a company incorporated in Delaware, US `Intel Option' An option granted by the Company under the acquisition of interest in PCC, pursuant to which Intel can convert at any time and from time to time in the ten years following completion of such acquisition on 15th September, 1999, its 100,307 shares in PCC Holdings Ltd. into 1,003,070,000 Shares `ISP' Internet service provider `Lead Manager' BNP Prime Peregrine `Listing Rules' Rules Governing the Listing of Securities on the Stock Exchange `MSO' Multiple system operation `Nasdaq' the Nasdaq National Market in the US `Option' the over-allotment option granted by the Company to BNP Prime Pergrine in respect of acquiring or procuring purchasers to acquire from PCRD up to an additional 95.25 million Shares in aggregate at the Placing Price pursuant to the Placing and Underwriting Agreement `PCC' Pacific Convergence Corporation, Ltd., a joint venture established in February 1998 and is wholly-owned by PCC Holdings Limited `PCD' Pacific Century Diversified Limited, a company incorporated in the Cayman Islands and wholly-owned by Mr. Li Tzar Kai, Richard `PCG' Pacific Century Group Holdings Limited, a company incorporated in the British Virgin Islands with limited liability which is wholly owned by Mr. Li Tzar Kai, Richard and is the controlling shareholder of PCRD `PCRD' Pacific Century Regional Developments Limited, a company incorporated in Singapore in October 1963 with limited liability, the securities of which are listed on the Stock Exchange of Singapore `Placing' the placing of up to an aggregate of 730.25 million new Shares at HK$6.10 per Share under the Placing and Underwriting Agreement `Placing Agents' BNP Prime Peregrine, HSBC Investment Bank Asia Limited and Jardine Fleming Securities Limited, all of which are also underwriters to the Placing `Placing and Underwriting the placing and underwriting Agreement' agreement dated 12th October, 1999 and entered into between PCG, PCRD and the Placing Agents in relation to the Placing `Placing Price' HK$6.10 per Share, being the placing price under the Placing and Underwriting Agreement `PRC' The People's Republic of China `Share(s)' share(s) of HK$0.05 each in the issued ordinary share capital of the Company `SilkRoute' SilkRoute Pte. Holdings Ltd., a private company incorporated in Singapore in 1994 with limited liability `SilkRoute Transaction' the transaction as announced on 9th October, 1999, in which (i) Wong Toon King, Kirpal Singh Sidhu, Felix Tan Jia Kien and Mak Chee Wah had agreed to sell 12,435 shares of S$1.00 each in SilkRoute to the Company for a total consideration of US$11,070,648 (about HK$85,908,225); (ii) SilkRoute had agreed to issue and the Company had agreed to subscribe 18,130 new shares for a total consideration of US$15,850,476 (about HK$122,999,695); and the Company will issue 24,976,603 new Shares at HK$6.50 to SilkRoute `SoftNet' SoftNet System, Inc., a public company incorporated in Delaware, US the shares of which are listed on the Nasdaq `SoftNet Shares' shares(s) of US$0.01 each in the common stock of SoftNet `Star East Holdings' Star East Holdings Limited, a company incorporated in Bermuda with limited liability, the securities of which are listed on the Stock Exchange `Star East Information' Star East Information Technology Corporation, a company incorporated in the British Virgin Islands with limited liability `Star East Transaction' the transaction as announced on 29th September, 1999 in which the Company entered into (i) a conditional subscription agreement with, amongst others, Star East Holdings, ITC Corporation Limited, Hikari Tsushin Inc. and a company owned by a group of entertainers in relation to the subscription for 100 new shares in Star East Information for a cash consideration of about US$10.6 million (about HK$81.8 million); and (ii) two conditional sale and purchase agreements for the purchase of an aggregate of 100 existing shares in Star East Information, to be satisfied by the issuance of an aggregate of 11,719,994 Shares at the issue price of HK$6.98 per share `Stock Exchange' The Stock Exchange of Hong Kong Limited `Subscription' the subscription of up to an aggregate of 730.25 million new Shares, being such number of Shares to be placed under the Placing and the Option, at HK$6.10 per Share under the Subscription Agreement `Subscription Agreement' the subscription agreement dated 12th October, 1999 and entered into between PCG, PCRD and the Company `S$' Singapore dollars `US' United States of America `U.S. GAAP' generally accepted accounting principles, standards, practices and policies consistently applied in the US `US$' U.S. dollars `VSAT' very small aperture terminal Note: For the purpose of this announcement and unless otherwise specified, all amounts in U.S. dollars are translated into Hong Kong dollars at an exchange rate of about US$1:HK$7.75. By Order of the board of Directors Chu Mee Lai, Helen Company Secretary Hong Kong, 13th October, 1999