Paradise Entertainment Limited — M&A Activity 2000

Oct 10, 2000

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.

This announcement appears for information purposes only and does not constitute an invitation or offer to acquire, purchase or subscribe the securities of the Company.

(Incorporated in Bermuda with limited liability)

DISCLOSEABLE TRANSACTION AND POSSIBLE SHARE TRANSACTION

Deloitte & Touche Corporate Finance Ltd

LifeTec, a wholly-owned subsidiary of the Company entered into the Acquisition Agreement with the Vendors and the Company on 5 October 2000 for the acquisition by LifeTec of an approximately 69.97% interest in the issued share capital of Goldstone together with the Sale Debt for an aggregate consideration of HK$44 million. The Group will be interested in 100% of the issued share capital of Goldstone upon Completion. The consideration will, at the option of LifeTec, be satisfied by LifeTec either (i) wholly by Shares, (ii) wholly in cash or (iii) by a combination of Shares and cash.

The Acquisition constitutes a discloseable transaction and a possible share transaction for the Company under the Listing Rules.

At the request of the Company, trading in the Shares was suspended on the Stock Exchange with effect from 10:00 a.m. on 9 October 2000 pending the release of this announcement. Application has been made to the Stock Exchange for the resumption of trading in the Shares with effect from 10:00 a.m. on 10 October 2000.

AGREEMENT

Date:	5 October 2000
Vendors:	Mr. Guo Qiang and Madam Chan Siu Fung, the beneficial owners of 4,660 shares of US$1.00 each in Goldstone

Mr. Guo and Madam Chan are beneficial shareholders of the Company who currently hold 30,474,000 Shares and 2,300,000 Shares respectively (representing approximately 3.39% and 0.26% of the existing issued share capital of the Company, respectively). Save as aforesaid, the Vendors are independent third parties not connected with the directors, chief executive or substantial shareholders of the Company and its subsidiaries or any of their respective associates (as defined under the Listing Rules).

Purchaser:	LifeTec, a wholly-owned subsidiary of the Company
Issuer:	the Company as guarantor of LifeTec's obligations under the Acquisition Agreement

ASSETS ACQUIRED

4,660 shares of US$1.00 each in Goldstone, representing 69.97% of its entire issued share capital together with the Sale Debt, which amounted to US$6,013,317.17 (equivalent to approximately HK$46,500,000) as at 5 October 2000.

CONSIDERATION

The total consideration for the Acquisition is HK$44 million (the "Consideration"), which will be settled on Completion, and at the option of LifeTec, be satisfied:

(i) wholly by Shares at HK$0.25 per Share, or

(ii) wholly in cash, or

(iii) by a combination of Shares and cash.

Further announcement will be made in respect of the Consideration Shares issued under (i), or (iii) above on or before Completion.

The issue price of the Consideration Shares of HK$0.25 per Share represents a premium of approximately 0.4 % to the closing price of the Shares of HK$0.249 on the date of the Acquisition Agreement and a premium of approximately 17.6% to the average of the closing price of the Shares for the last ten trading days as quoted on the Stock Exchange up to and including 5 October 2000, being the date of the Acquisition Agreement.

The Full Consideration Shares represent approximately 19.6 % of the existing issued share capital of the Company and approximately 16.4% of the issue share capital of the Company as enlarged by the allotment and issue of the Full Consideration Shares.

The Full Consideration Shares will be issued pursuant to the general mandate granted to the Directors to issue Shares at the annual general meeting of the Company held on 21 June 2000.

The Consideration was determined after arm's length negotiations among the parties to the Acquisition Agreement and represents a premium of approximately 10% over the consideration for the Previous Acquisition as announced on 26 August 1999. The Directors consider the premium to be fair and reasonable taking into account the fact that i) the Drug developed by Sinogen has reached a commercial production stage and that ii) the Company will obtain an effective control of Sinogen via Goldstone.

Subject to the Consideration being wholly or partly satisfied by way of an issue of the Consideration Shares, the Vendors have undertaken that for the First Lock-Up Period, they will not dispose of any of the Consideration Shares allotted to them and they have further undertaken that for a period of six months after the expiry of the First Lock-Up Period, they will not dispose of more than 50 % of the Consideration Shares allotted to them.

CONDITIONS

Completion of the Acquisition Agreement is conditional upon, inter alia, satisfaction of the following conditions on or before 5:00pm, on 31 October 2000:

(i) Sinogen having obtained all relevant PRC government approvals (including the final approval from the State level of the State Drug Administration of the PRC) for the commerical production and sale of the Drug in the PRC;

(ii) Singoen having obtained all relevant PRC government approvals for the conversion of its enterprise status from a Sino-foreign joint venture enterprise into a wholly foreign owned enterprise, details of which are set out in the section headed "Information on Goldstone and Sinogen" below;

(iii) the receipt by Lifetec of a legal opinion from a firm of PRC lawyers confirming, inter alia, the matters referred to in paragraph (i) and (ii) above;

(iv) completion of a due diligence of the business and financial condition of Goldstone and Sinogen to the satisfaction of LifeTec in its sole and absolute opinion;

(v) if LifeTec shall elect to satisfy all or part of the Consideration by way of the Consideration Shares, the Listing Committee of the Stock Exchange granting listing of and permission to deal in the Consideration Shares.

LifeTec may at any time waive in writing any of the conditions except (v) as set out above, such waiver may be made subject to such terms and conditions as determined by LifeTec.

COMPLETION

Completion will take place on or before the fifth business day after all the conditions set out in the section headed "Conditions" above have been fulfilled or waived, which is expected to be on or before 31 October 2000.

INFORMATION ON GOLDSTONE AND SINOGEN

Goldstone is an investment holding company which was incorporated in the British Virgin Islands. Goldstone's sole investment is its 66.6% interest in Sinogen. Prior to the Acquisition, Goldstone is held as to 30.03% by the Group and as to the remaining 69.97% by the Vendors equally. Sinogen was originally incorporated as a wholly foreign owned enterprise with 66.6% of its registered capital being held by Goldstone. The remaining equity interest in Sinogen is held as to 22.2% by H.K. BrightFuture Limited and as to 11.2% by Fairwin International Holdings Ltd. (formerly known as Starlines Limited), both are independent third parties not connected with the chief executive, directors of substantial shareholders of the Company or its subsidiaries or any of their respective associates (as defined in the Listing Rules).

On 28th March, 2000, Sinogen was approved to convert its enterprise status from a wholly foreign owned enterprise into a Sino-foreign equity joint venture enterprise with a share placement to a PRC party. As the PRC party failed to pay up its contribution to the joint venture, accordingly, the remaining parties, which are the shareholders before the conversion, to the joint venture have applied for the re-conversion of Sinogen's enterprise status from a Sino-foreign equity joint venture enterprise into a wholly foreign owned enterprise. Sinogen is principally engaged in the research and development, and manufacture and sale of biotech pharmaceutical products using the most advanced and latest technology. Sinogen owns and manufactures the Drug, which is a PRC Category I Western medicine invention. The Drug is processed from live cells extracted from living organisms. At the current stage of development, the Drug is manufactured and sold as injection fluid containing Hepatocyte Growth-Promoting Factors (pHGF), which is used in treating liver cancer, cirrhosis of the liver and different types of acute and chronic hepatitis. The results of clinical trials conducted over the past seven years indicated that the Drug has outstanding curing effect on the aforesaid diseases.

Sinogen had completed all requisite clinical trials of the Drug and an application has been submitted to the State level of the State Drug Administration of the PRC for the final approval of commercial production and sale of the Drug. Technical clearance of the results of clinical trials by the State Drug Administration was obtained on 29 August 2000.

The unaudited net loss of Sinogen for the year ended 31 December 1999 and for the six months ended 30 June 2000 were approximately HK$2.75 million and HK$3.00 million, respectively. The proportionally higher loss incurred in the 6 months ended 30 June 2000 was mainly due to the lower volume of trial sales as the Drug approached the completion stage of the clinical trials. The unaudited net tangible assets of Sinogen was approximately HK$33.54 million as at 30 June 2000 adjusted by the amount of the Sale Debt which will be purchased by LifeTec.

REASONS FOR THE ACQUISITION

The Group is principally engaged in the development and sale of Western and Chinese medicine, medical equipment and medical software with applications on the Internet. The Acquisition is part of the Group's continuous effort to develop a major presence in the biotech medicine industry and to strengthen the Group's long term earning base. The Directors believe the Acquisition is the first step through which the Group will establish itself as a key player in the biotech medicine industry in the Asia Pacific.

GENERAL

The Acquisition constitutes a discloseable transaction and a possible share transaction for the Company under the Listing Rules. A circular containing, inter alia, details of the Acquisition Agreement, will be despatched to the shareholders of the Company soon.

Application will be made to the Stock Exchange for the listing of and permission to deal in the Consideration Shares.

SUSPENSION AND RESUMPTION

At the request of the Company, trading in the Shares was suspended on the Stock Exchange with effect from 10:00 a.m. on 9 October 2000 pending the release of this announcement. Application has been made to the Stock Exchange for the resumption of trading in the Shares with effect from 10:00 a.m. on 10 October 2000.

DEFINITIONS

"Acquisition"	the acquisition by LifeTec from the Vendors of 69.97% of the issued share capital of Goldstone
"Acquisition Agreement"	the conditional sale and purchase agreement entered into between, LifeTec, the Vendors, and the Company on 5 October 2000 in relation to the Acquisition
"Company"	LifeTec Group Limited, an exempt company incorporated in Bermuda with limited liability, the shares of which are listed on the Stock Exchange
"Completion"	Completion of the Acquisition Agreement
"Consideration Shares"	ordinary shares of HK$0.01 each in the Company (if any) to be issued and allotted, at the option of Lifetec, to the Vendors on Completion
"Directors"	the directors of the Company
"Drug"	the drug having the medical name "Hepatocyte Growth-promoting Factors Injection" and is marketed as a clinical test drug by Sinogen under the name "Wei Jia"
"First Lock-Up Period"	the period of six months from Completion
"Full Consideration Shares"	176,000,000 Shares, which is the maximum number of Consideration Shares that will be issued as consideration for the Acquisition
"Goldstone"	Goldstone International Holdings Limited, a company incorporated in the British Virgin Islands with limited liability
"Group"	the Company and its subsidiaries
"LifeTec"	LifeTec (Holdings) Limited (formerly known as Yip's Pota (Holdings) Company Limited) , a wholly-owned subsidiary of the Company
"Listing Rules"	the Rules Governing the Listing of Securities on the Stock Exchange
"PRC"	the People's Republic of China
"Previous Acquisition"	the acquisition of 30.03% interest in Goldstone by Yip's Pota (Holdings) Company Limited (now LifeTec (Holdings) Limited), a wholly-owned subsidiary of the Company, as stated in the announcement of the Company dated 26 August 1999
"Sale Debt"	the principal amount of US$6,013,317.17 due to the Vendors by Goldstone which is interest free and repayable on demand
"Sale Shares"	4,660 shares or approximately 69.97% of the entire issued capital of Goldstone
"Share(s)"	ordinary share(s) of HK$0.01 each in the capital of the Company
"Sinogen"	Weihai Sinogen Pharmaceutical Co., Ltd., a Sino-foreign equity joint venture enterprise to be re-converted into a wholly foreign owned enterprise and in which Goldstone has a 66.6% interest
"Stock Exchange"	The Stock Exchange of Hong Kong Limited
"Vendors"	Guo Qiang, and Chan Siu Fung, the vendors under the Acquisition Agreement
"HK$"	Hong Kong dollars
"US$"	United States dollars

By Order of the Board

LifeTec Group Limited

Jay Chun

Managing Director

Hong Kong, 9 October 2000

Please also refer to the published version of this announcement in the SCMPl dated 10/10/2000.