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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.


SILVERNET GROUP LIMITED
(Incorporated in Bermuda with limited liability)

CONNECTED TRANSACTION

Further to the Company's announcement dated 14th June, 2000 in relation to, inter alia, the eGoChina Subscription Agreement, the Directors wish to announce that on 11th December, 2000, eGoChina Holdings entered into the Further Subscription Agreement with Rado and Atlantic Cay whereby Rado and Atlantic Cay conditionally agreed to further subscribe for the Preferred Shares at an aggregate consideration of US$3 million (equivalent to approximately HK$23.34 million). Under the Further Subscription Agreement, Rado and Atlantic Cay will subscribe additional Preferred Shares at the same subscription price under the eGoChina Subscription Agreement.

The Further Subscription Agreement will be a connected transaction for the Company under the Listing Rules. Accordingly, the Further Subscription Agreement will be subject to the approval by Independent Shareholders. An independent board committee will be formed to advise the Independent Shareholders in respect of the Further Subscription Agreement. An independent financial advisor has been appointed to advise the independent board in respect of the same. A circular containing, amongst other things, further information of the Further Subscription Agreement will be despatched to the Shareholders as soon as practicable.

The Directors wish to announce that Rado, a wholly-owned subsidiary of the Company, has entered into the following agreement:-

FURTHER SUBSCRIPTION AGREEMENT

Date:11th December, 2000
Parties:
Subscribers(1) Rado
(2) Atlantic Cay;
and
The company:(3) eGoChina Holdings
Interests to be subscribed:Subscription of an aggregate of 3,000,000 Preferred Shares by the Subscribers as to 2,000,000 Preferred Shares by Atlantic Cay and 1,000,000 Preferred Shares by Rado.

Such new Preferred Shares shall rank pari passu in all respect with those Preferred Shares in issue as at the date of issue. As at the date hereof, there are 3,250,000 Preferred Shares in issue.
Subscription price:An aggregate of US$3 million (approximately HK$23.34 million) at US$1 per Preferred Share. The subscription price payable by Altantic Cay and Rado will be satisfied in cash at completion of the Further Subscription Agreement.
Basis for consideration:The subscription price, which is equivalent to the terms in the eGoChina Subscription Agreement, was determined after arm's length negotiations among the parties thereto by reference to the valuation implied by the investment cost in eGoChina by the Company. The Directors consider the consideration for the subscription to be fair and reasonable.

Shareholding Structure of eGoChina Holdings before and after the Further Subscription Agreement

Pursuant to an agreement dated 30th November, 2000, A.C. Technology (Act) N.V., a member of the Andersen Consulting group and an independent third party not connected with any directors, chief executives or substantial shareholders of the Company and its subsidiaries or any of their respective associates, subscribed for 150,000 Preferred Shares at a total subscription price of US$150,000.

Pursuant to an agreement dated 5th December, 2000, Ni Lin (one of the eGoChina Founders and a director of eGoChina Holdings) disposed of 716,666 Ordinary Shares representing 5.56 per cent. of the issued share capital of eGoChina Holdings (assuming the Top-up Entitlements were fully exercised) to Rado at par; and Rado, being the largest shareholder of eGoChina Holdings, intends to hold such Ordinary Shares, and to transfer such Ordinary Shares to employees of the eGoChina Group (other than connected persons of the Company) under the Employee Incentive Scheme, the purpose of which is to provide performance incentives to employees of the eGoChina Group. At present, the consideration for such transfer of Ordinary Shares to employees has not been determined.

In addition, Li Zhi Qiang (one of the eGoChina Founders) also disposed of 1,146,667 Ordinary Shares representing 8.89 per cent. of the issued share capital of eGoChina Holdings (assuming the Top-up Entitlements were fully exercised) to Jay Zhao, a director of the Company and chief executive officer of eGoChina Holdings at par.

As disclosed in the Company's announcement dated 14th June, 2000 and circular dated 5th July, 2000, Top-up Entitlements were provided to the eGoChina Founders to subscribe for additional Ordinary Shares at par in order to maintain their combined shareholding in eGoChina Holdings of 15% (on a fully diluted basis) of the issued share capital of eGoChina Holdings (excluding any disposal of shares by such holders of Top-up Entitlements). The eGoChina Founders shall be entitled to the Top-up Entitlements in the event of the occurrence of a dilution event; and provided that eGoChina Holdings has not yet received investments totalling at least US$25 million. Such entitlements were transferred to Rado and Jay Zhao on a pro rata basis by Ni Lin and Li Zhi Qiang respectively upon their disposal of shares. The terms of the Top-up Entitlements were disclosed in the Company's circular dated 5th July, 2000 and the eGoChina Shareholders' Agreement (which provides for, inter alia, the Top-up Entitlements) was subsequently approved by the Independent Shareholders on 22nd July, 2000.

As at the date hereof and assuming the Top-up Entitlements were fully exercised, Rado, Ni Lin, Jay Zhao, Atlantic Cay, iVentures, Comtech and A.C. Technology (Act) N.V. are interested in approximately 63.70%, 2.22%, 8.89%, 15.50%, 7.75%, 0.78% and 1.16% of the issued share capital of eGoChina Holdings respectively.

Upon completion of the Further Subscription Agreement and assuming the Top-up Entitlements were fully exercised, Rado, Ni Lin, Jay Zhao, Atlantic Cay, iVentures, Comtech and A.C. Technology (Act) N.V. will be interested in approximately 57.07%, 2.22%, 8.89%, 24.24%, 6.06% and 0.61% and 0.91% of the enlarged issued share capital of eGoChina Holdings respectively.

Conditions

The Further Subscription Agreement is conditional upon:

(a) the passing by each of the shareholders of eGoChina Holdings and holders of Preferred Shares of eGoChina Holdings of a written shareholders' resolution to approve Further Subscription Agreement and the transactions contemplated thereunder including, inter alia, the allotment and issue of such Preferred Shares to be issued thereunder; and

(b) the passing by Shareholders (other than those prohibited from voting under the Listing Rules) at a special general meeting of the Company of an ordinary resolution approving the Further Subscription Agreement and the transactions contemplated thereunder including, inter alia, the allotment and issue of such Preferred Shares to be issued thereunder.

Each of the parties hereto shall use its reasonable endeavours to ensure that the above conditions shall be fulfilled within three months from the date of the Further Subscription Agreement, or such other date as mutually agreed.

Completion

Completion of the Further Subscription Agreement shall take place within five business days after the Further Subscription Agreement has become unconditional or at such other date as agreed between the parties thereto.

Information on eGoChina Holdings

eGoChina Holdings is an investment company holding 100 per cent. equity interests in Onson Investment Limited, which holds 90 per cent. equity interests in eGoChina. eGoChina is a Sino-foreign joint venture company incorporated in the PRC with a registered capital of US$5,000,000 (HK$38.9 million). The principal activities of eGoChina are the development and the provision of consultancy services in relation to a travel portal (www.eGoChina.com) providing travel related information and advance booking services to corporate users. The www.eGoChina.com web site was preliminarily launched in April 2000.

CONNECTED TRANSACTION

Atlantic Cay is a connected person of the Company by virtue of its being a substantial shareholder of the Company and eGoChina Holdings. eGoChina Holdings is a non-wholly-owned subsidiary of the Company through Rado indirectly. The entering into of the Further Subscription Agreement, is a connected transaction for the Company and is thus subject to Independent Shareholders' approval at the Special General Meeting, according to the Listing Rules. An independent board committee will be formed to advise the Independent Shareholders on the fairness and reasonableness of the Further Subscription Agreement. An independent financial advisor has been appointed to advise the independent board in respect of the same.

As Atlantic Cay is interested in the Further Subscription Agreement, Atlantic Cay shall abstain from voting in respect of the resolution to approve the Further Subscription Agreement at the Special General Meeting.

REASONS FOR THE ENTERING INTO OF THE FURTHER SUBSCRIPTION AGREEMENT

The eGoChina Subscription Agreement has been approved by Independent Shareholders of the Company at a special general meeting held on 22nd July, 2000.

Pursuant to the eGoChina Subscription Agreement, Atlantic Cay and Rado agreed to assist eGoChina Holdings to raise additional capital of at least US$3 million (which was arrived at after considering the available cash of eGoChina Holdings and the expected operating cash flow requirement of eGoChina Holdings for the year of 2001) from third parties at a subscription price based on a higher valuation of the Company than that upon which the subscription price is determined under the eGoChina Subscription Agreement within a period of one (1) month commencing from completion of the eGoChina Subscription Agreement, failing which each of Atlantic Cay and Rado shall invest an additional US$2 million and US$1 million in the Company respectively by subscribing additional Preferred Shares at the same subscription price under the eGoChina Subscription Agreement.

At the time of signing of the eGoChina Subscription Agreement, the investors have not been identified and detailed terms of such investments have not been finalised.

Proceeds from the Further Subscription Agreement will be used to fund product development, marketing and expansion programme and other working capital requirements of the eGoChina Holdings and its subsidiaries. The Directors (including the independent non-executive Director) consider the terms of the Agreements to be fair and reasonable as far as the Shareholders as a whole are concerned.

GENERAL

The Company is an investment holding company incorporated in Bermuda with limited liability. The principal activities of its subsidiaries and associated companies are (i) online travelling and related services in the PRC; (ii) online e-commerce and software application businesses in the PRC; and (iii) investment properties in Hong Kong and the PRC.

FURTHER INFORMATION

A circular containing, amongst other things, further information of the Further Subscription Agreement, a letter from the independent board committee of the Company regarding the Further Subscription Agreement, a letter from the independent financial adviser and a notice to convene the Special General Meeting for Shareholders to consider and approve the same will be despatched in due course.

DEFINITIONS

"Atlantic Cay"Altantic Cay International Ltd, a company incorporated in the British Virgin Islands;
"Company"SilverNet Group Limited;
"Comtech"Comtech Development Co. Ltd., a company incorporated in Hong Kong;
"Directors"Directors of the Company;
"eGoChina"eGoChina.com Consultancy Services Co., Ltd., a sino-foreign equity joint venture established under the laws of the PRC;
"eGoChina Founders"Li Zhi Qiang and Ni Lin;
"eGoChina Group"eGoChina Holdings and its subsidiaries;
"eGoChina Holdings"eGoChina Holdings Limited, a company incorporated in the Cayman Islands;
"eGoChina Shareholders' Agreement"the shareholders' agreement entered into between Rado, eGoChina Founders, eGohina Holdings, Atlantic Cay, iVentures and Comtech on 1st August, 2000 in relation to their respective rights and obligations in eGoChina Group;
"eGoChina Subscription Agreement"the subscription agreement entered into among Atlantic Cay, iVentures, Comtech, Rado, eGoChina Founders and eGoChina Holdings on 12th June, 2000 in relation to the subscription of 3,100,000 Preferred Shares by Altlantic Cay, iVentures and Comtech;
"Employee Incentive Scheme"the incentive scheme to be adopted by Rado for the benefit of employees of eGoChina Group which is as more particularly described above;
"Further Subscription Agreement"the subscription agreement entered into among Atlantic Cay, Rado, eGoChina Holdings on 11th December, 2000 in relation to the subscription of the Preferred Shares by the Subscribers;
"iVentures"iVentures I, L.P., a limited partnership organized and existing under the laws of New York, United States of America;
"Independent Shareholders"Shareholders other than Atlantic Cay and its associates;
"Jay Zhao"Zhao Jian Gong, Jay, director of the Company and chief executive officer of eGoChina Holdings
"Listing Rules"the Rules Governing the Listing of Securities on the Stock Exchange;
"Ordinary Shares"the ordinary shares of US$0.001 each in the share capital of eGoChina Holdings
"Preferred Shares"Series A voting convertible preferred shares of US$0.001 each in the capital of eGoChina Holdings;
"PRC"the People's Republic of China, and for the purpose of this announcement, excluding Hong Kong;
"Rado"Rado International Limited, a company incorporated in the British Virgin Island;
"Special General Meeting"the special general meeting to be held among Shareholders by the Company to consider and approve the Further Subscription Agreement and the transactions contemplated thereunder;
"Shareholders"shareholders of the Company;
"Stock Exchange"The Stock Exchange of Hong Kong Limited;
"Subscribers"the subscribers of the Preferred Shares pursuant to the Further Subscription Agreement, namely Altantic Cay and Rado;
"Top-up Entitlements"the entitlements of eGoChina Founders pursuant to the eGoChina Shareholders' Agreement whereby eGoChina Founders shall be entitled to subscribe for additional Ordinary Shares at par in order to maintain their combined shareholding in eGoChina Holdings of 15% (on a fully diluted basis) of the issued share capital of eGoChina Holdings upon a dilution event provided that eGoChina Holdings has yet to receive investments totaling at least US$25 million.


By order of the board
Sun Qiang Chang
Chairman

Hong Kong, 11th December, 2000


Source: Silvernet Group Limited
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