YUGANG INT'L<0613> - 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.
YUGANG INTERNATIONAL LIMITED (the 'Company')
(Incorporated in Bermuda with limited liability)
Increases in price and trading volume of securities
This announcement is made in response to the recent increases in
the price and trading volume of the shares and warrants of the
Company.
Save for the TIC Agreement as described below, the directors of the
Company are not aware of any reasons for such increases.
This statement is made at the request of The Stock Exchange of Hong
Kong Limited.
We have noted the recent increases in the price and trading volume
of the shares and warrants of the Company and wish to state that save
and except for the entering into on 21 December 1999 by Top Eagle
Holdings Limited (`Top Eagle'), a wholly owned subsidiary of the
Company, with Tengtu International Corp. (`TIC') a convertible
debenture and warrant purchase agreement (the `TIC Agreement') as
described below and for the placing of existing shares and
subscription of new shares of the Company as announced on 5 January
2000, we are not aware of any reasons for such increases.
TIC Agreement
TIC is a company incorporated in Delaware U.S.A. on 6 May 1988. TIC
is independent of, not connected with the directors, chief executive
or substantial shareholders of the Company, and any of its
subsidiaries or any of their respective associates (as defined under
the Rules (the `Listing Rules') Governing the Listing of Securities
on the Stock Exchange). The ordinary shares in TIC (the `TIC Shares')
are traded or quoted on the National Association of Securities
Dealers Over the Counter Bulletin Board Market (`OTCBB'). The average
closing price of the TIC Shares for the 5 trading days ended on 31
December 1999 was US$2.90. TIC and its subsidiaries (the `TIC Group')
is involved in the development, production and marketing of
educational software platform and systems as well as electronic
publishing and digital animation production in North America, the
mainland China and Hong Kong.
Under the TIC Agreement, Top Eagle lends to TIC the sum of US$1.5
million (equivalent to approximately HK$11.7 million) repayable on 15
December 2003 (the `Maturity Date') with interest receivable on the
principal sum outstanding from time to time quarterly (15th day of
March, June, September, December) in arrears at the per annum rate
equal to the best lending rate of The Hongkong and Shanghai Banking
Corporation (as in effect from time to time) plus two percent (the
`Initial Interest Rate') and default interest rate (applicable if TIC
defaults in repayment of principle sum and overdue interest) at the
Initial Interests Rate plus 5%.
Further, pursuant to the TIC Agreement, Top Eagle is entitled but
not under any obligation:
(a)
to convert the loan of US$1.5 million or so much thereof as Top
Eagle desires into shares in TIC at prices ranging from US$0.5 per
share in the 1st year and increasing at 100% per annum up to US$4.00
per share depending on the time of exercise from 15 December 1999 up
to the 4th anniversary thereof;
(b)
at nil consideration for 1,500,000 warrants exchangeable for shares
in TIC at prices ranging from US$1.00 in the 1st year and increasing
at 100% per annum up to US$4.00 per share depending on the time of
exercise from 15 December 1999 up to the 3rd anniversary thereof;
(c)
to increase on or before 15 June 2000 its loans to TIC by maximum of
US$3.50 million (equivalent to approximately HK$27.3 million) which
further loans to TIC and all accrued and unpaid interest or so much
thereof as Top Eagle desires and such further loans will be
convertible into shares in TIC at prices ranging from US$1.00 per
share in the 1st year and the 2nd year and thereafter increasing at
100% per annum up to US$4.00 per share depending on the time of
exercise up to 4th anniversary date of the issue of such additional
debenture and in the event Top Eagle exercises the right to further
increase its loans as aforesaid, Top Eagle is further entitled to
3,500,000 additional warrants exchangeable for additional shares in
TIC at prices ranging fromUS$1.00 in the 1st year and increasing at
100% per annum up to US$4.00 per share depending on the time of
exercise, up to one-third of such warrants exercisable from the date
of issue of the additional debenture to the 1st anniversary thereof,
up to two-thirds of such warrants exercisable from the expiry of the
1st anniversary to the 3rd anniversary of the date of issue of the
additional debenture; and
(d)
at the option of Top Eagle to have the entire unrepaid amount of the
loan and accrued interest thereon outstanding as at the Maturity Date
converted into shares in TIC at the price equivalent to a 20%
discount from the then market price, provided under no circumstances
shall such conversion exceed 50.1% of the common stock outstanding as
at the date of conversion.
Moreover, under the TIC Agreement, Top Eagle is entitled to have
right of first offer to participate in all future projects of the TIC
Group and Top Eagle will also be entitled to a seat in the board of
directors of TIC if its total investment therein reaches US$5 million
(equivalent to approximately HK$39 million) or its holding of TIC
common shares exceeds the amount of 3 million shares or reaches 15%
of issued share capital of TIC.
In the event that Top Eagle fully exercises its rights to lend to
TIC and to convert or exchange for shares in TIC, the total
investment of Top Eagle in TIC will range from approximately US$12.33
million (equivalent to approximately HK$96.17 million) to US$25
million (equivalent to approximately HK$195 million) assuming no
outstanding interest.
Pursuant to the TIC Agreement Top Eagle is only obliged to commit to
lend to TIC in the sum of US$1.5 million (HK$11.7 million). Top Eagle
has not yet decided whether or not to make further loans or exercise
the warrants. Since the loan paid to TIC under TIC Agreement in the
sum of US$1.5 million represents approximately 1% of the consolidated
net tangible asset value of the Company and its subsidiaries (the
`Group') based on its latest published audited accounts for the year
ended 31 December 1998 , the TIC Agreement will not constitute a
notifiable transaction under the Listing Rules . Should the Group
decide to make further loans to TIC or exercise the warrants thereof,
it may or may not constitute a notifiable transaction for the Company
under the Listing Rules and the Company will comply with the relevant
disclosure and/or shareholders' approval requirements therein.
Save as disclosed above, we also confirm that there are no
negotiations or agreements relating to intended acquisitions or
realisations which are disclosable under paragraph 3 of the Listing
Agreement, neither is the Board aware of any matter disclosable under
the general obligation imposed by paragraph 2 of the Listing
Agreement, which is or may be of a price-sensitive nature.
Made by the order of the Board of the Company, the directors of
which individually and jointly accept responsibility for the accuracy
of this statement.
By Order of the Board
Cheung Chung Kiu
Chairman
Hong Kong, 5 January 2000
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