10:32 PEARL ORIENTAL<00600>-Announcement&Resumption of Trading (2) THE AGREEMENT Date 3 January 2005 Parties Pearl Oriental Macau Limited, a wholly-owned subsidiary of the Company, as the purchaser. The Vendors as sellers. U Wa is principally engaged in hotel and business management. Trustmove is a hotel investment holding company and Hang Fok is an investment holding company. To the best of the Directors' knowledge, information and belief having made all reasonable enquiries, the Vendors and their ultimate beneficial owners are not connected persons and are third parties independent of the Company and its connected persons. Assets to be acquired The Sale Shares. Upon Completion, Golden Dragon will be owned as to 40% by the Company and will become an associated company of the Company. Any subsequent disposal of the equity interest in Golden Dragon will be subject to the first rights of refusal offered to other shareholders (including the Purchaser). Undertaking The Vendors have given the undertaking in favour of the Purchaser that the outstanding banking facilities of Golden Dragon at the Completion Date shall not exceed HK$365 million ("Banking Facilities"). Profit Guarantee The Vendors have guaranteed and warranted to the Purchaser that the audited net profit after taxation for each of the three financial years for the period from 5 January 2005 to 4 January 2008 (the "Net Profit") shall not be less than HK$200 million (the "Guaranteed Profit"). The Vendors will pay any shortfall in cash to Golden Dragon in the event that the actual Net Profit falls below the Guaranteed Profit (i) in the first year; (ii) in the second year after taking into account any surplus of the Guaranteed Profit for the first year; and (iii) in the third year after taking into account any surplus of the Guaranteed Profits for the preceding two years. It is also agreed that any dividends payable by Golden Dragon to its shareholders, after repayment of the principal and interests of the Banking Facilities, shall not be less than 70% of the net profit of Golden Dragon. Consideration The Consideration is HK$514 million. The Consideration was arrived at after arm's length negotiations between the Purchaser and the Vendors with reference to (i) the confidence of the Company in the economic potential of the tourism and gaming industry in Macau as a whole; (ii) the Undertaking; (iii) the Profit Guarantee; and (iv) the preliminary valuation made by BMI Appraisals, an independent firm of valuers, in respect of the valuation of the assets of Golden Dragon on market approach of not less than HK$1.7 billion as at 31 December 2004. The Company will disclose the final valuation report in the circular to be despatched to the Shareholders. The Consideration will be settled as follows: (i) a cash deposit of HK$50 million upon signing of the Agreement which will be placed in an escrow account and will only be released to the Vendors within 14 days after the Purchaser is satisfied with the relevant due diligence results; and (ii) HK$188 million in cash payable upon Completion and 345,000,000 Consideration Shares to be issued by the Company to the nominee(s) as assigned by each of the shareholders of U Wa, Trustmove and Hang Fok in proportion to their respective effective interest in the Sale Shares at an issue price of HK$0.80 per Consideration Share upon Completion. Based on the closing price of the Shares on the Last Trading Date of HK$0.82 each, the Consideration Shares had a market value of HK$282.9 million.