10:16 TCL COMM<02618> - Announcement & Resumption of Trading (4) Alcatel Cash Payment In consideration of the release of its IP Indemnification Obligation as mentioned below, Alcatel shall pay 20 million (about HK$199.51 million) in cash to T&A HK on the later of 1 October 2005 or the date on which the conditions precedent set out under the heading ``Conditions Precedent'' below having been fulfilled. Such payment is subject to the completion of the Company's acquisition of the Alcatel Shares. Upon such payment and in consequence of Alcatel ceasing to hold directly or indirectly any shares in T&A HK, Alcatel will be fully released from its IP Indemnification Obligation in respect of the patent cross license under the Pre-closing IP Agreement, and any claims existing or in connection with such obligations save for certain third party claims (Details of the Pre-closing IP Agreement are set out in the Listing Document). Conditions Precedent The respective obligations of the parties to the Framework Agreement (save for in respect of the Soft Landing) are subject to the satisfaction of the following conditions: (a) the Shareholders shall have approved the terms of the transactions contemplated under the Framework Agreement (save for in respect of the Soft Landing) at the EGM; and (b) T&A HK shall have utilized the sum of 67.5 million (about HK$673 million) forming part of the subscription money paid by the Company and Alcatel Participations for shares of T&A HK at the time when T&A HK was established, to invest in T&A SAS. If the condition (a) is not fulfilled on or prior to 31 July 2005 or if the condition (b) is not fulfilled within 5 business days from the date of the Framework Agreement, the Framework Agreement shall be terminated. In case the acquisition of the Alcatel Shares is made by way of Share Swap, the approval of the Listing Committee of the Stock Exchange granting the listing of and permission to deal in the Shares to be issued under the Share Swap is also required and an application will be made to the Stock Exchange for the listing of and permission to deal in such Shares. Reasons for Entering into the Agreement The key objective of the restructuring as contemplated in the Framework Agreement is to enhance the competitiveness of the group of companies under T&A HK, especially T&A SAS, by optimizing its operations and reducing its operating cost through the transfer of the employees of T&A SAS to Alcatel and the Soft Landing in an effective and responsible manner. T&A HK will as a result improve the overall operation efficiency and have full control of the human resources deployment within its group. Given T&A HK will become a direct wholly owned subsidiary of the Company, the Company will have full control over its resources and be able to speed up business integration within the Group. As a result, more significant synergies resulting from the procurement, manufacturing, research and development and economies of scale within different members of the Group are expected to be realized and hopefully the Company will be in a better position to turn around its current loss position. Although T&A HK and T&A SAS are now making a loss, the Directors expect that through the restructuring as contemplated in the Framework Agreement, T&A HK and the group of companies thereunder will achieve the aforesaid synergies which are expected to contribute its profits to the Group in the future. The Framework Agreement was negotiated and entered into on an arm's length basis in the ordinary and usual course of business of the Group and on normal and commercial terms which, in the Directors' opinion, are fair and reasonable and in the interests of the Shareholders as a whole. EGM The Framework Agreement constitutes a discloseable and share transaction for the Company under the Listing Rules. As Alcatel Participations, by virtue of its 45% interest in T&A HK, is a connected person of the Company, the Framework Agreement also constitutes a connected transaction for the Company under the Listing Rules. As the amount involved in the Framework Agreement exceeds 2.5% of the Relevant Ratio, the Framework Agreement is subject to the requirements of reporting, announcement and the Independent Shareholders' approval in accordance with Chapter 14A of the Listing Rules.