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EC-FOUNDER (HOLDINGS) COMPANY LIMITED
(Incorporated in Bermuda with limited liability)

CONNECTED TRANSACTION:
ONLINE ADVERTISEMENT IN YAHOO!'S PORTAL

SUMMARY

The Company has been purchasing advertising spaces from Yahoo!'s portal in various countries since January, 2001 on an ad hoc basis. In mid July 2001, it came to the knowledge of the directors of the Company ("Directors") that the committed expenditure for the first and second quarters of year 2001 with Yahoo! amounted to US$298,000 (approximately HK$2,324,400). However, no disclosure was made when the total amount of the committed expenditure exceeded the prescribed threshold under the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited ("Listing Rules"). The failure to make a timely disclosure constitutes a breach of Rule 14.25 of the Listing Rules. The Stock Exchange of Hong Kong Limited reserves the right to take appropriate action against the Company and/or its Directors for the breaching of the Listing Rules.

In mid July 2001, the Company was considering that more advertising programs will be required for the launch of new products and business and in view of the possibility of future cooperation with Yahoo!, the Company believed that it was important to have formal negotiations with Yahoo! to negotiate for a promotion plan for the whole calendar year of 2001. As the expenditure already committed would form part of the future plan for the whole 2001 calendar year's promotion plan, in order to give the public the full picture of the arrangement, the Company accelerated the negotiation process with Yahoo! and after arm's length negotiation, a formal agreement was eventually signed on 27 July 2001, under which (inter alia), the Company, through its subsidiary, Founder Data Corporation International Limited agreed to purchase online advertising space in Yahoo!'s portal including without limitation, Yahoo! Hong Kong, Yahoo! China, Yahoo! Taiwan and Yahoo! USA for a term of one year from 1 January 2001 to 31 December 2001 at a consideration of US$1,200,000 (approximately HK$9,360,000) from Yahoo! Holdings (Hong Kong) Limited. The agreement has been negotiated on normal commercial terms and the consideration was agreed after arm's length negotiations.

Since Yahoo! Holdings (Hong Kong) Limited is a wholly-owned subsidiary of Yahoo! Inc., a substantial shareholder (as defined under the Listing Rules) of the Company holding 93,240,000 shares in the Company (approximately 11.36% of the issued share capital of the Company), the agreement is a connected transaction for the Company under the Listing Rules. However, in view of the amount of consideration involved in the transactions in the agreement, no independent shareholders' approval is required.

The Directors (including the independent non-executive directors) consider that the terms of the agreement are fair and reasonable and the Company will include details of the transactions in their next published annual reports and accounts.

Yahoo! - EC-Founder Commercial Partnership Confidential Agreement dated 27 July 2001

PARTIES

Vendor:Yahoo! Holdings (Hong Kong) Limited (the "Vendor")
Purchaser:Founder Data Corporation International Limited (the "Purchaser")

ONLINE ADVERTISING COMMITMENT

The Company has been purchasing advertising spaces from Yahoo!'s portal in various countries since January, 2001 on an ad hoc basis on normal commercial terms. The amount of committed advertising expenditure is calculated with Yahoo! at the end of each quarter. From 1 January 2001 to 31 March 2001, the amount of committed advertising expenditure with Yahoo! amounted to US$48,000 (approximately HK$374,400). It came to the knowledge of the Directors in mid July 2001 that the committed advertising expenditure for the second quarter 2001 with Yahoo! amounted to US$250,000 (approximately HK$1,950,000). However, no disclosure was made when the total amount of the committed advertising expenditure exceeded the prescribed threshold under the Listing Rules. The failure to make a timely disclosure constitutes a breach of Rule 14.25 of the Listing Rules. The Stock Exchange of Hong Kong Limited reserves the right to take appropriate action against the Company and/or its Directors for the breaching of the Listing Rules.

In mid July 2001, the Company was considering that more advertising programs will be required for the launch of new products and business and in view of the possibility of future cooperation with Yahoo!, the Company believed that it was important to have formal negotiations with Yahoo! to negotiate for a promotion package for the whole calendar year of 2001. As the expenditure already committed would form part of the future plan for the whole 2001 calendar year's promotion plan, in order to give the public the full picture of the arrangement, the Company accelerated the negotiation process with Yahoo! and after arm's length negotiation, a formal agreement was signed on 27 July 2001. Under which, the Company agreed to purchase, through the Purchaser, (i) online advertising space in Yahoo!'s portal including without limitation, Yahoo! Hong Kong, Yahoo! China, Yahoo! Taiwan and Yahoo! USA for a term of one year from 1 January 2001 to 31 December 2001 at a consideration of US$1,200,000 (approximately HK$9,360,000) from Yahoo! Holdings (Hong Kong) Limited; and (ii) grant to Yahoo! Holdings (Hong Kong) Limited a right of first refusal to participate in certain e-commerce projects of Founder Data Corporation International Limited. The agreement has been negotiated on normal commercial terms and the consideration was agreed after arm's length negotiations.

FUTURE COOPERATION BETWEEN THE COMPANY AND YAHOO!

The Purchaser agreed to grant to the Vendor a right of first refusal to invest or otherwise participate in certain projects of the Purchaser to develop e-commerce platform and platform products for application service provider services.

CONSIDERATION

The consideration payable by the Company pursuant to the agreement amounts to US$1,200,000 (approximately HK$9,360,000) which was determined after arm's length negotiation taking into account the provision of services in advertising elements, placement fees, promotions, banner advertisements and sponsorships. The consideration was funded by internal sources of the Company.

INFORMATION ON THE VENDOR

The Vendor is a wholly-owned subsidiary of Yahoo! Inc. , a substantial shareholder (as defined under the Listing Rules) of the Company holding 93,240,000 shares in the Company (approximately 11.36% of the issued share capital of the Company). Yahoo! Inc. is a leading global internet communications, commerce and media company. Yahoo! Inc. also provides online business and enterprise services designed to enhance the productivity and Web presence of Yahoo!'s clients. These services include Corporate Yahoo!, a popular customized enterprise portal solution; audio and video streaming; store hosting and management; and Web site tools services.

REASONS FOR THE TRANSACTIONS

Yahoo! Inc. is the leading global internet company occupying a premier market position. It is believed that the technical support and expert advice in investment and strategic development to be provided by the Vendor will strengthen the Company's position in e-commerce projects.

The Directors consider, web-based advertising, especially in popular websites with high traffic networks, is more effective than traditional media advertising. The Directors consider that the users of Yahoo! Inc. are the Company's targeted customers and online advertisement will enhance the publicity of the Company and its launch of new products and business thereby giving rise to further business opportunities.

The transactions are in line with the Company's overall business strategy to seek investment opportunities in e-commerce and electronic products businesses and to widen and strengthen its earning base. The Directors (including the independent non-executive directors) consider that the transactions are fair and reasonable and are in the best interest of the Company.



By Order of the Board
Cheung Shuen Lung
Chairman and Executive Director

At the rate of US$1.00 to HK$7.80

Hong Kong, 2 August 2001

Please also refer to the published version of this announcement in the Hong Kong iMail and Hong Kong Economic Times.


Source: EC-Founder (Holdings) Company Limited
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