▇.▇. ▇▇▇, INC.
QUALITY PRINCE LTD.
PHENOMENAL LIMITED
▇▇▇ ▇▇▇ WING
CHAN YAM FAI, ▇▇▇▇
HANG ▇▇▇▇ GOLD TECHNOLOGY LIMITED
HANG ▇▇▇▇ JEWELLERY COMPANY LIMITED
SOYCUE LIMITED
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DEED OF AMENDMENT
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▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
29th Floor, Entertainment Building
▇▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇▇-▇▇▇▇
THIS DEED is made on the day of June 1998.
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AMONG
(1) ▇.▇. ▇▇▇, INC. a company incorporated in Nevada, United States of America
with its registered office at Corporation Trust Company, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇.▇.▇. ("▇.▇. ▇▇▇, Inc.");
(2) QUALITY PRINCE LTD. a British Virgin Islands corporation with its
registered office at ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ("Quality Prince");
(3) PHENOMENAL LIMITED a British Virgin Islands corporation with its registered
office at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,
British Virgin Islands ("Phenomenal");
(4) ▇▇▇ ▇▇▇ WING [HKID: ▇▇▇▇▇▇▇(▇)] at ▇▇▇▇▇ ▇▇-▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, Focal
Industrial Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong ("▇▇.
▇▇▇");
(5) CHAN YAM FAI, ▇▇▇▇ [HKID: ▇▇▇▇▇▇▇(▇)] at ▇▇▇▇▇ ▇▇-▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇,
Focal Industrial Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong
("▇▇▇ ▇▇▇"; collectively with ▇▇. ▇▇▇, "the Lams"); and
(6) HANG ▇▇▇▇ GOLD TECHNOLOGY LIMITED a company incorporated in Bermuda with
its registered office at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇,
Bermuda ("List Co").
(7) HANG ▇▇▇▇ JEWELLERY COMPANY LIMITED, a company incorporated in Hong Kong
with its registered office at ▇▇▇▇▇ ▇▇-▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, Focal
Industrial Centre, ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ("HF Jewellery").
(8) SOYCUE LIMITED, a company incorporated in the British Virgin Islands with
its registered office at P. O. Box 71, Craigmuir ▇▇▇▇▇▇▇▇, Road Town,
Tortola, British Virgin Islands ("Soycue").
RECITALS
A. Quality Prince is the holding company of the group of companies known as
the Hang ▇▇▇▇ Group.
B. HF Jewellery, further details of which are specified in Schedule 6, is a
wholly owned subsidiary of Quality Prince.
C. The parties (apart from HF Jewellery, Soycue and List Co) entered into an
agreement entitled "Investment Agreement for a Warrant to Purchase
5,263,158 shares of Common Stock of ▇.▇. ▇▇▇, Inc. and a US$ 10,000,000
Convertible Note Certificate of Quality Prince Ltd." on May 20, 1997 in
Hong Kong (the "Original Agreement") for the purpose of providing by
Phenomenal financing in the amount of US$10,000,000 to the Hang ▇▇▇▇ Group,
as that term is defined in the Original Agreement. A copy of the Original
Agreement is attached to this Deed as Schedule 1.
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D. Pursuant to Section 6 of the Convertible Note Certificate of Quality Prince
(the "Note"), which was issued under and formed an integral part of the
Original Agreement, the amount due under the Note, i.e. the principal
amount of US$10,000,000 and all the interest accruing, shall be due and
repayable on the expiration of ten months from the date of issue, namely on
March 20, 1998, unless the holder of the Note has exercised its right of
conversion pursuant to Section 3 of the Note. Phenomenal, as the holder of
the Note, has not exercised such right.
E. To extend the financing provided to the Hang ▇▇▇▇ Group by Phenomenal under
the Original Agreement, the parties have agreed that the principal amount
advanced by Phenomenal pursuant to the Note shall be restructured and
capitalized into redeemable preference shares in the capital of HF
Jewellery, that Phenomenal shall waive its right to obtain all interest
accrued under the Note, and that certain modifications to the Original
Agreement shall be adopted under the terms and conditions as further
described below.
F. The parties also wish to document their intention to list the Hang ▇▇▇▇
Group on The Stock Exchange of Hong Kong Limited and to specify certain
circumstances under which Phenomenal or its nominee may subscribe for
shares in List Co.
G. The parties began negotiating the terms and conditions for the
restructuring before March 20, 1998 but were not able to complete the
restructuring as of March 20, 1998. The parties executed extension
agreements to extend the Original Agreement until June ___, 1998 to allow
time for the preparation and execution of documents necessary for the
implementation of the restructuring.
H. Section 9.09 of the Original Agreement provides that any term of the
Original Agreement may be amended only by a written instrument signed by
the party against whom enforcement of any such amendment is sought.
I. The parties desire to amend the Original Agreement to carry out the
purposes of Recitals E and F above by and in accordance with this Deed.
NOW THIS DEED WITNESSES:
ARTICLE 1. GENERAL
Section 1.1 Effectiveness.
This Deed shall be effective as of the date hereof ("Effective Date").
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Section 1.2 Definitions.
For purposes of this Deed, the following words and phrases shall have the
following meanings:
(a) "Aggregate Redemption Amount" has the meaning specified in Section 7.4.
(b) "Completion" has the meaning specified in Section 6.1.
(c) "Effective Date" has the meaning specified in Section 1.1.
(d) "Listing" has the meaning specified in Section 7.1.
(e) "Prospectus Date" has the meaning specified in Section 7.6.
(f) "Put Option Agreement" has the meaning specified in Section 2.2.
(g) "Redeemable Preference Shares" has the meaning specified in Section 2.1.
Any other words with initial capitalization that are used and not defined in
this Deed shall have the meanings ascribed to them in the Original Agreement.
ARTICLE 2. ISSUANCE OF REDEEMABLE PREFERENCE SHARES
Section 2.1 Issuance of Redeemable Preference Shares.
Before Completion, HF Jewellery will have duly authorized the issuance of
5,263,788 redeemable preference shares of US$0.01 each ("Redeemable Preference
Shares") at a premium of US$ 1.8897726 each to Phenomenal or its nominee
(representing a total subscription amount of US$10,000,000), such redeemable
preference shares having the rights, restrictions, privileges, and preferences
of which are set forth in Schedule 2 to this Deed. HF Jewellery shall before the
Completion amend its Memorandum and Articles of Association to permit HF
Jewellery to be legally authorized to issue the Redeemable Preference Shares in
accordance with the terms under Schedule 2.
Section 2.2 Put Option Agreement.
The Lams shall enter into a duly executed put option agreement (the "Put Option
Agreement") with Phenomenal substantially in the form set out in Schedule 3 at
Completion, enabling Phenomenal to sell the Redeemable Preference Shares to the
Lams in the event HF Jewellery fails to timely redeem the Redeemable Agreement
Shares pursuant to Section 7.2 or 7.3 hereof, as the case may be, on the terms
specified in the Put Option Agreement.
ARTICLE 3. SATISFACTION OF NOTE AND RELEASE OF SECURITY
Section 3.1 Satisfaction of the Note.
Upon Completion, all obligations of Quality Prince under the Note shall be
deemed fully satisfied and extinguished and the Note shall cease to have any
force or effect.
Section 3.2 Release of Share Mortgage and Personal Guarantee.
3
Upon Completion, the Share Mortgages and the Personal Guarantees referred to in
the Original Agreement shall be completely discharged, and the original share
certificates in ▇.▇. ▇▇▇, Inc. and Good Day Holdings Limited and all blank
instruments of transfer held by Phenomenal under the Share Mortgages shall be
returned to the holders of the share certificates.
Section 3.3 Language Made Without Force and Effect.
All language in the Original Agreement relating to the Note that are made
obsolete or inconsistent with the provisions herein shall be deleted and made
without force and effect upon the Completion.
ARTICLE 4. COMMON STOCK PURCHASE WARRANT TO BE EXTENDED
Section 4.1 Warrant to be Extended.
The Common Stock Purchase Warrant of ▇.▇. ▇▇▇, Inc. executed in connection with
the Original Document (the "Warrant") shall be extended through mid-night, May
31, 1999 or until the Listing, whichever date is earlier, by the execution of an
Extension and Modification Agreement substantially in the form of Schedule 4
hereto by ▇.▇. ▇▇▇, Inc. and Phenomenal.
Section 4.2 Number of Common Stock Modified.
The number of shares in the Common Stock of ▇.▇. ▇▇▇, Inc. subject to the
Warrant shall be modified in accordance with the following formula:
5,263,788 shares x [ 1 + (n x 0.1956)/365 x 1.899773/2.15 ]
where
-----
n = number of days elapsing between March 20, 1998 and the day on which the
Warrant is exercised
Section 4.3 Rights as Redeemable Preference Share Holder and Warrant Holder
Mutually Exclusive.
The redemption and subscription rights of Phenomenal specified in Article 7
herein are alternative to and mutually exclusive with the rights of Phenomenal
as holder of the Warrant. By exercising its right to cause the redemption of the
Redeemable Preference Shares and subscribe for ordinary shares in List Co with
the redemption proceeds, Phenomenal will forfeit its right to exercise the
Warrant. By exercising the Warrant, Phenomenal will forfeit its right to to
cause the redemption of the Redeemable Preference Shares and subscribe for
ordinary shares in List Co with the redemption proceeds.
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ARTICLE 5. COVENANTS OF HF JEWELLERY AND SOYCUE
Section 5.1 No New Shares in HF Jewellery.
From the Effective Date and prior to redemption by HF Jewellery of all the
Redeemable Preference Shares issued to Phenomenal pursuant to Section 7.2 or
7.3, HF Jewellery covenants not to issue additional shares, whether ordinary or
preference, to any other party without the written consent of Phenomenal (such
consent not to be unreasonably withheld).
Section 5.2 No Demand on Inter-Company Loan.
From the Effective Date and prior to the redemption of the Redeemable Preference
Shares by HF Jewellery pursuant to Section 7.2 or 7.3 hereof, Soycue covenants
that it shall not demand nor accept any payment from HF Jewellery for the
repayment of any interest or principal on an inter-company loan due from HF
Jewellery to Soycue in the amount of HK$22,791,000 existing as of the Effective
Date without the consent of Phenomenal.
ARTICLE 6. COMPLETION
Section 6.1 Time and Place.
The completion ("Completion") of the transactions contemplated under this Deed
shall take place at the offices of ▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇ ("▇▇▇▇▇ Day") at
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ on June
30, 1998, or such other time and place as may be mutually agreed on.
Section 6.2 Documents to be Delivered.
At Completion the Lams will deliver or procure the delivery of the following
documents to Phenomenal:
(a) Share certificates representing 5,263,788 shares of Redeemable Preference
Shares in HF Jewellery issued to Phenomenal or its nominee. The
certificates shall be registered on HF Jewellery's books in the name of
Phenomenal or its nominee.
(b) Evidence to the reasonable satisfaction of Phenomenal that the Memorandum
and Articles of Association of HF Jewellery has been amended pursuant to
Section 2.1 herein.
(c) A Put Option Agreement substantially in the form of Schedule 3, duly
executed by the Lams.
(d) An Extension and Modification Agreement for the Warrant substantially in
the form of Schedule 4 (the "Warrant Extension Agreement"), duly executed
by ▇.▇. ▇▇▇, Inc.
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Section 6.3 Documents to be Delivered by Phenomenal.
At Completion Phenomenal will deliver the following documents to the Lams,
Quality Prince or ▇.▇. ▇▇▇, Inc., as the case may be:
(a) The original Convertible Note Certificate executed by Quality Prince.
(b) Share certificates and blank instruments of transfer in ▇.▇. ▇▇▇, Inc. and
in Good Day Holdings Limited.
(c) The original Personal Guarantees executed by the Lams.
(d) The original Share Mortgages.
Section 6.4 Procedures at Completion.
At Completion, the Lams, ▇.▇. ▇▇▇, Inc. and Phenomenal, as the case may be,
shall execute the following documents:
(a) The Warrant Extension Agreement.
(b) The Put Option Agreement.
ARTICLE 7. RIGHT TO SUBSCRIBE FOR SHARES IN LIST CO AND LISTING OF HANG ▇▇▇▇
GROUP OF COMPANIES
Section 7.1 Intention of Listing.
The Lams, ▇.▇. ▇▇▇, Inc., Quality Prince and HF Jewellery hereby jointly and
severally represent that it is their intention that the Hang ▇▇▇▇ Group should
apply for listing of the shares in List Co on The Stock Exchange of Hong Kong
Limited (the "Listing"), and that for that purpose the respective parties have
procured the incorporation of List Co, a company incorporated in Bermuda, on
December 4, 1997. Notwithstanding any other provision in the Original Agreement
or this Deed, the Lams, ▇.▇. ▇▇▇, Inc., Quality Prince, List Co, HF Jewellery
and Soycue are not required to obtain any consent from Phenomenal in order to
implement the Listing. The Lams, ▇.▇. ▇▇▇ Inc and Quality Prince hereby agree to
use their reasonable endeavors to procure that prior to March 20, 1999 the Hang
▇▇▇▇ Group will implement a restructuring so that List Co shall become the
holding company of the corporations constituting the Hang ▇▇▇▇ Group.
Section 7.2 Redemption of Redeemable Preference Shares before March 20, 1999.
The parties hereto agree that except as provided in this paragraph, Phenomenal
shall not have the right to redeem any of its Redeemable Preference Shares
before March 20, 1999. Phenomenal shall be obliged to exercise its right to (i)
cause HF Jewellery to redeem the Redeemable Preference Shares to be issued to
Phenomenal or its nominee pursuant to this Deed (notwithstanding the terms of
issue of such Redeemable Preference Shares) and (ii) to apply a minimum of US$
10,000,000 or any larger amount up to the Aggregate Redemption Amount (as
defined in Section 7.4) for the subscription of shares in List Co pursuant to
Section 7.5, if at any time before March 20, 1999 reasonable evidence has been
produced to Phenomenal in writing of (a) the completion of the restructuring
contemplated in Section 7.1; and (b) the approval by the Listing Committee of
The Stock Exchange of Hong Kong Limited of the Listing, provided that the
notional market capitalization of List Co disclosed in the prospectus to be
issued by List Co shall not be less than the amount set forth in Section 7.7.
Within five (5) days of the occurrence of (a) and (b) above, Phenomenal shall
serve a notice in writing to HF Jewellery or the Lams to cause the redemption of
the Redeemable Preference Shares and to subscribe for shares in List Co, in each
case, prior to the date of bulk printing of the prospectus as referred to above.
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Section 7.3 Redemption of Redeemable Preference Shares after March 19, 1999.
If one or both of the above conditions (a) and (b) set out in Section 7.2 are
not satisfied by 20 March 1999, Phenomenal shall be required by serving an
irrevocable notice (the "March Notice") to HF Jewellery or the Lams before March
31, 1999 to elect either one of the following options (i) or (ii).
(a) Under option (i), Phenomenal shall cause HF Jewellery to redeem the
Redeemable Preference Shares in accordance with Section 7.4 without further
subscribing for any shares in List Co with any of the Aggregate Redemption
Amount received from the redemption.
(b) Under option (ii), Phenomenal shall cause HF Jewellery to redeem the
Redeemable Preference Shares in accordance with Section 7.4, and, provided
that it is established before March 31, 1999 by HF Jewellery or the Lams
that condition (a) set out in Section 7.2 has been satisfied, shall be
obliged to apply part or all of the Aggregate Redemption Amount to
subscribe for shares in List Co pursuant to Section 7.5. If condition (a)
set out in Section 7.2 has not been satisfied before March 31, 1999,
Phenomenal shall be obliged to continue to hold the Redeemable Preference
Shares and shall not have the right to require HF Jewellery or the Lams to
redeem any of the Redeemable Preference Shares until such time when
condition (a) set out in Section 7.2 is satisfied, which time in no event
shall be later than June 30, 1999, under which circumstance Phenomenal
shall be obliged to cause the redemption and subscribe for shares in List
Co pursuant to Section 7.5. If the condition (a) set out in Section 7.2 is
not satisfied by June 30, 1999, Phenomenal shall have the right but not the
obligation by serving an irrevocable notice (the "June Notice") to HF
Jewellery or the Lams to cause a redemption of the Redeemable Preference
Shares and elect to apply none, part or all of the Aggregate Redemption
Amount to subscribe for shares in List Co until such time when condition
(a) set out in Section 7.2 is satisfied, at which time Phenomenal shall be
obliged to serve an irrevocable notice to HF Jewellery or the Lams within
ten (10) days after satisfaction of condition (a) set out in Section 7.2 to
cause HF Jewellery to redeem the Redeemable Preference Shares and elect to
apply none, part or all of the Aggregate Redemption Amount to subscribe for
shares in List Co pursuant to Section 7.5.
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Section 7.4 Determination and Payment of Redemption Amount.
The Aggregate Redemption Amount shall mean and consist of (i) US$10,000,000
representing a return of capital; and (ii) a dividend payable at the same time
with (i), and collectively shall be calculated in accordance with the following
formula:
ARA = US$10,000,000 x (1 + n x 0.1956/365)
where
-----
ARA = the aggregate redemption amount (the "Aggregate Redemption Amount")
payable by HF Jewellery to Phenomenal for the redemption of all the 5,263,788
Redeemable Preference Shares held by Phenomenal.
n = number of days elapsing from March 20, 1998 to the date the Aggregate
Redemption Amount is paid to Phenomenal, which in any event will not exceed 365
days.
Only in the event of either (a) a redemption by HF Jewellery of the Redeemable
Preference Shares held by Phenomenal pursuant to Section 7.3 (a) whereby
Phenomenal has served the March Notice electing not to subscribe for shares in
List Co; or (b) where condition (a) set out in Section 7.2 not being satisfied
by June 30, 1999 pursuant to Section 7.3(b) and Phenomenal has served the June
Notice to HF Jewellery or the Lams, HF Jewellery shall be required to tender the
payment in lawful U.S. currency for (i) the Aggregate Redemption Amount within
90 days of the date of the March Notice or the June Notice, as the case may be,
served by Phenomenal under Section 7.3; and (ii) a special dividend calculated
under the formula below shall accrue and be payable together with the Aggregate
Redemption Amount on the date the payment for the Aggregate Redemption Amount is
made:
SD = US$10,000,000 x (n x 0.1956/365 )
where
-----
SD = special dividend
n = number of days elapsing from March 20, 1999 to the date the Aggregate
Redemption Amount is paid to Phenomenal.
Section 7.5 Subscription of Shares.
Immediately upon the payment by HF Jewellery of the Aggregate Redemption Amount
in respect of the Redeemable Preference Shares pursuant to Section 7.4,
Phenomenal shall be obliged to subscribe for that number of shares in List Co
using all or part of the Aggregate Redemption Amount paid by HF Jewellery to
Phenomenal for the redemption of all of the 5,263,788 Redeemable Preferences
Shares held by Phenomenal pursuant to Section 7.2 as follows:
(a) For an aggregate subscription of US$10 million, Phenomenal will subscribe
for such number of shares in the List Co representing 29.14% of total
number of outstanding ordinary shares in List Co without taken into any
shares to be issued and allotted under the Listing. The per share issue
price shall be US$ 10 million divided by the number of shares issued
pursuant to this paragraph.
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(b) For any amount in excess of US$ 10,000,000, Phenomenal will subscribe for
shares in List Co at a price per share 13.16% higher than the price per
share paid for the first 29.14% shares under Section 7.5(a).
(c) In the event a special dividend is paid pursuant to the June Notice,
Phenomenal may elect to apply the proceeds of such special dividend to
subscribe for any additional shares in List Co at the per share price
stated in (b) hereinabove.
Section 7.6 Shareholders Agreement.
▇.▇. ▇▇▇, Inc. and the Lams shall further procure, and Quality Prince shall
further agree that upon the subscription of the shares by Phenomenal or its
nominee as provided in Section 7.3, the shareholders of List Co shall enter into
a shareholders agreement with Phenomenal or its nominee in the form specified in
Schedule 5. It is expressly agreed and acknowledged that such agreement shall
terminate and shall become void and cease to have any force or effect on the
date being the date of any prospectus (the "Prospectus Date") that may be issued
by List Co in respect of the initial public offer in the course of an
application for listing of the shares of List Co or such earlier date as may be
agreed by the parties.
Section 7.7 Market Capitalization.
Phenomenal hereby agrees and covenants by its execution hereof, that List Co may
seek a listing of the shares on The Stock Exchange of Hong Kong Limited without
the consent of Phenomenal (or any affiliated company of Phenomenal) under the
Original Agreement, this Deed or any shareholders agreement to which Phenomenal
is a party, provided that:
(a) the notional market capitalization expressed in Hong Kong dollars of List
Co immediately prior to the commencement of trading of List Co on The Stock
Exchange of Hong Kong Limited shall be not less than HK$ 2.5 x 18,063,158 x
A.
where
-----
A = represents the US$/HK$ exchange rate prevailing on the date of issuance
of the prospectus, under which an initial public offer is made to
facilitate the Listing.
(b) In this Section 7.7 notional market capitalisation shall mean the amount
calculated as follows:
MC = N x IP
where
-----
MC - is the notional market capitalisation
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N - is the number of shares in issue on the first day of trading of the
shares of List Co on The Stock Exchange of Hong Kong Limited
IP - means the issue price of shares to be issued under the initial public
offer prior to such listing.
Section 7.8 Right to Appoint Board Representative.
▇. ▇. ▇▇▇, Inc., Quality Prince, and the Lams hereby agree and covenant that
they will procure that while Phenomenal or it nominees hold twenty per cent
(20%) or greater of the total issued share capital of List Co, Phenomenal shall
have the right to appoint one Director to the Board of Directors of the List Co.
ARTICLE 8. WARRANTIES AND REPRESENTATIONS
Section 8.1 Representations and Warranties.
▇▇. ▇▇▇, ▇▇▇. ▇▇▇, ▇.▇. ▇▇▇, Inc., Quality Prince and HF Jewellery do hereby
jointly and severally represent and warrant as follows:
(a) The details of HF Jewellery specified in Schedule 6 are complete and
accurate in all respect and without limitation, Quality Prince is the
holding company of the Hang ▇▇▇▇ Group in the manner specified in the
organizational chart annexed to Schedule 6.
(b) The representations and warranties under Article 5 in the Original
Agreement were true and accurate when made and, except as hereby rendered
obsolete or inconsistent by this Deed, remain true and accurate in all
material respects as of this date.
(c) Each of the parties has obtained all consents and authorizations necessary
or required for it to meet and perform the conditions of this Deed and the
Deed constitutes a legal, valid, and binding obligation, enforceable in
accordance with its provisions.
ARTICLE 9. MISCELLANEOUS
Section 9.1 Continued Effect of Original Agreement.
All provisions of the Original Agreement, except as modified by this Deed, shall
remain in full force and effect and are reaffirmed. Each party acknowledges that
it, as its respective interests appear, is liable for all damages arising from
nonperformance under this Deed if all conditions of this Deed are not met; and
that if this Deed is performed such performance shall be accepted as full
performance of its obligations under the Original Agreement. Other than as
stated in this Deed, this Deed shall not operate as a waiver of any condition or
obligation imposed on the parties under the Original Agreement. All
representations and warranties under Article 5 and all the affirmative and
negative covenants under Articles 7 and 8 of the Original Agreement attributable
to Quality Prince Limited shall be deemed to also have been made by and
applicable to HF Jewellery.
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Section 9.2 Further Assurances.
The parties shall at their own cost and expense execute and deliver further
documents and instruments and shall take such other actions as may be reasonably
required or appropriate to evidence or carry out the intent and purposes of this
Deed.
Section 9.3 Interpretation of Deed.
In the event of any conflict, inconsistency, or incongruity between any
provision of this Deed and any provision of the Original Agreement, the
provisions of this Deed shall prevail.
Section 9.4 Governing Law and Severability.
This Deed shall be governed by and construed in accordance with the laws of the
Hong Kong SAR and the parties submit to the non-exclusive jurisdiction of the
courts of the Hong Kong SAR. If a court or other tribunal of competent
jurisdiction holds any provision of this Deed to be unenforceable, the remaining
portions of this Deed shall remain in full force and effect.
Section 9.5 Entire Agreement.
This Deed, together with the Original Agreement, constitutes the entire
agreement between the parties hereto pertaining to the subject matter of this
Deed, and any and all other written or oral agreements existing between the
parties before the date of this Deed with respect to the subject matter of this
Deed, except pertinent parts of the Original Agreement, are expressly cancelled.
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EXECUTED as a deed:
THE COMMON SEAL of )
PHENOMENAL LIMITED )
was hereunto affixed in accordance )
with its Articles of Association )
in the presence of: )
------------------------------------------
Director
THE COMMON SEAL of )
▇.▇. ▇▇▇, INC. )
was hereunto affixed in accordance )
with its Bylaws )
in the presence of: )
------------------------------------------
▇▇▇ ▇▇▇ Wing, President
------------------------------------------
Chan Yam Fai, Jane, Secretary
THE COMMON SEAL of )
QUALITY PRINCE LIMITED )
was hereunto affixed in accordance )
with its Articles of Association )
in the presence of: )
------------------------------------------
Director
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SIGNED, SEALED and )
DELIVERED by ▇▇▇ ▇▇▇ WING )
[HKID: ▇▇▇▇▇▇▇(▇)] )
in the presence of: )
------------------------------------------
SIGNED, SEALED and )
DELIVERED by CHAN YAM FAI, ▇▇▇▇ )
[HKID: ▇▇▇▇▇▇▇(▇)] )
in the presence of: )
------------------------------------------
THE COMMON SEAL of )
HANG ▇▇▇▇ GOLD TECHNOLOGY LIMITED )
was hereunto affixed in accordance )
with its Bye-laws )
in the presence of: )
------------------------------------------
Director
THE COMMON SEAL of )
HANG ▇▇▇▇ JEWELLERY COMPANY LIMITED )
was hereunto affixed in accordance )
with its Articles of Association )
in the presence of: )
------------------------------------------
Director
THE COMMON SEAL of )
SOYCUE LIMITED )
was hereunto affixed in accordance )
with its Articles of Association )
in the presence of: )
------------------------------------------
Director
13
Schedule 1
INVESTMENT AGREEMENT
14
Schedule 2
RIGHTS, RESTRICTIONS, PRIVILEGES, AND PREFERENCES
OF REDEEMABLE PREFERENCE SHARES
The nature and extent of the preferences, rights, privileges, and restrictions
granted to or imposed on the holders of the Redeemable Preference Shares are as
follows:
(a) Redemption Right by holder: holders of the Redeemable Preference Shares
shall be entitled on or after March 20, 1999 pursuant to a Deed of
Amendment, dated June ________, 1998, to which HF Jewellery is a party (the
"Deed") to deliver to HF Jewellery for redemption a certificate or
certificates for the Redeemable Preference Shares, properly endorsed, at
which time HF Jewellery shall redeem the shares represented by the
certificate or certificates by paying to each registered shareholder of
Redeemable Preference Shares, in cash, the value of the shares determined
in accordance with the following formula:
The aggregate redemption amount shall consist of (i) US$10,000,000
representing a return of capital; and (ii) a dividend payable at the same
time with (i) , and collectively shall be calculated in accordance with the
following formula:
ARA = US$10,000,000 x (1 + n x 0.1956/365)
where
-----
ARA = the aggregate redemption amount (the "Aggregate Redemption Amount")
payable by HF Jewellery to Phenomenal for the redemption of all the
5,263,788 Redeemable Preference Shares held by Phenomenal.
n = number of days elapsing from March 20, 1998 to the date the Aggregate
Redemption Amount is paid to Phenomenal, which in any event will not exceed
365 days.
(b) Special Dividend Entitlement: holders of Redeemable Preference Shares shall
be entitled to a special dividend pursuant to Section 7.4 of the Deed.
(c) Voting Rights: holders of Redeemable Preference Shares shall have no voting
rights in respect of any general meeting of HF Jewellery, save and except
for any resolution:
(i) under which the rights attaching to Redeemable Preference Shares may
be varied in any manner;
(ii) any resolution in respect of the winding up of HF Jewellery;
(iii)any resolution to issue additional shares in the capital of HF
Jewellery or provide mandate to directors to issue the same.
-15-
(d) Winding-Up: holders of Redeemable Preference Shares shall on a winding up
of HF Jewellery rank for priority to holders of ordinary shares, so that
any surplus assets proceeds or assets shall be distributed to holders of
Redeemable Preference Shares, so as to repay the Aggregate Redemption
Amount prior to any distribution to ordinary shareholders.
-16-
Schedule 3
PUT OPTION AGREEMENT
Date day of 1998
▇▇▇ ▇▇▇ WING
CHAN YAM FAI, ▇▇▇▇
and
PHENOMENAL LIMITED
-----------------------------------
PUT OPTION AGREEMENT
-----------------------------------
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
29th Floor, Entertainment Building
▇▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇▇-▇▇▇▇
-17-
PUT OPTION AGREEMENT made on _______ day of _______, 1998.
BETWEEN
(1) ▇▇▇ ▇▇▇ Wing (Hong Kong Identity Card No.: ▇▇▇▇▇▇▇ (▇)) of ▇▇▇▇ ▇▇-▇▇, ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇, and Chan Yam Fai, ▇▇▇▇ (Hong Kong Identity Card No. ▇▇▇▇▇▇▇(▇) of
the same address (collectively the "Optionor"); and
(2) Phenomenal Limited, a company incorporated under the laws of the British
Virgin Islands and whose registered office is at P.O. Box 957, Offshore
Incorporations Centre, Road Town, Tortola, British Virgin Islands (the
"Optionee").
RECITALS
A. At the request of the Optionor and pursuant to the terms of a deed of
amendment (the "Deed") dated June _______, 1998 between the Optionor, Hang
▇▇▇▇ Jewellery Company Limited, a company incorporated in Hong Kong with
its registered office at ▇▇▇▇▇ ▇▇-▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, Focal Industrial
Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong (the "Company"),
▇.▇. ▇▇▇, Inc., Quality Prince Limited, Soycue Limited, Hang ▇▇▇▇ Gold
Technology Limited ("List Co") and the Optionee, the Optionee agrees to
replace a convertible note in the sum of US$10,000,000 issued by Quality
Prince Limited to Optionee with an investment in the Company in the form of
Redeemable Preference Shares in the capital of the Company.
B. The Company has issued 5,263,788 Redeemable Preference Shares to the
Optionee (the "Redeemable Preference Shares") on the terms specified in the
Deed and the Company's Memorandum and Articles of Association.
C. It is a condition of the Deed that the Optionor will grant to Optionee a
put option pursuant to this Put Option Agreement.
NOW IT IS HEREBY AGREED:
1. PUT OPTION AGREEMENT
--------------------
In consideration of the Optionee entering into the Deed, the Optionor
grants to the Optionee an option to require Optionor to purchase all of the
5,263,788 Redeemable Preference Shares in the Company (the "Option Shares")
held by the Optionee under the following terms and conditions.
1.1 Optionee shall have the right to require Optionor to purchase or to procure
purchasers for all of the Option Shares from Optionee if the Company shall
default in redeeming the Option Shares pursuant to the Deed and the terms
of issue of the Option Shares.
-18-
1.2 Optionee may exercise this Put Option by giving written notice (the "Put
Option Notice") to Optionor (or any one of them) at the address specified
in Clause 7 herein, stating that the Put Option is thereby exercised. Such
Put Option Notice may be given any time after the failure of the Company
described in Section 2.2 of the Deed has occurred.
1.3 Within 90 days after the date of service of the Put Option Notice on
Optionor by Optionee, Optionor shall be obliged to pay to Optionee the Put
Option Exercise Price as defined below payable for the Option Shares
calculated in accordance with Clause 1.4 and Optionee shall be obliged to
deliver to Optionor, or as Optionor may direct, the certificate or
certificates relating to the Option Shares together with an instrument of
transfer and bought and sold note in respect thereof executed by Optionee,
such instrument of transfer to be in a registrable form in all respects.
1.4 The purchase price (the "Put Option Exercise Price") payable by Optionor to
Optionee in respect of the Option Shares shall be the Aggregate Redemption
Amount calculated pursuant to Section 7.4 of the Deed, together with an
additional amount representing interest calculated on a daily basis at the
rate of 19.56% per annum for the period commencing from the date the
Aggregate Redemption Amount is due under the Deed to the date the payment
is made by Optionor.
1.5 Optionee warrants that upon the exercise of the Put Option:
(a) the Option Shares shall be free from any lien, charge, encumbrance or
interest of any kind whatsoever; and
(b) the Option Shares shall be sold together with all rights attaching
thereto at the date of the exercise of such option.
2. INDEMNITY
---------
Without prejudice to the provisions contained in Clause 1, the Optionor
unconditionally and irrevocably undertakes and covenants, as a separate,
additional and continuing obligation, to indemnify the Optionee against all
losses, liabilities, damages, costs and expenses whatsoever arising out of
any failure by the Company to redeem the Option Shares pursuant to the
Deed. This indemnity shall remain in effect notwithstanding that the Put
Option under Clause 1 may cease to be valid or enforceable against the
Optionor for any reason whatsoever.
(The put option in Clause 1 and the indemnity in Clause 2 given by the
Optionor are hereinafter collectively referred to as the "Put Option".)
3. SECURITY
--------
3.1 Neither the liability of the Optionor nor the validity or enforceability of
this Put Option shall be prejudiced, diminished, affected or discharged by:
-19-
(a) the granting of any time, concession or indulgence to the Company or
any other person with respect to the redemption of the Option Shares;
(b) any variation or modification of the Deed or any document in relation
thereto;
(c) the invalidity or unenforceability of any obligation or liability of
the Company to the Optionee;
(d) any invalidity or irregularity in the execution of the Deed or other
document relating thereto;
(f) the insolvency or liquidation or any incapacity, disability or
limitation, or any change in the constitution or status of the
Company.
4. RECONSTRUCTION OF OPTIONEE
--------------------------
This Put Option Agreement shall continue to be binding and effective as a
continuing protection notwithstanding any amalgamation of the Optionee with
any third party and notwithstanding any reconstruction of the Optionee
involving the transfer of all or any of the assets of the Optionee to a
party, or notwithstanding the sale of all or any part of the undertaking
and assets of the Optionee to a third party, whether the third party with
which the Optionee amalgamates or to whom the Optionee transfers all or any
of the assets, either on a reconstruction or sale as aforesaid, shall or
shall not differ in their or in its objects character and construction from
that of the Optionee, it being the intent of the Optionor that this Put
Option Agreement shall remain valid and effectual in all respects and that
the benefit of this Put Option Agreement and all rights conferred upon the
Optionee hereby may be assigned to and enforced by such third party and
enforceable in the same manner to all intents and purposes as if such third
party had been named herein instead of the Optionee.
5. WAIVER AND SEVERABILITY
-----------------------
5.1 No failure or delay by the Optionee in exercising any right, power or
remedy hereunder shall impair such right, power or remedy or operate as a
waiver thereof, nor shall any single or partial exercise of the same
preclude any further exercise thereof or the exercise of any other right,
power or remedy.
5.2 The rights, powers and remedies herein provided are cumulative and do not
exclude any other rights, powers and remedies provided by law.
5.3 Each of the provisions in this Put Option Agreement is severable and
distinct from the others, and if at any time any provision of this Put
Option Agreement is or becomes illegal, invalid or unenforceable in any
respect under the law of any jurisdiction, the legality, validity and
enforceability of such provision under the law of any other jurisdiction,
and of the remaining provisions of this Put Option Agreement, shall not be
affected or impaired thereby.
-20-
6. ASSIGNMENT
----------
The Optionee may assign its rights under this Put Option Agreement or any
part thereof, and this Put Option Agreement shall enure to the benefit of
the Optionee and its successors and assigns.
7. NOTICES
-------
7.1 Delivery
All notices, demands or other communications which are to be given under
this Put Option Agreement shall be in writing and shall be addressed as
shown below:
(a) if to the Optionor or either of them:
Address: c/o ▇▇▇▇▇ ▇▇-▇▇, ▇ ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇, Focal Industrial Centre
▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇▇-▇▇▇▇
(b) if to the Optionee:
Address: ▇/▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Two ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: Managing Director, Transpac Group
7.2 Receipt
-------
Any such notice may be delivered personally, by prepaid post, or sent by
facsimile transmission and shall be deemed to have been effectively served:
(a) if by delivery in person, when delivered to the addressee;
(b) if by facsimile transmission when despatched;
(c) if by post:
-21-
(i) on the second Business Day following day of posting if sent from
Hong Kong to the address of a recipient in Hong Kong unless
actually received sooner; or
(ii) on the seventh Business Day following the day of posting if sent
from Hong Kong to the address of an overseas recipient (and vice
versa) unless actually received sooner.
7.3 Nothing in this Clause 7 shall preclude the service of communication or the
proof of such service by any other mode permitted by law.
8. GENERAL
-------
8.1 The expressions the "Optionee", the "Company" and the "Optionor" whenever
used here include and extend to their successors, executors, administrator,
legal representatives and assigns. Where the context allows the expression
"security", the term shall be deemed to include a judgement, specialty,
guarantee, indemnity, negotiable and other instruments and securities of
every kind.
8.2 Headings used in this Put Option Agreement are for convenience only and
shall not affect its interpretation.
8.3 The obligations and liabilities of ▇▇▇ ▇▇▇ Wing and Chan Yam Fai, ▇▇▇▇
under the Put Option Agreement shall be joint and several.
9. TERMINATION UPON LISTING
------------------------
Notwithstanding any other provisions herein, this Put Option Agreement
shall terminate and shall become void and cease to have any force or effect
on the date being the date of any prospectus that may be issued by List Co
in respect of the listing of the shares of List Co on The Stock Exchange of
Hong Kong Limited.
10. GOVERNING LAW AND ARBITRATION
-----------------------------
This Put Option Agreement is governed by and is to be construed in
accordance with the laws of Hong Kong SAR and the parties hereto submit to
the non exclusive jurisdiction of the courts of Hong Kong.
-22-
IN WITNESS whereof the Optionor has duly executed this Put Option Agreement as a
deed.
SIGNED, SEALED AND DELIVERED by ) Signature
▇▇▇ ▇▇▇ WING )
in the presence of: ) ------------------------------------
------------------------------------
Name:
SIGNED, SEALED AND DELIVERED by ) Signature
CHAN YAM FAI, ▇▇▇▇ )
in the presence of: ) ------------------------------------
------------------------------------
Name:
THE COMMON SEAL of )
PHENOMENAL LIMITED )
was hereunto affixed in accordance with its )
Articles of Association )
in the presence of: )
------------------------------------
Director
-23-
Schedule 4
EXTENSION AND MODIFICATION AGREEMENT
▇. ▇. ▇▇▇, INC. - COMMON STOCK PURCHASE WARRANT
THIS EXTENSION refers to a Warrant to Purchase 5,263,158 shares of Common
Stock in ▇.▇. ▇▇▇, Inc. (the "Common Stock")granted to Phenomenal Limited, a
British Virgin Islands corporation, on May 20, 1997 (the "Warrant"). The Warrant
will be void after May 31, 1998.
▇.▇. ▇▇▇, Inc. Phenomenal Limited, and all the other parties to a certain
"Investment Agreement for a Warrant to Purchase 5,263,158 Shares of Common Stock
of ▇.▇. ▇▇▇, Inc. and a US$10,000,000 Convertible Note Certificate of Quality
Prince Ltd." (the "Original Agreement") have agreed to restructure the financing
provided thereunder by entering into a Deed of Amendment amending the Original
Agreement (the "Deed"). The Deed contemplates an extension of the Warrant
through May 31, 1999, or the Prospectus Date (as defined in the Deed), whichever
date is earlier, and to adjust the number of shares of Common Stock subject to
the Warrant.
In consideration of the mutual obligations in the Deed, ▇.▇. ▇▇▇, Inc.
agrees to and hereby extends the term of the Warrant to May 31, 1999, or the
Prospectus Date (as defined in the Deed), whichever date is earlier, and the
date "May 31, 1998" appearing on the first page and in Sections 3(i) and 5(e) of
the Warrant shall be substituted with the date "May 31, 1999, or the Prospectus
Date (as defined in the Deed), whichever date is earlier." The number of shares
of Common Stock subject to the Warrant shall be adjusted in accordance with
Section 4.2 under the Deed.
▇.▇. ▇▇▇, Inc. agrees that except as hereby modified as to the term and the
dates of the Warrant, the Warrant shall remain in full force and effect in
accordance with all the terms and conditions as originally stated therein
through May 31, 1999, or the Prospectus Date (as defined in the Deed), whichever
date is earlier.
Dated: April ______________, ▇▇▇▇
▇.▇. ▇▇▇, Inc.
By:
-----------------------------
▇▇▇ ▇▇▇ Wing, President
By:
-----------------------------
Chan Yam Fai, Jane, Secretary
HOLDER OF WARRANT:
-----------------------------
Phenomenal Limited
By:
--------------------------
-24-
Schedule 5
SHAREHOLDERS AGREEMENT (List Co)
THIS SHAREHOLDERS AGREEMENT AND DEED (the "Agreement") is made on
________________, 19________.
BETWEEN
(1) PHENOMENAL LIMITED, a company incorporated in the British Virgin Islands,
at P.O. Box 957, Offshore Incorporations Centre, Road Town, Tortola,
British Virgin Islands ("Phenomenal")
(2) QUALITY PRINCE LIMITED, a company incorporated in the British Virgin
Islands, at ▇.▇. ▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
("QPL")
RECITALS
A. QPL is the holder of __________ Shares in Hang ▇▇▇▇ Gold Technology Limited
(the "List Co"), and Phenomenal is the holder of _______Shares in List Co.
B. By this Agreement, the undersigned parties desire to establish certain
mutual rights, obligations, and covenants as set forth herein.
NOW IT IS AGREED AS A DEED AS FOLLOWS:
1. CERTAIN DEFINITIONS
-------------------
As used in this Agreement, the following terms shall have the following
respective meanings:
"Associates" means, with reference to any person, a spouse; and
relative of that person within the third degree;
any director, officer, or employee of that person,
any corporation, association, firm, or other entity
of which that person is a member, director, officer,
or employee; and any other person directly or indirectly
controlling or controlled by, or under direct of indirect
common control with, that person.
"Board" means the board of directors of List Co.
"Control" means the ownership of 51 percent or more of the voting
power of the corporate entity.
-25-
"Deed" means the Deed of Amendment entered into between
Phenomenal, QPL, List Co, and certain other parties on
June ____, 1998.
"Director" means a director of the board of directors of List Co.
"Hang ▇▇▇▇ Group"means Hang ▇▇▇▇ Jewellery Company Ltd., a Hong Kong
corporation, and Kai Hang Jewellery Company Ltd., a Hong
Kong corporation, both of which are wholly owned
subsidiaries of QPL.
"Investment means the Investment Agreement executed by and among
Agreement" SWL, QPL, Phenomenal Limited, ▇▇▇ ▇▇▇ Wing and Chan Yam
Fai, ▇▇▇▇ in Hong Kong on May 20, 1997.
"List Co" means Hang ▇▇▇▇ Gold Technology Limited
"Phenomenal" means Phenomenal Limited, a British Virgin Islands
corporation.
"QPL" means Quality Prince Limited, a company incorporated
in the British Virgin Islands.
"Shareholder" means a holder of Shares.
"Shares" means all [#] outstanding and issued common or ordinary
shares in List Co.
"SWL" means ▇. ▇. ▇▇▇, Inc. a corporation organized under
the laws of the State of Nevada.
2. APPOINTMENT OF DIRECTORS AND MEETINGS OF SHAREHOLDERS AND DIRECTORS
-------------------------------------------------------------------
2.1 Appointment of Directors
------------------------
Phenomenal shall have the right to appoint, or effectively have the ability
to elect a minimum of one (1) Director to the board of directors of List
Co. Such a Director appointed by Phenomenal shall have the right to approve
or disapprove any major actions of List Co, including without limitation
those specified in Section 3.1 herein. The parties hereto may agree to
increase the number of Directors representing the interest of Phenomenal to
more than one (1) to reflect any increase in the proportional equity
interest of Phenomenal in List Co. If any director(s) nominated or elected
directly or indirectly by Phenomenal shall resign or otherwise cease to act
as a director any replacement or substitute shall also be nominated or
elected by Phenomenal.
-26-
2.2 Calling of meetings
-------------------
Any Shareholder shall have the right to call a shareholders' meeting upon
at least seven days' notice to the other Shareholders. Any Director shall
have the right to call a board of directors' meeting upon at least five
days' notice. All the board meetings and shareholders' meeting of List Co
shall be held in Hong Kong, unless otherwise unanimously agreed upon by all
the Shareholders or Directors.
2.3 Quorum
------
The presence of a Director appointed or elected by Phenomenal at any Board
meetings shall be a condition for a quorum. The presence of a
representative of Phenomenal at any Shareholders' meeting shall be a
condition for a quorum, except after adjournment with notice of at least
three days.
2.4 Deed of Bylaws, etc.
-------------------
The provisions under Sections 2.1 through 2.3 shall be binding on the
parties to the extent they are not inconsistent with the laws of the
jurisdiction of List Co.
3. APPROVAL FOR MAJOR ACTIONS AND REPORTING REQUIREMENTS
-----------------------------------------------------
3.1 Actions requiring Approvals
---------------------------
Any of the following actions undertaken by List Co or any companies within
the Hang ▇▇▇▇ Group shall require Board approval of List Co.
(a) amendment to the bye-laws and memorandum of association, material
changes in the business, winding up of List Co or any of its
subsidiaries or affiliates, or mergers or acquisitions of disposal of
other companies, otherwise than for the purpose of reorganizing List
Co and its subsidiaries in preparation for the listing of List Co on
the Hong Kong Stock Exchange.
(b) increase of authorized capital, or issuance of new shares or options
or of any other interests in shares, or any capital reorganization,
otherwise than for the purpose of reorganizing List Co and its
subsidiaries in preparation for the listing of List Co on the Hong
Kong Stock Exchange.
(c) approval of annual budgets and business plans, and any proposed or
actual increase of 10 percent or more over the total budgeted amount
for capital, operating and any other expenditures under the business
plans approved.
(d) capital expenditures exceeding HK$1 million per item, or any other
major asset commitments or disposal.
(e) any banking facilities or other assumptions of liability out of the
ordinary course of business, or the granting of any security interest.
(f) the granting of any gifts or the guaranteeing of any third party's
obligations.
27
(g) any activities not in the ordinary course of business, and any
transactions that may involve a conflict of interest for any
shareholder or director or that are otherwise conducted other than at
arm's length.
(h) any declaration of dividends by List Co or its subsidiaries.
(i) any change in auditor or financial year end.
3.2 Continuing Reporting Requirements
---------------------------------
All the financial reporting requirements and obligations of List Co to
Phenomenal as specified in Sections 7.02 through 7.09 of the Investment
Agreement shall continue in full force and effect, until List Co's or a
successor company's common or ordinary shares are listed and publicly
traded on the Hong Kong Stock Exchange or another national securities
exchange.
3.3 Disposition of Shares in Hang ▇▇▇▇ Group
----------------------------------------
The parties agree they shall procure that there shall not be any
disposition or transfer of any shares in the companies constituting the
Hang ▇▇▇▇ Group, including without limitation Hang ▇▇▇▇ Jewellery Company
Limited and Kai Hang Jewellery Company Limited by List Co or any other
party without the written consent of Phenomenal, otherwise than for the
purpose of reorganizing List Co and its subsidiaries in preparation for the
listing of List Co on the Hong Kong Stock Exchange.
4. TRANSFER OF SHARES
------------------
4.1 Restrictions on Transfers
-------------------------
Save as provided in Section 4.2, no Shareholders of List Co shall, or shall
attempt or offer to sell, transfer, assign or otherwise dispose of
("Transfer") any of its Shares except for transfer to one of more corporate
entities which are affiliated or under common control with the Shareholder.
Any purported Transfer by such a Shareholder of its shares in violation of
this Section 4 shall be void and of no force or effect.
4.2 Right of First Refusal
----------------------
Except as provided in Section 4.1 hereof, if at any time any Shareholder
(the "Transferring Shareholder") desires to Transfer any of its Shares (the
"Offered Stock"), such Transfer shall take place only in accordance with
the following procedures:
(a) The Transferring Shareholder shall give written notice ("Shareholder's
Notice") to the other Shareholders of the Shares (collectively, the
"Offerees") within ten (10) days after receipt of written, bona fide
offer (the "Offer") from a third party (the "Offeror"), which notice
is signed by the Transferring Shareholder and sets forth all the
material terms of the Offer (including (i) the Transferring
Shareholder's bona fide intention to transfer the Offered Stock; (ii)
the number of shares of the Offered Stock; (iii) the name, address and
relationship, if any, to the Transferring Shareholder of the Offeror;
and (iv) the bona fide cash price or, in reasonable detail, other
consideration, per share for which the Transferring Shareholder
proposes to transfer such Offered Stock (the "Offered Price")),
together with copies of any agreement or documents executed or
delivered, or to be executed or delivered, by the Transferring
Shareholder and the Offeror.
-28-
(b) The Offerees shall have the exclusive right for a period of thirty
(30) days after receipt of the Shareholder's Notice ("Exercise
Period") to notify the Transferring Shareholder of the Offerees'
election to purchase the shares of Offered Stock on the same terms and
conditions contained in the Offer ("Right of First Refusal"). The
Offerees' rights to purchase the shares of Offered Stock shall be
prorata to their respective holdings of List Co's capital stock on a
fully diluted basis. An Offeree's prorata share shall be determined by
dividing the number of Shares and Common Stock held by an Offeree by
the total number of Shares and Common Stock held by all Offerees. Any
Offeree that wishes to exercise the Right of First Refusal shall so
notify List Co and the Transferring Shareholder within the Exercise
Period. If any Offeree does not make such election to exercise the
Right of First Refusal within the Exercise Period, such declining
Offeree shall give written notice ("Declining Notice") to the
remaining Offerees and such remaining Offerees shall have the right to
purchase any shares of Offered Stock not purchased by the declining
Offeree or Offerees, which purchase shall be prorata if more than one
remaining Offeree elects to make such purchase. An election to
purchase the shares of Offered Stock not purchased by the declining
Offeree or Offerees shall be made by written notice to the other
Offerees and List Co within fifteen (15) days after receipt of the
Declining Notice ("Additional Exercise Period"). Within five days
after expiration of the Additional Exercise Period, List Co will give
written notice (the "Expiration Notice") to the Transferring
Shareholder and to the Offerees specifying the shares of Offered Stock
that were subscribed by the Offerees exercising their Right of First
Refusal.
(c) In the event that no Offeree elects to purchase the shares of Offered
Stock (or if such elections are made with respect to less than all the
shares of Offered Stock) within the Exercise Period and the Additional
Exercise Period, the Transferring Shareholder shall have the right
during the ensuing thirty (30) day period to Transfer to the Offeror
the shares of Offered Stock offered to the Offerees on the terms set
forth in the Shareholder's Notice. The Offeror shall as a condition to
each such purchase execute a counterpart of this Agreement or
otherwise agree in writing (in such form as shall be satisfactory to
the Board of Directors of List Co) to be bound by this Agreement to
the same extent that the Transferring Shareholder was bound. If such
Transfer is not completed within such thirty (30) day period, the
Transferring Shareholder shall be required, before Transferring its
shares to any third party, to reoffer the shares to the Offerees in
the manner set forth in this Section 4.2.
(d) The Transfer of the shares of Offered Stock resulting from the
acceptance of the Offer by one or more Offerees in accordance with
this Section 4.2 shall take place at a closing on a date designated by
List Co within ten (10) business days following acceptance of the
Offer by such Offeree or Offerees or such other time as the
Transferring Shareholder and the Offerees shall mutually agree. At
such closing, each Offeree shall pay the purchase price for the shares
of Offered Stock against delivery by the Transferring Shareholder of
(I) documentary evidence reasonably satisfactory to the Offeree of the
Transfer of all shares to such Offeree and (ii) a sales agreement in
form reasonably satisfactory to the Offeree containing, among other
things, a representation and warranty by the Transferring Shareholder
that the Transferring Shareholder is, and the Offeree shall be, the
record and beneficial owner of such shares with good title thereto,
free and clear of all liens and encumbrances.
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4.3 Tack Along and Repurchase Option
--------------------------------
Subject to Section 4.4 below, QPL and any of its Associates holding Shares
in List Co (each an "Applicable Shareholder" and collectively the
"Applicable Shareholders") shall jointly and severally, before making a
transfer or other disposal of any of their Shares (the "Applicable
Shareholders' Transfer Shares") to a third party, procure that such third
party offers to acquire from Phenomenal the same proportionate part of
Phenomenal's Shares as the number of the Applicable Shareholders' Transfer
Shares bears to all the Shares held by the Applicable Shareholders, and any
such offer shall:
(a) in relation to the acquisition of Phenomenal's Shares, be on the same
terms (subject to Sub-Section (b) below) as to price per Share, time
of payment and sharing of stamp duty as those applicable to the
proposed transfer by the Applicable Shareholders of the Applicable
Shareholders' Transfer Shares and be conditional upon the Applicable
Shareholders actually transferring the Applicable Shareholders'
Transfer Shares and customary warranties as to title being given by
Phenomenal; and
(b) where the offers extended to the Applicable Shareholders are not the
same as among them, the terms to be offered to Phenomenal shall be
those as are, in the opinion of Phenomenal, most favorable to the
offeree.
4.4 Notice to Phenomenal
--------------------
Each of the Applicable Shareholders shall, before a transfer by them of
Control of List Co to a third party, or a transfer of any Shares to a third
party which, when aggregated with the Shares held by such third party or
his Associates, would result in such third party and his Associates
acquiring Control of List Co, give not less than 14 days' notice in writing
to Phenomenal, and Phenomenal may at any time within 14 days after the
expiry of such 14 day period by a written notice (the "Election Notice")
served on any of the Applicable Shareholders require any of the Applicable
Shareholders either:
(a) to procure that the proposed transferee offers to acquire from
Phenomenal all of its Shares, and any such offer shall be made in
accordance with Section 4.5 below; or
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(b) to purchase from Phenomenal all of its Shares in accordance with
Section 4.6 below.
4.5 Election Notice
---------------
If Phenomenal shall by Election Notice require any of the Applicable
Shareholders to procure the proposed transferee referred to in Section 4.4
to acquire from Phenomenal all of its Shares, the offer by the proposed
transferee must:
(a) in relation to the acquisition of Phenomenal's Shares, be on the same
terms (subject to Sub-Section (b) below) as to price per Share, time
of payment and sharing of stamp duty as those applicable to the
proposed transfer by any of the Applicable Shareholders of their
Shares and be conditional upon the Applicable Shareholders actually
transferring Control of List Co and customary warranties as to title
being given by Phenomenal; and
(b) where the offers extended to the Applicable Shareholders are not the
same as among them, the terms to be offered to Phenomenal shall be
those as are, in the opinion of Phenomenal, most favorable to the
offeree; and unless such third party then proceeds to acquire Control
of List Co and Phenomenal's Shares in accordance with the terms of the
relevant offers, none of the Applicable Shareholders shall transfer
any of their respective Shares to such third party.
4.6 Repurchase
----------
If Phenomenal shall elect in its Election Notice to require the Applicable
Shareholders to purchase all Phenomenal's Shares, the following provisions
shall apply:
(a) the price (the "Repurchase Price") to be paid to Phenomenal for the
repurchase (the "Repurchase") of Phenomenal's Shares ("Repurchase
Shares") shall be the offered price of the third party;
(b) notwithstanding any provisions in this Section, the liability of each
of the Applicable Shareholders to purchase the Repurchase Shares shall
be joint and several;
(c) Phenomenal shall sell with full title guarantee and the Applicable
Shareholders shall purchase the Repurchase Shares free from all
encumbrance and together with all rights attaching thereto as at the
date of the Election Notice including all dividends or distributions
which may be paid, declared or made in respect thereof at any time on
or after the date of the Election Notice;
(d) without prejudice to Sub-Section (b),unless the Applicable
Shareholders agreed otherwise, each of Applicable Shareholders shall
purchase the same proportionate part of the Repurchase Shares as the
number of Shares held by each of the Applicable Shareholders bears to
the aggregate number of Shares held by all the Applicable
Shareholders;
31
(e) completion shall take place at 12:00 noon on the twenty-first day
after the date of the Election Notice or, if that is not a bank
business day, the first bank business day thereafter and, at such
completion:
(i) Phenomenal shall deliver to each of the Applicable Shareholders duly
executed instruments of transfer in favor of each of the Applicable
Shareholders the number of the Repurchase Shares determined by Section
4.6(d) above together with the share certificate therefor in the name
of Phenomenal or its nominee;
(ii) Phenomenal shall, so far as it lies within its power to do so, procure
the resignation of all Directors or directors on the board of
directors of SWL, Quality Prince, List Co or any of its subsidiaries
nominated by it with effect from completion of the Repurchase and each
such person shall acknowledge under seal that he has no claim against
List Co for whatsoever nature;
(iii)the Applicable Shareholders and Phenomenal (so far as it lies within
its power to do so) shall procure that a meeting of the Directors be
held at which resolution shall be passed:
(A) approving the transfer of the Repurchase Shares to each of the
Applicable Shareholders and the registration by List Co of such
transfer;
(B) the resignations of all Directors nominated by Phenomenal being
accepted; and
(C) such persons as the Applicable Shareholders shall be appointed
Directors with effect from completion of the Repurchase;
(iv) the Applicable Shareholders shall jointly and severally:
(A) pay or procure the payment to Phenomenal of the Repurchase Price
payable by the Applicable Shareholders by cashier's order or a
banker's draft drawn on a duly licensed bank in Hong Kong; and
(B) execute an instrument of transfer for the relevant Repurchase
Shares;
(f) Phenomenal shall warrant to the Applicable Shareholders that:
(i) Phenomenal is the legal and beneficial owner of the Repurchase Shares
free from all encumbrances and together with all rights attaching
thereto as at the date of the Election Notice and has the full power
and authority to sell and transfer the entire beneficial interests in
the Repurchase Shares to the Applicable Shareholders free from all
encumbrances and together with all rights as aforesaid; and
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(ii) all stamp duties and other costs, expenses (including legal costs) and
charges payable in connection with the sale and re-transfer of the
Repurchase Shares under this Section 4.6 shall be borne by the
Applicable Shareholders and Phenomenal in equal shares.
5. MISCELLANEOUS
-------------
5.1 Governing Law
-------------
This Agreement shall be governed in all respects by the laws of Hong Kong
SAR, without regard to its conflict of law principles.
5.2 Survival
--------
The representations, warranties, covenants and agreements made herein shall
survive any investigation made by any Shareholder and the closing of the
transactions contemplated hereby.
5.3 Successors and Assigns
----------------------
Except as otherwise provided herein, the provisions hereof shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties hereto.
5.4 Entire Agreement
----------------
This Agreement constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof, and no party shall
be liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein.
5.5 Notices, etc.
-------------
All notices and other communications required or permitted hereunder shall
be in writing and shall be delivered personally, mailed by certified or
registered mail, postage prepaid, return receipt requested, facsimile or
delivered by courier or overnight delivery, addressed (a) if to Phenomenal,
at 3322, 33rd Floor, Two ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and if by
fax, to (▇▇▇) ▇▇▇▇-▇▇▇▇ (attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇), or at such other
address or fax number Phenomenal shall have provided to List Co in writing,
or (b) if to QPL, at ▇▇▇▇▇ ▇▇-▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇, Focal Industrial
Centre, 21 Man Lok Street, Hunghom, Kowloon, Hong Kong, or if by fax, to
(▇▇▇) ▇▇▇▇-▇▇▇▇, or at such other address or fax number as QPL shall have
furnished to Phenomenal in writing. Notices that are mailed shall be deemed
received upon personal delivery or confirmation of facsimile receipt or, if
earlier, three (3) days after deposit in the mail.
33
5.6 Delays or Omissions
-------------------
Except as expressly provided herein, no delay or omission to exercise any
right, power or remedy accruing to any holder of any party hereto, upon any
breach or default of any other party under this Agreement, shall impair any
such right, power or remedy of such holder nor shall it be construed to be
a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any
waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any holder of
any breach or default under this Agreement, or any waiver on the part of
any holder of any provisions or conditions of this agreement, must be in
writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
5.7 Counterparts
------------
This Agreement may be executed in any number of counterparts, each of which
shall be an original, but all of which together shall constitute one
instrument.
5.8 Severability
------------
If any provision of this Agreement, or the application thereof, shall for
any reason and to any extent be invalid or unenforceable the remainder of
this Agreement and application of such provision to persons or
circumstances shall be interpreted so as best to reasonably effect the
intent of the parties hereto, the parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and
enforceable provision which will achieve to the extent possible, the
economic, business and other purposes of the void or unenforceable
provision.
5.9 Titles and Subtitles
--------------------
The titles and subtitles used in this Agreement are used for convenience
only and are not considered in construing or interpreting this Agreement.
6. TERMINATION UPON LISTING
Notwithstanding any other provisions herein, this Agreement shall terminate
and shall become void and cease to have any force or effect on the date
being the date of any prospectus that may be issued by List Co in respect
of the listing of the shares of List Co on The Stock Exchange of Hong Kong
Limited.
The foregoing agreement is hereby executed as a deed as of the date first
above written.
-▇▇-
▇▇▇ ▇▇▇▇▇▇ SEAL of )
PHENOMENAL LIMITED )
was hereunto affixed in accordance )
with its Articles of Association )
in the presence of: )
----------------------------------------
Director
THE COMMON SEAL of )
QUALITY PRINCE LIMITED )
was hereunto affixed in accordance )
with its Articles of Association )
in the presence of: )
----------------------------------------
Director
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Schedule 6
INFORMATION IN RESPECT OF
HANG ▇▇▇▇ JEWELLERY COMPANY LIMITED
Name: Hang ▇▇▇▇ Jewellery Company Limited
Registration Number: 496642
Registered Office:
▇▇▇▇▇ ▇▇-▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇,
Focal Industrial Centre, ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ SAR
Authorized Capital: HK$500,000 divided into two classes:
2 Class A non-voting shares of HK$ 1.00 each and
499,998 Class B voting shares of HK$1.00 each
Directors: ▇▇▇ ▇▇▇ Wing, and
Chan Yam Fai, ▇▇▇▇
Shareholders (and no. held):
Class A non-voting shares No. of shares
------------------------- -------------
▇▇▇ ▇▇▇ Wing 1
Chan Yam Fai, ▇▇▇▇ 1
Class B voting shares
---------------------
▇▇▇ ▇▇▇ Wing (Note 1) 1
Quality Prince Limited 1
Subsidiaries: None
Note 1: ▇▇▇ ▇▇▇ Wing holds one Class B voting share on trust for Quality Prince
Limited.