As filed with the Securities and Exchange Commission on May 14, 1997
Registration Statement No. 333-______________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________
OVM INTERNATIONAL HOLDING CORP.
(Name of Small Business Issuer in its Charter)
_______________
Nevada 3531 88-0344135
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classifi- Identification No.)
or organization) cation Code Number)
_______________
West 516 Sprague Avenue No. 3 Longguan Road, Liuzhou City,
Spokane, Washington 99204 Guangxi Zhuang Autonomous Region,
(509) 747-8590 People's Republic of China
(Address and telephone (Address of principal place
number of principal of business or intended principal
executive offices) place of business)
_______________
Ching Lung Po
OVM International Holding Corp.
West 516 Sprague Avenue
Spokane, Washington 99204
(509) 747-8590
(Name, address and telephone number of agent for service)
_______________
With copies to:
James M. Schneider, Esq.
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las Olas Boulevard
Suite 1900
Fort Lauderdale, Florida 33331
(954) 763-1200
_______________
Approximate date of commencement of proposed sale to the public: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box: [X]
_______________
<PAGE>
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier registration statement for the same offering.
[ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
================================================================================
CALCULATION OF REGISTRATION FEE [UPDATE]
================================================================================
Title of Proposed Proposed
Each Class Maximum Maximum
of Securities Amount Offering Aggregate Amount of
to be to be price Offering Registra-
Registered Registered per Unit(1) Price(1) tion Fee
- --------------------------------------------------------------------------------
Common Stock
(par value
$.01 per
share) 50,000 $1.50(2) $75,000 $25.86
======== ======= ======
Common Stock
issuable under
Warrants 4,000,000(3) $1.50(2)(3) $6,000,000 $2,068.97
=========== ========== =========
================================================================================
Total..................................... $2,094.83
================================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(b).
(2) The price as estimated based on the average of the closing bid and asked
prices on May 9, 1997.
(3) Represents shares of Common Stock issuable upon exercise of Common Stock
Purchase Warrants exercisable at $4.00 per share on or prior to December
23, 1997 and $5.00 per share thereafter. Also includes such additional
indeterminate number of shares as may be issued under such Warrants by
reason of the anti-dilution provisions contained therein.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
OVM INTERNATIONAL HOLDING CORP.
_______________
Cross Reference Sheet for Prospectus Under Form SB-2
Form SB-2 Item No. and Caption Caption or Location in Prospectus
------------------------------ ---------------------------------
1. Forepart of Registration Cover Page; Cross Reference
Statement and Outside Sheet; Outside Front Cover
Front Cover of Prospectus Page of Prospectus
2. Inside Front and Outside Back Inside Front and Outside Back
Cover Pages of Prospectus Cover Pages of Prospectus
3. Summary Information, Risk Prospectus Summary; High Risk
Factors Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Cover Page
Price
6. Dilution Not Applicable
7. Selling Security-Holders Sales by Selling Security Holders
8. Plan of Distribution Outside Front Cover Page of
Prospectus; Sales by Selling
Security Holders
9. Legal Proceedings Business
10. Directors, Executive Offi- Management
cers, Promoters and Control
Persons
11. Security Ownership of Cer- Principal Shareholders
tain Beneficial Owners and
Management
12. Description of Securities Description of Securities
13. Interest of Named Experts Legal Matters
and Counsel
14. Disclosure of Commission Undertakings
Position on Indemnifica-
tion for Securities Act
Liabilities
15. Organization within Last Not Applicable
Five Years
16. Description of Business Business
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<PAGE>
17. Management's Discussion Management's Discussion and
and Analysis and Plan of Analysis or Plan of Operations
Operation
18. Description of Property Business - Properties
19. Certain Relationships and Certain Transactions
Related Transactions
20. Market for Common Equity Price Range for Common Stock;
and Related Stockholder Description of Securities
Matters
21. Executive Compensation Management - Executive Compen-
sation
22. Financial Statements Financial Statements
23. Changes in and Disagree- Management's Discussion and
ments with Accountants on Analysis or Plan of Operations -
Accounting and Financial Replacement of Independent
Disclosure Auditors
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
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<PAGE>
Preliminary Prospectus Dated May ___, 1997
Subject to Completion
PROSPECTUS
- ----------
OVM INTERNATIONAL HOLDING CORP.
4,050,000 Shares of Common Stock
There are 4,050,000 shares of Common Stock (the "Shares"), par value
$.0001 per share ("Common Stock") of OVM International Holding Corp. (the
"Company" or "OVM") being offered by certain shareholders of the Company (the
"Selling Security Holders"), if at all, on a delayed basis, including 4,000,000
shares (the "Warrant Shares") issuable upon the exercise of Common Stock
Purchase Warrants issued by the Company (collectively the "Warrants"). See
"Sales by Selling Security Holders" and "Description of Securities."
The Company's Common Stock is traded on a limited basis on the OTC
Bulletin Board under the symbol "OVMI," and on May 9, 1997, the closing bid
price for the Common Stock was $1.50. The Company intends to apply for inclusion
of its Common Stock on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") at such time as the Company satisfies NASDAQ minimum
listing requirements. However, there can be no assurances that the Company's
Common Stock will be accepted for inclusion in the NASDAQ System. Furthermore,
there can be no assurances that a substantial trading market for its Common
Stock will develop or be sustained in the future. At December 31, 1996, the net
tangible book value of the Company's Common Stock was approximately Rmb 4.26
(US$0.51) per share. Accordingly, it is likely that the purchasers in this
offering will incur an immediate and substantial dilution from the purchase
price of their shares of Common Stock. See "Price Range of Common Stock" and
"Description of Securities."
_____________________
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. POTENTIAL PURCHASERS SHOULD NOT
INVEST IN THESE SECURITIES UNLESS THEY CAN AFFORD A LOSS OF THEIR ENTIRE
INVESTMENT HEREIN. SEE "HIGH RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This date of this Prospectus is _______________, 1996
<PAGE>
The Company has been advised by the Selling Security Holders that they may
sell all or a portion of the Shares offered hereby from time to time in the
over-the-counter market, in negotiated transactions, directly or through brokers
or otherwise, and that such shares will be sold at market prices prevailing at
the time of such sales or at negotiated prices. The Company will not receive any
of the proceeds from the sale of the Shares offered hereby except upon exercise
of the Warrants. In connection with such sales, the Selling Security Holders and
any brokers participating in such sales may be deemed to be underwriters within
the meaning of the Securities Act of 1933. See "Use of Proceeds" and "Sales by
Selling Security Holders."
All costs, expenses and fees in connection with the registration of the
shares of Common Stock offered hereby will be borne by the Company. Brokerage
commissions, if any, directly attributable to the sale of the Shares will be
borne by the Selling Security Holders.
The Company has informed the Selling Security Holders that the
anti-manipulative rules and regulations under the Securities Exchange Act of
1934, including Regulation M thereunder, may apply to their sales in the market
and has furnished each of the Selling Security Holders with a copy thereof. The
Company has also informed the Selling Security Holders of the need for delivery
of copies of this Prospectus in connection with any sale of Shares registered
hereunder.
________________________
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN
THOSE TO WHICH IT RELATES OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO
BUY, IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH AN
OFFER IN SUCH JURISDICTION. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THIS
DATE.
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and may distribute quarterly reports
containing unaudited summary financial information for each of the first three
quarters of each fiscal year.
The Company has filed with the Securities and Exchange Commission
("Commission") a Registration Statement on Form SB-2 (herein together with all
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<PAGE>
amendments and exhibits referred to as the "Registration Statement") under the
Securities Act of 1933. Reports and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices at 7 World Trade Center New York, New York
10048, Room 1204, Everett McKinley Dirksen Building, 219 South Dearborn Street,
Chicago, Illinois 60604, and Suite 500 East, 5757 Wilshire Boulevard, Los
Angeles, California 90036. Copies of such material can be obtained upon written
request addressed to the Commission, Public Reference Section, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Commission also maintains
a Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov.
3
<PAGE>
PROSPECTUS SUMMARY
The following is intended to summarize more detailed information and
financial statements and notes thereto which are set forth more fully elsewhere
in this Prospectus or incorporated herein by reference and, accordingly, should
be read in conjunction with such information. Except as otherwise specifically
described in the Registration Statement, of which this Prospectus is a part, all
information gives effect to a one-for-five (1:5) reverse stock split of the
Company's Common Stock, effective August 22, 1996.
Other than historical and factual statements, the matters and items
discussed in this Prospectus are forward-looking statements that involve risks
and uncertainties. Actual results may differ materially from the results
discussed in the forward-looking statements. Certain factors that could
contribute to such differences are discussed with the forward-looking statements
throughout this Prospectus and are summarized in Sections "High Risk Factors"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
THE COMPANY
OVM International Holding Corporation was organized under the laws of the
State of Nevada on October 18, 1971 under the name of Mr. Nevada, Inc., and,
following the completion of a limited public offering in April 1972, commenced
limited operations which were discontinued in 1990. Thereafter, the Company
engaged in a reorganization and on several occasions sought to merge with or
acquire certain active private companies or operations, all of which were
terminated or resulted in discontinued negotiations. On October 20, 1995, the
Company changed its name to Intermark Development Corporation. On November 4,
1996, the Company acquired all of the capital stock of OVM Development Limited,
a British Virgin Islands corporation ("ODL") and changed its name to OVM
International Holding Corporation. ODL owns a 70 percent equity interest in
Liuzhou OVM Construction Machinery Company Limited ("Liuzhou OVM"), a
Sino-foreign equity joint venture incorporated in the People's Republic of China
("PRC" or "China") on May 10, 1995. The PRC venture partner is Liuzhou
Construction Machinery General Factory (the "Factory"), which was a PRC
State-owned enterprise. The Factory was subsequently reorganized into a limited
liability share capital company on January 10, 1995 known as Liuzhou OVM Joint
Stock Company Limited (the "Stock Company"). As used herein, the "Company" or
"OVM" refers to OVM International Holding Corporation and includes, unless the
context otherwise requires, the prior or current operations of ODL, Liuzhou OVM,
the Stock Company, or, if prior to its establishment, the Factory.
Liuzhou OVM has assumed substantially all the businesses originally
carried out by the Factory since January 1, 1995, which principally includes the
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<PAGE>
manufacture, production, sale and distribution of prestressing equipment,
components and hardware used in the construction of motorways, bridges,
railroads, buildings, hydroelectric dams and power stations in the PRC. The
products include anchorage systems, jacks, electric high-pressure oil pumps,
steel cables, direct display sensors, unbonded prestressing tendons and
ancillary equipment widely used in the construction industry. Liuzhou OVM is the
successor to the manufacturing business originally conducted by the Factory.
Accordingly, the following discussion is principally a description of the
business of Liuzhou OVM or that of its predecessor, the Factory.
OVM's products are distributed throughout the PRC to a diversified
customer base, with a small proportion sold overseas. OVM's PRC customers
include construction and engineering companies and provincial, municipal and
regional construction bureaus across the PRC. Currently, demand in the PRC for
prestressed products is expanding rapidly as the number of infrastructure
construction projects increases.
Liuzhou OVM (inclusive of the operations of the Factory), has
approximately 30 years of operating history in manufacturing prestressing
equipment and related components. Management believes that Liuzhou OVM is the
largest manufacturer of prestressing equipment and related components in the PRC
in terms of total sales and profit before taxation for each of the two years
ended December 31, 1995 and 1996. Given the well recognized "OVM" brand names in
the PRC, the quality of Liuzhou OVM's product line and Liuzhou OVM's after sales
and customer support systems, management believes that the Liuzhou OVM has
established and will continue to maintain a significant competitive position in
the PRC prestressing equipment industry. Liuzhou OVM's products have an
estimated overall market share of approximately 60% in the PRC (Statistics from
China Rock Anchoring and Engineering Association).
5
<PAGE>
The following diagram depicts the corporate structure of the Company.
-----------------------------
| OVM International Holding |
| Corporation (Nevada) |
-----------------------------
|
100%
|
-------------------------------
| OVM Development Limited |
| (British Virgin Islands) |
-------------------------------
|
| -------------------------------
| | Liuzhou OVM Joint Stock |
| | Company Limited (formerly |
| | known as Liuzhou |
| | Construction Machinery |
| | General Factory (People's |
| | Republic of China) |
| -------------------------------
70% |
| 30%
| |
------------------------------- |
| Liuzhou OVM Construction | |
| Machinery Company Limited |---------------
|(People's Republic of China) |
-------------------------------
|
50%
|
-------------------------------
| OVM Prestress Co. Pte Ltd. |
| (Republic of Singapore) |
-------------------------------
OVM Development Limited, formerly known as Kolcari Investments Limited
("ODL"), is a private limited company incorporated in the British Virgin Islands
on May 3, 1994.
Liuzhou Construction Machinery General Factory (the "Factory"), located in
Guangxi Zhuang Autonomous Region, the PRC was the largest State-owned
manufacturer of prestressing equipment in the PRC. The Factory had been
operating in the PRC since 1967. The Factory was subsequently reorganized into a
limited liability share capital company on January 10, 1995 under the name of
Liuzhou OVM Joint Stock Company Limited (the "Stock Company").
Liuzhou OVM Construction Machinery Company Limited. ("Liuzhou OVM") is a
Sino-foreign equity joint venture established under the laws of PRC on May 10,
1995 and owned 70% by Kolcari and 30% by the Stock Company. The registered
capital of Liuzhou OVM is US$4 million.
OVM Prestress Co. Pte Ltd is a private limited company incorporated in the
Republic of Singapore on December 11, 1993 that is 50% owned by Liuzhou OVM and
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50% by Wee Poh Construction Co. (Pte) Ltd., an independent third party, and is
principally engaged in the provision of prestressing and related engineering
services.
The Company's operating offices are located at 1611 B, Kailey Industrial
Centre, 12 Fung Yip Street, Chai Wan, Hong Kong (Telephone No. (852) 25225215;
Facsimile No. (852) 25220634).
The Offering and Outstanding Securities
Common Stock Outstanding
at April 30, 1997................... 12,050,000 shares of Common
Stock
Common Stock Offered
by Selling Security Holders......... 4,050,000 shares of Common
Stock1
Proceeds to be received upon
exercise of Warrants................ $16,000,000/$20,000,0002
Risk Factors........................... Investment in these securities
involves a high degree of risk.
See "High Risk Factors."
OTC Bulletin Board Symbol.............. "OVMI"3
____________________
1 Includes 4,000,000 shares issuable upon the exercise of the Warrants.
2 Under the terms of the Warrants, such Warrants are exercisable at $4.00 per
Warrant Share on or prior to December 23, 1997 and $5.00 per Warrant Share
thereafter.
3 The Company intends to apply for inclusion of its Common Stock on the NASDAQ
SmallCap Market at such time as the Company satisfies NASDAQ listing
requirements. However, there can be no assurances that the Common Stock will
qualify for inclusion at any time in the future. Inclusion on NASDAQ does
not imply that an established trading market will develop or be sustained
for the Common Stock. See "Description of Securities."
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(Not covered by Accountant's Report)
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth the selected historical consolidated
financial data of the Company for the two years ended December 31, 1996. The
selected historical consolidated financial data of the Company for the two years
ended December 31, 1996 are derived from the audited consolidated financial
statements of the Company for the two years ended December 31, 1996.
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The selected historical consolidated financial data should be read in
conjunction with, and qualified in their entirety by reference to, the
respective financial statements and their accompanying notes thereto.
SELECTED HISTORICAL CONSOLIDATED STATEMENT OF INCOME DATA
Audited Historical
------------------
Year Ended December 31,
-----------------------
1995 1996 1996
---- ---- ----
Rmb Rmb *US$
(Amounts in thousands except per share data)
Net sales 135,761 161,492 19,457
Cost of sales (81,331) (101,007) (12,170)
-------- --------- --------
Gross Profit 54,430 60,485 7,287
Selling and administrative
expenses (26,472) (31,342) (3,776)
Allowance for doubtful accounts -- (4,329) (521)
Interest expense (7,612) (6,140) (740)
Other income 662 3,536 426
Foreign exchange gains/(losses), net 864 (24) (3)
**Reorganization expenses -- (18,196) (2,192)
Income before income taxes 21,872 3,990 481
Income taxes -- -- --
------ ------ ------
Income after income taxes 21,872 3,990 481
Share of profit of an associated
company -- 157 19
Net income before minority
interests 21,872 4,147 500
Minority interests (7,496) (7,030) (847)
------- ------- -----
Net income/(loss) 14,376 (2,883) (347)
Earnings/(loss) per share 1.20 (0.24) (0.03)
SELECTED HISTORICAL CONSOLIDATED BALANCE SHEET DATA
Audited Historical
------------------
December 31,
---------------------
1996 1996
---- ----
Rmb *US$
(Amounts in thousands)
Current assets 228,811 27,568
Working capital 58,907 7.097
Total assets 252,958 30,477
Current liabilities 169,904 20,471
Minority interests 24,726 2,979
Total liabilities and minority interests 194,630 23,450
Shareholders' equity 58,328 7,027
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* For convenience, amounts have been converted from Renminbi to US$ at Rmb
8.30 = $1.00. No representation is made that Renminbi amounts could have been,
or could be, converted into US$ at that rate or any other rate.
** Reorganization expenses were incurred in connection with the acquisition
of ODL by the Company which reduced net income for the year ended December 31,
1996 by Rmb 18.2 million and primarily included Rmb 15.6 million which
represented the fair value of the 26.67% of the issued and outstanding shares of
the common stock of the Company held by the then existing shareholders of the
Company prior to the acquisition. Rmb 15.6 million of reorganization expenses
has no impact on the Company's net assets.
This is an one time expense in connection with the acquisition of ODL by
the Company. Management does not expect the acquisition would have any
significant impact on the future results of operations, liquidity and sources
and uses of capital resources of the Company.
Excluding the reorganization expenses, the Company's net income and
earnings per share for the year ended December 31, 1996 would be Rmb 15.3
million and Rmb 1.28 per share.
HIGH RISK FACTORS
The shares of Common Stock offered hereby involve a high degree of risk
and is speculative in nature. Prospective investors should carefully consider
the following risks and speculative factors, among others, inherent in and
affecting both the business of the Company and the value of the Common Stock,
including, among other matters, the following risk factors:
LIMITED OPERATING HISTORY
The Company was organized in the State of Nevada on October 18, 1971 and,
as a result of the acquisition of ODL, has acquired a 70% interest in an active
operating company conducting operations in the PRC. Prior to the acquisition of
ODL, the Company had only limited and sporadic operations. The Company and its
operations are subject to all the risks inherent in the establishment and
operation of a new publicly traded business enterprise as described hereafter.
Accordingly, the Shares offered hereby are speculative and involve a high degree
of risk. Inasmuch as the Company has only recently become a public traded
company, there can be no assurance that it will be profitable in the future, at
what price the Shares will trade, or if a listing on an exchange can be secured.
An investment should be made only by persons who can afford to risk of loss of
their investment and only after careful consideration of those significant risk
factors which may affect the Company.
Results of operations in the future will be influenced by numerous
business factors including technological developments, regulatory costs and
impediments, increases in expenses associated with sales growth, market
acceptance of the Company's products, the capacity of the Company to expand and
maintain the quality of its products, competition and the ability of the Company
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to control costs. There can be no assurance that revenue growth or profitability
on a quarterly or annual basis can be obtained. Additionally, the Company will
be subject to all the risks incident to a rapidly developing business in a
highly regulated society such as the PRC currently undergoing a political
succession. Prospective investors should consider the frequency with which
relatively newly developed and/or expanding businesses encounter unforeseen
expenses, difficulties, complications and delays, as well as other factors such
as the possibility of competition with larger companies. See "Management's
Discussion and Analysis or Plan of Operations."
BUSINESS DEPENDENT UPON KEY EMPLOYEES
The business of the Company is specialized. The continued employment of
Messrs. Ching Lung Po and Wu Guosen is critical to the Company's business and
the conduct of the Company's operations. There can be no assurance that the
Company will be able to retain Messrs. Ching Lung Po and/or Wu Guosen, who are
not restricted should they depart the Company, or other equally qualified
individ- uals to run the operations of the Company. No insurance has been
obtained on the lives of such principals. See "Management."
RISK ASSOCIATED WITH EXPANSION AND ACQUISITIONS
The Company has recently acquired ODL and through it acquired its 70%
interest in Liuzhou OVM, and may expand into other areas of product development
that augment Liuzhou OVM's operating capacity. Any acquisitions, joint ventures
or expansion of operations the Company may undertake will entail substantial
risks since they may involve specific operations which may be unfamiliar to the
Company's management. Consequently, shareholders must assume the risks that the
Company (i) may acquire or develop operations for which the Company may not
possess adequate or sufficient managerial background to administer effectively,
(ii) such acquisitions and expansion may ultimately involve expenditure of funds
beyond the resources that will be available to the Company at that time, and
(iii) management of such new or expanded operations may divert management's
attention and resources away from its existing operations. All of these factors
may have a substantial adverse affect on the Company's present and prospective
business activities. ^
Dependent on Suppliers; Credit Arrangements
The major raw materials and components required by Liuzhou OVM include
rubber, steel and mechanical and electrical components such as bearings and
motors. All of the raw materials and components used by Liuzhou OVM are sourced
from PRC suppliers. For each of the two years ended December 31, 1995 and 1996,
the cost of raw materials and components accounted for approximately 77% and
84%, respectively of the Liuzhou OVM's total cost of production. It is the
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policy of Liuzhou OVM to maintain more than one supplier for certain major raw
materials in order to avoid over reliance on a single source of supply. Liuzhou
OVM has long standing relationships with its major suppliers and has not to date
experienced any significant difficulties in sourcing raw materials and
components. Management does not anticipate any difficulties in the sourcing or
supply of its raw materials and components. For each of the two years ended
December 31, 1995 and 1996, the largest ten suppliers of raw materials and
components to Liuzhou OVM accounted for approximately 22% and 64% respectively
of Liuzhou OVM's total purchases. The single largest supplier accounted for
approximately 9% and 50% respectively for the same periods. All purchases by
Liuzhou OVM are settled in Renminbi. Liuzhou OVM has formulated a material
supply management policy in respect to raw materials and components used in
Liuzhou OVM's production operations. Under this policy, the stock level of raw
materials and components is determined by reference to planned annual
consumption and predetermined stock level for different types of raw materials
and components. The average stock level of Liuzhou OVM's raw materials and
components is approximately two months. See "Business - Raw Materials and
Components."
SUPPLY AND PRICES OF RAW MATERIAL PRICES
Steel and rubber account for a substantial portion of Liuzhou OVM's total
raw materials and components consumption (57% and 59% for each of the two years
ended December 31, 1995 and 1996). Steel and rubber are in great demand in the
PRC and as a result, demand has exceeded domestic supply in recent years. The
excess demand over domestic supply was resolved by imports. A shortage of steel
and rubber supply in the PRC market may affect Liuzhou OVM's production and
escalate raw material costs and impact the future profit margins of Liuzhou OVM
and the Company. See "Business - Raw Materials and Components."
Competition
The markets for the Liuzhou OVM's products are highly competitive,
involving several other producers. The principal competitive factors with
respect to Liuzhou OVM's products are pricing, product range and quality,
technical advantages and distribution capabilities with varying emphasis on
these factors depending on the market and product. Liuzhou OVM depends
principally on market position, its reputation with end users and recognition of
its distinguished products. To the extent that Liuzhou OVM's competitors become
more successful with respect to key competitive factors mentioned herein,
Liuzhou OVM's business could be adversely affected. During 1996, the PRC engaged
in extensive negotiations to join the World Trade Organization ("WTO"), which
regulates trading and tariffs among its signatory states. Although such
negotiations are currently stalled, it is expected that negotiations will
restart at some point and that the PRC will eventually assume a position as a
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member of the WTO. In such event, it will be required to reduce further some of
its import tariffs to conform with the uniform tariffs under the WTO.
Furthermore, in order to facilitate its re-entry to the WTO, the PRC has already
begun, and is expected to continue, lowering some import tariffs and reducing
certain other restrictions on imports. The PRC's entry into the WTO and the
current policy of lowering import barriers may result in increased competition
in the domestic market by foreign competitors who manufacture and sell similar
products. See "Business - Competition."
POLITICAL CONSIDERATIONS
Since 1978, the PRC government under its current leadership has been
reforming, and is expected to continue to reform, the PRC's economic and
political systems despite the recent death of Deng Ziaoping. Such reforms have
resulted in significant economic growth and social progress. Many of the reforms
are unprecedented or experimental and are expected to be refined, and improved
upon. Other political, economic and social factors can also lead to further
readjustment of the reform measures. This refinement and readjustment process
may not always have a positive effect on the operations of Liuzhou OVM. Liuzhou
OVM's results at times may also be adversely affected by changes in the PRC's
political, economic and social conditions and by changes in policies of the PRC
government, such as changes in laws and regulations (or the interpretation
thereof), the introduction of measures to control inflation, changes in the rate
of method of taxation and imposition of additional restrictions on currency
conversion and remittances abroad. Although historically there have been periods
of political instability, such as during the "Cultural Revolution," and certain
of the reform measures have from time-to-time been readjusted, because of the
broad support for the reform process and because the economic system in the PRC
has already undergone extensive changes as a result of the success of such
reforms, management believes that the basic principles underlying the reforms
will continue to provide the framework for the PRC's political and economic
system. See "Discussion Pertaining to Certain Conditions Relating to the
People's Republic of China - Political Considerations."
The PRC's Economy, Economic Reform and Inflation
The economy of the PRC differs from the economies of most countries
belonging to the Organization for Economic Cooperation and Development in such
respects as structure, government involvement, level of development, growth
rate, capital reinvestment, allocation of resources, self-sufficiency, rate of
inflation and balance of payments position, among others. In the past, the
economy of the PRC has been primarily a planned economy subject to State plans.
The PRC government has recently adopted a policy to transform its economy to a
more market oriented one. Although the majority of productive assets in the PRC
is still owned by the PRC government, the portion of the PRC economy subject
12
<PAGE>
to State plans has been gradually diminishing. There can be no assurance,
however, that the PRC government's policies for economic reforms will be
consistent or effective.
The PRC economy has experienced significant growth in the past decade, but
such growth has been uneven geographically and among various sectors of the
economy. The PRC government has implemented various policies from time to time,
such as during 1989-1991 to restrain the rate of such economic growth and
control inflation and otherwise regulate economic expansion. In response to
increasing inflationary pressures and concern over the accelerating rate of
economic growth, the People's Bank of China announced in May 1993 the first
increase in interest rates since April 1991. In July 1993, the PRC government
adopted a number of additional measures to strengthen the "macroeconomic
control" of the economy and to combat inflation, including, among others,
increasing interest rates on bank loans and deposits, and postponing certain
planned price reforms. These measures had the temporary effect of causing the
Renminbi to appreciate against foreign currencies at the foreign exchange
centers, reducing speculative activities, increasing individual bank deposits
and reducing the prices of certain commodities. Although inflation has eased
since the second half of 1995, no assurance can be given that inflation will not
increase in the future or that further measures to combat inflation and
speculative activities will not be implemented in a manner that may adversely
affect the profitability of Liuzhou OVM over time.
A significant portion of the economic activity in the PRC is related to
exports and may therefore be affected by developments in the economies of the
PRC's principal trading partners. The United States annually reconsiders the
renewal of "Most Favored Nation" ("MFN") trading status for the PRC, which
provides the PRC with certain trading privileges available generally to trading
partners of the United States. Although in June 1996, the PRC's MFN Status was
renewed for a further year without restrictions, there can be no assurance that
the continuation of such status will be obtained in the future. In the event
that the PRC's MFN status were not renewed in any given year, exports of
products to the United States would be affected. See "Discussion Pertaining to
Certain Conditions Relating to the People's Republic of China - The PRC's
Economy and Economic Reform."
GOVERNMENT CONTROL OF CURRENCY CONVERSION AND EXCHANGE RATE RISKS
All of Liuzhou OVM's domestic sales are denominated in Renminbi, the
official currency of the PRC. Export sales are denominated in U.S. dollars and
account for only 16% percent of total sales by volume respectively for each of
the two years ended December 31, 1995 and 1996. The PRC government imposes
control over the convertability of Renminbi into foreign currencies. Prior to
January 1, 1994, all foreign exchange transactions involving Renminbi in the PRC
13
<PAGE>
had to take place either through the authorized financial institutions at the
official exchange rate set by the State Administration for Exchange Control
("SAEC"), the PRC government agency responsible for matters relating to foreign
exchange administration, or at local foreign exchange swap centers at exchange
rates largely determined by supply and demand. However, transactions effected
through swap centers required the prior approval of the SAEC.
On January 1, 1994, the PRC government abolished its two-tier exchange
rate system and replaced it with a unified managed floating exchange rate system
largely based on market supply and demand. Under the new system, the People's
Bank of China publishes a daily exchange rate of Renminbi (the "PBOC Exchange
Rate") based on the previous day's dealings in the inter-bank foreign exchange
market. Financial institutions authorized to deal in foreign currency may enter
into foreign exchange transactions at exchange rates within an authorized range
above or below the PBOC Exchange Rate according to market conditions. Currently,
foreign investment enterprises ("FIEs") (including Sino-foreign joint ventures
such as Liuzhou OVM) are required to apply to the SAEC for "Foreign exchange
registration certificates" ("FERCs"). With such FERC (which are granted to FIEs
upon fulfilling certain specified conditions and which are reviewed annually by
the SAEC) and authorization from the SAEC (which is obtained on a
transaction-by- transaction basis), FIEs may enter into transactions at the swap
centers to obtain foreign exchange for their needs.
During the period between 1990 and the end of 1993, the value of the
Renminbi against the U.S. dollar declined steadily. Although the Renminbi has
revalued against the U.S. dollar moderately since January 1, 1994 and the PRC
government has stated its intention to intervene in the future to support the
value of the Renminbi, there can be no assurance that exchange rates will not
become volatile or that the Renminbi will not devalue again against the U.S.
dollar. Exchange rate fluctuations may adversely affect Liuzhou OVM's financial
performance. See "Discussion Pertaining to Certain Conditions Relating to the
People's Republic of China - Government Control of Currency Conversion and
Exchange Rate Risks."
LEGAL SYSTEM
Since 1979, many laws and regulations dealing with economic matters in
general have been promulgated in the PRC. Despite this activity in developing
the legal system, the PRC does not have a comprehensive system of laws. In
addition, enforcement of existing laws may be uncertain and sporadic, and
implementation and interpretation thereof inconsistent. The PRC judiciary is
relatively inexperienced in enforcing the laws that exist, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate law exists in the PRC, it may be difficult to obtain swift and
14
<PAGE>
equitable enforcement of such law, or to obtain enforcement of a judgment by a
court of another jurisdiction. The PRC's legal system is based on written
statutes and, therefore, decided legal cases are without binding legal effect,
although they are often followed by judges as guidance. The interpretation of
PRC laws may be subject to policy changes reflecting domestic political changes.
As the PRC legal system develops, the promulgation of new laws, changes to
existing laws and the pre-emption of local regulations by national laws may
adversely affect foreign investors. The trend of legislation over the past 18
years has, however, significantly enhanced the protection afforded foreign
investors in enterprises in the PRC. However, there can be no assurance that
changes in such legislation or interpretation thereof will not have an adverse
effect upon the business and prospects of the Company and its operating
division, Liuzhou OVM.
Liuzhou OVM's activities in the PRC are by law subject, in some particular
cases, to administrative review and approval by various national and local
agencies of the PRC government. In particular, part of the Liuzhou OVM's current
operations and the realization of its future expansion programs in the PRC will
be subject to PRC government approvals. See "Discussion Pertaining to Certain
Conditions Relating to the People's Republic of China Legal System."
NO ASSURANCE OF PROTECTION FOR PROPRIETARY RIGHTS; RELIANCE ON TRADE SECRETS AND
PATENTS
Liuzhou OVM's method of operations will have only limited proprietary
protection as it is unlikely that it will be able to secure meaningful
proprietary protection relevant to its methods of business operations. There are
no unique barriers for others to emulate the Liuzhou OVM's methods of operations
except for those barriers and limitations confronting anyone engaged in
undertaking innovative activities and obtaining credibility in an emerging
industry. Liuzhou OVM, as an alternative strategy, will seek to maintain its
proprietary rights by trade secret protection and by the use of non-disclosure
agreements with its employees. There can be no assurance that meaningful
proprietary protection can be obtained, Liuzhou OVM will be able to enter into
or enforce agreements which restrict competitive activities of its employees, or
that various individuals trained by Liuzhou OVM may not seek to engage in
competitive activities subsequent to their employment by the Liuzhou OVM. See
"Business - Intellectual Property Rights."
ASSETS OUTSIDE OF THE U.S.; ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN
PERSONS
While the Company is a U.S. corporation with executive offices in the
State of Nevada, it is a holding company for entities which are domiciled
outside the U.S. For the foreseeable future, a substantial portion of the
15
<PAGE>
Company's assets will be held or used outside the U.S. Enforcement by investors
of civil liabilities under the Federal securities laws may also be affected by
the fact that while the Company is located in the U.S., its principal subsidiary
and operations will be located outside the U.S., none of the Company's
contemplated executive officers or directors will be U.S. residents, and all or
a substantial portion of the assets of the Company will be located outside the
U.S.
MARKET ACCEPTANCE
There can be no assurance that Liuzhou OVM's products can be successfully
marketed on a continued basis, or that any or all of the products will be
commercially accepted outside the PRC. Even if commercial acceptance is
achieved, the appeal of Liuzhou OVM's products may be limited given the wide
range of competitive products and systems available. Management has not
conducted any marketing or feasibility studies or surveys relating to the
market- ability of Liuzhou OVM's products. See "Business - Sales and Marketing."
VOTING CONTROL OF THE COMPANY
The Company's principal shareholder, Hoi Wai Investments Limited, majority
owned by the President of the Company, Mr. Ching Lung Po, will own a substantial
majority of the Company's outstanding Common Stock following the offering as a
consequence of the recent Acquisition of ODL by the Company, and thus will be
able to elect all of the Company's directors and control the Company. The
Company's Articles of Incorporation do not provide for cumulative voting. Thus,
investors in this Offering will have only a minority interest in the Company and
no ability to control or readily influence the conduct of affairs of the
Company. See "Principal Shareholders."
LIMITED TERM OF JOINT VENTURE
Liuzhou OVM, the Company's operating subsidiary in the PRC, is governed by
the PRC Joint Venture Laws, its Joint Venture Agreement and articles of
association. The Joint Venture Agreement and the Articles of Association of
Liuzhou OVM have been approved by the requisite government authorities. In
accordance with the government approvals granted for the joint ventures, its
term is initially restricted to expire on May 10, 2025. Its initial term may be
extended upon the mutual agreement of the parties to the joint venture and the
approval of the applicable PRC government agencies. There can be no assurance
that Liuzhou OVM will continue following the expiration of its initial term. The
existence of Liuzhou OVM may also be terminated in certain limited circumstances
under the PRC Joint Venture Laws including, inability to continue operations due
to severe losses, failure of a party to honor its obligations under the Joint
Venture Agreement or Articles of Association in such a manner as to impair the
operation of the joint venture company. See "Business - History and Development
of Liuzhou OVM."
16
<PAGE>
RELIABILITY OF INFORMATION
The information contained herein regarding the PRC has been sourced from a
variety of government and private publications and is based on various
discussions between representatives of the Company and certain PRC government
officials. In some cases, independent verification of this information is not
available and there can be no assurance that the source from which it is taken
or on which it is based are wholly reliable. Official statistics in relation to
the PRC may also be produced on a basis different from that used in more
developed countries. If such official statistics are materially inaccurate, the
present and future economic prospects of the PRC could be materially different
from those which currently appear to be the case. Accordingly, no assurance can
be given as to the completeness or reliability of available official and public
information.
REPATRIATION OF EARNINGS FROM PRC
Pursuant to the relevant laws and regulations for Sino-foreign joint
venture enterprises, earnings of the Company's operating subsidiary, Liuzhou
OVM, a Sino-foreign equity joint venture enterprise, is available for
distribution in the form of cash dividends to each of the joint venture partners
after Liuzhou OVM (1) satisfies all tax liabilities; (2) provides for losses in
previous years; and (3) makes appropriation to reserve funds, as determined at
the discretion of the board of directors. These appropriations include general
reserve fund, enterprise expansion fund and staff bonus and welfare fund. The
Company has been advised that Liuzhou OVM intends to allocate as appropriations
of up to 10-15% of the net income as reflected in its statutory financial
statements.
Earnings reflected in the financial statements prepared in accordance with
US GAAP differ from those reflected in the statutory financial statements of
Liuzhou OVM. In accordance with the relevant laws and regulations for
Sino-foreign joint venture enterprises, profit available for distribution by
Liuzhou OVM is based on the statutory financial statements. Consequently, a
portion of the earnings included in the retained earnings of the Company is not
available for distribution to the Company and therefore is not available for
distribution as dividends to the shareholders of the Company.
Profit distribution of Liuzhou OVM is declared and payable in Renminbi. If
Liuzhou OVM has foreign currency available after meeting its operational needs,
the Company may receive its share of any distributions to the joint venture
partners in foreign currency to the extent available. The amount of foreign
17
<PAGE>
currency remitted to the Company will be determined with reference to the then
prevailing PBOC Exchange Rate. Only if foreign currency is not available and
only if the Company desires to obtain the foreign currency equivalent of
Renminbi distributions will be necessary to convert such distributions at a swap
center. However, there can be no assurance that shortages of foreign currency at
the swap centers will not restrict Liuzhou OVM to obtain sufficient foreign
currency to pay distributable profits in foreign currency. If such a shortage
occurs, the Company may accept Renminbi payments which can be held or reinvested
in other projects. In such circumstances, this may affect the Company's ability
to pay dividends in U.S. dollars. See "Discussion Pertaining to Certain
Conditions Relating to the People's Republic of China - Repatriation of Earnings
from PRC."
NO DIVIDENDS ANTICIPATED TO BE PAID
The Company has not paid any cash dividends on its Common Stock since its
inception and does not anticipate paying cash dividends in the foreseeable
future. The future payment of dividends is directly dependent upon future
earnings of the Company, the capital requirements of the Company, its financial
requirements and other factors to be determined by the Company's Board of
Directors. For the foreseeable future, it is anticipated that earnings, if any,
which may be generated from the Company's operations will be used to finance the
growth of the Company, and that cash dividends will not be paid to common
shareholders. See "Dividend Policy."
IMMEDIATE SUBSTANTIAL DILUTION TO PURCHASERS IN THIS OFFERING
Initial purchasers of the Common Stock of the Company offered hereby will
incur an immediate and substantial dilution from the purchase price of their
shares. As of December 31, 1996, the net tangible book value of the Company's
Common Stock was approximately Rmb 4.26 (US$0.51).
POSSIBLE RESALES OF SECURITIES BY CURRENT SHAREHOLDERS AND DEPRESSIVE EFFECT ON
MARKET
As of April 30, 1997, there were 8,850,000 shares of the Company's Common
Stock outstanding which were "restricted securities" as that term is defined by
Rule 144 under the Securities Act of 1933 as amended, (the "Securities Act"),
inclusive of shares being registered pursuant to this Registration Statement of
which this Prospectus is a part. Certain of such shares will be eligible for
public sale only if registered under the Securities Act or if sold in accordance
with Rule 144. Under Rule 144, a person who has held restricted securities for a
period of one year may sell a limited number of shares to the public in ordinary
brokerage transactions. Sales under Rule 144 may have a depressive effect on the
18
<PAGE>
market price of the Company's Common Stock due to the potential increased number
of publicly held securities. The timing and amount of sales of Common Stock
covered by the Registration Statement of which this Prospectus is a part, as
well as such subsequently filed registration statement, could also have a
depressive effect on the market price of the Company's Common Stock. See "Shares
Eligible for Future Sales."
LIMITED MARKET FOR THE COMPANY'S COMMON STOCK; POSSIBLE VOLATILITY OF SECURITIES
PRICES
There is currently only a limited trading market for the Common Stock of
the Company. The Common Stock of the Company trades on the OTC Bulletin Board
under the symbol "OVMI" which is a limited market and subject to substantial
restrictions and limitations in comparison to the NASDAQ System. There can be no
assurance that a substantial trading market will develop (or be sustained, if
developed) for the Common Stock upon completion of this offering, or that
purchasers will be able to resell their securities or otherwise liquidate their
investment without considerable delay, if at all. Recent history relating to the
market prices of newly public or recently listed companies indicates that, from
time to time, there may be significant volatility in the market price of the
Company's securities because of factors unrelated, as well as related, to the
Company's operating performance. There can be no assurances that the Company's
Common Stock will ever qualify for inclusion within the NASDAQ System or that
more than a limited market will ever develop for its Common Stock. See "Price
Range of Common Stock."
BROKER-DEALER SALES OF COMMON STOCK AND LIMITATION ON MARKETABILITY
The Company's Common Stock is not presently included for trading on the
NASDAQ System, and while the Company intends to apply in the near term, there
can be no assurances that the Company will ultimately qualify for inclusion
within that system. In order for an issuer to be included in the NASDAQ System,
it is required to have total assets of at least $4,000,000, capital and surplus
of at least $2,000,000, a minimum price per share of not less than $3.00, have
publicly held shares with a market value of at least $1,000,000 as well as
certain other criteria.
The Nasdaq Stock Market, Inc. has recently proposed certain changes to the
entry and maintenance criteria for listing eligibility on The Nasdaq SmallCap
Market. The proposed entry standards would require at least $4 million in net
tangible assets or $750,000 in net income in two of the last three years. The
proposed entry standards would also require a public float of at least 1 million
shares, a $5 million market value of public float, a minimum bid price of $4.00
per share, at least three market makers, and at least 300 shareholders. The
proposed maintenance standards (as opposed to entry standards) would require at
least $2 million in net tangible assets or $500,000 in net income in two of
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<PAGE>
the last three years, a public float of at least 500,000 shares, a $1 million
market value of public float, a minimum bid price of $1.00 per share, at least
two market makers, and at least 300 shareholders. The Nasdaq Stock Market, Inc.
is currently in the process of soliciting comments from investors, issuers,
market participants, and others with respect to the foregoing proposed changes.
No changes have yet been adopted by the Nasdaq Stock Market, Inc. While the
Company currently meets the minimum current and proposed NASDAQ (SmallCap)
financial criteria, no assurance can be given that the Common Stock of the
Company will qualify for inclusion on the NASDAQ System. Until the Company's
shares are approved for inclusion in the NASDAQ system, the Company's Common
Stock will be traded in the over-the-counter markets on the OTC Bulletin Board.
As a result, the Company's Common Stock is covered by a Securities and Exchange
Commission rule that imposes additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally institutions with assets in excess
of $5,000,000 or individuals with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse). For
transactions covered by the rule, the broker-dealer must make a special
suitability determination for the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Consequently, the rule may
affect the ability of broker-dealers to sell the Company's securities and may
also affect the ability of shareholders to sell their shares in the secondary
market. See "Description of Securities."
PENNY STOCK RULES
Any shares which trade under $5.00 per share are considered Penny Stocks.
The Units offered hereby are being sold for substantially under $5.00 per share
and will be considered Penny Stocks. There is no assurance a market for the
Common Stock of the Company will develop. In the event that the share price does
not reach $5.00 per share, these shares will be subject to the Penny Stock Rules
promulgated under the Securities Exchange Act of 1934. These rules regulate
broker-dealer practices in connection with transactions in "penny stocks." Penny
stocks generally are equity securities with a price of less than $5.00 (other
than securities registered on certain national securities exchanges or quoted on
the NASDAQ system, provided that current price and volume information with
respect to transactions in such securities is provided by the exchange or
system). The Penny Stock Rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document prepared by the Commission that provides information
about penny stocks and the nature and level of risks in the penny stock market.
The broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and monthly account statements showing the
20
<PAGE>
market value of each penny stock held in the customer's account. The bid and
offer quotations, and the broker dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before or
with the customer's confirmation.
In addition, the Penny Stock Rules require that prior to a transaction in
a penny stock not otherwise exempt from such rules, the broker and/or dealer
must make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the level of purchases in the instant offering and trading activity in the
secondary market for the Company's Common Stock. If the Company's Shares are, or
become, subject to the Penny Stock Rules, investors in this offering may find it
more difficult to sell such securities.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock commenced trading on April 21, 1996 on the OTC
Bulletin Board under the symbol "OVMI." The following table sets forth the high
and low bid quotations for the Common Stock for the periods indicated. These
quotations reflect prices between dealers, do not include retail mark-ups,
mark-downs or commission and may not necessarily represent actual transactions.
Period High Low
------ ---- ---
April 21, 1997-May 9, 1997 $1.50 $1.25
On May 9, 1997, the closing bid price for the Common Stock was $1.50.
As of April 30, 1997, the approximate number of record holders of the
Company's Common Stock was 464.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Stock since
incorporation. As the Company has significant capital requirements in the
future, it is not anticipated that funds will be available for the issuance of
dividends in the foreseeable future. The Company presently intends to retain
future earnings, if any, to finance the expansion of its business, and its
future dividend policy will depend on the Company's earnings, if any, capital
requirements, expansion plans, financial condition and other relevant factors.
Payment of dividends are also restricted based on the commercial laws of the
PRC. See "Discussion Pertaining to Certain Conditions Relating to the People's
Republic of China - Repatriation of Earnings from PRC."
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CAPITALIZATION
The following table sets forth the actual capitalization of the Company at
December 31, 1996, and as adjusted to give effect to the exercise of the
Warrants prior to December 23, 1997. All of the Warrants are exercisable at
$4.00 per share on or prior to December 23, 1997 and at $5.00 per share
thereafter.
December 31, 1996
-----------------
Actual As Adjusted
------ -----------
(Amounts in Thousands)
Rmb Rmb US$(a)
--- --- ------
Short term debt.......................... 41,424 41,424 $4,991
Long term debt........................... - - -
Shareholders' equity:
Common Stock, $.0001 par value per
share; 40,000,000 shares authorized;
12,050,000 shares issued and outstanding;
16,050,000 shares to be outstanding,
as adjusted(b)........................ 10 13 2
Additional paid-in capital............... 46,567 179,364 21,610
Retained earnings ....................... 11,469 11,469 1,382
Reserves................................. 282 282 34
------ ------- ------
Total shareholders' equity............ 58,328 191,128 23,028
------ ------- ------
Total capitalization.................. 99,752 232,552 $28,019
====== ======= =======
___________________________
(a) The data under the "As Adjusted" column has been translated from Renminbi
solely for convenience at US$1.00 = Rmb 8.30 which represents the single
rate of exchange as quoted by the People's Bank of China on December 31,
1996.
(b) Adjustment to reflect the estimated proceeds from the exercise of the
Warrants at $4.00 per share.
(1) See "Description of Securities" included elsewhere herein for a
description of the terms of the Warrants.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
for the accounts of the Selling Security Holders. There is included in the
Registration Statement of which this Prospectus is a part, 4,000,000 shares of
Common Stock underlying Warrants issued in connection with the Company's
previous private placement. If all of the Warrants were exercised in their
entirety on or prior to December 23, 1997 at exercise price of $4.00 per
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Warrant, the Company would receive total proceeds, before expenses, of
approximately $16,000,000. Inasmuch as the holders of all of the Warrants have
no obligation to exercise such Warrants, the Company is not in a position to
evaluate when and if such derivative securities will ever be exercised and the
amount of proceeds that may be realized therefrom. Accordingly, the Company is
not able to allocate specifically at this time the proceeds that may be received
from the exercise of the Warrants, and any proceeds realized will be utilized
for the purchase of production facilities and technical equipment, expanding the
production capacity and existing product range, enhancing the Company's research
and development and for general working capital purposes. To the extent the
proceeds of such exercise are not used immediately, they will be invested in
certificates of deposit, savings deposits, other interest bearing instruments or
will be left in the checking accounts of the Company.
SUMMARY OF FINANCIAL INFORMATION
The following table sets forth the selected historical consolidated
financial data of the Company for the two years ended December 31, 1996. The
selected historical consolidated financial data of the Company for the two years
ended December 31, 1996 are derived from the audited consolidated financial
statements of the Company for the two years ended December 31, 1996. The
selected historical consolidated financial data should be read in conjunction
with, and qualified in their entirety by reference to, the respective financial
statements and their accompanying notes thereto.
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SELECTED HISTORICAL CONSOLIDATED STATEMENT OF INCOME DATA
Audited Historical
------------------
Year Ended December 31,
-----------------------
1995 1996 1996
---- ---- ----
Rmb Rmb *US$
(Amounts in thousands except per share data)
Net sales 135,761 161,492 19,457
Cost of sales (81,331) (101,007) (12,170)
-------- --------- --------
Gross Profit 54,430 60,485 7,287
Selling and administrative
expenses (26,472) (31,342) (3,776)
Allowance for doubtful accounts -- (4,329) (521)
Interest expense (7,612) (6,140) (740)
Other income 662 3,536 426
Foreign exchange gains/(losses), net 864 (24) (3)
**Reorganization expenses -- (18,196) (2,192)
Income before income taxes 21,872 3,990 481
Income taxes -- -- --
------ ------ ------
Income after income taxes 21,872 3,990 481
Share of profit of an associated
company -- 157 19
Net income before minority
interests 21,872 4,147 500
Minority interests (7,496) (7,030) (847)
------- ------- -----
Net income/(loss) 14,376 (2,883) (347)
Earnings/(loss) per share 1.20 (0.24) (0.03)
SELECTED HISTORICAL CONSOLIDATED BALANCE SHEET DATA
Audited Historical
------------------
December 31,
---------------------
1996 1996
---- ----
Rmb *US$
(Amounts in thousands)
Current assets 228,811 27,568
Working capital 58,907 7.097
Total assets 252,958 30,477
Current liabilities 169,904 20,471
Minority interests 24,726 2,979
Total liabilities and minority interests 194,630 23,450
Shareholders' equity 58,328 7,027
* For convenience, amounts have been converted from Renminbi to US$ at Rmb
8.30 = $1.00. No representation is made that Renminbi amounts could have been,
or could be, converted into US$ at that rate or any other rate.
** Reorganization expenses were incurred in connection with the acquisition
of ODL by the Company which reduced net income for the year ended December 31,
1996 by Rmb 18.2 million and primarily included Rmb 15.6 million which
represented the fair value of the 26.67% of the issued and outstanding shares of
the common stock of the Company held by the then existing shareholders of the
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<PAGE>
Company prior to the acquisition. Rmb 15.6 million of reorganization expenses
has no impact on the Company's net assets.
This is an one time expense in connection with the acquisition of ODL by
the Company. Management does not expect the acquisition would have any
significant impact on the future results of operations, liquidity and sources
and uses of capital resources of the Company.
Excluding the reorganization expenses, the Company's net income and
earnings per share for the year ended December 31, 1996 would be Rmb 15.3
million and Rmb 1.28 per share.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
OVERVIEW
THE COMPANY
The Company is a Nevada holding company whose only significant asset is a
wholly-owned British Virgin Islands subsidiary, OVM Development Limited, which
owns a 70% interest in Liuzhou OVM, a Sino-foreign equity joint venture company
established under the laws of the PRC which is principally engaged in the
manufacture and sale of prestressing equipment, components and hardware used in
the construction of motorways, bridges, railroads, buildings, hydroelectric dams
and power stations in the PRC. Accordingly, the Company will derive its revenues
from the distributions paid to the Company by ODL resulting from distributions
paid by Liuzhou OVM. Liuzhou OVM pays distributions to its joint venture
partners in accordance with their percentage interests as follows: ODL (70%) and
the Stock Company (30%).
The Company's Financial Statements appearing elsewhere in this Prospectus
consist of the Audited Consolidated Financial Statements of the Company for two
years ended December 31, 1995 and 1996. ^
The discussions below is presented in the Company's primary operating
currency which is the Renminbi Yuan ("Rmb"). For information purposes these
amounts have been translated into U.S. dollars at an exchange rate of $1.00 =
Rmb 8.30 which represents the single rate of exchange as quoted by the People's
Bank of China on December 31, 1996. This U.S. dollars information is presented
for convenience only. No representation is made that Renminbi amounts could have
been, or could be, converted into U.S. dollars at that rate throughout the
periods presented.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
from the Company's Statement of Operations expressed as a percentage of the
Company's net sales.
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Historical
----------
Year ended December 31
----------------------
1996 1995
---- ----
Net sales 100.0% 100.0%
Cost of sales 62.5 59.9
Gross profit 37.5 40.1
Selling and administrative expenses 19.4 19.5
Allowance for doubtful accounts 2.7 -
Interest expense 3.8 5.6
Other income 2.2 0.5
Reorganization expenses 11.3 -
Income before income taxes 2.5 16.1
Income taxes - -
Share of profit of an associated company 0.1 -
Net income before minority interests 2.6 16.1
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995.
NET SALES AND GROSS PROFIT. Net sales for the year ended December 31, 1996
increased by Rmb 25,731,000 ($3,100,120) or 19% to Rmb 161,492,000 ($19,456,867)
compared to Rmb 135,761,000 ($16,356,747) of the corresponding period of the
prior year. The increase was mainly due to an indent sales (a sales directly
matched by a purchase) of steel wire, amounting to approximately Rmb 48,363,000
($5,826,867) and accounted for approximately 30% of the total sales for the year
ended December 31, 1996.
Sales of the Company's products are seasonal. In general, sales in the
first half year are less than the second half. This is because the major
customers of the Company are construction bureaus and contractors. Construction
works in the PRC will normally be suspended during the Lunar Chinese New Year
holiday with the result that sales for the first quarter are usually lower than
the other quarters. In addition, customers in the southern and eastern part of
the PRC tend to make orders after August of each year in order to prevent the
over-accumulation of construction materials during the rainy and typhoon season,
which last from May to August each year.
Gross profits increased by Rmb 6,055,000 ($729,518) or 11% to Rmb
60,485,000 ($7,287,349) for the year ended December 31, 1996 compared to Rmb
54,430,000 ($6,557,831) for the corresponding period in 1995. The increase in
gross profits was mainly due to the increase in net sales for the year ended
December 31, 1996 as compared to that of the corresponding period in prior year.
The gross profit margin reduced by 3% to 37% for the year ended December 31,
1996 from 40% for the corresponding period in 1995. This was due primarily to
the lower profit margin earned of less than 20% from the indent sales of steel
wire, as previously mentioned, compared to an average of 40% for the sales of
other products.
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SELLING AND ADMINISTRATIVE EXPENSES. Selling and administrative expenses
increased by Rmb 4,870,000 ($586,747) or 18% to Rmb 31,342,000 ($3,776,145) for
the year ended December 31, 1996 as compared to Rmb 26,472,000 ($3,189,398) in
the corresponding period in 1995. Such increase was primarily related to the
increase in salaries and bonus, traveling and rental expenses. Salaries and
bonus, traveling and rental expenses increased by Rmb 1,240,000 ($149,398), Rmb
1,557,000 ($187,590) and Rmb 441,000 ($53,133), respectively, as compared to
that of the corresponding period in 1995. Selling and administrative expenses as
a percentage of sales in 1996 of 19.4% was similar to that of 19.5% in 1995.
ALLOWANCE FOR DOUBTFUL ACCOUNTS. Allowance for doubtful accounts amounted
to RMB 4,329,000 ($521,566) for the year ended December 31, 1996. No such
allowance was provided for the year ended December 31, 1995. For the year ended
December 31, 1996, a general provision of 50% was made on those accounts
receivable and other receivables with age over one year and 10% on such
receivables with age over six months but not exceeding twelve months. No
provision for doubtful accounts was made in 1995 as the recoverability on all
such receivables aged over one year (which were originally injected by the Stock
Company), was guaranteed by the Stock Company.
INTEREST EXPENSE. Interest expenses decreased by Rmb 1,472,000 ($177,349),
or 19% to Rmb 6,140,000 ($739,759) for the year ended December 31, 1996 from Rmb
7,612,000 ($917,108) for the corresponding period in 1995. The average borrowing
rate during the year ended December 31, 1996 was 12.6%, which is comparable to
that of the corresponding period last year. The decrease in interest expense is
due principally to the reduction in the average bank loans outstanding during
the year ended December 31, 1996 compared to that of the comparable period in
1995.
OTHER INCOME. Other income increased significantly by 434% from Rmb
662,000 ($79,759) for the year ended December 31, 1995 to Rmb 3,536,000
($426,024) for the year ended December 31, 1996. This change is principally
resulted from rental income of Rmb 849,000 ($102,289) received from a customer
for leasing of certain prestressing equipment of the Company. No such rental
income was earned for the corresponding period in 1995. In addition, pursuant to
an agreement dated October 18, 1996, between Liuzhou OVM and the Stock Company,
a service fee of Rmb 1,305,000 ($157,229) was charged to the Stock Company in
1996 in connection with the debt collecting services rendered by Liuzhou OVM
with respect to those accounts receivable and other receivables originally
injected by the Stock Company into Liuzhou OVM. No such fee was charged in 1995.
REORGANIZATION EXPENSES. Reorganization expenses were incurred in
connection with the acquisition of ODL by the Company which reduced net income
for the year ended December 31, 1996 by Rmb 18.2 million and primarily included
Rmb 15.6 million which represented the fair value of the 26.67% of the issued
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and outstanding shares of the common stock of the Company held by the then
existing shareholders of the Company prior to the acquisition, Rmb 15.6 million
of reorganization expenses has no impact on the Company's net assets.
This is an one off expense in connection with the acquisition of ODL by
the Company. Management does not expect the acquisition would have any
significant impact on the future results of operations, liquidity and sources
and uses of capital resources of the Company.
Excluding the reorganization expenses, the Company's net income and
earnings per share for the year ended December 31, 1996 would be Rmb 15.3
million and Rmb 1.28 per share.
INCOME TAXES. Pursuant to the Income Tax Law of the PRC concerning Foreign
Investment Enterprises, the income of Liuzhou OVM is fully exempted from income
tax for two years commencing from the first profitable year of operations, which
is 1995, followed by a 50% exemption for the next three years, after which the
income is taxable at the full rate of 30%. No income tax is provided for the two
years ended December 31, 1996 and 1995 as they are the first and second
profitable years of operation, respectively.
Share of profit of an associated company. The share of profit of an
associated company arose from the 50% ownership interest in OVM Prestress Co Pte
Ltd, a company incorporated in the Republic of Singapore.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary liquidity needs are to fund inventories, accounts
receivable and capital expenditures. The Company has financed its working
capital requirements through a combination of internally generated cash, short
term bank loans and advances from affiliates.
The Company has a working capital surplus of Rmb 58,907,000 ($7,097,000),
as of December 31, 1996. Net cash provided by operating activities for the year
ended December 31, 1996 was Rmb 38,735,000 ($4,666,867). Net cash used in
operating activities was Rmb 14,615,000 ($1,760,843) for the year ended December
31, 1995. Net cash flows from the Company's operating activities are
attributable to the Company's income and changes in operating assets and
liabilities.
Net Cash flows provided by investing activities of Rmb 13,287,000
($1,600,843) are principally in relation to the acquisition of a 50% ownership
interest in an associated company established under the laws of the Republic of
Singapore for the year ended December 31, 1995. For the year ended December 31,
1996, the cash flow used in investing activities related principally to the
acquisition of property, machinery and equipment.
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Capital expenditures for the two years ended December 31, 1995 and 1996
were Rmb 701,000 ($84,458) and Rmb 1,152,000 ($138,795), respectively.
The Company's capital expenditure have been principally funded to date by
a combination of short-term bank loans and advances from the Stock Company's
affiliates. As at December 31, 1996, the Company had outstanding short term bank
loans of Rmb 41,424,000 ($4,990,843) and advances from the Stock Company's
affiliates of Rmb 4,786,000 ($576,627).
The Company estimates that the expansion program of the Company will be
funded partially by the retained profits and by additional indebtedness.
Management believes that it is and will continue to be able to secure the
external debt financing it requires to complete the program on schedule. In
addition, management anticipates continuing to utilize cash on hand and cash
flows from operations to mitigate its external financing requirements over the
next two years.
IMPACT OF INFLATION ON RESULTS OF OPERATIONS, LIABILITIES AND ASSETS
The PRC economy has experienced rapid growth which has led to a
significant growth in money supply and rising inflation. In September 1993,
total money supply had grown by 34% on an annual basis. The inflation rate,
based on 35 major urban areas, was recorded at an annualized rate of
approximately 14%. If revenues generated by Liuzhou OVM do not rise sufficiently
to compensate for the rate of inflation, profitability may be adversely
affected.
In order to control inflation, the PRC government has reinstated controls
on bank credits, limits on loans for fixed assets and restrictions on state bank
lending. This austerity plan, first announced in June 1993, seems to have been
relaxed during the first half of 1996. There is no assurance that the austerity
program will be completed in the proximate future, nor any assurance that if it
were terminated it might not be later reinstated.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of"
("SFAS 121"). SFAS 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. SFAS 121 is effective for fiscal years beginning after December 15,
1995. The Company believes that the adopting of SFAS 121 will not have a
material impact on its financial statements.
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<PAGE>
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS
123 establishes a fair value based method of accounting for stock-based employee
compensation plans; however, it also allows companies to continue to measure
costs for such plans using the method of accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). Companies that elect to continue with the accounting under APB 25
must provide certain pro forma disclosures of net income, as if SFAS 123 had
been applied. The accounting and disclosure requirements of SFAS 123 are
effective for the Company for transactions entered into during the year ended
December 31, 1996. The Company is currently evaluating its alternatives under
SFAS 123, and its impact on operating results is not presently known.
DISCUSSION PERTAINING TO CERTAIN CONDITIONS
RELATING TO THE PEOPLE'S REPUBLIC OF CHINA
WORLD TRADE ORGANIZATION
During 1996, the PRC engaged in extensive negotiations to join the World
Trade Organization ("WTO"), which regulates trading and tariffs among its
signatory states. Although such negotiations are currently stalled, it is
expected that negotiations will restart at some point and that the PRC will
eventually assume a position as a member of the WTO. In such event, it will be
required to reduce further some of its import tariffs to conform with the
uniform tariffs under the WTO. Furthermore, in order to facilitate its reentry
to the WTO, the PRC has already begun, and is expected to continue, lowering
some import tariffs and reducing certain other restrictions on imports. The
PRC's entry into the WTO and the current policy of lowering import barriers may
result in increased competition in the domestic market by foreign competitors
who manufacture and sell similar products.
POLITICAL CONSIDERATIONS
Since 1978, the PRC government under its current leadership has been
reforming, and is expected to continue to reform, the PRC's economic and
political systems. Such reforms have resulted in economic growth and certain
social progress. Many of the reforms are unprecedented or experimental and are
expected to be refined and improved upon. Other political, economic and social
factors can also lead to further readjustment of the reform measures. This
refinement and readjustment process may not always have a positive effect on the
operations of the Company. The Company's results at times may also be adversely
affected by changes in the PRC's political, economic and social conditions and
by changes in policies of the PRC government, such as changes in laws and
regulations (or the interpretation thereof), the introduction of measures to
control inflation, changes in the rate of method of taxation and imposition of
additional restrictions on currency conversion and remittances abroad. Although
historically there have been periods of political instability, such as during
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the "Cultural Revolution," and certain of the reform measures have from
time-to-time been readjusted, because of the broad support for the reform
process, the economic system in the PRC has already undergone extensive changes
as a result of the success of such reforms. Management believes that the basic
principles underlying the reforms will continue to provide the framework for the
PRC's political and economic system.
THE PRC'S ECONOMY AND ECONOMIC REFORM
The economy of the PRC differs from the economies of most countries
belonging to the Organization for Economic Cooperation and Development in such
respects as structure, government involvement, level of development, growth
rate, capital reinvestment, allocation of resources, self-sufficiency, rate of
inflation and balance of payments position, among others. In the past, the
economy of the PRC has been primarily a planned economy subject to State plans.
The PRC government has recently adopted a policy to transform its economy to a
more market oriented one. Although the majority of productive assets in the PRC
is still owned by the PRC government, the portion of the PRC economy subject to
State plans has been gradually diminishing. There can be no assurance, however,
that the PRC government's policies for economic reforms will be consistent or
effective.
The PRC economy has experienced significant growth in the past decade, but
such growth has been uneven geographically and among various sectors of the
economy. The PRC government has implemented various policies from time to time,
such as during 1989-1991 to restrain the rate of such economic growth and
control inflation and otherwise regulate economic expansion. In response to
increasing inflationary pressures and concern over the accelerating rate of
economic growth, the People's Bank of China announced in May 1993 the first
increase in interest rates since April 1991. In July 1993, the PRC government
adopted a number of additional measures to strengthen the "macroeconomic
control" of the economy and to combat inflation, including, among others,
increasing interest rates on bank loans and deposits, and postponing certain
planned price reforms. These measures had the temporary effect of causing the
Renminbi to appreciate against foreign currencies at the foreign exchange
centers, reducing speculative activities, increasing individual bank deposits
and reducing the prices of certain commodities. Although inflation has eased
since the second half of 1995, no assurance can be given that inflation will not
increase in the future or that further measures to combat inflation and
speculative activities will not be implemented in a manner that may adversely
affect the profitability of the Company over time.
GOVERNMENT CONTROL OF CURRENCY CONVERSION AND EXCHANGE RATE RISKS
All the Company's domestic sales are denominated in Renminbi, the official
currency of the PRC. Export sales are denominated in U.S. dollars and account
for only 16% of total sales by value respectively for each of the two years
ended December 31, 1996.
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Since Liuzhou OVM's products are sold in the PRC primarily in Renminbi
transactions, its revenues and profits are predominantly in Renminbi, and will
have to be converted to pay dividends to the Company in hard currency. The PRC
government imposes control over the convertability of Renminbi into foreign
currencies. Prior to January 1, 1994, all foreign exchange transactions
involving Renminbi in the PRC had to take place either through the authorized
financial institutions at the official exchange rates set by the State
Administration for Exchange Control ("SAEC"), the PRC government agency
responsible for matters relating to foreign exchange administration, or at local
foreign exchange swap centers at exchange rates largely determined by supply and
demand. However, transactions effected through swap centers required the prior
approval of the SAEC.
On January 1, 1994, the PRC government abolished its two-tier exchange
rate system and replaced it with a unified managed floating exchange rate system
largely based on market supply and demand. Under the new system, the People's
Bank of China publishes a daily exchange rate of Renminbi (the "PBOC Exchange
Rate") based on the previous day's dealings in the inter-bank foreign exchange
market. Financial institutions authorized to deal in foreign currency may enter
into foreign exchange transactions at exchange rates within an authorized range
above or below the PBOC Exchange Rate according to market conditions.
Currently, foreign investment enterprises ("FIEs") (including Sino-foreign
joint ventures such as Liuzhou OVM) are required to apply to the SAEC for
"Foreign exchange registration certificates" ("FERCs"). With such FERCs (which
are granted to FIEs upon fulfilling certain specified conditions and which are
reviewed annually by the SAEC) and authorization from the SAEC (which is
obtained on a transaction-by-transaction basis), FIEs may enter into
transactions at the swap centers to obtain foreign exchange for their needs.
REPATRIATION OF EARNINGS FROM PRC
Pursuant to the relevant laws and regulations for Sino-foreign joint
venture enterprises, earnings of the Company's operating subsidiary, Liuzhou
OVM, a Sino-foreign equity joint venture enterprise, is available for
distribution in the form of cash dividends to each of the joint venture partners
after Liuzhou OVM (i) satisfies all tax liabilities; (ii) provides for losses in
previous years; and (iii) makes appropriation to reserve funds, as determined at
the discretion of the board of directors. These appropriations include general
reserve fund, enterprise expansion fund and staff bonus and welfare fund. The
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Company has been advised that Liuzhou OVM intends to allocate as appropriations
of up to 10-15% of the net income as reflected in its statutory financial
statements.
Earnings reflected in the financial statements prepared in accordance with
US GAAP differ from those reflected in the statutory statements of Liuzhou OVM.
In accordance with the relevant laws and regulations for Sino-foreign joint
venture enterprises, profit available for distribution by Liuzhou OVM is based
on the statutory financial statements. Consequently, a portion of the earnings
included in the retained earnings of the Company is not available for
distribution to the Company and therefore is not available for distribution as
dividends to the shareholders of the Company.
Profit distribution of Liuzhou OVM is declared and payable in Renminbi. If
Liuzhou OVM has foreign currency available after meeting its operational needs,
the Company may receive its share of any distributions to the joint venture
partners in foreign currency to the extent available. The amount of foreign
currency remitted to the Company will be determined with reference to the then
prevailing PBOC Exchange Rate. Only if foreign currency is not available and
only if the Company desires to obtain the foreign currency equivalent of
Renminbi distributions will it be necessary to convert such distributions at a
swap center. However, there can be no assurance that shortages of foreign
currency at the swap centers will not restrict Liuzhou OVM to obtain sufficient
foreign currency. If such a shortfall occurs, the Company may accept Renminbi
payments which can be held or reinvested in other projects. In such
circumstances, this may affect the Company's ability to pay dividends in U.S.
dollars.
LEGAL SYSTEM
Since 1979, many laws and regulations dealing with economic matters in
general have been promulgated in the PRC. Despite this activity in developing
the legal system, the PRC does not have a comprehensive system of laws. In
addition, enforcement of existing laws may be uncertain and sporadic, and
implementation and interpretation thereof inconsistent. The PRC judiciary is
relatively inexperienced in enforcing the laws that exist, leading to a higher
than usual degree of uncertainty as to the outcome of any litigation. Even where
adequate law exists in the PRC, it may be difficult to obtain swift and
equitable enforcement of such law, or to obtain enforcement of a judgment by a
court of another jurisdiction. The PRC's legal system is based on written
statutes and, therefore, decided legal cases are without binding legal effect,
although they are often followed by judges as guidance. The interpretation of
PRC laws may be subject to policy changes reflecting domestic political changes.
As the PRC legal system develops, the promulgation of new laws, changes to
existing laws and the pre-emption of local regulations by national laws may
33
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adversely affect foreign investors. The trend of legislation over the past 18
years has, however, significantly enhanced the protection afforded foreign
investors in enterprises in the PRC. However, there can be no assurance that
changes in such legislation or interpretation thereof will not have an adverse
effect upon the business and prospects of the Company.
The Company's activities in the PRC are by law subject, in some particular
cases, to administrative review and approval by various national and local
agencies of the PRC government. In particular, part of the Company's current
operations and the realization of its future expansion programs in the PRC will
be subject to PRC government approvals.
FUTURE PLANS AND PROSPECTS
INTRODUCTION
The economies of the Asian countries have grown rapidly. In order to
maintain their growth momentum and to reach parity with their neighbors, most
Asian countries have planned for massive infrastructure developments in the past
few years. The PRC alone is planning for a total investment of US$500 billion
over the next decade. According to the Outline of the Ten-Year Program (1991-
2000), one of the key national goals of the PRC Government is to build more
basic industry and infrastructure projects during the 1990's. The PRC Government
is planning to arrange development of such projects, adopt measures which favor
investment in such projects and raise funds for such projects in various ways.
Priority in the allocation of state resources will be given to the
infrastructure sector.
Management believes that the PRC Government's plan to increase its
spending to upgrade its infrastructure will increase the demand for the
Company's prestressed products and prestressing anchorage system which are
widely used for the building of bridges, motorways, railroads and power
stations.
Currently, the Company's products have a market share of over 60% in the
domestic prestressing market, and it is the Company's strategy to strengthen its
position in the domestic market and actively penetrate into the overseas
markets, particularly the Asian market.
THREE GORGES DAM AND HYDROELECTRIC POWER PROJECT
This is expected to be the largest hydroelectric power project in the
world. The project involves the construction of a 26,700 megawatt hydroelectric
power plant and the associated infrastructures including road network, bridges,
etc. The Three Gorges area will start from Pudong (an economic zone in
Shanghai), along with the Yangtze River and through Nanjing, Wuhan to Chongqing.
The project is estimated to cost approximately US$30 billion. Construction of
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the 185-meter high dam started in 1994. The whole project is expected to be
completed in the year 2009 to 2010.
The Company is actively participating in the Three Gorges Project and has
secured contracts to supply its products for the construction of the five of the
seven bridges to be built during the first phase of the projects. The Company is
expecting to be awarded more contracts from the project.
Up to now, the Company has been awarded prestressing contracts in relation
to the construction of the dam gate and the anchorage system for the gate
together with certain peripheral transportation construction works. According to
management estimation, these contracts accounted for approximately 85% of the
total prestressing work contracts already allotted out from the Project up to
the current time.
CONSTRUCTION OF ACROSS-SEAS BRIDGES
According to the Outline of the PRC Government's Ten-Year Program (1991 to
2000), the Chinese government is planning to build 10 new across-seas bridges
within the next five years. A summary of the location of these ten bridges and
their estimated length are set out below:
Estimated
Location Length (Km)
- -------- -----------
Leizhou Peninsula to Hainan Island 50
Shanghai to Chongming Island 20
Shanghai to Ningbo 70
Zhuhai to Hong Kong 40
Dalian to Penglai 70
Qingdao Gouzhou Wan 20
Hangzhou Wan to Hailin 30
Hangzhou to Shaoxing 20
Xiamen to Haichang 20
Fujian to Pingtan 30
---
Total 370
All these projects have been put under feasibility study and the Company
believes that most of which will start construction within the coming five
years.
CONSTRUCTION OF EXPRESSWAYS AND TOP GRADE HIGHWAYS
According to remarks made by the Ministry of Communications, the PRC
Government plans to improve the quality of, and alleviate significantly the
shortages that currently characterize, the existing road network in the PRC by
making an investment of over US$20 billion in the next 10 years. The
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construction of these road networks and highways will also include the
construction of cross-over bridges and strengthened slopes. All these
construction projects will involve the use of prestressing products.
Most of these road systems will use the prestressing products of the
Company. In April 1996, the Yunnan Transportation Bureau decided to use the
prestressing products of the Company in the following major highways: (i)
Chuxiong to Dali; (ii) Kunming (the capital of Yunnan) to Dalu (the border of
Burma); and (iii) Kunming to Bangkok (Thailand).
OVERSEAS MARKET
Over the past few years, the Company has been actively exploring the
overseas market. For each of the two years ended December 31, 1995 and 1996,
export sales accounted for approximately 16% of the Company's total sales,
respectively, a significant growth as compared to that of approximately 6% for
the year ended December 31, 1994. The Company has demonstrated its ability to
produce products with reliable quality at competitive prices. The Company's
products have been sold in Hong Kong, Singapore, Japan, Vietnam, Pakistan and
Sudan. The Company's products and efficient after sales service have been
particularly well received by overseas customers particularly those in Vietnam
and Singapore. The Company is currently in negotiation with its Vietnam
customers for the supply of its prestressing products to one expressway and
seven bridges in Vietnam. Recently, the Company has successfully procured a
sales contract with Vietnam National Import & Export Corp. for the sale of
certain prestressing equipment including hydraulic jacks and anchorage system.
In Singapore, the Company's products have passed the tests conducted by
Singapore Institute of Standards and Industrial Research and are allowed to be
used in construction projects in Singapore. Supply contracts for the
construction of SLE Phase II Bridge, Jurong Interchange, and the Tanjong Rhu
Bridge in Singapore have been allotted to the Company and construction work is
in progress. More sales will be recorded as the projects progress.
Negotiations are also underway with customers in Korea and Japan for the
sale of its products to these two countries. In addition, the Company has also
procured a long term equipment supply contract with Japan National Fire Fighting
Technology Corp.
The execution of these contracts indicate that the Company's products have
become recognized in the overseas markets.
With about 30 years' experience in the industry, management believes that
the Company possesses the competitive capacity to compete in international
markets. The Company has representative offices in Hong Kong and Singapore and
recently, has set up a representative office in Malaysia.
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The Company believes that it is well-placed to benefit from the
anticipated continued growth in infrastructure projects in the PRC. On the basis
of the PRC government's projected economic growth rate of 8% to 9% between now
and the end of the century, the Company believes that the demand for the
Company's products will continue to increase.
The Company intends to take advantage of the expected increase in demand
for its products by developing new products; increasing production capacity
through the construction of new plants and upgrading its existing production
facilities; improving production technology; rationalizing and improving its
sales office network and its marketing strategies generally; and actively
exploring the overseas market.
BUSINESS
INTRODUCTION
OVM International Holding Corporation was organized under the laws of the
State of Nevada on October 18, 1971 under the name of Mr. Nevada, Inc., and,
following the completion of a limited public offering in April 1972, commenced
limited operations which were discontinued in 1990. Thereafter, the Company
engaged in a reorganization and on several occasions sought to merge with or
acquire certain active private companies or operations, all of which were
terminated or resulted in discontinued negotiations. On October 20, 1995, the
Company changed its name to Intermark Development Corporation. On November 4,
1996, the Company acquired all of the capital stock of OVM Development Limited
("ODL"), a British Virgin Islands corporation, and changed its name to OVM
International Holding Corporation.
ODL owns a 70 percent equity interest in Liuzhou OVM Construction
Machinery Company Limited "(Liuzhou OVM"), a Sino-foreign equity joint venture
incorporated in the People's Republic of China on May 10, 1995. The PRC venture
partner is Liuzhou Construction Machinery General Factory (the "Factory"), which
was a PRC State-owned enterprise. The Factory was subsequently reorganized into
a limited liability share capital company on January 10, 1995 known as Liuzhou
OVM Joint Stock Company Limited (the "Stock Company"). ODL and the Stock Company
are parties to the Articles of Association and Joint Venture Contract dated
April 18, 1995 which establishes the basis of their relationship. The joint
venture contract is for a 30-year term which may be terminated under certain
limited circumstances as agreed upon by the parties. These Articles establish a
board of directors consisting of seven persons, a majority of which are to be
designated by ODL. The board of directors has a responsibility for all major
decisions relating to the activities of the venture, although all major
decisions affecting the joint venture require unanimous approval of the
directors. The regular operations of the joint venture are to be overseen by the
37
<PAGE>
general manager and other deputy general managers, and the Stock Company is
responsible for the nomination for the appointment by the board of directors of
the initial general manager whose term expires in April 1998. ODL, in addition
to providing initial cash contributions to the joint venture, is responsible to
assist in the purchase of machinery and equipment outside the PRC, to promote
products and assist in obtaining contracts outside the PRC and to assist in
certain training, personnel and procurement functions. As used herein, the
"Company" or "OVM" refers to OVM International Holding Corporation and includes,
unless the context otherwise requires, the prior or current operations of ODL,
Liuzhou OVM, the Stock Company, or, if prior to its establishment, the Factory.
Liuzhou OVM has assumed substantially all the businesses originally
carried out by the Factory since January 1, 1995 which principally includes the
manufacture, production, sale and distribution of prestressing equipment,
components and hardware used in the construction of motorways, bridges,
railroads, buildings, hydroelectric dams and power stations in the PRC. The
products include anchorage systems, jacks, electric high-pressure oil pumps,
steel cables, direct display sensors, unbonded prestressing tendons and
ancillary equipment widely used in the construction industry. Liuzhou OVM is the
successor to the manufacturing business originally conducted by the Factory.
Accordingly, the following discussion is principally a description of the
business of Liuzhou OVM or that of its predecessor, the Factory.
OVM's products are distributed throughout the PRC to a diversified
customer base, with a minority proportion sold overseas. OVM's PRC customers
include construction and engineering companies and provincial, municipal and
regional construction bureaus across the PRC. Currently, demand in the PRC for
prestressed products is expanding rapidly as the number of infrastructure
construction projects increases.
OVM's head office and production facilities are located in Liuzhou
Municipality, the industrial city of Guangxi Zhuang Autonomous Region
("Guangxi"), with a site area of approximately 12 acres (equals 60,000 square
meters) and production and related facilities comprising buildings and
structures with a total gross floor area of approximately 9,463 sq. meters
(101,807 sq. ft.). Long term land use rights for the land and the buildings on
which these facilities are situated are held by the Stock Company and leased to
Liuzhou OVM for a period equal to the term of duration of Liuzhou OVM.
Guangxi has substantial mineral resources and is well known as a base of
non-ferrous metals such as manganese, tin, arsenic and bentonite. According to
China Statistical Yearbook 1996, the regional gross domestic product in Guangxi
amounted to approximately Rmb 161 billion ($19 billion), ranking it 15th in the
38
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construction of these road networks and ("Rmb"). For information purposes these
amounts have been translated into U.S. dollars at an exchange rate of $1.00 =
Rmb 8.30, which represents the single rate of exchange as quoted by the People's
Bank of China on December 31, 1996.
Liuzhou OVM (inclusive of the operations of the Factory), has
approximately 30 years of operating history in manufacturing prestressing
equipment and related components. Management believes that Liuzhou OVM is the
largest manufacturer of prestressing equipment and related components in the PRC
in terms of total sales and profit before taxation for each of the two years
ended December 31, 1995 and 1996. Given the well recognized "OVM" brand name in
the PRC, the quality of Liuzhou OVM's product line and Liuzhou OVM's after sales
and customer support systems, management believes that Liuzhou OVM has
established and will continue to maintain a significant competitive position in
the PRC prestressing equipment industry. Liuzhou OVM's products have an
estimated overall market share of approximately 60% in China (Statistics from
China Rock Anchoring and Engineering Association).
39
<PAGE>
STRUCTURE
The following diagram depicts the corporate structure of the Company.
-----------------------------
| OVM International Holding |
| Corporation (Nevada) |
-----------------------------
|
100%
|
-------------------------------
| OVM Development Limited |
| (British Virgin Islands) |
-------------------------------
|
| -------------------------------
| | Liuzhou OVM Joint Stock |
| | Company Limited (formerly |
| | known as Liuzhou |
| | Construction Machinery |
| | General Factory (People's |
| | Republic of China) |
| -------------------------------
70% |
| 30%
| |
------------------------------- |
| Liuzhou OVM Construction | |
| Machinery Company Limited |---------------
|(People's Republic of China) |
-------------------------------
|
50%
|
-------------------------------
| OVM Prestress Co. Pte Ltd. |
| (Republic of Singapore) |
-------------------------------
OVM Development Limited ("ODL"), formerly known as Kolcari Investments
Limited is a private limited company incorporated in the British Virgin Islands
on May 3, 1994.
Liuzhou Construction Machinery General Factory (the "Factory"), located in
Guangxi Zhuang Autonomous Region, the PRC, was the largest State-owned
manufacturer of prestressing equipment in China. The Factory has been operating
in the PRC since 1967. The Factory was subsequently reorganized into a limited
liability share capital company on January 10, 1995 under the name of Liuzhou
OVM Joint Stock Company Limited (the "Stock Company").
40
<PAGE>
Liuzhou OVM Construction Machinery Company Limited. ("Liuzhou OVM") is a
Sino-foreign equity joint venture established under the laws of PRC on May 10,
1995 and owned 70% by ODL and 30% by the Stock Company. The registered capital
of Liuzhou OVM is US$4 million.
OVM Prestress Co. Pte Ltd is a private limited company incorporated in the
Republic of Singapore on December 11, 1993 that is 50% owned by Liuzhou OVM and
50% owned by Wee Poh Construction Co. (Pte) Ltd., an independent third party,
and is principally engaged in the provision of prestressing and related
engineering services.
SUMMARY OF BUSINESSES
The Company is principally engaged in the manufacture and sale of
prestressing equipment and ancillary products. Prior to the establishment of
Liuzhou OVM in May 1995, which took over the Stock Company's business effective
at January 1, 1995, the business was carried out by the Factory (and
subsequently the Stock Company, which is the largest manufacturer of
prestressing equipment and related components in the PRC).
Liuzhou OVM has played a prominent role in the development of the PRC
prestressing equipment industry by supplying a wide range of prestressing
equipment and ancillary products which are essential for the production of
prestressed concrete and are widely used in infrastructure projects such as
highways, railroads, bridges, buildings and power stations. Management believes
that Liuzhou OVM's products have an estimated overall market share of
approximately 60% in China (Statistics from China Rock Anchoring and Engineering
Association).
The Company manufactures a wide array of prestressing equipment and
ancillary products including prestressing anchorage, stressing and lifting
jacks, electric high-pressure oil pumps, unbonded prestressing strand, stay
cable, soil anchor drillers, pipe pullers, steel ducts and ancillary products.
The Company's PRC customers include construction and engineering companies, and
provincial, municipal and regional construction bureaus throughout the PRC. At
present the Company manufactures a range of products which serve various
applications including the construction of bridges and buildings, structural
strengthening and repairs, anchoring in rock and soil, lifting and sliding of
heavy loads, and many other applications. The Company serves as more than a
supplier of products to engineering projects by conducting related construction
and offering a comprehensive range of professional engineering consultancy
services including feasibility studies, structural design and construction
assistance.
The Company has supplied products and provided technical support for more
than 100 major projects in the PRC including Shanghai Yangpu Bridge, one of the
largest cable-stayed bridges in the world, and the lifting of the antenna
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masterpole of the Shanghai East Pearl TV and Broadcasting Tower, the tallest
television broadcasting tower in the PRC. The Company's products were also used
in SouthEast Asia projects, such as New Macau-Taipa Bridge in Macau, Mei Bridge
in Vietnam and Serangon Bridge in Singapore.
Liuzhou OVM is one of the several companies designated by the Ministry of
Construction of the PRC as the manufacturers of prestressing equipment. The
following are some of the major projects in the PRC as well as other countries
in Asia in which products of Liuzhou OVM or its predecessors were used:
o Yangpu Bridge in Shanghai
o Nanpu Bridge in Shanghai
o Aodang Bridge in Macau
o Reconstruction Engineering of Beijing International
Airport
o Beijing-Shenzhen Expressway
o Shuikou Hydropower Station in Fujian Province
o The Dongming Yellow River Bridge
o The Huangshi Yangtze River Bridge
o The New Railway Station in Beijing
o Friendship Gate in Vietnam
o Bridge over Sungei Serangoon, part of Tampines Expressway
Phase III, in Singapore
o East Pearl TV and Broadcasting Tower in Shanghai
In December 1994, Liuzhou OVM was ranked 29th by the State Council
Research and Development Center within the 500 PRC Special Machinery
Manufacturing Enterprises in terms of economic achievement. Liuzhou OVM has
adopted an extensive quality control system for compliance with the ISO 9001
series of international standards. Liuzhou OVM has obtained the ISO 9001
accreditation in July 1995 as a recognition of its standard of quality assurance
system. Specified tests on the qualifications of OVM post-tensioning systems in
accordance with BS 4447 and FIP standards have been conducted by the Singapore
Institute of Standards and Industrial Research. All the test results confirmed
that OVM post-tensioning systems fully meet the requirements of the standards.
Liuzhou OVM's products have been approved for use by many governmental
departments, local authorities and multinational companies. In November 1996,
Liuzhou OVM was awarded a Certificate of Registration from the BSI Quality
Assurance of the United Kingdom in recognition of its quality management system.
STRATEGIC PLAN
Management attributes the success of Liuzhou OVM's operations to the
following principal factors:
o A long-standing history of manufacturing prestressing equipment and
its prominent position in the PRC prestressing equipment industry, a
significant part of the important infrastructure industry of the PRC
economy; and
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o the well established and recognized "OVM" brand name in the PRC.
o A product design and development capabilities predicated on its
working group of experienced technicians with technical expertise in
prestressing equipment manufacturing; A A strict quality and cost
control policies;
o ability to produce products with reliable quality at competitive
prices;
o efficient after sales services;
Management believes that the Company is well placed to benefit from
the continued economic growth in the PRC as the Chinese government has
formulated plans to increase spending in infrastructure. The existing
infrastructure is perceived to be inadequate to keep pace with economic
growth. The Chinese government plans annual increases in spending of 13.4%
a year up to the year 2000. It is estimated that investments in the
transportation area will amount to Rmb 966 billion (approximately US$116
billion) by the year 2000. To achieve this goal, approximately 93,000
miles of road are to be built, and plans are in hand for about 27,000
miles of railway lines and bridges to be built across the Yellow River and
Yangtze River according to remarks of the State Planning Commission of the
PRC. The Company believes that demand for prestressing systems and
equipment will increase in line with the planned increase in
infrastructure activities in the PRC, and this anticipated demand can
provide the basis for the future expansion of the business of the Company.
The Company intends to take advantage of the expected increase in
demand for its products by:
o developing new products;
o increasing production capacity through the construction of new
plants and upgrading its existing production facilities;
o improving production technology;
o rationalizing and improving its sales office network and
marketing strategies generally; and
o actively exploring the overseas markets.
OVERVIEW OF PRESTRESSED CONCRETE
Modern structural engineering tends to progress toward more economic
structures through gradually improved methods of design and the use of higher
strength materials. This results in a reduction of cross-sectional dimensions
and consequent weight savings. Significant savings can be achieved by the use of
high strength concrete and steel in conjunction with present-day design methods,
which permit an accurate appraisal of member strength. However, there are
limitations to this development, due mainly to the interrelated problems of
cracking and deflection at service loads.
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<PAGE>
The undesirable characteristics of ordinary reinforced concrete and steel
have been overcome by the development of prestressed concrete which use steels
and concrete of very high strength. The steel, usually in the form of wires or
strands, is embedded in the concrete under high tension that is held in
equilibrium by compressive stresses in the concrete after hardening.
A prestressed concrete member can be defined as one in which there have
been introduced internal stresses of such magnitude and distribution that the
stresses resulting from the given external loading are counteracted to a desired
degree. A prestressed concrete member include anchorage, jacks and its ancillary
equipment. Concrete is basically a compressive material, with its strength in
tension a low and unreliable value. Prestressing applies a precompression to the
member which reduces or eliminates undesirable tensile stresses that would
otherwise be present. Cracking under service loads can be minimized or even
avoided entirely. Deflections may be limited to an acceptable value. In fact,
members can be designed to have zero deflection under the combined effects of
service load and prestress force. Deflection and crack control, achieved through
prestressing, permit the engineer to make use of efficient and economical high
strength steels in the form of strands, wires or bars, in conjunction with
concrete of much higher strength than normal. Thus prestressing results in
overall improvement in performance of structural concrete used for ordinary
loads and spans, and extends the range of application far beyond old limits,
leading not only to much longer spans than previously thought possible, but
permitting innovative new structural forms to be employed.
Prestressed concrete is particularly well suited for use in bridges of all
kinds because of its durability, rigidity, and economy, as well as the
comparative ease with which an aesthetic appearance can be achieved. Prestressed
concrete bridges frequently make use of composite action. Commonly the beams are
precast and placed in position by crane, eliminating the need for obstructing
traffic. The deck slab is then cast in place and locked to the precast units by
stirrups that project upward into the slab. The long-span concrete bridges
require the development of segmentally cast-in-place hollow prestressed concrete
box girders by post- tensioning.
HISTORY AND DEVELOPMENT OF LIUZHOU OVM
The predecessor of Liuzhou OVM, is Liuzhou Construction Machinery General
Factory, which was founded in 1987 under the supervision of Liuzhou Municipal
Mechanical and Electrical Industrial Bureau. The Factory evolved out of the
former Liuzhou Construction and Machinery Plant founded in 1967. The major
products of the Factory included anchorage systems, electric high-pressure oil
44
<PAGE>
pumps, jacks and other ancillary products which were widely used in
infrastructure projects such as the construction of highways, railroads, bridges
and hydro-power stations.
In 1993, the Factory was granted independent import and export rights by
the Ministry of Foreign Trade and Economic Co-operation of the PRC, which
entitled the Factory to handle import and export transactions directly without
going through various independent import and export corporations. Thereafter,
the Factory was actively involved in exploring the overseas prestressing
equipment market, and its products have been sold for use in Hong Kong, Macau,
Vietnam and Singapore. In the same year, upon the approval of the Commission for
Restructuring the Economic System of Guangxi Zhang Autonomous Region, the
Factory established Orient Prestress Company Ltd ("Orient"), a joint stock
limited liability company, in conjunction with eight other institutional
shareholders which are mainly technical and research institutes in the PRC. The
Stock Company, being the successor of the Factory (see below), owns
approximately 41% equity interest in Orient and is the largest shareholder.
In December 1994, the Factory was ranked 29th by the State Council
Research and Development Center within the 500 PRC Special Machinery
Manufacturing Enterprises in terms of economic achievement, i.e., sales and
pre-tax profit. On January 10, 1995, upon the approval of the Commission for
Restructuring the Economic System of Guangxi Zhuang Autonomous Region, the
Factory was reorganized into a limited liability share capital company known as
Liuzhou OVM Joint Stock Company Limited.
On May 10, 1995, Liuzhou OVM was established as a Sino-foreign equity
joint venture enterprise. Pursuant to its establishment, Liuzhou OVM took over,
effective from January 1, 1995, certain assets and liabilities together with the
business of the Stock Company which related to the manufacture and sale of
prestressing equipment and ancillary products and certain ancillary functions
including research and development, quality control, sales and marketing,
sourcing and other business support functions. The Stock Company retained
certain assets and liabilities that were not assumed by Liuzhou OVM,
representing mainly investments in various joint ventures and wholly-owned
subsidiaries which are engaged in trading and other businesses that are not
competing with the business of Liuzhou OVM as well as certain other
non-production-related facilities such as welfare facilities, education and
training facilities, recreational, catering, heat, water and electricity
facilities.
PRODUCTS
The Company produces a wide range of products which are mainly used in
prestressed concrete construction, using the pretensioning and post-tensioning
method, which are widely used in the infrastructure projects including
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<PAGE>
motorways, railroads, bridges, buildings and hydro-power stations. These
products include prestressing anchorage systems, jacks, electric high-pressure
oil pumps, unbonded prestressing tendons, digital display sensors and the
ancillary components. The Company's products are summarized as follows:
Prestressing anchorage systems and ancillary products. The main
prestressing anchorage system manufactured by the Company include tensile end
anchorage, fixed end anchorage and connectors. Prestressing anchorage systems
are used for prestressed concrete construction and construction units using
pretensioning and postensioning methods, as well as rock and soil anchorage,
external cable and stay cable construction.
Jacks. The Company produces various types of jacks including platform,
pushing and cold-drawn jacks which are used for tensioning of strand, lifting
and pushing of engineering structures and cold drawing of reinforced steel with
different parameters such as nominal oil pressure (MPa), jacking/stressing force
(kN) and/or jacking stroke (mm).
Electric high-pressure oil pumps. The Company produces several types of
electric high-pressure oil pumps and hydraulic pressure stations. The oil pumps
and stations are always used with various jacks for lifting the heavy objects or
for anchoring the objects.
Digital display sensors. Model SC sensor is equipped with a special device
and mainly used for digitally displaying technical parameters of various jacks
and in checking the degree of stress in a short period of time.
Unbonded prestressing tendons. The Company produces two types of unbonded
prestressing tendons with single or double layer of plastic sheaths, which are
used in construction of prestressed concrete under the post-tensioning system.
Screw thread steel pipe for prestressed components. The pipe is made of
low carbon steel band, some are zinc coated, and then rolled up spirally. The
pipe is used for forming a hole in the prestressed concrete using the
post-tensioning method.
Others. The Company produces machinery and equipment for its site test
facilities used in the concrete or rock shear test and rock shear elasticity
test in the construction or survey of a dam for a hydraulic power station, and
soil anchor driller for drilling holes in various texture of soils and strong
decayed rock. In the process of dry drilling, the soil is taken off with the
blades of the spiral drill. This drilling method is used under good soil
conditions where no collapse will occur.
46
<PAGE>
MAJOR PROJECTS
The products manufactured and sold by the Company have been used in
construction projects in various locations in the PRC and overseas. The table
below sets out the major projects using the products of the Company:
Year of
Projects Completion
-------- ----------
Bridges
- -------
Majiabao Railway Overpass Bridge, Beijing 1984
Yonghe bridge, Tianjian 1987
Haiyin Bridge over Pearl River, Guangzhou 1988
Jiujiang Bridge, Guangdong 1988
Shimen Bridge over Jialing River, Chong Qing, Sichuan 1988
Xianglujiao Overpass Bridge, Dalian 1988
Fengtai Bridge, Anhui 1989
Xinhui Dadong and Hukeng Bridges, Guangdong 1990
Huanggang Overpass Bridge, Shenzhen 1991
Liuku Nu River Bridge, Yunnan 1991
Nanpu Bridge in Shanghai 1991
Qiantang River Bridge II in Hangzhou, Zhejiang 1991
Yuanling Bridge, Hunan 1991
Jiujiang Yangtze River Bridge, Jiangxi 1992
Ningbo Yong River Bridge, Zhejiang 1992
The Zhongwei Yellow River Bridge, Ningxia 1992
Aodang Bridge in Macau 1993
Nanchang Gan River Bridge, Jiangxi 1993
Niwan Bridge, Zhuhai 1993
Nunyang Hanyang River Bridge, Hubei 1993
Rebuilding of the East Third Ring
Expressway in Beijing 1993
Siyuan Overpass Bridge in Beijing 1993
The Dongming Yellow River Bridge in Shandong 1993
The Sanmen Gorge Yellow River Bridge, Henan 1993
Xiangtan Bridge II, Hunan 1993
Yangpu Bridge in Shanghai 1993
Rebuilding of the Northwest Third Ring
Expressway, Beijing 1994
Liuzhou Huxi Bridge, Guangxi 1994
Friendship Gate, Vietnam 1996
Humen Bridge, Guangdong 1996
The Chong Qing Yangtze River Bridge II, Sichuan 1995
The Huangshi Yangtze River Bridge, Hubei 1996
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Yongjiang River Bridge III in Nanning, Guangxi 1995
Zhuzhou Xiang-River Bridge, Hunan 1996
Expressways
- -----------
Shenyang-Dalian Expressway 1987
Guangzhou-Fuzhan Expressway, Guangdong 1989
Airport Expressway in Beijing 1993
Jinan-Qingdao Expressway 1993
North Ring Expressway Bridge, Guangdong 1993
Viaduct of Chengdu Road in Shanghai 1993
Bridge over Sungei Seragoon, part of Tampines Expressway
Phase III, Singapore 1994
Guangzhou-Shenzhen-Zuhai Expressway, Guangdong 1994
Eastern Line of Guangzhou-Zhuhai
Expressway, Guangdong in progress
Eastern Line Expressway in Hainan 1995
Fushan-Kaiping Expressway, Guangdong 1996
The Huangshi Yangtze River Expressway, Hubei 1995
Wuhan Yangtze River Expressway, Hubei in progress
Power stations
- --------------
Dashankou Power Station, Xinjiang 1993
Shuikou Hydropower Station, Fujian 1993
Yantan Hydropower Station, Guangxi 1993
Lijia Gorge Hydropower Station, Qinghai 1994
Longyang Gorge Hydropower Station, Qinghai 1994
Manwan Hydraulic Power Station, Yunnan 1993
Tianshenqiao Bridge Hydraulic Power
Station, Guangxi in progress
Xiaolangdi Hydraulic Power Station, Henan in progress
Others
- ------
The Reinforcing Dam project of Fengman Hydraulic
Power Station
Huhehot Civil Aeronautic Hanger, the Inner
Mongolia Autonomous Region 1992
Hoisting the antenna of the East-pearl TV Tower
in Shanghai 1993
Jinan Sewage Treatment Plant 1993
Reconstruction Engineering of Beijing
International Airport 1993
Shuangliu Airport Hangar in Chengdu, Sichuan 1993
Reservoir harnessing project of Manwan
Hydraulic Power Station, Yunnan 1994
Hoisting the framework of the Passenger Station in
Beijing 1994
New Beijing Railway Station, Beijing 1996
48
<PAGE>
SALES AND MARKETING
The following table sets forth the Company's aggregate net sales revenue
by product category for each of the two years ended December 31, 1996.
Year ended December 31,
1996 1995
Product RMB'000 % RMB'000 %
OVM anchorage system 45,205 28.0 73,241 54.0
Jack 29,697 18.4 25,694 18.9
High-pressure oil pump 5,996 3.7 5,295 3.9
Cable, tendon and steel wire 51,797 32.1 2,757 2.0
Other equipment and parts 18,901 11.7 23,040 17.0
*Others 9,896 6.1 5,734 4.2
------ ---- ------ ----
Total 161,492 100 135,761 100
======= === ======= ===
* Others include rubber engineering products, corrugation pipes and digital
display sensors.
For each of the two years ended December 31, 1996, the largest ten
customers of the Company, which are mainly construction and engineering
companies and provincial, municipal and regional construction bureaus throughout
the PRC, accounted for approximately 34.8% and 54.9%, respectively, of the
Company's total sales by value. The largest customer of the Company for each of
the two years ended December 31, 1996 accounted for approximately 7.2% and
20.0%, respectively, of the Company's total sales by value. The single largest
customer which accounted for more than 10% of the Company's total sales in 1996
was Kunming Futong Trading Company which accounted for 20.0%, of the total sales
for the year ended December 31, 1996. No single customer accounted for more than
10% in 1995.
The significant increase in the percentage in 1996 as compared to 1995 was
mainly due to an indent sale (a sale directly matched by a purchase) of
approximately Rmb 48,363,000 ($5,826,867) in 1996.
For each of the two years ended December 31, 1996, approximately 84% of
the Company's total sales was derived from products sold in the PRC with the
balance attributable to products exported to overseas customers (mainly arranged
through an import and export company wholly-owned by the Stock Company).
The Company also sells its products directly to end-users through its in
house sales and marketing and after sales staff, consisting of 51 full-time
employees, of which 10 are after sales technicians. These personnel are
responsible for conducting marketing research, sales planning, marketing
strategy, order consultation with customers, sales coordination and control, and
payment collection. The Company maintains sales offices in major cities
including Liuzhou, Guangzhou, Xiamen, Shanghai, Beijing, Xian, Wuhan, Chengdu,
Chongqing, Yichang, Kunming and the site of the Three Gorges Dam project. The
Company also maintains overseas offices in Hong Kong, Singapore, and Malaysia.
The Company's marketing efforts include visits to existing and prospective
customers and participation in various exhibitions and trade fairs held in the
PRC at which the Company's products are marketed to local and overseas
customers.
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In order to maximize the sales distribution network for the Company's
products, the Company has entered into a sales and purchase agreement with
Orient Prestress Company Ltd, a company which is owned approximately 41% by the
Stock Company. For each of the two years ended December 31, 1996, the Company's
sales through Orient accounted for 49% and 2%, respectively, of its total sales.
Pursuant to the formal establishment of Liuzhou OVM and commencing January 1996,
most of the sales were conducted on a direct basis instead of through Orient.
This accounts for the significant reduction in the percentage of sales made
through Orient for the year ended December 31, 1996. The Company has also
entered into other non-exclusive agency agreements with other companies.
However, sales through these agency arrangements were not significant and
accounted for less than 1% of the Company's total sales for each of the two
years ended December 31, 1996.
The Company has been actively expanding overseas markets. Its products
have been sold in Pakistan, Singapore, Japan, Hong Kong, Sudan and Vietnam. The
export sales (mainly arranged through an import and export company wholly-owned
by the Stock Company) accounted for approximately 16% of the Company's total
sales for each of the two years ended December 31, 1996. All export sales are
denominated in U.S. dollars.
As most of the infrastructure construction projects are capital intensive
and extend for a relatively long time, most of the equipment and products
manufactured by the Company are sold under fixed price contracts. The production
cycle of the Company's products varies from two months to six months. For
certain large contracts, customers are usually required to pay a cash deposit
(the amount of which differs from customer to customer as each contract is
individually negotiated) upon signing of the relevant sales and purchase
contracts, with the remaining balance payable after delivery or on-site
installation by way of bank collection. All of the contracts concluded with
domestic customers are dominated in Renminbi. For export sales, customers are
required to pay a deposit of at least 30% upon signing of a sales contract, and
the balance is payable after delivery of products by way of telegraphic transfer
or bank collection. Depending on the credit standing of the customers and the
contract sum involved, the Company usually allows credit of up to 90 days to
customers.
AFTER SALES SERVICE
The Company's after sales service forms an integral part of its policy.
The Company provides a wide range of after sales service to customers located
both in the PRC and overseas. These services include: providing on-site
installation services upon the request of the customer; organizing training
seminars in the PRC for customers from time to time regarding the operations and
technical attributes of the Company's products; responding to customers' request
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<PAGE>
to modify and assist in the technical operations of the Company's products;
processing of inquiries and feedback from customers and prompt provision of
parts and components; and conducting visits on a regular basis to customers in
order to identify customers' specific needs and level of satisfaction in respect
of the Company's products.
RAW MATERIALS AND COMPONENTS
The major raw materials and components required by the Company include
metallurgical products including steel and rubber products such as high-pressure
rubber pipes as well as mechanical and electrical components such as bearings
and motors. All of the raw materials and components used by the Company are
sourced from PRC suppliers and/or through the manufacture of various components
at its own facility. All the Company's purchases are settled in RMB. For each of
the two years ended December 31, 1996, the cost of raw materials and components
accounted for approximately 77% and 84%, respectively, of the Company's total
production costs.
The Company has formulated a material supply management policy in respect
of the raw materials and components used in the Company's production operations.
Under this policy, the stock level of raw materials and components is determined
by reference to planned annual consumption and a predetermined inventory level
for different kinds of raw materials and components. The average inventory level
of the Company's raw materials and components is approximately two months usage.
It is the policy of the Company to maintain more than one supplier for
certain major materials in order to avoid over reliance on a single source of
supply. The Company has long standing relationships with major suppliers and has
not experienced any significant difficulties in sourcing raw materials and
components. The Company has not entered into any long-term purchase arrangements
with any supplier. However, the Company does not anticipate that it will face
any difficulties in the sourcing of its raw materials and components.
For each of the two years ended December 31, 1996, the largest ten
suppliers of raw materials and components of the Company accounted for
approximately 22.3% and 64.3%, respectively, of the Company's total cost of
purchases, while the largest supplier accounted for approximately 9.0% and 45.8%
of the Company's total cost of purchases, respectively, for the same periods.
The significant increase in the percentage in 1996 was due to an indent purchase
(purchase directly matched by a sale) of steel wire of approximately Rmb
38,861,000 (US$4,682,048), which accounted for 50.0% of total purchases, from
Jiangyin Huaxin Steel Cable Company Ltd. for the year ended December 31, 1996.
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PRODUCTION FACILITIES AND PROCESS
PRODUCTION FACILITIES
The Company's head office and production facilities are located in Liuzhou
Municipality, the industrial city of Guangxi Zhuang Autonomous Region, with a
site area of approximately 645,000 square feet and 101,807 sq. ft. of production
workshops and premises. Guangxi has substantial mineral resources and is
recognized as a base of non-ferrous metals such as manganese, tin, arsenic, and
bentonite. According to the China Statistical Yearbook 1996, the regional gross
domestic product of Guangxi amounted to approximately Rmb 161 billion in 1995
(approximately US$19 billion, based on an exchange rate of US$1 = Rmb 8.30),
ranking it 15th in the PRC.
Long term land use rights for the land and buildings on which these
facilities are situated are held by the Stock Company and leased to Liuzhou OVM
for a period equal to the duration of Liuzhou OVM which has an initial term of
30 years commencing May 10, 1995. The Company's production facilities and
equipment include lathe machines, planers, milling machines, boring machines,
drilling machines and other ancillary production machines such as forklifts, air
compressors, welding machines, shearing machines, jigs, dies, tools and
hardening furnaces.
PRODUCTION PROCESS
The production process can be divided into three stages. The first stage
is the production of various parts and components, which involves milling,
grinding, boring, heat treatment, welding, refining and painting and coating.
The second stage is the in-house assembly and testing of the products
manufactured. The final stage is the on-site installation and test run.
PRODUCTION CAPACITY
The Company currently manufactures a wide range of prestressing equipment
and ancillary products. The production capacity of the Company is mainly
dependent on the product mix of the Company, which is subject to adjustment from
time to time, the production floor area available for operation, the quantity of
production equipment and the number and working hours of the Company's
workforce. The Company's product mix and the production output for each product
in a given period are determined by the Company's management after considering
several factors including the number of orders received by the Company for each
product, the forecast of future market demand for different products and the
estimated gross profit margins of different products. The majority of the
Company's production facilities can be used, with or without adaptation, for the
manufacture of different products, though certain facilities can be used for
certain components and special parts only.
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The following table summarizes the capital expenditure on the purchase of
production equipment for each of the two years ended December 31, 1996:
For the year ended
December 31,
1996 1995
---- ----
Rmb Rmb
Capital expenditure
on production
equipment 1,152,000 701,000
Management believes that the Company's continuous investments in expanding
and improving its production facilities, the rational use of human resources,
together with the appropriate use of parts, components and processing services
provided by third party manufacturers, will continue to serve to enhance the
Company's overall production capacity of various products with a view to meeting
the demand and maximizing the Company's overall profitability.
COMPETITION
The Company has approximately 30 years' history of manufacturing
prestressing equipment and ancillary components and was the largest manufacturer
in the PRC of these specialized products in terms of sales revenue and profit
before taxation for each of the two years ended December 31, 1995 and 1996.
Given what management believes to be the well established OVM brand name, the
reliable quality of the Company's products and the Company's efficient after
sales service, the Company believes that Liuzhou OVM has established and should
continue to maintain a strong competitive position in the PRC prestressing
equipment industry.
There are only several companies designated by the Ministry of
Construction of the PRC as the manufacturers of these specialized products. The
Company believes that the prestressing market in the PRC is dominated by six
major domestic manufacturers. The names of these manufacturers and their
respective market shares for the year ended December 31, 1994 are as follows:
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Estimated
Name Market Share (%)
- ---- ----------------
Liuzhou OVM 62.4
Zhongyuan Prestress Machinery Company 13.4
Bridge sub-administrations of the Ministry of Railway 6.3
Siping Construction and Machinery Factory 6.3
Hefei Sifong Group Company 5.9
Xinjin Road Construction and Machinery Factory 4.6
Others 1.1
-----
100.0
(Statistics provided by China Rock Anchoring and Engineering Association)
Although Liuzhou OVM's competitive advantage over imported products in
terms of pricing may be partially undermined with the PRC's entry into the World
Trade Organization, management believes the Company can still maintain its
competitiveness due to the significant pricing differential between the
Company's products and imports, the accessibility and efficiency of after sales
services and the timely availability of components and special parts.
The major export markets of the Company are developing countries in Asia
where infrastructure activities are expected to sharply increase. Management
believes that the demand for the Company's products in these countries should be
strong because Liuzhou OVM's products are less costly than those of the overseas
manufacturers and the quality is readily comparable.
In respect of the domestic market, management believes that the Company
has a competitive advantage over other domestic manufacturers in terms of
product technology and product quality. In addition, the Company's capability to
continuously manufacture and supply parts and components for its products and
efficient after sales service also strengthen its competitiveness.
QUALITY CONTROL
The Company is committed to manufacturing high quality products and to
providing a high level of after sales service to its customers. Management
believes that product quality is vital to enhancing the Company's
competitiveness, market position and reputation. In order to maintain and
improve the quality of its products and production standards, the Company has
adopted a comprehensive quality control system which conforms with the
internationally recognized ISO 9001 standards. The Company was awarded an ISO
9001 certification in July 1995. In November 1996, the Company was awarded a
Certificate of Registration by BSI Quality Assurance of the United Kingdom in
recognition of its quality management system.
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The Company has established a quality control team consisting of 58
full-time employees to ensure that the quality products is consistently
maintained. The major responsibilities of the quality control department
include: (i) devising, implementing and improving quality control procedures in
order to comply with ISO 9001; (ii) conducting inspection of raw materials,
work-in-progress and finished products on a sampling basis; (iii) examining of
parts and components manufactured at each stage of the production process; and
(iv) reviewing and improving quality testing procedures and carrying out
stringent testing of the Company's products.
RESEARCH AND DEVELOPMENT
The Company has set up a technical process design and control department
and a research and development department. The technical process design and
control department is responsible for developing new production skills and
designing new production processes. The research and development department is
responsible for development of new products and the technological improvement of
products. The two departments employed at September 30, 1996, 98 full-time
employees including 10 senior engineers and 32 engineers.
Most of the research and products development programs undertaken by the
Company are in cooperation with universities and research institutions in the
PRC. The Company has worked with over 200 universities, testing facilities,
research institutes and local provincial and municipal construction bureaus in
developing its product line. Management believes that Liuzhou OVM has been able
to maintain a very good relationship with these universities and research
institutes, and this relationship is expected to be continued in the future.
Since 1989, the Company has developed 26 new products, of which 11 have
obtained scientific awards from the State, provincial and municipal governmental
authorities.
The Company is accredited as a high and new technology enterprise by the
Guangxi Western Scientific Technology Commission. The Company's products, such
as OVM anchorage systems, YCW jack series, LSD200 jack series, OVM200 stay cable
system, and OVM-ZLD Automatic Continuous Pressing and Lifting Device, have been
categorized as high and new technology products.
The Company's annual research and development expenditure accounts for
less than 1% of total sales for each of the two years ended December 31, 1996.
For the two years ended December 31, 1996, the aggregate research and
development expenses incurred by the Company amounted to approximately RMB
1,230,000 (US$148,193).
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ENVIRONMENTAL PROTECTION
The Company has adopted measures to reduce the level of pollution caused
by its operation and has continuously complied with the PRC's environmental
protection law and regulations. Environmental protection measures adopted by the
Company include the treatment of emulsified effluent and smoke and dust emitted
from boilers of the Company's production facilities. The Company has never been
fined for violation of environmental laws in the PRC.
INTELLECTUAL PROPERTY RIGHTS
The Company's products are currently marketed under the "OVM" trademark
registered in the PRC. Management believes that since inception, Liuzhou OVM has
developed considerable goodwill within the PRC prestressing equipment
manufacturing industry.
The Company has an exclusive license for a term equivalent to the period
of validity (including such extended period as may be permitted under the law of
the relevant jurisdiction) to use the following trademark which is owned by and
registered in the PRC in the name of the Stock Company.
Registration Registration Date of
Trademark Class Number Date Expiry
- --------- ----- ------ ---- ------
OVM 6 784409 October 21, 1995 October 21, 2005
The Company has an exclusive license for a term equivalent to the period
of validity (including such extended period as may be permitted under the law of
the relevant jurisdiction) to use the following utility model patents which are
registered in the PRC in the name of the Stock Company:
Registration Date of
Patent Number Application Date of expiry
- ------ ------ ----------- --------------
Stay cable multi-anchorage 90224483.2 November 27, 1990 November 27,1998
Hydraulic-automatic force 89202440.2 March 3, 1989 March 3, 1997
inspecting device
Automatic-continuous 90220583.8 September 15, 1990 September 15,
1998
lifting and pressing device
Long-diameter high-strength 90208621.9 June 11, 1990 June 11, 1998
steel wire cone anchorage
Stranded wire & bunched 90208622 June 11, 1990 June 11, 1998
steel wires prestressed
tensioning anchorage
Heavy-tonnage cable force 92204510 March 14, 1992 March 14, 2000
inspecting long-distance
sensor
Prestressed ductile anchor 88220725 November 30, 1988 November 30, 1996
strut
Liuzhou OVM entered into an agreement with the Stock Company on June 5,
1995 and a supplementary agreement dated December 18, 1995 pursuant to which the
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Stock Company granted to Liuzhou OVM an exclusive and assignable right to use
the "OVM" trademark and various patents in connection with the manufacturing
operations assumed by the Company following the establishment of the Liuzhou OVM
in the PRC and any territory outside the PRC for a term equivalent to the period
of validity (including such extended period as may be permitted under the law of
the relevant jurisdiction) of the trademark or the relevant patent in
consideration of the sum of RMB 8 million (approximately US$963,855).
Under these agreements, the Stock Company has undertaken to apply for any
renewal of the registration of the "OVM" trademark and the relevant patents
promptly upon the expiration of the registration of the same and to procure the
registration of the trademark and patents in any territory outside the PRC as
the Company may require, all such renewals and registrations to be made at the
cost of the Company.
EMPLOYEES
As at December 31, 1996, the Company had a total of 965 employees,
categorized by function as follows:
Production 638
Administration and management 87
Quality control 58
Technical process design and control 47
Research and development 51
Sales, marketing and after sales service 51
Raw materials supply 30
Others 3
---
965
===
PROPERTY
All of the Company's operations are conducted from its 101,807 square foot
facility located in the Liuzhou Municipality, PRC. The facility is leased for a
term ending May 10, 2025 at a current annual rate of approximately Rmb 18.3
($2.2) per sq. feet. See preceding discussion in "Production Facilities and
Process."
MANAGEMENT
The following table sets forth the names, positions with the Company and
ages of the executive officers and directors of the Company and Liuzhou OVM.
Directors of the Company will be elected at the Company's annual meeting of
shareholders and serve for one year or until their successors are elected and
qualify. Officers are elected by the Board and their terms of office are, except
to the extent governed by employment contract, at the discretion of the Board.
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Name Age Position
- ---- --- --------
Ching Lung Po 50 Chairman of the Board of Directors,
President and CEO of the Company and
Vice Chairman of the Board of
Directors of Liuzhou OVM
Wu Guosen 62 Vice Chairman of the Board of
Directors of the Company and Chairman
of the Board of Directors and General
Manager of Liuzhou OVM
Wan Ying Lin 48 Director of the Company
Kwok Kwan Hung 30 Director and Chief Financial Officer
of the Company
Peng Fang 35 Vice President of the Company and
Deputy General Manager of Liuzhou OVM
Tang Xiaoping 35 Vice President of the Company and
Deputy General Manager of Liuzhou OVM
Cheung Lai 42 Director and Treasurer of the Company
Wan Wai On 23 Director and Corporate Secretary of
the Company
MR. CHING LUNG PO, aged 50, the Chairman of the Board of Directors and
Managing Director of the Company and Vice Chairman of the Board of Directors of
Liuzhou OVM. Mr. Ching has been involved in more than 20 years in the management
of production and technology of industrial enterprises in PRC. He worked in
Heilongjiang Suihua Electronic Factory as an engineer from 1969 to 1976 and was
the Head of the Heilongjiang Suihua Industrial Science & Technology Research
Institute from 1975 to 1976. Mr. Ching joined the Heilongjiang Qingan Factory in
1976 and became the General Manager since 1976. In 1988, Mr. Ching started his
own business and established the Shenzhen Hongda Science & Technology Company
Limited in Shenzhen which manufactures electronic products. Mr. Ching is
graduated from the Harbin Military and Engineering Institute and holds the title
of Senior Engineer. Mr. Ching is responsible for the overall corporate policy
and development strategy of the Company.
MR. WU GUOSEN, aged 62, senior economist, is the Vice Chairman of the
Board of Directors and General Manager of Liuzhou OVM. Mr. Wu graduated from the
China Huatung Military University specializing in civil engineering and
enterprise management. He joined the Factory in late 1984 as the Director and
secretary of the Communist Party of the Factory. He has been closely involved in
the research and development of the anchoring system and jacks and has over 30
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years of technical and enterprise management experience of the prestressing
engineering industry. He has won such titles and awards as "National Machinery
Industry Labour Model" awarded by the Ministry of Machinery in 1994 and "Labour
Model of Guangxi Electronic Industry System" in 1995. He also held the position
as the Deputy General Manager of the China Rock Anchoring and Engineering
Association since late 1988. He is responsible for the overall management of
Liuzhou OVM.
MR. WAN YING LIN, aged 48, is a Director of the Company and Director of
Liuzhou OVM. Mr. Wan is graduated from the Guangxi Liuzhou Institute of Medical
Specialty specializing in administration and management. From January 1986
through December 1987, he was the manager of Lam Ko Mould Company in charge of
the China marketing and development division in Hong Kong. Then in January 1988
through February 1993, he worked as the marketing manager in Wai Tong Trading
Company in Hong Kong. In 1993, he joined the Hong Kong Prestressing Concrete
Engineering Company Limited and has been working as manager until now.
MR. PENG FANG, aged 35, is a Director and Deputy General Manager of
Liuzhou OVM. He graduated from Dilian Polytechnic Institute specializing in
structuring engineering and obtained the title of senior engineer in 1993. He
also obtained a master degree and Ph.D. degree from the institute. He complete
his master degree in December 1986 and then his Ph.D. degree in December 1990.
In December 1990 through June 1994, he worked as senior engineer in the Foreign
Office of the Ministry of Communications. He joined the Factory in February 1994
and worked as the Deputy General Manager. He has considerable knowledge about
the government planning on transportation and communication. He is responsible
for development of the overseas market of Liuzhou OVM.
MS. CHEUNG LAI, aged 42, Director of Liuzhou OVM. Ms. Cheung graduated
from Heilongjiang Broadcasting Television University specializing in English
language. In September 1982 through September 1988, she worked as the sales
manager of Heilongjiang Qingan Steel & Iron Factory. In October 1988 through
August 1992, he worked as sales manager of the Shenzhen Zhenbao Enterprise
Company. In September 1992, she joined Shenzhen Hongda Science & Technology
Enterprise Company Limited as the finance manager.
MS. TANG XIAOPING, aged 35, is the Deputy General Manager of Liuzhou OVM.
She graduated from Guangxi Broadcasting Television University specializing in
machinery manufacturing. She obtained the title of engineer in 1992. She joined
the Factory in 1985 and became the Deputy General Manager of the Factory in
December 1993. She has many years experience in sales and marketing. She was
awarded the "Ten Most Outstanding Sales Person" by the Liuzhou Mechanical and
Electrical Industry Bureau in 1993. She is also the council member of Huadong
Prestressing Technology United Development Center. She is responsible for the
sales of Liuzhou OVM's products.
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<PAGE>
MR. KWOK KWAN HUNG, aged 30, is the Director and Chief Financial Officer
of the Company and is responsible for the Company's finance and taxation
matters, as well as the overall accounting operations of the Company. Mr. Kwok
obtained a bachelor's degree in Economics from the University of London and is
an associate member of the Chartered Association of Certified Accountants. He
joined Ernst & Young after graduation and worked as senior auditor until late
1992. From October 1992 to April 1996, he held the position of Finance Manager
and Financial Controller for two Hong Kong listed companies. In April 1996, he
joined a private company in Hong Kong as the Finance Director.
MR. WAN WAI ON, aged 23, is the Director and Corporate Secretary of the
Company. Mr. Wan is a graduate of Rutgers University, New Brunswick, New Jersey
where he received a Bachelors of Arts degree. Since graduation in May 1996, he
has been employed as a general manager of a computer company based in Hong Kong.
EXECUTIVE COMPENSATION
No director or executive officer has received compensation in excess of
US$100,000 per year for each of the two years ended December 31, 1995 and 1996.
The Company, except for Liuzhou OVM, currently has no employment contracts
with any of its officers and directors and maintains no retirement, fringe
benefits or similar plans for the benefit of its officers and directors.
CASH COMPENSATION
The following table shows, for each of the two years ended December 31,
1996, the cash and other compensation paid by the Company to its President and
Chief Executive Officer. None of the executive officers of the Company had
annual compensation in excess of $100,000.
Summary Compensation Table
Name and Other All
Principal Annual Other
Position Year Salary Bonus Compensation(1) Compensation(2)
- -------- ---- ------ ----- ------------ ------------
Ching Lung Po, 1996 $62,016 -0- $ -0- $ -0-
Chairman, 1995 $62,016 -0- $ -0- $ -0-
President, and
CEO
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OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to the grant of
options to purchase shares of Common Stock during the fiscal year ended December
31, 1996 to each person named in the Summary Compensation Table.
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or
Options/SARs Employees in Base Price Expiration
Name Granted(#) Fiscal Year ($/Shares) Date
- ---- ---------- ----------- ---------- ----------
Ching Lung Po -0- -0- -0- -0-
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the exercise of
options to purchase shares of Common Stock during the fiscal year ended December
31, 1996 to each person named in the Summary Compensation Table and the
unexercised options held as of the end of the 1996 fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised in-the-Money
Acquired Options/SARs Options/SARs
on Value at FY-End (#) at FY-End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
---- --- --- ------------- -------------
Ching Lung Po -0- -0- -0- -0-
President, Chief
Executive Officer
INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN
The Board of Directors and a majority of the Company's shareholders
adopted the Company's 1996 Stock Option Plan (the "Plan") on September 5, 1996.
Under the Plan, the Company has reserved an aggregate of 1,000,000 shares
of Common Stock for issuance pursuant to options granted under the Plan ("Plan
Options"). The Board of Directors or a Committee of the Board of Directors (the
"Committee") of the Company will administer the Plan including, without
limitation, the selection of the persons who will be granted Plan Options under
the Plan, the type of Plan Options to be granted, the number of shares subject
to each Plan Option and the Plan Option price.
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
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<PAGE>
("Non-Qualified Options"). Any Incentive Option granted under the Plan must
provide for an exercise price of not less than 100% of the fair market value of
the underlying shares on the date of such grant, but the exercise price of any
Incentive Option granted to an eligible employee owning more than 10% of the
Company's Common Stock must be at least 110% of such fair market value as
determined on the date of the grant. The term of each Plan Option and the manner
in which it may be exercised is determined by the Board of the Directors or the
Committee, provided that no Plan Option may be exercisable more than 10 years
after the date of its grant and, in the case of an Incentive Option granted to
an eligible employee owning more than 10% of the Company's Common Stock, no more
than five years after the date of the grant.
The exercise price of Non-Qualified Options shall be determined by the
Board of Directors or the Committee.
The per Share purchase price of shares subject to Plan Options granted
under the Plan may be adjusted in the event of certain changes in the Company's
capitalization, but any such adjustment shall not change the total purchase
price payable upon the exercise in full of Plan Options granted under the Plan.
Officers, directors, key employees and consultants of the Company and its
subsidiaries (if applicable in the future) will be eligible to receive
Non-Qualified Options under the Plan. Only officers, directors and employees of
the Company who are employed by the Company or by any subsidiary thereof are
eligible to receive Incentive Options.
All Plan Options are nonassignable and nontransferable, except by will or
by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not an employee of the Company but is a member of
the Company's Board of Directors and his service as a Director is terminated for
any reason, other than death or disability, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date or three
months following the date of termination. If the optionee dies during the term
of his employment, the Plan Option granted to him shall lapse to the extent
unexercised on the earlier of the expiration date of the Plan Option or the date
one year following the date of the optionee's death. If the optionee is
permanently and totally disabled within the meaning of Section 22(c)(3) of the
Internal Revenue Code of 1986, the Plan Option granted to him lapses to the
extent unexercised on the earlier of the expiration date of the option or one
year following the date of such disability.
The Board of Directors or the Committee may amend, suspend or terminate
the Plan at any time, except that no amendment shall be made which (i) increases
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the total number of shares subject to the Plan or changes the minimum purchase
price therefor (except in either case in the event of adjustments due to changes
in the Company's capitalization), (ii) affects outstanding Plan Options or any
exercise right thereunder, (iii) extends the term of any Plan Option beyond ten
years, or (iv) extends the termination date of the Plan. Unless the Plan shall
theretofore have been suspended or terminated by the Board of Directors, the
Plan shall terminate on September 4, 2006. Any such termination of the Plan
shall not affect the validity of any Plan Options previously granted thereunder.
As of May 1, 1997, no incentive stock options had been granted.
RETIREMENT AND PENSION FUND
In accordance with the relevant government regulations, Liuzhou OVM has
participated in a central retirement and pension fund scheme. The Company
currently makes an annual contribution representing 19% of the total wages of
employees to the retirement and pension fund out of which the pensions of the
Company's retired workers are paid. Effective from January 1, 1993, Liuzhou OVM
has internally implemented an additional retirement plan for its staff. Under
this additional plan, the Company is required to contribute 5% of the total
wages of the employees to the retirement plan. The aggregate pension costs
incurred by the Company for each of the two years ended December 31, 1995 and
1996 amounted to RMB 1,870,000 (US$225,301), RMB 1,894,000 (US$228,193),
respectively.
CERTAIN TRANSACTIONS
On April 18, 1995, Kolcari and the Stock Company entered into a Joint
Venture Contract (the "Contract"), pursuant to which such parties agreed to
establish Liuzhou OVM as a joint venture limited liability company in accordance
with the Laws of the PRC on Sino- Foreign Equity Joint Venture. The Contract
provided that Liuzhou OVM's total initial registered capital of $4 million was
to be contributed in assets and/or cash as follows: the Stock Company (30%) and
Kolcari (70%).
Pursuant to an agreement dated June 5, 1995 between Liuzhou OVM and the
Stock Company (successor in interest to the Factory), operating assets and
production facilities of the Factory valued at US$1,423,324, according to a
valuation performed by the PRC State- approved assets valuer, were transferred
to Liuzhou OVM. Of the total value of assets transferred into Liuzhou OVM,
US$1,200,000 represented a capital contribution by the Stock Company for its 30%
equity interest in Liuzhou OVM and the balance of US$223,325 was recorded as a
loan to Liuzhou OVM. The remaining 70% of the issued capital is being provided
by Kolcari through the contribution of cash in the approximate amount of
US$2,800,000, of which $1,960,000 had been paid as at December 31, 1996 with the
balance to be due on March 31, 1997. Pursuant to a supplementary agreement
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entered into among Kolcari and the Stock Company on March 28, 1997, the due date
for the last instalment of $80,000, representing 30% of Kolcari's share of
capital, was extended to December 31, 1997.
Following the establishment of Liuzhou OVM, a series of comprehensive
services, leases and assets transfer agreements were entered into between
Liuzhou OVM and the Stock Company and its affiliates. A description of these
agreements are set out below.
A lease agreement dated June 5, 1995 and a supplementary agreement dated
September 28, 1995 between Liuzhou OVM and the Stock Company were commenced,
pursuant to which the Stock Company agreed to lease land use rights with gross
area of approximately 60,000 sq. meters, production plants and premises with a
gross area of approximately 9,463 sq. meters and 22 transportation vehicles, to
Liuzhou OVM. The lease regarding the land use rights, production plants and
premises is for a term equal to the period of duration of Liuzhou OVM. The
rental rate is renewable every three years with each increment capped below 10%.
With respect to the leasing of the transportation vehicles, the initial lease
term is for a period of three years from the date of the agreement. The
aggregate actual cost of such rentals for each of the two years ended December
31, 1995 and 1996 amounted to approximately Rmb 1,210,000 (US$145,783) and Rmb
1,709,000 (US$205,904), respectively.
Pursuant to a service agreement dated June 5, 1995, the Stock Company has
agreed to provide Liuzhou OVM with water and electricity services. The service
charge will depend on actual consumption by Liuzhou OVM and at a rate equal to
that actually payable by the Stock Company. In addition, Liuzhou OVM has agreed
that the Stock Company will provide Liuzhou OVM services including the provision
of workers' dormitories, medical, recreational facilities and certain social and
related services. The service charge for the provision of such social services
will be adjusted for every three years with each increment capped below 10%.
As provided under an agreement dated June 5, 1995 among Liuzhou OVM, the
Stock Company and the heat treatment plant (the "Plant") wholly owned by the
Stock Company, the Plant agreed to provide Liuzhou OVM heat treatment
subcontracting services at a discount of 3-5% from the prevailing market rate.
The aggregate subcontracting charges for each of the two years ended December
31, 1996 amounted to Rmb 3,958,000 (US$476,867) and Rmb 6,884,000 (US$829,398),
respectively.
In accordance with an agreement dated June 5, 1995 and a supplementary
agreement dated December 18, 1995 between Liuzhou OVM and the Stock Company, the
Stock Company agreed to transfer its intangible assets including trademarks,
patents, technology and know-how related to existing products and products under
development to Liuzhou OVM at a total consideration of Rmb 8,000,000
(US$963,855) (the "Transfer Fee"). An annual royalty equal to 0.6% of the net
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sales (after deducting VAT) will be payable by Liuzhou OVM until the full
Transfer Fee is settled. The royalty will be payable by Liuzhou OVM each year
commencing January 1, 1997.
In accordance with an agreement dated June 8, 1995 between Liuzhou OVM and
the Stock Company, certain assets and liabilities and the business of the Stock
Company were transferred to Liuzhou OVM commencing January 1, 1995. Under this
agreement, Liuzhou OVM assumed the business of the Stock Company effective
January 1, 1995.
On November 4, 1996, the Company completed the acquisition of all of the
capital stock interests of Kolcari Investments Limited (which thereafter changed
its name to OVM Development Limited) in exchange for 8,800,000 shares of Common
Stock of the Company. The shareholders of ODL, Hoi Wai Investments, Ltd., NJI
No. 1 (A) Investment Fund, NJI No. 1 (B) Investment Fund, Nomura/Jarco East Asia
Growth Fund, received 6,512,000 shares, 572,000 shares, 572,000 shares and
1,144,000 shares, respectively, of the Company pursuant to such acquisition.
Such shareholders acquired their capital stock interests in ODL on August 17,
1995 for an aggregate consideration of US$2,000,000.
In accordance with a supplementary agreement dated October 18, 1996
between Liuzhou OVM and the Stock Company, the Stock Company agreed to pay an
annual service fee to Liuzhou OVM for the collection of the accounts receivable
and other receivables (the "Receivables") injected into Liuzhou OVM by the Stock
Company. The annual fee is calculated at 6.3% on the actual amount collected
from the Receivables in any particular year.
In addition, Liuzhou OVM also undertakes a significant portion of its
business with the Stock Company and its affiliate. For each of the two years
ended December 31, 1996, Liuzhou OVM had sales amounting to approximately Rmb
2,292,000 (US$276,145) and Rmb 33,000 (US$3,976), respectively, to Hong Kong
Prestressed Engineering Limited, a company incorporated in Hong Kong, of which
two of the Company's directors, Mr. Wan Ying Ling, and Mr. Wu Guo Sen, have a
beneficial interest. In addition, Liuzhou OVM purchases and sells a significant
portion of its raw materials to the Stock Company's affiliates. The amount of
such sales and purchases were Rmb 2,192,000 (US$264,096) and Rmb 5,313,000
(US$640,120), respectively for the year ended December 31, 1995 and Rmb
5,335,000 (US$642,771) and Rmb 3,640,000 (US$438,554), respectively, for the
year ended December 3, 1996.
Liuzhou OVM also leases certain plant and machinery to the Stock Company's
affiliates, and for each of the two years ended December 31, 1996, a rental
income of Rmb 924,000 (US$111,325) and Rmb 684,000 (US$82,410), respectively,
was received by Liuzhou OVM. At the same time, the Stock Company's affiliates
also lease certain plant and machinery to Liuzhou OVM and a rental expense of
65
<PAGE>
Rmb 1,328,000 (US$160,000) and Rmb 964,000 (US$116,145), respectively, was
incurred by Liuzhou OVM for each of the two years ended December 31, 1996.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the Company's
Common Stock beneficially owned on April 30, 1997 for (i) each shareholder known
by the Company to be the beneficial owner of five (5%) percent or more of the
Company's outstanding Common Stock, (ii) each of the Company's directors, and
(iii) all executive officers and directors as a group. In general, a person is
deemed to be a "beneficial owner" of a security if that person has or shares the
power to vote or direct the voting of such security, or the power to dispose or
to direct the disposition of such security. A person is also deemed to be a
beneficial owner of any securities of which the person has the right to acquire
beneficial ownership within sixty (60) days. At April 30, 1997, there were
12,050,000 shares of Common Stock outstanding.
Name and Address or Amount and Nature of Percentage
Beneficial Owner Beneficial Ownership(1) of Class
---------------- ----------------------- --------
Hoi Wai Investments Limited 6,512,000(2) 54.0%
P.O. Box 116, Road Town
Tortola, British Virgin Islands
NJI No. 1 (A) Investment Fund 572,000(3) 4.8%
6 Battery Road #42-01 Singapore
049909, Republic of Singapore
NJI No. 1(B) Investment Fund 572,000(3) 4.8%
6 Battery Road #42-01n Singapore
049909, Republic of Singapore
Nomura/Jafco East Asia Growth Fund 1,144,000 9.5%
6 Battery Road #42-01 Singapore
049909, Republic of Singapore
Mr. Ching Lung Po 6,512,000(2) 54.0%
Room 1015, Blck M. Telford Garden
Kowloon Bay, Hong Kong(4)
Mr. Wan Ying Lin -0-(2) -
Flat A, 26/F., Wing Po Mansion, 33
Fort Street, North Point, Hong Kong(5)
Li Kin Hang 1,215,000(6) 9.2%
20/F King Jnin Mansion,
13-15 Yik Yam Street
Happy Valley, Hong Kong
Law Shun Ping 826,200(7) 6.4%
86 Shun Ling Street
3/F San Po Kong,
Kowloon, Hong Kong
Officers and Directors as a group 6,512,000 54.0%
(8 persons)
66
<PAGE>
________________________
(1) The inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of these shares.
(2) All shares of capital stock indicated as held by Mr. Ching Lung Po and Mr.
Wan Ying Lin are held on record by Hoi Wai Investments Limited. Mr. Ching
has a 71.43% controlling interest in Hoi Wai Investments^ Limited and,
accordingly all of its shares have been attributed to Mr. Ching.
(3) All shares of capital stock held by NJI No. 1(A) Investment Fund and NJI
No. 2(B) Investment Fund are held on record by Nomura International (Hong
Kong) Limited, a nominee shareholder for NJI No. 1(A) Investment Fund and
NJI No. 2(B) Investment Fund.
(4) Mr. Ching Lung Po is Chairman of the Board and President of the Company.
(5) Mr. Wan Ying Lin is a Director of the Company.
(6) Includes 1,200,000 Warrant Shares.
(7) Includes 816,000 Warrant Shares.
SALES BY SELLING SECURITY HOLDERS
The following table sets forth the name of each Selling Security Holder,
the amount of shares of Common Stock held directly or indirectly by each holder
on December 31, 1996, the amount of shares of Common Stock to be offered by each
such holder, the amount of Common Stock to be owned by each such holder
following sale of such shares of Common Stock and the percentage of shares of
Common Stock to be owned by each such holder following completion of such
offering. On December 31, 1996, there were 12,050,000 shares of Common Stock of
the Company outstanding.
Shares to Percentage
Number Shares be Owned to be
Name of Selling of Shares to be After Owned After
Security Holder Owned Offered Offering Offering
- --------------- ----- ------- -------- --------
Cheng Ming Chuan 267,300 (1) 267,300 (1) -0- --
Feng Yun 259,200 (2) 259,200 (2) -0- --
Wu Li Qing 243,000 (3) 243,000 (3) -0- --
Luo Jian Yue 226,800 (4) 226,800 (4) -0- --
Li Jian Jiang 267,300 (5) 267,300 (5) -0- --
Xia Man Xin 251,100 (6) 251,100 (6) -0- --
Tian Yuan 234,900 (7) 234,900 (7) -0- --
Wu Qing Hua 259,200 (8) 259,200 (8) -0- --
Li Kin Hang 1,215,000 (9) 1,215,000 (9) -0- --
Lau Shun Ping 826,200(10) 826,200(10) -0- --
______________________
(1) Includes 264,000 Warrant Shares underlying the Warrants.
67
<PAGE>
(2) Includes 256,000 Warrant Shares underlying the Warrants.
(3) Includes 240,000 Warrant Shares underlying the Warrants.
(4) Includes 224,000 Warrant Shares underlying the Warrants.
(5) Includes 264,000 Warrant Shares underlying the Warrants.
(6) Includes 248,000 Warrant Shares underlying the Warrants.
(7) Includes 232,000 Warrant Shares underlying the Warrants.
(8) Includes 256,000 Warrant Shares underlying the Warrants.
(9) Includes 1,200,000 Warrant Shares underlying the Warrants.
(10) Includes 816,000 Warrant Shares underlying the Warrants.
In December 1996, the Company issued an aggregate of 50,000 shares of
Common Stock for an aggregate consideration of $75,000 and Warrants to purchase
4,000,000 shares of Common Stock to the aforementioned investors in a private
placement. The Warrants are exercisable at $4.00 per Warrant Share prior to
December 23, 1997 and at $5.00 per Warrant Shares thereafter.
The Company has undertaken to maintain the Registration Statement current
for a period of not less than nine months from the effective date of the
Registration Statement of which this Prospectus is a part in order that sales of
shares of Common Stock may be made by the Selling Security Holders. The Company
has agreed to pay for all costs and expenses incident to the issuance, offer,
sale and delivery of the Common Stock, including, but not limited to, all
expenses and fees of preparing, filing and printing the Registration Statement
and Prospectus and related exhibits, amendments and supplements thereto and
mailing of such items. The Company will not pay selling commissions and expenses
associated with any such sales by the Selling Security Holders. The Company has
agreed to indemnify the Selling Security Holders against civil liabilities
including liabilities under the Securities Act of 1933. The Selling Security
Holders have advised the Company that sales of shares of their Common Stock may
be made from time to time by or for the accounts of the Selling Security Holders
in one or more transactions in the over-the-counter market, in negotiated
transactions or otherwise, at prices related to the prevailing market prices or
at negotiated prices.
DESCRIPTION OF SECURITIES
The Company is currently authorized to issue up to 40,000,000 shares of
Common Stock, $.0001 par value, of which 12,050,000 shares were outstanding as
of April 30, 1997. No shares of Preferred Stock are presently authorized.
COMMON STOCK
The Company is authorized to issue up to 40,000,000 shares of Common
Stock, $.0001 par value per Share. Subject to the dividend rights of the holders
of any outstanding shares of Preferred Stock, subsequently authorized by
amendment of the Articles of Incorporation, holders of shares of Common Stock
are entitled to share, on a ratable basis, such dividends as may be declared by
68
<PAGE>
the Board of Directors out of funds legally available therefor. Upon
liquidation, dissolution or winding up of the Company, after payment to
creditors and holders of any outstanding shares of Preferred Stock, the assets
of the Company will be divided pro rata on a per Share basis among the holders
of the Common Stock.
Each share of Common Stock entitles the holders thereof, to one vote.
Holders of Common Stock do not have cumulative voting rights which means that
the holders of more than 50% of shares voting for the election of Directors can
elect all of the Directors if they choose to do so, and in such event, the
holders of the remaining shares will not be able to elect any Directors. The
By-Laws of the Company require that only a majority of the issued and
outstanding shares of Common Stock of the Company need be represented to
constitute a quorum and to transact business at a shareholders' meeting. The
Common Stock has no preemptive, subscription or conversion rights and is not
redeemable by the Company.
TRANSFER AGENT
The Transfer Agent for the shares of Common Stock is CJB Transfer
Services, 6312 South Fiddler's Green Circle, Suite 200-N, Englewood, Colorado
80111.
CERTAIN MARKET INFORMATION
As of April 30, 1997, 12,050,000 shares of the Company's Common Stock are
outstanding of which 8,850,000 shares will be "restricted securities," as such
term is defined under the Securities Act of 1933, exclusive of the Common Stock
to be sold pursuant to the Registration Statement of which this Prospectus is a
part.
In general, Rule 144 (as presently in effect), promulgated under the Act,
permits a shareholder of the Company who has beneficially owned restricted
shares of Common Stock for at least one year to sell without registration,
within any three-month period, such number of shares not exceeding the greater
of 1% of the then outstanding shares of Common Stock or, if the Common Stock is
quoted on NASDAQ, the average weekly trading volume over a defined period of
time, assuming compliance by the Company with certain reporting requirements of
Rule 144. Furthermore, if the restricted shares of Common Stock are held for at
least two years by a person not affiliated with the Company (in general, a
person who is not an executive officer, director or principal shareholder of the
Company during the three-month period prior to resale), such restricted shares
can be sold without any volume limitation. Any sales of shares by shareholders
pursuant to Rule 144 may have a depressive effect on the price of the Company's
Common Stock.
69
<PAGE>
LEGAL MATTERS
Legal matters in connection with the securities being offered hereby will
be passed upon for the Company by Atlas, Pearlman, Trop & Borkson, P.A., 200
East Las Olas Boulevard, Suite 1900, Fort
Lauderdale, Florida 33301.
EXPERTS
The audited consolidated financial statements of the Company as of
December 31, 1996 and for each of the two years in the period ended December 31,
1996, appearing in this Prospectus and Registration Statement have been audited
by Ernst & Young, ^certified public accountants, as set forth in their report
thereon and included therein in the Registration Statement, and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission, 450
Fifth Street, Washington, D.C., a Registration Statement on Form SB-2 under the
Securities Act of 1933 with respect to the securities offered hereby. This
Prospectus does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information about the Company
and the securities offered hereby, reference is made to the Registration
Statement and to the exhibits filed as a part thereof. The statements contained
in this Prospectus as to the contents of any contracts or other documents
identified as exhibits in this Prospectus are not necessarily complete, and in
each instance, reference is made to a copy of such contract or document filed as
an exhibit to the Registration Statement. The Registration Statement, including
exhibits, may be inspected without charge at the principal reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of all or any part thereof may be obtained upon payment of fees
prescribed by the Commission from the Public Reference Section of the Commission
at its principal office in Washington, D.C. set forth above. The Commission also
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission at http://www.sec.gov.
70
<PAGE>
Consolidated Financial Statements
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
December 31, 1996
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
-----
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
Report of Independent Auditors F-1
Consolidated Balance Sheet F-2
Consolidated Statements of Income F-3
Consolidated Statements of Cash Flows F-4
Consolidated Statements of Changes in Shareholders' Equity F-5
Notes to Consolidated Financial Statements F-6 - F-20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders,
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
We have audited the accompanying consolidated balance sheet of OVM
International Holding Corporation (the "Company") and its subsidiaries as of
December 31, 1996, and the related consolidated statements of income, cash flows
and changes in shareholders' equity for each of the two years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
OVM International Holding Corporation and its subsidiaries as of December
31, 1996 and the consolidated results of their operations and their cash flows
for each of the two years in the period ended December 31, 1996 in conformity
with accounting principles generally accepted in the United States of America.
ERNST & YOUNG
Hong Kong
April 18, 1997
F-1
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
December 31,
1996 1996
Notes RMB US$
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and bank balances 22,526 2,714
Accounts receivable, net of allowance of RMB3,076 4 104,924 12,642
Inventories 5 35,980 4,335
Prepayments, deposits and other receivables, net
of allowance of RMB1,253 6 10,954 1,320
Due from related parties 20 54,427 6,557
-------- -------
Total current assets 228,811 27,568
Property, machinery and equipment, net 7 10,443 1,258
Deferred asset 8 1,833 221
Goodwill 9 3,757 453
Intangible assets 10 3,248 391
Interest in an associated company 11 4,866 586
-------- -------
Total assets 252,958 30,477
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank loans 12 41,424 4,991
Accounts payable 78,246 9,427
Advance payments by customers 11,547 1,391
Other payables and accrued liabilities 22,949 2,765
Due to related parties 20 4,786 577
Sales taxes payable 10,952 1,320
-------- -------
Total current liabilities 169,904 20,471
Minority interests 24,726 2,979
-------- -------
Total liabilities and minority interests 194,630 23,450
-------- -------
Commitments and contingencies 14
Stockholders' equity:
Common stock 15 10 1
Authorized:
40,000,000 shares, par value of US$0.0001 each
Issued and fully paid:
12,050,000 shares, par value of US$0.0001 each
Additional paid-in capital 15 46,567 5,610
Reserves 282 34
Retained earnings 11,469 1,382
-------- -------
Total stockholders' equity 58,328 7,027
-------- -------
Total liabilities and stockholders' equity 252,958 30,477
======== =======
</TABLE>
The accompanying notes form an integral part of
these consolidated financial statements.
F-2
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(Amounts in thousands except share data)
<TABLE>
<CAPTION>
Year ended December 31,
Notes 1995 1996 1996
RMB RMB US$
<S> <C> <C> <C>
Sales:
Related parties 70,577 9,477 1,142
Others 65,734 152,015 18,315
Sales tax ( 550) - -
--------- --------- --------
Net sales 135,761 161,492 19,457
Cost of sales, including raw materials purchased
from related parties of RMB 5,313 and RMB
4,203; subcontracting charges paid to related
parties of RMB 3,958 and RMB 6,884; rental
expenses for leasing of plant and machinery
from related parties of RMB 2,538 and RMB 2,673
in 1995 and 1996, respectively ( 81,331) ( 101,007) ( 12,170)
--------- --------- --------
Gross profit 54,430 60,485 7,287
Selling and administrative expenses ( 26,472) ( 31,342) ( 3,776)
Allowance for doubtful accounts receivable
and other receivables - ( 4,329) ( 521)
Interest expense ( 7,612) ( 6,140) ( 740)
Other income 662 3,536 426
Foreign exchange gains/(losses), net 864 ( 24) ( 3)
Reorganization expenses 17 - ( 18,196) ( 2,192)
--------- --------- --------
Income before income taxes 21,872 3,990 481
Income taxes 13 - - -
--------- --------- --------
21,872 3,990 481
Share of profit of an associated company - 157 19
--------- --------- --------
Net income before minority interests 21,872 4,147 500
Minority interests ( 7,496) ( 7,030) ( 847)
--------- --------- --------
Net income/(loss) 14,376 ( 2,883) ( 347)
========= ========= ========
Earnings/(loss) per share 3(j) 1.20 ( 0.24) ( 0.03)
========= ========= ========
</TABLE>
The accompanying notes form an integral part of
these consolidated financial statements.
F-3
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Year ended December 31,
1995 1996 1996
RMB RMB US$
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss) 14,376 ( 2,883) ( 347)
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interests 7,496 7,030 847
Share of profit from an associated company - ( 157) ( 19)
Depreciation 2,107 1,401 169
Amortization of goodwill 135 135 16
Amortization of intangible assets 116 116 14
Interest expense 437 494 60
Currency translation adjustments - 405 49
Reorganization expenses - 15,649 1,885
Decrease/(increase) in assets:
Accounts receivable ( 16,508) ( 77,070) ( 9,286)
Inventories 4,269 8,297 1,000
Prepayments, deposits and other receivables ( 12,059) 8,920 1,075
Due from related parties ( 16,596) 12,028 1,449
Deferred asset 1,149 2,153 259
Increase/(decrease) in liabilities:
Accounts payable 12,623 43,694 5,264
Advance payments by customers 998 7,996 963
Other payables and accrued liabilities ( 8,772) 4,423 533
Due to related parties ( 4,748) ( 4,486) ( 540)
Sales taxes payable 362 10,590 1,276
-------- -------- -------
Net cash provided by/(used in) operating activities (14,615) 38,735 4,667
------- -------- -------
Cash flows from investing activities:
Acquisition of property, machinery and equipment ( 701) ( 1,152) ( 139)
Net cash acquired on acquisition of a subsidiary 13,988 - -
-------- -------- -------
Net cash provided by/(used in) investing activities 13,287 ( 1,152) ( 139)
-------- -------- -------
Cash flows from financing activities:
Repayment of bank loans ( 9,040) ( 12,546) ( 1,512)
Proceeds from issue of shares 29,762 621 75
Repayment of long term loan from a related party ( 3,202) ( 19,722) ( 2,376)
-------- ------- ------
Net cash provided by/(used in) financing activities 17,520 ( 31,647) ( 3,813)
-------- ------- ------
Net increase in cash and cash equivalents 16,192 5,936 715
Cash and cash equivalents, at beginning of year 398 16,590 1,999
-------- ------- ------
Cash and cash equivalents, at end of year 16,590 22,526 2,714
======== ======= ======
</TABLE>
Theaccompanying notes form an integral part of
these consolidated financial statements.
F-4
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
Retained
Additional Currency earnings/
Common paid-in translation (accumulated
stock capital adjustments losses) Total
RMB RMB RMB RMB RMB
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 10 30,297 ( 123) ( 24) 30,160
Net income - - - 14,376 14,376
------ ------ ------ -------- ------
Balance at December 31, 1995 10 30,297 ( 123) 14,352 44,536
Issue of 50,000 shares of common
stock, par value US$0.0001 per
share, at US$1.50 per share - 621 - - 621
Net loss - - - ( 2,883) ( 2,883)
Reorganization expenses - 15,649 - - 15,649
Currency translation adjustments - - 405 - 405
------ ------ ------ -------- ------
Balance at December 31, 1996 10 46,567 282 11,469 58,328
====== ====== ====== ======== ======
</TABLE>
Theaccompanying notes form an integral part of
these consolidated financial statements.
F-5
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
OVM International Holding Corporation (the "Company") was formerly
known as Intermark Development Corporation ("IDC") which was incorporated
in the State of Nevada, the United State of America.
OVM Development Limited ("ODL") was formerly known as Kolcari
Investments Limited ("Kolcari") which was incorporated in the British
Virgin Islands on May 3, 1994 with limited liability.
In 1995, Kolcari entered into an agreement with Liuzhou OVM Joint
Stock Company Limited (the "JV Partner"), which was incorporated in the
People's Republic of China (the "PRC") and was principally engaged in the
manufacture and sale of prestress products used in the construction of
motorways, bridges and buildings, to set up a Sino-foreign equity joint
venture (the "JV") in the PRC under the name of Liuzhou OVM Construction
Machinery Company Limited.
As provided in the joint venture agreement, the total investment for
the JV is US$6,000 (RMB51,000) which includes a registered capital of
US$4,000 (RMB34,000). The JV Partner transferred part of its property,
machinery and equipment, valued at US$1,423 (RMB12,098) by a PRC valuer as
at January 31, 1995, to the JV as contribution of 30% of the issued
capital and a loan of US$223 (RMB1,898). The remaining assets and
liabilities of the JV Partner as at December 31, 1994, other than
investments in subsidiaries, joint ventures and the remaining property,
machinery and equipment, were also transferred to the JV as a loan by the
JV Partner. In addition, the business operations of the JV Partner were
taken up by the JV. The remaining 70% of the issued capital were provided
by Kolcari by the contribution of cash of US$2,800 (RMB23,800).
Accordingly, Kolcari has a controlling interest in the JV through a
majority voting interest of 70%.
The above capital injection is to be settled by instalments. As at
December 31, 1996, 70% of Kolcari's share capital was due and paid. The
last instalment of 30% of Kolcari's share of capital was originally due on
31 March 1997. Pursuant to a supplement agreement entered into among
Kolcari and the JV Partner on 28 March 1997, the due date of the last
instalment of 30% of Kolcari's share of capital was extended to December
31, 1997.
The net income of the JV after provision for income taxes and
appropriations to various statutory and discretionary reserves will be
shared by the Company and the JV Partner according to their respective
percentage of equity interests. The term of the JV is 30 years. The JV was
principally engaged in the manufacture and sale of prestress products used
in the construction of motorways, bridges and buildings.
Pursuant to an agreement between Kolcari and the JV Partner, the
assets and liabilities and the business of the JV Partner are deemed to
have been transferred to the JV on January 1, 1995. Such agreement has
been approved by the relevant government authorities in the PRC. The
financial statements have been prepared under the purchase method as if
the business, assets and liabilities of the JV Partner as described above
had been transferred to the JV on January 1, 1995. The goodwill acquired
is amortised over 30 years using the straight line method.
F-6
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)
On September 30, 1996, IDC changed its name to OVM International
Holding Corporation.
With effect on November 4, 1996, pursuant to an acquisition
agreement (the "Agreement") among the Company and ODL and the then
shareholders of ODL, the Company issued 8,800,000 shares of its common
stock to the original shareholders of ODL in exchange for all the issued
ordinary shares of ODL.
The above transactions have been treated as a recapitalisation of
ODL with ODL as the acquirer (the "Reverse Acquisition"). Accordingly, the
historical financial statements of the Group prior to November 4, 1996 are
those of ODL except for share capital which represents that of the Company
immediately after the Reverse Acquisition.
2. BASIS OF PRESENTATION
The consolidated financial statements of the Group included the
accounts of the Company and its subsidiaries and to give effect to the
Reverse Acquistion as set out in note 1 to these consolidated financial
statements has been completed prior to January 1, 1995.
The consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States of
America ("US GAAP"). This basis of accounting differs from that used in
the statutory financial statements of the JV which are prepared in
accordance with the accounting principles and the relevant financial
regulations established by the Ministry of Finance of the PRC.
The principal adjustments made to the statutory financial statements
of the JV to conform to US GAAP include the following:
. Allowance for doubtful accounts and other receivables;
. Depreciation expense for property, machinery and equipment to more
accurately reflect the economic useful lives of these assets;
. Reclassification of certain expense items from equity
appropriations to charges against income; and
. Recognition of sales and cost of sales upon delivery to the
customers.
The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
2. BASIS OF PRESENTATION (continued)
The consolidated financial statements include the financial
statements of the Company and the JV. The results of the JV are
consolidated from the deemed acquisition date of January 1, 1995. All
material intercompany balances and transactions have been eliminated on
consolidation.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and cash equivalents
Cash and cash equivalents include cash on hand and demand
deposits with banks with an original maturity of less than three
months.
(b) Inventories
Inventories are stated at the lower of cost and market value.
Cost is determined on the weighted average basis and in the case of
work in progress and finished goods, comprises direct materials,
direct labor and an appropriate proportion of overheads.
(c) Property, machinery and equipment
Property, machinery and equipment are stated at cost less
accumulated depreciation.
Depreciation is calculated on the straight-line method to
write off the cost of each asset over its estimated useful life. The
principal annual rates used for this purpose are as follows:
Buildings 8.4%
Plant and machinery 12%
(d) Goodwill
Goodwill is amortised over 30 years using the straight-line
method.
(e) Intangible assets
Intangible assets which represent proprietary technology and
trademarks are stated at cost less accumulated amortization which is
calculated on the straight-line basis over the estimated useful life
of 30 years.
F-8
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Associated company
An associated company is a company, not being a subsidiary, in
which the Group exerts significant influence.
The Group's share of the associated company's post-acquisition
results is included in the consolidated statements of income under
the equity method of accounting. The Group's investment in the
associated company is stated at cost plus the Group's share of the
associated company's post-acquisition results and capital
transactions.
(g) Revenue recognition
Sales represent the invoiced value of goods, net of returns
and allowances, recognized upon delivery of goods to customers.
(h) Income taxes
Income taxes are determined under the liability method as
required by Financial Accounting Standards Board Statement No.109,
"Accounting for Income Taxes".
(i) Foreign currency translation
The financial records of the Company and its associated
company are maintained in United States dollars ("US$") and
Singapore dollars, which are also their functional currency,
respectively. The records of the Company and the associated company
are translated into Renminbi using the respective applicable rates
of exchange quoted by the People's Bank of China ("the "Exchange
Rates") prevailing at the date of the transactions. Monetary assets
and liabilities in US dollars and other foreign currencies are
translated using the Exchange Rates at the balance sheet date. The
gains or losses resulting from the change in exchange rates from
year to year have been reported separately as a component of
stockholders' equity.
The financial records of the JV are maintained in Renminbi.
In preparing these financial statements, foreign currency
transactions have been translated into Renminbi using the Exchange
Rates. Monetary assets and liabilities denominated in foreign
currencies have been translated into Renminbi using the the Exchange
Rates at the balance sheet date. The exchange gains or losses were
credited or charged to the statement of income.
The market risks associated with changes in exchange rates and
the restrictions over the convertibility of Renminbi into foreign
currencies are discussed in note 18.
F-9
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Foreign currency translation (continued)
Translation of amounts from RMB into US$ for the convenience
of the reader has been made at the Exchange Rate as quoted by the
People's Bank of China on December 31, 1996 of US$1.00 = RMB8.30. No
representation is made that the RMB amounts could have been, or
could be, converted into US$ at that rate on December 31, 1996 or at
any other date.
(j) Earnings/(loss) per share
The computation of primary loss per share for the year ended
December 31, 1996 is based on the weighted average number of common
stock outstanding after giving effect to dilutive stock warrants,
which are included as common stock equivalents using the treasury
stock method and assumed to be converted to common stock. The number
of shares used in computing the primary earnings per share was
12,002,186 shares as if the Reversed Acquisition had been completed
at the beginning of the year. Since the Group incurred a net loss
for the year, the fully diluted loss per share, reflecting the
diluting effect of the outstanding stock warrants, has not been
presented.
For the year ended December 31, 1995, primary earnings per
share is based on an aggregate of 12,000,000 shares of common stock
outstanding as if the Reverse Acquisition had been completed at the
beginning of the year.
4. ACCOUNTS RECEIVABLE, NET
December 31,
1996
RMB
Accounts receivable 108,000
Less allowance for doubtful accounts ( 3,076)
-------
Accounts receivable, net 104,924
=======
Allowance for doubtful accounts of RMB3,076 was provided in 1996 (1995:nil).
F-10
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
5. INVENTORIES
December 31,
1996
RMB
Raw materials 11,917
Work in progress 11,891
Finished goods 12,172
------
35,980
======
6. PREPAYMENTS, DEPOSITS AND OTHER RECEIVABLES, NET
December 31,
1996
RMB
Prepayments, deposits and other receivables 12,207
Less allowance for doubtful accounts ( 1,253)
------
Prepayments, deposits and other receivables, net 10,954
======
Allowance for doubtful accounts of RMB1,253 was provided in 1996 (1995:nil).
7. PROPERTY, MACHINERY AND EQUIPMENT, NET
December 31,
1996
RMB
At cost:
Buildings 4,221
Plant and machinery 9,730
13,951
Accumulated depreciation:
Buildings 571
Plant and machinery 2,937
3,508
------
Property, machinery and equipment, net 10,443
======
The buildings are located in the PRC and the land where the buildings are
situated is State-owned.
F-11
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data)
8. DEFERRED ASSET
This represents the deemed value-added tax ("VAT") recoverable
arising from the introduction of the new PRC sales tax system on July 1,
1993 which was fully implemented from January 1, 1994. Pursuant to a
directive issued by the Ministry of Finance and the State Tax Bureau, the
deferred VAT can be used to offset against the sales tax payable within a
period of five years from January 1, 1995 such that, in general, 20% of
the deferred asset can be utilised each year. The title to the deemed VAT
recoverable was passed by the JV Partner to the JV on January 1, 1995 as
discussed in note 1.
9. GOODWILL
December 31,
1996
RMB
Cost 4,027
Accumulated amortization ( 270)
-----
3,757
=====
10. INTANGIBLE ASSETS
December 31,
1996
RMB
Cost 3,480
Accumulated amortization ( 232)
-----
3,248
=====
11. INTEREST IN AN ASSOCIATED COMPANY
December 31,
1996
RMB
Unlisted shares, at cost 4,709
Share of post-acquisition profits 157
-----
4,866
=====
F-12
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data)
11. INTEREST IN AN ASSOCIATED COMPANY (continued)
The associated company, OVM Prestress Co. Pte. Ltd, is a limited
company incorporated in the Republic of Singapore with a registered
capital of US$1,000,000 on December 11, 1993, 50% of which equity
shareholding is held by the Group.
12. BANK LOANS
All bank loans are denominated in Renminbi and are unsecured except
for amounts of RMB30,924 which are secured by the pledge of the land use
right of a certain portion of the land where the factory premises of the
JV are located and by certain plant and machinery held by the JV and the
JV Partner. All bank loans are repayable within one year but are renewable
with the consent of the banks.
Interest on bank loans is payable at the weighted average rate of
12.6% per annum as of December 31, 1996.
13. INCOME TAXES
It is management's intention to reinvest all the income attributable
to the Company earned by its PRC operations as at December 31,1996.
Accordingly, no United States corporate income taxes have been provided in
these financial statements.
Under the current BVI laws, dividends and capital gains arising from
BVI's investment are not subject to income taxes and no withholding tax is
imposed on payments of dividends by the Company.
The JV is governed by the Income Tax Law of the PRC concerning
Foreign Investment Enterprises (the "FIE Income Tax Laws"). Pursuant to
the FIE Income Tax Laws, the income of the JV is fully exempted from
income tax for two years commencing from the first profitable year of
operations followed by a 50% exemption for the next three years, after
which the income is taxable at the full rate of 30%. No income tax is
provided, as this is the second profitable year of operation of the JV.
The tax savings resulting from this tax holiday for the year ended
December 31, 1995 and 1996 amounted to RMB 7,336 and RMB 5,785 (RMB0.61
and RMB0.48 per share), respectively.
The Company's share in the undistributed earnings of the Company's
foreign subsidiaries amounted to RMB26,670 at December 31, 1996. Because
those earnings are considered to be indefinitely invested, no provision
for United States corporate income taxes on those earnings has been
provided. Upon distribution of those earnings in the form of dividends or
otherwise, the Company would be subject to United States corporate income
taxes. Unrecognized deferred United States corporate income tax in respect
of these undistributed earnings as at December 31, 1996 was RMB9.068.
No deferred income taxes have been provided as the effect of all
temporary differences is not material.
F-13
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share data)
14. COMMITMENTS AND CONTINGENCIES
As of December 31, 1996, the Group had outstanding capital
commitments for purchases of equipment, land and staff quarters of
approximately RMB1,198.
15. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL
As of November 4, 1996, 3,200,000 shares of common stock of
US$0.0001 each were outstanding to the then existing shareholders of the
Company and as of the same day, 8,800,000 shares of common stock of
US$0.0001 were alloted to the then shareholders of ODL pursuant to the
Reverse Acquisition set out in note 1 to the consolidated financial
statements.
On December 16, 1996, 50,000 shares of common stock, par value
US$0.0001, were issued for cash at US$1.50 per share. For each of the
50,000 shares of common stock issued, the subscriber was allotted a total
of 80 stock purchase warrants, each of which is convertible into one share
of common stock, par value US$0.0001. (see note 16).
16. STOCK OPTIONS AND STOCK PURCHASE WARRANTS
The Company adopted a stock option plan (the "Plan") as of September
4, 1996. The Plan allows the Board of Directors, or a committee thereof at
the Board's discretion, to grant stock options to officers, directors, key
employees, consultants and affiliates of the Company. The aggregate number
of shares of common stock reserved for issuance upon exercise of the
options granted under the Plan shall be 1,000,000 shares. Pursuant to the
Plan, the exercise price shall in no event be less than the fair market
value of the shares of common stock at the date of grant. As at December
31, 1996, no stock options have been granted under the Plan.
The Company has issued 4,000,000 stock purchase warrants in
connection with the issuance of 50,000 shares of common stock as detailed
in note 15. Each of the warrants is convertible into one share of the
Company's common stock at an exercise price of US$4.00 per warrant on or
prior to December 23, 1997 and US$5.00 per warrant thereafter. All the
stock purchase warrants remained outstanding at the date of preparation of
these financial statements.
17. REORGANIZATION EXPENSES
Concurrent with the the Reverse Acquisition set out in note 1 to the
consolidated financial statements, reorganization expenses were incurred
which reduced net income by RMB18,196. The reorganization expenses
included (i) RMB2,547 of related professional and consultancy fees
incurred, and (ii) RMB15,649 which represented the fair value of the
26.67% of the issued and outstanding shares of common stock of the Company
held by the then existing shareholders of the Company prior to the Reverse
Acquisition. The amount of the expense in (ii) above was determined based
on the fair value of ODL's net assets as determined by management.
F-14
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
18. FOREIGN CURRENCY EXCHANGE
The Renminbi is not freely convertible into foreign currencies.
From April 1995, the National Foreign Exchange Trading Center in
Shanghai (the "exchange center") commenced operations. Enterprises
operating in the PRC can enter into exchange transactions at the exchange
center through the Bank of China or other authorized institutions.
Payments for imported materials are subject to the availability of foreign
currency, which is dependent on the foreign currency denominated earnings
of the enterprises, or must be arranged through the exchange center.
Approval for exchange at the exchange center is granted to enterprises in
the PRC for valid reasons such as purchases of imported materials and
remittance of earnings. While conversion of Renminbi into United States
dollars or other foreign currencies can generally be effected at the
exchange center, there is no guarantee that it can be effected at all
times. At December 31, 1996, RMB43,330 of the Group's shareholders' equity
was subject to exchange conversion restriction.
The exchange rates as of December 31, 1995 and 1996 were:
December 31,
1995 1996
United States dollars ("US$") US$1 : RMB8.32 US$1 : RMB8.30
Singapore dollars ("S$") N/A S$1 : RMB5.83
19. RETIREMENT PLANS
The Company does not have any retirement plans while the JV has a
defined contribution retirement plan for its staff. As stipulated by the
PRC government regulations, the JV is required to contribute to PRC
insurance companies organized by the PRC government which are responsible
for the payments of pension benefits to retired staff. The monthly
contribution of the JV was equal to 19% of the basic salaries of the
staff. The pension costs incurred by the JV during the years ended
December 31, 1995 and 1996 amounted to RMB 1,350 and RMB1,410,
respectively.
Moreover, the JV has internally implemented an additional defined
contribution plan for its staff. As a start-up fund for the plan, the JV
contributed an amount for each staff member according to the number of
years of service. In addition, the JV has to contribute 5% of the monthly
basic salaries. On retirement, the staff members are entitled to a lump
sum payment in respect of the previous contributions. The pension costs
incurred by the JV for the additional plan during the years ended December
31, 1995 and 1996 amounted to RMB520 and RMB484, respectively.
The JV has no obligation for the payment of pension benefits beyond
the annual contributions described above.
F-15
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
20. RELATED PARTY TRANSACTIONS
A significant portion of the business undertaken by the Group during
the years has been effected with other State-owned enterprises in the PRC
and on such terms as determined by the relevant PRC authorities.
The significant transactions of the Group with the JV Partner and
its subsidiaries are summarised below:
Year ended
December 31,
1995 1996
RMB RMB
The JV Partner:
Rental expenses for leasing of land and buildings,
plant and machinery and motor vehicles 1,210 1,709
Debt collecting services income - 1,305
===== =====
The subsidiaries of the JV Partner:
Rental income from leasing of plant and machinery 924 684
Sales of raw materials 2,192 5,335
Purchases of raw materials 5,313 3,640
Sales of finished goods - 1,206
Subcontracting charges 3,958 6,884
===== =====
In addition, the Group had significant transactions with associated
companies of the JV Partner, as summarised below:
Year ended
December 31,
1995 1996
RMB RMB
Purchases of raw materials - 563
Sales of finished goods 66,093 2,903
Rental expenses for leasing of plant and machinery 1,328 964
====== =====
During the years ended December 31, 1995 and 1996, the Group had
sales amounting to RMB2,292 and RMB33 respectively to Hong Kong
Prestressed Engineering Limited ("HK Prestress"), a company incorporated
in Hong Kong, of which two of the Company's directors, Mr. Guo Sen Wu and
Mr. Ying Lin Wan, have a beneficial interest.
F-16
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
20. RELATED PARTY TRANSACTIONS (continued)
The amounts due from/to and loan to related parties are as follows:
December 31,
1996
RMB
Due from related parties:
Subsidiaries of the JV Partner 29,183
Associated companies of the JV Partner 18,932
HK Prestress 2,899
JV Partner 3,413
------
54,427
======
Due to related parties:
Subsidiaries of the JV Partner 4,786
======
The balances with related parties are unsecured, interest-free and
repayable on demand. A loan of RMB3,917 from the JV Partner, which were
netted off in the amount due from the JV Partner, has been discounted at
an effective interest rate of 12.6%. The amount will be settled by annual
instalments calculated at 0.6% of the gross sales before VAT of each year
commencing January 1, 1997, while the remaining balance is not repayable
within one year.
As at December 31, 1996, the Group's accounts receivable and other
receivables of RMB8,147 and RMB1,003, respectively, which were acquired by
the Group through an acquisition of a subsidiary in 1995, were transferred
back to the JV Partner at book value.
21. SUPPLEMENTAL CASH FLOW INFORMATION
Year ended
December 31,
1995 1996
RMB RMB
Interest paid 9,236 7,336
===== =====
Income taxes paid - -
===== =====
F-17
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
21. SUPPLEMENTAL CASH FLOW INFORMATION (continued)
Year ended
December 31,
1995
RMB
ACQUISITION OF A SUBSIDIARY
Fair value of net assets acquired:
Cash 20,000
Accounts receivable, net 19,493
Inventories 48,546
Prepayments, deposits and other receivables 13,527
Due from subsidiaries of the JV Partner 17,556
Due from related parties 28,890
Property, machinery and equipment, net 12,098
Deferred asset 5,135
Intangible assets 3,480
-------
168,725
Short term bank loans 43,650
Accounts payable 21,929
Advance payments by customers 2,553
Other payables and accrued liabilities 27,298
Due to subsidiaries of the JV Partner 8,422
Due to related parties 5,598
Long term bank loans 19,360
Long term loan from the JV Partner 30,790
Minority interests 7,140
-------
1,985
Goodwill 4,027
-------
6,012
=======
Discharged by cash 6,012
=======
NON-CASH ACTIVITIES
In 1996, a prepayment of RMB4,709 brought forward from 1995 was
reclassified as interest in an associated company on the formal
establishment of the associated company.
As set out in note 1 to these consolidated financial statements,
with effect as of November 4, 1996, the Company issued 8,800,000 shares of
its common stock to the original shareholders of ODL in exchange for all
the issued ordinary shares of ODL.
F-18
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
21. SUPPLEMENTAL CASH FLOW INFORMATION (continued)
As at December 31, 1996, the Group's accounts receivable and other
receivables of RMB8,147 and RMB1,003, respectively, which were acquired by
the Group through an acquisition of a subsidiary in 1995, were transferred
back to the JV Partner at book value.
22. FINANCIAL INSTRUMENTS
The carrying amounts reported in the Group's balance sheet for
current assets and current liabilities, except for bank loans, qualifying
as financial instruments approximate their fair values because of the
short maturity of such instruments. The carrying amounts of bank loans
approximate their fair value based on the borrowing rates currently
available for bank loans with similar terms and average maturities.
23. NATURE OF OPERATIONS AND CONCENTRATION OF RISK
The Group manufactures and sells substantially all prestress
products used in the construction of motorways, bridges and buildings in
the PRC. Accordingly, the credit risk arising from accounts receivable of
the JV is concentrated on the PRC government which is usually the
initiator of these large scale capital projects.
The PRC economy has, for many years, been a centrally-planned
economy, operating on the basis of annual, five-year and ten-year state
plans adopted by central PRC governmental authorities which set out
national production and development targets. The PRC government has been
pursuing economic reforms since it first adopted its "open-door" policy in
1978. There is no assurance that the PRC government will continue to
pursue economic reforms or that there will not be any significant change
in its economic or other policies, particularly in the event of any change
in the political leadership of, or the political, economic or social
conditions in, the PRC. There is also no assurance that the Group will not
be adversely affected by any such change in governmental policies or any
unfavourable change in the political, economic or social conditions, the
laws or regulations or the rate or method of taxation in the PRC.
As many of the economic reforms which have been or are being
implemented by the PRC government are unprecedented or experimental, they
may be subject to adjustment or refinement which may have adverse effects
on the Group. Further, through state plans and other economic and fiscal
measures, it remains possible for the PRC government to exert significant
influence on the PRC economy.
In 1995 and 1996, the Group sold finished goods of RMB66,093 and
RMB2,903 respectively to Orient Prestress which accounted for 49% and 2%
of the total sales of the Group during the year. Orient Prestress was
formed by the JV Partner with some PRC parties in the industry of
prestress engineering. Contracts for prestress projects are entered into
by Orient Prestress with the ultimate customers. In turn, Orient Prestress
purchases all the required products from the Group. As at December 31,
1996, the Group had a receivable of RMB15,976 from Orient Prestress.
F-19
<PAGE>
OVM INTERNATIONAL HOLDING CORPORATION
(Formerly Intermark Development Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands)
23. NATURE OF OPERATIONS AND CONCENTRATION OF RISK (continued)
In 1996, the Group made purchases of steel wire of RMB38,861(1995:
nil) from Jiang Yin Huaxin Steel Cable Co. Ltd. representing 50 % of total
purchases for the year and sales of steel wire of RMB32,137 (1995: nil)
and RMB12,756 (1995: nil) to two of its customers, Kunming Futong Trading
Company and Panyu Bridge Development and Construction Group Company,
representing 20% and 7.9% of total sales for the year, respectively.
24. DISTRIBUTION OF PROFITS
The Company's ability to pay dividends is primarily dependent on the
Company receiving distributions from its PRC subsidiary, the JV.
Pursuant to the relevant laws and regulations of sino-foreign joint
venture enterprises, and the JV's articles of association, the JV is
required to make appropriations to a general reserve fund, an enterprise
development fund and an employee welfare and incentive fund, in which the
percentage of annual appropriations are subject to the decision of the
JV's board of directors. The appropriations to the employee welfare and
incentive fund have been charged to the statement of income. The other
appropriations, if any, are accounted for as reserve funds in the balance
sheet and are not available for distribution as dividends to the joint
venture partners of the JV. No appropriations to the reserve funds except
for the employee welfare and incentive fund were made by the JV for 1995
and 1996 as determined by its board of directors.
As described in note 2 to the consolidated financial statements, the
net income of the JV as reported in the US GAAP financial statements
differ from those as reported in the JV's statutory financial statements.
In accordance with the relevant laws and regulations in the PRC, the
profits available for distribution are based on the statutory financial
statements of the JV. At December 31, 1996, the Group's share in the JV's
distributable profits amounted approximately to RMB 26,670.
F-20
<PAGE>
No person has been authorized to give
any information or to make any
representations other than those
contained in this Prospectus in
connection with this offering, and any
information or representations not
contained herein must not be relied upon
as having been authorized by the Company
or any other person. This Prospectus
does not constitute an offer to sell or
a solicitation of an offer to buy any
securities other than the securities to
which it relates, or any offer to or
solicitation of any person in any
jurisdiction in which such offer or
solicitation would be unlawful. Neither
the delivery of this Prospectus nor any
offer or sale made hereunder shall,
under any circumstances, create an
implication that information herein is OVM INTERNATIONAL
correct at any time subsequent to the HOLDING CORP.
date hereof.
___________ 4,050,000 SHARES
TABLE OF CONTENTS COMMON STOCK
Page
----
Prospectus Summary.........
High Risk Factors.......... ________________________________
Price Range of Common
Stock....................
Dividend Policy............ PROSPECTUS
Capitalization.............
Use of Proceeds............ ________________________________
Summary Financial
Information..............
Management's Discussion
and Analysis of Results
of Operations and ___________, 1997
Financial Condition.......
Discussion Pertaining to
Certain Conditions
Relating to the People's
Republic of China........
Business...................
Management.................
Certain Transactions.......
Principal Shareholders.....
Sales by Selling
Security Holders.........
Description of Securities..
Certain Market
Information..............
Legal Matters..............
Experts....................
Additional Information.....
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
Article VI of the Company's Bylaws provides as follows:
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The corporation shall, to the maximum extent and in the manner permitted by the
General Corporation Law of Nevada, indemnify each of its directors and officers
against expenses (including attorneys' fees), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation. For purposes of this Section 6.1, a "director" or "officer" of
the corporation includes any person (i) who is or was a director or officer of
the corporation, (ii) who is or was serving at the request of the corporation as
a director ore officer of another corporation, partnership, joint venture, trust
or other enterprise, or (iii) who was as director or officer of a corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the manner
permitted by the General Corporation Law of Nevada, to indemnify each of its
employees and agents (other than directors and officers) against expense
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section an "employee" or "agent" of the corporation (other than
a director or officer includes any person (i) who is or was an employee or agent
of the corporation, (ii) who is or was serving at the request of the corporation
as an employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation of the
corporation or of another enterprise at the request of such predecessor
corporation."
The above indemnification provisions notwithstanding, the Company is aware
that insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission, such indemnification
is against public policy was expressed in the act and is therefore
unenforceable.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and resale of the securities offered hereby. The
Company is responsible for the payment of all expenses in connection with the
Offering.
Registration fee under
the Securities Act of 1933.................. $ 2,095.00*
Blue Sky filing fees and expenses............ 1,000.00*
Printing and engraving expenses.............. 10,000.00*
Legal fees and expenses...................... 25,000.00*
Accounting fees and expenses................. 25,000.00*
Miscellaneous................................ 1,905.00*
----------
Total................................... $65,000.00*
==========
*Estimated.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
All transactions described hereafter give effect to the Company's
one-for-five (1:5) reverse stock split effective August 22, 1996.
On February 22, 1996, the Company issued 400,000 shares of Common Stock to
four investors located in Germany for an aggregate consideration of $20,000.
This transaction was undertaken following the execution of a letter of intent to
acquire I.Q. Golf, Inc., an operating company, on February 22, 1996. This
acquisition was abandoned when the company to be acquired could not supply the
Company with audited financial statements. All of these investors were
accredited investors within the meaning of Section 501 of the Securities Act of
1933 or were otherwise qualified investors, and were provided with appropriate
information or documentation relevant to the Company. Accordingly, the
transaction was undertaken in accordance with Rule 504 under Regulation D of the
Securities Act of 1933.
On September 4, 1996, the Company issued an aggregate of 2,800,000 shares
of Common Stock to ten non-U.S. citizens (i.e, European and Asian investors) for
an aggregate purchase price of $56,000. This transaction was undertaken
following the execution of a letter of intent between ODL and the Company on
August 21, 1996, and which transaction was ultimately consummated. All of these
investors were accredited investors within the meaning of Section 501 of the
Securities Act of 1933 or were otherwise qualified investors, and were provided
with appropriate information and documentation relevant to the Company.
Accordingly, the transaction was undertaken in accordance with Rule 504 under
Regulation D of the Securities Act of 1933.
II-2
<PAGE>
On November 4, 1996 the Company acquired all of the capital stock of ODL
from four investors based in Hong Kong and Singapore in exchange for 8,800,000
shares of Common Stock of the Company. Inasmuch as each of the investors was an
accredited investor within the meaning of Section 501 of the Securities Act of
1933, as well as being sophisticated investors and having been provided with
various information and documentation concerning the Company, the issuance and
exchange was effected in accordance with Section 4(2) of the Act.
Between December 13 and December 16, 1996 the Company issued 50,000 shares
of its Common Stock and Warrants to purchase 4,000,000 Warrant Shares to a group
of ten investors, all of whom were non-U.S. persons. Inasmuch as each of the
investors was an accredited investor within the meaning of Section 501 of the
Securities Act of 1933, as well as being sophisticated investors and having been
provided with various information and documentation concerning the Company, the
issuance and exchange was effected in accordance with Rule 506 and Section 4(2)
of the Securities Act of 1933.
ITEM 27. EXHIBITS
Exhibits Description of Document
- -------- -----------------------
2.1 Acquisition Agreement dated November 4, 1996
3.1 Articles of Incorporation and Amendments thereto
3.2 Bylaws
4.1 Form of Common Stock Purchase Warrant dated December 16, 1996
5. Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to the validity of
securities being registered
10.1 Joint Venture Contract between Liuzhou OVM Joint Stock Co. Ltd. and
Kolcari Investments Limited and Articles of Association for Sino-Foreign
Equity Joint Venture
10.2 Agreement Concerning Entrustment of the Heat Treatment Plant with
Processing Tasks
10.3 Agreement Concerning Transfer of Intangible Assets
10.4 Agreement Concerning the Provision of Power, Water Supply and Welfare
Facilities
10.5 Supplementary Agreement on the Transfer of Intangible Assets
10.6 Agreement Concerning the Leasing of Land, Buildings and Motor Vehicles
10.7 Supplementary Agreement on the Leasing of Land, Buildings and Motor
Vehicles
10.8 Agreement Concerning Matters Relating to the Establishment of the
Financial Accounts for the Joint Venture
10.9 Agreement concerning the Injection of Assets of three Production
Workshops
10.10 Supplementary Agreement Concerning Collection of Account Receivables and
Allocation of Expenses Incurred on the Collection of Accounts
Receivable.
10.11 1996 Stock Option Plan
II-3
<PAGE>
21 Subsidiaries of the Registrant
23(i) Consent of Ernst & Young^
23(ii) Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included as part of
Exhibit 5)
27 Financial Data Schedule
ITEM 28. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which it offers or sells
securities being made, a post-effective amendment to this Registration
Statement:
(i) To include any Prospectus required by Section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) To include any additional or changed material
information with respect to the plan of distribution.
(2) For determining any liability under the Securities Act of
1933, as amended, treat each post-effective amendment as a new registration
statement relating to the securities offered, and the offering of the securities
at that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove any of the
securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Act"), may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that, in the opinion
of the Securities and Exchange Commission, such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Amendment to its
Registration Statement to be signed on its behalf by the undersigned in Hong
Kong on May 14, 1997.
OVM INTERNATIONAL HOLDING CORP.
By: /s/ Ching Lung Po
-----------------------------------
Ching Lung Po, Chairman of
Board and President
POWER OF ATTORNEY
Know all men by these presents, that each person whose signature appears
below constitutes and appoints Ching Lung Po and Wu Guosen or either of them,
such person's true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for such person and in such person's name,
place and stead, in any and all capacities (including such persons' capacity as
a director and/or officer of OVM International Holding Corp.) to sign any and
all amendments (including post-effective amendments pursuant to Rule 462(b) or
otherwise) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each said attorney-in-fact and agent, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.
In accordance with the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement was signed by the following persons in
the capacities and on the dates stated.
Signature Title Date
--------- ----- ----
Chairman of the
/s/ Ching Lung Po Board of Directors,
- ------------------------- President and Principal
Ching Lung Po Executive Officer May 14, 1997
/s/ Wu Guosen Vice Chairman of the
- -------------------------- Board May 14, 1997
Wu Guosen
<PAGE>
Principal Financial
/s/ Kwok Kwan Hung and Accounting
- ------------------------- Officer and Director May 14, 1997
Kwok Kwan Hung
/s/ Wan Ying Lin
- ------------------------- Director May 14, 1997
Wan Ying Lin
/s/ Cheung Lai
- ------------------------- Treasurer and Director May 14, 1997
Cheung Lai
/s/ Wan Wai On
- ------------------------- Secretary and Director May 14, 1997
Wan Wai On
<PAGE>
________________________________________________________________________________
LIST OF EXHIBITS
OF
OVM INTERNATIONAL HOLDING CORP.
FILED WITH
REGISTRATION STATEMENT
FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
________________________________________________________________________________
<PAGE>
EXHIBITS DESCRIPTION OF DOCUMENT
- -------- -----------------------
2.1 Acquisition Agreement dated November 4, 1996
3.1 Articles of Incorporation and Amendments thereto
3.2 Bylaws
4.1 Form of Common Stock Purchase Warrant dated December 16, 1996
5. Opinion of Atlas, Pearlman, Trop & Borkson, P.A. as to the validity of
securities being registered
10.1 Joint Venture Contract between Liuzhou OVM Joint Stock Co. Ltd. and
Kolcari Investments Limited and Articles of Association for Sino-Foreign
Equity Joint Venture
10.2 Agreement Concerning Entrustment of the Heat Treatment Plant with
Processing Tasks
10.3 Agreement Concerning Transfer of Intangible Assets
10.4 Agreement Concerning the Provision of Power, Water Supply and Welfare
Facilities
10.5 Supplementary Agreement on the Transfer of Intangible Assets
10.6 Agreement Concerning the Leasing of Land, Buildings and Motor Vehicles
10.7 Supplementary Agreement on the Leasing of Land, Buildings and Motor
Vehicles
10.8 Agreement Concerning Matters Relating to the Establishment of the
Financial Accounts for the Joint Venture
10.9 Agreement concerning the Injection of Assets of three Production
Workshops
10.10 Supplementary Agreement Concerning Collection of Account Receivables and
Allocation of Expenses Incurred on the Collection of Accounts
Receivable.
10.11 1996 Stock Option Plan
21 Subsidiaries of the Registrant
23(i) Consent of Ernst & Young^
23(ii) Consent of Atlas, Pearlman, Trop & Borkson, P.A. (included as part of
Exhibit 5)
27 Financial Data Schedule
<PAGE>
SHENGANG LAW OFFICE SHENZHEN
April 23, 1997
OVM International Holding Corporation
c/o Anka Capital Limited
Room 2005, 20/F, Universal Trade Center
3-5A Arbuthnot Road, Central
Hong Kong
Attn: Mr. Ching Lung Po
- ------------------------
Dear Sirs,
Re: English Translation of Chinese Documents
We have reviewed the Chinese versions of the following documents and the English
translations which you have provided:
1. Articles of Association of Liuzhou OVM Construction Machinery Co., Ltd.
2. Joint Venture Contract dated April 18, 1995 between Kolcari Investments
Limited and Liuzhou OVM Joint Stock Co., Ltd.
3. Agreement Concerning the Injection of Assets of Three Production Workshops
dated June 5, 1995 between Liuzhou OVM Joint Stock Company Limited and
Liuzhou OVM Construction Machinery Company Limited;
4. Agreement Concerning the Leasing of Land, Building and Motor Vehicles
dated June 5, 1995 between Liuzhou OVM Joint Stock Company Limited and
Liuzhou OVM Construction Machinery Company Limited;
5. Agreement Concerning Entrustment of the Heat Treatment Plant and
Processing Task dated June 5, 1995 between Liuzhou OVM Joint Stock Company
Limited, Liuzhou OVM Construction Machinery Company Limited and the Heat
Treatment Plant;
6. Agreement Concerning the Provision of Power, Water Supply and Welfare
Facilities dated June 5, 1995 between Liuzhou OVM Joint Stock Company
Limited and Liuzhou OVM Construction Machinery Company Limited;
<PAGE>
7. Agreement Concerning the Transfer of Intangible Assets dated June 5, 1995
between Liuzhou OVM Joint Stock Company Limited and Liuzhou OVM
Construction Machinery Company Limited and the Exhibit;
8. Agreement Concerning Matters Relating to the establishment of the
Financial Accounts for the Joint Venture dated June 8, 1995 between
Liuzhou OVM Joint Stock Company Limited and Liuzhou OVM Construction
Machinery Company Limited;
9. Supplementary Agreement on the Leasing of Land, Building and Motor
Vehicles dated September 28, 1995 between Liuzhou OVM Joint Stock Company
Limited and Liuzhou OVM Construction Machinery Company Limited;
10. Supplementary Agreement on the Transfer of Intangible Assets dated
December 18, 1995 between Liuzhou OVM Joint Stock Company Limited and
Liuzhou OVM Construction Machinery Company Limited; and
11. Supplementary Agreement Concerning Collection of Accounts Receivable and
Allocation of Expenses Incurred on the Collection of Accounts Receivable
dated October 18, 1996 between Liuzhou OVM Joint Stock Company Limited,
Kolcari Investments Limited and Liuzhou OVM Construction Machinery Company
Limited.
Please note that we do not hold qualification in translation but to the extent
that we have reviewed the above English translations, we believe the
translations, incorporating our suggested amendments, should be fair and correct
translations of the various corresponding Chinese documents above.
Yours sincerely,
Li Song Zhang
Senior Lawyer
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT (the Agreement"), dated as of September 30,
1996, by and among Intermark Development Corporation, a Nevada corporation
(hereinafter called the "Company"); Kolcari Investments Limited, a British
Virgin Islands corporation (hereinafter called "Kolcari"); and the shareholders
of Kolcari (hereinafter called the "Shareholders").
RECITALS
WHEREAS, the Shareholders own or control in their respective capacity the
right to sell, transfer and exchange One Hundred (100%) percent of all of the
shares of the capital stock of Kolcari;
WHEREAS, the Company wishes to acquire all of the issued ordinary shares
of U.S.$1.00 each in the capital of Kolcari (hereinafter collectively referred
to as the "Kolcari Stock") in exchange for a total of Eight Million Eight
Hundred Thousand (8,800,000) shares of common stock of the Company, with a par
value of $0.0001(the "Common Stock") as are to equal, in the aggregate, 73.33%
of the resulting issued and outstanding capital stock of the Company
(hereinafter collectively referred to as the "Company Common Stock");
WHEREAS, the Shareholders wish to exchange their interest in the Kolcari
Stock for Company Common Stock and it is in the best interest of Kolcari for
such exchange to occur;
NOW, THEREFORE, in consideration of the premises herein contained, the
mutual covenants hereinafter set forth, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto covenant and agree as follows:
TERMS
1. Exchange of Securities. Subject to the terms and conditions
hereinafter set forth, at the time of the closing referred to in Section 7
hereof (hereinafter called the "Closing Dates"), the Company will issue and
deliver, or cause to be issued and delivered, to the Shareholders, in proportion
to their ownership of ordinary shares of Kolcari, Eight Million Eight Hundred
Thousand (8,800,000) shares of the Company Common Stock (which, in the
aggregate, shall equal 73.33% of the resulting issued and outstanding capital
stock of the Company after all conditions precedent to such issuance have been
satisfied) in exchange for which the Shareholders will deliver, or cause to be
delivered to the Company, all of the issued ordinary shares of U.S.$1.00 each in
the capital of Kolcari (hereinafter the "Exchange").
<PAGE>
2. Representations and Warranties by Kolcari. Kolcari represents,
warrants and covenants to the Company, all of which representation and
warranties shall be true at the time of the Closing Date and shall survive the
Closing Date for a period of one (1) year therefrom, that:
a. Kolcari is duly organized, validly existing and in good standing
under the laws of the British Virgin Islands. Certified copies of the Memorandum
and Articles of Association for Kolcari have heretofore been furnished by the
directors of Kolcari to the Company and such documents are true and correct
copies of the Memorandum and Articles of Association of Kolcari and include all
amendments thereto through the date hereof;
b. Kolcari is the owner of a 70% joint venture interest in Liuzhou OVM
Construction Machinery Co., Ltd., a Sino-foreign equity joint venture ("LZ
Construction") established under the laws of the Peoples Republic of China
("PRC") and the remaining 30% joint venture interests of LZ Construction are
owned by Liuzhou OVM Joint Stock Company, Ltd., a PRC state-owned enterprise. LZ
Construction further owns Fifty (50%) percent equity interest in OVM Prestress
Co. Pte. Ltd. ("OVM Prestress"), a company incorporated in the Republic of
Singapore. OVM Prestress is primarily engaged in the business as an independent
contractor, specializing in providing engineering services related to
prestressing and construction.
c. The financial information consisting of audited consolidated
financial statements of Kolcari, for the period from May 3, 1994 (date of
incorporation) to December 31, 1995, provided to the Company by Kolcari and
prepared by Ernst & Young, Certified Public Accountants, constitute true and
correct statements of all material facts, as of such date of the financial
condition of Kolcari and of its assets, liabilities and income, and from such
date and until the Closing Date, no dividends or distributions of capital,
surplus, or profits has been paid or declared by Kolcari (in redemption of its
outstanding shares or otherwise), other than those disclosed in writing to the
Company. The audited consolidated financial statements of Kolcari provided to
the Company have been prepared in accordance with accounting standards and a
format consistent with U.S. GAAP.
d. Since December 31, 1995, Kolcari has not experienced any material
adverse changes with respect to its business condition (financial or otherwise),
results of operations, assets, contracts, liabilities or property.
e. Kolcari and LZ Construction have complied, in all material respects,
with the terms and provisions of all agreements to which they are a party and
all laws, rules, regulations and orders to which they or their assets are
subject.
f. Kolcari has not violated any law, rule, regulation or order, and is
not involved in any pending or threatened litigation, which would materially
2
<PAGE>
adversely affect its financial condition as shown in the Kolcari financial
information referenced in Section 2.c above, which has not been provided for or
referred to in such Kolcari financial information or otherwise disclosed to the
Company.
g. Kolcari shall not, from the date hereof through the Closing Date,
engage in any transaction other than transactions in the normal course of the
operation of its business, except as specifically authorized by the Company in
writing; provided, however, the Company consents to the issuance by Kolcari of
additional ordinary shares in the capital of Kolcari to third parties from the
date hereof to the Closing Date, so long as not less than 100.0% of all such
shares are transferred to the Company on the Closing Date.
3. Representations and Warranties by the Shareholders. Each Shareholder
represents and warrants to the Company, all of which representation and
warranties shall be true at the time of the Closing Date and shall survive the
Closing Date for a period of one (1) year therefrom, that:
a. Such Shareholder has, and will have at the Closing Date, good and
marketable title to all of the shares of Kolcari Stock which it is selling,
transferring and exchanging, free and clear of any and all liens or
encumbrances.
b. Such Shareholder has the full power to exchange his or her shares in
the capital of Kolcari upon the terms provided for in this Agreement.
c. Such Shareholder understands that (i) the Company is relying upon an
exemption from registration under the Securities Act of 1933, as amended (the
"Securities Act"), as set forth in Section 4 thereof, which relate to
"transactions by an issuer not involving any public offering," and applicable
regulations promulgated by the Securities and Exchange Commission ("SEC")
thereunder or other exemption under such act; and (ii) the Company is also
relying upon the securities laws of any state on the basis that the Exchange is
a transaction exempt from the registration requirements of such laws.
d. That the Company has made available to such Shareholder and his
representative, if any, the opportunity to ask questions of and receive answers
from the Company concerning the terms and conditions of the Exchange and to
obtain any additional information desired by the Shareholder concerning the
Company.
e. That the investment by such Shareholder in the Company Common Stock
is a suitable investment for the Shareholder, given the investment goals and
objectives of the Shareholder.
f. Such Shareholder, either individually or together with his purchaser
representative, if one has been retained, has such knowledge and experience in
3
<PAGE>
financial and business matters that he is capable of evaluating the merits and
risks of an investment in the Company Common Stock. The Shareholder understands
the effect of accepting the Exchange and the differing rights, restrictions and
obligations of a holder of Company Common Stock.
g. Such Shareholder is purchasing the Company Common Stock for his own
account, for investment purposes only, and not with a view to the sale, pledge,
hypothecation, or other distribution or disposition thereof or of any interest
therein, except as referenced in Section 3.h. below .
h. Such Shareholder understands that resale or transfer of the Company
Common Stock will be prohibited indefinitely unless either (i) the Company
causes the Company Common Stock to be registered under the Securities Act or,
(ii) an exemption from such registration is available and such resale or
transfer will not otherwise violate federal or state securities laws. Such
Shareholder further understands that a legend will be affixed to the
certificates representing the Company Common Stock setting forth the forgoing
limitations.
4. Representation and Warranties by the Company. The Company
represents, warrants and covenants to the Shareholders, all of which
representations and warranties shall be true at the time of the Closing Date and
shall survive the Closing Date for a period of one (1) year therefrom, that:
a. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada and has the corporate power
to own its properties and carry on its business as now being conducted and has
authorized capital stock consisting of 40,000,000 shares of common stock, with a
par value of $.0001, of which 3,200,000 shares of common stock are presently
issued and outstanding to shareholders. Certified copies of the Articles of
Incorporation, Amendments of the Articles of Incorporation and the By-Laws for
the Company have heretofore been furnished by the Company to the Shareholders
and Kolcari and such documents are true and correct copies of the Articles of
Incorporation and the By-Laws of the Company and include all amendments thereto
through the date hereof. No other securities of the Company, other than the
above described shares, are or will be issued, outstanding or agreed to be
issued as of the date hereof and on the Closing Date.
b. The Company has all of the necessary corporate power and authority
to execute, deliver and perform this Agreement and to issue and deliver the
Company Common Stock and any other shares of the Company's common stock required
to be delivered hereunder.
c. The audited financial statements of the Company prepared by Terrence
L. Dunne, Certified Public Accountants, for the periods ended December 31, 1995
and June 30, 1996, attached hereto as Schedule 4.c, constitute true and correct
statements as of such date of the financial condition of the Company and of its
4
<PAGE>
asset, liabilities and income, prepared in accordance with U.S.GAAP consistently
applied and that from such date and until the Closing Date, no dividends or
distributions of capital, surplus, or profits has been, or will be, paid or
declared by the Company (in redemption of its outstanding shares or otherwise)
and no additional shares have been, or will be, issued by the Company.
d. The Company has and will have on the Closing Date, good and
marketable title to all of its property and assets free and clear of any and all
liabilities, liens, encumbrances or restrictions and there are no pending or
threatened actions or claims against them of any kind, except as shown on
Schedule 4.d hereto and except for taxes and assessments due and payable after
the Closing Date and easements or minor restrictions with respect to its real
property which do not materially affect the present value or use of such real
property.
e. Schedule 4.e sets forth all of the contracts to which the Company is
a party. The Company does not have, nor will it have on the Closing Date, any
long-term contracts ("long-term" being defined as any contract other than those
cancelable by the Company without penalty on the giving of no more than ninety
(90) days notice).
f. Since June 30, 1996, neither the Company nor its affiliates, if any,
have experienced any material adverse changes with respect to their business
condition (financial or otherwise), results of operations, assets, contracts,
liabilities or property.
g. The Company has complied, in all material respects, with the terms
and provisions of all agreements to which it is a party and all laws, rules,
regulations and orders or to which it or its assets are subject.
h. The Company has not violated any law, rule, regulation or order, and
is not involved in any pending or threatened litigation, which would materially
adversely affect its financial condition as shown by its audited financial
statements, dated June 30, 1996 (Schedule 4.c hereto), which has not been
provided for on such audited financial statements, referred to in such audited
financial statements or disclosed, in writing, to Kolcari.
i. The Company shall not, from the date hereof through the Closing
Date, engage in any transaction other than transactions in the normal course of
the operation of its business, except as specifically authorized by Kolcari in
writing. Kolcari authorizes the sale, assignment and transfer of the assets of
the Company set forth on Schedule 4.i in accordance with the terms of this
Agreement.
5
<PAGE>
j. The Company does not have a defined Non-qualified Stock Option and
Stock Appreciation Rights Plan in place, nor will it have on the Closing Date,
any pension plan, profit sharing plan, or stock-purchase plan for any of its
employees. The creation of a plan was authorized by the Board of Directors of
the Company on September 4, 1996 and approved by written consent of a majority
of the shareholder on September 5, 1996. The Board of Directors, at a future
date is authorized to instruct the Company's attorney to prepare a Non-qualified
Stock Option and Stock Appreciation Rights Plan.
k. Neither the execution or delivery of this Agreement, nor the
issuance of the Company Common Stock or other shares to be issued hereunder, nor
the performance, observance or compliance with the terms and provisions of this
Agreement, will violate any provision of law, any order of any court or other
governmental agency, the Articles of Incorporation or By-laws of the Company or
any indenture, agreement or other instrument to which the Company is a party, or
which the Company is bound or by which any of its property is bound.
l. The Company Common Stock deliverable hereunder will, upon their
delivery in accordance with the terms hereof, be duly authorized, validly
issued, fully paid and non-assessable.
m. All of the issued and outstanding shares of Company's Common Stock
and the Company's Common Stock to be issued to Kolcari, shall be duly
authorized, validly issued, fully paid and non-assessable. The Company's Common
Stock is not currently listed for trading on the NASDAQ Bulletin Board, no
application for listing on the NASDAQ Bulletin Board has been filed by the
Company as of this date and the Common Stock of the company does not presently
trade on any other recognized stock exchange.
n. The Company and its subsidiaries, if any, have complied with all
applicable foreign, federal and state laws, rules and regulations, including,
without limitation, the requirements of the Exchange Act and the Securities Act.
o. The Company is not required to file reports under Section 12(g) of
the Exchange Act.
p. As of the Closing Date, the Company will have paid all outstanding
obligations of the Company relating to sales tax, use tax, Social Security Tax,
Federal Income Withholding Tax, all foreign, federal and state income tax,
workmen's compensation, unemployment compensation taxes of the Company and any
other foreign, federal and state taxes incurred by the Company prior to the
Closing Date.
q. The Company hereby acknowledges that the shares of Kolcari to be
exchanged for the Company Common Stock are not registered under the Securities
Act or the laws of any other jurisdiction and are subject to restrictions on
their transfer and resale under applicable federal and state law.
6
<PAGE>
r. The Company understands that (i) in agreeing to transfer their
Kolcari Stock to the Company in the Exchange, the Shareholders are relying upon
an exemption from registration under the Securities Act, as set forth in Section
4 thereof, which relate to private resales of restricted securities; and (ii)
the Shareholders are also relying upon the securities laws of any state on the
basis that the Exchange is a transaction exempt from the registration
requirements of such laws.
s. That Kolcari has made available to the Company the opportunity to
ask questions of and receive answers from Kolcari concerning the terms and
conditions of the Exchange and to obtain any additional information from Kolcari
or the Shareholders desired by the Company concerning Kolcari or the
Shareholders.
t. That the investment by the Company in the Kolcari Stock is a
suitable investment for the Company, given the investment goals and objectives
of the Company.
u. The Company has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of an
investment in the Kolcari Stock. The Company understands the effect of accepting
the Exchange and the differing rights, restrictions and obligations of a holder
of Kolcari Stock.
v. The Company has had access to and has thoroughly reviewed all
documents and instruments, including but not limited to the Memorandum and
Articles of Association, of Kolcari, as amended, and have been able to obtain
such information, and has had the opportunity to ask all questions of, and
receive answers from Kolcari and the Shareholders, which it deems necessary or
relevant to an investment in the Kolcari Stock and has utilized such opportunity
to the extent deemed necessary by the Company to allow it to make a fully
informed decision to purchase the Kolcari Stock described herein.
w. The Company is purchasing the Kolcari Stock for its own account, for
investment purposes only, and not with a view to the sale, pledge,
hypothecation, or other distribution or disposition thereof or of any interest
therein.
x. The Company understands that resale or transfer of the Kolcari Stock
will be prohibited indefinitely unless the Kolcari Stock is registered under the
Act or an exemption from such registration is available and such resale or
transfer will not otherwise violate federal or state securities laws.
y. The Company is domiciled and has its principle headquarters in the
State of Nevada.
7
<PAGE>
z. The Company has relied solely upon written materials and
investigations made by the Company in making the decision to acquire the Kolcari
Stock, and has not relied upon undocumented representations of Kolcari or the
Shareholders.
aa. Notwithstanding anything set forth in this Agreement to the
contrary, the Company acknowledges that after the acquisition of Kolcari, it is
the intention of the Company to negotiate with third parties for the possible
issuance of additional shares of common stock of the Company to acquire other
corporations by the exchange of common stock or for the sale of additional
shares of common stock to increase the operating capital of the Company.
Therefore, the Company acknowledges and consents that the number of shares
outstanding and number of shareholders of the Company may change after the date
hereof and the financial condition of Company may change to reflect the results
of any such issuances for assets or another corporation or may change to reflect
the proceeds from a future sale of common stock.
ab. Immediately prior to the closing of the acquisition of Kolcari by the
Company, the Company will take such action as required to obtain shareholder
approval by written consent, pursuant to the Nevada Revised Code, to Amend
Article I of the Articles of Incorporation and change the Company name from
Intermark Development Corporation to OVM International Holding Corporation.
5. Conditions to the Obligations of the Company. The obligations of the
Company hereunder are subject to the following conditions as of the date hereof
and the Closing Date.
a. The Company shall not have discovered any material error or
misstatement in any of the representations and warranties made by the
Shareholders or Kolcari and all of the terms and conditions of this Agreement to
be performed and complied with prior to the Closing Date have been performed and
complied with on or prior to the Closing Date.
b. Kolcari is in compliance with all covenants set forth herein.
c. There have been no substantial adverse change in the condition
(financial, business or otherwise) of Kolcari from December 31, 1995 to the
Closing Date, except for changes resulting from operations in the usual and
ordinary course of business.
d. Kolcari has received all corporate, regulatory and other third party
approvals and authorizations necessary to consummate the Exchange.
<PAGE>
6. Conditions to the Obligations of the Shareholders and Kolcari. The
obligations of the Shareholders and Kolcari hereunder are subject to the
following conditions:
a. The Shareholders or Kolcari shall not have discovered any material
error or misstatement in any of the representations or warranties made by the
Company herein and all the terms and conditions of the Agreement to be performed
and complied with by the Company herein to the Closing Date have been performed
and complied with on or prior to the Closing Date.
b. The Company is in compliance with all covenants set forth herein.
c. There have been no material adverse change in the conditions
(financial, business or otherwise) of the Company from June 30, 1996 to the
Closing Date, except for changes resulting from operations in the usual and
ordinary course of business, except for the private placements of 2,800,000
shares of common stock at $.02 per share (post-reverse split) on September 3,
1996, this private offering was undertaken pursuant to exemptions available
under Regulation D, Rule 504 of the Securities Act.
d. As of the Closing date the Kolcari Shareholders shall have received
the opinion of Thomas G. Walsh, counsel for the Company, to the effect and in
the form described in Schedule 6.c hereto.
e. As of the Closing date the Company shall have received all
corporate, regulatory and other third party approvals and authorizations
necessary to consummate the Exchange.
f. As of the Closing Date, (i) the Company and its assets shall have no
material liabilities (contingent or otherwise) or pending or threatened claims
against them of any kind, (ii) the Company shall provide for the satisfaction or
discharge of all existing claims, liens, choses in action and other encumbrances
or obligations of any sort whatsoever against the Company or any of its assets,
and (iii) the Company shall have paid the costs associated with the acquisition
of Kolcari by the Company.
g. The delivery to the Shareholders and Kolcari of the Due Diligence
Checklist, the form of which is attached hereto as Exhibit 8.a(7), executed by a
principal officer and each director of the Company attesting that all of the
information, documents, instruments, representations and disclosures set forth
therein or attached thereto are true, correct and complete in all material
aspects and not misleading.
h. As of the Closing Date, the delivery to the Shareholders of Kolcari
of indemnifications from those officers and directors set forth on Schedule
8.a(8) in the form attached hereto as Exhibit 8.a(8) which among other things,
sets forth their indemnification and agreement to hold the Company, Kolcari and
the Shareholders harmless from all existing claims, suits, liens, choses in
action and other encumbrances and obligations (contingent or otherwise) of
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<PAGE>
any sort whatsoever against the Company, Kolcari or the Shareholders or any of
their assets now existing or which may arise in the future and relate, directly
or indirectly to the activities of the Company prior to and in connection with
this Agreement and the Exchange.
7. Closing Date. The Closing Date shall take place on, or prior, to
November 15, 1996 at the offices of Atlas, Pearlman, Trop & Borkson, 200 South
Las Olas Boulevard, Sun Sentinel Building, Suite 1900, Ft. Lauderdale, Florida
33301, or at such other time and place as the parties hereto shall mutually
agree.
8. Actions at Closing. At closing, the Company and the Shareholders
will each deliver, or cause to be delivered to the other, the securities to be
exchanged in accordance with Section 1 of this Agreement, and each party shall
pay any and all taxes required to be paid in connection with the issuance and
delivery of its own securities. All share certificates shall be in the name of
the party to which the same are deliverable except the Shareholders' shares,
which will be accompanied by an instrument of transfer executed in favor of the
Company.
In addition, the following shall occur at Closing:
a. The Company will deliver to the Shareholders:
(1) Duly certified copies of all corporate resolutions and other
corporate proceedings taken by the Company to authorize the execution, delivery
and performance of this Agreement.
(2) The opinion of Thomas G. Walsh counsel for the Company, as provided
for in Section 6.c hereof.
(3) A Certificate executed by a principal officer and each director of
the Company attesting that all of the representations and warranties of the
Company are true and correct as of the Closing Date, and that all of the
conditions to the obligations for the Shareholders to be performed by the
Company have been performed as of the Closing Date.
(4) A Certificate of Incumbency and signatures of the officers of the
Company dated as of the date of this Agreement.
(5) The written resignations of all directors and such officers and
auditors of the Company as are required by the Shareholders, which resignations
will contain an acknowledgment from each of them that they have no claims
against the Company for loss of office, unpaid compensation, or otherwise.
(6) All registration certificates, statutory books, minute books and
common seal of the Company, all accounts books and all documents and papers in
connection with the affairs of the Company and all documents of title relating
to the Company's assets (unless already in the possession of the Shareholders)
as are required by the Shareholders.
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<PAGE>
(7) The Due Diligence Checklist, the form of which is attached hereto as
Exhibit 8.a(7), executed by a principal officer and each director of the Company
attesting that all of the information, documents, instruments, representations
and disclosures are true, accurate, correct and complete in all material
respects and not misleading.
(8) The indemnifications described in Section 6(h) hereof.
b. The Shareholders will deliver to the Company:
(1) A Certificate of the Shareholders signed by each Shareholder that
each of the representations and warranties of the Shareholders are true and
correct as of the Closing Date and that all of the Conditions to the Obligations
of Kolcari, specified in Section 6 of of this Agreement to be performed by the
Shareholders have been performed as of the Closing Date.
c. Kolcari will deliver to the Company:
(1) A Certificate executed by a principal officer of Kolcari attesting
that all of the representations and warranties of Kolcari are true and correct
as of the Closing Date, and that all the conditions to the obligations for
Kolcari to be performed by Kolcari have been performed as of the Closing Date.
(2) The Due Diligence Checklist, the form of which is attached hereto as
Exhibit 8.c(2), executed by a principal officer and each director of Kolcari
attesting that all of the information, documents, instruments, representations
and disclosures are true, accurate, correct and complete in all material
respects and not misleading.
9. Confidential Information: Delivery; Return: NonDisclosure.
a. Delivery of Information. Until the earlier of the Closing Date or
the termination of this Agreement (such date hereinafter the "Termination
Date"), pursuant to the terms of this Agreement:
(1) Kolcari has provided and will provide the Company and its officers,
directors, employees, agents, counsel, accountants, financial advisors,
consultants and other representatives (together "Company Representatives") with
full access, upon reasonable prior notice, to all officers, employees and
accountants of Kolcari and LZ Construction and to their assets, properties,
contracts, books, records and all such other information and data concerning the
11
<PAGE>
business and operations of Kolcari as the Company Representatives reasonably may
request in connection with such investigation, but only to the extent that such
access does not unreasonably interfere with the business and operations of
Kolcari.
(2) the Company has provided and will provide the Shareholders and
Kolcari and its officers, directors, employees, agents, counsel, accountants,
financial advisors, consultants and other representatives (together "Kolcari
Representatives") with full access, upon reasonable prior notice, to all
officers, employees and accountants of the Company and its subsidiaries and to
their assets, properties, contracts, books, records and all such other
information and data concerning the business and operations of the Company and
its subsidiaries as the Kolcari Representatives reasonably may request in
connection with such investigation.
b. Acknowledgements: definitions:
(1) The Company has been and, pursuant to the terms of this Section,
shall continue to be privy to certain proprietary and confidential information
of Kolcari and/or the Shareholders (the "Kolcari Confidential Information"). As
used herein, the term "Kolcari Confidential Information" shall include, but not
be limited to, any and all information or documentation whatsoever which has
been disclosed or made available to the Company by Kolcari, the Shareholders or
LZ Construction, regarding their products, services, techniques, manufacturing
or other processes, activities, businesses, properties, operations, clients,
customers, prospective clients, price lists, suppliers, business associates,
equipment, Trade Secrets (as defined herein), computer software, scientific
discoveries, experiments, data, equipment designs, training, devices, charts,
manuals, payroll, financial statements and improvements thereto and any other
information or materials disclosed or delivered to the Company which the
disclosing party may from time to time designate and treat as confidential,
proprietary or as a trade secret, including all information relating (directly
or indirectly) to the material set forth in the Kolcari business plan delivered
or to be delivered to the Company and all information defined as "high
technology" by applicable Nevada or other law.
(2) Kolcari and/or the Shareholders have been and, pursuant to the terms
of this Section, shall continue to be privy to certain proprietary and
confidential information of the Company (the "Company Confidential
Information"). As used herein, the term "Company Confidential Information" shall
include, but not be limited to, any and all information or documentation
whatsoever which has been disclosed or made available to Kolcari and/or the
Shareholders regarding its products, services, techniques, manufacturing or
other processes, activities, businesses, properties, operations, clients,
customers, prospective clients, price lists, suppliers, business associates,
equipment, Trade Secrets (as defined herein), computer software, scientific
12
<PAGE>
discoveries, experiments, data, equipment designs, training devices, charts,
manuals, payroll, financial statements and improvements thereto and any other
information or materials disclosed or delivered to Kolcari and/or the
Shareholders which the disclosing party may from time to time designate and
treat as confidential, proprietary or as a trade secret.
(3) Reference to "Confidential Information" herein shall include and
relate to both Kolcari Confidential Information and the Company Confidential
Information.
(4) As used herein, the term "Trade Secret" shall mean the whole or any
portion of any formula, pattern, device, combination of devices, or compilation
of information which is for use, or is used in the operation of the other
party's businesses and which provides such party's business an advantage, or an
opportunity to obtain an advantage, over those who do not know or use it. For
purposes of interpretation hereunder the following shall apply:
Irrespective of novelty, invention, patentability, the state of the prior
art, and the level of skill in the business, art or field to which the subject
matter pertains, when the owner thereof takes measures to prevent it from
becoming available to persons other than those selected by the owner to have
access thereto for limited purposes, a trade secret is considered to be secret,
of value, for use or in use by the business, and of advantage to the business,
or providing an opportunity to obtain an advantage, over those who do not know
or use it.
In addition, a "Trade Secret" shall include information (not readily
compiled from publicly available sources) which has been made available by
Kolcari and/or the Shareholders to the Company or by the Company to Kolcari
and/or the Shareholders, as the case may be, during the course of their
involvement with each other, including but not limited to the names, addresses,
telephone numbers, qualifications, education, accomplishments, experience and
resumes of all persons who have applied or been recruited for employment, for
either or both permanent and temporary jobs, job order specifications and the
particular characteristics and requirements of persons generally hired by the
disclosing party, as well as specific job listings from companies with whom the
disclosing party does, or attempts to do, business, as well as mailing lists,
computer runoffs, financial or other information not generally available to
others.
c. Non-Disclosure: the Company:
(1) The Company, for itself, its officers, employees, directors, agents,
affiliates, subsidiaries, independent contractors, and related parties (all of
whom are to be deemed included in any reference herein to the Company) agrees
that it will not at any time during or after the termination or expiration
13
<PAGE>
of this Agreement, except as authorized or directed herein or in writing by
Kolcari and/or the Shareholders, use for the Company's own benefit, copy,
reveal, sell, exchange or give away, disclose, divulge or make known or
available in any manner to any person, firm, corporation or other entity
(whether or not the Company receives any benefit therefrom), any Kolcari
Confidential Information.
(2) The Company will take all actions necessary to ensure that the Kolcari
Confidential Information is maintained as secret and confidential and its
disclosure shall only be made, to the extent necessary, to a limited group of
the Company's employees, officers and/or directors who are actually engaged in
the evaluation of the Kolcari Confidential Information; provided, however, the
Company acknowledges and agrees that it shall be responsible and held liable for
the actions or inactions of such employees, officers and directors (regardless
whether or not such actions or inactions are within their scope of employment)
with respect to the maintenance of the secrecy and confidentiality of the
Kolcari Confidential Information.
(3) The Company understands that if it discloses to others, use for its
own benefit (other than as part of an agreement with Kolcari and the
Shareholders, which contemplates such use) or for the benefit of any person or
entity other than Kolcari and/or the Shareholders, copies or makes notes of any
such Kolcari Confidential Information, such conduct will constitute a breach of
the confidence and trust bestowed upon the Company by Kolcari and the
Shareholders and will constitute a breach of this Agreement and render the
Company responsible for any and all damages suffered by Kolcari and/or the
Shareholders as a result thereof.
(4) Provided, however, notwithstanding the foregoing, the terms of this
subsection (c) shall not be applicable to any information which the Company is
compelled to disclose by judicial or administrative process or by other
requirements of law (including, without limitation, in connection with obtaining
the necessary approvals of the Exchange of governmental or regulatory
authorities).
d. Non-Disclosure: Kolcari and the Shareholders:
(1) Kolcari and the Shareholders, for themselves, their officers,
employees, directors, agents, affiliates, subsidiaries, independent contractors,
and related parties (all of whom are to be deemed included in any reference
herein to Kolcari and the Shareholders) agree that they will not at any time
during or after the termination or expiration of any agreement or negotiations
for an agreement with the Company, except as authorized or directed herein or in
writing by the Company, use for Kolcari and the Shareholders' own benefit, copy,
14
<PAGE>
reveal, sell, exchange or give away, disclose, divulge or make known or
available in any manner to any person, firm, corporation or other entity
(whether or not Kolcari and the Shareholders receive any benefit therefrom), any
Company Confidential Information. The obligations and undertakings of Kolcari
and the Shareholders under Section 9.d. shall not apply to any disclosures made
by Kolcari and/or the Shareholders to their respective shareholders, investors
and/or fund managers.
(2) Kolcari and the Shareholders will take all actions necessary to
ensure that the Company Confidential Information is maintained as secret and
confidential and its disclosure shall only be made, to the extent necessary, to
a limited group of Kolcari and/or the Shareholders' own employees, officers,
directors and/or professional advisors who are actually engaged in the
evaluation of the Company Confidential Information; provided, however, Kolcari
and the Shareholders acknowledge and agree that they shall be responsible and
held liable for the actions or inactions of such employees, officers, directors
and/or professional advisors (regardless whether or not such actions or
inactions are within their scope of employment) with respect to the maintenance
of the secrecy and confidentiality of the Company Confidential Information.
(3) Kolcari and the Shareholders understand that if they disclose to
others, uses for their own benefit (other than as part of an agreement with the
Company, which contemplates such use) or for the benefit of any person or entity
other than the Company, copies or makes notes of any such Company Confidential
Information, such conduct will constitute a breach of the confidence and trust
bestowed upon Kolcari and the Shareholders by the Company and will constitute a
breach of this Agreement and render Kolcari and the Shareholders severally
responsible for any and all damages suffered by the Company as a result thereof.
(4) Provided, however, notwithstanding the foregoing, the terms of this
subsection (d) shall not be applicable to any information which Kolcari and/or
the Shareholders are compelled to disclose by judicial or administrative process
or by other requirements of law (including, without limitation, in connection
with obtaining the necessary approvals of the Exchange of governmental or
regulatory authorities).
e. Return of Information:
(1) At any time after the Termination Date, upon request of Kolcari or
any Shareholder, the Company will, and will cause the Company Representatives
to, promptly (and in no event later than five days after such request) redeliver
or cause to be redelivered to Kolcari all Kolcari Confidential Information and
destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
15
<PAGE>
compilations and other writings relating thereto or based thereon prepared by
the Company or any Company Representative. Such destruction shall be certified
in writing to Kolcari by an authorized officer supervising such destruction.
(2) At any time after the Termination Date, upon request of the Company,
the Shareholders and/or Kolcari will, and will cause the Kolcari Representatives
to, promptly (and in no event later than five days after such request) redeliver
or cause to be redelivered to the Company all Company Confidential Information
and destroy or cause to be destroyed all notes, memoranda, summaries, analyses,
compilations and other writings relating thereto or based thereon prepared by a
Shareholder, Kolcari or Kolcari Representatives. Such destruction shall be
certified in writing to the Company by an authorized officer supervising such
destruction.
10. Equitable Relief. The Company and the Shareholders agree that money
damages would not be a sufficient remedy for any breach of any provision set
forth in Sections 9, 11 or 12 by the other, and that, in addition to all other
remedies which any party hereto may have, each party will be entitled to
specific performance and injunctive or other equitable relief as a remedy for
any such breach. No failure or delay by any party hereto in exercising any
right, power or privilege hereunder will operate as a waiver thereof, nor will
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any right, power or privilege hereunder.
11. Conduct and Business.
a. Between the date hereof and the Closing Date, Kolcari shall conduct
its business in the same manner in which it has heretofore been conducted, and
the Shareholders will not permit Kolcari to; (l) enter into any contracts,
agreements, arraignments, etc., other than in the ordinary course of business,
or (2) declare or make any distribution of any kind to the shareholders of
Kolcari without first obtaining the written consent of the Company.
b. Between the date hereof and the Closing Date, the Company shall
conduct its business in the same manner in which it has heretofore been
conducted, and the Company will not; (1) enter into any contracts, agreements,
arraignments, etc., other than in the ordinary course of business, or (2)
declare or make any distribution of any kind to the shareholder" of the Company
without first obtaining the written consent of Kolcari. Further, also during
such time period, the Company hereby agrees that neither the Company nor any of
its affiliates or associates (as such terms are defined in Rule 12b-2 under the
Exchange Act) will, and the Company and they will not assist or encourage others
to, directly or indirectly, (l) sell or dispose of or agree, offer, seek or
propose to sell or dispose of (or request permission to do so from any person)
ownership (including, but not limited to, beneficial ownership as defined in
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<PAGE>
Rule 13d-3 under the Exchange Act) of (x) any of the assets or business of the
Company, (y) any securities of the Company (whether outstanding or to be issued)
or (z) any rights or options to acquire such ownership (including to or from a
person other than the Company), or (2) enter into any discussions, negotiations,
arrangements or understandings with any person or entity with respect to any of
the foregoing. The restrictions contained in the forgoing sentence shall not be
applicable to ordinary brokerage or trading transactions by a securities broker
or dealer or purchases by an institutional investor solely for investment
purposes aggregating less than 5% of the Company's outstanding voting
securities.
12. No Public Disclosure.
a. Kolcari and the Shareholders hereby acknowledge that they are aware
(and that the Kolcari Representatives who have been apprised of this Agreement
and the Shareholders' consideration of the Exchange have been, or upon becoming
so apprised will be advised) of the restrictions imposed by federal and state
securities laws on a person possessing material "non-public" information about a
company with a class of securities registered under the Exchange Act. In this
regard, each such Shareholder agrees that while it is in possession of material
non-public information with respect to the Company and its subsidiaries, the
Shareholder will not purchase or sell any securities of the Company, or
communicate such information to any third party, in violation of any such laws.
b. Without the prior written consent of the other, neither the
Shareholders or Kolcari, on the one hand, nor the Company, on the other, will,
and will each cause their respective representatives not to, make any release to
the press or other public disclosure with respect to either the fact that
discussions or negotiations are taking place concerning the Exchange, the
existence or contents of this Agreement or any prior correspondence relating to
this transaction, except for such public disclosure as may be necessary, in the
written opinion of outside counsel (reasonably satisfactory to the other party)
for the party proposing to make the disclosure not to be in violation of or
default under any applicable law, regulation or governmental order. If either
party proposes to make any disclosure based upon such an opinion, that party
will deliver a copy of such opinion to the other party, together with the text
of the proposed disclosure, as far in advance of its disclosure as is
practicable, and will in good faith consult with and consider the suggestions of
the other party concerning the nature and scope of the information it proposes
to disclose.
13. Brokerage Fee. Each party hereto represents that no brokers have
been employed in this transaction for which the other party could or will become
liable. The parties acknowledge that a one-time only finders fee in the amount
of Fifty Thousand ($50,000) has been paid to Wistow Holdings Limited, by the
Company.
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14. Agreement to Indemnify. Subject to the terms and conditions of this
Section, the Company hereby agrees for a period of One (1) year to indemnify,
defend and hold Kolcari and the Shareholders harmless from and against all
demands, claims, actions or causes of action, assessments, losses, damages,
liabilities, costs and expenses, including without limitation, interest,
penalties, court costs and reasonable attorneys fees (including paralegal and
law clerk fees and other legal expenses and costs) and expenses, asserted
against, relating to, imposed upon or incurred by Kolcari or the Shareholders by
reason of or resulting from a breach of (i) any representation or warranty given
by the Company contained in or made pursuant to this Agreement, or (ii) any
provision set forth in this Agreement by the Company or the Company
Representatives.
Subject to the terms and conditions of this Section, Kolcari hereby agrees
for a period of one (1) year to indemnify, defend and hold the Company harmless
from and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including without limitation,
interest, penalties, court costs and reasonable attorneys' fees (including
paralegal and law clerk fees and other legal expenses and costs) and expenses,
asserted against, relating to, imposed upon or incurred by the Company by reason
of or resulting from a breach of (i) any representation or warranty given by
Kolcari contained in or made pursuant to this Agreement, or (ii) any provision
set forth in this Agreement by the Shareholders, Kolcari or the Kolcari
Representatives.
All of the foregoing are hereinafter collectively referred to
as "Claims" and singularly as a "Claim."
a. Conditions of Indemnification. The obligations and liabilities of
the Shareholders, Kolcari and the Company, with respect to Claims resulting from
the assertion of liability by third parties, shall be subject to the following
terms and conditions:
(1) The party hereto seeking indemnification (the "Indemnitee") will
give the other party hereto (the "Indemnitor") notice of any such Claim
reasonably promptly after the Indemnitee receives notice thereof, and the
Indemnitor will undertake the defense thereof by representatives of its own
choosing.
(2) In the event that the Indemnitor, within ten (10) business days
after notice of any such Claim, fails to defend such Claim, the Indemnitee will
(upon giving written notice to the Indemnitor) have the right, but not the
obligation, to undertake the defense, compromise or settlement of such Claim on
behalf of and for the account and risk of the Indemnitor, subject to the right
of the Indemnitor to assume the defense of such Claim at any time prior to
settlement, compromise or final determination thereof.
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(3) Anything in this Section to the contrary notwithstanding, if there
is a reasonable probability that a Claim may materially and adversely affect the
Indemnitee other than as a result of money damages or other money payments, the
Indemnitee shall have the right to defend, compromise or settle such Claim, in
good faith, on behalf of and for the account and risk of the Indemnitor.
However, the Indemnitee shall not, without the Indemnitor's written consent,
settle or compromise any Claim or consent to entry of any judgment which does
not include an unconditional release from all liability in respect of such
Claim, other than liability specified in the settlement, from the claimant or
plaintiff to the Indemnitor and the Indemnitee. To the greatest extent
reasonably possible, the parties shall attempt to obtain general releases from
such plaintiff or claimant.
15. Cost and Expenses. Each party hereto shall pay its own costs and
expenses incident to the negotiation and preparation of this Agreement and to
the consummation of the transaction contemplated herein.
16. Miscellaneous.
a. Waiver: Strict Construction. No change or modification of this
Agreement shall be valid unless the same is in writing and signed by all the
parties hereto. No wavier of any provision of this Agreement shall be valid
unless in writing and signed by the person against whom sought to be enforced.
The failure of any party at any time to insist upon strict performance of any
condition, promise, agreement or understanding set forth and shall not be
construed as a waiver of relinquishment of the right to insist upon strict
performance of the same condition, promise, agreement or understanding at a
future time.
b. Entire Agreement. This Agreement, together with all schedules and
exhibits, sets forth all of the promises, agreements, conditions,
understandings, warranties and representations among the parties hereto, and
there are no promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, among them other than as
set forth herein. This Agreement is, and is intended by the parties to be, an
integration of any and all prior agreements or understandings, oral or written.
c. Headings. The headings in this Agreement are inserted for
convenience of reference only and are not to be used in construing or
interpreting the provisions of this Agreement.
d. Counterparts. This Agreement may be executed in two or more
identical counterparts, each of which will be deemed an original and all of
which will constitute one instrument.
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e. Construction. Unless the context clearly otherwise requires the use
of the singular will include the plural and the use of the plural will include
the singular, and the use of any gender will include the other two genders.
f. Severability. If a covenant or provision provided in this Agreement
is deemed to be contrary to law, that covenant or provision will be deemed
separable from the remaining covenants and provisions of this Agreement, and
will not affect the validity, interpretation, or effect of the other provisions
of either this Agreement or any agreement executed pursuant to it or the
application of that covenant or provision to other circumstances not contrary to
law.
g. Computation of Time. Whenever the last day for the exercise of any
privilege or the discharge of any duty hereunder falls upon Saturday, Sunday, or
any public or legal holiday, whether Nevada or federal, the party having the
privilege or duty will have until 5:00 p.m. Pacific Standard Time on the next
succeeding regular business day to exercise the privilege or discharge the duty.
h. Interpretation. No provision of this Agreement will be construed
against or interpreted to the disadvantage of any party by any court or other
governmental or judicial authority by reason of such party having or being
deemed to have structured or dictated such provision.
i. Governing Law. This Agreement and the obligations of the parties
hereunder will be interpreted, construed, and enforced in accordance with the
Laws of the State of Nevada, and the parties hereto specifically consent to the
jurisdiction and venue of the courts in Las Vegas, Nevada or a city determined
by mutual consent of the parties.
j. Attorneys' Fees. In the event a lawsuit is brought by either party to
enforce or interpret the terms hereof, or for any dispute arising out of this
transaction, the party prevailing in any such lawsuit shall be entitled to
recover from the non-prevailing party its costs and expenses thereof, including
its legal fees in reasonable amount and prejudgment and post-judgment interest
at the highest rate allowable under Nevada law.
k. Assignment. This Agreement shall not be assignable by either party
without the prior written consent of the other.
1. Notices. All notices, requests, instructions or other documents to
be given hereunder shall be in writing and sent by registered mail:
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If to Kolcari, then:
Kolcari Investments Limited
c/o Anka Capital Limited
Rm 2005, 20/F Universal Trade Center
3-5A Arbuthnot Road
Central, Hong Kong
Attn: Bell Tam
with copies to:
James Schneider, Esq.
Atlas, Pearlman, Trop, & Borkson
200 South Las Olas Blvd.
Sun Sentinel Building, Suite 1900
Ft. Lauderdale, Florida 33301;
and
Ching Lung Po
Cammer Commercial Building, 10/F
30-32 Cameron Road
Tsimshatsui, Kowloon, Hong Kong
If to the Company, then:
Richard Ellis, President
Intermark Development Corporation
c/o Thomas Walsh, Esq.
West 516 Sprague Avenue
Spokane, Washington 99204
with copies to:
Thomas G. Walsh, Esq.
West 518 Sprague Avenue
Spokane, Washington 99204
If to the Shareholders then:
To the names and addresses of the Shareholders set out on the signature
page of this Agreement.
m. Benefit and Burden. This Agreement shall inure to the benefit of,
and shall be binding upon, the parties hereto and their legatees, distributees,
estates, executors or administrators, successors and assigns, and personal and
legal representatives.
n. Execution in Counterpart. This Agreement may be signed in
counterpart.
21
<PAGE>
IN WITNESS WHEREOF, on the date first written above, the parties hereto
have duly executed this Agreement and the Company and Kolcari have caused their
corporate seal to be affixed hereto as of the date and year first above written,
except that the minority shareholders of Kolcari (the "Minority Shareholders"
i.e. Nomura/Jafco East Asia Growth Fund, NJI No. 1 (A) Investment Fund and NJI
No.1 (B) Investment Fund) which have executed this Agreement on November 4,
1996.
Intermark Development Corporation, a Nevada corporation
By: __________________________
Richard A. Ellis
Its: President
ATTEST: __________________________
Cindy K. Swank
Its: Secretary
Kolcari Investments Limited, a British Virgin Islands corporation
By: __________________________
Ching Lung Po
Its: Chairman
ATTEST: __________________________
Wan Ying Lin
Its: Secretary
MAJORITY SHAREHOLDER OF KOLCARI INVESTMENTS LIMITED:
Hoi Wai Investments Limited
c/o Anka Capital Limited
Room 2005, 20/F., Universal Trade Center,
3-5A Arbuthnot Road, Central,
Hong Kong
By: __________________________
Ching Lung Po
Its: Managing Director
ATTEST: __________________________
Wan Ying Lin
Its: Secretary
22
<PAGE>
MINORITY SHAREHOLDERS OF KOLCARI INVESTMENTS LIMITED
Nomura/Jafco East Asia Growth Fund
6 Battery Road #42-01
Singapore, 049909
Republic of Singapore
By: __________________________
Masayoshi Shirota, Agent
NJI No. 1 (A) Investment Fund
c/o Nomura/Jafco Investment (Asia) Ltd
6 Battery Road #42-01
Singapore, 049909
Republic of Singapore
By: __________________________
Masayoshi Shirota, Agent
NJI No. 1 (B) Investment Fund
c/o Nomura/Jafco Investment (Asia) Ltd
6 Battery Road #42-01
Singapore, 049909
Republic of Singapore
By: __________________________
Masayoshi Shirota, Agent
23
<PAGE>
LIST OF SCHEDULES
SCHEDULE 4.c
Audited financial statements prepared by Terrence L. Dunne, C.P.A., for
the periods ending December 31, 1995 and June 30, 1996.
SCHEDULE 4.d
Description of exception for all assets.
SCHEDULE 4.e
List of material contracts the company is a party to.
SCHEDULE 4.i
Description of assets authorized by Kolcari to be sold by the Company.
SCHEDULE 6.c
Legal opinion letter from Thomas G. Walsh.
SCHEDULE 8.a(3)
A Certificate executed by a principal officer and each director of the
Company.
SCHEDULE 8.a(7)
Due diligence checklist executed by a principal officer and each director
of the Company.
SCHEDULE 8.a(8)
Indemnification letter executed by a principal officer and each director
of the Company.
SCHEDULE 8.c(1)
A Certificate executed by a principal officer and each director of
Kolcari.
SCHEDULE 8.c(2)
Due diligence checklist executed by a principal officer and each director
of Kolcari.
24
<PAGE>
SCHEDULE 4.d
Description of exception for all assets.
NONE
25
<PAGE>
SCHEDULE 4.e
List of material contracts the company is a party to.
1. Agreement between INTERMARK DEVELOPMENT CORPORATION and
CJB Transfer Services, Inc. (independent stock transfer
agent)
26
<PAGE>
SCHEDULE 4.i
Description of assets authorized by Kolcari to be sold.
NONE
27
<PAGE>
SCHEDULE 6.c
Legal opinion letter from Thomas G. Walsh.
28
<PAGE>
SCHEDULE 8(a)3
A Certificate executed by a principal officer and each director of the
Company.
29
<PAGE>
SCHEDULE 8.a(7)
Due diligence checklist executed by a principal officer and each director
of the Company.
30
<PAGE>
SCHEDULE 8.a(8)
Indemnification letter executed by a principal officer and each director
of the Company .
<PAGE>
SCHEDULE 8c(1)
A Certificate executed by a principal officer and each director of
Kolcari.
32
<PAGE>
SCHEDULE 8c(2)
Due diligence checklist executed by a principal officer and
each director of Kolcari
33
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
OCT 18, 1971
JOHN KORVITZ
No. 2819-71
ARTICLES OF INCORPORATION
OF
MR. NEVADA, INC.
KNOW ALL MEN BY THESE PRESENTS:
That we, the undersigned, have this day voluntarily associated
ourselves together for the purpose of forming a corporation under the laws of
the State of Nevada, and we do hereby state and certify:
FIRST: That the name of said corporation shall be as follows: MR. NEVADA,
INC.
SECOND: That the purpose and objects for which this corporation is formed
is to engage in and carry on any lawful activity, subject to expressed
limitations, if any.
THIRD: That the location of the principal office of this corporation,
within the State of Nevada, is Suite 500, 302 East Carson, Las Vegas, Nevada,
and that the Resident Agent in charge thereof is THOMAS L. PURSEL, ESQ.
FOURTH: That the total authorized capital stock of this corporation is one
HUNDRED THOUSAND ($100,000.00) DOLLARS, divided into ONE MILLION (1,000,000)
shares of common stock of the par value of TEN (10(cent)) CENTS per share.
FIFTH: That the capital stock of this corporation shall not be subject to
assessment.
<PAGE>
SIXTH: The member of the governing board shall be styled Directors, and
the number of such Board of Directors shall consist of three and the names and
addresses of the first Board of Directors who will serve as such until their
successors are elected or appointed are:
MILLARD J. HATCH- Suite 500, 302 E. Carson, Las Vegas, Nevada
MILDRED L. HATCH- Suite 500, 302 E. Carson, Las Vegas, Nevada
THOMAS L. PURSEL- Suite 500, 302 E. Carson, Las Vegas, Nevada
SEVENTH: The names and addresses of each of the incorporators signing the
Articles of Incorporation, are:
WILLIAM J. HATCH................... Suite 500, 302 E. Carson
Las Vegas, Nevada
THOMAS L. PURSEL................... Suite 500, 302 E. Carson
Las Vegas, Nevada
KAREN F. CAESAR.................... Suite 500, 302 E. Carson
Las Vegas, Nevada
EIGHTH: That this corporation shall have perpetual existence.
IN WITNESS WHEREOF, the undersigned incorporators have executed these
Articles of Incorporation this 8th day of September, 1971.
/s/
--------------------
WILLARD J. HATCH
/s/
--------------------
THOMAS L. PURSEL
/s/
--------------------
KAREN P. CAESAR
<PAGE>
STATE OF NEVADA )
) SS:
COUNTY OF CLARK )
On this 8th day of September, 1971, before me a Notary Public in and for
the County and State, personally appeared WILLARD J. HATCH, THOMAS L. PURSEL and
KAREN F. CAESAR, known to me to be the persons described in and who executed the
foregoing Articles of Incorporation, who acknowledged to me that they executed
the same freely and voluntarily and for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal.
/s/Jack J. Pursel
--------------------------------
Notary Public - State of Nevada
Clark County
JACK J. PURSEL
My Commission Expires June 17, 1975
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION
OF
INTERMARK DEVELOPMENT CORPORATION
Pursuant to the provisions of the Nevada Revised Statutes, INTERMARK
DEVELOPMENT CORPORATION, a Nevada corporation adopts the following amendment to
its Articles of Incorporation:
1. The undersigned individuals, as officers of the corporation, hereby
certify that on the 4th day of September, 1996, a Special Meeting of the Board
of Directors was duly held and convened at which was present a quorum of the
Board of Directors acting through all proceedings, and at which time the
following resolution was duly adopted by the Board of Directors:
RESOLVED: That the Secretary of the corporation is hereby ordered and
directed to obtain written consent of the stockholders owning at least a
majority of the voting power of the outstanding stock of the corporation
for the following purposes:
To amend Article One of the Articles of Incorporation, filed on the
October 18, 1971, to provide that name of the corporation be changed for
INTERMARK DEVELOPMENT CORPORATION to OVM INTERNATIONAL HOLDING
CORPORATION.
2. Pursuant to the provisions of the Nevada Revised Statutes, a majority
of the registered stockholders holding Three Million (3,000,000) shares out of
Three Million Five Hundred Thousand (3, 500, 000) shares executed written
consent authorizing the ad option of the Amendment to Article One of the
Articles of
Incorporation as follows:
FIRST: The name of the corporation shall be as follows:
OVM INTERNATIONAL HOLDING CORPORATION
IN WITNESS WHEREOF, the undersigned be the President and Secretary of
INTERMARK DEVELOPMENT CORPORATION, a Nevada corporation, hereunto affix their
signatures this 5th day of September, 1996. This Certificate of Amendment may be
executed in any number of counterparts, each of which when so executed, shall
constitute an original copy hereof but all of which together shall consider but
one and the same document.
INTERMARK DEVELOPMENT CORPORATION
By:_____________________________
Richard A. Ellis, President
By:_____________________________
Cindy K. Swank, Secretary
<PAGE>
STATE OF TEXAS )
)ss:
COUNTY OF DALLAS )
On the 5th day of September, before me, the undersigned, an Notary Public,
personally appeared Richard A. Ellis, President of INTERMARK DEVELOPMENT
CORPORATION, a Nevada corporation, known to be the individual described in and
who executed the foregoing instrument and acknowledged to me that he executed
the same as a free and voluntary act for the uses and purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
-----------------------------
Notary Public
My Commission Expires:
STATE OF WASHINGTON )
)ss:
COUNTY OF SPOKANE )
On the 5th day of September, before me, the undersigned, an Notary Public,
personally appeared Cindy K. Swank, Secretary of INTERMARK DEVELOPMENT
CORPORATION, a Nevada corporation, known to be the individual described in and
who executed the foregoing instrument and acknowledged to me that he executed
the same as a free and voluntary act for the uses and purposes therein stated.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
-----------------------------
Notary Public
My Commission Expires:
2
<PAGE>
CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION
(after issuance of stock)
MR. NEVADA, INC.
We, the undersigned President and Secretary of Mr. Nevada, Inc. do hereby
certify:
That the Board of Directors of said corporation at a meeting duly convened
and held on the 5th day of July, 1995, again adopted a resolution, said
resolution originally adopted at a meeting duly convened and held on 16th April,
1990, to amend the original articles as follows: ;
Article IV is hereby amended to read as follows:
FOURTH: That the total authorized capitalization of this corporation shall
be and is the sum of $4,000.00 consisting of 40,000,000 shares of $.0001 par
value common stock. Said stock shall carry full voting power and the said shares
shall be issued full paid and non assessable at such times as the Board of
Directors may designate in exchange for cash, property or services, the stock of
other corporations or other values, rights or things and the judgment of the
Board of Directors as to the value thereof shall be conclusive.
The number of shares of the corporation outstanding and entitled to vote on an
amendment to the Articles of Incorporation is One million, six hundred thousand
(1,600,000), that said change and amendment have been consented to and approved
by a majority vote of the stockholders holding at least a majority of each class
of stock outstanding and entitled to vote thereon.
------------------------------
President
------------------------------
Secretary
State of Arizona )
)ss:
County of Maricopa )
On this 6th day of July, 1995, personally appeared before me, a Notary
Public, William G. Priess and J. M. Green, both of whom acknowledged that they
executed the above instrument.
-----------------------------
Notary Public
My Commission Expires:
3
BYLAWS OF
INTERMARK DEVELOPMENT CORPORATION
(a Nevada Corporation)
TABLE OF CONTENTS
Page
----
ARTICLE I - CORPORATE OFFICES .............................. 1
1.1 REGISTERED OFFICE .................................... 1
1.2 OTHER OFFICES ........................................ 1
ARTICLE II - MEETINGS OF STOCKHOLDERS ...................... 1
2.1 PLACE OF MEETINGS .................................... 1
2.2 ANNUAL MEETING ....................................... 1
2.3 SPECIAL MEETING ...................................... 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS ..................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE 2
2.6 QUORUM ............................................... 3
2.7 ADJOURNED MEETING; NOTICE ............................ 3
2.8 VOTING ............................................... 3
2.9 WAIVER OF NOTICE ..................................... 4
2.10 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING .............................................. 5
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING;
GIVING CONSENTS ...................................... 5
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . 5
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE . . . . . . 5
2.14 INSPECTORS OF ELECTION ............................... 5
ARTICLE III - DIRECTORS .................................... 6
3.1 POWERS ............................................... 6
3.2 NUMBER OF DIRECTORS .................................. 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS ............................................ 6
3.4 RESIGNATION AND VACANCIES............................. 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE ............. 8
3.6 FIRST MEETINGS ....................................... 8
3.7 REGULAR MEETINGS...................................... 8
3.8 SPECIAL MEETINGS; NOTICE.............................. 8
3.9 QUORUM ............................................... 9
3.10 WAIVER OF NOTICE ..................................... 9
3.11 ADJOURNED MEETING; NOTICE............................. 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT
A MEETING............................................. 10
3.13 FEES AND COMPENSATION OF DIRECTORS.................... 10
3.14 APPROVAL OF LOANS TO OFFICERS......................... 10
3.15 REMOVAL OF DIRECTORS................................... 10
<PAGE>
ARTICLE IV - COMMITTEES..................................... 11
4.1 COMMITTEES OF DIRECTORS............................... 11
4.2 COMMITTEE MINUTES .................................... 12
4.3 MEETINGS AND ACTION OF COMMITTEES..................... 12
ARTICLE V - OFFICERS........................................ 12
5.1 OFFICERS.............................................. 12
5.2 ELECTION OF OFFICERS ................................. 12
5.3 SUBORDINATE OFFICERS ................................. 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS .................. 13
5.5 VACANCIES IN OFFICES ................................. 13
5.6 CHAIRMAN OF THE BOA RD................................ 13
5.7 PRESIDENT ............................................ 13
5.8 VICE PRESIDENT ....................................... 14
5.9 SECRETARY ............................................ 14
5.10 TREASURER............................................. 14
5.11 ASSISTANT SECRETARY ................................... 15
5.12 ASSISTANT TREASURER ................................... 15
5.13 AUTHORITY AND DUTIES OF OFFICERS ...................... 15
ARTICLE VI - INDEMNITY ..................................... 16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS............. 16
6.2 INDEMNIFICATION OF OTHERS............................. 16
6.3 INSURANCE............................................. 16
ARTICLE VII - RECORDS AND REPORTS .......................... 17
7.1 MAINTENANCE AND INSPECTION OF RECORDS................. 17
7.2 INSPECTION BY DIRECTORS............................... 17
7.3 ANNUAL STATEMENT TO STOCKHOLDERS...................... 18
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS 18
ARTICLE VIII - GENERAL MATTERS.............................. 19
8.1 CHECKS ............................................... 19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS 19
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES................ 20
8.4 SPECIAL DESIGNATION ON CERTIFICATES................... 20
8.5 LOST CERTIFICATES..................................... 20
8.6 CONSTRUCTION; DEFINITIONS............................. 20
8.7 DIVIDENDS............................................. 20
8.8 FISCAL YEAR .......................................... 20
8.9 SEAL ................................................. 21
8.10 TRANSFER OF STOCK .................................... 21
8.11 STOCK TRANSFER AGREEMENTS ............................. 21
8.12 REGISTERED STOCKHOLDERS ............................... 21
ARTICLE IX - AMENDMENTS..................................... 21
ii
<PAGE>
ARTICLE X - DISSOLUTION..................................... 22
ARTICLE XI - CUSTODIAN ..................................... 22
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES ........... 22
11.2 DUTIES OF CUSTODIAN ................................... 23
iii
<PAGE>
BYLAWS OF INTERMARK DEVELOPMENT CORPORATION
(a Nevada Corporation)
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of Reno, County of
Clark, State of Nevada. The name of the registered agent of the corporation at
such location is Nevada Agency and Trust Company, located at West 50 Liberty
Street, Bank of America, Reno, Nevada
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place or
places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the State
of Nevada, designated by the board of directors. In the absence of any such
designation, stockholders' meetings shall be held at the registered office of
the corporation.
The annual meeting of stockholders shall be held each year within 180 days of
the end of the prior fiscal year, on a date and at a time designated by the
board of directors or as otherwise determined by the board of directors.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the board of
directors, or by the chairman of the board, or by the president, or by one or
more stockholders holding shares in the aggregate entitled to cast not less than
ten percent (10%) of the votes at that meeting.
If a special meeting is requested by any person or persons other than the board
of directors or the president or the chairman of the board, then the request
shall be in writing, specifying the general nature of the business proposed to
be transacted, and shall be delivered personally or sent by registered mail or
by telegraphic or other facsimile transmission to the chairman of the board, the
president, any vice president or the secretary of the corporation.
1
<PAGE>
No business may be transacted at such special meeting otherwise than specified
in such notice. The board of directors shall determine the time and place of
such special meeting, which shall be held not less than 35 nor more than 120
days after the receipt of the request. Upon determination of the time and the
place of the meeting, the officer receiving the request shall cause notice to be
given to the stockholders entitled to vote, in accordance with the provisions of
Section 2.4 of these bylaws. If the notice is not given within 61 days after the
receipt of the request, the person or persons requesting the meeting may set the
time and place of the meeting and give the notice. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.
2.4 NOTICE OF STOCKHOLDERS MEETINGS
All notices of meetings of stockholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) nor more than
sixty (60) days before the date of the meeting. The notice shall specify the
place, date, and hour of the meeting and (i) in the case of a special meeting,
the general nature of the business to be transacted (no business other than that
specified in the notice may be transacted) or (ii) in the case of the annual
meeting, those matters which the board of directors, at the time of giving the
notice, intends to present for action by the stockholders (but any proper matter
may be presented at the meeting for such action). The notice of any meeting at
which directors are to be elected shall include the name of any nominee or
nominees who, at the time of the notice, the board intends to present for
election.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders shall be given either personally
or by first class mail or by telegraphic or other written communication. Notices
not personally delivered shall be sent charges prepaid and shall be addressed to
the stockholder at the address of that stockholder appearing on the books of the
corporation or given by the shareholder to the corporation for the purpose of
notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that stockholder by mail or
telegraphic or other written communication to the corporation's principal
executive office, or if published at least once in a newspaper of general
circulation in the county where that office is located. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram or other means of written communication.
If any notice addressed to a stockholder at the address of that stockholder
appearing on the books of the corporation is returned to the corporation by the
2
<PAGE>
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the stockholder at that address, then
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the stockholder on written
demand of the stockholder at the principal executive office of the corporation
for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stock holders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURN MEETING: NOTICE
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. When a meeting
is adjourned to another time or place, unless these bylaws otherwise require,
notice need not be given of the adjourned meeting if the time and place thereof
are announced at the meeting at which the adjournment is taken. At the adjourned
meeting the corporation may transact any business that might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of the General Corporation Law of Nevada (relating to
3
<PAGE>
voting rights of fiduciaries, pledgers and joint owners of stock and to voting
trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the certificate of incorporation, each stockholder shall
be entitled to one vote for each share of capital stock held by such
stockholder.
At a stockholders' meeting at which directors are to be elected, or at elections
held under special circumstances, a stockholder shall be entitled to cumulate
votes (i.e., cast for any candidate a number of votes greater than the number of
votes which such stockholder normally is entitled to cast). Each holder of
stock, or of any class or classes or of a series or series thereof, who elects
to cumulate votes shall be entitled to as many votes as equals the number of
votes which (absent this provision as to cumulative voting) he would be entitled
to cast for the election of directors with respect to his shares of stock
multiplied by the number of directors to be elected by him, and he may cast all
of such votes for a single director or may distribute them among the number to
be voted for, or for any two or more of them, as he may see fit.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Nevada or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor business on the day next preceding the day on
which the meeting is held.
(i) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
(ii) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the board of directors may fix a new record date for the adjourned
meeting.
4
<PAGE>
2.12 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney in fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of the General
Corporation Law of Nevada.
2.13 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
2.14 INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment. If
no inspector of election is so appointed, then the chairman of the meeting may,
and on the request of any stockholder or a stockholder's proxy shall, appoint an
inspector or inspectors of election to act at the meeting. The number of
inspectors shall be either one (1) or three (3). If inspectors are appointed at
a meeting pursuant to the request of one (1) or more stockholders or proxies,
then the holders of a majority of shares or their proxies present at the meeting
shall determine whether one (1) or three (3) inspectors are to be appointed. If
any person appointed as inspector fails to appear or fails or refuses to act,
then the chairman of the meeting may, and upon the request of any stockholder or
a stockholder's proxy shall appoint a person to fill that vacancy.
5
<PAGE>
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all stockholders.
ARTICLE III
DIRECTORS
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3.1 POWERS
Subject to the provisions of the General Corporation Law of Nevada and any
limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be one (1). This number may be
changed by a duly adopted amendment to the certificate of incorporation or by an
amendment to this bylaw adopted by the vote or written consent of the holders of
a majority of the stock issued and outstanding and entitled to vote or by
resolution of a majority of the board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be elected at
each annual meeting of stockholders to hold office until the next annual
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meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the corporation. When
one or more directors so resigns and the resignation is effective at a future
date, a majority of the directors then in office (even if less than a quorum),
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these bylaws:
(i) Vacancies and newly created directorships resulting from any increase
in the authorized number of directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the directors
then in office, although less than a quorum, or by a sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in the General Corporation Law of Nevada.
If, at the time of filling any vacancy or any newly created directorship, the
directors then in office constitute less than a majority of the whole board (as
constituted immediately prior to any such increase), then the Court may, upon
application of any stockholder or stockholders holding at least ten (10) percent
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of the total number of the shares at the time outstanding having the right to
vote for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office as aforesaid, which election shall be governed by
the provisions of the General Corporation Law of Nevada as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular and
special, either within or outside the State of Nevada. Unless otherwise
restricted by the certificate of incorporation or these bylaws, members of the
board of directors, or any committee designated by the board of directors, may
participate in a meeting of the board of directors, or any committee, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at such
time and place as shall be fixed by the vote of the stockholders at the annual
meeting and no notice of such meeting shall be necessary to the newly elected
directors in order legally to constitute the meeting, provided a quorum shall be
present. In the event of the failure of the stockholders to fix the time or
place of such first meeting of the newly elected board of directors, or in the
event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at such
time and at such place as shall from time to time be determined by the board.
3.8 SPECIAL MEETINGS NOTICE
Special meetings of the board of directors for any purpose or purposes may be
called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered personally
or by telephone to each director or sent by first class mail or telegram,
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charges prepaid, addressed to each director at that director's address as it is
shown on the records of the corporation. If the notice is mailed, it shall be
deposited in the United States mail at least four (4) days before the time of
the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized number
of directors shall constitute a quorum for the transaction of business and the
act of a majority of the directors present at any meeting at which there is a
quorum shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum is not present at any meeting of the board of directors, then the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Nevada or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
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3.11 ADJOURNED MEETING NOTICE
If a quorum is not present at any meeting of the board of directors, then the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these bylaws,
any action required or permitted to be taken at any meeting of the board of
directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these bylaws,
the board of directors shall have the authority to fix the compensation of
directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or otherwise
assist any officer or other employee of the corporation or of its subsidiary,
including any officer or employee who is a director of the corporation or its
subsidiary, whenever, in the judgment of the directors, such loan, guaranty or
assistance may reasonably be expected to benefit the corporation. The loan,
guaranty or other assistance may be with or without interest and may be
unsecured, or secured in such manner as the board of directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section contained shall be deemed to deny, limit or restrict the
powers of guaranty or warranty of the corporation at common law or under any
statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation or
by these bylaws, any director or the entire board of directors may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors; provided, however, that, so long as
stockholders of the corporation are entitled to cumulative voting, if less that
the entire board is to be removed, no director may be removed without cause if
the votes cast against his or her removal would be sufficient to elect him or
her if then cumulatively voted at an election of the entire board of directors.
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No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in the General Corporation Law of Nevada,
fix any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under the General Corporation Law of Nevada, (iii) recommend to the stockholders
the sale, lease or exchange of all or substantially all of the corporation's
property and assets, (iv) recommend to the stockholders a dissolution of the
corporation or a revocation of a dissolution, or (v) amend the bylaws of the
corporation; and, unless the board resolution establishing the committee, the
bylaws or the certificate of incorporation expressly so provide, no such
committee shall have the power or authority to declare a dividend, to authorize
the issuance of stock, or to adopt a certificate of ownership and merger
pursuant to the General Corporation Law of Nevada.
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4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the same to
the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken in
accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may also be called by resolution of the board of
directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
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5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed in
accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be
chosen by the board of directors, subject to the rights, if any, of an officer
under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint, such
other officers and agents as the business of the corporation may require, each
of whom shall hold office for such period, have such authority, and perform such
duties as are provided in these bylaws or as the board of directors may from
time to time determine.
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5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of employment,
any officer may be removed, either with or without cause, by an affirmative vote
of the majority of the board of directors at any regular or special meeting of
the board or, except in the case of an officer chosen by the board of directors,
by any officer upon whom such power of removal may be conferred by the board of
directors.
Any officer may resign at any time by giving written notice to the corporation.
Any resignation shall take effect at the date of the receipt of that notice or
at any later time specified in that notice; and, unless otherwise specified in
that notice, the acceptance of the resignation shall not be necessary to make it
effective. Any resignation is without prejudice to the rights, if any, of the
corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by the
board of directors and the number of directors can be increased by board action.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if present,
preside at meetings of the board of directors and exercise and perform such
other powers and duties as may from time to time be assigned to him by the board
of directors or as may be prescribed by these bylaws. If there is no president,
then the chairman of the board shall also be the chief executive officer of the
corporation and shall have the powers and duties prescribed in Section 5.7 of
these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
non-existence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
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vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if any, in
order of their rank as fixed by the board of directors or, if not ranked, a vice
president designated by the board of directors, shall perform all the duties of
the president and when so acting shall have all the powers of, and be subject to
all the restrictions upon, the president. The vice presidents shall have such
other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive office
of the corporation or such other place as the board of directors may direct, a
book of minutes of all meetings and actions of directors, committees of
directors, and shareholders. The minutes shall show the time and place of each
meeting, whether regular or special (and, if special, how authorized and the
notice given), the names of those present at directors' meetings or committee
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office
of the corporation or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the
shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
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liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name and to the
credit of the corporation with such depositaries as may be designated by the
board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
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ARTICLE VI
INDEMNITY
---------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by the
General Corporation Law of Nevada, indemnify each of its directors and officers
against expenses (including attorneys' fees), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding, arising by reason of the fact that such person is or was an agent of
the corporation. For purposes of this Section 6.1, a "director" or "officer" of
the corporation includes any person (i) who is or was a director or officer of
the corporation, (ii) who is or was serving at the request of the corporation as
a director or officer of another corporation, partnership, joint venture, trust
or other enterprise, or (iii) who was a director or officer of a corporation
which was a predecessor corporation of the corporation or of another enterprise
at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the manner
permitted by the General Corporation Law of Nevada, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person who
is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Nevada.
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ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such place
or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall, upon
written demand under oath stating the purpose thereof, have the right during the
usual hours for business to inspect for any proper purpose the corporation's
stock ledger, a list of its stockholders, and its other books and records and to
make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every instance
where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Nevada or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock ledger, a
list of its stockholders, and its other books and records for a purpose
reasonably related to his position as a director. The Court of Chancery is
hereby vested with the exclusive jurisdiction to determine whether a director is
entitled to the inspection sought. The Court may summarily order the corporation
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to permit the director to inspect any and all books and records, the stock
ledger, and the stock list and to make copies or extracts therefrom. The Court
may, in its discretion, prescribe any limitations or conditions with reference
to the inspection, or award such other and further relief as the Court may deem
just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any special
meeting of the stockholders when called for by vote of the stockholders, a full
and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the treasurer, the
secretary or assistant secretary of this corporation, or any other person
authorized by the board of directors or the president or a vice president, is
authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by such person having the
authority.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS
From time to time, the board of directors shall determine by resolution which
person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
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8.3 STOCK CERTIFICATES: PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided that
the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice chairman of
the board of directors, or the president or vice president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly paid and
subject to call for the remainder of the consideration to be paid therefor. Upon
the face or back of each stock certificate issued to represent any such partly
paid shares, upon the books and records of the corporation in the case of
uncertificated partly paid shares, the total amount of the consideration to be
paid therefor and the amount paid thereon shall be stated. Upon the declaration
of any dividend on fully paid shares, the corporation shall declare a dividend
upon partly paid shares of the same class, but only upon the basis of the
percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or more
than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in the General Corporation Law of Nevada, in lieu
of the foregoing requirements there may be set forth on the face or back of the
certificate that the corporation shall issue to represent such class or series
of stock a statement that the corporation will furnish without charge to each
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stockholder who so requests the powers, the designations, the preferences, and
the relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares shall be
issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation at its option may require the owner of the lost,
stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION: DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Nevada General Corporation Law shall govern
the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in the
certificate of incorporation, may declare and pay dividends upon the shares of
its capital stock pursuant to the General Corporation Law of Nevada. Dividends
may be paid in cash, in property, or in shares of the corporation's capital
stock.
The directors of the corporation may set at out of any of the funds of the
corporation available for dividends a reserve or reserves for any proper purpose
and may abolish any such reserve. Such purposes shall include but not be limited
to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the board of
directors and may be changed by the board of directors.
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8.9 SEAL
The Corporation shall have power to have a corporate seal, which shall be
adopted and which may be altered by the board of directors, and the corporation
may use the same by causing it or a facsimile thereof to be impressed or affixed
or in any other manner reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement with
any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Nevada.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends and to vote
as such owner, shall be entitled to hold liable for calls and assessments the
person registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Nevada.
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
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ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors of
the corporation that the corporation should be dissolved, the board, after the
adoption of a resolution to that effect by a majority of the whole board at any
meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed dissolution.
If a majority of the outstanding stock of the corporation entitled to vote
thereon votes for the proposed dissolution, then a certificate stating that the
dissolution has been authorized in accordance with the provisions of the General
Corporation Law of Nevada and setting forth the names and residences of the
directors and officers shall be executed, acknowledged, and filed and shall
become effective in accordance with the General Corporation Law of Nevada. Upon
such certificate's becoming effective in accordance with the General Corporation
Law of Nevada, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with the General Corporation Law
of Nevada. Upon such consent's becoming effective in accordance with the General
Corporation Law of Nevada, the corporation shall be dissolved. If the consent is
signed by an attorney, then the original power of attorney or a photocopy
thereof shall be attached to and filed with the consent. The consent filed with
the Secretary of State shall have attached to it the affidavit of the secretary
or some other officer of the corporation stating that the consent has been
signed by or on behalf of all the stockholders entitled to vote on a
dissolution; in addition, there shall be attached to the consent a certification
by the secretary or some other officer of the corporation setting forth the
names and residences of the directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of the state of Nevada, upon application of any stockholder, may
appoint one or more persons to be custodians and, if the corporation is
insolvent, to be receivers, of and for the corporation when:
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(i) at any meeting held for the election of directors the stockholders are
so divided that they have failed to elect successors to directors whose terms
have expired or would have expired upon qualification of their successors; or
(ii) the business of the corporation is suffering or is threatened with
irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has failed within a
reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed under
the General Corporation Law of Nevada, but the authority of the custodian shall
be to continue the business of the corporation and not to liquidate its affairs
and distribute its assets, except when the Court of the state of Nevada
otherwise orders and except in cases arising out of the General Corporation Law
of Nevada.
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Certificate by Secretary
The undersigned hereby certifies that she is the duly elected, qualified and
acting Secretary of INTERMARK DEVELOPMENT CORPORATION and that the foregoing
Bylaws, comprising twenty five (25) pages, were adopted as the Bylaws of the
corporation on the ____ day of August, 1996, pursuant to a corporate resolution
of the Board of Directors.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this ___ day of August, 1996.
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<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
INTERMARK DEVELOPMENT CORPORATION
(a Nevada Corporation)
Adoption by Board of Directors
------------------------------
The undersigned person was appointed by the Board of Directors of the
corporation to act as the secretary of INTERMARK DEVELOPMENT CORPORATION hereby
adopts the foregoing bylaws, comprising twenty five (25) pages, as the Bylaws of
the corporation.
Executed this ___ day of August, 1996.
- -------------------------------
Cindy K. Swank, Secretary
<PAGE>
BY-LAWS
OF
MR. NEVADA, INC.
ARTICLE I - OFFICES
The registered office of the corporation in the State of Nevada shall be
located at 112 North Third, Las Vegas,Nevada. The corporation may have such
other offices, either within or without the state of incorporation, as the Board
of Directors may designate or as the business of the corporation may from time
to time require.
ARTICLE II - SHAREHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held on 10th of April in
each year, beginning with the year 1972 at 2:00 o'clock p.m., or such other time
or such other day as shall be fixed by the Board of Directors, for the purpose
of electing Directors and for the transaction of such other business as may come
before the meeting. If the day fixed for the annual meeting shall be a Sunday or
a legal holiday such meeting shall be held on the next succeeding business day.
If the election of directors shall not be held on the day designated herein for
the annual meeting, the Board of Directors shall cause the election to be held
at a special meeting of shareholders as soon thereafter as conveniently
possible.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute, may be called by the President or by a minimum
of two members of the Board of Directors, and shall be called by the President
at the request of the holders of not less than fifty (50%) per cent of all the
outstanding shares of the corporation entitled to vote at the meetings.
3. PLACE OF MEETING.
The Directors may designate any place, either within or without the State
of Nevada, unless otherwise prescribed by statute, as the place of meeting for
any annual meeting or for any special meeting called by the Directors. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the corporation.
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4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour of the meeting
and, in case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than ten (10) nor more than forty five
(45) days before the date of the meeting, either personally or by mail, by an
officer of the corporation at the direction of the President, the Secretary, or
the person or persons calling the meeting, to each stockholder or record
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail, addressed to the stockholder
at his address as it appears on the stock transfer books of the corporation,
with postage thereon prepaid.
5. FIXING DATE FOR DETERMINATION OF SHAREHOLDERS OF RECORD.
In order that the corporation may determine the shareholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express written consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect of any
change conversion or exchange of shares or for the purpose of any other lawful
action, the Board of Directors of the corporation may provide that the stock
transfer books shall be closed for a stated period but not to exceed, in any
case, ten (10) days. If the stock transfer books shall be closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten (10) days immediately
preceding such meeting. In lieu of closing the stock transfer books, the
Directors may fix in advance a date as the record date for any such
determination of stockholders, such date in any case to be not more than sixty
(60) days and, in case of a meeting of stockholders, not less than ten (10) days
prior any other action.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer books for shares
of the corporation shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to vote at such
meeting, or any adjournment thereof, arranged in alphabetical order with the
address of and the number of shares held by each, which list, for a period of
ten (10) days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to inspection by any stockholder
at any time during usual business hours. Such list shall also be produced and
kept open at the time and place of the meeting and shall be subject to the
inspection of any stockholder at any time during the meeting. The original stock
transfer book shall be prima facie evidence as to those stockholders entitled to
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examine such list or transfer book or to vote at the meeting of stockholders.
Failure to comply with the requirements of this section does not affect the
validity of any action taken at the meeting.
7. QUORUM.
At any meeting of stockholders fifty per cent (50%) of the outstanding
shares of the corporation entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of stockholders. If less than said number
of the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote by proxy executed
in writing by the stockholder or by his duly authorized attorney in fact. Such
proxy shall be filed with the Secretary of the corporation before or at the time
of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the terms and
provisions of the certificate of incorporation and these by-laws shall be
entitled to one vote, in person or by proxy, for each share of stock entitled to
vote held by such stockholders. Upon the demand of any stockholder, the vote for
Directors and upon any question before the meeting shall be by ballot. All
elections for Directors shall be decided by plurality vote\\; all other
questions shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation or the laws of the State of incorporation. Voting
for any matter need not be by written ballot.
10. ORDER OF BUSINESS.
The order of business at all meetings of the stockholders, shall be as
follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
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4. Reports of Officers.
5. Reports of Committees.
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. INFORMAL ACTION BY STOCKHOLDERS.
Unless otherwise provided by law, any action required to be taken at a
meeting of the shareholders, or any other action which may be taken at a meeting
of the shareholders, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by all of the shareholders
entitled to vote with respect to the subject matter thereof.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be managed by its Board
of Directors. The Directors shall in all cases act as a Board, and they may
adopt such rules and regulations for the conduct of their meetings and the
management of the corporation, as they may deem proper, not inconsistent with
these by-laws and the laws of the State of incorporation.
2. NUMBER, TENURE AND QUALIFICATIONS.
The number of Directors of the corporation shall be at least two (2) and
not more than thirty five (35). Each Director shall hold office until the next
annual meeting of stockholders and until his successor shall have been elected
and qualified.
3. REGULAR MEETINGS.
A regular meeting of the Directors, shall be held without other notice
than this by-law immediately after, and at the same place as, the annual meeting
of stockholders The Directors may provide, by resolution, the t me and place for
the holding of additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the Directors may be called by or at the request of
the President or a majority of the remaining Directors. The person or persons
authorized to call special meetings of the Directors may fix the place for
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holding any special meeting of the Directors called by them, provided that the
place of the meeting is approved by the President of the corporation.
5. NOTICE.
Notice of any special meeting shall be given at least ten (10) days
previously thereto by written notice delivered personally, or by telegram or
mailed to each Director at his business address. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed to be delivered when the telegram is delivered to the telegraph
company. The attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting.
6. QUORUM.
At any meeting of the Directors fifty one per cent (51%) shall constitute
a quorum for the transaction of business, but if less than said number is
present at a meeting, a majority of the Directors present may adjourn the
meeting.
7. MANNER OF ACTING.
The act of the majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Directors.
8. NEWLY CREATED DIRECTORSHIPS
The Board of Directors may increase the number of Directors by a two
thirds (2/3) majority vote, subject to the ratification of the shareholders.
Newly created directorships resulting from an increase in the number of
Directors may be filled by a vote of a two thirds (2/3) majority of the
Directors then in office, subject to a ratification of the shareholders. The
term of any newly created directorship shall be determined by the Board of
Directors.
9. REMOVAL OF DIRECTORS.
Any of the Directors may be removed for cause by vote of the stockholders
or by action of the Board.
10. RESIGNATION.
A Director may resign at any time by giving written notice to the Board,
the President or the Secretary of the corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
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11. VACANCIES
Directors shall be elected to fill any vacancy by simple majority vote of
the Board of Directors. A Director elected to fill a vacancy caused by
resignation, death or removal shall be elected to hold office for the unexpired
term of his or her successor.
12. COMPENSATION.
Compensation may be paid to Directors as such, for their services, by
resolution of the Board. A fixed sum and expenses for actual attendance at each
regular or special meeting of the Board may also be authorized. Nothing herein
contained shall be construed to preclude any Director from serving the
corporation in any other capacity and receiving compensation therefore.
13. PRESUMPTION OF ASSENT.
A Director of the corporation who is present at a meeting of the Directors
at which action on any corporate matter is taken shall be presumed to have
assented to the action taken unless his dissent shall be entered in the minutes
of the meeting or unless he shall file his written dissent to such action with
the person acting as the Secretary of the meeting before the adjournment thereof
or shall forward such dissent by registered mail to the Secretary of the
corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a Director who voted in favor of such action.
14. EXECUTIVE AND OTHER COMMITTEES.
The Board, by resolution, may designate from among its members an
executive committee and other committees, each consisting of one (1) or more
Directors. Each such committee shall serve at the pleasure of the Board.
15. INDEMNIFICATION.
Each Officer and/or Director shall be indemnified by the corporation from
suits by Shareholders, other Directors or creditors of the corporation unless
such Officer or Director shall have been adjudicated in a court of law to have
committed fraud or willful malfeasance. This indemnification shall not apply to
suits filed under the Securities Exchange Act of 1934 and amendments thereto.
Nothing in this paragraph shall be construed to run counter to public policy as
set forth by the United States Securities and Exchange Commission.
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ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a President, a Secretary and a
Treasurer, each of whom shall be elected by the Directors. Such other officers
and assistant officers as may be deemed necessary may be elected or appointed by
the Directors.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the Directors shall be
elected annually at the first meeting of the Directors held after each annual
meeting of the stockholders. Each officer shall hold office until his successor
shall have been duly elected and shall have qualified or until his death or
until he shall resign or shall have been removed in the manner hereinafter
provided.
3. REMOVAL.
Any officer or agent elected or appointed by the Directors may be removed
by the Directors whenever in their judgment the best interests of the
corporation would be served thereby, but such removal shall be without prejudice
to the contract right, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation, removal,
disqualification or otherwise, may be filled by the Directors for the unexpired
portion of the term.
5. PRESIDENT.
The President shall be the principal executive officer of the corporation
and, subject to the control of the Directors, shall in general supervise and
control all of the business and affairs of the corporation. He shall, when
present, preside at all meetings of the stockholders and of the Directors. He
may sign, with the Secretary or any other proper officer of the corporation
authorized by the Directors, certificates for shares of the corporation, any
deeds, mortgages, bonds, contracts, or other instruments which the Directors
have authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Directors or by these by-laws to
some other officer or agent of the corporation, or shall be required by law to
be otherwise signed or executed; and in general shall perform all duties
incident to the office of President and such other duties as may be prescribed
by the Directors from time to time.
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6. SECRETARY.
The Secretary shall keep the minutes of the stockholders' and of the
Directors' meetings in one or more books provided for that purpose, see that all
notices are duly given in accordance with the provisions of these by-laws or as
required, be custodian of the corporate records and of the seal of the
corporation and keep a register of the post office address of each stockholder
which shall be furnished to the Secretary by such stockholder, have general
charge of the stock transfer books of the corporation and in general perform all
duties incident to the office of Secretary, preside at meetings in the absence
of the President perform such other duties as from time to time may be assigned
to him by the President or by the Directors.
7. TREASURER.
If required by the Directors, the treasurer shall give a bond for the
faithful discharge of his duties in such sum and with such surety as the
Directors shall determine. He shall have charge and custody of and be
responsible for all funds and securities of the corporation; receive and give
receipts for moneys due and payable to the corporation from any source
whatsoever, and deposit all such monies in the name of the corporation in such
banks, trust companies or other depositories as shall be selected in accordance
with these by-laws and in general perform all of the duties incident to the
office of treasurer and such other duties as from time to time may be assigned
to him by the President or by the Directors.
8. SALARIES.
The salaries of the officers shall be fixed from time to time by the
Directors and no officer shall be prevented from receiving such salary by reason
of the fact that he is also a Director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The Directors may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
2. LOANS.
No loans shall be contracted on behalf of the corporation and no evidences
of indebtedness shall be issued in its name unless authorized by a resolution of
the Directors. Such authority may be general or confined to specific instances.
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3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall be
signed by such officer or officers, agent or agents of the corporation and in
such manner as shall from time to time be determined by resolution of the
Directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositories as the Directors may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall be in such form
as shall be determined by the Directors. Such certificates shall be signed by
the President and by the Secretary or by such other officers authorized by law
and by the Directors. All certificates for shares shall be consecutively
numbered or otherwise identified. The name and address of the stockholders, the
number of shares and date of issue, shall be entered on the stock transfer books
of the corporation. All certificates surrendered to the corporation for transfer
shall be canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except that in case of a lost destroyed or mutilated certificate a new
one may be issued there for upon such terms and indemnity to the corporation as
the Directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, and cancel the old certificate; every such transfer shall be entered on
the transfer book of the corporation which shall be kept at its principal
office.
(b) The corporation shall be entitled to treat the holder of record of any
share as the holder in fact thereof, and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of the state of incorporation.
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ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the 1st day of January
in each year.
ARTICLE VIII - DIVIDENDS
The Directors may from time to time declare, and the corporation may pay,
dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law.
ARTICLE IX - SEAL
The Directors shall provide a corporate seal which shall be circular in
form and shall have inscribed thereon the name of the corporation, the state of
incorporation, year of incorporation and the words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is required to be
given to any stockholder, or Director of the corporation under the provisions of
these by-laws or under the provisions of the articles of incorporation, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.
ARTICLE XI - AMENDMENTS
These by-laws may be altered, amended or repealed and new by-laws may be
adopted by a vote of the stockholders representing a majority of all the shares
issued and outstanding, at any annual stockholders' meeting or at any special
stock holders' meeting when the proposed amendment has been set out in the
notice of such meeting.
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WARRANT TO PURCHASE
COMMON STOCK
OF
OVM INTERNATIONAL HOLDING, INC.
This is to certify that __________________________ (the "Holder") is
entitled, subject to the terms and conditions hereinafter set forth, to purchase
________________ shares of Common Stock, par value $.0001 per share (the "Common
Shares"), of OVM International Holding, Inc., a Nevada corporation (the
"Company"), from the Company at the price per share and on the terms set forth
herein and to receive a certificate for the Common Shares so purchased on
presentation and surrender to the Company with the subscription form attached,
duly executed and accompanied by payment of the purchase price of each share
purchased either in cash or by certified or bank cashier's check or other check
payable to the order of the Company.
The purchase rights represented by this Warrant are exercisable commencing
with the date hereof through and including _____________, 1998, at a price per
Common Share of $4.00, and commencing ________, 1999, at a price per Common
Share of $5.00.
The purchase rights represented by this Warrant are exercisable at the
option of the registered owner hereof in whole or in part, from time to time,
within the period specified; provided, however, that such purchase rights shall
not be exercisable with respect to a fraction of a Common Share. In case of the
purchase of less than all the Common Shares purchasable under this Warrant, the
Company shall cancel this Warrant on surrender hereof and shall execute and
deliver a new Warrant of like tenor and date for the balance of the shares
purchasable hereunder.
The Company agrees at all times to reserve or hold available a sufficient
number of Common Shares to cover the number of Common Shares issuable on
exercise of this and all other Warrants of like tenor then outstanding.
This Warrant shall not entitle the holder hereof to any voting rights or
other rights as a shareholder of the Company, or to any other rights whatever
except the rights herein expressed and such as are set forth, and no dividends
shall be payable or accrue in respect of this Warrant or the interest
represented hereby or the Common Shares purchasable hereunder until or unless,
and except to the extent that, this Warrant shall be exercised.
<PAGE>
In the event that the outstanding Common Shares hereafter are changed into
or exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of merger, consolidation, other
reorganization, recapitalization, reclassification, combination of shares, stock
split-up or stock dividend:
(a) The aggregate number, price and kind of Common Shares subject to
this Warrant shall be adjusted appropriately;
(b) Rights under this Warrant, both as to the number of subject
Common Shares and the Warrant exercise price, shall be adjusted appropriately;
and
(c) In the event of dissolution or liquidation of the Company or any
merger or combination in which the Company is not a surviving corporation, this
Warrant shall terminate, but the registered owner of this Warrant shall have the
right, immediately prior to such dissolution, liquidation, merger or
combination, to exercise this Warrant in whole or in part to the extent that it
shall not have been exercised.
The foregoing adjustments and the manner of application of the foregoing
provisions may provide for the elimination of fractional share interests.
The Company will file a registration statement under the Securities Act of
1933 (the "Act") with respect to the Warrants and the Common Shares underlying
this Warrant within 90 days of the date hereof. Such registration shall be at
the cost and expense of the Company for those costs and expenses normally borne
by issuers.
The Company shall not be required to issue or deliver any certificate for
Common Shares purchased on exercise of this Warrant or any portion thereof prior
to fulfillment of all the following conditions:
(a) The completion of any required registration or other
qualification of such shares under any federal or state law or under the rulings
or regulations of the Securities and Exchange Commission or any other government
regulatory body which is necessary;
(b) The obtaining of any approval or other clearance from any
federal or state government agency which is necessary;
(c) The obtaining from the registered owner of the Warrant, as
required in the sole judgment of the Company, a representation in writing that
the owner is acquiring such Common Shares for the owner's own account for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof, if the Warrants and the related shares have
not been registered under the Act; and
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(d) The placing on the certificate, as required in the sole judgment
of the Company, of an appropriate legend and the issuance of stop transfer
instructions in connection therewith if this Warrant and the related shares have
not been registered under the Act to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE LAWS OF ANY
STATE AND HAVE BEEN ISSUED PURSUANT TO AN EXEMPTION FROM
REGISTRATION PERTAINING TO SUCH SECURITIES AND PURSUANT TO A
REPRESENTATION BY THE SECURITY HOLDER NAMED HEREON THAT SAID
SECURITIES HAVE BEEN ACQUIRED FOR PURPOSES OF INVESTMENT AND MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF REGISTRATION. FURTHERMORE, NO OFFER, SALE, TRANSFER,
PLEDGE OR HYPOTHECATION IS TO TAKE PLACE WITHOUT THE PRIOR WRITTEN
APPROVAL OF COUNSEL OR THE ISSUER BEING AFFIXED TO THIS CERTIFICATE.
THE TRANSFER AGENT HAS BEEN ORDERED TO EXECUTE TRANSFERS OF THIS
CERTIFICATE ONLY IN ACCORDANCE WITH THE ABOVE INSTRUCTIONS."
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
the signature of its duly authorized officer.
OVM INTERNATIONAL HOLDING, INC.
By:______________________________
, President
Dated: ______________________
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SUBSCRIPTION FORM
(To be executed by the registered holder to exercise
the rights to purchase Common Shares evidenced by the
within Warrant.)
OVM INTERNATIONAL HOLDING, INC.
West 516 Sprague Avenue
Spokane, Washington 99204
The undersigned hereby irrevocably subscribes for __________ Common Shares
pursuant to and in accordance with the terms and conditions of this Warrant, and
herewith makes payment of $__________ therefor, and requests that a certificate
for such Common Shares be issued in the name of the undersigned and be delivered
to the undersigned at the address stated below, and if such number of shares
shall not be all of the shares purchasable hereunder, that a new Warrant of like
tenor for the balance of the remaining Common Shares purchasable hereunder shall
be delivered to the undersigned at the address stated below.
Dated:_______________________ Signed:_______________________________
Address:______________________________
______________________________
______________________________
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
Direct Line: (954) 766-7858
May 12, 1997
OVM International Holding Corp.
West 516 Sprague Avenue
Spokane, Washington 99204
Re: Registration Statement on Form SB-2; OVM International Holding
Corp. (the "Company"), 4,050,000 Shares of Common Stock
Gentlemen:
This opinion is submitted pursuant to the applicable rules of the
Securities and Exchange Commission with respect to the registration by the
Company of 4,050,000 shares of Common Stock, par value $.01 per share (the
"Common Stock") to be sold by the Selling Security Holders designated in the
Registration Statement. The shares of Common Stock to be sold include up to
4,000,000 shares of Common Stock issuable upon exercise of Common Stock Purchase
Warrants (the "Warrants").
In our capacity as counsel to the Company, we have examined the original,
certified, conformed, photostat or other copies of the Company's Certificate of
Incorporation (as Amended), By-Laws, the Company's Confidential Term Sheet,
subscription documents, the Warrants and corporate minutes provided to us by the
Company. In all such examinations, we have assumed the genuineness of all
signatures on original documents, and the conformity to originals or certified
documents of all copies submitted to us as conformed, photostat or other copies.
In passing upon certain corporate records and documents of the Company, we have
necessarily assumed the correctness and completeness of the statements made or
included therein by the Company, and we express no opinion thereon.
<PAGE>
OVM Holding International Corp.
May 12, 1997
Page 2
Based upon and in reliance of the foregoing, we are of the opinion that
the Common Stock previously issued and to be issued upon exercise of the
Warrants, when issued in accordance with the terms of the Warrants, will be
validly issued, fully paid and non-assessable.
We hereby consent to the use of this opinion in the Registration Statement
on Form SB-2 to be filed with the Commission.
Very truly yours,
ATLAS, PEARLMAN, TROP & BORKSON, P.A.
JOINT VENTURE CONTRACT
Chapter 1. General Provisions
In accordance with the "Law of the People's Republic of China on
Chinese-Foreign Equity Joint Ventures" and relevant Chinese laws and
regulations, LIUZHOU OVM JOINT STOCK CO., LTD. (formerly Liuzhou Construction
Machinery General Factory) and KOLCARI INVESTMENTS LIMITED (a British Virgin
Islands company), adhering to the principle of equality and mutual benefit and
through friendly consultations, agree to jointly invest to set up a joint
venture enterprise in Liuzhou, Guangxi Zhuang Autonomous Region, the People's
Republic of China ("PRC" or "China"), and hereby enter into this Joint Venture
contract (the "Contract").
Chapter 2. Parties to the Joint Venture
Article 1.
Parties to this Contract are as follows:
LIUZHOU OVM JOINT STOCK CO., LTD (hereinafter referred to as Party A),
registered in Guangxi Zhuang Autonomous Region, China, and having its legal
address at 3 Longquan Road, Liuzhou city, guangxi Zhuang Autonomous Region, PRC.
Name of legal representative: Wu Guo Sen
Position: Director
Nationality: Chinese
KOLCARI INVESTMENTS LIMITED (hereinafter referred to as Party
B) incorporated in the British virgin Islands and having its legal
address at P.O. Box 71, Criagmuir Chambers, Road Tortola, British
Virgin Islands.
Name of legal representative: Ching Lung Po
Position: Managing Director
Nationality: Chinese
Chapter 3. Establishment of the Joint Venture Company
Article 2.
In accordance with the "Law of the People's Republic of China on
Sino-Foreign Equity Joint Ventures" and other relevant laws and regulations,
both parties to the Joint Venture agree to set up LIUZHOU OVM CONSTRUCTION
MACHINERY CO., LTD. a joint venture limited liability company (hereinafter
referred to as the "Joint Venture Company").
<PAGE>
Article 3.
The name of the Joint Venture is LIUZHOU OVM CONSTRUCTION MACHINERY CO.,
LTD.
The Chinese language is ______________________________.
The Legal address of the Joint Venture company is at 3 Longquan Road,
Liuzhou City, Guangxi Zhuang Autonomous Region, PRC.
Article 4.
All activities of the Joint Venture company shall be governed by the laws
and pertinent rules and regulations of the People's Republic of China.
Article 5.
The Joint Venture Company shall be a limited liability company. Each party
to the Joint Venture Company is liable to the Joint Venture Company within the
limit of the capital subscribed by it. The profits, risks and losses of the
Joint Venture Company shall be shared by the parties in proportion to their
contributions of the registered capital.
Chapter 4. The Purpose, Scope and Scale of Production and Business
Article 6.
The purpose of the Joint Venture Company is to enhance the economic
cooperation and technical exchange between the parties, to improve products
quality, develop new products, and to gain competitive position in the world
market by adopting advanced and appropriate technology and scientific management
method, so as to raise economic efficiency and ensure satisfactory economic
benefits for both parties.
Article 7.
The business scope of the Joint Venture Company is to produce and market
all kinds of construction machinery, bridge anchorages, stay cable and stressing
jacks and installation and construction of steel-structured bridge, etc.
Article 8.
The production scale of the Joint Venture Company is to realize an annual
sales of around RMB 1-2 billion from the sale of all kinds of construction
machinery, bridge anchorages, stay cable and stressing jacks.
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Chapter 5. Total Amount of Investment and the Registered Capital
Article 9.
The total amount of investment of the Joint Venture Company is US
$6,000,000.
Article 10.
Investment contributed by the parties shall be US $4,000,000 which shall
be the registered capital of the Joint Venture Company.
Of which: Party A shall contribute Rmb 10,200,000 or US $1,200,000 which
shall account for 30% of the registered capital; Party B shall contribute US
$2,800,000, which shall account for 70% of the registered capital.
Article 11.
Both Party A and Party B shall contribute the following as their
investment:
Party A: par to fits existing assets (premises, plan and equipment) valued
at Rmb 10,200,000 or US $1,200,000 in accordance with the method and procedure
adopted by the government (see Appendix).
Party B: cash of US $2,800,000.
Article 12.
The registered capital of the Joint Venture company shall be paid in three
installments by Party A and Party B according to their respective share of the
investment.
The three installment shall be paid as follows:
First installment: Each party should pay 15% of its capital subscribed
within 60 days after the date of registration of the Joint Venture company.
Second installment: Each party should pay 55% of its capital subscribed
within 180 days after the date of registration of the Joint Venture company.
Third installment: Each party should pay the remaining 30% of its capital
subscribed within 360 days after the date of registration of the Joint Venture
Company.
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Article 13.
In case any party to the Joint Venture intends to assign all or part of
its capital subscribed to a third party, prior written consent shall be obtained
from the other party to the Joint Venture and approval from the original
examination and approval authority is required.
When one party to the Joint Venture intends to assign all or part of its
subscribed capital, the other party has preemptive right.
Chapter 6. Compensation for Use of Intangible Assets, Equipment and Plants
Article 14.
The intangible assets (including Party A's registered trademark, goodwill,
patents and the existing unique production technique and technology etc.) owned
by Party A shall be put in use and properly compensated by the Joint Venture
Company. Both parties to the Joint Venture shall negotiate and conclude an
agreement concerning the amount of compensation to Party A in relation to the
use of the intangible assets by the Joint Venture Company.
Article 15.
For those intangible assets such as jointly developed new products,
registered patent technology and trademark that are developed by the Joint
Venture Company after the establishment of the Joint Venture shall belong to the
Joint Venture Company. Neither party is allowed to transfer the foregoing
intangible assets to any third party without the mutual consent of both parties
to the Joint Venture.
Article 16.
For those fixed assets that are owned by Party A and have not yet been
injected into the Joint Venture Company may be used by the Joint Venture Company
for production purpose by entering into a lease with Party A. The rental rates
shall be determined through negotiation between both parties to the Joint
Venture and should be governed by a separate agreement.
Article 17.
Land Use Fee: As Party A owns the land use right in which the Joint
Venture operations are located, the Joint Venture Company shall lease the right
to use the land from Party A by paving an annual rental of RMB 1.5/sq.m. The
area of land use right under the lease is estimated to be approximately 40,000
sq.m.
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Chapter 7. Profit Distribution and Loss Assumption
Article 18.
The parties to the Joint Venture shall contribute capital in proportion to
their respective share of total registered capital and shall accordingly share
the profit and losses of the Joint Venture in proportion to their respective
share of the total registered capital. In principle, the parties to the Joint
Venture shall share profits and losses for every fiscal year in proportion to
their respective share of the total registered capital until the termination or
expiration of the Joint Venture Company.
Chapter 8. Responsibilities of Each Party to the Joint Venture
Article 19.
The parties to the Joint Venture shall assume the following
responsibilities:
Party A:
(1) To apply for and secure approval, registration, business license and
other government authorizations concerning the establishment of the Joint
Venture Company;
(2) to provide part of the assets (including the liabilities) in
accordance with the provisions in Article 11 and Article 12 of this Contract and
submit to the relevant authorities for examination and approval;
(3) To warrant that the financial statements of Party A have fully
disclosed all assets and liabilities of Party A prior to the establishment of
the Joint Venture Company and the financial statements should be audited by an
overseas auditors engaged by Party B. Any liabilities that are not reflected in
the financial statements of Party A prior to the establishment of the Joint
Venture shall be borne by Party A:
(4) To warrant that the property rights for all assets injected into the
Joint Venture are complete, no third party is entitled to any property right
therein or claims any property rights;
(5) To appoint the Joint Venture Company to undertake the manufacture and
marketing businesses originally undertaken by Party A. After its establishment
the Joint Venture Company shall enter into a separate agreement with the parties
concerned to govern this arrangement;
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(6) To warrant the recoverability of all the accounts receivables and
other receivables that were injected into the Joint Venture Company by Party A
and which arose before the formal registration and establishment of the Joint
Venture Company Any bad debts arising therefrom shall be borne by Party A. Party
A agrees, after the formal registration and establishment of the Joint Venture,
to conclude a relevant agreement with the Joint Venture or, to enter into an
arrangement upon the mutual consent of both parties to the Joint Venture, to
warrant that any accounts receivable and other receivables of Party A, which
arose prior to the formal registration and establishment of the Joint Venture,
shall be recovered within 12 months following the formal establishment of the
Joint Venture Company; any amounts which cannot be recovered within the
designated 12-month period shall be charged against the accounts payable to
Party A by the Joint Venture Company.
(7) To recommend to or to assist the Joint Venture Company to recruit
local Chinese managerial personnel, technical personnel, workers and other
personnel as needed;
(8) To assist Party B's expatriate staff in handling matters like
obtaining provisional residence cards, work permits and other traveling matters;
(9) To handle other matters entrusted to it by the Joint Venture Company.
(10) To provide cash contribution in accordance with the provisions in
Article 11 and Article 12 of this Contract;
(11) To assist the Joint Venture Company to purchase the machinery,
equipment and materials outside China as authorized by the Joint Venture;
(12) to promote and market products and to procure engineering contracts
outside China on behalf of the Joint Venture Company;
(13) To provide needed technical personnel, as determined by the Joint
Venture Company, for installing, testing and trial production of the machinery
and equipment;
(14) To assist in training senior managerial personnel, marketing
personnel and financial accounting personnel of the Joint Venture Company and
also to train technical personnel and workers for the Joint Venture Company;
(15) To organize the procurement of raw materials outside China; and
(16) To handle other matters entrusted to it by the Joint Venture Company.
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Chapter 9. The Board of Directors
Article 20.
The Joint Venture Company shall establish a Board of Directors. The date
of registration of the Joint Venture Company shall be the date of the
establishment of the Board of Directors of the Joint Venture Company.
Article 21.
The Board of Directors shall consist of 7 Directors, of which 3 shall be
appointed by Party A and 4 by Party B. The Chairman of the Board shall he
appointed by Party B and the Vice-Chairman by Party A. The term of office for
the Directors, Chairman and Vice-- Chairman shall be three years, their term of
office may be renewed upon re-appointment by the original appointing party.
Article 22.
The highest authority of the Joint Venture Company shall he the Board of
Directors. It shall have the power to decide all major issues concerning the
Joint Venture Company. Resolution on the following matters shall require
unanimous agreement among Directors present at the Board meeting:
(1) formulating or amending the Articles of Association for the Joint
Venture Company;
(2) terminating and dissolution of the Joint Venture Company;
(3) increase or assignment of the registered capital of the Joint Venture
Company; and
(4) merger of the Joint Venture Company with other economic organization.
Resolution on all other matters shall require the approval by a simple
majority of the Board of Directors.
Article 23.
The Chairman of the Board is the legal representative of the Joint Venture
Company. Should the Chairman be unable to exercise his duties for any reason,
the Chairman shall authorize the Vice-Chairman or any other Directors to
represent the Joint Venture Company temporarily.
Article 24.
The Board of Directors shall convene at least one meeting ever year. The
meeting shall he called and presided over by the Chairman of the Board. The
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Chairman may convene an interim meeting if an interim meeting is proposed by at
least one-third of the Directors. Minutes of the meetings shall be properly kept
in the Joint Venture Company's file.
The Board meeting will principally he held at the location of the Joint
Venture.
Chapter 10. Supervisory Board
Article 25.
The Joint Venture Company shall establish a supervisory board which shall
consist of 3 persons, one appointed by each party to the Joint Venture and one
from the staff and workers of the Joint Venture Company. The first Chairman of
the supervisory hoard will he recommended by Party A.
Article 26.
The term of office for the supervisory board shall be three years, which
may be renewed re-appointment by the original appointing part.
Chapter 11. Business Management Office
Article 27.
The Joint Venture Company shall establish a management office which shall
be responsible for its daily management. The management office shall have a
General Manager and several Deputy General Managers. The first General Manager
shall he nominated by Party A and appointed by the Board with a term of office
of three years, and the Deputy General Managers shall he nominated by the
General Manger and appointed by the Board.
Article 28.
The responsibility of the General Manager is to carry out the decisions of
the Board meeting and to manage the daily operation of the Joint Venture
Company. The Deputy General Managers shall assist the General Manager in his
work.
The Management office may set up various departments and appoint
Departmental Managers, who shall be responsible for managing matters within the
respective department and matters handed over by the General Manager. Department
Managers shall be responsible to the General Manager.
In case of graft or serious dereliction of duty on the part of the General
Manager and Deputy General Managers, the Board of Directors shall have the power
to dismiss them at any time.
8
<PAGE>
Chapter 12. Purchase of Equipment
Article 29.
In the purchase of required raw materials, fuel, parts means of
transportation and articles for office use, the Joint Venture Company shall give
first priority to purchase in China where the conditions concerning such
purchase are the same.
Article 30.
In case the Joint Venture Company entrusts Party B to purchase equipment
from overseas suppliers, the Joint Venture Company shall invite Party A to
participate in the purchase.
Article 31.
The equipment means of transportation, raw materials, parts and articles
for office use purchased from overseas suppliers by the Joint Venture Company
shall be inspected by the Commodity Inspection Department of China in accordance
with the Regulation of the Commodity Inspection of PRC.
Chapter 13. Preparation and Construction
Article 32.
During the period of preparation and incorporation of the Joint Venture
Company, a provisional office shall be established under the Board of Directors.
The provisional office shall consist of three persons. Out of which two will be
appointed by Party A and one from Party B. The provisional office shall have one
Manager nominated by Party A and one Deputy Manager nominated by Party B. The
Manager and Deputy Manager shall be appointed by the Board of Directors.
Article 33.
The provisional office shall be responsible for the establishment of the
Joint Venture Company, such as submitting an application to the relevant
authorities for approval and procurement the business license from the relevant
Chinese authorities.
Chapter 14. Labor Management
Article 34.
Labor contract concerning employment, dismissal and resignation, wages,
labor insurance, welfare, rewards, penalty and other matters of the staff and
workers of the Joint Venture Company shall be drawn up between the Joint Venture
Company and the Trade
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<PAGE>
Venture Company shall he drawn up between the Joint Venture Company between the
Joint Venture company and the Trade Union of the Joint Venture company as a
whole, or individual employees in accordance with the "Regulations of the
People's Republic of China on Labor Management in Sino-Foreign Equity Joint
Ventures and its Implementation Rules."
The labor contracts shall, after being signed, be filed with the Liuzhou
Labor Management Department.
Articles 35.
The appointment of senior administrative personnel nominated by both
parties to the Joint Venture Company, their salaries, social insurance, welfare,
benefits and the traveling expenses shall he decided by the Board of Directors.
Chapter 15. Taxes, Finance and Audit
Article 36.
The Joint Venture Company shall pay taxes in accordance with the
provisions of Chinese laws and other relevant regulations.
Article 37.
Staff members and workers of the Joint Venture Company shall pay
individual income tax in accordance with the "Individual Income Tax Law of the
People's Republic of China".
Article 38.
The reserve fund, the welfare and bonus fund for staff and workers, and
the development fund of the Joint Venture Company shall be appropriated by the
Joint Venture Company in accordance with the provisions of the "Law of the
People's Republic of China on Sino-Foreign Equity Joint Venture" and relevant
regulations. The amount of such appropriations shall be decided by the Board of
Directors according to the business financial conditions of the Joint Venture
Company.
After taxes are paid and the various funds are appropriated, the remaining
profits may be distributed between the parties according to the proportion of
each party's share in the registered capital.
Article 39.
The finance and accounting system and the organization of the finance and
accounting department of the Joint Venture Company shall be formulated in
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accordance with the "Stipulations of the Finance and Accounting System of the
Sino-Foreign Equity Joint Venture" and relevant regulations.
The finance and accounting system shall be filed to the Liuzhou Finance
and Taxes Bureau for record.
Chapter 16. Duration of the Joint Venture
Article 40.
The duration of the Joint Venture Company is 30 years. The establishment
of the Joint Venture Company shall continence from the date on which the
business license of the Joint Venture Company is issued.
An application for the extension of the duration, proposed by one party
and unanimously approved by the Board of Directors, shall be submitted to the
original examination and approval authority six months prior to the expiry date
the Joint Venture Company.
Chapter 17. The Disposal of Assets After the Expiration of the Duration
Article 41.
Upon the expiration of the duration or termination before the date of
expiration of the Joint Venture Company, liquidation shall be carried out
according to the relevant Chinese law. The liquidated assets shall be
distributed in accordance with the proportion of the respective share of the
total registered capital by each party.
Chapter 18. Insurance
Article 42.
Insurance policies of the Joint Venture Company, on various kinds of risks
shall be underwritten by the People's Insurance Company of China. Types, value
and duration of the insurance shall be decided bs the Board of Directors in
accordance with the provisions of the People's Insurance Company of China.
Chapter 19. The Amendment, Alteration and Discharge of the Contract
Article 43.
Any amendment of the Contract or other appendices shall come into force
only after a written agreement is signed by both Party A and Party B and
approved by the original examination and approval authority.
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Article 44.
In case of inability to implement the Contract or continue the operations
of the Joint Venture Company due to heavy losses or force majeure, the duration
of the Joint Venture Company and the Contract shall be terminated before the
time of expiration after such termination is unanimous agreed upon by the Board
of Directors and approved by the original examination and approval authority.
Article 45.
Should the Joint Venture Company be unable to continue its operations or
achieve the business purpose stipulated in the Contract due to the fact that one
of the contracting parties fails to fulfil the obligations prescribed by the
Contract and the Articles of Association, or seriously violate the Stipulations
of the Contract and Articles of Association, the defaulting party shall be
deemed as unilaterally terminates the contract. The other party shall have the
right to terminate the contract in accordance with the provisions of the
Contract after such termination is approved by the original examination and
approval authority and shall also have the right to claim damages against the
defaulting party. In case Party A and Party B of the Joint Venture company agree
to continue the operation, the defaulting party shall be liable to the economic
losses incurred by the Joint Venture Company as a result of such default.
Chapter 20. Liabilities for Breach of Contract
Article 46.
Should any Party fails to pay the contributions in accordance with the
provisions defined in Chapter 5 of this Contract, the defaulting party shall pay
to the other party a compensation equal to 2% of its prescribed contributions
commencing from the first month after the designated period of contribution.
Should the defaulting party fail to pay 6 months after the designated period of
contribution, an amount equal to 12% of its prescribed contribution shall be
payable by the defaulting party to the other party, who shall also have the
right to terminate the contract and to claim damages from the defaulting party
in accordance with the stipulations in Article 46 of the Contract.
Article 47.
If all or part of the Contract and its appendices be unable to be
fulfilled owing to the fault of one party. The defaulting party shall bear the
responsibilities thus caused. Should it be the fault of both parties, they shall
bear their respective responsibilities according to actual circumstances.
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Chapter 21. Force Majeure
Article 48.
Should either party to the Contract he prevented from performing the
Contract by force majeure, such as earth-quake, typhoon, flood, fire, war and
other unforeseen events and their occurrence and consequences are unpreventable
and unavoidable, the party affected by such event shall notify the other party
by telex without any delay and within 15 days, the party affected by such event
should provide the detailed information of the events and a valid evidencing
document issued by the relevant public notary organization to explain the reason
of its inability to perform or delay the performance of part of the Contract.
Both parties shall through consultations, decide whether or not to terminate the
Contract or to exempt all or part of their respective obligations under the
Contract or whether to delay the performance of the Contract.
Chapter 22. Applicable Law
Article 49.
The formulation of this Contract, its validity, interpretation, execution
and settlement of the disputes shall be governed by the relevant laws of the
People's Republic of China.
Chapter 23. Settlement of Disputes
Article 50.
Any disputes arising from the performance of, or in connection with the
Contract shall be settled through friends consultations between both parties.
Failing which, the disputes shall be submitted to the Foreign Economic and Trade
Arbitration Commission of the China Council for the Promotion of International
Trade in accordance with its rules and procedures. The arbitral award is final
and binding upon both parties. The fee for arbitration shall be paid by the
party against whom the decision is rendered.
Article 51.
During the arbitration, the Contract shall continue to be performed by
both parties except for matters in disputes.
Chapter 24. Effectiveness of the Contract and Miscellaneous
Article 52.
The appendices drawn up in accordance with the principles of this Contract
are integral part of this Contract, including the Articles of Association.
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Article 53.
The Contract and its appendices shall come into force beginning from the
date of registration and approval by the examination and approval authority of
Liuzhou government.
Article 54.
The Contract is signed in Liuzhou City, Guangxi Zhuang Autonomous Region,
China.
Article 55.
The Contract is signed in Liuzhou City, Guangxi Zhuang Autonomous Region,
China by the authorized representatives of both parties on April 18, 1995.
Party A: Party B:
LIUZHOU OVM JOINT STOCK KOLCARI INVESTMENTS LIMITED
CO., LTD.
By:_______________________ By:__________________________
Wu Guo Sen Ching Lung Po
Dated: April 18, 1995
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Articles of Association for Sino-Foreign
Equity Joint Venture
Chapter 1. General Provisions
Article 1.
In accordance with the "Law of the People's Republic of China on
Sino-Foreign Equity Joint Ventures", the Joint Venture Contract signed on April
18, 1995, by LIUZHOU OVM JOINT STOCK CO., LTD. (hereinafter referred to as Party
A) and KOLCARI INVESTMENTS LIMITED, a British Virgin Islands Company
(hereinafter referred to as Party B) and the articles of association for the
Sino-Foreign Joint Venture (hereinafter referred to as the Joint Venture) hereby
is formulated.
Article 2.
The name of the Joint Venture shall be LIUZHOU OVM CONSTRUCTION MACHINERY
CO. LTD.
Its name in Chinese language is ___________ (OVM) ___________
The legal address of the Joint Venture is at 3 Longquan Road, Liuzhou
City, Guangxi Zhuang Autonomous Region, P.R.C.
Article 3.
The names and legal address of the parties to the Joint Venture are as
follows:
Party A:
Name: LIUZHOU OVM JOINT STOCK CO., LTD.
Legal address: 3 Longquan Road, Liuzhou City,
Guangxi Zhuang
Autonomous Region, PRC
Name of legal
representative: Wu Guo Sen
Position: Director
Nationality: Chinese
Party B:
Name: KOLCARI INVESTMENTS LIMITED
Legal address: P.O. Box 71, Craigmuir Chambers,
Road Town,
Tortola, British Virgin Islands
<PAGE>
Name of legal
representative: Ching Lung Po
Position: Director and General Manager
Nationality: Chinese
Article 4.
The Joint Venture is a limited liability company.
Article 5.
The Joint Venture has the status of a legal person and is subject to the
jurisdiction and protection of Chinese law concerned. All its activities shall
be governed by Chinese laws, other pertinent rules and regulations.
Chapter 2. Purpose and Scope of Business
Article 6.
The purpose of the Joint Venture is to improve the product quality,
develop new products, and gain competitive position in the world market in
quality and price by adopting advanced and appropriate technology and scientific
management methods, so as to raise economic results and ensure satisfactory
economic benefits for each investor.
Article 7.
The business scope the Joint Venture is to manufacture and market all
kinds of construction machinery, bridge anchorage, stay cable, bridge stressing
jacks and installation and construction of steel-structure bridges, etc.
Article 8.
The production scale of the Joint Venture is to achieve an annual sales of
around 1-2 billion RMB Yuan from the sale of all kinds of construction
machinery, bridge anchorage, stay cable and stressing jacks.
Chapter 3. The Total Amount of Investment and the Registered Capital
Article 9.
The total amount of investment of the Joint Venture is USD 6,000,000. Its
registered capital is USD 4,000,000.
2
<PAGE>
Article 10.
The capital contributed by each part is as follows:
Party A shall contribute RMB 10,200,000 Yuan or USD 1,200,000, which shall
account for 30% of the registered capital.
Party B shall contribute USD 2,800,000, which shall account for 70% of the
registered capital.
Article 11.
Both parties shall contribute the capital respectively subscribed in
accordance with the provision of the Joint Venture Contract.
Article 12.
After the capital is paid by the parties to the Joint Venture, a Chinese
registered accountant engaged by the Joint Venture shall verify such paid-in
capital and provide a certificate of verification. According to this
certificate, the Joint Venture shall then issue an investment certificate which
includes the following items: name of the Joint Venture; date of the
establishment of the Joint Venture; names of the parties and the capital
contributed; date of the contribution of the capital, and the date of the
issuance of the investment certificate.
Article 13.
During the term of the Joint Venture, the Joint Venture shall not reduce
its registered capital.
Article 14.
Any increase of the registered capital of the Joint Venture Company shall
be approved by both parties to the Joint Venture and submitted to the original
examination and approval authority for approval.
Article 15.
Should one party assign all or part of its capital subscribed, consent
shall be obtained from the other party of the Joint Venture. When one party
intends to assign its subscribed capital, the other party has preemptive right.
Article 16.
Any increase, assignment of the registered capital of the Joint Venture
shall be approved by the Board of Directors and submitted to the original
3
<PAGE>
examination find approval authority for approval. The registration procedures
for changes shall be dealt with at the original registration and administration
office.
Chapter 4. The Board of Directors
Article 17.
The Joint Venture shall establish a Board of Directors which is the
highest authority of the Joint Venture.
Article 18.
The Board of Directors shall decide all major issues concerning the Joint
Venture. Its functions and powers are as follows:
(1) deciding and approving the important reports submitted by the general
manager (for instance: production plan, annual business report, funds, supply,
sales, etc.);
(2) approving annual financial reports budget of receipts and expenditures
distribution plan of annual profits;
(3) adopting major rules and regulations of the Joint Venture;
(4) signing labor contracts;
(5) deciding to set up branches;
(6) mending the articles of association of the Joint Venture;
(7) discussing and deciding the termination of production termination of
the Joint Venture or merging of the Joint Venture with another economic
organization;
(8) deciding the engagement of high-rank officials such as the general
manager' the deputy general manager, chief engineer, treasurer;
(9) handling the liquidation matters upon the expiration or termination of
the Joint Venture; and
(10) other major issues which shall be decided by the Board of Directors.
Article 19.
The Board of Directors shall consist of 7 Directors, of which 3 shall be
appointed by Party A and 4 by Party B. The term of office for the Directors is
three years and may be renewed.
4
<PAGE>
Article 20.
Chairman of the Board shall be appointed by Party B and Vice- Chairman of
the Board by Party A.
Article 21.
Any of the Directors may be removed bs its appointing party and replaced
at any time provided that the Board of Directors shall be notified of such
removal and replacement.
Article 22.
The Board of Directors shall convene at least one meeting every year. An
interim meeting of the Board of Directors may be held based on a proposal made
by more than one third of the total number of directors.
Article 23.
The Board meeting will in principally be held at the location of the Joint
Venture.
Article 24.
The Board meeting shall be called and presided by the Chairman. Should the
Chairman be absent, the Vice-Chairman shall call and preside the Board meeting.
Article 25.
The Chairman shall give each Director a written notice 30 class before the
date of the Board meeting. The notice shall contain the agenda, time and place
of the meeting.
Article 26.
Should any director be unable to attend the Board meeting, he may present
a proxy in written form to the Board. In case the director fails to attend or
appoint a proxy, he will be regarded as abstention.
Article 27.
The Board meeting requires a quorum of over two thirds of the total number
of Directors. If the quorum is less than two thirds, the decisions adopted by
the Board at such meeting shall be invalid.
5
<PAGE>
Article 28.
Detailed written records shall be made for each Board meeting and signed
by all the Directors attended in person or by proxy. The record shall be made in
Chinese and be kept in the Joint Venture's files by the person specially
assigned by the Board and must not be altered or destroyed by anyone during the
term of the Joint Venture.
Article 29.
The following matters shall be unanimously agreed upon and decided by the
Board of Directors attending the Board meeting:
(1) The formulation and amendment of the Articles of association of the
Joint Venture;
(2) The termination and dissolution of the Joint Venture:
(3) Any increase or assignment of the registered capital of the Joint
Venture.
(4) The merger of the Joint Venture with other economic organization.
Article 30.
The other matters except those mentioned in Article 29 shall be passed by
over of the Board members.
Chapter 5. Supervisory Board
Article 31.
A supervisory board shall be established in the Joint Venture. The
supervisory board shall consist of three persons, of which one will be nominated
by each Joint Venture partner and the remaining one from the staff and workers
of the Joint Venture.
Article 32.
The supervisory board has the following rights:
(1) to examine the financial affairs of the Joint Venture:
(2) to supervise the act of the Directors and managers in carrying out the
business operations of the Joint Venture so that their acts will not contravene
any laws, regulations, and the Joint Venture's Articles of Association;
6
<PAGE>
(3) to demand the rectification of the acts of the directors or the
managers if their act is detrimental to the benefit of the company;
(4) to propose to convene a provisional special meeting of the Directors:
(5) to perform other duties as provided by the Articles of Association of
the Joint Venture.
The supervisors are entitled to attend the Directors' meetings as
non-voting delegates.
Article 33.
The Directors, the General Manager, the Deputy General Manager, and
personnel from the financial department of the Company are not allowed to join
the supervisory board.
Chapter 6. Business Management Organization
Article 34.
The Joint Venture shall establish a management organization which will be
set up in accordance with the decision of the Board meeting.
Article 35.
The Joint Venture shall have one General Manager and several Deputy
General Managers who are engaged by the Board of Directors. The first General
Manager shall be nominated by Party A, and appointed by the Board of Directors.
The Deputy General Managers shall be nominated by the General manager and
appointed by the Board.
Article 36.
The General Manager is directly responsible to the Board of Directors. He
shall carry out the decisions of the Board of Directors, organize and conduct
the daily management of the Joint Venture. The Deputy General Managers shall
assist the General Manager in his work and act as the authorized representative
of the General Manager during his absence and exercise the functions of the
General Manager.
Article 37.
Decisions on the major issues concerning the day-to-day operations of the
Joint Venture shall be signed jointly by the General Manager and any one of the
Deputy General Managers. Issues which need co-signatures shall be specifically
stipulated by the Board of Directors.
7
<PAGE>
Article 38.
The initial term of office for the General Manager and Deputy General
managers shall be 3 years and may be renewable at the recommendation of the
Board of Directors.
Article 39.
At the recommendation of the Board of Directors, the Chairman,
Vice-Chairman or Directors of the Board may take executive position as the
General Manager, Deputy General Managers or other high- ranking personnel of the
Joint Venture.
Article 40.
The General Manager and Deputy General Manager shall not hold posts
concurrently as general manager or deputy general managers of other economic
entities in competition with the Joint Venture Company.
Article 41.
The General manager, Deputy General Managers, and other high- ranking
personnel who ask for resignation shall submit their written resignation reports
to the Board of Directors 30 days in advance.
In case any one of the above-mentioned persons conduct graft or serious
dereliction of duty, they may be dismissed at any time upon the decision of the
Board of Directors. Those who violate the criminal law shall be under criminal
sanction.
Chapter 6. Finance and Accounting
Article 42.
The finance and accounting of the Joint Venture shall be handled in
accordance with the "Stipulations of the Finance and Accounting System of the
Sino-Foreign Equity Joint Ventures" and other relevant regulations.
Article 43.
The fiscal year of the Joint Venture shall coincide with the calendar
year, i.e. from January 1 to December 31 on the Gregorian calendar.
Article 44.
All vouches, account books, statements and reports of the Joint Venture
Company shall be written in Chinese.
8
<PAGE>
Article 45.
The Joint Venture adopts Renminbi ("RMB") as its accounts keeping unit.
The conversion of RMB into other currency shall be in accordance with the
exchange rate at the date of conversion published by the State Administration of
Exchange Control of the People's Republic of China.
Article 46.
The Joint Venture shall open bank accounts in RMB and foreign currency
with the Bank of China and or other banks agreed by the Bank of China.
Article 47.
The Joint Venture shall adopt internationally used accrual basis and debit
and credit accounting system in preparation of its accounts.
Article 48.
The following items shall be included in the financial accounts books:
(1) All cash receipts and expenses of the Joint Venture;
(2) All purchases and sales of materials purchasing by the Joint Venture;
(3) The registered capital and indebtedness condition of the Joint
Venture;
(4) The time of payment, increase and assignment of the registered capital
of the Joint Venture.
Article 49.
The Joint Venture shall complete the balance sheet, the loss or profit
statement for the previous fiscal year within the lust three months of each
fiscal year, and shall then submit such financial statements to the Board
meeting for approval after having been examined and signed by the auditor.
Article 50.
Each party to the Joint Venture has the right to engage an auditor to
undertake annual review and examination of the accounting books and records of
the Joint Venture Company at its own expense. The Joint Venture shall provide
cooperation.
9
<PAGE>
Article 51.
The depreciation period for the fixed assets of the Joint Venture Company
shall be decided by the Board of Directors in accordance with the "Rules for the
Implementation of the Income Tax Law of the People's Republic of China
Concerning Sino-Foreign Equity Joint Ventures."
Article 52.
The matters concerning foreign exchange shall be handled in accordance
with the "Provisional Regulations for Exchange Control of the People's Republic
of China," and other pertaining regulations as well as the stipulations of the
Joint Venture Contract.
Chapter 7. Profits Sharing
Article 53.
The Joint Venture Company shall make appropriation to reserve funds,
expansion funds and the welfare and bonus fund for staff and workers from
distributable profits after income taxes. The amounts of such appropriations is
decided by the Board of Directors.
Article 54.
After taxes are paid and the various funds are appropriated, the remaining
profits may be distributed between the parties according to the proportion of
each party's share in the registered capital, except when the Board of Directors
unanimously agree otherwise.
Article 55.
A profit distribution plan shall be determined by the Board of Directors
and published within the first three months of each first fiscal year with
respect to profits attributed to the immediately preceding fiscal year.
Article 56.
The Joint Venture shall not distribute profits unless the losses of prior
fiscal year have been made up. Undistributed profits from the prior years can be
distributed together with that of the current year.
10
<PAGE>
Chapter 9. Staff and Workers
Article 57.
The employment and dismissal of the staff and workers of the Joint Venture
and their salaries, welfare benefits, labor insurance and protection, and other
matters shall be handled in accordance with the "Regulations of the People's
Republic of China on Labor Management in Sino-Foreign Equity Joint Ventures" and
its implementation rules.
11
<PAGE>
Article 58.
The staff and workers to be employed by the Joint Venture will be
recruited through public selection examinations. The staff and workers of Party
A shall have the preemptive right.
Article 59.
The Joint Venture has the right to take disciplinary actions, concluding
demerit, salary reduction, against any employee who violates the rules and
regulations of the Joint Venture. Dismissal shall be used only in serious case
and a report thereof shall be filed with local labor administrative authority.
Article 60.
The salaries of the employees shall be determined by the Board of
Directors according to the business conditions of the Joint Venture, and the
laws and regulations of China, and shall be specified in detail in the labor
contract. The salary of the staff and workers shall be increased correspondingly
with the development of production and the improvement of the production
capability of the staff and workers.
Article 61.
Matters concerning the welfare, bonuses, labor protection, insurance, etc.
shall be stipulated respectively in various rules of the Joint Venture to ensure
that the staff and workers are working under normal conditions.
Chapter 10. The Trade Union Organization
Article 62.
The staff and workers of the Joint Venture have the right to establish
trade union organization and carry out activities in accordance with the
stipulations of the "Trade Union Law of the People's Republic of China."
12
<PAGE>
Article 63.
The trade union in the Joint Venture is representative of the interests of
the staff and workers. The duties of the trade union are: to protect the
interests of the staff and workers: to discuss with the Joint Venture Company on
matters regarding the welfare of the staff and workers; to unite and educate
staff and workers: to fulfil production plans: to observe labor discipline; to
implement the labor contract.
Article 64.
The trade union of the Joint Venture may provide assistance and guidance
to help the staff and workers to enter into personal labor contracts with the
Joint Venture or to sign collective labor contract on behalf of the staff and
workers with the Joint Venture and to supervise the implementation of the labor
contracts.
Article 65.
Persons in charge of the trade union of the Joint Venture shall have the
right to attend as non-voting members and to report the opinions and demands of
staff and workers to meetings of the Board of Directors held to discuss matters
such as the staff and worker's salary, rewards and penalties' welfare benefits,
labor protection and labor insurance and labor discipline.
Article 66.
The trade union shall take part in the mediation of disputes arising
between the staff and workers and the Joint Venture.
Article 67.
The Joint Venture shall allot an amount of funds totaling 2% of all the
salaries of the staff and workers of the Joint Venture as trade union's funds,
which shall be used by the trade union in accordance with the "Managerial Rules
for the Trade Union Funds" promulgated by the All China Federation of Trade
Unions.
Chapter 11. Duration, Termination and Liquidation
Article 68.
The duration of the Joint Venture shall be 30 years, beginning from the
day the business license is issued.
Article 69.
An application for the extension of duration shall. if proposed by both
parties and approved at the Board Meeting, be submitted to the original
13
<PAGE>
examination and approval authority six months prior to the expiry date of the
Joint Venture. Only upon the approval by the original examination and approval
authority may the duration be extended. The Joint Venture shall go through all
registration formalities for the extension with the original registration
office.
Article 70.
The Joint Venture may be terminated before its expiration in case the
parties to the Joint Venture agree unanimously that the termination of the Joint
Venture is for the best interests of the parties.
The proposal to terminate the Joint Venture before the duration expires
shall be decided by the Board of Director through a plenary meeting, and the
decision shall be submitted to the original examination and approval authority
for approval.
Article 71.
Either party shall have the right to terminate the Joint Venture in case
one of the following events occur:
(1) expiration of the tenure of the Joint Venture;
(2) the Joint Venture incurs heavy loses continuously in successive years
or its inability to continue operation;
(3) the violation of the provisions of the Joint Venture Contract or the
Articles of Association by any party which causes the Joint Venture unable of
continuing its operations and achieving its business purpose stipulated by the
Contract; and
(4) in case of inability to fulfill the Joint Venture Contract due to
force majeure.
In case of termination and liquidation resulting from Clauses 2, 3 and 4,
the decision to terminate the Joint Venture must be approved by the original
examination and approval authority. In case of termination resulting from Clause
3, the party who fails to fulfill the obligations shall be liable to the
economic losses that are caused to the Joint Venture.
Article 72.
Upon the expiration or termination of the Joint Venture before its
duration expires, a liquidation committee should be set up in accordance with
"the Regulations for the Implementation of the Joint Venture Law" to undertake
the liquidation of the Joint Venture's assets.
14
<PAGE>
Article 73.
The duties of the liquidation committee are: to conduct the liquidation
through check of the assets of the Joint Venture, its claim and indebtedness; to
work out the statement of assets and liabilities and list of assets and to
formulate a liquidation plan. All of such duties shall be carried out upon the
approval by the Board of Directors.
Article 74.
During the process of liquidation, the liquidation committee shall
represent the Joint Venture to sue and be sued.
Article 75.
The liquidation expenses and remuneration to the members of the
liquidation committee shall be paid in priority from the existing assets of the
Joint Venture.
Article 76.
During the liquidation, the liquidation committee shall re-evaluate the
Joint Venture's assets with reference to book value of the assets and the
prevailing market price.
Article 77.
The remaining assets after the clearance of debts of the Joint Venture
shall be distributed between the parties to the Joint Venture according to the
proportion of each party's share in the registered capital.
Article 78.
On completion of the liquidation, the Joint Venture shall submit a
liquidation report to the original examination and approval authority, cancel
its registration in the original registration office and hand in its business
license, and at the same time, make an announcement to the public.
Article 79.
After winding up of the Joint Venture, its account books and records shall
be kept by Party A.
Chapter 12. Rules and Regulations
Article 80.
The following are the rules and regulations to be formulated by the Board
of Directors of the Joint Venture:
15
<PAGE>
(1) Management regulations, including the powers and functions of the
managerial branches and its working rules and procedures;
(2) Rules for the staff and workers;
(3) System of labor and salary;
(4) System of work attendance record, promotion, awards and penalty for
the staff and workers;
(5) Detailed rules concerning staff and worker's welfare:
(6) Financial system;
(7) Liquidation procedures upon the dissolution of the Joint Venture;
(8) Other necessary rules and regulations.
Chapter 13. Supplementary Articles
Article 81.
Any amendments to the Articles of Association shall be unanimously agreed
and decided by the Board of Directors and submitted to the original examination
and approval authority for approval.
Party A: Party B:
LIUZHOU OVM JOINT STOCK CO., LTD. KOLCARI INVESTMENTS LTD.
By:______________________________ By:__________________________
Wu Guo Sen Ching Lung Po
Dated: April 18, 1995
16
Agreement Concerning
Entrustment of the Heat Treatment Plan
with Processing Task
(LJ102-2/2)
Party A: Liuzhou OVM Joint Stock Co., Ltd.
The Heat Treatment Plan of Liuzhou OVM Joint Stock
Co., Ltd., (the "Heat Treatment Plant")
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
A. In order to guarantee the smooth production operation of Liuzhou OVM
Construction Machinery Co., Ltd., it has been agreed after friendly
consultations by both parties that, Party B shall entrust the Heat
Treatment Plant with the provision of heat treatment processing service to
all its parts and components before the Heat Treatment Plant is being
acquired by Party B.
B. The Heat Treatment Plant shall complete the heat treatment processing
services entrusted by Party B in a timely manner and with good quality.
C. The Heat Treatment Plant shall charge its heat treatment processing
services entrusted by Party B at a discount of around 3-5% to the
prevailing market price.
D. This Agreement shall come into effect at the date when the corporate
representatives of both parties sign and stamp the common seals on the
Agreement.
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- ------------------------------
(Wu Guo Sen)
Corporate Representative
For and on behalf of
The Heat Treatment Plant
- ------------------------------
(Li Zhong Jian)
Director
<PAGE>
For and on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
- --------------------------------
(Ching Lung Po)
Corporate Representative
Dated: June 5, 1995
2
<PAGE>
January 6, 1997
OVM International Holding Corporation
c/o Anka Capital Limited
Room 2005, 20/F., Universal Trade Center,
305A Arbuthnot Road, Central
Hong Kong
Attn: Mr. Ching Lung Po
- ------------------------
Dear Sirs:
Re: English Translation of Chinese Documents
We have reviewed the Chinese versions of the following documents and the English
translations which you have provided:-
1. Articles of Association of Liuzhou OVM Construction Machinery Co., Ltd.;
2. Joint Venture Contract dated April 18, 1995 between Kolcari Investments
Limited and Liuzhou OVM Joint Stock Co., Ltd.;
3. Agreement Concerning the Commencement date of the Financial Accounts dated
January 17, 1995 between Kolcari Investments Limited and Liuzhou OVM Joint Stock
Co., Ltd.,
4. Agreement Concerning the Entrustment of the Heat Treatment Plant with
Processing Task dated June 5, 1995 between Liuzhou OVM Construction Machinery
Co., Ltd., Liuzhou OVM Joint Stock Co., Ltd. and the Heat Treatment Plant;
5. Agreement Concerning the Transfer of Intangible Assets dated June 5, 1995
between Liuzhou OVM Construction Machinery Co., Ltd. and Liuzhou Joint Stock
CO., Ltd. and the Exhibit List of Items of Technical Know-how Transferred;
6. Agreement Concerning the Provision of Power, Water Supply and Welfare
Facilities dated June 15, 1995 between Liuzhou OVM Construction Machinery Co.,
Ltd., and Liuzhou OVM Joint Stock Co., Ltd.,; and
7. Supplementary Agreement on the Transfer of Intangible Assets dated
December 18, 1995 between Liuzhou OVM Construction Machinery Co., Ltd., and
Liuzhou OVM Joint Stock Co., Ltd.
Please note that we do not hold qualification in translation but to the extent
that we have reviewed the above English translations, we believe the
translations, incorporating our suggested amendments, should be fair and correct
translations of the various corresponding Chinese documents above.
Yours faithfully,
Li Song Zhang
Senior Lawyr
Agreement Concerning the Transfer
of Intangible Assets
(LJ102-3)
Party A: Liuzhou OVM Joint Stock Co., Ltd.
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
A. All the intangible assets originally owned by Party A including the
technical patents, technical know-how, the developed new products
(including all new products, the patents and ISO 9000 certification
developed, registered and obtained in 1995), the registered trademarks,
goodwill, etc. shall be transferred to Party B at the date when the Party
B is established.
B. Details of all the intangible assets originally owned by Party A are
listed on the attachment.
C. All the intangible assets on the attachment originally owned by Party A
shall be valued at RMB 24,000,000.00.
D. Party A shall assist party B in completing all the legal procedures in
transferring the ownership of the intangible assets to party B according
to the regulation of the PRC Laws.
E. Party A shall be responsible to any disputes and assume any economic
responsibilities arising before the date of transfer of the above
mentioned intangible assets.
F. Party B shall pay Party A compensation for transfer of the intangible
assets in the following manner:
(1) Party B shall pay Party A an annual fee at the rate equal to 1.5% of
the total annual sales (not including VAT) of Party B.
(2) The consideration for the transfer of intangible assets by Party A
shall be considered fully paid when the accumulated total of the
annual fee reaches RMB 24,000,000.
G. Before all the intangible assets originally owned by Party A have been
transferred to Party B, Party A shall not transfer any part or the whole
of the above mentioned intangible assets to any third party.
<PAGE>
H. Without unanimous agreement by all the members of the Board of Directors
of Party B, Party B shall not transfer the right to use any part of the
above mentioned intangible assets to any third party.
I. Following the establishment of Party B, the intangible assets subsequently
developed by Party B shall belong solely to Party B.
J. This Agreement shall come into effect after it is signed by the legal
representatives of both parties and stamped with the common seal of both
parties.
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- -----------------------------
(Wu Guo Sen)
Corporate Representative
For and on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
- -----------------------------
(Ching Lung Po)
Corporate Representative
Dated: June 5, 1995
2
<PAGE>
Detailed Items of Technical Know-how Transferred
(5-03B)
<TABLE>
<CAPTION>
Date Putting in
Date of Production/(Date
Items Description Application of Authorization)
- ----- ----------- ----------- -----------------
<S> <C> <C>
A Transfer of technical know-how -- --
(including new products and
patented technology with expired
protection period.
1 Automatic Continuous Pressing and September 5, July 24, 1991
Device for bridge construction 1990
Patent number: 61755)
2 Stay cable multi-anchorages (Patent November 27, May 20, 1992
number 77041) 1990
3 Long diameter high strength steel wire June 11, 1990 May 27, 1992
conical anchorage (Patent number 79627)
4 Strnded wire and bunched steel wires June 11, 1990 August 12, 1992
prestressed tensioning anchorage
(Patent number 86725)
5 OVM series anchorage system - 1990
6 Series 200 stay cable system - 1992
7 HM15 series ring stressing anchorage - 1993
8 Screw thread steel pipe series - 1991
9 GZ series conical stressing anchorages - 1988
10 Unbonded prestressing tendons - 1990
11 DM series steel strand bundle anchorages - 1991
with button-head end and ancillary stressing
devices
12 LM series anchorages for stay cable - 1990
13 LZM series steel strand anchorages with - 1991
cold button-head end
14 ZB series high pressure electric oil pumps - 1990
15 SC,CX and LSS series digital sensors - 1992
<PAGE>
16 YCW, YZ, YC, YD, YCL, YQL, YCT, - 1991-1994
YSD, YPD, YDG, ZPX, ZLD, LSD series
17 ZPB and ZLDB series pump stations - 1994
18 YBG-88 series tube pulling assemblies - 1993
19 Complete sets of 50-T and 80-T lifting jacks 1995
B System with ISO 9001 qualify certification - July, 1995
C OVM trademark - January 27, 1994
D Goodwill and sales network establishe
</TABLE>
<PAGE>
January 6, 1997
OVM International Holding Corporation
c/o Anka Capital Limited
Room 2005, 20/F., Universal Trade Center,
305A Arbuthnot Road, Central
Hong Kong
Attn: Mr. Ching Lung Po
- ------------------------
Dear Sirs:
Re: English Translation of Chinese Documents
We have reviewed the Chinese versions of the following documents and the English
translations which you have provided:-
1. Articles of Association of Liuzhou OVM Construction Machinery Co., Ltd.;
2. Joint Venture Contract dated April 18, 1995 between Kolcari Investments
Limited and Liuzhou OVM Joint Stock Co., Ltd.;
3. Agreement Concerning the Commencement date of the Financial Accounts dated
January 17, 1995 between Kolcari Investments Limited and Liuzhou OVM Joint Stock
Co., Ltd.,
4. Agreement Concerning the Entrustment of the Heat Treatment Plant with
Processing Task dated June 5, 1995 between Liuzhou OVM Construction Machinery
Co., Ltd., Liuzhou OVM Joint Stock Co., Ltd. and the Heat Treatment Plant;
5. Agreement Concerning the Transfer of Intangible Assets dated June 5, 1995
between Liuzhou OVM Construction Machinery Co., Ltd. and Liuzhou Joint Stock
CO., Ltd. and the Exhibit List of Items of Technical Know-how Transferred;
6. Agreement Concerning the Provision of Power, Water Supply and Welfare
Facilities dated June 15, 1995 between Liuzhou OVM Construction Machinery Co.,
Ltd., and Liuzhou OVM Joint Stock Co., Ltd.,; and
7. Supplementary Agreement on the Transfer of Intangible Assets dated
December 18, 1995 between Liuzhou OVM Construction Machinery Co., Ltd., and
Liuzhou OVM Joint Stock Co., Ltd.
Please note that we do not hold qualification in translation but to the extent
that we have reviewed the above English translations, we believe the
translations, incorporating our suggested amendments, should be fair and correct
translations of the various corresponding Chinese documents above.
Yours faithfully,
Li Song Zhang
Senior Lawyr
Agreement Concerning the Provision of Power,
Water Supply and Welfare Facilities
(LJ102-5)
Party A: Liuzhou OVM Joint Stock Co., Ltd.
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
1. Party A agrees and warrants the provision of water and power supply
facilities owned by Party A for the use of Party B is established. Party B
shall pay for the consumption of water and power according to the amount
actually consumed. The rates shall be the same as those actually payable
by Party A to the water and power supply authorities.
2. Party B shall settle its consumption of water and power to Party A to the
water and power supply authorities.
3. Party A agrees that, upon Party B request, it will transfer to Party B all
the water and power supply facilities within the factory site. The
transfer fee shall be determined through negotiations between both
parties.
4. Party A agrees that Party B and its staff and workers shall have the right
to use Party A's existing welfare facilities. Party B shall share the
expenses for the use of the welfare facilities.
5. The expenses for the welfare facilities shall be shared in the following
manner:
(1) Staff canteen meals administration fee: a monthly fee of RMB 30.00
per person based on the total number of staff and workers of Party B
who regularly dine in the canteen.
(2) Medical administration fee: a monthly fee of RMB 12.00 per person
based on the total number of the staff and workers of Party B.
(3) Dormitory rental for singles: a monthly fee of RMB 60.00 per person
based on the total number of the staff and workers of Party B who
reside in the dormitory.
(4) The compensation for the use of other welfare facilities by Party B
and its staff and workers shall be shared after mutual agreement
with reference to the rates determined above.
<PAGE>
6. Party B shall pay Party A its previous month's share of the expenses for
the use of the welfare facilities before the 15th of each month.
7. The compensation to Party A for the use of the welfare facilities by Party
B shall be adjusted every three years. The exact rate shall be determined
through mutual negotiations with a limit of no more than 10% per
increment.
8. This Agreement shall come into effect after it is signed by the corporate
representatives of both parties and stamped with the common seal of both
parties.
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- ------------------------------
(Wu Guo Sen)
Corporate Representative
For and on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
- --------------------------------
(Ching Lung Po)
Corporate Representative
Dated: June 5, 1995
2
<PAGE>
January 6, 1997
OVM International Holding Corporation
c/o Anka Capital Limited
Room 2005, 20/F., Universal Trade Center,
305A Arbuthnot Road, Central
Hong Kong
Attn: Mr. Ching Lung Po
- ------------------------
Dear Sirs:
Re: English Translation of Chinese Documents
We have reviewed the Chinese versions of the following documents and the English
translations which you have provided:-
1. Articles of Association of Liuzhou OVM Construction Machinery Co., Ltd.;
2. Joint Venture Contract dated April 18, 1995 between Kolcari Investments
Limited and Liuzhou OVM Joint Stock Co., Ltd.;
3. Agreement Concerning the Commencement date of the Financial Accounts dated
January 17, 1995 between Kolcari Investments Limited and Liuzhou OVM Joint Stock
Co., Ltd.,
4. Agreement Concerning the Entrustment of the Heat Treatment Plant with
Processing Task dated June 5, 1995 between Liuzhou OVM Construction Machinery
Co., Ltd., Liuzhou OVM Joint Stock Co., Ltd. and the Heat Treatment Plant;
5. Agreement Concerning the Transfer of Intangible Assets dated June 5, 1995
between Liuzhou OVM Construction Machinery Co., Ltd. and Liuzhou Joint Stock
CO., Ltd. and the Exhibit List of Items of Technical Know-how Transferred;
6. Agreement Concerning the Provision of Power, Water Supply and Welfare
Facilities dated June 15, 1995 between Liuzhou OVM Construction Machinery Co.,
Ltd., and Liuzhou OVM Joint Stock Co., Ltd.,; and
7. Supplementary Agreement on the Transfer of Intangible Assets dated
December 18, 1995 between Liuzhou OVM Construction Machinery Co., Ltd., and
Liuzhou OVM Joint Stock Co., Ltd.
Please note that we do not hold qualification in translation but to the extent
that we have reviewed the above English translations, we believe the
translations, incorporating our suggested amendments, should be fair and correct
translations of the various corresponding Chinese documents above.
Yours faithfully,
Li Song Zhang
Senior Lawyr
Supplementary Agreement on the
Transfer of Intangible Assets
(LJ5-03))
Party A: Liuzhou OVM Joint Stock Co., Ltd.
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
It is known that both parties have entered into "The Agreement Concerning the
Transfer of the Intangible Assets" (LJ102-3).
In consideration of the fact that the effective period for the four patents
originally owned by Party A have been expired and in view of the influence of
the macro-economic control policies implemented by the State, both parties have
agreed to revise Section 3 and Section 6 of the Agreement concerning the
"Transfer of the Intangible Assets" as follows:
Section 3: All the Intangible Assets originally owned by Party A listed on the
attachment of this Agreement (5-03B) shall be valued at RMB 8,000,000.00.
1. As the effective period for the four patents listed on the attachment to
this Agreement LJ102-3 have been expired according to "The Law of Patents
of the People's Republic of China", therefore, the transfer of patents are
revised as the transfer of know-how to Party B.
2. The 19 items of know-how on the attachment to this Agreement (5-03B) shall
be valued in aggregate, at RMB 2,000,000.00. Items 2, 3 and 4 on (5-03B)
shall be valued in aggregate, at RMB 6,000,000.00.
Section 6: Party B shall pay Party A a transfer fee for the intangible assets
transferred to it in the following manner:
1. Party B shall pay Party A an annual transfer fee at a rate equal to 6% of
the annual sales (not including VAT) of Party B.
2. The transfer fee for 1995 and 1996 shall be fully exempted.
3. When the accumulated total of the transfer fee paid by Party B to Party A
has reached the amount as stipulated in Section 3 above, the transfer fee
shall be regarded as fully paid.
<PAGE>
After the above revision is made, the original Section 3 and Section 6 of the
"Agreement Concerning the Transfer of Intangible Assets (LJ102-3)" shall be
canceled.
This Agreement shall come into effect on the date when this Agreement is signed
by both parties.
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- ------------------------------
(Wu Guo Sen)
Legal Representative
For and on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
- --------------------------------
(Ching Lung Po)
Corporate Representative
Dated: December 18, 1995
2
<PAGE>
January 6, 1997
OVM International Holding Corporation
c/o Anka Capital Limited
Room 2005, 20/F., Universal Trade Center,
305A Arbuthnot Road, Central
Hong Kong
Attn: Mr. Ching Lung Po
- ------------------------
Dear Sirs:
Re: English Translation of Chinese Documents
We have reviewed the Chinese versions of the following documents and the English
translations which you have provided:-
1. Articles of Association of Liuzhou OVM Construction Machinery Co., Ltd.;
2. Joint Venture Contract dated April 18, 1995 between Kolcari Investments
Limited and Liuzhou OVM Joint Stock Co., Ltd.;
3. Agreement Concerning the Commencement date of the Financial Accounts dated
January 17, 1995 between Kolcari Investments Limited and Liuzhou OVM Joint Stock
Co., Ltd.,
4. Agreement Concerning the Entrustment of the Heat Treatment Plant with
Processing Task dated June 5, 1995 between Liuzhou OVM Construction Machinery
Co., Ltd., Liuzhou OVM Joint Stock Co., Ltd. and the Heat Treatment Plant;
5. Agreement Concerning the Transfer of Intangible Assets dated June 5, 1995
between Liuzhou OVM Construction Machinery Co., Ltd. and Liuzhou Joint Stock
CO., Ltd. and the Exhibit List of Items of Technical Know-how Transferred;
6. Agreement Concerning the Provision of Power, Water Supply and Welfare
Facilities dated June 15, 1995 between Liuzhou OVM Construction Machinery Co.,
Ltd., and Liuzhou OVM Joint Stock Co., Ltd.,; and
7. Supplementary Agreement on the Transfer of Intangible Assets dated
December 18, 1995 between Liuzhou OVM Construction Machinery Co., Ltd., and
Liuzhou OVM Joint Stock Co., Ltd.
Please note that we do not hold qualification in translation but to the extent
that we have reviewed the above English translations, we believe the
translations, incorporating our suggested amendments, should be fair and correct
translations of the various corresponding Chinese documents above.
Yours faithfully,
Li Song Zhang
Senior Lawyr
Agreement Concerning the Leasing of Land, Buildings and Motor Vehicles
(LJ102-4)
Party A: Liuzhou OVM Joint Stock Co., Ltd.
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
1. Party A agrees to lease to Party B land with a gross area of 60,000 square
meters. The annual rental rate shall be Rmb 6.00 per square meter.
2. Party A agrees to lease to Party B production workshops, warehouses and
offices with a total gross area of 9,463 square meters. The annual rental
rate shall be Rmb 5.00 per square meter.
3. The term of the lease will be equivalent to the tenure of Party B.
4. The rental rate for the land, buildings and motor vehicles will be
adjusted every three years with each increment limited below 10%.
5. During the term of the lease, all government taxes on land and
buildings are borne by Party A.
6. During the term of the lease, Party B will be responsible for
repairs and maintenance of the buidlings.
7. Party A agrees to lease to Party B 22 transportation vehicles at an annual
rental of Rmb 13,500.00 per vehicle. The lease term will be for a period
of three years.
8. All taxes with respect to the ownership and use of the transporation
vehicles will be borne by Party B during the lease term.
9. All claims or disputes arising from the use of the above land, buildings
and motor vehicles at the time these land, buildings and motor vehicles
were owned by Party A and before the effective date of this Agreement will
be the sole responsibility of Party A.
10. During the term of the lease, if Party B, upon the approval by the Board
of Directors of Party B, offers to purchase the land, buildings and motor
vehicles under the lease, Party A shall agree to sell. The selling price
will be determined according to the prevailing market condition and the
relevant government regulations at the time such offer is made.
11. This Agreement shall come into effect at the date when the corporate
representatives of both parties sign and stamp the common seals on the
Agreement.
<PAGE>
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- -----------------------------------------------------
(Wu Guo Sen)
Corporate Representative
For an on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
- ----------------------------------------------------
(Ching Lung Po)
Corporate Representative
Dated June 5, 1995
Supplementary Agreement on the Leasing of Land, Buildings and Motor
Vehicles
(LJ5-02)
Party A: Liuzhou OVM Joint Stock Co., Ltd.
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
Through friendly consultations between both parties, matters with respect to the
leasing of land, buidlings and motor vehicles (collectively referred to as
"Properties") were agreed as follows:
(1) The land, buildings and motor vehicles leased by Party B were as follows:
(i) The land with a gross area of 60,000 square meters;
(ii) The buildings, warehouses and offices with a gross area of 9,463
square meters;
(iii) 22 vehicles for transportaion purposes.
(2) For each the two fiscal years 1995 and 1996, the total rental for the
Properties shall amount to Rmb 300,000 respectively.
(3) For fiscal years commencing January 1, 1997, the rental for the Properties
shall be subject to further negotiation between the two parties.
(4) This Agreement shall come into effect after it is signed by the corporate
representatives of both parties and stamped with the common seals of both
parties.
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- -----------------------------------------------------
(Wu Guo Sen)
Corporate Representative
<PAGE>
For an on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
- ----------------------------------------------------
(Ching Lung Po)
Corporate Representative
Dated September 28, 1995
Agreement Concerning Matters Relating to the Establishment
of the Financial Accounts for the Joint Venture
(LJ-5-01)
Party A: Liuzhou OVM Joint Stocks Co., Ltd.
Party B: Liuzhou OVM Construction Machinery Co Ltd
On May 10, 1995, Liuzhou OVM Construction Machinery Co Ltd. (the "JV Co.")
was granted approval for incorporation by the Liuzhou Municipal Government.
According to the Joint Venture Contract, the Articles of Association of the JV
Co., and other agreements entered by both parties together with the approval
granted by the Liuzhou Municipal Economic Commission concerning the report on
the commencement date of the financial accounts of the JV Co., and through
friendly consultation, the following matters in relation to the establishment of
the financial accounts for the JV Co. were agreed:
(1) In order to ensure the smooth operation of the JV Co., Party A agrees to
transfer the following assets and liabilities to the JV Co. commencing January
1, 1995. A summary breakdown of the category of assets and liabilities
transfered is set out below:
Assets/(liabilities) Amount
-------------------- ------
(Rmb'000)
Cash and cash equivalent 20,000
Accounts receivable, net 19,493
Inventories 48,546
Prepayments, deposits and other receivables 13,527
Amounts due from subsidaries companies of Party A 17,556
Amounts due from related companies 28,890
Deferred assets 3,150
Short term bank loans (43,650)
Accounts payable (21,929)
Customer deposits (2,553)
Other Payable (27,298)
Amounts due to subsidaries of Party A (8,422)
Amounts due to related companies (5,598)
Long term bank loans (19,360)
------------
22,354
=======
(2) The net value of assets transfered into the JV Co. shall be temporary
treated us advance to the JV Co. by Party A until the issue of the formal
capital verification report.
(3) Party A should possess the sole property rights with respect to the assets
transferred into the JV Co. and these assets should neither be pledged nor
subject to any lease at the date of this Agreement.
<PAGE>
(4) Any claims or disputes arising from the assets transferred into the JV Co.
at the tiime these assets were owned by Party A and before the effective date of
this Agreement will be the sole responsibility of Party A.
(5) This Agreement shall come into effect at the date when the corporate
representives of both parties sign and stamp the common seals on the Agreement.
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- -------------------------------------
(Wu Guo Sen)
Corporate Representative
For and on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
- ------------------------------------
(Ching Lung Po)
Corporate representative
DATED June 8, 1995.
Agreement Concerning the Injection of Assets of Three Production Workshops
(LJ102-1)
Party A: Liuzhou OVM Joint Stock Co., Ltd.
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
1. According to Article 11 of the Articles of Association of Party B, Party A
is required to inject certain production facilities and workshops with a fair
value of US$1,200,000.
Through friendly consultation, Party A agrees to inject into Party B all
production and installation facilities of Production Workshops No.1, No.2 and
No.3.
2. All assets that are agreed to be injected by Party A are owned by Party A
and are neither pledged nor leased before the effective date of this Agreement.
3. Any claims or disputes arising from the use of these injected assets by
Party A, before these assets are injected into Party B, shall be the sole
responsibility of Party A.
4. Both parties agree to adopt the valuation endorsed by the State Asset
Administration Bureau of Rmb 12,098,261.96 (equivalent to US$ 1,423,324.94) as a
fair valuation of the assets injected by Party A. Of which, US$1,200,000 shall
represent a capital contribution by Party A and the balance of US$223,325 shall
be recorded as a loan by Party A to Party B.
Both parties further agree that the excess balance of US$223,325 should be
fully repaid by Party B within 18 months from the date of its establishemnt and
shall carry an interest of 20% per annum.
5. This Agreement shall come into effect at the date when the corporate
representatives of both parties sign and stamp the common seals on the
Agreement.
For and on behalf of
Party A: Liuzhou OVM Joint Stock Co., Ltd.
- -----------------------------------------------------
(Wu Guo Sen)
Corporate Representative
For an on behalf of
Party B: Liuzhou OVM Construction Machinery Co., Ltd.
<PAGE>
- ----------------------------------------------------
(Ching Lung Po)
Corporate Representative
Dated June 5, 1995
SUPPLEMENTARY AGREEMENT CONCERNING COLLECTION OF ACCOUNTS RECEIVABLE AND
ALLOCATION OF EXPENSES INCURRED ON COLLECTION OF ACCOUNTS RECEIVABLE
(LJ504)
Party A: Liuzhou OVM Joint Stock Company Limited
Party B: Kolcari Investments Limited
Party C: Liuzhou OVM Construction Machinery Company Limited
WHEREAS, A Joint Venture Contract (the "Contract") dated April 18, 1995 was
entered into between Party A and Party B for the establishment of Liuzhou OVM
Construction Machinery Company Limited, a Sino-foreign equity joint venture.
According to Chapter Eight, Article 19.6 of the Contract, Party A shall warrant
the recoverability of accounts receivable and other receivables (collectively
the "Receivables") injected into Party C. However, the Contract did not mention
about the responsibility for collection of such Receivables and the allocation
of expenses incurred for the collection of such Receivables.
NOW THEREFORE, pursuant to friendly mutual consultations, the parties agree as
follows:
1. Commencing from the date of incorporation of Party C, Party C shall be
responsible for the collection of the Receivables.
2. Expenses incurred for the collection of the Receivables (the "Collection
Expenses") shall be borne by Party A. The annual Collection Expenses shall
be equal to 6.3% on the actual amount collected from the Receivables for
each particular year. Party A shall reimburse the Collection Expenses to
Party C by the end of each fiscal year.
<PAGE>
Party A:
Liuzhou OVM Joint Stock Company Limited
- ----------------------------------
Representative: ( Wu Guosen)
Party B:
Kolcari Investments Limited
- ----------------------------------
Representative: (Ching Lung Po)
Party C:
Liuzhou OVM Construction Machinery Company Limited
- ----------------------------------
Representative: (Ching Lung Po)
Dated: October 18, 1996
OVM INTERNATIONAL HOLDING CORP.
1996 STOCK OPTION PLAN
----------------------
1. GRANT OF OPTIONS; GENERALLY. In accordance with the provisions
hereinafter set forth in this stock option plan, the name of which is the OVM
INTERNATIONAL HOLDING CORP. 1996 STOCK OPTION PLAN (the "Plan"), the Board of
Directors (the "Board") or, the Compensation Committee (the "Stock Option
Committee") of OVM International Holding Corp. (the "Corporation") is hereby
authorized to issue from time to time on the Corporation's behalf to any one or
more Eligible Persons, as hereinafter defined, options to acquire shares of the
Corporation's $.01 par value common stock (the "Stock").
2. TYPE OF OPTIONS. The Board or the Stock Option Committee is
authorized to issue Incentive Stock Options ("ISOs") which meet the requirements
of Section ss.422 of the Internal Revenue Code of 1986, as amended (the "Code"),
which options are hereinafter referred to collectively as ISOs, or singularly as
an ISO. The Board or the Stock Option Committee is also, in its discretion,
authorized to issue options which are not ISOs, which options are hereinafter
referred to collectively as Non Statutory Options ("NSOs"), or singularly as an
NSO. Except where the context indicates to the contrary, the term "Option" or
"Options" means ISOs and NSOs Options.
3. AMOUNT OF STOCK. The aggregate number of shares of Stock which may
be purchased pursuant to the exercise of Options shall be 1,000,000 shares. Of
this amount, the Board or the Stock Option Committee shall have the power and
authority to designate whether any Options so issued shall be ISOs or NSOs,
subject to the restrictions on ISOs contained elsewhere herein. If an Option
ceases to be exercisable, in whole or in part, the shares of Stock underlying
such Option shall continue to be available under this Plan. Further, if shares
of Stock are delivered to the Corporation as payment for shares of Stock
purchased by the exercise of an Option granted under this Plan, such shares of
Stock shall also be available under this Plan. If there is any change in the
number of shares of Stock due to of the declaration of stock dividends,
recapitalization resulting in stock split-ups, or combinations or exchanges of
shares of Stock, or otherwise, the number of shares of Stock available for
purchase upon the exercise of Options, the shares of Stock subject to any Option
and the exercise price of any outstanding Option shall be appropriately adjusted
by the Board or the Stock Option Committee. The Board or the Stock Option
Committee shall give notice of any adjustments to each Eligible Person granted
an Option under this Plan, and such adjustments shall be effective and binding
on all Eligible Persons. If because of one or more recapitalizations,
reorganizations or other corporate events, the holders of outstanding Stock
receive something other than shares of Stock then, upon exercise of an Option,
the Eligible Person will receive what the holder would have owned if the holder
had exercised the Option immediately before the first such corporate event and
not disposed of anything the holder received as a result of the corporate event.
<PAGE>
4. ELIGIBLE PERSONS.
(a) With respect to ISOs, an Eligible Person means any individual who
has been employed by the Corporation or by any subsidiary of the Corporation,
for a continuous period of at least sixty (60) days.
(b) With respect to NSOs, an Eligible Person means (i) any individual
who has been employed by the Corporation or by any subsidiary of the
Corporation, for a continuous period of at least sixty (60) days, (ii) any
director of the Corporation or any subsidiary of the Corporation or (iii) any
consultant of the Corporation or any subsidiary of the Corporation.
5. GRANT OF OPTIONS. The Board or the Stock Option Committee has the
right to issue the Options established by this Plan to Eligible Persons. The
Board or the Stock Option Committee shall follow the procedures prescribed for
it elsewhere in this Plan. A grant of Options shall be set forth in a writing
signed on behalf of the Corporation or by a majority of the members of the Stock
Option Committee. The writing shall identify whether the Option being granted is
an ISO or an NSO and shall set forth the terms which govern the Option. The
terms shall be determined by the Board or the Stock Option Committee, and may
include, among other terms, the number of shares of Stock that may be acquired
pursuant to the exercise of the Options, when the Options may be exercised, the
period for which the Option is granted and including the expiration date, the
effect on the Options if the Eligible Person terminates employment and whether
the Eligible Person may deliver shares of Stock to pay for the shares of Stock
to be purchased by the exercise of the Option. However, no term shall be set
forth in the writing which is inconsistent with any of the terms of this Plan.
The terms of an Option granted to an Eligible Person may differ from the terms
of an Option granted to another Eligible Person, and may differ from the terms
of an earlier Option granted to the same Eligible Person.
6. OPTION PRICE. The option price per share shall be determined by the
Board or the Stock Option Committee at the time any Option is granted, and shall
be not less than (i) in the case of an ISO, the fair market value, (ii) in the
case of an ISO granted to a ten percent or greater stockholder, 110 percent of
the fair market value, or (iii) in the case of an NSO, not less than 55% of the
fair market value (but in no event less than the par value) of one share of
Stock on the date the Option is granted, as determined by the Board or the Stock
Option Committee. Fair market value as used herein shall be:
7. (a) If shares of Stock shall be traded on an exchange or
over-the-counter market, the mean between the high and low sales prices of Stock
on such exchange or over-the-counter market on which such shares shall be traded
on that date, or if such exchange or over-the-counter market is closed or if no
shares shall have traded on such date, on the last preceding date on which such
shares shall have traded.
(b) If shares of Stock shall not be traded on an exchange or
over-the-counter market, the value as determined by a recognized appraiser as
selected by the Board or the Stock Option Committee.
2
<PAGE>
8. PURCHASE OF SHARES. An Option shall be exercised by the tender to
the Corporation of the full purchase price of the Stock with respect to which
the Option is exercised and written notice of the exercise. The purchase price
of the Stock shall be in United States dollars, payable in cash, check,
Promissory Note secured by the Shares issued through exercise of the related
Options, or in property or Corporation stock, if so permitted by the Board or
the Stock Option Committee in accordance with the discretion granted in
Paragraph 5 hereof, having a value equal to such purchase price. The Corporation
shall not be required to issue or deliver any certificates for shares of Stock
purchased upon the exercise of an Option prior to (i) if requested by the
Corporation, the filing with the Corporation by the Eligible Person of a
representation in writing that it is the Eligible Person's then present
intention to acquire the Stock being purchased for investment and not for
resale, and/or (ii) the completion of any registration or other qualification of
such shares under any government regulatory body, which the Corporation shall
determine to be necessary or advisable.
9. STOCK OPTION COMMITTEE. The Stock Option Committee may be appointed
from time to time by the Corporation's Board of Directors. The Board may from
time to time remove members from or add members to the Stock Option Committee.
The Stock Option Committee shall be constituted so as to permit the Plan to
comply in all respects with the provisions set forth in Paragraph 19 herein. The
members of the Stock Option Committee may elect one of its members as its
chairman. The Stock Option Committee shall hold its meetings at such times and
places as its chairman shall determine. A majority of the Stock Option
Committee's members present in person shall constitute a quorum for the
transaction of business. All determinations of the Stock Option Committee will
be made by the majority vote of the members constituting the quorum. The members
may participate in a meeting of the Stock Option Committee by conference
telephone or similar communications equipment by means of which all members
participating in the meeting can hear each other. Participation in a meeting in
that manner will constitute presence in person at the meeting. Any decision or
determination reduced to writing and signed by all members of the Stock Option
Committee will be effective as if it had been made by a majority vote of all
members of the Stock Option Committee at a meeting which is duly called and
held.
10. ADMINISTRATION OF PLAN. In addition to granting Options and to
exercising the authority granted to it elsewhere in this Plan, the Board or the
Stock Option Committee is granted the full right and authority to interpret and
construe the provisions of this Plan, promulgate, amend and rescind rules and
procedures relating to the implementation of the Plan and to make all other
determinations necessary or advisable for the administration of the Plan,
consistent, however, with the intent of the Corporation that Options granted or
awarded pursuant to the Plan comply with the provisions of Paragraph 19 and 20
herein. All determinations made by the Board or the Stock Option Committee shall
be final, binding and conclusive on all persons including the Eligible Person,
the Corporation and its stockholders, employees, officers and directors and
consultants. No member of the Board or the Stock Option Committee will be liable
for any act or omission in connection with the administration of this Plan
unless it is attributable to that member's willful misconduct.
3
<PAGE>
11. PROVISIONS APPLICABLE TO ISOS. The following provisions shall apply
to all ISOs granted by the Board or the Stock Option Committee and are
incorporated by reference into any writing granting an ISO:
(a) An ISO may only be granted within ten (10) years from September 5,
1996, the date that this Plan was originally adopted by the Corporation's Board
of Directors.
(b) An ISO may not be exercised after the expiration of ten (10) years
from the date the ISO is granted.
(c) The option price may not be less than the fair market value of the
Stock at the time the ISO is granted.
(d) An ISO is not transferrable by the Eligible Person to whom it is
granted except by will, or the laws of descent and distribution, and is
exercisable during his or her lifetime only by the Eligible Person.
(e) If the Eligible Person receiving the ISO owns at the time of the
grant stock possessing more than ten (10%) percent of the total combined voting
power of all classes of stock of the employer corporation or of its parent or
subsidiary corporation (as those terms are defined in the Code), then the option
price shall be at least 110% of the fair market value of the Stock, and the ISO
shall not be exercisable after the expiration of five (5) years from the date
the ISO is granted.
(f) The aggregate fair market value (determined at the time the ISO is
granted) of the Stock with respect to which the ISO is first exercisable by the
Eligible Person during any calendar year (under this Plan and any other
incentive stock option plan of the Corporation) shall not exceed $100,000.
(g) Even if the shares of Stock which are issued upon exercise of an ISO
are sold within one year following the exercise of such ISO so that the sale
constitutes a disqualifying disposition for ISO treatment under the Code, no
provision of this Plan shall be construed as prohibiting such a sale.
(h) This Plan was adopted by the Corporation on September 5, 1996, by
virtue of its approval by the Corporation's Board of Directors and Stockholders.
12. DETERMINATION OF FAIR MARKET VALUE. In granting ISOs under this
Plan, the Board or the Stock Option Committee shall make a good faith
determination as to the fair market value of the Stock at the time of granting
the ISO.
13. RESTRICTIONS ON ISSUANCE OF STOCK. The Corporation shall not be
obligated to sell or issue any shares of Stock pursuant to the exercise of an
Option unless the Stock with respect to which the Option is being exercised is
4
<PAGE>
at that time effectively registered or exempt from registration under the
Securities Act of 1933, as amended, and any other applicable laws, rules and
regulations. The Corporation may condition the exercise of an Option granted in
accordance herewith upon receipt from the Eligible Person, or any other
purchaser thereof, of a written representation that at the time of such exercise
it is his or her then present intention to acquire the shares of Stock for
investment and not with a view to, or for sale in connection with, any
distribution thereof; except that, in the case of a legal representative of an
Eligible Person, "distribution" shall be defined to exclude distribution by will
or under the laws of descent and distribution. Prior to issuing any shares of
Stock pursuant to the exercise of an Option, the Corporation shall take such
steps as it deems necessary to satisfy any withholding tax obligations imposed
upon it by any level of government.
14. EXERCISE IN THE EVENT OF DEATH OF TERMINATION OR EMPLOYMENT.
(a) If an optionee shall die (i) while an employee of the Corporation or
a Subsidiary or (ii) within three months after termination of his employment
with the Corporation or a Subsidiary because of his disability, or retirement or
otherwise, his Options may be exercised, to the extent that the optionee shall
have been entitled to do so on the date of his death or such termination of
employment, by the person or persons to whom the optionee's right under the
Option pass by will or applicable law, or if no such person has such right, by
his executors or administrators, at any time, or from time to time. In the event
of termination of employment because of his death while an employee or because
of disability, his Options may be exercised not later than the expiration date
specified in Paragraph 5 or one year after the optionee's death, whichever date
is earlier, or in the event of termination of employment because of retirement
or otherwise, not later than the expiration date specified in Paragraph 5 hereof
or one year after the optionee's death, whichever date is earlier.
(b) If an optionee's employment by the Corporation or a Subsidiary shall
terminate because of his disability and such optionee has not died within the
following three months, he may exercise his Options, to the extent that he shall
have been entitled to do so at the date of the termination of his employment, at
any time, or from time to time, but not later than the expiration date specified
in Paragraph 5 hereof or one year after termination of employment, whichever
date is earlier.
(c) If an optionee's employment shall terminate by reason of his
retirement in accordance with the terms of the Corporation's tax-qualified
retirement plans if any, or with the consent of the Board or the Stock Option
Committee or involuntarily other than by termination for cause, and such
optionee has not died within the following three months, he may exercise his
Option to the extent he shall have been entitled to do so at the date of the
termination of his employment, at any time and from to time, but not later than
the expiration date specified in Paragraph 5 hereof or thirty (30) days after
termination of employment, whichever date is earlier. For purposes of this
Paragraph 14, termination for cause shall mean; (i) termination of employment
for cause as defined in the optionee's Employment Agreement or (ii) in the
absence of an Employment Agreement for the optionee, termination of employment
by reason of the optionee's commission of a felony, fraud or willful misconduct
5
<PAGE>
which has resulted, or is likely to result, in substantial and material damage
to the Corporation or a Subsidiary, all as the Board or the Stock Option
Committee in its sole discretion may determine.
(d) If an optionee's employment shall terminate for any reason other
than death, disability, retirement or otherwise, all right to exercise his
Option shall terminate at the date of such termination of employment absent
specific provisions in the optionee's Option Agreement.
15. CORPORATE EVENTS. In the event of the proposed dissolution or
liquidation of the Corporation, a proposed sale of all or substantially all of
the assets of the Corporation, a merger or tender for the Corporation's shares
of Common Stock the Board of Directors may declare that each Option granted
under this Plan shall terminate as of a date to be fixed by the Board of
Directors; provided that not less than thirty (30) days written notice of the
date so fixed shall be given to each Eligible Person holding an Option, and each
such Eligible Person shall have the right, during the period of thirty (30) days
preceding such termination, to exercise his Option as to all or any part of the
shares of Stock covered thereby, including shares of Stock as to which such
Option would not otherwise be exercisable. Nothing set forth herein shall extend
the term set for purchasing the shares of Stock set forth in the Option.
16. NO GUARANTEE OF EMPLOYMENT. Nothing in this Plan or in any writing
granting an Option will confer upon any Eligible Person the right to continue in
the employ of the Eligible Person's employer, or will interfere with or restrict
in any way the right of the Eligible Person's employer to discharge such
Eligible Person at any time for any reason whatsoever, with or without cause.
17. NONTRANSFERABILITY. No Option granted under the Plan shall be
transferable other than by will or by the laws of descent and distribution.
During the lifetime of the optionee, an Option shall be exercisable only by him.
18. NO RIGHTS AS STOCKHOLDER. No optionee shall have any rights as a
stockholder with respect to any shares subject to his Option prior to the date
of issuance to him of a certificate or certificates for such shares.
19. AMENDMENT AND DISCONTINUANCE OF PLAN. The Corporation's Board of
Directors may amend, suspend or discontinue this Plan at any time. However, no
such action may prejudice the rights of any Eligible Person who has prior
thereto been granted Options under this Plan. Further, no amendment to this Plan
which has the effect of (a) increasing the aggregate number of shares of Stock
subject to this Plan (except for adjustments pursuant to Paragraph 3 herein), or
(b) changing the definition of Eligible Person under this Plan, may be effective
unless and until approval of the stockholders of the Corporation is obtained in
the same manner as approval of this Plan is required. The Corporation's Board of
Directors is authorized to seek the approval of the Corporation's stockholders
for any other changes it proposes to make to this Plan which require such
approval, however, the Board of Directors may modify the Plan, as necessary, to
effectuate the intent of the Plan as a result of any changes in the tax,
6
<PAGE>
accounting or securities laws treatment of Eligible Persons and the Plan,
subject to the provisions set forth in this Paragraph 19, and Paragraphs 20 and
21.
20. COMPLIANCE WITH RULE 16B-3. This Plan is intended to comply in all
respects with Rule 16b-3 ("Rule 16b-3") promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to participants who are subject to Section 16 of
the Exchange Act, and any provision(s) herein that is/are contrary to Rule 16b-3
shall be deemed null and void to the extent appropriate by either the Stock
Option Committee or the Corporation's Board of Directors.
21. COMPLIANCE WITH CODE. The aspects of this Plan on ISOs is intended
to comply in every respect with Section 422 of the Code and the regulations
promulgated thereunder. In the event any future statute or regulation shall
modify the existing statute, the aspects of this Plan on ISOs shall be deemed to
incorporate by reference such modification. Any stock option agreement relating
to any Option granted pursuant to this Plan outstanding and unexercised at the
time any modifying statute or regulation becomes effective shall also be deemed
to incorporate by reference such modification and no notice of such modification
need be given to optionee.
If any provision of the aspects of this Plan on ISOs is determined to
disqualify the shares purchasable pursuant to the Options granted under this
Plan from the special tax treatment provided by Code Section 422, such provision
shall be deemed null and void and to incorporate by reference the modification
required to qualify the shares for said tax treatment.
22. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. The Plan, the grant and
exercise of Options thereunder, and the obligation of the Corporation to sell
and deliver Stock under such options, shall be subject to all applicable federal
and state laws, rules, and regulations and to such approvals by any government
or regulatory agency as may be required. The Corporation shall not be required
to issue or deliver any certificates for shares of Stock prior to (a) the
listing of such shares on any stock exchange or over-the-counter market on which
the Stock may then be listed and (b) the completion of any registration or
qualification of such shares under any federal or state law, or any ruling or
regulation of any government body which the Corporation shall, in its sole
discretion, determine to be necessary or advisable. Moreover, no Option may be
exercised if its exercise or the receipt of Stock pursuant thereto would be
contrary to applicable laws.
23. DISPOSITION OF SHARES. In the event any share of Stock acquired by
an exercise of an Option granted under the Plan shall be transferable other than
by will or by the laws of descent and distribution within two years of the date
such Option was granted or within one year after the transfer of such Stock
pursuant to such exercise, the optionee shall give prompt written notice thereof
to the Corporation or the Stock Option Committee.
24. Name. The Plan shall be known as the "OVM International Holding
Corp. 1996 Stock Option Plan."
7
<PAGE>
25. NOTICES. Any notice hereunder shall be in writing and sent by
certified mail, return receipt requested or by facsimile transmission (with
electronic or written confirmation of receipt) and when addressed to the
Corporation shall be sent to it at its office, West 516 Sprague Avenue, Spokane,
Washington 99204 and when addressed to the Committee shall be sent to it at West
516 Sprague Avenue, Spokane, Washington 99204, subject to the right of either
party to designate at any time hereafter in writing some other address,
facsimile number or person to whose attention such notice shall be sent.
26. HEADINGS. The headings preceding the text of Sections and
subparagraphs hereof are inserted solely for convenience of reference, and shall
not constitute a part of this Plan nor shall they affect its meaning,
construction or effect.
27. EFFECTIVE DATE. This Plan, the OVM International Holding Corp. 1996
Stock Option Plan, was adopted by the Board of Directors and Stockholders of the
Corporation on September 5, 1996. The effective date of the Plan shall be the
same date.
8
SUBSIDIARIES OF THE REGISTRANT
Percentage
Name Jurisdiction Ownership
- ---- ------------ ---------
OVM Development
Limited British Virgin Islands 100%
Liuzhou OVM
Construction Machinery People's Republic of 70%
Company Limited China (by ODL)
OVM Prestress Co. Pte 50%
Ltd. Republic of Singapore (by Liuzhou OVM)
We consent to the reference to our firm under the caption "EXPERTS" and to the
use of our report dated April 18, 1997 in the Registration Statement (Form
SB-2No. 333- ) of OVM International Holding Corporation for the registration of
50,000 shares of its common stock and 4,000,000 shares of common stock issuable
upon the exercise of common stock purchase warrants issued by the Company.
Ernst & Young
Hong Kong
May 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF OVM INTERNATIONAL HOLDING CORP FOR THE TWELVE MONTHS
ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> RENMINBI YUAN
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 8.30
<CASH> 22,526
<SECURITIES> 0
<RECEIVABLES> 104,924
<ALLOWANCES> 3,076
<INVENTORY> 35,980
<CURRENT-ASSETS> 228,811
<PP&E> 10,443
<DEPRECIATION> 3,508
<TOTAL-ASSETS> 252,958
<CURRENT-LIABILITIES> 169,904
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 58,318
<TOTAL-LIABILITY-AND-EQUITY> 252,958
<SALES> 161,492
<TOTAL-REVENUES> 165,028
<CGS> 101,007
<TOTAL-COSTS> 35,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,329
<INTEREST-EXPENSE> 6,140
<INCOME-PRETAX> 3,990
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,833)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,833)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
