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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10SB
General Form for Registration of Securities of Small
Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
Belair Enterprises, Inc.
(Exact name of Small Business Issuer in its charter)
NEVADA 98-0194067
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
16th Floor, 25A, Fontana Gardens, Tai Hang Road
Causeway Bay, Hong Kong
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: 852-9156-8865
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Forward-Looking Statements and Associated Risk. This Registration
Statement contains forward-looking statements including statements
regarding, among other items, the Company's growth strategies, and
anticipated trends in the Company's business and demographics. These
forward-looking statements are based largely on the Company's
expectations and are subject to a number of risks and uncertainties,
certain of which are beyond the Company's control. Actual results
could differ materially from these forward-looking statements as a
result of the factors, including among others, regulatory or economic
influences.
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ITEM 1. DESCRIPTION OF BUSINESS
A. The Company was incorporated on May 11, 1998, in the State of Nevada
The Company was formed to serve as a holding company for one or more
operating subsidiaries to start-up and/or conduct business of
consultation, acquisition and joint venture programs with corporate
entities doing business nationally and internationally, throughout the
world.
The Company currently has two wholly owned subsidiary, Bickmore
Holdings, Inc., a Commonwealth of the Bahamas company and Tampa Bay
Investments Limited, a British Virgin Island company.
Tampa Bay Investments Limited ("Tampa")
Tampa was incorporated in British Virgin Island in May 1999. In
August 1999, Tampa entered into a letter of intent to acquire a 49%
interest for $11,500,000 with an option to acquire a further 2%
interest for no more than $1,500,000 in Guangzhou South China
Telecommunications Investment Corporation, a China telecommunications
company. The letter of intent does not have a specific closing date
as a number of conditions must first be completed. On June 28, 1999,
the Company issued 250,000 restricted common shares at $2.00 per share
as earnest money under the letter of intent. These shares are
currently held in safe keeping by the Company's attorneys. The Company
also advanced $315,000 on October 4, 1999 as partial payment on the
acquisition. If the acquisition is not completed, the $315,000 is
fully refundable. Tampa and the Company intend to finance the
acquisition through the issuance of convertible debentures or issuance
of common shares in the Company. The Company may be required to loan
the China telecommunication company $3,000,000 at terms to be
determine.
Bickmore Holdings, Inc. ("Bickmore")
Bickmore is in the business of investing in the telecommunications
industry, particularly with regard to wireless technology and related
products and/or services, in the People's Republic of China ("PRC").
Bickmore is a company incorporated under the Laws of the Bahamas on
13th February 1998. Bickmore maintains offices in Hong Kong. The Hong
Kong office manages all Asian investments. The Hong Kong office
address is 16th Floor, Flat 25A, Fontana Gardens, Causeway Bay, Hong
Kong.
Through joint ventures with Chinese partners, Bickmore plans on
investing in the manufacturing and development of telecommunications
equipment in the PRC.
Bickmore's management has identified the PRC as having a significant
untapped requirement for telecommunications equipment and
infrastructure. As the country's economy continues to grow and as
foreign investment becomes increasingly important, so does its
telecommunications infrastructure. Bickmore's management sees the
strong economy in PRC and government commitment to expanding
telecommunications infrastructure as creating an opportunity to
capitalize on the huge market potential for wireless telecommunications.
Bickmore will concentrate its efforts in Guangdong Province located in
southern PRC and which borders on Hong Kong. Its major city, Shenzhen,
has been designated an economic development zone. As such, this region
has seen incredible economic activity and foreign investment since its
designation in 1980. The population has grown 80-fold in just 18
years. Business activity in the region has prompted a huge need and
demand for all forms of telecommunications.
Bickmore's proposed acquisition: Zhanjiang Casonic Electronic Co. Ltd.
("Casonic")
Bickmore is in the final stages of completion of the acquisition of
Casonic. The companies have signed acquisition contracts on June
22,1999.
Bickmore intends to acquire 60% of the company for a total price of
US$4.7 million. The acquisition will be made through a sino joint
venture between Bickmore, Zhanjiang Ministry of Post and
Telecommunications and Kartek Holdings Ltd. The acquisition price is at
a price / earnings ratio of four.
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Bickmore will pay US$2.3 million in cash with the balance being
financed by the cash flow of Casonic through the collection of accounts
receivables outstanding. The US$2.3 million will be raised through
equity or debt financing.
Casonic is located in Zhanjiang, Guangdong China. The company has been
in operations since 1995 and has approximately 1,000 employees. Casonic
has produced over 10 million phones over the last 15 years all for the
domestic Chinese market. This equates to 10% of the overall phones
produced in China by domestic manufacturers over the last 15 years.
Casonic is a brand name that is recognized in many parts of China.
Casonic is a vertically integrated company. The production facilities
include plastics molding, printing and assembly departments. All
facilities are located on its own premises with over 200,000 feet of
production space. Casonic is capable of producing up to three million
telephone sets per year.
Market Value of Zhanjiang Casonic
Nelson Wheeler RSM , an international Certified Public Accounting firm
in Hong Kong, prepared a due diligence report dated October 31,1998.
After adjustments for differences in Chinese and US GAAP accounting
practises and various other adjustments, the unaudited net asset value
of the company was US$800,000.
C.Y. Leung & Company Limited, International Surveyors, Real Estate
Agents, Valuers & Auctioneers, prepared a valuation report on the
market value of the real estate properties held by Casonic. Based on
the report dated January 1999, Casonic holds real estate properties
worth US$3.75 million.
Richards Butler, a Hong Kong based international law firm, has given
the opinion that the acquisition of Casonic is legal under the current
PRC laws. Richards Butler was also responsible for the drafting of the
acquisition contracts.
The Product
The Company through Casonic intends to further the development of new
technology in the production of hi technology telephone handsets such
as DECT telephones. The Company will enter into strategic
relationships with technology holders to import new products into the
PRC.
Bickmore will invest in new equipment so that the hi technology phones
can be produced at the factory in Zhanjiang.
The Competition
The telephone market in the PRC is very competitive as there are many
manufacturers of telephone products. Pricing of the products are still
relatively high as compared to exports of the telephone products.
Bickmore's proposed acquisition: Kingtone Cable Enterprises Ltd. -
"Kingtone"
Bickmore is in final stages to acquire Kingtone. Acquisition contracts
were signed on June 22,1999 with amendments to the acquisition price on
November 2,1999.
Bickmore intends to acquire 60% of the company for a total price of
US$2.5 million. The acquisition will be made through a sino joint
venture between Bickmore, Zhanjiang Ministry of Post and
Telecommunications and Kartek Holdings Ltd.
Bickmore will pay US$1.25 million in cash with the balance being
financed by the cash flow of Kingtone through the collection of
accounts receivables outstanding. The US$1.25 million will be raised
through equity of debt financing.
Kingtone was established in 1995 to produce telephone communications
cables. The main product is the copper coax telephone cables and is
available in many different gauges. All cable products are sold to the
various telephone ministries around the PRC. Kingtone has 318,000 feet
of production space all housed on one site.
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Market Value of Kingtone
Nelson Wheeler RSM , an international Certified Public Accounting firm
in Hong Kong, prepared a due diligence report dated October 31,1998.
After adjustments for differences in Chinese and US GAAP accounting
practises and various other adjustments, the unaudited net asset value
of the company was US$2.8 million.
C.Y. Leung & Company Limited, International Surveyors, Real Estate
Agents, Valuers & Auctioneers, prepared a valuation report on the
market value of the real estate properties held by Casonic. Based on
the report dated January 1999, Kingtone holds real estate properties
worth US$4.64 million.
Richards Butler, a Hong Kong based international law firm, has given
the opinion that the acquisition of Kingtone is legal under the current
PRC laws. Richards Butler was also responsible for the drafting of the
acquisition contracts.
The Product
Bickmore intends to develop the fiber optics cable and preform
manufacturing in the PRC. Through a joint venture with a US based
technology company, Bickmore intends to set up a fiber optics preform
and cable manufacturing facility in Zhanjiang.
The fiber optics market in the PRC is growing exponentially over the
next ten years. According to experts from the Ministry of Information
Industry of China, the demand for optical fiber and cable will continue
to grow in the next ten years. It is expected that by the year 2000 the
annual demand for optical fiber will reach 6 million kilometers and the
demand for cable will exceed 300,000km.
In 1998, the total market for fiber optic communication systems and
equipment in China exceeded US$1 billion and it will grow to US$2
billion by the year 2010 according to the Director General of the
Telecom R&D Centre at Beijing University of Post and
Telecommunications.The fiber optics core and cable factory have an
estimated cost of between US$20 million and US$35 million including
plant and equipment.
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Tampa Bay's proposed Joint Venture: Guangzhou South China
Telecommunications Investment Corporation.
Tampa Bay is in the process of raising funding for the joint venture
agreement signed with South China. Tampa Bay intends to set up a sino
joint venture with South China with Tampa Bay holding 49% of the
company.
Guangzhou South China Telecom Investment Co. is one of the 15
shareholders of China United Telecommunications Corporation Limited,
commonly known as "China Unicom". GSCT has a strong foothold in the
Chinese telecommunications market and has the expertise to operate
and expand further into the telecommunications businesses such as
CDMA cellular manufacturing and operation, internet telephony and
cable television networks as well as Web television projects.
Combining the efforts of the newly formed joint venture and the
Zhanjiang factories that Belair is in the process of acquiring,
Belair Enterprises Inc. and Guangzhou South China Telecom Investment
Co. is poised to gain market share in the Chinese telecommunications
market with their products and services.
A legal due diligence has been completed by Richards Butler in Hong
Kong.
BUSINESS OF THE COMPANY AND ITS WHOLLY OWNED SUBSIDIARIES
Company Goals and Objectives
- To provide better quality and higher technology telephone
products to the people of the PRC.
- To expand by acquiring new technologies and products and
develop them in the PRC
- To seek long term partners to develop the PRC market
- To diversify into other related telecommunications industries
The Company does not expect to be dependent on any suppliers for any
essential raw material, energy or other items. There are no existing
supply contracts.
ECONOMIC ACTIVITY IN THE PEOPLE'S REPUBLIC OF CHINA
The People's Republic of China
The People's Republic of China (the "PRC"), is the third largest
country in the world with a total land area estimated at 9.572 million
square kilometers. The official language is Mandarin.
The population of the PRC is estimated at 1.2 billion people, 80% of
whom live in the eastern half of the country. At the end of 1992,
approximately 25% of the population resided in cities.
The government is organized pursuant to the Constitution. The National
People's Congress (NPC), is the supreme legislative body and the
Constitution provides for the election of members to the NPC and
provides for the legalization of private companies and the rental of
land use rights.
When the NPC is not in session, the Standing Committee carries out the
duties of the NPC and supervises the State Council which is responsible
for state administration. The State Council is headed by the Premier
and is composed of departmental ministers, vice-premiers, and state
councilors. The State Council is responsible for the operation of all
ministries and commissions at the state level and the state
administrative agencies at the local levels. An estimated sixty
ministries, commissions, and "adhoc" organizations, together with The
People's Bank of China, are under the administration of the State
Council.
The PRC is administratively divided into provinces, autonomous regions,
and government-controlled municipalities. The provinces and autonomous
regions report directly to the State Council while the municipalities
are administered by the Central PRC government (Beijing, Tianjin, and
Shanghai). The autonomous regions are Inner Mongolia, Guangxi,
Ningxia, Xinjiang, and Tibet. The provinces, autonomous regions, and
government-controlled municipalities, in turn, are divided into
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prefectures, autonomous prefectures, counties, autonomous counties, and
municipalities and townships. Local congresses exist at the
provincial, county, municipal, and certain autonomous prefecture
levels.
Although the NPC is the supreme legislative body in the PRC, it
operates under the leadership of the Communist Party of the PRC, which
has a central committee consisting of 175 full members.
Economic Development
The Chinese central government is in the process of changing from a
centrally planned collective economy, with limited private ownership,
into a "Socialist market economy"; as a result, economic initiatives
are in a state of change. During the late 1980's and early 1990's,
economic growth and change were substantial.
The PRC's "open door" policy and economic reform programs were formally
adopted at the Third Plenary Session of the Party Central Committee of
the 1 1 the National Party Congress in December, 1978. This marked a
shift in the PRC economy from a rigid centralized system to a more
decentralized economy, which included a reopening of foreign trade.
Although the initial reform programs embraced comprehensive policies
and long-term objectives, implementation has occurred gradually over
the past fifteen years. The reform programs are intended to transform
the economy into a market-oriented economy with an effective control
system, a modern enterprise system and an equitable system of income
distribution and social security.
China has developed and operated a centrally-planned economy, managed
in part through a series of five-year economic and social development
plans formulated by the State Council. Each five-year plan sets
overall agricultural, industrial, financial, and other economic and
social development targets. In implementing the five-year plans, the
State Planning Commission establishes specific annual production and
development targets, formulates and supervises the implementation of
annual plans designed to achieve those targets, and approves major
projects. Currently, there exists a five-year economic plan covering
the period from 1991 to 1995, and a ten-year plan which covers the
period to 2001.
Over the five-year period to 1993, the PRC experienced significant
economic growth stimulated by the government's continued implementation
of the economic reform policies initiated in 1978. Between 1988 and
1992, the annual real growth of gross national product was 8.1%. During
the same period, gross domestic product growth averaged 8.1% per year
and national income rose at an annual rate of 8.4%, supported by gains
in industrial and agricultural gross output of 15.6% and 4.9% per year,
respectively. Between 1988 and 1992, average income including non-wage
income, increased by 23% in urban areas and 17.9% in rural areas.
Foreign capital investment, including foreign loans and direct foreign
investment, increased from $10.2 billion in 1988 to $19.2 billion in
1992. During this same period, the aggregate of total imports and
exports increased from $102.8 billion to $165.6 billion.
The PRC, historically, has had an agrarian economy. In 1992,
approximately 74% of the labor force lived in rural areas. Since 1949,
the government has fostered growth in industry and the construction
sectors but recently, the services sector, including commerce,
transportation, telecommunications, entertainment, tourism, and
banking, has experienced substantial growth. In 1992, industry and
construction accounted for approximately 48% of the gross domestic
product; agriculture accounted for approximately 24%; and the services
sector accounted for 28%. In 1992, China was the world's eleventh
largest economy and the second largest in Asia in terms of GDP.
As a result of early initiatives to encourage growth through various
means during the early 1990's including foreign investment, the economy
"overheated" and several major cities experienced inflation of more
than 20%. The central government has taken steps to restrain the pace
of economic development and control inflation.
Some of the more recent measures instituted by the PRC central
government include:
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General
Development and implementation of a new legal framework. The concept
of contract law in the PRC is vague. Governance is sometimes by
regulations which are not publicized; a company may not know the rules
under which it may operate;
Passage of a new business incorporation law effective July 1, 1994;
Passage of a new income tax law on December 29, 1993, which was
applicable to foreign enterprises effective January 1, 1994;
Introduction of new foreign exchange controls which were effective
March 31, 1994.
Import and Trade
A proposal by the central government to implement a phased reduction of
import tariffs to an average of approximately 15%;
An undertaking by the government to release all documents about import
and export management and to apply only those and regulations that are
in the public domain as opposed to applying informal rules that are not
available to foreign companies.
Economic Structure
The principal participants in the economy are state-owned enterprises
which are wholly-owned by the people acting through the government;
collective enterprises owned by local groups for which the government
is not responsible for wages or similar obligations; businesses
operated by private individuals; joint-stock companies, including those
subject to varying degrees of state ownership; and enterprises owned at
least 25% by foreign individuals or companies. In 1992, state-owned
enterprises, located mostly in urban areas, accounted for approximately
48% of the PRC's total industrial gross output value, while
collectively-owned enterprises, predominantly located in rural areas,
accounted for approximately 38%.
Although increasing in absolute terms, gross industrial output value
contributed by state-owned enterprises has been declining in percentage
terms due to the rapid growth of other sectors. The fastest growing
sectors of the economy have been joint-stock companies, foreign
invested companies, and cooperative enterprises, with privately-owned
enterprises and collectively-owned enterprises also growing rapidly.
Township and village enterprises, a form of small-scale collectively-
owned enterprise developed primarily in townships and rural areas after
the 1978 reform, accounted for approximately 97% of the industrial
gross output value of all collectively-owned enterprises in 1992.
These have been a vibrant segment of the economy with the total gross
industrial output value increasing from 25% to 37% of the PRC total
over the period from 1988 to 1992.
On January 1, 1994, the PRC government implemented a managed-floating-
rate system under which the currency, called Renminbi, though still not
freely convertible, is allowed to float within limits against other
currencies based on market forces. Several new tax regulations came
into effect on January 1, 1994 that are designed to introduce
uniformity, simplicity, and fairness into the taxation system and to
clarify the fiscal relationships between the PRC government and state-
owned enterprises and between the central and local governments.
Foreign Investment
As part of its reopening to foreign trade in 1978, the PRC embarked
upon a policy of allowing foreign investors to establish certain types
of business enterprises in the PRC. Since then, a broad range of
related laws, administrative rules and regulations have been adopted
that provide a framework within which foreign investment activities can
be effectively conducted and regulated. Up to 1994, over 180,000
foreign enterprises have come into existence.
Such foreign enterprises have taken one of three forms; equity joint-
ventures, cooperative joint-ventures, and wholly foreign-owned
enterprises.
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Equity Joint-Ventures
An equity joint-venture is a limited liability company, incorporated
and registered in the PRC, with a foreign entity as one party and a PRC
entity as the other party. An equity joint-venture is a PRC legal
entity which has the right to own, use, and dispose of personal
property. The parties share in the investment risk and profits of the
joint-venture in proportion to their respective contribution in same.
At the end of the joint-venture period, the Chinese partner typically
has the option to purchase the foreign partners' share in the joint-
venture at fair market value.
Cooperative Joint-Ventures
In contrast to equity joint-ventures, cooperative joint-ventures are
not necessarily PRC legal entities, although many have such status. If
a cooperative joint-venture is not a PRC legal entity, each PRC and
foreign party is responsible for paying its own taxes on profits
derived from the venture and bears its own liability of risks and
losses. Parties may use equipment, materials, and services as
investments without such contribution being expressed in monetary terms
and accordingly, may determine any method of profit distribution as
they see fit. At the end of the cooperative joint-venture period, the
foreign partner typically turns over its interest in the venture to the
PRC partner who assumes complete control of the operations.
Wholly Foreign-Owned Enterprises
A wholly foreign-owned enterprise is owned completely by one or more
foreign investors using their own capital and does not involve any PRC
parties. The enterprise is a PRC legal entity under PRC law and must
generally be an enterprise, which either utilizes advanced technology
or which exports 50% or more of its products. The establishment of
wholly foreign-owned enterprises is restricted or prohibited in certain
specified business sectors such as media, trading companies, banking,
insurance and telecommunications.
The Chinese government affords flexibility to foreign parties in
managing such enterprises, including latitude in hiring and firing of
workers, in setting levels of wages and systems of bonuses and
allowances, in purchasing raw materials, and in marketing products.
General Issues
Attracting qualified staff for joint-venture operations can mean higher
wages and operating costs than existing domestic Chinese operations.
Nevertheless, compared to other developing countries, wage rates are
considerably lower for joint-venture operations and typically range
between $60 and $120 per month.
Joint-ventures usually involve a PRC entity and foreign partners and
typically are established to generate foreign exchange earnings.
Investments are controlled, resulting in a need for numerous documents,
studies, and certificates. Export market potential and technologically
advanced ventures tend to be favored. There can be restrictions on
involvement in some industries as well as on specific aspects of a
venture's operation. Trade, currency, and other regulations must be
observed and documented. Foreigners are usually expected to supply
capital, technical expertise, management skills, and technology. Tax
incentives, material sourcing, and foreign exchange exists for some
investments. The Chinese partner usually has supervisory authority
with respect to the joint-venture's operations, however, the joint-
venture company's Board of Directors decides all major issues,
including the determination of policy relating to the distribution of
profits.
Profit allocation is generally proportional to a partner's share of the
registered capital and distributed according to the contract and
articles of association of the venture. Most joint-ventures are for
periods ranging from ten to thirty years, with most being fifteen
years.
Business structures in the PRC use the concept of registered capital.
This is the value contributed by partners and registered with Chinese
authorities. Capital may be cash or, tangible or intangible assets,
and is treated similarly by all joint-venture types. Value placed upon
the capital depends upon the official exchange rate and the valuation
agreed to by the partners or their jointly appointed valuator.
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The fiscal year for Chinese regulatory reporting is the calendar year.
Accounting books and statements must be kept in Chinese. Unaudited
quarterly accounts and audited annual accounts must be submitted to the
authorities. General tax rates on profits for joint-ventures usually
are as follows:
Years one and two zero
Years three to five 16 2/3%
Beyond year five, taxes are usually 33% of profits although special
incentives exist for some locations, technologies, and industries.
Taxes may be refunded on profits reinvested in China. Losses may be
carried forward five years. Double taxation treaties exist with many
nations.
Foreign Exchange
All foreign exchange movements in and out are subject to the approval
of the People's Bank of China and the State Administration of Exchange
Control (SAEC). Foreign currency loans from overseas banks must be
registered with the SAEC. All foreign investments in the PRC must
establish both local currency (Rmb) and foreign exchange accounts with
the Bank of China. All receipts and disbursements of foreign exchange
must pass through these foreign exchange accounts.
Foreign investors may repatriate capital but must go through a clearing
process. Capital may be repatriated during operating periods if all
parties agree and if all prior years' losses have been cleared, taxes
have been paid, and contributions have been made to staff bonus and
welfare funds, the enterprise funds, and the general reserve fund.
Prior to 1994, not only were two legal currency exchange rates in
existence in China, but also, two units of currencies, the Foreign
Exchange Certificate (FEC) and the Renminbi (Rmb). Foreigners and/or
tourists entering China, had their foreign money exchanged for FEC's
using the Official Rate. This Rate also applied to most government
businesses. Commercial enterprises and all other trades, which account
for over 90% of the money transactions, were conducted using the Swap
Rate. In 1993, the Official Rate to the U.S. dollar was 5.6 FEC: $1.00
U.S., whereas the Swap Rate was 8.8 Rmb: $1.00 U. S.
Since January 1, 1994, the FEC has been discontinued and the official
unit of Chinese currency is the Rmb. The 'old' Official Rate is no
longer used and all currency conversions are now transacted at the Swap
Rate, which floats in a narrow range.
The unification of the two rate system into one is China's effort to
facilitate the move to have its currency traded in the international
monetary marketplace. As China strides to become a major international
trading partner, it is only a matter of time when its currency will
find a place in the world money market. In Hong Kong, the Rmb is now
readily accepted for value in many stores and convertible into most
world currencies at major financial institutions.
Zhanjiang , Guangdong Province
Zhanjiang is a sea side city with a natural deep water port. It is
located in the southwest part of Guangdong Province. Zhanjiang is one
of the fourteen economic development zones approved by the State
Council in Beijing. Zhanjiang lies in surrounded by three coastal
provinces of Guangdong, Hainan and Guangxi.
Zhanjiang offers offers the shortest sea route from China to countries
like Vietnam, Singapore and other Southeast Asia destinations.
Zhanjiang has its own airport and a railway system that connects it to
all parts of China.
Letters of Intents.
On April 14, 1999, the Company entered into a letter of intent to
acquire a majority interest in an Internet software development company
in Kuala Lumpur, Malaysia. The letter of intent gives the Company an
exclusive period to acquire The MediaShoppe SdnBhd subject to the
completion of the due diligence. The accounting firm of Hanifah Teo &
Associates in Kuala Lumpur have been engaged in the due diligence which
was completed in October, 1999. Negotiations on the acquisition terms
are currently being conducted.
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In June 1999, the Company entered into a letter of intent to purchase
60% of Zhanjiang Casonic Electronic Industrial Company Limited, a
telephone manufacturing company in Zhanjiang, China for approximately
$4,390,000. The Company has completed its due diligence and is
currently negotiating an adjustment to the purchase price. The closing
was originally set at September 30, 1999 but has been verbally extended
indefinitely. The Company intends to finance the purchase by issuing
convertible debentures and/or common shares.
In June 1999, the Company entered into a letter of intent subject to
certain conditions to purchase 60% of Zhanjiang Kingstone Cable
Enterprises Limited, a cable manufacturing company in Zhanjiang, China
for approximatley $3,500,000. The Company has completed its due
diligence and currently negotiating an adjustment to the purchase
price. The closing was originally set at September 30, 1999 but has
been verbally extended indefinitely. The Company intends to finance
the purchase by issuing convertible debentures and/or common shares.
Seasonal Nature of Business Activities. The Company's business
activities are not seasonal.
Item 2. Management's Discussion and Analysis or Plan of Operation
Trends and Uncertainties. Demand for the Company's products and
services will be dependent on, among other things, market acceptance of
the Company's concept, its proposed operations and general economic
conditions that are cyclical in nature. Inasmuch as a major portion of
the Company's activities will be the receipt of revenues from the sales
of its products and services, the Company's business operations, upon
commencement, may be adversely affected by the Company's inability to
obtain the necessary financing, competitors and prolonged recessionary
periods.
Capital and Source of Liquidity. The Company requires substantial
capital in order to meet its ongoing corporate obligations and in order
to continue and expand its current and strategic business plans.
For the nine months ended January 31, 2000, the Company issued
common shares for $1,199,321 resulting in net cash provided by financing
activities of $1,199,321.
For the nine months ended January 31, 1999, the Company received $584,250
from the sale of its common shares resulting in net cash provided by
financing activities of $584,250.
For the period from inception to April 30, 1999, the Company sold its
common shares for net proceeds of $670,000. As a result, the Company
had net cash provided by financing activities of $697,000 for the
period from inception to April 30, 1999.
The Company had net cash used in investment activities of $(263,905) in
its investment in Guangzhou South China Telecommunications Investment
Co.
For the nine months ended January 31, 2000, the Company made advances
to affiliates of $(325,843) resulting in cash flows from investing
activities of $(325,843).
For the nine months ended January 31, 1999, the Company had no
investing activities.
For the period from inception to April 30, 1999, the Company had no
investing activities.
Results of Operations. For the nine months ended January 31, 2000,
the Company had a net loss of $(771,116). The Company did not have
any revenues for that same period. For the nine months ended January
31, 2000, the Company paid advertising expenses of $1,944, consulting
fees of $429,321, courier of $163, bank charges of $1,086, automobile
of $168, entertainment expenses of $778, exchange gains of $863, legal
and accounting of $206,160, office supplies of $494, wage of $125,887,
telephone of $1,322, travel and hotel of $8,936, transfer agent
charges of $324.
For the nine months ended January 31, 1999, the Company had a net loss
of $(568,644). The Company did not have any revenues for that same
period. For the nine months ended January 31, 1999, the Company paid
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bank changes of $1,945 , consulting fees of $290,232, general and
administrative of $2,450, other fees of $157,978, professional fees of
$96,108 and travel of $19,931.
For the period from inception to April 30, 1999, the Company had a net
loss of $740,706. The Company did not have any revenues for that
same period. For the period from inception to April 30, 1999, the
Company paid bank charges of $3,410, travel expenses of $43,963,
professional fees of $162,730, general expenses of $15,905, consulting
fees of $356,720 and other fees of $157,978.
Plan of Operation. The Company is not delinquent in any of its
obligations even though the Company has generated no operating
revenues. However, the Company continues its efforts to raise
capital. The Company does not currently have sufficient capital to
expand operations for the next twelve months and will have to raise
additional capital to meet its business objectives as well as 1934 Act
reporting requirements. The Company intends to pursue its business
plan and meet its reporting requirements utilizing cash made available
from advances revenues from its subsidiary and the private and future
public sale of its securities. The Company's management is of the
opinion that revenues from the sales of its securities will be
sufficient to pay its expenses until its business operations create
revenue.
Other than described above, the Company does not expect significant
changes in the number of employees during the next twelve months.
On a long-term basis, the Company's liquidity is dependent on
expansion of operations, revenue generation, additional infusions of
capital and potential debt financing. The Company management believes
that additional capital and debt financing in the short term will allow
it to commence its business plan and thereafter result in revenue and
greater liquidity in the long term. However, there can be no assurance
that the Company will be able to obtain the needed additional equity or
debt financing in the future.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company's executive offices consist of approximately 300 square
feet, located at 16th Floor, 25A, Fontana Gardens, Tai Hang Road,
Causeway Bay, Hong Kong. The offices are provided free of charge to
the Company by Zhanjiang Kingtone Cable Enterprises.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
There are currently 18,153,200 Common Shares outstanding. The
following tabulates holdings of shares and other securities of the
Company by each person who, subject to the above, at the date of this
prospectus, holds of record or is known by Management to own
beneficially more than 5.0% of the Common Shares and, in addition, by
all directors and officers of the Company individually and as a group.
Each named beneficial owner has sole voting and investment power with
respect to the shares set forth opposite his name.
Shareholdings
<TABLE>
<CAPTION>
Percentage of
Number & Class(1) Outstanding
Name and Address of Shares Common Shares
<S> <C> <C>
William W.M. Ko
16th Floor, 25A
Fontana Gardens
Causeway Bay, Hong Kong 312,000 1.72%
Jack Augsback
580 Village Boulevard
Suite 140
West Palm Beach, FL 33409 0 0%
Directors and Officers
as a group
(2 persons) 312,000 1.72%
<PAGE>13
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or
sole or shared investment power (including the power to dispose or
direct the disposition) with respect to a security whether through a
contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable unity property laws.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
Board of Directors. The following persons listed below have been
retained to provide services as director until the qualification and
election of his successor. All holders of Common Stock will have the
right to vote for Directors of the Company. The Board of Directors has
primary responsibility for adopting and reviewing implementation of the
business plan of the Company, supervising the development business
plan, review of the officers' performance of specific business
functions. The Board is responsible for monitoring management, and
from time to time, to revise the strategic and operational plans of the
Company. Directors receive no cash compensation or fees for their
services rendered in such capacity. The directors will serve until the
next annual meeting scheduled for the fourth quarter of 2000.
The Executive Officers and Directors are:
</TABLE>
<TABLE>
<CAPTION>
Name Position Term(s) of Office
<S> <C> <C>
William W.N. Ko, age 32 President, Chief Executive November 1998
Officer,
Secretary Chief Financial January 6, 2000
Director, Controller to present
Jack Augsback, age 56 Director July 1999
</TABLE>
William Ko will devote approximately 100% of his time to the business.
Mr. Ko is serving a five year term as a director. Mr. Augsback is
serving two year terms as directors.
RESUMES
Willliam W.N. Ko. From November 1998 to present, Mr. Ko has been
President, Chief Executive Officer and Director of the Company. From
April 1997 to April 1998, Mr. Ko was a Director of APAC
Telecommunications Corporation, a telecommunications company. From
January 1994 to April 1997, Mr. Ko was a Director and Manager of BC
Garment Factory Limited, a clothing distributor. Mr. Ko graduated in
1989 from the University of British Columbia, Vancouver, Canada with a
Bachelor of Commerce degree in Accounting. He obtained the Canadian
Certified Management Accountants designation in 1995.
Jack Augsback. Mr. Augsback has been a director of the Company since
July 1999. For the last five years, Mr. Augsback has been President
and Chief Executive Officer of Jack Augsback & Associates, Inc., Jack
Augsback & Co., Inc. and Managing Partner of Jack Augsback & Co. LLC.
These companies are all in the financial consulting and investor
relations business. Mr. Augsback graduated from Miami University with
a Bachelor of Science degree in Economics. He received a MBA in
Quantivie Economics from the Miami Graduate School of Business and MBAs
in Finance and Economics from the St. Moritz University.
<PAGE>14
Remuneration. During the year ended April 30, 1999, the Company was
charged $36,000 for management services by William Ko, an officer and a
director of the Company, of which $9,000 was payable at year end. In
July 1999 the Company entered into an employment contract with this
individual to continue providing services to the Company for a minimum
of $143,000 per annum for five years. The contract may be terminated
by either party with 6 months notice. Under the terms of employment,
Mr. Ko is entitled to 500,000 stock options annually for 5 years.
These options are exercisable at $.50 per share. The option to
acquire shares, if not exercised in the year granted, can be carried
forward to subsequent years of the employment contract.
During the year ended April 30, 1999, the Company was charged $32,000
for management services by Michael Tan, a shareholder of the Company,
of which $8,000 was payable at year end. In July 1999, the Company
entered into an employment agreement with this individual to continue
providing management services to the Company for a minimum of $104,000
per annum for five years. The contract may be terminated by either
party with six months notice. Under the terms of employment, the
shareholder is entitled to 500,000 stock options annually for five
years. These options are exercisable at $.50 per share. The option
to acquire shares, if not exercised in the year granted, can be carried
forward to subsequent years of the employment contract.
Jack Augsback, a director of the Company shall receive 225,000 stock
options to purchase shares of the Company upon assisting the Company in
raising $4,000,000 in financing. The stock options shall be
exercisable at $.50 per share for a period of five years.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Contract. On May 12, 1998, the Company entered into a
management contract with Joist Management Ltd. under which Joist
Management Ltd. would provide administrative and general office
services to the Company at a rate of $10,000 per month until May 31,
1999, unless terminated with 5 days notice by either party. Current
management believes none of the shareholders, directors or officers of
Joist Management Ltd. are shareholders of Belair. In November 1998,
the contract was terminated. The Company paid a total of $120,000 to
Joist Management Ltd. from may 1998 to November 1998 for its management
services.
In September 1999, a director lent the Company approximately $32,000.
The loan is repayable on demand and bears interest at 8% per annum.
The loan is convertible at the director's option into common shares of
the Company at $0.60 per share.
Consulting Fees to Shareholders. In November 1998, the Company paid
consulting fees totally $97,500 to two shareholders of the Company.
The shareholders provided services to the Company.
During the year ended April 30, 1999, the Company paid a consulting fee
of $50,000 to APAC Telecommunications Corporation, a company with
common shareholders and directors.
During the year ended April 30, 1999, the Company paid a fee of
$157,978 to Joist Management Ltd., a company which current management
believes may have common shareholders or be related to prior management
or connect to Joist Management Ltd.
On April 30, 1999, the Company purchase 100% of Bickmore Holdings, Inc.
from a relative of Wiliam Ko, a director of the Company for $1.00.
Bickmore holdings, Inc. did not have any assets, liabilities, revenue
or expenses as of April 30, 1999.
On November 10, 1998, the Company entered into an agreement with Jack
Augsback & Company, a company controlled by Jack Augsback who become a
director of the Company on July 21, 1999. Under this agreement, Jack
Augsback and Company would provide sources of corporate financing to
the Company in exchange for the payment of finders fees on the
successful completion of any financing transactions brought in by Jack
Augsback and Company. The agreement terminates on December 31, 1999
<PAGE>15
ITEM 8. DESCRIPTION OF SECURITIES
Qualification. The following statements constitute brief summaries of
the Company's Certificate of Incorporation and Bylaws, as amended.
Such summaries do not purport to be complete and are qualified in their
entirety by reference to the full text of the Certificate of
Incorporation and Bylaws.
Common Shares. The Company's articles of incorporation authorize it to
issue up to 30,000,000 Common Shares, $.001 par value per Common Share.
All outstanding Common Shares are legally issued, fully paid and non-
assessable.
Liquidation Rights. Upon liquidation or dissolution, each outstanding
Common Share will be entitled to share equally in the assets of the
Company legally available for distribution to shareholders after the
payment of all debts and other liabilities.
Dividend Rights. There are no limitations or restrictions upon the
rights of the Board of Directors to declare dividends out of any funds
legally available therefor. The Company has not paid dividends to date
and it is not anticipated that any dividends will be paid in the
foreseeable future. The Board of Directors initially may follow a
policy of retaining earnings, if any, to finance the future growth of
the Company. Accordingly, future dividends, if any, will depend upon,
among other considerations, the Company's need for working capital and
its financial conditions at the time.
Voting Rights. Holders of Common Shares of the Company are entitled
to voting rights. Holders may cast one vote for each share held at all
shareholders meetings for all purposes.
Other Rights. Common Shares are not redeemable, have no conversion
rights and carry no preemptive or other rights to subscribe to or
purchase additional Common Shares in the event of a subsequent
offering.
Transfer Agent. Interwest Transfer Company, Inc., Salt Lake City, Utah
acts as the Company's transfer agent.
<PAGE>16
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock began trading on November 10, 1998. Until
October 7, 1999, the Company's Common Stock was listed for trading
under the symbol "BLAI" in the over-the-counter market on the OTC
Bulletin Board maintained by the NASD. After that date, the Company's
Common Stock has been listed on the "pink sheets."
The following table sets forth the range of high and low bid quotations
for the Company's common stock for each quarter since the Company
commenced trading as reported on the NASD Bulletin Board by the
Company's market makers. The quotations represent inter-dealer
prices without retail markup, markdown or commission, and may not
necessarily represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
January 31, 1999 - -
April 30, 1999 $1.50 $2.3125
July 31, 1999 $.625 $.6875
October 31, 1999 $.375 $.375
January 31, 2000 $.375 $.375
April 30, 2000 $.375 $.375
</TABLE>
The Company has never paid any cash dividends nor does it intend, at
this time, to make any cash distributions to its shareholders as
dividends in the near future.
As of January 31, 2000, the number of shareholders of the Company was
44.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings nor is the Company
aware of any disputes that may result in legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
During the Company's two most recent fiscal years or any later interim
period, there have been no changes in or disagreements with the
Company's principal independent accountant or a significant
subsidiary's independent accountant.
<PAGE>17
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
At inception, the Company authorized the issuance of 1,500,000 Common
Shares at $.001 per share (an aggregate of $1,500 cash) to the
following:
Name Amount of Shares
Terry Woo 500,000
Haliun Hongorzul 250,000
Tak Hing Lam 250,000
Siu Hing Chan 250,000
Chiam Ai Ngoh 250,000
These issuances were made pursuant to an exemption from registration
under Section 4(2) of the Securities Act of 1933. These issuances
were made to sophisticated investors who had an ongoing relationship
with the Company.
During May 1998, the Company pursued an offering of 4,000,000 Common
Shares at $.01 per Common Share under Rule 504 of Regulation D. The
offering was approved and/or exempted by the required states and the
appropriate Form D was filed with the Securities and Exchange
Commission. The Company received gross proceeds of $40,000 cash.
Name Amount of Shares
Enrique Yon 260,000
Khin Chong 250,000
Hsiao Wei Li 250,000
Kam Chun Hui 260,000
Sui Tong Chan 260,000
Kwok Tim Leung 260,000
Chi Jen Chen 250,000
Lillian Wong 230,000
Tun Sze Tang 230,000
Kum Peng Lee 230,000
Richard Tan 230,000
Choilon Khulan 260,000
Kar Chun Chow 260,000
Rita Meiyi Fang 260,000
Anna Fon 250,000
Sodgerel Suren 260,000
During July 1998, the Company pursued an offering of 67,000 Common
Shares at $3.00 per Common Share under Rule 504 of Regulation D. The
offering was approved and/or exempted by the required states and the
appropriate Form D was filed with the Securities and Exchange
Commission. The Company received gross proceeds of $201,000 cash.
Name Amount of Shares
Mun Soo Chun 2,000
Wendy Yu 2,000
Joanne Wood 2,000
Justina Mark 2,000
Benjamin Ka Yuen Cheng 3,000
Hitomi Gilliam 1,000
Sue Kah Wone 5,000
Suyan Ponich 3,000
Richard Hung Fai Kwan 3,000
Kum Peng Lee 7,000
Chi Jen Chen 7,000
Bailey Wang 8,000
Lillian Wong 8,000
Philip Wong 8,000
Dr. Shuryo Nakai 1,000
Kam Chun Hui 2,000
KY Matthews 3,000
In December 1998, the Company pursuant an offering of 130,000 Common
Shares at $2.80 per Common Share under Rule 504 of Regulation D. The
offering was approved and/or exempted by the required states and the
appropriate Form D was filed with the Securities and Exchange
Commission. The Company received gross proceeds of $364,000
<PAGE>18
Name Amount of Shares
Lim Cher Kia 100,000
Anthony Heng 10,000
Tan Tian Hin Jerry 20,000
On June 1999, the Company issued 50,000 Common Shares for cash proceeds
of $112,500 to Lim Chai Huat. This issuance was made pursuant to an
exemption from registration under Section 4(2) of the Securities Act of
1933. The issuance was made to a sophisticated investor who had an
ongoing relationship with the Company.
On June 28, 1999, the Company issued 250,000 Common Shares to Shenzhen
Dragon Investments at $2.00 per share ($500,000) in relation to an
agreement entered into by its wholly owned subsidiary, Tampa Bay
Investments, Limited. These shares are currently held in escrow
pending completion of the acquisition of a China Telecommunications
Company. This issuance was made pursuant to an exemption from
registration under Section 4(2) of the Securities Act of 1933. The
issuance was made to sophisticated investors who had an ongoing
relationship with the Company.
On June 28, 1999, the Company issued 624,000 Common Shares to William
Ko and Tardjo Halim (312,000 each) as consideration for Mr. Ko and
Tardjo Halim utilizing a portion of their shares as payment to
unrelated third parties for services to be rendered to the Company.
This issuance was made pursuant to an exemption from registration under
Section 4(2) of the Securities Act of 1933. These issuances were made
to sophisticated investors who had an ongoing relationship with the
Company.
On July 21, 1999, 500,000 Common Shares were issued to William Lai as
partial payment on the possible acquisition of the Zhanjiang Casonic
Electronic industrial Company Limited and Zhanjiang Kingstone Cable
Enterprises Limited.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Indemnification. The Company shall indemnify to the fullest extent
permitted by, and in the manner permissible under the laws of the State
of Nevada, any person made, or threatened to be made, a party to an
action or proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he is or was a director or
officer of the Company, or served any other enterprise as director,
officer or employee at the request of the Company. The Board of
Directors, in its discretion, shall have the power on behalf of the
Company to indemnify any person, other than a director or officer, made
a party to any action, suit or proceeding by reason of the fact that
he/she is or was an employee of the Company.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the
Company, the Company 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 Company of expenses incurred or paid by
a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceedings) is asserted by
such director, officer, or controlling person in connection with any
securities being registered, the Company 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 issues.
INDEMNIFICATION OF OFFICERS OR PERSONS CONTROLLING THE CORPORATION FOR
LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, IS HELD TO BE
AGAINST PUBLIC POLICY BY THE SECURITIES AND EXCHANGE COMMISSION AND IS
THEREFORE UNENFORCEABLE.
<PAGE>19
PART F/S
The following financial statements required by Item 310 of Regulation
S-B are furnished below:
Belair Enterprises, Inc. Unaudited Balance Sheet dated January 31, 2000
Belair Enterprises, Inc. Unaudited Statement of Operations for the
nine months ended January 31, 2000 and 1999
Belair Enterprises, Inc. Unaudited Statement of Cash Flows for the
nine months ended January 31, 2000 and 1999
Belair Enterprises, Inc. Notes to Unaudited Consolidated Financial
Statements
Independent Auditor's Report dated March 23, 2000
Consolidated Balance Sheets - April 30, 1999
Consolidated Statement of Operations for the year ended April 30, 1999
Consolidated Statement of Changes In Stockholders' Equity for the year
ended April 30, 1999
Consolidated Statement of Cash Flows for the Year Ended April 30, 1999
Notes to Consolidated Financial Statements
<PAGE>20
Belair Enterprises, Inc.
(A Development Stage Company)
Balance Sheet
January 31, 2000
ASSETS
Current assets:
Cash $ 522,966
Stock subscriptions receivable 286,379
Accrued interest receivable 2
Prepaid expenses -
-----------
Total current assets 809,347
Acquisition deposits 825,000
Advances to affiliates 325,843
------------
$ 1,960,190
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 41,671
Accounts payable - related party 32,256
------------
Total current liabilities 73,927
Common stock, $.001 par value,
30,000,000 shares authorized,
18,153,200 shares issued and outstanding 18,153
Additional paid in capital 3,386,947
Accumulated deficit (1,518,837)
------------
1,886,263
------------
$ 1,960,190
See accompanying notes to consolidated financial statements.
<PAGE>21
Belair Enterprises, Inc.
(A Development Stage Company)
Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Period From
Ended Inception To
January 31, January 31, January 31,
2000 1999 2000
<S> <C> <C> <C>
General and administrative expenses $ 280,047 $ 143,166 $ 528,292
General and administrative expenses
- related parties 497,400 425,478 990,878
--------- -------- ---------
777,447 568,644 1,519,170
--------- -------- ---------
(777,447) (568,644) (1,519,170)
Other income and (expense):
Interest income 331 - 333
--------- -------- ----------
331 - 333
--------- -------- ----------
(Loss) before income taxes (777,116) (568,644) (1,518,837)
Provision for income taxes - - -
--------- -------- ----------
Net (loss) $ (777,116) $(568,644) $(1,518,837)
========== ========= ===========
Per share data
Basic and diluted loss per share $ (.10) $ (.11) $ (.23)
========== ========= ===========
Weighted average shares outstanding 8,053,244 5,158,000 6,478,200
========== ========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>22
Belair Enterprises, Inc.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Period From
Ended Inception To
January 31, January 31, January 31,
2000 1999 2000
<S> <C> <C> <C>
Net income (loss) $ (777,116) $ (568,644) $ (1,518,837)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Stock and options issued for services 397,400 - 397,400
Compensation value of stock issued at discount - 250 250
Changes in assets and liabilities:
(Decrease) increase in accrued interest receivable - - (2)
(Decrease) increase in prepaid expenses 355 - -
Increase (decrease) in accounts payable 24,899 17,000 41,671
Increase (decrease) in accounts payable - related 3,584 - 32,256
---------- -------- -----------
Total adjustments 426,238 17,250 471,575
---------- -------- -----------
Net cash (used in)
operating activities (350,878) (551,394) (1,047,262)
Cash flows from investing activities:
Advances to affiliates (325,843) - (325,843)
---------- -------- -----------
Net cash provided by
financing activities (325,843) - (325,843)
Cash flows from financing activities:
Proceeds from the sale of common stock 1,199,321 584,250 1,896,071
---------- -------- -----------
Net cash provided by
financing activities 1,199,321 584,250 1,896,071
---------- -------- -----------
Increase (decrease) in cash 522,600 32,856 522,966
Cash and cash equivalents,
beginning of period 366 - -
---------- -------- -----------
Cash and cash equivalents,
end of period $ 522,966 $ 32,856 522,966
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>23
Belair Enterprises, Inc.
Notes to Unaudited Financial Statements
January 31, 2000
Basis of presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions incorporated in
Regulation 10-SB of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments and accruals) considered
necessary for a fair presentation have been included.
The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full
year. The accompanying financial statements should be read in
conjunction with the Company's financial statements for the year ended
April 30, 1999, included elsewhere herein.
Basic loss per share was computed using the weighted average number of
common shares outstanding.
During the nine months ended January 31, 2000, the Company issued an
aggregate of 11,032,200 shares of its common stock for cash of
$485,700 of which $286,379 was paid subsequent to January 31, 2000.
Additionally, the Company issued an aggregate of 624,000 shares of its
common stock for services provided to the Company. The Company valued
the securities issued at the amounts paid by cash investors nearest
the dates during which the services were provided to the Company.
The Company also recognized $300,000 of compensation value associated
with options granted to officers in connection with employment
contracts entered into during July 1999. The 1,000,000 options
granted are exercisable at $.50 per share and were issued at a time
when outside investors paid $.80 per share for the Company's stock.
On July 21, 1999, 500,000 restricted common shares were issued as
partial payment on the possible acquisition of the Zhanjang Casonic
Electronic Industrial Company Limited and Zhanjiang Kingstone Cable
Enterprises Limited at $0.65 per share. The shares are restricted
from trading for one year from date of issuance. The shares are not
refundable should the acquisition not be completed.
On June 28, 1999 Belair issued 250,000 restricted common shares at $2
per share (total $500,000) as earnest money under the agreement. These
shares are currently held in safe keeping by Belair's lawyers. Should
the investment not be completed, the earnest money is fully
refundable.
<PAGE>24
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Shareholders
Belair Enterprises, Inc.
(A Development Stage Company)
We have audited the consolidated balance sheet of Belair Enterprises,
Inc. as of April 30, 1999, and the related consolidated statements of
operations, changes in stockholders' equity, and cash flows for the
year then ended, which includes the period from inception to April 30,
1999. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above, present fairly, in all material respects, the financial
position of Belair Enterprises, Inc. as of April 30, 1999, and the
results of its operations and cash flows for year then ended which
includes the period from inception to April 30, 1999, in conformity
with generally accepted accounting principles.
James E. Scheifley & Associates, P.C.
Certified Public Accountants
Denver, Colorado
March 23, 2000
<PAGE>25
Belair Enterprises, Inc.
(A Development Stage Company)
Balance Sheet
April 30, 1999
ASSETS
Current assets:
Cash $ 366
Accrued interest receivable 2
Prepaid expenses 355
-----------
Total current assets 723
$ 723
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,772
Accounts payable - related party 28,672
-----------
Total current liabilities 45,444
Common stock, $.001 par value,
30,000,000 shares authorized,
5,747,000 shares issued and outstanding 5,747
Additional paid in capital 691,253
Accumulated deficit (741,721)
(44,721)
-----------
$ 723
See accompanying notes to consolidated financial statements.
<PAGE>26
Belair Enterprises, Inc.
(A Development Stage Company)
Statement of Operations
Year Ended
April 30,
1999
General and administrative expenses $ 248,245
General and administrative expenses - related parties 493,478
-----------
741,723
-----------
(741,723)
Other income and (expense): 2
Interest income -----------
2
(Loss) before income taxes (741,721)
Provision for income taxes -
-----------
Net (loss) $ (741,721)
Per share data
Basic and diluted loss per share $ (0.14)
Weighted average shares outstanding 5,296,917
See accompanying notes to consolidated financial statements.
<PAGE>27
Belair Enterprises, Inc.
(A Develpoment Stage Company)
Statement of Changes in Stockholders' Equity
For the Year Ended April 30, 1999
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital (Deficit) Total
<S> <C> <C> <C> <C> <C>
Shares issued at inception for cash, May 1998 at 1,500,000 $ 1,500 $ (250) $ - $ 1,250
Compensation value of shares issued at discount 250 250
Shares issued for cash
June 1998 at $.01 4,000,000 4,000 36,000 40,000
August 1998 at $3.00 67,000 67 200,933 201,000
October 1998 at $2.80 130,000 130 363,870 364,000
April 1999 at $2.25 50,000 50 112,450 112,500
Expenses related to stock sales (22,000) (20,000)
Net (loss) for the year (741,721) (741,721)
---------- --------- --------- --------- ---------
Balance, April 30, 1999 5,747,000 $ 5,747 $ 691,253 $(741,721) $ (44,721)
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>28
Belair Enterprises, Inc.
(A Development Stage Company)
Statement of Cash Flows
<TABLE>
<CAPTION>
Year Ended
April 30,
1999
<S> <C>
Net income (loss) $ (741,721)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Compensation value of stock issued at discount 250
Changes in assets and liabilities:
(Decrease) increase in accrued interest receivable (2)
(Decrease) increase in prepaid expenses (355)
Increase (decrease) in accounts payable 16,722
Increase (decrease) in accounts payable - related parties 28,672
-----------
Total adjustments 45,337
Net cash (used in) -----------
operating activities (696,384)
-----------
Cash flows from financing activities:
Proceeds from the sale of common stock 696,750
-----------
Net cash provided by
financing activities 696,750
Increase (decrease) in cash 366
Cash and cash equivalents,
beginning of period -
-----------
Cash and cash equivalents,
end of period $ 366
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>29
Belair Enterprises, Inc.
(A Development Stage Company)
Statement of Cash Flows
Year Ended
April 30,
1999
Supplemental cash flow information:
Cash paid for interest $ -
Cash paid for income taxes $ -
See accompanying notes to consolidated financial statements.
<PAGE>30
Belair Enterprises, Inc.
(A Development Stage Company)
Notes to Consolidated Financial Statements
April 30, 1999
Note 1. Organization and Summary of Significant Accounting Policies.
Belair Enterprises, Inc. (Belair) was incorporated in the State of
Nevada on May 12, 1998. The Company is considered to be in its
development stage and plans to engage in the telecommunications
business. Subsequent to April 30, 1999, the Company entered into
several agreements to develop its interests in this industry in the
Peoples Republic of China and in South
East Asia.
Principals of Consolidation:
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary, Bickmore Holdings, Inc., a
Commonwealth of the Bahamas company. All inter-company balances and
transactions have been eliminated in the consolidated financial
statements.
Cash:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with maturity of three months
or less to be cash equivalents.
Estimates:
The preparation of the Company's financial statements requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from these estimates
Fair value of financial instruments
The Company's short-term financial instruments consist of cash and
cash equivalents, accounts and loans receivable, and payables and
accruals. The carrying amounts of these financial instruments
approximate fair value because of their short-term maturities.
Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of cash and accounts
receivable, trade. During the year the Company did not maintain cash
deposits at financial institutions in excess of the $100,000 limit
covered by the Federal Deposit Insurance Corporation. The Company
does not hold or issue financial instruments for trading purposes nor
does it hold or issue interest rate or leveraged derivative financial
instruments
Foreign Currency Translation
Monetary assets and liabilities are translated at the rate prevailing
at the balance sheet date. Non-monetary assets and liabilities are
translated at rates prevailing at the respective transaction date
while revenue and expenses are translated at an average rate. Foreign
currency gains and losses arising on transactions are included in
income. The Company's functional currency during the year ended April
30, 1999 was the U.S. dollar.
New Accounting Pronouncements
SFAS No. 130, "Reporting Comprehensive Income", establishes
guidelines for all items that are to be recognized under accounting
standards as components of comprehensive income to be reported in the
financial statements. The statement is effective for all periods
beginning after December 15, 1997 and reclassification financial
statements for earlier periods will be required for comparative
purposes. To date, the Company has not engaged in transactions that
would result in any significant difference between its reported net
loss and comprehensive net loss as defined in the statement and
therefore the reported net loss is equivalent to comprehensive net
loss.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use ("SOP 98-1").
SOP 98-1 provides authoritative guidance on when internal-use software
costs should be capitalized and when these costs should be expensed as
incurred.
<PAGE>31
Effective in 1998, the Company adopted SOP 98-1, however the Company
has not incurred costs to date that would require evaluation in
accordance with the SOP.
Effective December 31, 1998, the Company adopted SFAS No. 131,
Disclosures about Segments of an Enterprise and Related Information
("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards for
the way that public business enterprises report information about
operating segments in annual financial statements and requires that
those enterprises report selected information about operating segments
in interim financial reports. SFAS 131 also establishes standards for
related disclosures about products and services, geographic areas, and
major customers. The adoption of SFAS 131 did not affect results of
operations or financial position. To date, the Company has not
operated in any planned business activity.
Effective December 31, 1998, the Company adopted the provisions of
SFAS No. 132, Employers' Disclosures about Pensions and Other Post-
retirement Benefits ("SFAS 132"). SFAS 132 supersedes the disclosure
requirements in SFAS No. 87, Employers' Accounting for Pensions, and
SFAS No. 106, Employers' Accounting for Post-retirement Benefits Other
Than Pensions. The overall objective of SFAS 132 is to improve and
standardize disclosures about pensions and other post-retirement
benefits and to make the required information more understandable. The
adoption of SFAS 132 did not affect results of operations or financial
position.
The Company has not initiated benefit plans to date that would require
disclosure under the statement.
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities
("SFAS 133"), which is required to be adopted in years beginning after
June 15, 1999. SFAS 133 will require the Company to recognize all
derivatives on the balance sheet at fair value. Derivatives that are
not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes
in the fair value of derivatives will either be offset against the
change in fair value of hedged assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company has not yet determined
what the effect of SFAS 133 will be on earnings and the financial
position of the Company, however it believes that it has not to date
engaged in significant transactions encompassed by the statement.
During 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5 - Reporting on the Costs of Start-Up
Activities. The statement is effective for fiscal years beginning
after December 15, 1998 and requires that the cost of start-up
activities, including organization costs be expensed as incurred. The
Company adopted the statement upon its inception and has charged $450
of organization costs to expense during the period ended December 31,
1999.
Note 2. Stockholders' Equity.
In May 1998, the Company sold 1,500,000 shares of its common stock to
five individuals for cash at $.001 per share except that one
shareholder paid $.0005 for 500,000 of the shares. The difference
($250) between the price paid by this shareholder and the others who
purchased stock at $.001 per share has been accounted for as
compensation expense by the Company.
During the period from June 1998 through April 1999, the Company sold
an aggregate of 4,427,000 shares of its common stock to unrelated
investors at prices from $.01 per share to $3.00 per share. The
Company received gross proceeds of $717,500 from the stock sales and
paid $22,000 of expenses related to the stock offerings.
The Company had no outstanding warrants or options for the purchase of
its stock outstanding at April 30, 1999, however options were granted
subsequent to that date. See Note 4.
<PAGE>32
Note 3. Income taxes.
The Company has not provided for income taxes for the years ended
April 30, 1999 due to an operating loss.
The Company has a net operating loss carryforward available to offset
future taxable income of approximately $741,000 that expires in the
year 2014.
The Company has fully reserved the deferred tax asset (approximately
$252,000) that would arise from the loss carryforward since it is more
likely than not that the Company will not sustain a level of
operations that will provide sufficient taxable income to utilize the
loss to reduce taxes in future periods.
Note 4. Related Party Transactions.
On May 12, 1998, Belair entered into a management contract with Joist
Management Ltd. under which Joist Management Ltd. would provide
administrative and general office services to Belair at a rate of
$10,000 per month until May 31, 1999, unless terminated with 5 days
notice by either party. Current management believes none of the
shareholders, directors or officers of Joist Management Ltd. are
shareholders of Belair. In November 1998, the contract was
terminated. Belair paid a total of $120,000 to Joist Management Ltd.
from May 1998 to November 1998 for its management services.
In November 1998, Belair paid consulting fees totaling $97,500 to two
shareholders.
During the year, Belair was charged $36,000 for management services by
a director of the company, of which $9,000 was payable at year-end.
In July 1999, Belair entered into an employment contract with this
individual to continue providing services to Belair for a minimum of
$143,000 per annum for five years. The contract may be terminated by
either party upon six months notice. Under the terms of employment,
the director is entitled to 500,000 stock options annually for 5
years. These options are exercisable at $0.50 per share. The option
to acquire shares if not exercised in the year granted can be carried
forward to subsequent years of the employment contract.
During the year, Belair was charged $32,000 for management services by
a shareholder of the company, of which $8,000 was payable at year-end.
In July 1999, Belair entered into an employment agreement with this
individual to continue providing management services to Belair for a
minimum of $104,000 per annum for five years. The contract may be
terminated by either party upon six months notice. Under the terms of
employment, the shareholder is entitled to 500,000 stock options
annually for 5 years. These options are exercisable at $0.50 per
share. The option to acquire shares if not exercised in the year
granted can be carried forward to subsequent years of the employment
contract.
During the year, Belair paid a consulting fee of $50,000 to a company
with common shareholders and directors.
During the year, Belair reimbursed $157,978 to one of its directors
for amounts that he paid to several individuals for services at the
request of the prior management.
On April 30, 1999, Belair purchased 100% of Bickmore Holdings Inc.
from a relative of a director of Belair for $1. Bickmore Holdings
Inc. had no assets, liabilities, revenue or expenses at April 30, 1999
and for the year then ended.
On November 10, 1998, Belair entered into an agreement with a company
controlled by an individual who became a director of Belair on July
21, 1999. Under this agreement, the company would provide sources of
corporate financing to Belair in exchange for the payment of finder's
fees on the successful completion of any financing transactions this
company bring in. The agreement terminated on December 31, 1999.
Note 5. Supplemental Statement of Operations Information.
During the year ended April 30, 1999, the Company incurred $741,723 of
general and administrative expenses respectively, the components of
which are as follows:
<PAGE>33
1999
Consulting expense $ 356,720
Travel expense 28,699
Professional fees 162,730
Stockholder expenses 157,978
Entertainment 15,265
Other expenses 20,331
--------
$ 741,723
Note 6. Subsequent Events.
In May 1999, Belair incorporated a wholly owned subsidiary, Tampa Bay
Investments Limited, a British Virgin Island company. In August 1999
Belair entered into an agreement through Tampa Bay Investments
Limited, to acquire a 49% interest for $11,500,000, with an option to
acquire a further 2% interest for no more than $1,500,000, in a China
telecommunications company. The agreement does not have a specific
closing date, as a number of conditions must first be completed. On
June 28, 1999 Belair issued 250,000 restricted common shares at $2 per
share (total $500,000) as earnest money under the agreement. These
shares are currently held in safe keeping by Belair's lawyers. Should
the investment not be completed, the earnest money is fully
refundable.
Belair also has advanced $813,905 through March 23, 2000 as partial
payment on the investment. Should the investment not be completed,
the $500,000 is fully refundable.
In addition, Belair management anticipates paying a finders fee on the
completion of the agreement to a maximum of $2,000,000 subject to
completion. Management maintains that no agreement exists regarding
this possible finders fee. Belair management also anticipates paying
an additional $10,000,000 in common shares at a price in the range of
$2.00 to $2.50 per share and may also lend the China telecommunication
company $3,000,000 at unspecified terms. The terms of both the finders
fees, additional $10,000,000 common shares and $3,000,000 loan are
still under negotiations. Management of Belair maintains that both the
additional $10,000,000 in common shares and the $3,000,000 loan forms
an integral part of Belair's ability to complete the original
agreement to purchase the 49% interest in the company and the original
agreement will not be completed until these additional items are
resolved.
In June 1999, Belair entered into an agreement to purchase 60% of
Zhanjiang Casonic Electronic Industrial Company Limited, a telephone
manufacturing company in Zhanjiang, China, for approximately
$4,390,000. Belair has completed its due diligence and consequently
is in the process of negotiating an adjustment to the purchase price.
The agreement was to be completed by September 30, 1999 but has been
verbally extended indefinitely.
In June 1999, Belair entered into an agreement subject to certain
conditions to purchase 60% of Zhanjiang Kingstone Cable Enterprises
Limited, a cable manufacturing company in Zhanjiang, China, for
approximately $3,500,000. Belair has completed its due diligence and
consequently is in the process of negotiating a reduction of the
purchase price. The agreement was to be completed by September 30,
1999 but has been verbally extended indefinitely.
On July 21, 1999, 500,000 restricted common shares were issued as
partial payment on the possible acquisition of the Zhanjang Casonic
Electronic Industrial Company Limited and Zhanjiang Kingstone Cable
Enterprises Limited at $0.65 per share. The shares are restricted
from trading for one year from date of issuance. The shares are not
refundable should the acquisition not be completed.
Subsequent to April 30, 1999, Belair allotted 500,000 common shares to
an individual who is connected with the Zhangjiang Casonic Electronic
Industrial Company Limited and Zhangjiang Kingstone Cable Enterprises
Limited for cash proceeds of $0.65 per share (total $325,000). As at
March 23, 2000, these shares had been issued.
In September, 1999, a director lent Belair approximately $32,000.
The loan is repayable on demand and bears interest at 8% per annum.
The loan is convertible at the director's option into common shares of
Belair at $0.60 per share.
<PAGE>34
On November 18, 1999, Belair released a news report that Belair had
finalized a Memorandum of Intent pending both shareholders and
directors approval, for Southland Financial, Inc. ("Southland") to
acquire Belair and its telecommunications assets in the People's
Republic of China in exchange for Southland shares. A formal
agreement has not been finalized.
On June 13, 1999, Belair entered in to an agreement with a company
whereby the company would provide advertising services worth $100,000
in exchange for 133,333 free trading common shares and 133,333
restricted common shares. On July 19, 1999, 50,000 of the restricted
common shares were issued for the equivalent of $18,750 of services.
<PAGE>35
PART III
ITEM 1. INDEX TO EXHIBITS
(3) Charter and By-Laws
(4) Instruments defining the rights of security holders
(10) Material Contracts
(27) Financial Data Schedule
ITEM 2. DESCRIPTION OF EXHIBITS
(3.1) Articles of Incorporation
(3.2) Bylaws
(4) Common Stock Certificate
(10) Agreement between Kartek International Holdings Limited,
Zhanjiang Post Bureau, Zhanjiang Telecommunications Bureau
and Bickmore Holdings, Inc. dated June 22, 1999.
(27) Financial Data Schedule
<PAGE>36
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Belair Enterprises, Inc., Inc.
Date: May 12, 2000 /s/ William W.M. Ko
-------------------------
By: William W.N. Ko, President
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVEDA
MAY 12, 1998
NO. C11012-1998
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
BELAIR ENTERPRISES
I, the person hereinafter named as incorporator, for the purpose of
associating to establish a corporation under the provisions and
subject to the requirements of Title 7, Chapter 78 of Nevada Revision
Statutes, and the acts amendatory thereof, and hereinafter sometimes
referred to as the General Corporation Law of the State of Nevada, do
hereby adopt and make the following Articles of Incorporation:
ARTICLE I.
NAME
The name of this corporation is Belair Enterprises, Inc.
ARTICLE II.
AGENT FOR -SERVICE OF PROCESS
The name of this corporation's initial agent in the State of Nevada
for service of process is CSC Services of Nevada, Inc. The address of
the agent is 502 East John Street, Carson City, Nevada 89706.
ARTICLE IH.
STOCK
The corporation is authorized to issue only one class of Ames of
stock, to be known as "common stock." The total number of shares that
the corporation is authorized to issue is Thirty Million (30,000,000),
all of which are of a par value of $.001 each.
ARTICLE IV.
DIRECTORS
The governing board of the corporation shall be styled as a "Board of
Directors," and any member of the Board shall be styled as a
"Director".
The number of members constituting the Board of Directors of the
corporation is two (2). The names and post office boxes or street
addresses, either residence or business, of said members are as
follows:
<PAGE>38
Name, Address
David Ho 1409 Forbes Ave.
North Vancouver, B.C.
Canada V2M 242
Terry Woo 745 E. 50th Ave.
Vancouver, B.C.
V5X lB4
The number of directors of the corporation may be increased or
decreased in the manner provided in the Bylaws of the corporation;
provided, that the number of directors shall never be less than one.
In the interim between elections of directors by stockholders entitled
to vote, all vacancies, including vacancies caused by an increase in
the number of directors and including vacancies resulting from the
removal of directors by the stockholders entitled to vote which are
not filled by said stockholders, may be filled by the remaining
directors, though less than a quorum.
ARTICLE V
LIMITATION OF DIRECTOR LIABILITY
The personal liability of the directors of the corporation is hereby
eliminated to the fullest extent permissible under the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented.
ARTICLE VI.
INDEMNIFICATION
The corporation shall, to the fullest extent permitted by the General
Corporation Law of the State of Nevada, as the same may be amended and
supplemented (the "Law"), indemnify any and all persons whom it shall
have power to indemnify under the Law from and against any and all of
the expenses, liabilities, or other matters referred to in or covered
by the Law, The indemnification provided for herein shall not be
deemed exclusive of any other rights to which those indemnified may be
entitled under any Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding
such office, and shall continue as to a person who has ceased to be a
director, officer, employee, or agent and shall inure to the benefit
of the heirs, executors and administrators of such a person.
ARTICLE VII.
INCORPORATOR
The name and post office box or street address, either residence or
business, of the incorporator signing these Articles of Incorporation
are as follows:
Name Address
Kellie E. Davidson c/o Jones, Day, Reavis & Pogue
555 West 5th Street, Suite 4600
Los Angeles, California 90013
IN WITNESS WHEREOF, I do hereby execute these Articles of
Incorporation on May 11, 1998.
Kellie E. Davidson, Incorporator
BYLAWS
for the regulation, except as
otherwise provided by statute or its
Articles of Incorporation,
of
BELAIR ENTERPRISES, INC.
(a Nevada corporation)
ARTICLE 1. Offices.
Section 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the Corporation shall be fixed and located at such place as the
Board of Directors (herein referred to as the "Board") shall
determine. The Board is granted full power and authority to change
said principal executive office from one location to another.
Section 2. OTHER OFFICES. Branch or subordinate offices may be
established at any time by the Board at any place or places.
ARTICLE 11. Shareholders.
Section 1. PLACE OF MEETINGS. Meetings of shareholders shall be held
at the principal executive office of the Corporation unless another
place within or without the State of Nevada is designated by the
Board.
Section 2. ANNUAL MEETINGS. The annual meetings of shareholders shall
be held on the last Friday in August of each year, at 10:00 A.M.,
local time, or such other date or such other time as may be fixed by
the Board, provided, however, that should said day fall upon a
Saturday, Sunday or legal holiday observed by the Corporation at its
principal executive office, then any such annual meeting of
shareholders shall be held at the same time and place on the next day
thereafter ensuing which is a business day. At such meetings,
directors shall be elected and any other proper business may be
transacted.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders may
be called at any time by the Board, the Chairman of the Board, the
President or by the holders of shares entitled to cast not less than
ten percent of the votes at such meeting.
Section 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written notice of
each annual or special meeting of shareholders shall be given not less
than 10 nor more than 60 days before the date of the meeting to each
shareholder entitled to vote thereat.
Such notice shall be given either personally or by first-class mail,
postage prepaid, or by other means of written communication, addressed
to the shareholder at the address of such shareholder appearing on the
books of the Corporation or given by the shareholder to the
Corporation for the purpose of notice, or if no such address appears
or is given, at the place where the principal executive office of the
Corporation is located or by publication at least once in a newspaper
of general circulation in the county in which the principal executive
office is located. After notice is given by mail, the Secretary or
the Assistant Secretary, if any, or transfer agent, shall execute an
affidavit of mailing in accordance with this section.
The notice shall state 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, and no other business may be transacted, or (ii) in
the case of the annual meeting, those matters which the Board, at the
time of the mailing of the notice, intends to present for action by
the shareholders, but, subject to the provisions of applicable law,
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 names of nominees intended at the time of notice to be
presented by the Board for election.
Section 5. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any
meeting of the shareholders. Subject to the Articles of Incorporation
<PAGE>40
of the Corporation (herein referred to as the "Articles of
Incorporation"), the shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment)
is approved by at least a majority of the shares required to
constitute a quorum.
Section 6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any meeting of
shareholders, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders
of which are either present in person or represented by proxy thereat,
but in the absence of a quorum (except as provided in Section 5 of
this Article) no other business may be transacted at such meeting.
It shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat,
other than by announcement at the meeting at which such adjournment is
taken; provided, however, when any shareholders' meeting is adjourned
for more than 45 days or, if after adjournment a new record date is
fixed for the adjourned meeting, notice of the adjourned meeting shall
be given as in the case of an original meeting.
Section 7. VOTING. The shareholders entitled to notice of any meeting
or to vote at any such meeting shall be only those persons in whose
names shares are registered in the stock records of the Corporation on
the record date determined in accordance with Section 8 of this
Article.
Except as provided below and except as may be otherwise provided in
the Articles of Incorporation, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a
vote of shareholders. Subject to the requirements of the next
sentence, every shareholder entitled to vote at any election of
directors may cumulate such shareholder's votes and give one candidate
a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such shareholder's shares
are normally entitled, or distribute the shareholder's votes on the
same principle among as many candidates as the shareholder thinks fit.
No shareholder shall be entitled to cumulate votes (i.e., cast for any
candidate a number of votes greater than the number of votes which
such shareholder normally is entitled to cast) unless such candidate
or candidates' names have been placed in nomination prior to the
voting and any shareholder has given notice at the meeting prior to
the voting of such shareholder's intention to cumulate the
shareholder's votes.
Any holder of shares entitled to vote on any matter may vote part of
the shares in favor of the proposal and refrain from voting the
remaining shares or vote them against the proposal, other than
elections to office, but, if the shareholder fails to specify the
number of shares such shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with
respect to all shares such shareholder is entitled to vote.
Elections for directors need not be by ballot unless a shareholder
demands election by ballot at the meeting and before the voting
begins.
Provided that the quorum requirements of Section 5 above are
satisfied: the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a
majority of the required quorum) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required
by the Nevada General Corporation Law or the Articles of
Incorporation, provided that whenever under the Nevada General
Corporation Law shares are disqualified from voting on any matter,
they shall not be considered outstanding for purposes of the
determination of a quorum at any meeting to act upon, or the required
vote to approve action upon any matter; and in any election of
directors, the candidates receiving the highest number of affirmative
votes of the shares entitled to be voted for them, up to the number of
directors to be elected by such shares, are elected; votes against the
director and votes withheld shall have no legal effect.
<PAGE>41
Section 8. RECORD DATE. The Board may fix, in advance, a record date
for the determination of the shareholders entitled to notice of, or to
vote at, any meeting of the shareholders, or the shareholders entitled
to receive payment of any dividend or other distribution, or any
allotment of rights, or to exercise rights in respect of any other
lawful action. The record date so fixed shall be not more than 60
days nor less than 10 days prior to the date of the meeting nor more
than 60 days prior to any other action.
If no record date is fixed by the Board, (i) the record date for
determining shareholders entitled to notice of, or to vote at, a
meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if
notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held, and (ii) the record
date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, when no prior action by
the Board has been taken, shall be the day on which the first written
consent is given.
A determination of shareholders of record entitled to notice of, or to
vote at, a meeting of shareholders shall apply to any adjournment of
the meeting unless the Board fixes a new record date for the adjourned
meeting. The Board shall fix a new record date if the meeting is
adjourned for more than 45 days from the date set for the original
meeting.
Section 9. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as
valid as though had at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if,
either before or after the meeting, each of the persons entitled to
vote, not present in person or by proxy, signs a written waiver of
notice, or a consent to the holding of the meeting, or an approval of
the minutes thereof. All such waivers, consents or approvals shall be
filed with the corporate records or made a part of the minutes of the
meeting. Neither the business to be transacted at nor the purpose of
any annual or special meeting of shareholders, need be specified in
any written waiver of notice, except as provided in the Nevada General
Corporation Law.
Section 10. ACTION WITHOUT MEETING. Subject to the applicable
section of the Nevada General Corporation Law, any action which, under
any provision of the Nevada General Corporation Law, may be taken at
any annual or special meeting of shareholders, may be taken without a
meeting and without prior notice if a consent in writing, setting
forth the action so taken, shall be signed by the holders of
outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting
at which all shares entitled to vote thereon were present and voted.
Section 11. PROXIES. Every person entitled to vote shares shall have
the right to do so either in person or by one or more persons
authorized by a valid written proxy signed by such person or such
person's attorney in fact and filed with the Secretary. Subject to
the provisions of this bylaw and applicable law, any duly executed
proxy continues in full force and effect until revoked by the person
executing it prior to the vote pursuant thereto.
Section 12. INSPECTORS OF ELECTION. Prior to any meeting of
shareholders, the Board may appoint inspectors of election to act at
the meeting or any adjournment thereof. If inspectors of election are
not so appointed, or if any persons so appointed fail to appear or
refuse to act, the chairman of the meeting may, and on the request of
any shareholder or his proxy shall, appoint inspectors of election or
persons to replace those who fail to appear or refuse to act at the
meeting. The number of inspectors shall be either one or three. If
appointed at a meeting on the request of one or more shareholders or
proxies, the holders of a majority of shares or their proxies present
at the meeting shall determine whether one or three inspectors are to
be appointed. The inspectors of election shall (i) determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum and the
authenticity, validity and effect of proxies, (ii) receive votes,
ballots or consents, (iii) hear and determine all challenges and
questions in any way arising in connection with the right to vote,
(iv) count and tabulate all votes or consents, (v) determine when the
<PAGE>42
poll shall close and the election result and (vi) do any other acts
that may be proper to conduct the election or vote with fairness to
all shareholders.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as it is
practicable. If there are three inspectors of election, the decision,
act or certificate of majority is effective in all respects as the
decision, act or certificate of all.
ARTICLE 111. Directors.
Section 1. POWERS. Subject to limitations of the Articles of
Incorporation, these Bylaws and the Nevada General Corporation Law
relating to actions required to be approved by the shareholders 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.
Section 2. COMMITTEES. The Board may, by resolution adopted by a
majority of the authorized number of directors, designate one or more
committees, each consisting of two or more directors, to serve at the
pleasure of the Board. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent
member of the committee. The appointment of members or alternate
members of a committee requires the vote of a majority of the
authorized number of directors. Any such committee, to the extent
provided in the resolution of the Board, shall have all the authority
of the Board, except with respect to (i) the approval of any action
required to be approved by the shareholders or by the outstanding
shares under the Nevada General Corporation Law, (ii) the filling of
vacancies on the Board or in any committee, (iii) the fixing of
compensation of the directors for serving on the Board or on any
committee, (iv) the adoption, amendment or repeal of Bylaws, (v) the
amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable, (vi) a distribution
to the shareholders, except at a rate or in a periodic amount or
within a price range determined by the Board and (vii) the appointment
of other committees of the Board or the members thereof.
Section 3. NUMBER OF DIRECTORS. The authorized number of directors
shall be not less than one (1) nor more than five (5), the exact
number to be fixed from time to time by the Board.
Section 4. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of the shareholders, but if any such
annual meeting is not held or the directors are not elected thereat,
the directors may be elected at any special meeting of shareholders
held for that purpose. Subject to Section 5 of this Article, each
director shall hold office until the next annual meeting and until a
successor has been elected and qualified.
Section 5. VACANCIES. A vacancy or vacancies in the Board shall be
deemed to exist in case of the death, resignation or removal of any
director, if the authorized number of directors be increased or if the
shareholders fail at any annual or special meeting of shareholders at
which any directors are elected, to elect the full authorized number
of directors to be voted at that meeting.
Vacancies in the Board, except those existing as a result of a removal
of a director, may be filled by a majority of the remaining directors,
or, if the number of remaining directors is less than a quorum, by (i)
the unanimous written consent of the remaining directors, (ii) the
affirmative vote of a majority of the remaining directors at a meeting
held pursuant to notice or waivers of notice complying with the
applicable section of the Nevada General Corporation Law, or (iii) by
a sole remaining director, and each director so elected shall hold
office until the next annual meeting and until such director's
successor has been elected and qualified.
Vacancies in the Board created by the removal of a director may be
filled only by the affirmative vote of a majority of the shares
represented and voting at a duly held meeting at which a quorum is
present (which shares voting affirmatively also constitute at least a
majority of the required quorum) or by the unanimous written consent
of all shares entitled to vote for the election of directors.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such
election by written consent other than to fill a vacancy created by
removal requires the consent of a majority of the outstanding shares
entitled to vote.
Section 6. RESIGNATION. Any director may resign effective upon giving
written notice to the President, the Secretary or the Board, unless
the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a
successor may be elected to take office when the resignation becomes
effective.
<PAGE>43
Section 7. PLACE OF MEETINGS. Regular or special meetings of the
Board shall be held at any place within or without the State of Nevada
which has been designated in the notice of the meeting or, if not
stated therein, as designated by resolution of the Board. In the
absence of such designation, meetings shall be held at the principal
executive office of the Corporation.
Section 8. ANNUAL MEETINGS. Immediately following each annual meeting
of shareholders, the Board may, but shall not be required to, hold an
annual meeting at the same place, or at any other place that has been
designated by the Board, for the purpose of organization, election of
officers or transaction of other business as the Board may determine.
Call and notice of this meeting of the Board shall be in the manner
for the conduct of special meetings as provided in Section 9 unless
the Board has determined by resolution to conduct a regular meeting at
such time and place, in which event call and notice of this meeting of
the Board shall not be required unless some place other than the place
of the annual shareholders' meeting has been designated.
Section 9. SPECIAL MEETINGS. Special meetings of the Board for any
purpose or purposes may be called at any time by the Chairman of the
Board, the President, the Secretary or by any two directors upon four
days' notice by mail or 48 hours' notice given personally or by
telephone, telegraph, telex or other similar means of communication.
Any such notice shall be addressed or delivered to each director at
such director's address as it is shown upon the records of the
Corporation or as may have been given to the Corporation by the
director for purposes of notice.
Section 10. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business,
except to adjourn as hereinafter provided. Every act or decision done
or made by a majority of the directors present at a meeting duly held
at which a quorum is present shall be regarded as the act of the
Board, unless a greater number be required by law or by the Articles.
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 such meeting.
Section 11. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board may participate in a meeting through use of
conference telephone or similar communications equipment, so long as
all members participating in such meeting can hear one another.
Section 12. WAIVER OF NOTICE. Notice of a meeting need not be given
to any director who signs a waiver of notice or a consent to holding
the meeting or an approval of the minutes thereof, whether before or
after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to such
director. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Section 13. ADJOURNMENT. A majority of the directors present,
whether or not a quorum is present, may adjourn any directors' meeting
to another time and place. If a meeting is adjourned for more than 24
hours, notice of any adjournment to another time or place shall be
given prior to the time of the adjourned meeting to the directors that
were not present at the time of adjournment.
Section 14. FEES AND COMPENSATION. Directors and members of
committees may receive such compensation, if any, for their services,
and such reimbursement for expenses, as may be fixed or determined by
the Board.
Section 15. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting if all members
of the Board shall individually or collectively consent in writing to
<PAGE>44
such action. Such written consent or consents shall be filed with the
minutes of the proceedings of the Board. Such action by written
consent shall have the same effect as a unanimous vote of the members
of the Board.
ARTICLE IV. Officers.
Section 1. OFFICERS. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer. The Corporation
may also have, at the discretion of the Board, a Chairman, one or more
Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Financial Officers and such other officers as may be elected
or appointed in accordance with the provisions of Section 3 of this
Article.
Section 2. ELECTION. The officers of the Corporation, except such
officers as may be elected or appointed in accordance with the
provisions of Section 3 or Section 5 of this Article, shall be chosen
by, and shall serve at the pleasure of, the Board, and shall hold
their respective offices until their resignation, removal or other
disqualification from service, or until their respective successors
shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS. The Board may elect, and may empower
the President to appoint, such other officers 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 may from time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed,
either with or without cause, by the Board at any time. Any officer
may resign at any time upon written notice to the Corporation without
prejudice to the rights, if any, of the Corporation under any contract
to which the officer is a party.
Section 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these Bylaws for regular election
or appointment to such office.
Section 6. PRESIDENT. The President is the general manager and chief
executive officer of the Corporation and has, subject to the control
of the Board, general supervision, direction and control of the
business and officers of the Corporation. The President shall preside
at all meetings of the shareholders and at all meetings of the Board.
The President has the general powers and duties of management usually
vested in the office of president and general manager of a corporation
and such other powers and duties as may be prescribed by the Board.
Section 7. VICE PRESIDENTS. In the absence or disability of the
President, unless a Chairman has been elected, the Vice Presidents in
order of their rank as fixed by the Board or, if not ranked, the Vice
President designated by the Board, 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.
Section 8. SECRETARY. The Secretary shall keep or cause to be kept,
at the principal executive office and such other place as the Board
may order, a book of minutes of all meetings of shareholders and the
Board, with the time and place of holding, whether regular or special,
and if special, how authorized, the notice thereof given, the names of
those present or represented at meetings of shareholders, and the
proceedings thereof. The Secretary shall keep, or cause to be kept, a
copy of the Bylaws of the Corporation at the principal executive
office or business office in accordance with the applicable section of
the Nevada General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the Corporation's transfer agent
or registrar, if one be appointed, a share register, or a duplicate
share register, showing the names of the shareholders and their
addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
<PAGE>45
The Secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the Board required by these Bylaws or by
law to be given, shall keep the seal of the Corporation in safe
custody, and shall have such other powers and perform such other
duties as may be prescribed by the Board.
Section 9. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
keep and maintain, or cause to be kept and maintained, adequate and
correct accounts of the properties and business transactions of the
Corporation, and shall send or cause to be sent to the shareholders of
the Corporation such financial statements and reports as are by law or
these Bylaws required to be sent to them. The books of account shall
at all times be open to inspection by any director.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board. The Chief Financial
Officer shall disburse the funds of the Corporation as may be ordered
by the Board, shall render to the President and directors, upon their
request, an account of all transactions as Chief Financial Officer 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.
Section 10. CHAIRMAN OF THE BOARD. If such an officer be elected,
the Chairman of the Board shall preside at meetings of the board of
directors and exercise and perform such other powers and duties as may
be from time to time assigned to him by the board of directors or
prescribed by the Bylaws. In the absence of the President, or if
there is no President, the Chairman of the Board shall, in addition,
be the chief executive officer of the Corporation and shall have the
powers and duties described in Section 6 above.
ARTICLE V. Other Provisions.
Section 1. INSPECTION OF CORPORATE RECORDS. The record of
shareholders shall be open to inspection and copying, and the
accounting books and records and minutes of proceedings of the
shareholders and the Board and committees of the Board, if any, shall
be open to inspection, upon written demand on the Corporation of any
shareholder at any reasonable time during usual business hours, for a
purpose reasonably related to such holder's interests as a
shareholder.
Section 2. INSPECTION OF BYLAWS. The Corporation shall keep at its
principal executive office in the State of Nevada, or if its principal
executive office is not in Nevada, at its principal business office in
Nevada, the original or a copy of these Bylaws as amended to date,
which shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive
office of the Corporation is outside Nevada and the Corporation has no
principal business office in Nevada, it shall upon the written request
of any shareholder furnish to such shareholder a copy of these Bylaws
as amended to date.
Section 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of
indebtedness, contract, share certificate, initial transaction
statement or written statement, conveyance or other instrument in
writing and any assignment or endorsement thereof executed or entered
into between the Corporation and any other person shall be valid and
binding on the Corporation, when signed by the Chairman, the President
or any Vice President and the Secretary, any Assistant Secretary, the
Chief Financial officer or any Assistant Financial Officer of the
Corporation unless the other party knew that the signing officers had
no authority to execute the same. Any such instruments may be signed
by any other person or persons and in such manner as from time to time
shall be determined by the Board, and, unless so authorized by the
Board, 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 amount.
Section 4. CERTIFICATES OF STOCK. Every holder of shares of the
Corporation shall be entitled to have a certificate signed in the name
of the Corporation by the President or a Vice President and by the
Chief Financial Officer or an Assistant Financial Officer or the
Secretary or an Assistant Secretary, certifying the number of shares
and the class or series of shares owned by the shareholder. Any or
all of the signatures on the certificate may be facsimile.
<PAGE>46
Except as provided in this Section, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered
and cancelled at the same time. The Board may, however, if any
certificate for shares is alleged to have been lost, stolen or
destroyed, authorize the issuance of a new certificate in lieu
thereof, and the Corporation may require that the Corporation be given
a bond or other adequate security sufficient to indemnify it against
any claim that may be made against it (including expense or liability)
on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
Section 5. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
President or any other officer or officers authorized by the Board or
by the President are each authorized to vote, represent and exercise
on behalf of the Corporation all rights incident to any and all shares
of any other corporation or corporations standing in the name of the
Corporation.
The authority herein granted may be exercised either by any such
officer in person or by any other person authorized so to do by proxy
or power of attorney duly executed by said officer.
Section 6. ANNUAL REPORT TO SHAREHOLDERS. The requirement of sending
an annual report to shareholders which is set forth in the Nevada
General Corporation Law is expressly waived, but nothing herein shall
be interpreted as prohibiting the Board from issuing annual or other
periodic reports to shareholders.
Notwithstanding the immediately preceding paragraph, if the
Corporation has 100 or more holders of record of its shares
(determined as provided in the Nevada General Corporation Law), the
Board shall cause an annual report to be sent to the shareholders not
later than 120 days after the close of the fiscal year. Such report,
in addition to such information as may be required by the Nevada
General Corporation Law, shall contain a balance sheet as of the end
of that fiscal year and an income statement and statement of changes
in financial position for that fiscal year, accompanied by any report
thereon of independent accountants or, if there is no such report, the
certificate of an authorized officer of the Corporation that the
statements were prepared without audit from the books and records of
the Corporation. The requirement of sending such report to the
shareholders at least 15 (or, if sent by third-class mail, 35) days
prior to the annual meeting of shareholders to be held during the next
fiscal year is expressly waived.
Section 7. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and
definitions contained in the General Provisions of the Nevada
Corporations Code and in the Nevada General Corporation Law shall
govern the construction of these Bylaws.
Section 8. COMPENSATION. The salaries of all officers and agents of
the Corporation shall be fixed by the Board.
Section 9. INDEMNIFICATION OF AGENTS OF THE CORPORATION; PURCHASE OF
LIABILITY INSURANCE. For purposes of this Section 9, "agent" means
any
person who is or was a director, officer, employee or other agent of
the Corporation, or is or was serving at the request of the
Corporation
as a director, officer, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director, officer, employee or agent of a foreign
or domestic corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such
predecessor
corporation; "proceeding" means any threatened, pending or completed
action or proceeding, whether civil, criminal, administrative or
investigative; and "expenses" includes without limitation, attorneys'
fees and any expenses of establishing a right to indemnification under
this Section 9.
The Corporation shall have the power to indemnify any person who was
or is a party or is threatened to be made a party to any proceeding
(other than an action by or in the right of the Corporation to procure
a judgment in its favor) by reason of the fact that such person is or
was an agent of the Corporation, against expenses, judgments, fines,
settlements and other amounts actually and reasonably incurred in
<PAGE>47
connection with such proceeding to the fullest extent permitted under
the General Corporation Law of the State of Nevada, as amended from
time to time.
Section 10. CORPORATE LOANS AND GUARANTEES TO DIRECTORS AND OFFICERS.
The Corporation shall not make any loan of money or property to, or
guarantee the obligation of, any director or officer of the
Corporationor of its parent, if any, unless the transaction, or an
employee benefit plan authorizing the loans or guarantees after
disclosure of the right under such a plan to include officers or
directors, is approved by a majority of the shareholders entitled to
act thereon.
The Corporation shall not make any loan of money or property to, or
guarantee the obligation of, any person upon the security of shares of
the Corporation or of its parent, if any, if the Corporation's
recourse in the event of default is limited to the security for the
loan or guaranty, unless the loan or guaranty is adequately secured
without considering these shares, or the loan or guaranty is approved
by a majority of the shareholders entitled to act thereon.
Notwithstanding the first paragraph of this Section 10, the
Corporation may advance money to a director or officer of the
Corporation or of its parent, if any, for any expenses reasonably
anticipated to be incurred in the performance of the duties of the
director or officer, provided that in the absence of the advance the
director or officer would be entitled to be reimbursed for the
expenses by the Corporation, its parent, or subsidiary, if any.
The provisions of the first paragraph of this Section 10 do not apply
to the payment of premiums in whole or in part by the Corporation on a
life insurance policy on the life of a director or officer so long as
repayment to the Corporation of the amount paid by it is secured by
the proceeds of the policy and its cash surrender value.
The provisions of this Section 10 do not apply to any transaction,
plan or agreement permitted under the applicable section of the Nevada
General Corporation Law relating to employee stock purchase plans.
For the purposes of this Section, "approval by a majority of the
shareholders entitled to act" means either (1) written consent of a
majority of the outstanding shares without counting as outstanding or
as consenting any shares owned by any officer or director eligible to
participate in the plan or transaction that is subject to this
approval, (2) the affirmative vote of a majority of the shares present
and voting at a duly held meeting at which a quorum is otherwise
present, without counting for purposes of the vote as either present
or voting any shares owned by any officer or director eligible to
participate in the plan or transaction that is subject to the
approval, or (3) the unanimous vote or written consent of the
shareholders. If the Corporation has more than one class or series of
shares outstanding, the "shareholders entitled to act" within the
meaning of this Section includes only holders of those classes or
series entitled under the articles to vote on all matters before the
shareholders or to vote on the subject matter of this Section, and
includes a requirement for separate class or series voting, or for
more or less than one vote per share, only to the extent required by
the Articles.
ARTICLE VI. Amendments.
These Bylaws may be amended or repealed either by approval of the
outstanding shares or by the approval of the Board; provided, however,
that after the issuance of shares, a Bylaw specifying or changing a
fixed number of directors or the maximum or minimum number or changing
from a fixed to a variable number of directors or vice versa may be
adopted only by approval of the outstanding shares.
<PAGE>48
CERTIFICATE OF SECRETARY
OF
BELAIR ENTERPRISES, INC.
(a Nevada Corporation)
I hereby certify that I am the duly elected and acting Secretary of
Belair Enterprises, Inc., a Nevada corporation (the 'Corporation'),
and that the foregoing Bylaws constitute the Bylaws of the Corporation
as duly adopted by the Board of Directors thereof by action taken
without a meeting.
DATED:May 12,1998
Roberto Chu
Secretary
NUMBER SHARES
Belair Enterprises, Inc.
Incorporated Under the Laws of the State of Nevada
Common Stock Par Value $.001 CUSIP
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID and NONASSESSABLE Shares of Belair Enterprises, Inc.,
transferable only on the books of the Corporation by the holder hereof
in person or by duly authorized attorney upon surrender of this
Certificate properly endorsed. This certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar
Witness the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Secretary President
THIS AGREEMENT is made on 22nd June, 1999 and is made
BETWEEN:-
(1) KARTEK INTERNATIONAL HOLDINGS LIMITED, a corporation
incorporated in the British Virgin Islands and having its registered
office at Akara Building, Suite # 8, Wickhams Cay I, Road Town,
Tortola, the British Virgin Islands ("Kartek");
(2) ZHANJIANG POST BUREAU) of 55 ("ZPB") ;
(3) ZHANJIANG TELECOMMUNICATIONS BUREAU of ("ZTB"); and
(4) BICKMORE HOLDINGS INC., a company incorporated in the Bahamas
with limited liability with its registered office at Providence House,
Easthill Street, P.O. Box N-3944 Nassau, the Bahamas (the
"Purchaser").
WHEREAS:-
(A) Information concerning (Zhanjiang Kingtone Cable
Enterprises Limited) (the "Company") is set out in Part A of Schedule
1.
(B) The Vendors are the registered and beneficial owners of
registered capital of the Company in such percentage as set opposite
their respective names in column (2) of Part B of Schedule 1. Part C
of Schedule 1, contains background information concerning the
ownership of the Company.
(C) Subject to the terms of this Agreement, each of the Vendors has
agreed to sell and the Purchaser has agreed to purchase the respective
portions of the registered capital of the Company owned by the Vendors
as set opposite the name of the Vendors in Column (3) of Part B of
Schedule 1, which collectively amount to an aggregate of 60% of the
registered capital of the Company.
IT IS HEREBY AGREED:-
1. INTERPRETATION
(A) In this Agreement, the Schedules and the Recitals hereto, unless
the context requires otherwise, the following expressions shall have
the following meanings:-
" Accounts" the audited balance sheet of the Company as at the
Accounts Date and the audited profit and loss account of the Company
for the financial year ended on the Accounts Date, in each case
including the notes thereto and together with the reports and other
documents required by law or relevant accounting standards or
practices to be annexed or attached to them, true and complete copies
of which are annexed hereto marked "A";
"Accounts Date" - 31st December, 1998
"Adjusted Retained Consideration" the amount payable by the Purchaser
to the Vendors in accordance with Clause 4(C) and Clause 10 and
calculated in accordance with Clause 10;
"Articles of Association" - the articles of association of the Company
for the time being;
"Business" - the business of the Company as carried on by the Company
as at the date hereof; a day (other than a Saturday) on which banks in
Hong Kong are generally open for business;
"Claim" - any claim for breach of a Warranty;
"Completion" - the performance by each of the Vendors and the
Purchaser of their respective obligations in accordance with the
provisions of Clause 9(A);
"Completion Date" - subject to Clause 2(D), the tenth Business Day
following the date of notification, as stated in Clauses 2A(x), by the
Purchaser to the Vendors;
<PAGE>51
"Conditions" - the conditions set out in Clause 2(A);
"Consent" - includes, inter alia, any licence, approval,
authorisation, permission, waiver, order or exemption;
"Corporate Documents" - in relation to the Company, its current
business licence, approval letters and certificates issued by the
relevant PRC authorities; records and minute books written up to date
as at the Completion Date; common seal, chops and all rubber stamps;
cheque books, cheque stubs and bank statements; receipt books; all
other accounting records; contractual documents, leases and title
documents in respect of the Property, copies of all tax returns and
assessment, if any, (receipted where the due dates for payment fell on
or before the Completion Date); all correspondence, if any, with its
lawyers, accountants or the PRC Tax Bureau; all other documents and
correspondence, if any, relating to the affairs of the Company; and
all copies of the memorandum, articles of association and joint
venture agreements including the Joint Venture Contract, the Articles
of Association;
"Deed of Indemnity" - the deed in the form set out in Schedule 4;
"Doubtful Debts" such amount of indebtedness owing by the Company's
debtors to the Company which has been overdue for more than 12 months
and has been classified as doubtful debts as shown in the Final
Accounts;
"Encumbrance" - any mortgage, pledge, charge, ledge, lien, assignment
by way of security, hypothecation, equities, adverse claims, third
party rights or interest, or other encumbrance, priority or security
interest, other security agreement arrangement or other rights or
interest of whatsoever nature or other security agreement arrangement
whether relating to existing or future assets, security or any
obligation of any relevant person and "Encumber" shall be construed
accordingly;
"Final Accounts" - the audited balance sheet of the Company as at the
Management Accounts Date and the audited profit and loss account of
the Company for the 16 month period ended on the Management Accounts
Date prepared in accordance with Clause 10;
"Hong Kong" - the Hong Kong Special Administrative Region of the PRC;
"Initial Consideration" - the respective amounts (or its US dollar
equivalent) as set opposite the names of the Vendors in column (5) of
Part B of Schedule 1 payable by the Purchaser to the Vendors in
accordance with Clause 4(B);
"Intellectual Property Rights" - all industrial and intellectual
property, including without limitation, patents, trade marks, service
marks, trade names, designs, copyrights and the copyright in all
drawings, plans, specifications, designs and computer software
(including in each application therefor) in any part of the world and
whether or not registered or registrable and all know-how, inventions,
formulae, trade secrets, confidential or secret processes and
information, business names and domain names and any similar rights
situated in any country; and the benefit (subject to the burden) of
any and all licences in connection with any of the foregoing
(including all documents relating thereto);
"Joint Venture Contract" - the joint venture contract dated 12th
January, 1993 entered into between Far East Kartek Enterprises Limited
and Zhanjiang Post and Telecommunications Bureau as supplemented by
various agreements dated 8th October, 1995, 13th August, 1998, and 4th
June, 1999 respectively, true and complete copies of which are annexed
hereto marked "B";
"Management Accounts" - the unaudited balance sheet of the Company as
at the Management Accounts Date and the unaudited profit and loss
account of the Company for the 4 months ended on the Management
Accounts Date, true and complete copies of which are annexed hereto
marked "C";
"Management Accounts Date" - 30th April, 1999;
"Material Adverse Change - any change (or effect), the consequence of
which(or Effect)" - is to materially and adversely affect the
financial position, the Business or Property, results of operations,
business prospects or assets of the Company;
"PRC" - the People's Republic of China;
<PAGE>52
"Property" - the property interests of the Company which are set out
in Schedule 2;
"Purchase Price" - subject to adjustments provided in Clause 10, the
respective aggregate consideration payable by the Purchaser for the
purchase of the relevant portions of Sale Capital as set opposite each
Vendor's name in column (4) in Part B of Schedule 1 and provided in
Clause 4;
"Purchaser's Accountants" - Nelson Wheeler of 7th Floor, Allied Kajima
Building, 138 Gloucester Road, Hong Kong;
"Purchaser's Solicitors" - Richards Butler of 20th Floor, Alexandra
House, 16-20 Chater Road, Central, Hong Kong;
"Retained Consideration" - in respect of the relevant portion of the
Sale Capital, the aggregate sum (or its US dollars equivalent) set
opposite each Vendor's name in column (7) of Part B of Schedule 1;
"Sale Capital" - collectively the 28 per cent. of the registered
capital of the Company to be sold by Kartek, the 13.68 per cent. of
the registered capital of the Company to be sold by ZPB and 18.32 per
cent. of the registered capital of the Company to be sold by ZTB to
the Purchaser (as set out in Column (3) of Part B of Schedule 1)
pursuant to the terms and conditions or this Agreement;
"Subsidiary" - in relation to a company or entity, a company in
respect of which such company or entity:-
(i) holds more than half of the issued share capital (excluding any
part of it which carries no right to participate beyond a specified
amount in a distribution of either profits of capital); or
(ii) controls the composition of the board of directors; or
(iii) controls more than half of the voting power,
and shall include any company which is a subsidiary (on the basis set
out above) of another company which is itself a subsidiary of such
company or entity;
"Supplemental Contract" - the supplemental contract in the form set
out in Schedule 5;
"Taxation" - has the meaning given thereto in the Deed of Indemnity;
"Vendors" - collectively, Kartek, ZPB and ZTB and "Vendor" shall mean
any one of them;
"Warranties" - the warranties, representations and undertakings given
by
the Vendors referred to in Clause 8 and Schedule 3;
"RMB" - Renminbi, the lawful currency of the PRC; and
"US$" or "US dollars" - United States dollars, the lawful currency of
the United States of America.
(B) References herein to statutory provisions shall be construed as
references to those provisions as amended or re-enacted or as their
applications are modified by other provisions (whether before or after
the date hereof) from time to time and shall include any provisions of
which they are re-enactments (whether with or without modification).
(C) References herein to "Clauses" and "Schedules" are to clauses of
and schedules to this Agreement unless the context requires otherwise
and the Schedules to this Agreement form an integral part of this
Agreement.
(D) The expressions "the Vendors" and "the Purchaser" in this
Agreement shall, where the context permits, include their respective
successors, personal representatives and permitted assigns.
(E) The table of contents and Clause headings are inserted for
convenience only and shall not affect the construction or
interpretation
of this Agreement.
<PAGE>53
(F) Unless the context requires otherwise, in this Agreement words
importing the singular include the plural and vice versa and words
importing gender or the neuter include both genders and the neuter.
(G) For the purposes of this Agreement, amounts quoted in RMB and
which require to be converted into US dollars (for the purpose of
payment or otherwise) shall be converted at the rate of US$1 to RMB
8.20.
2. CONDITIONS
(A) Completion of this Agreement is conditional upon the following
conditions being fulfilled and remaining fulfilled as at Completion:-
(i) where required pursuant to the terms of any contracts,
agreements or any loan or finance documentation, the counter parties
thereto having confirmed that they will not seek to terminate or vary
any term therein or make a claim thereunder as a result of, or treat
as a breach of any terms thereof, any change in the boards of
directors, the management or shareholding of the Company any other
changes or transactions contemplated under or arising out of or in
connection with this Agreement and all other necessary Consents and
authorisations which may be required to implement and complete this
Agreement having been obtained;
(ii) all Consents which are required for the entering into or the
implementation or completion of this Agreement by the relevant
Vendors, and/or the Company having been obtained, including, without
limitation, the Consents (if appropriate or required) of the
respective shareholders and the respective boards of directors of the
relevant Vendors and the Company and other relevant third parties in
the PRC which are required for the entering into and the
implementation of this Agreement having been made; all applicable
statutory or other legal obligations having been complied with;
(iii) all government or regulatory approvals required in the PRC
by the Vendors and the Company in respect of the sale and purchase of
the Sale Capital on the terms set out in this Agreement having been
obtained;
(iv) the term of the Joint Venture Contract having been legally
and validly extended from 20 years to 31 years;
(v) the Supplemental Contract having been entered into by the
relevant parties;
(vi) the Articles of Association having been revised to reflect
the corporate changes caused by the Supplemental Contract;
(vii) resolutions having been passed by all the directors of the
Company approving:
(a) the execution of the Supplemental Contract;
(b) the revision of the Articles of Association of the Company
referred to in Sub-clause 2(vi) above;
(c) the transfer of an aggregate 60% of the registered capital of
the Company from the Vendors to the Purchaser;
(d) the appointment of a new Chairman and legal representative
nominated by the Purchaser, and the appointment of new directors in
accordance with Clause 9(A)(ii)(a);
(e) such change of the authorised users of the Company's bank
accounts and chops (with effect from Completion) as the Purchaser may
request;
(viii) Execution of necessary documents by the original approval
authority in the PRC approving:-
(a) the Supplemental Agreement;
(b) the revision of the Articles of Association of the Company in
accordance with Sub-clause 2(vi) above;
(c) the transfer of an aggregate of 60% of the registered capital of
the Company from the Vendors to the Purchaser;
<PAGE>55
(d) the extension of the term of the Joint Venture Contract
referred to in Clause 2(A)(iv) above;
(ix) the issuance by the State Administration of Industry and
Commerce of the PRC of an amended business licence of the Company; and
(x) the Purchaser in its absolute discretion notifying the
Vendors in writing of its readiness to complete.
(B) Each of the Vendors and the Purchaser (in so far as it is within
their respective powers and capacities so to do) shall provide all
assistance, where relevant, as may be reasonably required by the other
parties hereto to procure the fulfillment of the Conditions set out in
Clause 2(A).
(C) The Purchaser may waive all or any of such Conditions at any
time by notice in writing to the Vendors.
(D) In the event that the Conditions shall not have been fulfilled,
or waived on or before 15th September, 1999, or Completion shall not
have taken place on or before that date (or such later date as the
Vendors and the Purchaser may determine), this Agreement and all
documents executed ancillary thereto shall lapse and be of no further
effect, and no party to this Agreement shall have any claim against or
liability to the other party but without prejudice to the rights and
obligations of the parties under Clause 5(C).
3. SALE AND PURCHASE
(A) Subject to the terms and conditions of this Agreement, each of
the Vendors as legal and beneficial owner shall sell the percentage of
the Sale Capital set opposite its name in Column (3) of Part B of
Schedule 1 and the Purchaser shall purchase such percentage of the
Sale Capital from each of the Vendors, free from all liens, claims,
equities, charges, Encumbrances or third party rights of whatsoever
nature and with all rights now or hereafter becoming attached thereto
(including the right to receive all dividends and distributions
declared, made or paid on or after the date hereof).
(B) The Purchaser shall not be obliged to complete the purchase of
any of the Sale Capital unless the sale and purchase of the Sale
Capital is completed simultaneously.
4. PURCHASE PRICE
(A) The total consideration for the relevant portion of the Sale
Capital shall be up to the respective amounts set opposite each
Vendor's name in column 4 of Part B of Schedule 1 subject to
adjustment in accordance with Clause 10 so that the Purchase Price
equals the sum of the Initial Consideration and the Adjusted Retained
Consideration.
(B) The Initial Consideration shall be payable to each of the
Vendors in the amounts set opposite their respective names in column
(5) of Part B of Schedule 1 on Completion in accordance with the
provisions in Clause 9.
(C) The Adjusted Retained Consideration payable to ZPB and ZTB shall
be payable and calculated in accordance with the provisions in Clause
10 and the Retained Consideration payable to Kartek shall be payable
as agreed between the relevant parties.
5. TERMINATION
(A) If at any time prior to Completion:-
(i) the Purchaser shall be aware of any matter or event showing
that any of the Warranties was or may have been, when given, untrue or
inaccurate in any respects or would or may be untrue or inaccurate in
any respects if repeated as at the date on which the Purchaser becomes
so aware; or
(ii) any of the Vendors commits any material breach of or omits
to observe any of the other obligations or undertakings expressed to
be assumed by it under this Agreement; or
<PAGE>56
(iii) any creditor makes a valid demand for repayment or payment
of any indebtedness of the Company prior to its stated maturity which
constitutes a Material Adverse Change (or Effect); or
(iv) without prejudice to any other provisions of this Clause,
between the date hereof and Completion any of the provisions of Clause
9 is not satisfied or has not been duly and promptly fulfilled,
observed or performed in any material respect due to a deliberate
default of the
Vendors; or
(v) the Company shall sustain any loss or damage which, in the
reasonable opinion of the Purchaser, constitutes a Material Adverse
Change (or Effect); or
(vi) a petition is presented for the winding up or liquidation of
the Company, or the Company makes any composition or arrangement with
its creditors or enters into a scheme of arrangement or any resolution
is passed for the winding up of the Company or a provisional
liquidator, receiver or manager is appointed over all or part of the
assets or undertaking of the Company or, anything analogous thereto
occurs in respect of the Company,then the Purchaser may in its
absolute discretion without any liability on its part, by notice in
writing to the Vendors, terminate this Agreement. The right to
terminate this Agreement under each of sub-Clauses (i) to (vi) above
is a separate and independent right to any other right to terminate
this Agreement.
(B) Upon the giving of notice pursuant to Clause 5(A) by the
Purchaser, all obligations of the Purchaser hereunder shall cease and
determine and no party shall have any claim against the other parties
in respect of any matter or thing arising out of or in connection with
this Agreement save and except the parties' obligations under Clause
5(C).
(C) If this Agreement is terminated for any reason or Completion
does not take place on 15th September, 1999 or such other date as
provided in Clause 2(D), each party hereto shall forthwith upon such
termination or 15th September, 1999 (whichever is earlier), provide
all assistance and sign and do all necessary documents and things as
such other party may reasonably require for the cancellation and
removal (as the case may be) of all documentation (including without
limitation the Supplemental Contract) that may have been entered into
between the relevant Vendors or the Company and the Purchaser, all
Consents or other approvals that may have been obtained pursuant to
the terms of this Agreement and all appointments of any nominees of
the Purchaser as officers of or other positions in the Company that
may have been made in connection with or pursuant to the terms or
arrangements under this Agreement.
6. DUE DILIGENCE REVIEW PRIOR TO COMPLETION
(A) The Purchaser and its appointed representatives and professional
advisers shall have the right to visit all facilities and office
premises of the Company and check the existence and condition of
assets thereat and to carry out a review and investigation of,
including but not limited to, the assets, liabilities, financial
condition, contracts, commitments, business and prospects of the
Company for the sole purpose of enabling the Purchaser satisfying
itself on all matters relating to the Company and completing the
purchase of the Sale Capital herein and on a strictly confidential
basis. In order to facilitate such review, as from the date of this
Agreement and prior to Completion, each of the Vendors shall (in so
far as it is within their respective powers and capacities so to do)
procure that the Purchaser and/or its appointed representatives and/or
professional advisers will be given all such information relating to
the Company and such access to the facilities and office premises and
Corporate Documents of the Company as the Purchaser or its appointed
representatives or professional advisers may reasonably request for
the above purpose and on the above basis and that the directors and
employees of the Company shall be instructed to give promptly all
information and explanations to the Purchaser or any such person as it
may reasonably request.
(B) Where the consent of any party would be required as a consequence
of Completion pursuant to any contract or agreement to which the
Company is a party, the Vendors shall procure (in so far as it is
within their respective powers and capacities so to do) that such
consent be obtained so that no Material Adverse Change (or Effect) on
the Company's continued operations will be caused by Completion.
<PAGE>57
7. CONDUCT OF BUSINESS PRIOR TO COMPLETION
(A) Each of the Vendors, hereby undertakes to procure (in so far as
it is within their respective powers and capacities so to do) that the
Business will continue to be operated in a normal and prudent basis
and in the ordinary course of day-to-day operations having regard to
the working capital available to the Company and they will not do or
omit to do (or allow to be done) or to be omitted to be done any act
or thing (in either case whether or not in the ordinary course of day-
to-day operations) which is material in the context of the Company
and/or the Business taken as a whole and in particular (but without
limiting the generality of the foregoing) will procure that the
Company shall not prior to Completion, without having first obtained
from the Purchaser its prior written consent:-
(i) increase or reduce the registered capital or total amount of
investment the Company;
(ii) issue any debentures or other securities convertible into
debentures;
(iii) borrow or raise money other than on normal commercial terms
in the ordinary course of its business;
(iv) make any advances or other credits to any person or give any
guarantee or indemnity or act as surety for or otherwise secure or
accept any direct or indirect liability for the liabilities or
obligations of any person;
(v) factor or assign any of its book debts;
(vi) alter the terms of any financing/lending documents or
security arrangements;
(vii) create or permit to arise any mortgage, charge (fixed or
floating), lien, pledge, other form of security or Encumbrance or
equity of whatsoever nature, whether similar to the foregoing or not,
on or in respect of any part of its undertaking, property or assets
other than liens arising by operation of law in amounts which are not
material in its ordinary course of business;
(viii) declare, pay or make any dividends or other distributions;
(ix) make any capital expenditure in excess of RMB50,000;
(x) sell, transfer, lease, assign or otherwise dispose of or
agree to sell, transfer, lease, assign or otherwise dispose of any
asset or of any part of its undertaking, property or assets (or any
interest therein), otherwise than in the ordinary course of business;
(xi) let or agree to let or otherwise part with possession or
ownership of the whole or any part of the Property nor purchase, take
on lease or assume possession of any real property;
(xii) acquire any material assets on hire purchase or deferred
terms;
(xiii) enter into or amend any contract or other transaction or
capital commitment or undertake any contingent liability which exceeds
a monetary value of RMB50,000;
(xiv) terminate any agreement or waive any right thereunder;
(xv) enter into or amend any service agreements with directors or
officers or increase the remuneration payable thereto;
(xvi) other than as envisaged herein, appoint any new directors;
(xvii) hire any new employee or consultant or terminate any
employee's contract of employment or appoint or terminate the services
of any consultant or vary the terms of employment of any employee or
of service of or consultant, in each case where the monthly salary
(including benefits) of that employee is or would be in excess of
RMB2,000 per month;
<PAGE>58
(xviii) establish any pension, retirement scheme, share option
scheme, profit sharing or bonus scheme or any other benefit scheme
operated by the Company;
(xix) grant any power of attorney or in any way delegate any of
the directors' powers;
(xx) undertake anything which would have the consequence of
requiring claim, action, demand or dispute or waive any right in
relation to any of the foregoing, which in each case is or can be
expected to be material in the context of the Business;
(xxii) release, compromise or write off any material amount
recorded in the books of account of the Company as owing by any
debtors of the Company;
(xxiii) terminate or allow to lapse any insurance policy now in
effect;
(xxiv) carry on any business other than the Business;
(xxv) enter into any partnership or joint venture arrangement;
(xxvi) establish or open or close any branch or office;
(xxvii) dispose of the ownership, possession, custody or control
of any corporate or other books or records;
(xxviii)save for the passing of any resolutions contemplated in
this Agreement propose or pass any shareholders' resolution other than
a resolution at any annual general meeting which is not special
business;
(xxix) enter into any transaction or arrangement, which is not
for full consideration and on arm's length terms;
(xxx) change its auditors;
(xxxi) alter its financial year end;
(xxxii) to the extent it has the power to prevent it, allow or
permit the occurrence of any Material Adverse Change (or Effect); or
(xxxiii) do, allow or procure any act or permit any omission which
would or might constitute a breach of any of the Warranties or any of
the undertakings set out in this Agreement.
8. REPRESENTATIONS, WARRANTIES, UNDERTAKINGS AND INDEMNITIES
(A) Subject to the terms and conditions herein contained, each of
the Vendors hereby represents, warrants and undertakes to the
Purchaser (to the intent that the provisions of this Clause shall
continue to have full force and effect notwithstanding Completion) in
the terms set out in Schedule 3 and acknowledges that the Purchaser in
entering into this Agreement is relying on such representations,
warranties and undertakings and the Purchaser shall be entitled to
treat the same as conditions of this Agreement.
(B) Each of the Warranties shall be separate and independent to the
intent that the Purchaser shall have a separate claim and right of
action in respect of any breach thereof and save as expressly provided
herein shall not be limited by reference to anything else in this
Agreement.
(C) The Vendors shall not do, allow or procure any act or permit any
omission by the Company before the Completion Date which would
constitute a breach of any of the Warranties if they were given at the
time of such act or omission on or at the Completion Date or which
would make any of the Warranties inaccurate or misleading if they were
so given. Each of the Vendors undertakes to disclose to the Purchaser
in writing any matter occurring prior to the Completion Date which
constitutes or may lead to a breach of or is inconsistent with any of
the Warranties or which may render any of the Warranties inaccurate or
misleading (or which would constitute a breach of or be inconsistent
with any of the Warranties, or renders any of them inaccurate or
misleading in any respect, if the Warranties were given at the time of
such occurrence) immediately upon becoming aware of the same.
<PAGE>59
(D) In addition to the Purchaser's rights at common law in respect
of any breach of any of the Warranties and notwithstanding whether all
or any of the transactions contemplated by this Agreement shall have
been completed, each of the Vendors covenants with the Purchaser to
hold the Purchaser fully indemnified on demand against any loss or
liability suffered by the Purchaser as a result of or in connection
with any breach of such Warranties and in respect of any depletion in
the assets, loss or allowance, set off or deduction of the Company
occasioned or suffered in connection with or in the rectifying of any
breach of the Warranties together with all costs, charges, interest,
penalties and expenses incidental or relating thereto.
(E) Where a Warranty is made or given "so far as the Vendors are
aware", such Warranty shall be deemed to be given to the best of the
knowledge, information and belief of the Vendors after making due and
careful enquiries before giving such Warranty of the appropriate
directors, employees and professional advisers best placed to confirm
the accuracy of such Warranty so given and having used their best
endeavours to ensure that the matters so warranted by them are true
and accurate in all respects.
(F) The Purchaser has entered into this Agreement upon the basis of
the Warranties and the same together with any provision of this
Agreement which shall not have been fully performed at Completion
shall remain in full force notwithstanding that Completion shall have
taken place.
(G) The Warranties are given only subject to matters which have been
disclosed to the Purchaser and none of the Warranties shall be deemed
in any way modified or discharged by reason of any investigation or
inquiry made or to be made by or on behalf of the Purchaser at any
time prior to Completion, and no information relating to the Company
of which the Purchaser has knowledge (whether actual, constructive or
otherwise) shall prejudice any claim which the Purchaser shall be
entitled to bring or shall operate to reduce any amount recoverable by
the Purchaser hereunder, and it shall not be a defence to any claim
against the Vendors that the Purchaser had knowledge (whether actual,
constructive or otherwise) of any information relating to the
circumstances giving rise to such claim.
(H) If it is found on or prior to Completion that any of the
Warranties is in any respect untrue, incorrect or unfulfilled or if
the Purchaser becomes aware of the occurrence of a Material Adverse
Change (or Effect), the Purchaser shall be entitled by notice in
writing to the Vendors to rescind this Agreement but shall not be
entitled to any damages in respect thereof.
(I) The obligations of the Vendors under this Clause 8 and the
Warranties are several.
(J) The liability for each of the Vendors under this Agreement shall
be limited as follows:-
(i) None of the Vendors shall be liable for a Claim for beach of any
of the Warranties to the extent that the subject matter of the Claim
which the Purchaser has actual knowledge or the subject matter of the
Claim arises or occurs pursuant to any request of the Purchaser.
(ii) No individual Claim shall be made against any of the Vendors
unless the Vendors' liability under that Claim exceeds RMB 10,000.00.
However, the Vendors shall be liable in respect of any Claims if the
aggregate liability of the Vendors for all such Claims exceed RMB
30,000.
(iii) The aggregate maximum liabilities of the respective Vendors in
respect of all claims made against the Vendor concerned in connection
with this Clause 8, this Agreement, the Deed of Indemnity or any
documents entered into or obligations incurred pursuant to this
Agreement shall not exceed the amount equivalent to the respective
amounts of Retained Consideration set out opposite each of the
Vendors' name in Column (7) of Part B of Schedule 1.
(iv) No claim in relation to this Clause 8, this Agreement or any
documents entered into or obligations incurred pursuant to this
Agreement shall be made by the Purchaser against any of the Vendors
later than 18 months after the Completion Date except for any claim in
relation to Taxation under the Deed of Indemnity for which the
Purchaser shall not make any claim against any of the Vendors later
than 3 years after the Completion Date.
<PAGE>60
9. COMPLETION
(A) Subject to satisfaction of all the Conditions in full (save for
any Condition the full compliance or satisfaction of which has been
waived by the Purchaser) and the provisions under Clauses 2 and 5,
Completion shall take place on the Completion Date at the offices of
the Company at 3.00 p.m. or at such other place and time as shall be
mutually agreed by the parties hereto (time in either case being of
the essence) when all (but not part only) of the following business
shall be transacted:-
(i) the Vendors shall (so far as it is within their respective
powers and capacities so to do) deliver or cause to be delivered to
the Purchaser:-
(a) certified true copies of the documents referred to in Clauses
2(A) (vi) to (ix);
(b) the Deed of Indemnity duly executed by each of the Vendors;
(c) evidence to the satisfaction of the Purchaser that the term of
the Joint Venture Contract has been validly extended from 20 years to
31 years;
(d) certified true copies of such legal opinions to the satisfaction
of the Purchaser (in form and substance) as the Purchaser may request;
(ii) the Vendors (so far as it is within their respective powers and
capacities so to do) shall procure that with effect from Completion:
(a) 5 persons nominated by the Purchaser be appointed as new
directors of the Company;
(b) the General Manager, Chief Accountant, and such other managerial
personnel as nominated by the Purchaser be appointed by the board of
directors of the Company in accordance with the meeting rules of the
Company;
(c) the resignation of such number of directors of the Company so
that the number of directors in the new board of the Company after the
appointments referred to in Clause 9(A)(ii)(a) above shall be 8; and
(d) the resignation of such managerial personnel as the Purchaser
may request;
(iii) the Vendors shall (so far as it is within their respective
powers and capacities so to do) produce evidence to the satisfaction
of the Purchaser that save for those related party transactions which
have been disclosed in writing by the Vendors, any arrangements and
agreements between the Vendors and the Company shall be terminated
with effect from the Completion Date by mutual agreement between the
respective parties thereto without liability on the part of the
Company ;
(iv) the Vendors shall (so far as it is within their respective
powers and capacities so to do) return or deliver and cause to be
returned or delivered to the Company or the Purchaser all Corporate
Documents of the Company;
(v) the Vendors shall (so far as it is within their respective
powers and capacities so to do) deliver and cause to be delivered to
the Purchaser written confirmation that the Vendors are not aware of
any matter or thing which is in breach of any of the Warranties when
they take effect on Completion;
(vi) the Vendors shall deliver such other documents to the
Purchaser as may be required to give the Purchaser good title to the
Sale Capital and to enable the Purchaser or its nominees to become the
owner thereof;and
(vii) the Purchaser shall procure that the Purchaser's Solicitors
shall pay to each of the Vendors the Initial Consideration in cash or
in the manner as the Vendors and the Purchaser shall have agreed and
as the Purchaser shall have been notified in writing at least two
Business Days prior to the Completion Date, such notification shall in
any event be binding on each of the Vendors.
<PAGE>61
(B) The Purchaser shall not be obliged to complete this Agreement
or perform any obligations hereunder unless the Vendors comply fully
with the requirements of Clause 9(A). Without prejudice to any other
remedies which may be available to the Purchaser hereunder, if any
provision of this Clause 9 is not complied with by the Vendors on the
Completion Date, the Purchaser may:-
(i) defer Completion to a date falling not more than 28 days
after the original Completion Date (so that the provisions of this
Clause 9 shall apply to the deferred Completion) provided that, time
shall be of the essence as regards the deferred Completion and if
Completion is not effected on such deferred date, the Purchaser may
rescind this Agreement; or
(ii) proceed to Completion so far as practicable (but without
prejudice to the Purchaser's rights hereunder) insofar as the Vendors
shall not have complied with their obligations hereunder; or
(iv) treat this Agreement as terminated for breach by the Vendors
of any of the Conditions of this Agreement.
10. FINAL ACCOUNTS & PURCHASE PRICE ADJUSTMENT
(A) For the Purchaser's own purpose and on its own account, the
Purchaser shall forthwith upon the signing of this Agreement instruct
the Purchaser's Accountants to prepare the Final Accounts in
accordance with this Clause as soon as practicable.
(B) The Final Accounts shall be prepared by the Purchaser's
Accountants in accordance with the following provisions:
(i) preparation by the Purchaser's Accountants of the Final Accounts
shall be completed within 60 days of the Completion Date unless the
Purchaser's Accountants shall request a longer period for such
preparation whereupon the parties hereto shall agree to such
extension;
(ii) the Vendors shall procure to be supplied to the Purchaser's
Accountants such information and records and accord the Purchaser's
Accountants such access to their properties and facilities of the
Company as the Purchaser's Accountants may reasonably require for
their preparation of the Final Accounts; and
(iii) the Purchaser's Accountants shall, in their audit of the Final
Accounts, apply such accounting practice, standards and principles as
are generally accepted in the United States of America.
(C) The Vendors agree to reimburse to the Purchaser the costs and
expenses of the Purchaser's Accountants in preparation of the Final
Accounts such amounts to be borne solely by the Company in accordance
with Clause 13(A).
(D) Within seven (7) Business Days from the completion of the
preparation of the Final Accounts by the Purchaser's Accountants, the
Purchaser shall procure the delivery to the Vendors of the Final
Accounts. The Final Accounts shall contain details of the Doubtful
Debts including the corresponding dates on which such Doubtful Debts
should have been payable.
(E) As from Completion, the Vendors shall use (in so far as it is
within their respective powers and capacities so to do) their best
endeavours to arrange for the collection of or procure the collection
of the Doubtful Debts.
(F) For every six month's interval commencing from the date of
delivery of the Final Accounts until the expiry of a 18-month period
from the date of delivery of the Final Accounts:
(i) the parties shall endeavor to prepare an account of the Doubtful
Debts recovered during each such 6-month period ("Recovered Debts")
identifying each amount of Recovered Debts; and
(ii) subject to any other arrangements agreed between any of the
Vendors and the Purchaser and to Clause 10(G), the Purchaser shall pay
to ZPB and ZTB as Adjusted Retained Consideration, in respect of any
amount of Recovered Debts, a total of 28% of the aggregate amount of
such Recovered Debts provided that the aggregate amount of Adjusted
Retained Consideration payable to each of ZPB and ZTB under this
<PAGE>62
Clause 10(F)(ii) shall not in any event exceed the Retained
Consideration as set out opposite their respective names in Column (7)
of Part B of Schedule 1. Other than the payment of Adjusted Retained
Consideration, the Purchaser shall not be liable to pay to any of the
Vendors any further sum/amount pursuant to this Agreement.
(G) Notwithstanding anything in this Clause 10, no adjustment shall
be made to the Retained Consideration payable to Kartek which shall be
payable in a manner other than in cash. The manner of payment shall
be agreed in writing between the Purchaser and Kartek.
11. POST COMPLETION UNDERTAKINGS
(A) To the extent permitted by the relevant laws and regulations,
each of ZPB and ZTB undertakes to the Purchaser that within 10 years
from the Completion Date it shall, and it shall procure that all of
its affiliated enterprises and organizations shall, purchase products
of the Company on an exclusive basis at the then prevailing market
price.
(B) Subject to the relevant laws and regulations, ZPB and ZTB
undertake to the Purchaser that for 12 months from the Completion
Date, ZPB and ZTB (on one part) and the Company (on the other part)
shall not cancel any financial and other guarantees in respect of the
other party's obligations.
(C) ZPB and ZTB shall continue to support the Business and shall
second relevant employees to the Company in accordance with its needs.
(D) The Vendors acknowledge and confirm that this Agreement is
entered into between them in a spirit of mutual co-operation, trust
and confidence and that it is the intention that the business,
profitability and reputation of the Company, shall be extended and
maximised by all reasonable and proper means and each party undertakes
to the other parties to use all reasonable commercial efforts to
continue to promote the Company's business in the PRC and elsewhere.
In particular, ZPB and ZTB shall ensure that the Company's
relationship with the relevant authorities governing the post,
telecommunications and other related industries in the PRC shall not
be tarnished or affected in any way by reason of this Agreement or the
changes made therein.
(E) The parties shall procure that the board of the Company shall
meet at least four times annually and that:-
(i) the quorum for each such board meeting shall comprise of at
least 6 directors present throughout the meeting;
(ii) not less than 14 days' notice shall be given to all directors
of the Company of the convening of any such board meeting;
(iii) all business discussed at any such board meeting shall be
subject to the provisions of confidentiality contained in Clause 12
below.
(F) It is hereby agreed by the parties that for so long as the Joint
Venture Contract remains in effect;
(i) the Purchaser shall be entitled to appoint 5 directors to the
board of directors of the Company; and
(ii) the General Manager, Chief Accountant, and such other
managerial personnel of the Company as nominated by the Purchaser
shall be appointed by the board of directors of the Company in
accordance with the meeting rules of the Company.
(G) It is hereby agreed by the parties that they will procure that
the Joint Venture Contract and the Articles of Association of the
Company shall be amended to give effect to this Agreement (and in
particular to incorporate the provisions in Clauses 11 (E) and 11(F)).
12. CONFIDENTIALITY
The terms contained in this Agreement shall be and remain
confidential save for disclosure to professional advisers and (if
required) regulatory authorities and where required by law. Where any
press or other announcement is required by law, the party proposing to
make the announcement shall so far as practicable obtain the consent
from the other parties hereto regarding the terms of such announcement
prior to its release.
<PAGE>63
13. COSTS AND EXPENSES
(A) The parties agree that the fees and expenses incurred by the
Purchaser on its financial and legal due diligence exercise on the
Company shall be payable and borne by the Company provided that the
maximum amount payable to the Purchaser shall not exceed US$200,000.
(B) If Completion fails to take place, Clause 13(A) shall not apply
or have any effect and each party shall bear its own cost incurred in
relation to the negotiation and the preparation of this Agreement.
14. MISCELLANEOUS
(A) Subject to any express provision of this Agreement to the
contrary, each party to this Agreement shall pay its own costs and
disbursements of and incidental to the preparation, negotiation and
completion of this Agreement and the sale and purchase hereby agreed
to be made.
(B) Each notice, demand or other communication given or made under
this Agreement shall be in writing and delivered or sent to the
relevant party at its address or fax number set out below (or such
other address or fax number as the addressee has by two (2) Business
Days' prior written notice specified to the other parties):-
To Kartek:-
Address Block J, 17/F, International Industrial Centre
2-8 Kwei Tei Street, Fo Tan
New Territories, Hong Kong
Fax Number (852) 2691-7297
Attention: Mr. William Lai
To ZPB:-
Address 24022
Fax Number: 002-86-759-3396000
Attention
To ZTB:-
Address: 24022
Fax Number: 002-86-759-3386666
Attention:
To the Purchaser:-
Address:
20th Floor, Alexandra House
16-20 Chater Road
Central, Hong Kong
Fax Number: (852) 2810-0664
Attention: Mr. William Ko (Ref: CJW/FFYC/WWLK/B277-002)
Any such notice or other document shall be deemed to have been duly
given upon receipt if delivered by hand or if sent by facsimile
transmission upon the receipt of machine printed confirmation and in
the case of a notice sent by post it shall be deemed to have been
given on the fifth Business Day after posting if the address is in the
PRC and on the tenth Business Day after posting if the address is
outside the PRC. In proving the giving of a notice it shall be
sufficient to prove that the notice was left or that the envelope
containing such notice was properly addressed and posted or that the
applicable means of telecommunication was properly received (as the
case may be).
(C) This Agreement constitutes the whole agreement between the
parties hereto and shall supersede the terms of any agreement, whether
oral or otherwise, made prior to the entering into of this Agreement.
It is expressly declared that no purported variations hereof shall be
effective unless made in writing and signed by all the parties
affected by such variations.
(D) The provisions of this Agreement, insofar as the same shall not
have been fully performed at Completion, shall remain in full force
and effect notwithstanding Completion.
<PAGE>64
(E) The Vendors shall at the reasonable request of the Purchaser do
and execute or procure to be done and executed all such further acts,
deeds, things and documents as may be necessary to give effect to the
provisions of this Agreement.
(F) No waiver by any party to this Agreement of any breach by any
other party of any provision hereof shall be deemed to be a waiver of
any subsequent breach of that or any other provision hereof and any
forbearance or delay by the relevant party in exercising any of its
rights hereunder shall not be constituted as a waiver thereof.
(G) Time shall be of the essence as regards any time, date or period
mentioned in this Agreement and any time, date or period substituted
for the same by agreement of the parties hereto or otherwise.
(H) The illegality, invalidity or unenforceability of any part of
this Agreement shall not affect the legality, validity or
enforceability of any other part of this Agreement.
(I) The provisions of this Agreement shall be binding on and shall
enure for the benefit of the successors and assigns and personal
representatives (as the case may be) of each party provided that the
Vendors may not assign or transfer their respective rights or
obligations hereunder without the prior written consent of the
Purchaser.
(J) The parties have signed both the English and Chinese versions of
this Agreement and it is agreed that both language versions shall be
of the same force and effect.
15. SETTLEMENT OF DISPUTES
(A) In the event a dispute arises in connection with the
interpretation, implementation or performance of this Agreement, the
parties hereto shall attempt in the first instance to resolve such
dispute through friendly consultations. If such dispute is not
resolved in this manner within 21 days after the commencement of
discussions, then any party hereto may submit the dispute for
arbitration in Singapore for final decision pursuant to the provisions
of UNCITRAL with instructions that the arbitration be conducted in the
manner set forth in Clause 15(B) hereof.
(B) Arbitration shall be conducted as follows:-
(i) the arbitrators may refer to both the English and Chinese
texts of this Agreement;
(ii) all proceedings in any such arbitration shall be conducted
in English and translated into Chinese; and
(iii) there shall be three (3) arbitrators all of whom shall be
fluent in English. The Purchaser and the Vendors (collectively)
shall each select one (1) arbitrator. The third arbitrator shall be
chosen as provided in the UNCITRAL Arbitration Rules and shall serve
as chairman of the panel.
(C) The arbitration awards shall be final and binding on the
parties, and the hereto agree to be bound thereby and to act
accordingly.
(D) The costs of arbitration shall be borne by the losing party,
unless otherwise determined by the arbitration award.
(E) Whenever any dispute occurs or is under arbitration, the
parties hereto shall continue to exercise their remaining respective
rights, and fulfill their remaining respective obligations, in such
manner in accordance with the provisions of this Agreement.
16. GOVERNING LAW AND JURISDICTION
This Agreement is governed by and shall be construed in accordance
with the laws of the PRC.
IN WITNESS WHEREOF this Agreement has been executed on 22nd June, 1999
at Zhanjiang City, Guangdong Province, the PRC.
<PAGE>65
SCHEDULE 1
PART A
THE COMPANY
Name: Zhanjiang Kingtone Cable Enterprises Limited
Date of establishment: 28th February, 1993
Class of company: Sino-foreign joint venture
Legal address: No. 53 People Avenue,
Centre Zhanjiang ETDZ,
Zhanjiang 524022
Guangdong, PRC
Total investment: US$27,253,859
Registered capital: US$13,080,000
Shareholder(s): Kartek
ZPB
ZTB
Other securities/
debentures in issue: NIL
Directors:
Legal representative:
Financial year : 31st December
Auditors: Zhanjiang Economic & Technological Development Zone
Auditor's
Office
Outstanding mortgage(s) or
encumbrance(s): NIL
Business: manufacture of telecommunications related cables
(Copper Coax/Fibre Optics etc.)
Place of business: PRC
Subsidiaries: NIL
PART C
OWNERSHIP BACKGROUND
(a) Far East Kartek Enterprises Limited ("Far East Kartek") and
Zhanjiang Post and Telecommunications Bureau ("ZPTB") entered into the
Joint Venture Contract and the Articles of Association on 12th
January, 1993 for the purpose of establishing the Company.
(b) On 29th January, 1993 Zhanjiang Administration Commission of
Economic and Technology Development Zone approved the JV Contract and
the Articles of Association. On 28th February, 1993, the Guangdong
people's Government issued the Approval Certificate to Kingtone and
the State Administrative for Industry and Commerce issued the
Business Licence. Kingtone also made tax registration and foreign
registration with the relevant authorities.
(c) On 31st March, 1997 an investment verification report was issued
to Kingtone confirming all the registered capital had been injected
into Kingtone by the parties.
(d) On 8th October, 1995, Far East Kartek transferred equity
interest in the Company to Kartek.
(e) On 13th August, 1998 a supplemental joint venture contract
("Supplemental Contract") was entered into to change the percentage of
equity held by Kartek and ZPTB from 48:52 to 38:62.
(h) On 26th August, 1998 Zhanjiang Administration Commission of
Development of Economic and Technology Zone approved the Supplemental
Contract.
<PAGE>66
(i) Pursuant to the reorganisation of ZPTB in 1998, ZPTB was
separated into ZPB and ZTB and the ZPTB's equity interest in the
Company was taken over by ZPB and ZTB in the proportion of 26.5% and
35.5% respectively.
SCHEDULE 2
PROPERTY
SCHEDULE 3
THE WARRANTIES
Subject to the matters referred to herein or within the actual
knowledge of the Purchaser, each of the Vendors hereby represents and
warrants and undertakes to the Purchaser that all representations and
statements of fact set out in this Schedule 3 or otherwise contained
in this Agreement are and will be true and accurate in all respects as
at the date hereof and as at Completion.
1. General information and powers of the Vendors
(A) Each of the Vendors has full power to enter into this Agreement
and to exercise its rights and perform its obligations hereunder and
(where relevant) all corporate and other actions required to authorise
its execution of this Agreement and this Agreement will, when executed
by it, be a legal, valid and binding agreement on it and enforceable
in accordance with the terms thereof.
(B) So far as the Vendors are aware, the execution, delivery and
performance of this Agreement by the Vendors does not and will not
violate in any respect any provision of (i) any law or regulation or
any order or decree of any governmental authority, agency or court
applicable to the Vendors or the Company or any part thereof
prevailing as at the date of this Agreement and as at Completion; (ii)
the laws and documents incorporating and constituting the Vendors
prevailing as at the date of this Agreement and as at Completion; or
(iii) any mortgage, contract or other undertaking or instrument to
which any of the Vendors is a party or which is binding upon it or
any of its assets, and does not and will not result in the creation or
imposition of any Encumbrance on any of its assets pursuant to the
provisions of any such mortgage, contract or other undertaking or
instrument.
(C) So far as the Vendors are aware, no Consent of or filing or
registration with or other requirement of any governmental department
authority or agency in Hong Kong, the PRC or any jurisdiction in
which any of the Vendors is incorporated or resides or any part
thereof is required by the Vendors in relation to the valid execution,
delivery or performance of this Agreement (or to ensure the validity
or enforceability thereof) and the sale of the Sale Capital.
(D) Neither the execution of this Agreement nor the performance by
the Vendors of their respective obligations hereunder will violate (i)
the Joint Venture Contract (ii) any provision of the business licence
of the Company or Articles of Association or other constitutional
documents (including directors' resolutions passed or purported to be
passed) of the Company.
(E) As at the date of this Agreement and immediately prior to
Completion, the information set out in Schedules 1 and 2 is true,
accurate and complete.
(F) The information set out in the Recitals to this Agreement is
true, complete and accurate in all respects and not misleading.
2. Sale Capital
(A) Each of the Vendors is the registered and beneficial owner of
its relevant Sale Capital free from any Encumbrances and together with
all rights and entitlements attaching thereto.
(B) Each of the Vendors are entitled to transfer the full legal and
beneficial ownership of the relevant Sale Capital to the Purchaser and
once the Conditions are satisfied and Completion takes place, the
Purchaser will legally and validly become the owner of 60 per cent.
Of the registered capital of the Company.
<PAGE>67
(C) The Sale Capital represents 60 per cent. of the registered
capital of the Company.
(D) There is no option, right to acquire, mortgage, charge, pledge,
lien or other form of security, Encumbrance or third party rights on,
over or affecting any part of the Sale Capital or any part of the
registered capital of the Company and there is no agreement or
commitment to give or create any of the foregoing and no claim has
been made by any person to be entitled to any of the foregoing which
has not been waived by such person in its entirety or satisfied in
full.
(E) There is no agreement or commitment outstanding which calls for
the issue of or accords to any person the right to call for the issue
of any registered capital in the Company.
3. Corporate Matters
(A) Compliance has been made with all legal and procedural
requirements and other formalities in connection with the Company
concerning (i) its business licence and the Articles of Association
and other constitutional documents (including directors' resolutions
passed or purported to be passed); (ii) the filing of all documents by
the Company as required by the laws of the PRC to be filed with
relevant governmental authorities in the PRC; (iii) the increase of
its registered capital and total investment; (iv) payments of interest
and dividends and making of other distributions, and (v) directors and
other officers.
(B) None of the provisions of the Joint Venture Contract have been
breached by the Vendors, each party has performed on time its
obligations thereunder and no event has occurred which may lead to the
invocation of any of the termination provisions thereunder. So far as
the Vendors are aware, none of the parties to the Joint Venture
Contract have infringed any laws or regulations of the PRC with
respect to their dealings with the Company or with each other or their
investment in the Company.
(C) The minute books of directors' meetings and of shareholders'
meetings respectively contain full and accurate records of all
resolutions passed by the directors and the shareholders respectively
of the Company and no resolutions have been passed by either the
directors or the shareholders of the Company which are not recorded in
the relevant minute books.
(D) All charges in favour of the Company have (if appropriate) been
registered in accordance with the provisions of the applicable
legislation and regulations and at the relevant registries or
authorities.
(E) All accounts, books, ledgers, and other financial records of the
Company:-
(i) have been properly maintained, are in the possession of the
Company and contain due and accurate records of all matters required
by law to be entered therein;
(ii) do not contain or reflect any material inaccuracies or
discrepancies; and
(iii) give and reflect a true and fair view of the matters which
ought to appear therein and no notice or allegation that any of the
same is incorrect has been received, or if the Company has received
such notice or allegation, the incorrectness or errors have been
rectified.
(F) So far as the Vendors are aware, all documents requiring to be
filed with the Registrar of Companies in Hong Kong or the equivalent
body in the British Virgin Islands, the Bahamas, the United States of
America and the PRC or any other relevant authority by the Company
have been properly made up and filed.
(G) So far as the Vendors are aware, each of the Company and its
directors (in their capacity as such) has complied with all relevant
legislation and obtained and complied with all necessary Consents to
carry on business whether in the country, territory or state in which
it is incorporated or elsewhere, including (but without limitation)
legislation relating to companies and securities, real property and
Taxation and have complied with all legal requirements in relation to
any transactions to which it is or has been a party prior to
Completion.
<PAGE>68
4. The Company
(A) The information in respect of the Company set out in Part A of
Schedule 1 is true and accurate and not misleading.
(B) The Company is a Sino-foreign equity joint venture validly
constituted and established and has the requisite power to carry on
and is carrying on its business in the manner and in the places within
the scope of its business licence and approval certificate and there
are no circumstances which lead to the suspension or cancellation of
any such permits, authorities, licences or Consents. So far as the
Vendors are aware, the Company has complied with all necessary
registration and filing requirements under the laws and regulations of
the PRC to any of its assets and to carry on its business as presently
conducted.
(C) The business licence and approval certificate issued by the
State Administration of Industry and Commerce Bureau and the Ministry
of Foreign Trade and Economic Co-operation in Zhanjiang to the Company
and all other approvals, licences, permits and Consents in connection
with its establishment and the conduct of its business are valid and
subsisting.
(D) As at the date of this Agreement, the Company's registered
capital is 38% per cent. owned by Kartek and 26.5% per cent. owned by
ZPB and 35.5% owned by ZTB.
(E) There has not been any reduction of or increase in the
registered capital or total investment amount of the Company nor has
any application been made to the approval authority of the Company or
other PRC governmental authorities for such reduction or increase.
(F) As of the date of this Agreement, the registered capital of the
Company has been fully paid up and there is no outstanding liability
to contribute to the registered capital of the Company nor any pending
application to increase the registered capital and/or the total
investment amount of the Company beyond the amounts set out in Part B
of Schedule 1. There has not been granted to the Company and there
is no agreement to grant any shareholder loans or to provide on behalf
of the Company any guarantees or similar forms of security.
(G) The Company does not have any subsidiaries and associated
companies (in incorporation form or otherwise) or any investment of
any nature.
5. Accounts
(A) The Accounts:-
(i) were prepared in accordance with applicable laws and with
generally accepted accounting principles, standards and practices in
the PRC (including all applicable Statements of Standard Accounting
Practice) at the time they were prepared and on a consistent basis
with the audited financial statements of the Company for each of the
three financial years ended on 31st December, 1998 (the "Previous
Accounts");
(ii) are true and accurate, correctly make or include full
provision for any bad and doubtful debts and all established
liabilities, make proper and adequate provision for (or contain a note
in accordance with good accounting practice respecting) all deferred,
disputed or contingent liabilities (whether liquidated or
unliquidated) and all capital commitments of the Company as at the
Accounts Date and the reserves and provisions (if any) made therein
for all Taxation relating to any period on or before the Accounts Date
are proper and adequate;
(iii) give a true and fair view of the state of affairs and
financial and trading positions of the Company at the Accounts Date
and of the Company's results for the financial period ended on that
date;
<PAGE>70
(iv) correctly include all the assets of the Company as at the
Accounts Date and the rate of depreciation adopted therein is
sufficient for each of the fixed assets of the Company to be written
down to 1-3% by the end of their estimated lives in accordance with
PRC law or generally accepted accounting principles, standards and
practices in the PRC;
(v) are not adversely affected by any unusual, exceptional,
extraordinary or non-recurring items which are not disclosed in the
Accounts; and
(vi) contain full provision for the diminution in value of the
Company's properties.
(B) The Management Accounts:-
(i) (a) were prepared in accordance with applicable law,
accounting principles, standards and practices generally accepted in
the PRC at the time they were prepared and commonly adopted by
companies carrying on businesses similar in all material respects to
that carried on by the Company in preparing management accounts and
the notes, if any, set out therein, and (b) in respect of which the
accounting policies adopted by the Company in preparing the Accounts
have been consistently applied; and
(ii) fairly reflect the state of affairs and financial and
trading positions of the Company and of its fixed and current assets,
contingent liabilities and debtors and creditors, in each case as at
the Management Accounts Date and the Company's results for the
financial period ended on that date;
(C) The accounting and other books and records of the Company are
in its possession, have been properly written up and accurately
present and reflect in accordance with generally accepted accounting
principles and standards in the PRC all the transactions entered into
by the Company or to which the Company has been a party and there are
at the date hereof no material inaccuracies or discrepancies of any
kind contained or reflected in any of the said books and records, and
that at the date hereof they give and reflect a true and fair view of
the financial, trading and contractual position of the Company and of
its fixed and current and contingent assets and liabilities and
debtors and creditors.
(D) Since the Accounts Date and save as disclosed or reflected in
the Accounts:-
(i) the Company has not entered into any material contracts or
commitments binding on it (other than contracts entered into in the
ordinary course of its business) and there has not been any
acquisition or disposal by the Company of material fixed or capital
assets or any agreement to effect the same;
(ii) there has not been any creation of liabilities by the
Company (other than on normal commercial terms in the ordinary course
of its business);
(iii) no event has occurred as regards the Company which would
entitle any third party to terminate any material contract or any
material benefit enjoyed by the Company or call in any material amount
of money before the normal due date therefor or indebtedness;
(iv) the Company has not created any mortgage or charge on the
whole or any part of its assets;
(v) the Company has not borrowed except from bankers in the
ordinary course of its day to day trading operation or increased any
secured liability;
(vi) the Business has been carried on in the ordinary and usual
course and in the same manner (including nature and scope) as in the
past; no fixed asset or stock has been written up nor any debt written
off, and no unusual or abnormal contract has been entered into by the
Company; and
(vii) the loss of the Company has not been substantially higher
than that of the previous year and subject to such losses and further
write-off of assets by the auditors there has been no material adverse
change in the financial or trading position of the Company.
<PAGE>70
(E) So far as the Vendors are aware, no part of the amounts included
in the Management Accounts and/or the Accounts or subsequently
recorded in the books of the Company, as owing by any debtors, has
been released on terms that any debtor pays less than the full book
value of its debt, or has been written off, or has been proven to any
extent to be irrecoverable, or is now regarded by the Company (as the
case may be) as irrevocable in whole or in part.
(F) So far as the Vendors are aware, all debts due to the Company
included in the Management Accounts and/or the Accounts (being debts
in excess of bad or doubtful debts for which provision has been made
in the Management Accounts and/or the Accounts) have either prior to
the date hereof been realised or will within twelve months realise
their full amount in cash.
(G) No transaction of any material importance to which the Company
is a party has taken place which if it had taken place would have to
be reflected in the Management Accounts and/or the Accounts.
(H) Adequate provisions have been made in the Management Accounts
and/or the Accounts for all dividends (if any) or other distributions
(if any) to shareholders declared and remaining unpaid as at the date
hereof.
(I) Since 30th April, 1999, no dividend has been declared or paid or
other distributions of capital made in respect of any share capital of
the Company, and no loans or loan capital have been repaid by the
Company in whole or in part.
(J) There has been no Material Adverse Change (or Effect) of the
Company as a whole since the Accounts Date.
(K) The Company has no present intention to discontinue or write
down investments in any other businesses other than those disclosed in
the Management Accounts and/or the Accounts.
(L) The Company has not and will not distribute any dividends
payable (whether declared or not) after 30th April, 1999.
6. Business
(A) The Business of the Company is the manufacture of
telecommunications related cables for Chinese markets and
as described in its business licence.
(B) The company has obtained for the purpose of its business all
necessary consent of any governmental or other authority and any other
person and of any owner of the Intellectual Property Rights
(C) Each of the Consents referred to in paragraph (B) is valid and
in force, the Company is not in breach of the terms of any such
Consent (including breach of any requirement relating to such Consent
to make returns or reports or supply information) and there are no
circumstances (including the sale of the Sale Capital) which are
known, or which the Vendors ought to have known and which might
invalidate any such Consent or render it liable to forfeiture or
modification or (in the case of a renewable Consent) affect its
renewal.
(D) After Completion there will be no restriction on the right of
the Company to carry on its business which does not now apply to the
Company.
(E) The Company has not manufactured, sold or supplied any product
or service in the course of its business which does not in all
respects comply with all applicable laws, regulations and standards,
or which is defective or dangerous or not in accordance with any
representation, warranty or other term (whether express or implied)
given in respect of it; and it has no outstanding liability (including
a contingent liability by virtue of the terms on which the product or
service was sold) in respect of any such product or service or its
repair, maintenance or replacement.
(F) The Company has not (except for the purpose of carrying on its
business in the ordinary course and subject to an obligation of
confidentiality and legal requirements) disclosed, or agreed to
disclose, or authorized the disclosure of, any of its lists of
suppliers or customers, trade secrets or technological or confidential
<PAGE>72
information concerning its Business, all of which are fully and
properly recorded in writing or other appropriate form and are not
incorrect or incomplete in any way.
(G) The Business is managed exclusively by its officers and
employees, and no person has authority to bind the Company other than
its officers and employees acting in the ordinary and ostensible
course of their duties.
(H) The Company is not, or has not agreed to become, a member of any
partnership, joint venture, consortium, trade association or any other
association of persons (whether incorporated or not incorporated).
(I) The Company does not carry on business through any branch,
agency or permanent establishment outside the PRC.
(J) The Company does not carry on any business other than that
stated in its business licence.
(K) So far as the Vendors are aware, the acquisition of the Sale
Capital by the Purchaser and compliance with the terms of this
Agreement will not:-
(i) cause the Company to lose the benefit of any right or privilege
it presently enjoys or cause any person who normally does business
with the Company not to continue to do so on the same basis as
previously;
(ii) relieve any person of any obligation to the Company (whether
contractual or otherwise) or enable any person to determine any such
obligation or any right or benefit enjoyed by the Company or to
exercise any right whether under an agreement with or otherwise in
respect of any of them;
(iii) result in any present or future indebtedness of the Company
becoming due or capable or being declared due and payable prior to its
stated maturity;
(iv) give rise to or cause to become exercisable any right of pre-
emption (except pursuant to the terms of the Joint Venture Contract
and applicable laws and regulations); or
(v) adversely affect the Company's relationships with its clients,
customers, suppliers or employees.
7. Financial Matters
(A) The aggregate amount of the borrowings of the Company as at the
date hereof is RMB132,663,355.
(B) The aggregate amount of guarantees provided by the Company in
favour of other entities as at the date hereof is RMB23,000,000.
(C) Since the Accounts Date, there has not been:-
(i) any damage, destruction, or loss materially adversely
affecting the Properties or the Business;
(ii) any sale or transfer by the Company of any material tangible
or intangible asset other than in the ordinary course of business, any
mortgage or pledge or the creation of any security interest, lien, or
encumbrance on any such asset, or any lease of property, including
equipment, other than tax liens with respect to taxes not yet due and
statutory rights of customers in inventory and other assets;
(iii) any material transaction not in the ordinary course of
business of the Company;
(iv) the lapse of any patent, utility models, design, trademark,
trade name, service mark, copyright, or licence or any application
with respect to the foregoing by the Company which is material in the
context of the Business as a whole;
(v) the making of any material loan, advance, indemnity or
guarantee by the Company to or for the benefit of any person except
the creation of accounts receivable in the ordinary course of
business; or
<PAGE>73
(vi) an agreement to do any of the foregoing.
(D) The Company has no material capital commitment nor is it engaged
in any scheme or project requiring the expenditure of capital of a
significant amount.
(E) All dividends or distributions declared, made or paid by the
Company have been declared, made or paid in accordance with its
articles of association (or equivalent documents) and the applicable
statutory provisions.
(F) The Company has not as at the date hereof and will not, as at
Completion, have outstanding:-
(i) any borrowing or indebtedness in the nature of borrowing or
other credit facility save and except for the borrowing or
indebtedness disclosed to the Purchaser;
(ii) any mortgage, charge or debenture or any obligation
(including a conditional obligation) to create a mortgage, charge or
debenture save and except for the mortgages disclosed to the Purchaser
in writing (if any);
(iii) any liabilities outstanding under any guarantee or other
material contingent obligation.
8. Plant, Equipment and Assets
(A) So far as the Vendors are aware, all plant, machinery,
equipment, vehicles, material assets owned or used by the Company are
in good and safe condition and in working order (fair wear and tear
excepted) in all material respects and have been regularly and
properly maintained, would not be expected to require replacement
within 12 months after Completion.
(B) The assets included in the Management Accounts and/or the
Accounts or acquired since the Accounts Date and all assets used or
owned by or in the possession of the Company:-
(i) are legally and beneficially owned by the Company free from
any mortgage, charge, lien or similar encumbrance any hire-purchase
agreement or agreement for payment on deferred terms or bills of sale
or lien, charge or other encumbrance;
(ii) are in the possession or under the control of the Company;
(iii) where purchased on terms that title to property does not
pass until full payment has been made, have been paid for in full by
the Company;
(iv) are not subject to any hire purchase, leasing arrangements
or other arrangements of a similar nature; and
(v) comprise all the material assets, property and rights which
the Company owns or which it uses or requires for the purpose of
carrying on its Business.
(C) The amount of all debts owing to the Company (less the amount of
any provision or reserve for bad and Doubtful Debts included in the
Accounts) will be fully recoverable in the ordinary course; and no
debt is owing to the Company by the Vendors.
(D) The Company is not a party to any agreement for the hire, rent,
hire purchase or purchase on deferred terms of any asset.
(E) The Company does not own nor has it agreed to acquire, any
shares or debentures in any other undertaking or any other securities.
(F) The Company has done everything (whether by way of giving
notice, registration, filing or otherwise), required or permitted to
be done by it by applicable laws and regulations for the protection of
its title to, or for the enforcement or the preservation of any order
of priority of its title to, any property or rights (including the
benefit of any debt, mortgage or charge) owned by it.
<PAGE>74
(G) All records or other documents recording or evidencing any
contract, licence, consent or other right of the Company or required
for the exercise of any such right are in the possession or under the
exclusive control of the Company.
9. Insurance
The Company has effected all insurances required by law to be effected
by it for its employees and over its Business and all such insurances
are valid and in force at the date of this Agreement.
10. Taxation
(A) The Company has complied with all relevant legal requirements
relating to registration, filing or notification for Taxation
purposes.
(B) So far as the Vendors are aware, the Company has:-
(i) paid all Taxation (if any) due to be paid and is under no
liability to pay any penalty or interest in connection with any claim
for Taxation; and
(ii) taken all necessary steps to obtain any repayment of or
relief from Taxation available to it.
(C) The Company is not in dispute with any Taxation or revenue
authority and, so far as the Vendors are aware, no such dispute is
pending or threatened.
(D) The Company has submitted all claims and disclaimers which have
been assumed to have been made for the purposes of the Accounts and
the Management Accounts.
11. Contracts, Commitments and Material Transactions
(A) Since the Accounts Date, the Company has carried on its business
in the ordinary course and, save as mentioned in or as contemplated by
this Agreement, the Company has not entered into any transaction or
incurred any material liabilities except in the ordinary course of its
day-to-day business and on an arm's length basis for full value.
(B) There is not now outstanding nor, save and except for such
contracts or agreements which may be entered into by the Company
pursuant to this Agreement, will there be outstanding at Completion
with respect to the Company:
(i) any agreement (whether by way of guarantee, indemnity,
warranty, representation or otherwise) under which the Company is
under any actual or contingent liability in respect of the obligations
of any person other than the Company;
(ii) any contract to which the Company is a party which is of a
long-term (i.e. more than one year) and non-trading nature or contains
any unusual or unduly onerous provision disclosure of which could
reasonably be expected to influence the decision of the Purchaser in
purchasing any or all of the Sale Capital;
(iii) any sale or purchase option or similar agreement affecting
any assets owned or used by the Company (with a value in the books of
account of the Company in excess of RMB200,000) except those entered
into the ordinary course of day to day trading;
(iv) any material agreement in excess of RMB200,000 entered into
by the Company otherwise than by way of bargain at arm's length; and
(v) any management agreements, joint venture agreements, agency
agreements or any form of agreement whatsoever which entitles any
person to bind the Company contractually, to settle, negotiate or
compromise any accounts or claims or to collect, receive or share in
any balances or sums payable to the Company save in the ordinary
course of business.
(vi) any contract to which the Company is a party and which cannot
be terminated by it without payment of compensation by less than 90
days' notice, or imposes on the Company any obligation to be performed
by it more than 180 days from the date of the contract;
<PAGE>75
(vii) any contract to which the Company is a party (except contracts
with employees) and which:-
(a) requires the Company to pay a commission, finder's fee, royalty
or similar amount;
(b) is dependent on the guarantee, covenant of or security provided
by any other person; or
(c) is a contract for the sale of shares or assets which contains
warranties or indemnities under which the Company still has a
remaining liability or obligation;
(viii) any contract to which the Company is a party and which is or
may be unenforceable by it by reason of the contract being voidable at
the instance of any other party or void;
(ix) any offer, tender or quotation made or given by the Company
capable by the unilateral act of any other person of giving rise to
any contract otherwise than in the ordinary course of trading;
(x) any contract or arrangement under which any person has the
exclusive right to supply any description of goods or services to or
for the Company or, as its agent or distributor, to supply any
description of goods or services within any geographical area;
(xi) any contract or arrangement to which any of the Vendors is a
party or has the benefit which requires to be assigned to or vested in
the Company to enable the Company to carry on its business or enjoy
the rights to the same extent as carried on or enjoyed prior to the
date of this Agreement;
(xii) any contract to which the Company is a party and which may
restrict its activities or the use or disclosure by it of any
information; or
(xiii) any breach by any party of the terms of any contract to which
the Company is a party.
(C) The Company has not received any formal or informal notice to
repay under any agreement relating to any borrowing (or indebtedness
in the nature of borrowing) which is repayable on demand and which
exceeds an aggregate amount of RMB1,000,000.
(D) The Company is not under any obligation, or party to any
contract, which cannot readily be fulfilled or performed by it on time
and without undue or unusual expenditure of money or effort and which
is material in the context of the Business as a whole.
(E) There are no outstanding contracts, engagements or liabilities,
whether quantified or disputed, save for (i) as shown in the
Management Accounts and/or the Accounts or (ii) entered into in the
ordinary course of the Company's day to day business operations.
(F) With respect to the Company, there are no:-
(i) contractual arrangements between the Company and any party
which will or may be legally terminated as a result of the execution
or completion of this Agreement; or
(ii) liabilities for any statutory or governmental levy or charge
(levy or charge below RMB100,000 excepted) other than for Taxation
provision for which has been made in the Management Accounts and/or
the Accounts; or
(iii) powers of attorney or other authorities (express or implied)
which are still outstanding or effective to or in favour of any person
to enter into any contract or commitment or to do anything on its
behalf; or
(iv) agreements or arrangements entered into by it otherwise than
by way of bargain at arm's length; or
(v) contracts which are unusual or of a long-term nature or
involving or which may involve obligations on it of a nature or
magnitude calling for special mention or which cannot be fulfilled or
performed on time or without undue or unusual expenditure of money or
effort.
(G) No alteration has been made to the memorandum of association or
articles of association of the Company since establishment other than
those requested by the Purchaser or contemplated by this Agreement.
(H) No agreement or arrangement to which the Company is a party, is
required or, following the execution and completion of this Agreement,
will be required to be registered with any authority or governmental
agency.
<PAGE>76
(I) Since the Accounts Date, the Company has not:-
(i) issued or repaid or agreed to issue or repay any share or loan
capital;
(ii) declared, made or paid any dividends or made any other
distribution out of profits, reserves or capital and no loans or loan
capital has been repaid in whole or in part other than the $1,000,000
dividend declared and paid in February, 1999.
12. Employment Arrangements
(A) All contracts of service to which the Company is a party can be
terminated by it without payment of compensation by not more than
three months' notice or less without compensation (save and except
otherwise required by applicable laws and regulations).
(B) The Company is not a party to any provident fund save as
required by any applicable laws and regulations.
(C) The Company has not since the Accounts Date:-
(i) changed, or agreed to change, the terms of its employment
(including terms relating to pension benefits) of any person who was
on the Accounts Date entitled to remuneration at a rate in excess of
RMB15,000 per annum;
(ii) paid or given, or agreed to pay or give, to any of its officers
or employees any remuneration or benefit, except the salary or wage to
which he is contractually entitled under the terms of his employment;
or
(iii) been notified of any wage claim or agreed any general
increase in wages or wage rates.
(D) Except otherwise required by any applicable laws and
regulations, the Company is not under any legal liability or
obligation or a party to any agreement, arrangement, scheme, fund, or
promise to pay pensions, gratuities, retirement annuities, in
connection with retirement, to or for any of its past or present
officers or employees or their relatives or dependants; and there are
no retirement benefit, or pension binding on the Company.
(E) Particulars of all loans, if any, to director of the Company
have been disclosed to the Purchaser.
(F) Except otherwise required by any applicable laws and
regulations, the Company is not under any obligation (whether actual
or contingent and whether or not disputed by the Company) to any
former employee whether for breach of any contract of service, for
compensation for wrongful dismissal or for unfair dismissal or for
payment of any salaries, wages, pensions, gratuities, severance pay,
long service payment, bonuses or otherwise howsoever or whatsoever and
no tax, levy, contribution or payment in respect of any former
employee whether to any governmental authority, pension fund, scheme
or trust or otherwise howsoever or whatsoever is outstanding or
disputed.
(G ) All schemes or plans for the provision of benefits to employees
of the Company comply in all respects with all applicable legislation
and all necessary Consents in relation to such schemes and plans have
been obtained and remain in full force and effect.
(H) The Company has not given any guarantee or assumed any
obligations in relation to the employees of any other person.
(I) Complete and accurate particulars have been given in writing to
the Purchaser of the details (name, age, length of service,
remuneration) and terms of employment by the Company of its employees
(including terms implied by custom or usage of the Company or of the
trade) and the terms of engagement under which the services of any
other individual are provided for the Company.
(J ) All salaries and wages due to the officers and employees of the
Company for any period before the date of this Agreement have been
paid in full.
(K) Save as contemplated by this Agreement, no present employee of
the Company or other individual whose services are provided for the
Company has given or received notice of termination of his employment
or engagement.
<PAGE>77
13. Property
(A) The Property represents all the real property owned, used or
occupied by the Company or in respect of which the Company has any
estate, interest, right or liability, and, except as disclosed in the
valuation report of the Property prepared by C.Y. Leung & Co. ("the
Valuation Report"):-
(i) the Company is the sole owner of and has the land use rights
and building ownership of the Property and is entitled to transfer,
dispose of, sell, mortgage or otherwise deal with the Property and is
entitled to develop the Property in the manner and in accordance with
the relevant requirements of the relevant government authority subject
to applicable laws and regulations;
(ii) the Property and the land use rights and building ownership
associated therewith held by the Company are free from mortgage,
debenture, charge, lien, lease, encumbrances or any third party rights
and the Company has not entered into any agreement to do any of the
foregoing;
(iii) all land premium, purchase price, land grant fees or other
fees payable in respect of the Property and the land use rights and
building ownership associated therewith (and the fees and charges for
demolition and re-settlement in connection with the acquisition of the
land use rights of the land of the Property (if any)) have been paid
in full and will be duly paid up to the date of completion of this
Agreement and no further such premiums, price or fees are payable
under the laws of the
PRC;
(iv) so far as the Vendors are aware, and save as disclosed to
the Purchaser in writing none of the terms and conditions contained in
the relevant transfer contracts, real estate title certificate, land
use rights certificate, building ownership certificates (if any)
and/or certificate of ownership and the applicable laws, rules and
regulations in the PRC have been breached in respect of the Property;
(v) the Company has duly performed and observed all the terms and
conditions contained in the sale and purchase contracts, land use
right certificate and building ownership certificates (if any) for the
Property to be performed and observed on the part of the Company as
purchaser thereof;
(vi) so far as the Vendors are aware, all relevant legal
requirements or conventions for notarization and registration of the
sale and purchase contracts for the Property have been complied with;
(vii) the land use rights and building ownership pertaining to
the Property and all permits and approvals in respect of the town
planning, construction and/or development of the Property are valid
and subsisting and have not been amended, modified or supplemented in
any manner whatsoever;
(viii) except as disclosed to the Purchaser in writing no
contracts have been entered into by the Company to sell, assign,
subdivide, let or lease, license, charge, mortgage, partition, share,
grant any option over or otherwise dispose of an interest in or part
with the possession or occupation of the Property or any part thereof
or otherwise encumber the Property nor is there any agreement by the
Company to do any of the aforesaid;
(ix) the Company is in physical possession and actual occupation
of the Property on an exclusive basis and no right of occupation or
enjoyment has been acquired or is in the course of being acquired by
any third party or has been granted or agreed to be granted to any
third party;
(x) the Company does not have any outstanding material
liabilities under the terms and conditions upon which the land use
rights and building ownership pertaining to the Property are granted
and there is no obligation or liability on the part of the Company to
transfer any part of the Property or any interests in the Property to
any person or authority whatsoever or to undertake any urban or public
facilities in connection with the Property;
(xi) the Property is not subject to any restrictive covenants,
stipulations, easements, licences, restrictions or other like rights
vested in third parties other than those stipulated in the terms and
<PAGE>78
conditions upon which the land use rights and building ownership
pertaining to the Property are granted which terms and conditions are
of a usual nature with reference to such terms and conditions in the
PRC;
(xii) to the best of the Vendors' knowledge having made all
reasonable enquiries, there are no circumstances which would entitle
or require any person to exercise any powers of entry or taking
possession of the Property;
(xiii) so far as the Vendors are aware, compliance has been made
with all applicable statutory and bye-law requirements with respect to
the Property;
(xiv) so far as the Vendors are aware, all requisite licences,
certificates and authorities necessary for the existing use of the
property by the Company have been duly obtained and are in full force,
validity and effect; and
(xv) so far as the Vendors are aware, all requisite planning and
building approvals required for any government, local or public
authority with respect to the Property have been obtained and are in
full force and effect.
14. Loans
(A) There are no loans made to the Company which are outstanding
except as shown in the Accounts or the Management Accounts.
(B) The Company has not factored any of its debts or engaged in any
financing of a type which would not require to be shown or reflected
in its accounts.
(C) Save as shown in the Accounts or the Management Accounts and
save as disclosed herein, the Company does not have outstanding any
mortgages, charges, debentures or other loan capital or bank
overdrafts, loans or other similar indebtedness, financial facilities,
finance leases or hire purchase commitments or any guarantees or other
material contingent liabilities.
(D) No material outstanding indebtedness of the Company has become
payable by reason of default by the Company and no event of default
has occurred.
15. Litigation
The Company is not a party to any litigation, arbitration or
prosecutions or to any other legal or contractual proceedings or
hearings before any statutory, regulatory or governmental body,
department, board or agency or to any material disputes or to the
subject of any investigation by any authority in the place where the
Business is conducted and no litigation, arbitration, prosecution or
other legal or contractual proceedings or investigations are
threatened or pending either by or against the Company and there are
no facts or circumstances, subsisting which might give rise to any
such proceeding, investigation, hearing or to any dispute or to any
payment and there are no unfulfilled or unsatisfied judgment or court
orders against the Company.
16. Intellectual Property
(A) The Intellectual Property Rights comprise all the intellectual
property rights used or required for the purposes of the Business
which are material in the context of the Business and all of the same
are valid, in full force and effect, registered (where applicable) in
the name of the Company or the relevant licensor, and in the sole
legal and beneficial ownership or the subject of valid licenses held
by the Company.
(B) The Company has not granted and is not obliged to grant any
licences or assignments under or in respect of any Intellectual
Property Rights or to disclose or provide know-how, trade secrets,
technical assistance, confidential information or lists of customers
or suppliers to any person; and no such disclosure has been made.
<PAGE>79
(C) All fees for the grant or renewal of the Intellectual Property
Rights of or used in the Business and which rights are material to the
Company have been paid on demand or will be paid in due course and no
circumstances exist which might lead to the cancellation, forfeiture
or modification of any such Intellectual Property Rights or to the
termination of or any claim for damages under any licence of
Intellectual Property Rights to the Company.
17. Insolvency
(A) No order has been made or resolution passed for the winding up
of the Company and there is not outstanding:-
(i) any petition or order for the winding up of the Company;
(ii) any receivership of the whole or any part of the undertaking or
assets of the Company;
(iii) any petition or order for the administration of the Company;
or
(iv) any voluntary arrangement between the Company and any of its
creditors.
(B) There are no circumstances which are known, or would on
reasonable enquiry be known, to the Vendors and which would entitle
any person to present a petition for the winding up or administration
of the Company or to appoint a receiver of the whole or any part of
its undertaking or assets.
(C) No distress, execution or other process has been levied against
the Company or action taken to repossess goods in the possession of
the Company.
(D) No floating charge created by the Company has crystallised and
there are no circumstances likely to cause such a floating charge to
crystallise.
(E) The Company is not and has not been a party to any transaction
which may be avoided in a winding up.
18. Trading
(A) So far as the Vendors are aware, the Company has and at all
times maintained valid and current foreign exchange control and is in
compliance with and is not in breach of any PRC laws or regulations
relating to foreign exchange control. The Vendors are not aware of any
prohibition or restriction (other than those imposed by law) on the
Subsidiary in relation to its handling of foreign exchange in the PRC
(including remittance of profit or dividend and opening of bank
accounts.
19. Delinquent Acts
The Company has not committed nor is liable for any criminal, illegal,
unlawful or unauthorized act or breach of any obligation whether
imposed by or pursuant to statute, contract or otherwise.
20. Miscellaneous
(A) All representations warranties and undertakings contained in the
foregoing provisions of this Schedule shall be deemed to be repeated
immediately before Completion and to relate to the facts then
existing.
(B) So far as the Vendors are aware, the Company has neither itself
nor vicariously:
(i) committed any breach of any statutory provision, order, bye-
law or regulation binding upon it or of any provision of its
memorandum of association or articles of association or bye-laws as of
any trust deed, agreement or licence to which it is a party or of any
covenant, mortgage, charge or debenture given by it;
<PAGE>79
(ii) entered into any transaction which is still executory and
which is or may be unenforceable by reason of the transaction being
voidable at the instance of any other party or ultra vires, void or
illegal; or
(iii) omitted to do anything required or permitted to be done by
it by the applicable laws and regulations necessary for the protection
of its respective title to or for the enforcement or the preservation
of any order or priority of any properties or rights owned by it.
(C) All information disclosed on the Purchaser for the purpose of
its due diligence exercise or otherwise prior to the signing of this
Agreement is true and correct in all material aspects and is not
misleading.
(D) All information contained in this Agreement was when given true
and accurate in all respects and there is no fact or matter which has
not been disclosed to the Purchaser, which may render any such
information or documents untrue, inaccurate or misleading at the date
of this Agreement or which if disclosed to the Purchaser might
reasonably be expected to influence adversely the Purchaser's decision
to purchase the Sale Capital on the terms of this Agreement.
SCHEDULE 4
FORM OF TAX DEED OF INDEMNITY
Date , 1999
KARTEK INTERNATIONAL HOLDINGS LIMITED
and
ZHANJIANG POST BUREAU
and
ZHANJIANG TELECOMMUNICATIONS BUREAU
and
BICKMORE HOLDINGS INC.
DEED OF INDEMNITY
THIS DEED OF INDEMNITY is dated , 1999
BETWEEN:-
(1) KARTEK INTERNATIONAL HOLDINGS LIMITED, a company incorporated in
the British Virgin Islands with its registered office at Akara
Building, Suite # 8, Wickhams Cay I, Road Town, Tortola, the British
Virgin Islands ("Kartek");
(2) ZHANJIANG POST BUREAU ("ZPB");
(3) ZHANJIANG TELECOMMUNICATIONS BUREAU of
55 ("ZTB"); and
(4) BICKMORE HOLDINGS INC., a company incorporated in the Bahamas
with limited liability, whose principal place of business is at
Providence House, Easthill Street, P.O. Box N-3944 Nassau, the Bahamas
(the "Purchaser").
WHEREAS:-
(A) Zhanjiang Kingtone Cable Enterprises Limited is an equity joint
venture company established in the PRC (the "Company").
<PAGE>81
(B) By an agreement (the "Principal Agreement") dated 22nd June,
1999 made between, inter alia, the Vendors and the Purchaser, the
Purchaser agreed to purchase from the Vendors an aggregate of 60 per
cent. of the registered capital of the Company.
(C) It is a condition of the Principal Agreement that the Vendors
shall enter into this Deed to provide the Purchaser, for itself and as
trustee for the Company, with an indemnity concerning certain taxation
liabilities.
NOW THIS DEED WITNESSES AND IT IS HEREBY AGREED as follows:-
1. INTERPRETATION
(A) In this Deed, including the Recitals, the following expressions
shall have the following meanings except where the context otherwise
requires:-
"PRC" the People's Republic of China;
"Principal Agreement" the agreement referred to in Recital (B)
above;
"Reference Accounts Date" 30th April, 1999;
"Relief" includes any relief, allowance, concession, set off or
deduction in computing profits, income or expenditure against which a
Taxation is assessed, and any credit granted by or pursuant to any
legislation or otherwise relating to all forms of Taxation;
"Taxation" means:-
(i) any liability to any form of taxation whenever created or
imposed and whether of the PRC or of any other part of the world and
without prejudice to the generality of the foregoing includes profits
tax, provisional profits tax, business tax on gross income, income
tax, value added tax, interest tax, salaries tax, property tax, estate
duty, resource duty, death duty, capital duty, stamp duty, payroll
tax, withholding tax, rates, import customs and exercise duties and
generally any tax duty, impost, levy or rate or any amount payable to
the revenue, customs or fiscal authorities of local municipal,
governmental, state, provincial, federal level whether of the PRC or
of any other part of the world;
(ii) such amount or amounts as is or are referred to in Clause 1(B);
and
(iii) all costs, interest, penalties, charges and expenses
incidental or relating to the liability to Taxation or the deprivation
of Relief or of a right to repayment of Taxation which is the subject
of the indemnity contained in Clause 2 to the extent that the same
is/are payable or suffered by the Company;
"Taxation Claim" includes any assessment, notice, demand or other
documents issued or action taken by or on behalf of the Tax Bureau of
the PRC or any other statutory or governmental authority whatsoever in
Hong Kong, in PRC or any other part of the world (if relevant) from
which it appears that the Purchaser and the Company or any of them are
liable or are sought to be made liable for any payment of any form of
Taxation or to be deprived of any Relief or right to repayment of any
form of Taxation which Relief or right to repayment would but for the
Taxation Claim have been available to the Company; and
"Vendors" means collectively Kartek, ZPB and ZTB.
(B) In the event of any deprivation of any Relief or of a right to
repayment of any form of Taxation there shall be treated as an amount
of Taxation for which a liability has arisen the amount of such Relief
or repayment or (if smaller) the amount by which the liability to any
such Taxation of the Company would have been reduced by such Relief if
there had been no such deprivation as aforesaid, applying the relevant
rates of Taxation in force in the period or periods in respect of
which such Relief would have applied or (where the rate has at the
relevant time not been fixed) the last known rate and assuming that
the Company had sufficient profits, turnover or other assessable
income or expenditure against which such Relief might be set off or
given.
<PAGE>82
(C) In this Deed:-
(i) Save for the words and expressions defined in Clause 1(A),
words and expressions and other rules of interpretation defined, used
or set out in the Principal Agreement have the same meanings and
application in this Deed;
(ii) unless the context otherwise requires, words denoting the
singular number include the plural thereof, words importing one gender
include both genders and the neuter and references to persons include
firms, companies, and corporations, in each case vice versa;
(iii) references to Clauses are to the clauses of this Deed; and
(iv) headings are for ease of reference only and do not form part
of this Deed.
2. TAXATION INDEMNITY
(A) Without prejudice to any of the foregoing provisions of this
Deed and subject as hereinafter provided, the Vendors hereby agree
with the Purchaser, for themselves and as trustee for the Company,
that they will indemnify and at all times keep the Purchaser fully and
effectively indemnified on demand against Taxation falling on the
Company resulting from or by reference to any income, profits or gains
earned, accrued or received or any event or transaction on or before
the Reference Accounts Date whether alone or in conjunction with any
circumstances whenever occurring and whether or not such Taxation is
chargeable against or attributable to any other person, firm or
company.
(B) The indemnity given by Clause 2 does not cover any Taxation
Claim:-
(i) which would not have arisen but for any act or omission by
the Purchaser or the Company voluntarily effected after the Reference
Accounts Date; or
(ii) to the extent that provision will be made for such Taxation
in the Audited Final Accounts; or
(iii) to the extent that any Taxation Claim arises or is incurred
as a result of or owing to any matter specifically disclosed to the
Purchaser prior to Completion of the Principal Agreement.
3. NO DOUBLE CLAIMS
No claim under this Deed shall be made:-
(i) by the Purchaser and the Company in respect of the same
Taxation; or
(ii) if a claim in respect thereof has been made under the
Principal Agreement.
4. TAXATION CLAIM
In the event of any Taxation Claim arising, the Purchaser shall
give or procure that notice thereof is as soon as reasonably
practicable given to the Vendors in the manner provided in Clause 9,
provided that such notice shall not be a condition precedent to the
liability of the Vendors hereunder; and, as regards any such Taxation
Claim, the Purchaser shall procure that the Company shall at the
request of the Vendors take such action, or procure that such action
be taken, as the Vendors reasonably request to cause the Taxation
Claim to be withdrawn, or to dispute, resist appeal against,
compromise or defend the Taxation Claim and any determination in
respect thereof but subject to the Company being indemnified and
secured to its or their reasonable satisfaction by the Vendors against
all losses (including additional Taxation), costs, damages and
expenses which may be thereby incurred.
<PAGE>83
5. PAYMENTS
(A) If after the Vendors have made any payment pursuant to Clause 2
hereof, the Company shall receive a refund of all or part of the
relevant Taxation the Purchaser shall, so far as it lies within its
power, procure the Company (if it shall receive such refund) to repay
to the Vendors a sum corresponding to the amount of such refund less:-
(i) any expenses, costs and charges properly incurred by the
Company in recovering such refund; and
(ii) the amount of any additional Taxation which shall not have
been taken into account in calculating any other payment made or to be
made pursuant to this Clause but which is suffered by the Company in
consequence of such refund.
(B) Any payments due by the Vendors pursuant to the provisions of
this Deed shall be increased to include such interest on unpaid tax as
the Company shall be or shall have been required to pay.
6. LIMITATION OR TIME FOR INDEMNITY CLAIMS
The Vendors shall not be liable in respect of any claim under this
Deed unless a written notice of such claim shall have been given to
the Vendors or either of them on or prior to the expiry of six years
from the date of this Deed.
7. BINDING EFFECT
The indemnities, agreements and undertakings herein contained shall
bind the personal representatives and successors of the Purchaser and
each of the Vendors and shall ensure for the benefit of each party's
successors and assigns.
8. SEVERABILITY
Any provision of this Deed prohibited by or which is unlawful or
unenforceable under any applicable law actually applied by any court
of competent jurisdiction shall, to the extent required by such law,
be severed from this Deed and rendered ineffective so far as is
possible without modifying the remaining provisions of this Deed.
Where, however, the provisions of any such applicable law may be
waived, they are hereby waived by the parties hereto to the full
extent permitted by such law to the extent that this Deed shall be
valid, binding and enforceable in accordance with its terms.
9. NOTICES
Each notice, demand or other communication given or made hereunder
shall be in writing and delivered or sent to the relevant party in
accordance with the provision of Clause 14(B) of the Principal
Agreement.
10. GOVERNING LAW AND JURISDICTION
This Deed is governed by and shall be construed in accordance with the
laws of the PRC.
IN WITNESS whereof this Deed of Indemnity has been duly executed on
the day and year first above written.
THE COMMON SEAL OF)
KARTEK INTERNATIONAL HOLDINGS )
LIMITED)
was hereunto affixed)
in the presence of:-)
THE COMMON SEAL OF)
ZHANJIANG POST BUREAU)
was hereunto affixed)
in the presence of:-)
<PAGE>84
THE COMMON SEAL OF)
ZHANJIANG TELECOMMUNICATIONS)
BUREAU)
was hereunto affixed)
in the presence of:-)
THE COMMON SEAL OF)
BICKMORE HOLDINGS INC.)
was hereunto affixed)
in the presence of:-)
SCHEDULE 5
THIS SUPPLEMENTAL CONTRACT is made on , 1999
BETWEEN:
(1) Kartek International Holdings Limited ("Party A")
(2) Zhanjiang Post Bureau ("Party B")
(3) Zhanjiang Telecommunications Bureau ("Party C")
(4) Bickmore Holdings Inc. ("Party D")
In this Supplemental Contract, Party A, Party B, Party C and Party D
are collectively referred to as "Parties" and "Party" means each or
any one of them, as the context may require.
WHEREAS:
(A) Parties A, B and C are parties to a joint venture contract
dated 12th January, 1993 (as supplemented) ("Joint Venture Contract")
in respect of their rights and obligations as investors in Zhanjiang
Kingtone Cable Enterprises Limited (the "Company").
(B) Pursuant to the Joint Venture Contract, Party A, Party B and
Party C are holders of the entire registered capital of the Company
which has been fully paid up in accordance with the Joint Venture
Contract.
(C) Party A, Party B and Party C wish to transfer their respective
holding of 28%, 13.68% and 18.32% of the registered capital of the
Company to Party D, and Party D wishes to accept such transfer; and
Party A, Party B and Party C consent to such transfer.
(D) Party D also wishes to amend some provisions of the Joint
Venture Contract and the Articles of Association of the Company; and
Party A, Party B and Party C consent to such amendments.
NOW, IT IS THEREFORE AGREED as follows:
1. Definitions and Interpretation
Words and expressions which have defined meaning in the Joint Venture
Contract and the Articles of Association of the Company shall have the
same meaning, as given to them in the Joint Venture Contract and
Articles of Association, when used in this Supplemental Contract.
2. Party D as party
(A) When this Supplemental Contract becomes effective, and subject
to the provisions of this Supplemental Agreement, Party D shall become
the foreign party to the Company, shall be vested with the 60% holding
in the registered capital of the Company originally owned by Party A,
Party B and Party C respectively, and shall be entitled to all the
rights and be liable to all the obligations stated in the Schedule
hereto.
<PAGE>85
(B) With regard to the present transfer of the holding of 60% of the
Company's registered capital from Party A, Party B and Party C to
Party D, Party A, Party B and Party C have waived and hereby confirm
their irrevocable waiver of the irrespective preferential pre-emptive
right to acquire such holding whether such right arises under the Law
on Chinese-Foreign Equity Joint Ventures, the Joint Venture Contract,
or the Articles of Association or otherwise howsoever.
3. Fee and expenses
Each Party shall bear the fees of its professional advisors, including
accountants, auditors and lawyers, and any other expenses incurred in
relation to or for the performance of its obligations under this
Supplemental Contract.
4. Extension of Term
The term of the joint venture shall be extended to 31 years.
Management
The Amended Joint Venture Contract and the Amended Articles of
Association shall contain the following provisions:
(i) the board of directors shall comprise of 8 directors and Party
A, Party B and Party C shall each be entitled to appoint 1 director
and Party D shall be entitled to appoint 5 directors;
(ii) Party D shall be entitled to nominate the General Manager,
Chief Accountant and other senior management to be appointed by the
board of directors of the Company in accordance with its meeting
rules.
6. Board Meetings
The Amended Joint Venture Contract and the Amended Articles of
Association shall contain the following provisions:
(i) the board of the Company shall meet at least four times
annually;
(ii) the quorum for each such board meeting shall comprise of at
least 6 directors present throughout the meeting;
(iii) not less than 14 days' notice shall be given to all directors
of the Company for convening any such board meeting;
(iv) all business discussed at any such board meeting shall be
remain confidential save for disclosure to professional advisers and
(if required) regulatory authorities and where required by law.
7. Settlement of Disputes
The Amended Joint Venture Contract and the Amended Articles of
Association shall contain the following provisions:-
In the event a dispute arises in connection with the
interpretation, implementation or performance of this Joint Venture
Agreement, the parties hereto shall attempt in the first instance to
resolve such dispute through friendly consultations. If such dispute
is not resolved in this manner within 21 days after the commencement
of discussions, then any party hereto may submit the dispute for
arbitration in Singapore for final decision pursuant to the provisions
of UNCITRAL with instructions that the arbitration be conducted in the
manner set forth below.
Arbitration shall be conducted as follows:-
(i) the arbitrators may refer to both the English and Chinese texts
of this Agreement;
(ii) all proceedings in any such arbitration shall be conducted in
English and translated into Chinese; and
(iii) there shall be three (3) arbitrators all of whom shall be
fluent in English. Party D and Parties A, B and C (collectively)
shall each select one (1) arbitrator. The third arbitrator shall be
<PAGE>86
chosen as provided in the UNCITRAL Arbitration Rules and shall serve
as chairman of the panel.
The arbitration awards shall be final and binding on the parties, and
the hereto agree to be bound thereby and to act accordingly.
The costs of arbitration shall be borne by the losing party, unless
otherwise determined by the arbitration award.
Whenever any dispute occurs or is under arbitration, the parties
hereto shall continue to exercise their remaining respective rights,
and fulfill their remaining respective obligations, in such manner in
accordance with the provisions of this Joint Venture Agreement.
8. Commencing of Effect
This Supplemental Agreement shall become effective when this
Supplemental Agreement together with the Amended Joint Venture
Contract (and documents annexed thereto) and Amended Articles of
Association are approved by the original examination and approval
authority of the Joint Venture Contract.
9. Miscellaneous
(A) The conclusion, validity, interpretation and execution of the
Equity Transfer Agreement and the settlement of disputes arising
therefrom shall be governed by the laws of the PRC.
(B) This Supplemental Agreement is written in both English and
Chinese in 10 original copies, 5 in English and 5 in Chinese. Both
versions are equally authentic and shall have the same force.
Executed in Zhanjiang City, Guangdong Province, the PRC by the legal
or duly authorised representatives of each of Party A, Party B, Party
C and Party D on 22nd June, 1999.
SIGNED by )
)
for and on behalf of )
KARTEK INTERNATIONAL HOLDINGS)
LIMITED in the presence of: -)
SIGNED by )
)
for and on behalf of )
ZHANJIANG POST BUREAU )
in the presence of:- )
SIGNED by )
)
for and on behalf of )
ZHANJIANG TELECOMMUNICATIONS)
BUREAU in the presence of:- )
SIGNED by )
)
for and on behalf of )
BICKMORE HOLDINGS INC. )
in the presence of:- )
Dated 22nd June, 1999
KARTEK INTERNATIONAL HOLDINGS LIMITED
and
ZHANJIANG POST BUREAU
and
ZHANJIANG TELECOMMUNICATIONS BUREAU
and
BICKMORE HOLDINGS INC.
AGREEMENT
relating to the sale and purchase
of 60 per cent. of the registered capital of
Zhanjiang Kingtone Cable Enterprises Limited
<PAGE>88
RICHARDS BUTLER
20th Floor
Alexandra House
16-20 Chater Road
Hong Kong
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