U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
(Exact name of Company as specified in its charter)
HUAYANG INTERNATIONAL HOLDINGS, INC.
NEVADA 58-1667944
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
No. 386 Qingnian Street
Heping District, Shenyang, China 89501
(Address of principal executive offices) (zip code)
011 (86) (24) 2318-0688
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(Issuer's telephone number, including area code)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
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Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.02
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(Title of Class)
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
Huayang International Holdings, Inc (the "Company"), formerly known as
Power Capital Corp., is a real-estate development company engaged in the
development of a 162,000 square meter hotel and business properties in the
People's Republic of China. The Company's current activities include the
development and construction of a hotel and office complex in Shenyang, China.
STRUCTURE OF THE COMPANY
The Company conducts its business through its 95% owned subsidiary
Shenyang Haitong House Properties Development, Ltd ("Haitong"), and the
following joint ventures in which the Company holds a 20% stake: Huayang
International Hotel Co., Ltd. ("Hotel"), Changhua Business Co., Ltd. ("Business
Center") and Changyuan Car Park Co., Ltd. ("Garage") (collectively referred to
as the "Hotel Group").
HISTORY
The Company was formerly known as Power Capital Corporation (PCC) which
its stock was traded on the Over The Counter (OTC) Bulletin Board. However, the
Company was delisted from the OTC Bulletin Board in December 1999. Immediately
prior to the acquisition and the issuance of common shares as described below,
PCC has issued and outstanding common shares of 100,807 shares to various
shareholders.
On December 29, 1995, PCC signed an acquisition agreement, as amended
on January 5, 1996, with the Huayang International Trust (the "Trust"), whereby
the Trust sold its 95%, 20%, 20% and 20% investments in Haitong, Hotel, Business
Center and Garage, respectively, to PCC in exchange for 6,000,000 shares of
common stock of PCC. On January 5, 1995, 6,000,000 shares were transferred to
the Trust. At the date of acquisition, PCC changed its name to Huayang
International Holdings, Inc.
HUAYANG INTERNATIONAL MANSION
INTRODUCTION
Upon completion, Huayang International Mansion will be a mixed-used
complex with a total building area of 162,000 square meters. The Mansion will be
located in Shenyang, a major Chinese city with a population of nearly seven
million, offering residential, hotel, office, recreation, shopping and
conference facilities.
The building consists of two towers and two podiums (lower floors
leased out to stores, restaurants and other businesses that service the needs of
the community and/or tower residents). Haitong owns Tower A and Podium A, while
Hotel Group owns Tower B and Podium B of the building.
Tower A will be a 28 story construction with 330 office units, 220
business apartments, and 66 penthouse apartments, totaling approximately 56,000
square meters. Assuming all the units in Tower A are sold, then the Company
estimates that it will provide at least US$49.7 million in gross revenues.
Podium A is a five story construction totaling
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approximately 27,000 square meters, with 21,285 square meters of commercial
space for lease. As of December 31, 1999, 332 units of Tower A totaling 27,821
square meters (69% of the total area available for sale) have been sold,
generating approximately US$21.6 million in gross revenues, and 71 Tower A units
totaling 5,832 square meters (36% of available space) have been leased,
generating US$0.68 million in annual gross revenues.
Tower B and Podium B of the building totaling approximately 80,000
square meters will be operated by Sheraton Overseas Management Corporation and
Hotel Group together as Sheraton Shenyang Lido Hotel. When completed, the
five-star hotel will have 512 rooms/suits and 90 luxury apartments.
MARKET
Shenyang is a major Chinese city with a population of nearly 7 million.
Together with its neighboring cities Anshan, known as the Steel Capital of
China, and Fushun, known as the Coal Capital of China, Shenyang is one of the
most important industrial centers of China. Shenyang is also the most important
traffic hub in northeastern China. It connects Beijing with major cities such as
Dalian, Harbin, Dandong, and Changchun as well as Russia, Mongolia and North
Korea.
In the process of China's economic reform, Shenyang has put great
effort into developing projects with high economic growth potential and has
significantly improved its infrastructure to ensure that its economy will
continue to grow. The city has given priority to the automobile manufacturing,
service, and high technology sectors and has been quite successful in attracting
investments in these sectors. For example, large automakers such as Toyota,
General Motors and Ford all have established joint ventures in the city.
The economic development has led to a higher level of demand for office
space, retail space, business apartments and hotels, especially for high-end
properties with good locations and quality services. The Company quickly
responded to market demands and initiated the Huayang International Mansion
project, which will provide office space, luxury residential units, retail
space, entertainment functions, convention and exhibition functions as well as a
five star-hotel.
PROJECT HIGHLIGHTS
The Mansion will be conveniently located in the City's Special Economic
Zone for new and hi-tech enterprises, and is only approximately15 minutes away
from the city's international airport and approximately 10 minutes away from the
city's main railway station. Qingnian
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Avenue, a major traffic thoroughfare for the city leads to the building. Wulihe
Stadium, the city's newest and most advanced stadium is located just on the
northern side of the building. Regent Park, on the western side of the building,
is a luxury residential area under development. JW Marriott Hotel and China
Northern Airline's main office face the building's south side. To the east,
across Qingnian Avenue is Riverside Garden, considered the most luxurious
residential development in northeastern China. Some major entertainment
facilities, such as Summer Place (a water park), the Science and Technology
Museum and an aquarium are also located nearby.
The total cost for the project is budgeted at US$170 million, of which
it is expected that US$70 million will fund the development of Tower A and
Podium A, and US$100 million will pay the costs of developing the Sheraton
Hotel.
The project is scheduled to be completed by June 2000. Construction on
Tower A was completed in January 2000. The Hotel is scheduled to open in June
2000.
JOINT VENTURES
Hotel: Hotel is developing a 50,000 square meter, 636 room luxury
business hotel in Tower B of the Mansion. The Company is a 20% stakeholder in
the Hotel project. The Hotel will be managed by Sheraton Hotels, a subsidiary of
Starwood Hotels & Resorts Trust.
As of December 31, 1999 the total construction costs of Tower B and
Podium B totaled approximately US$90.4 million, of which approximately US$41
million had been paid with the balance to be paid by the principal shareholder,
Yick Ho, Ltd., a wholly owned subsidiary of Cheung Kong (Holdings) Limited, a
Hong Kong based corporation listed on the Hong Kong Stock Exchange. The Company
must provide additional financing of US$2,500,000. The Hotel Group is expected
to generate annual revenues of $46.65 million based on a 70% annual occupancy
rate. This is based on projected revunes of $30.19 million from room tariffs,
and US$16.46 million from other services including the Business Center and
Garage.
Business Center: Business Center owns and operates a 20,000 square
meter business center occupying the five story podium of Tower B. The Company is
a 20% stakeholder in the Business Center project. Business Center has not yet
determined whether to lease the space to other service providers to generate
rental revenues, or to satisfy market demand through the development of their
own commercial enterprises. The Company expects the Business Center to generate
annual revenues of $16.25 million.
Garage: Garage owns and operates a 10,000 square meter parking facility
in support of the Hotel and Business Center. The facility occupies two basement
levels of Tower B. The Company is a 20% stakeholder in the Garage project. Based
on a 70% annual occupancy rate of the hotel, the parking facilities are expected
to generate annual revenues of $211,000.
PROJECT FUNDING
The Company's projects were financed through a combinations of debt
financing in the form of mortgage notes, capital contributions by Mr. Gao
Wanjun, an officer, director and controlling shareholder of the Company, and
shareholder loans to the Company by Mr. Gao.
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PROJECT STATUS
Tower A has been completed. There are 330 office units, 220 business
apartment units and 66 penthouse apartment units in Tower A, totaling
approximately 56,000 square meters. Of the total available space, approximately
40,000 square meters are designated for sale and approximately 16,000 square
meters are intended to be leased properties. As of December 31, 1999,
approximately 28,000 square meters of floor space had been sold and
approximately 5,800 square meters of floor space had been leased.
Podium A has almost been completed and the Company expects it to begin
full operation by the end of June 2000. Agriculture Bank of China has leased
1,000 square meters of the ground floor area. In addition, the "Spring of
Paris," a luxury shopping mall, has signed a letter of intent to leaser 8,000
square meters.
The construction of Hotel is almost finished as well. The Hotel plans
to open in June 2000.
COMPETITION
The Company is in direct competition with a number of real estate
development and property management companies that also provide office space to
businesses in Shenyang. Some of these companies may have more resources than the
Company, or be able to offer similar service at a better price than the company.
The Sheraton hotel will compete directly with other business hotels in Shenyang,
such as the JW Marriott.
GOVERNMENT REGULATION
The Company's projects are subject to various laws and
governmental regulations, such as zoning regulations, relating to its business
operations and project developments. The Company must obtain and keep current
various licenses, permits and regulatory approvals for its development projects.
The Company believes that it is in compliance with all laws, rules and
regulations applicable to its projects and that such laws, rules and regulations
do not currently have a material impact on the Company's operations. Due to the
increasing levels of development in the areas of China where the Company
currently operates, it is possible that new laws, rules and/or regulations may
be adopted that could affect the Company's projects or proposed projects. The
enactment of such laws, rules or regulations in the future could have a negative
impact on the Company's project growth or profitability, which could decrease
the Company's projected revenues or increase the Company's costs of doing
business.
EMPLOYEES
As of March 1, 2000, the Company had 20 employees, all of which are
salaried. No employee group is covered under a collective bargaining agreement.
The Company believes its relationship with its employees is good.
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CAUTIONARY STATEMENTS
RISKS ASSOCIATED WITH THE COMPANY
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO BASE AN INVESTMENT IN THE
COMPANY.
Although we merged into PCC in December 1995, we did not initiate
operations until October, 1997. As a result, we have a limited operating history
upon which an evaluation of our business and prospects. Our prospects must be
considered in light of risks, expenses, delays, problems and difficulties
frequently encountered by early stage companies.
OUR REAL ESTATE DEVELOPMENTS MAY NOT ACHIEVE THE MARKET ACCEPTANCE REQUIRED FOR
THE COMPANY TO GENERATE PROFITS.
The Company has not yet completed construction of its first project,
the Huayang International Mansion. Construction on the Mansion is scheduled to
be completed in June 2000. There can be no assurance that the Company will be
successful in its business operations or will achieve sufficient levels of
market acceptance for its property development projects and joint ventures. The
Company's business may be subject to any or all of the problems, expenses,
delays and risks inherent in the establishment of a new business enterprise
including limited capital resources, possible delays in construction and/or
development of its properties, possible cost overruns due to price and cost
increases in raw materials and the manufacturing processes, uncertain market
acceptance and the absence of an operating history. Therefore, there can be no
assurance that the Company's business or joint ventures will be able to achieve
or maintain profitable operations. Further, there can be no assurance that the
Company will not encounter unforeseen difficulties that may deplete its capital
resources more rapidly than anticipated.
WE MAY EXPERIENCE FLUCTUATIONS IN OUR QUARTERLY RESULTS.
Our operating results have varied significantly from quarter to quarter
in the past and may continue to vary significantly from quarter to quarter in
the future due to a variety of factors. Many of these factors are out of our
control. These factors include:
o Fluctuations in the real estate market where we operate;
o Seasonality of the hotel industry;
o Unexpected delays in construction of our real estate
developments;
o New office and hotel developments in the same market in which we
operate;
o A decline in tourism or business in the market in which we
operate; and
o Increases in expenses, whether related to sales and marketing,
new construction, maintenance or repair costs, or administration.
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We will continue to determine our investment and expense levels based
on our expected future revenues, which may not grow at historical rates in
future periods, if at all. A significant portion of our expenses is not variable
in the short term and cannot be quickly reduced to respond to descreases in
revenues. Therefore, if our revenues are below expectations, our operating
results and net income are likely to be adversely affected. In addition, we may
reduce our prices or accelerate our development activities in response to
competitive pressures or to pursue new market opportunities. Any one of these
activities may further limit our ability to adjust spending in response to
revenue fluctuations.
WE MAY BE UNABLE TO OBTAIN THE FUNDING NECESSARY TO EXPAND OUR BUSINESS.
We expect that we will require additional financing in order to expand
our business. We cannot assure you that we will successfully negotiate or obtain
additional financing, or that we will be able to obtain financing on terms
favorable or acceptable to us. We do not have any commitments for additional
financing. Our ability to obtain additional capital depends on market
conditions, economic conditions, and other factors beyond our control. If we do
not obtain adequate financing, or such financing is not available on acceptable
terms, our ability to finance our expansion, enhance our properties, develop new
properties or respond to competitive pressures would be significantly limited.
Our failure to secure necessary financing could have a material adverse effect
on our business, prospects, financial condition, and results of operations.
THE COMPANY IS SUBSTANTIALLY LEVERAGED IN RELATION TO ITS STOCKHOLDERS EQUITY.
As of the date hereof, the Company has consolidated indebtedness that
is substantial in relation to its stockholders equity. As of December 31, 1999,
the Company had total debt of approximately $17,295,731. The Company's leveraged
financial position poses substantial risks to holders of Common Stock, including
the risks that (i) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of interest on such indebtedness,
(ii) the Company's leveraged position may impede its ability to obtain financing
in the future for working capital, capital expenditures and general corporate
purposes and (iii) the Company's highly leveraged financial position may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. If the Company is unable to generate sufficient cash flow
from operations in the future to service its indebtedness and to meet its other
commitments, the Company will be required to adopt one or more alternatives,
such as refinancing or restructuring its indebtedness, selling material assets
or operations, or seeking to raise additional debt or equity capital. There can
be no assurance that any of these actions could be effected on satisfactory
terms, that they would enable the Company to continue to satisfy its capital
requirements or that they would be permitted by the terms of existing or future
debt agreements.
All of the Company's debt is secured by the Mansion. As of December 31,
1999, the Company's lenders held an aggregate of $17,295,731 of liens against
the Mansion as security for bank loans of the same amount. If the Company is
unable to meet the terms of its bank loans, resulting in a default under such
bank loans, the lenders may elect to declare all amounts outstanding under the
loans to be immediately due and payable and foreclose on the Mansion, which
would have a material adverse effect on the Company.
WE DEPEND ON KEY MEMBERS OF OUR MANAGEMENT.
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Our business is highly dependent upon the continued contributions of
our executive officers and other key employees. In particular, our future
success is dependent upon the personal efforts of Mr. Gao Wanjun, our Chairman,
President and Chief Executive Officer, Ms. Wang YuFai, our Secretary and
Director, and Ms. Wang XioaLuan, our Chief Financial Officer and Director. We do
not have employment agreements with our executive officers or key personnel, nor
do we have key man life insurance policies for such individuals. The loss of the
services of our executive officers or other key personnel could delay our
ability to fully implement our operating strategy, which could have a material
adverse effect on our business operating results and financial condition.
RISKS OF DOING BUSINESS IN THE PEOPLE'S REPUBLIC OF CHINA
WE MAY LOSE THE BENEFITS PROVIDED BY SPECIAL ECONOMIC ZONES.
As part of its economic reform, the PRC has designated certain areas,
including Shenyang where the Company's offices and property development projects
are located, as Special Economic Zones ("SEZs"). Foreign investment enterprises
in these areas generally benefit from greater economic autonomy and more
favorable tax treatment in the PRC. Accordingly, changes in the policies or laws
governing SEZs could have a material adverse effect on the Company's business,
financial condition and results of operations.
THE COMPANY IS SUBJECT TO VARIOUS POLITICAL AND LEGAL UNCERTAINTIES AS A RESULT
OF DOING BUSINESS IN THE PRC.
All of the Company's development projects are located in the PRC and,
as a result, the Company's operations and assets are subject to significant
political, economic, legal and other uncertainties. The economy of the PRC
differs from the economics of most countries belonging to the Organization for
Economic Co-operation and Development (the "OECD") in such respects as
structure, government involvement, level of development, growth rate, capital
reinvestment, allocation of resources, rate of inflation and balance of payments
position. China's economy is managed in part through a series of five-year
economic and social development plans (each a "Five-Year Plan") formulated by
the State Council and approved by the National People's Congress. Each Five-Year
Plan sets overall agricultural, industrial, financial and other economic and
social development targets. In implementing each Five-Year Plan, the State
Planning Commission, a commission directly under the State Council, establishes
annual production and development targets, formulates and supervises the
implementation of annual plans designed to achieve those targets and approves
major economic projects. Although the majority of productive assets in the PRC
are still owned by the Chinese Government, in the past several years the Chinese
Government has implemented economic reform measures that emphasize
decentralization, the utilization of market forces in the development of the PRC
economy and the encouragement of private economic activity. Such economic reform
measures may be inconsistent or ineffectual and the Company may not be able to
capitalize on all such reforms. Further, there can be no assurance that the
Chinese Government will continue to pursue such policies, that such policies
will be successful if pursued, that such policies will not be significantly
altered from time to time or that business operations in the PRC would not
become
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subject to the risk of nationalization, which could result in the total loss of
investments in that country.
ALTHOUGH THE PRC IS IN THE PROCESS OF ONGOING ECONOMIC REFORM, WE CAN NOT
PREDICT WITH CERTAINTY THE FUTURE SUCCESS OR CONTINUATION OF SUCH REFORMS.
Since 1978, the Chinese Government has been reforming its economic
systems. Many of the reforms are unprecedented or experimental and are expected
to be refined and improved. Other political, economic and social factors, such
as political changes, changes in the rates of economic growth, unemployment or
inflation, or in the disparities in per capita wealth between regions within
China, could also lead to further readjustment of the reform measures. This
refining and readjustment process may not always have a positive effect on the
operations of the Company. There can be no assurance that the reforms to China's
economic system will continue or that the Company will not be adversely affected
by changes in the PRC's political, economic and social conditions and by changes
in policies of the Chinese Government, such as changes in laws and regulations
(or the interpretation thereof), measures which may be introduced to control
inflation, changes in the rate or method of taxation, imposition of additional
restrictions on currency conversion and remittance abroad and reduction in
tariff protection and other import restrictions. The Company's operating results
may also be significantly affected by the inadequate development of an
infrastructure and the potential unavailability of adequate power and water
supplies, transportation, satisfactory roads and communications and raw
materials and parts.
The Chinese economy has experienced significant growth in recent years,
but such growth has been uneven among various geographical regions and among
various sectors of the economy. The Chinese Government has implemented various
policies from time to time, such as during 1989 to 1991 and again commencing in
1993, to restrain the rate of such economic growth and control inflation and
otherwise regulate economic expansion. Although the Company might benefit from
these types of policies, more severe measures or other actions by the Chinese
Government could decrease demand for the Company's products or otherwise
significantly adversely affect the Company's earnings.
THE PRC HAS AN UNCERTAIN AND EVOLVING LEGAL STRUCTURE.
The legal system of the PRC relating to foreign investments is both new
and continually evolving, and currently there can be no certainty as to the
application of its laws and regulations in particular instances. Enforcement of
existing laws or agreements may be sporadic and implementation or interpretation
of laws inconsistent.
ENTRY INTO THE WORLD TRADE ORGANIZATION BY THE PRC COULD RESULT IN INCREASED
COMPETITION IN THE MARKET IN WHICH WE OPERATE.
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The United States has announced a change in policy that may make it
easier for the PRC to join the World Trade Organization (the "WTO"), the
successor to the General Agreement on Tariffs and Trade. If the PRC joins the
WTO, it will be required to reduce some of its import tariffs and other trade
restrictions over time and, as a result, the Company's business could be
adversely effected as a result of increased competition.
DUE TO GOVERNMENT CONTROL OVER CURRENCY CONVERSION, OUR REVENUES MAY NOT BE
FREELY CONVERTIBLE INTO FOREIGN CURRENCIES.
The Company receives almost all of its revenues in Renminbi which is
not freely convertible into foreign exchange. However, the Company requires
foreign currency to meet foreign currency obligations, such as for future
purchases of certain equipment and raw materials. The PRC government imposes
control over its foreign currency reserves in part through direct regulation of
the conversion of Renminbi into foreign exchange and through restrictions on
foreign imports. Effective January 1, 1994, pursuant to the Notice of the
People's Bank of China Concerning Further Reform of the Foreign Currency Control
System (the "PBOC Notice"), the conversion of Renminbi into Hong Kong and United
States Dollars must be based on rates set by the PBOC, which rates are set daily
based on the previous day's PRC interbank foreign exchange market rate with
reference to current exchange rates on the world financial markets (the "PBOC
Rate"). Effective as of December 1, 1996, Renminbi has become fully convertible
for all current account transactions. Foreign exchange which is required for
current account transactions can be bought freely at authorized Chinese banks so
long as the procedural requirements prescribed by law are met. Payment of
dividends to foreign investors holding equity interests in Chinese companies,
including Foreign Investment Enterprises, is considered a current account
transaction. At the same time, Chinese companies are also required to sell their
foreign exchange earnings to authorized Chinese banks. Purchase of foreign
exchange for capital account transactions still requires prior approval of the
State Administration for Foreign Exchange. During the last five years, the value
of the Renminbi generally has experienced volatility in the exchange rate of
Renminbi to United States Dollars, and there was a significant devaluation in
the exchange rate of January 1, 1994 in connection with the abolition of the
official exchange rate and implementation of the new unitary rate exchange
system. Although the Renminbi/United States Dollar exchange rate has been
relatively stable since January 1, 1994, there can be no assurance that the
exchange rate will not again become volatile or that the Renminbi will not
devalue further against the United States Dollar. Exchange rate fluctuations may
adversely affect the Company's financial performance because of its foreign
currency denominated liabilities and may materially adversely affect the value,
translated or converted as applicable into United States Dollars, of the
Company's net fixed assets, the earnings of the Company and its declared
dividends. The Company currently does not engage in any hedging activities in
order to minimize the effect of exchange rate risks.
RISKS ASSOCIATED WITH HOLDING OUR SECURITIES
THERE IS A LACK OF LIQUIDITY IN THE MARKET FOR OUR COMMON STOCK.
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The Company's Common Stock currently does not trade on an exchange.
Although the Company will apply to trade its stock on the OTC Bulletin Board or
NASDAQ Small Cap Market, there can be no assurance that an active public market
for the Company's Common Stock will be created and sustained. Accordingly,
investors may not be able to sell their Common Stock should they desire to do
so, or may be able to do so only at lower than desired prices. While no
prediction can be made as to the effect, if any, that future sales of shares of
the Company's Common Stock, or the availability of additional shares for future
sales, will have on the market price of the Common Stock prevailing from time to
time, sales of substantial amounts of Common Stock or the perception that such
sales could occur, would likely adversely affect the market price for the Common
Stock.
YOU WILL BE UNABLE TO EXERCISE ANY CONTROL OVER THE COMPANY BECAUSE A SINGLE
STOCKHOLDER CONTROLS 80% OF THE VOTING CONTROL OF THE COMPANY.
Mr. Gao Wanjun, an officer and director of the Company, is the
principal stockholder of Huayang International Trust. Huayang International
Trust beneficially owns 80% of the outstanding common stock of the Company and
controls approximately 80% of all stockholder votes primarily as a result of its
ownership of 6,000,000 shares of the Company's common stock. Accordingly, Mr.
Gao, as Managing Member of Huayang International Trust, is in a position to
elect all of the directors of the Company and direct stockholder approval upon
all issues to be voted upon by the stockholders of the Company.
SINCE WE DO NOT INTEND TO DECLARE DIVIDENDS IN THE FORESEEABLE FUTURE, THE
RETURN ON YOUR INVESTMENT WILL DEPEND UPON APPRECIATION OF THE MARKET PRICE OF
YOUR SHARES.
We have never paid any dividends on our common stock. Our board of
directors does not intend to declare any dividends in the foreseeable future,
but intends to retain all earnings, if any, for use in our business operations.
As a result, the return on your investment in the Company's common stock will
depend upon appreciation of the market price of the common stock. The holders of
common stock are entitled to receive dividends when, as and if declared by the
board of directors out of funds legally available for dividend payments. The
payment of dividends, if any, in the future is within the discretion of our
board of directors and will depend upon our earnings, capital requirements and
financial condition, and other relevant factors.
WE MAY ISSUE BLANK CHECK PREFERRED STOCK, WHICH COULD SUBSTANTIALLY DEPRESS THE
VALUE OF YOUR STOCK.
The Company's Articles of Incorporation and By-laws authorizes the
issuance of "blank check" Preferred Stock with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder approval,
to issue Preferred Stock with dividend, liquidation, conversion, voting or other
rights which could adversely affect the relative voting power or other rights of
the holders of the Company's Common Stock. The issuance of Preferred Stock may
be used, under certain circumstances, as a method of discouraging, delaying or
preventing a change in control of the Company and could prevent stockholders
from receiving a premium for their shares in the event of a third party tender
offer or change of control transaction. There can be no assurance that the
Company will not issue shares of Preferred Stock in the future. If the Company
issues Preferred Stock, the issuance may have a dilutive effect upon the holders
of the Company's Common Stock.
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The issuance of any shares of Preferred Stock having rights superior to
those of the Common Stock may result in a decrease in the value or market price
of the Common Stock. Holders of Preferred Stock may have the right to receive
dividends, certain preferences in liquidation and conversion rights. The
issuance of Preferred Stock could, under certain circumstances, have the effect
of delaying, deferring or preventing a change in control of the Company without
further vote or action by the stockholders and may adversely affect the voting
and other rights of the holders of Common Stock.
OUR OFFICERS AND DIRECTORS ARE GRANTED LIMITED LIABILITY FOR THEIR ACTIONS BY
OUR ARTICLES OF INCORPORATION AND BY-LAWS.
The Company's Articles of Incorporation and By-laws contains
provisions limiting the liability of directors of the Company for monetary
damages to the fullest extent permissible under Nevada law. This is intended to
eliminate the personal liability of a director for monetary damages in an action
brought by or in the right of the Company for breach of a director's duties to
the Company or its stockholders except in certain limited circumstances. In
addition, the Articles of Incorporation and By-laws contains provisions
requiring the Company to indemnify directors, officers, employees and agents of
the Company serving at the request of the Company against expenses, judgments
(including derivative actions), fines and amounts paid in settlement. This
indemnification is limited to actions taken in good faith in the reasonable
belief that the conduct was lawful and in or not opposed to the best interests
of the Company. The Articles of Incorporation and By-laws provides for the
indemnification of directors and officers in connection with civil, criminal,
administrative or investigative proceedings when acting in their capacities as
agents for the Company. The foregoing provisions may reduce the likelihood of
derivative litigation against directors and officers and may discourage or deter
stockholders or management from suing directors or officers for breaches of
their duties to the Company, even though such an action, if successful, might
otherwise benefit the Company and its stockholders.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
Future sales of shares of Common Stock by existing stockholders under
Rule 144 ("Rule 144") of the Securities Act of 1933, as amended (the "Securities
Act"), could materially adversely affect the market price of the Common Stock. A
material reduction in the market price of the Company's Common Stock could
materially impair the Company's future ability to raise capital through an
offering of equity securities. A substantial number of shares of Common Stock
are available for sale under Rule 144 in the public market or will become
available for sale in the near future.
OUR COMMON STOCK MAY BE SUBJECT TO PENNY STOCK REGULATIONS.
The Securities Enforcement and Penny Stock Reform Act of 1990 requires
additional disclosure relating to the market for penny stocks in connection with
trades in any stock defined as a penny stock. Commission regulations generally
define a penny stock to be an equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. As the Company does not
currently satisfy the requirements to comply with any exception, the regulations
require the delivery, prior to certain transactions involving the Company's
Common Stock, of a disclosure schedule explaining the penny stock market and the
risks associated therewith. Transactions that meet the requirements of
Regulation D under the Securities Act or transactions with an issuer not
involving a public offering pursuant to Section 4(2) of the Securities Act are
exempt from the disclosure schedule delivery requirements.
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<PAGE>
Since the Company is subject to the penny stock regulations cited
above, trading in the Company's securities is covered by Rule 15g-9 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") for
non-NASDAQ and non-national securities exchange listed securities. Under such
rule, broker/dealers who recommend such securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale.
If market makers are unable to make a market in the Company's
securities, the market liquidity for the Company's securities could be adversely
affected. In such event, the absence of liquidity of the Company's Common Stock
could limit the ability of broker/dealers to sell the Company's securities and
thus the ability of holders of the Company's securities to sell their securities
in the secondary market.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
The following discussion of the financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and related notes thereto. The following discussion contains certain
forward-looking statements that involve risk and uncertainties. The Company's
actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, but are not limited to,
risks and uncertainties related to the need for additional funds, the rapid
growth of the operations and the ability of the Company to operate profitably
after the initial growth period is completed. The Company undertakes no
obligation to publicly release the results of any revisions to those
forward-looking statements that may be made to reflect any future events or
circumstances.
RESULTS OF OPERATIONS (IN U.S. DOLLARS)
FISCAL PERIODS ENDED DECEMBER 31, 1999 AND DECEMBER 31, 1998
Revenues for the fiscal year ended December 31, 1999 were $6,540,558
down from revenues of $16,115,067 in the fiscal year ended December 31, 1998, a
decline of 59.4%. Revenue from real estate sales declined by $10,236,792 to
$5,682,253 in fiscal year 1999 from $15,919,045 in fiscal year 1998, a decline
of 64.3%. The change was caused by the fact that most of the real estate units
available for sale were purchased during fiscal year 1998. This decline was
partially offset by a $662,283 increase in revenues from real estate rental
income to $858,305 in fiscal year 1999 from $196,022 in fiscal year 1998, an
increase of 337.9% caused by an increase in the amount of space available for
leasing. We expect a further decline in total revenues as the company's major
revenue source shifts from property sales to rental income.
Total costs and expenses for the fiscal year ended 1999 were $4,463,036
down from costs and expenses of $13,187,655 for fiscal year 1998, a decline of
66.2%. This decline was primarily attributable to the 64.3% decline in real
estate sales in fiscal year 1999 as compared to fiscal year 1998.
Costs of sales of real estate declined $8,677,681 to $3,585,851 in
fiscal year 1999 from $12,363,532 in fiscal year 1998, a decline of 70.2%. This
decrease was primarily attributable to the
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<PAGE>
64.3% decline in real estate sales in fiscal year 1999 as compared to fiscal
year 1998. The Company did not report any real estate operating expenses in
fiscal year 1999, as compared to real estate operating expeses of $18,005
reported in fiscal year 1998.
General and Administrative expenses declined $121,353 to $544,302 in
fiscal year 1999 as compared to $665,655 in 1998, a decrease of 18.2%. The
decrease was primarily attributable to reduced legal and professional fees paid
in 1999. As a percentage of revenues, general and administrative expenses
increased to 8.32% in fiscal year 1999 from 4.13% in fiscal year 1998. This
increase was the result of a steep decline in revenues coupled with slightly
improved operating efficiencies.
The Company reported net income before taxes of $2,077,522 in fiscal
year 1999 as compared to net income before taxes of $2,927,412 in fiscal year
1998, a decrease of 29%. This decline is primarily attributable to the fact that
most of the real estate units available for sale were purchased during fiscal
year 1998 and the Company's major income source shifted from property sales to
rental income. This decline was partially offset by an increase in real estate
rental income.
The Company's net income for fiscal year 1999 was $868,442 as compared
to $1,773,315, a decrease of 51%. The $904,873 decrease in the Company's net
income was due primarily to the reasons stated above.
FISCAL PERIODS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997
Revenues increased to $16,115,067 in fiscal year 1998 from none in
fiscal year 1997. Revenue from real estate sales increased to $15,919,045 in
fiscal year 1998 from none in fiscal year 1997. The Company also experienced an
increase in real estate rental revenues of $196,022 in fiscal year 1998, as
compared to none in fiscal year 1997. These increased were all attributable to
the Company commencing sales and leasing of its properties in fiscal year 1998.
Total costs and expenses for the fiscal year ended 1998 were
$13,187,655, up from none for fiscal year 1997. Among them, costs of sales
increased to $12,363,532 in fiscal year 1998 from none in fiscal year 1997 and
real estate operating expense increased to $18,005 in fiscal year 1998 from none
in fiscal year 1997. These increases were due to the commencement of real estate
sales and leases by the Company in fiscal year 1998.
General and administrative expenses increased to $665,655 in fiscal
year 1998 from none in fiscal year 1997 due to the commencement of its
operations.
The Company reported net income before taxes of $2,927,412 in fiscal
year 1998. The Company had no net income before taxes in fiscal year 1997.
The Company's net income for fiscal year 1998 was $1,773,315. The
Company had no net income in fiscal year 1997 because the Company had not yet
begun sales and lease of its real estate properties.
LIQUIDITY AND CAPITAL RESOURCES
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The Company liquidity consists of cash, receivables, real estate
held for development and sale and receipts from rental activities. It is
expected that future cash needs will be financed by a combination of cash flows
from rental and leasing operations, future advances under bank loans, and if
needed, other alternative financing arrangements, which may be available to the
Company.
The Company does not have any material commitments for capital
expenditures for the year ending December 31, 2000.
The Company's projection of future cash requirements is affected by
numerous factors, including but not limited to, changes in customer receipts,
consumer industry trends, operating cost fluctuations, and unplanned capital
spending.
The Company has retired approximately $4,086,000 of bank debt in 1999
through cash flows from operations and additional advances of $2,414,000 from
related companies. As a result of future cash payments required to retire bank
loans and debts owed to its related companies, management believes that it will
be necessary to secure additional financing to sustain the Company's operations
and to fund its anticipated growth.
As of the date hereof, the Company has consolidated indebtedness that
is substantial in relation to its stockholders equity. As of December 31, 1999,
the Company had total debt of approximately $17,295,731. The Company's leveraged
financial position poses substantial risks to holders of Common Stock, including
the risks that (i) a substantial portion of the Company's cash flow from
operations will be dedicated to the payment of interest on such indebtedness,
(ii) the Company's leveraged position may impede its ability to obtain financing
in the future for working capital, capital expenditures and general corporate
purposes and (iii) the Company's highly leveraged financial position may make it
more vulnerable to economic downturns and may limit its ability to withstand
competitive pressures. If the Company is unable to generate sufficient cash flow
from operations in the future to service its indebtedness and to meet its other
commitments, the Company will be required to adopt one or more alternatives,
such as refinancing or restructuring its indebtedness, selling material assets
or operations, or seeking to raise additional debt or equity capital. There can
be no assurance that any of these actions could be effected on satisfactory
terms, that they would enable the Company to continue to satisfy its capital
requirements or that they would be permitted by the terms of existing or future
debt agreements.
All of the Company's debt is secured by the Mansion. As of December 31,
1999, the Company's lenders held an aggregate of $17,295,731 of liens against
the Mansion as security for bank loans of the same amount. If the Company is
unable to meet the terms of its bank loans, resulting in a default under such
bank loans, the lenders may elect to declare all amounts outstanding under the
loans to be immediately due and payable and foreclose on the Mansion, which
would have a material adverse effect on the Company.
EFFECT OF FLUCTUATIONS IN FOREIGN EXCHANGE RATES
The Company operates in the People's Republic of China, maintains its
financial control center in Shenyang, PRC, and records most of its operating
activities in Renminbi ("RMB"), the Chinese currency. The exchange rate between
RMB and US Dollars has been relatively stable for the last few years. The
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<PAGE>
Company does not believe that fluctuations foreign exchange rates will have a
material effect on its financial statements. The RMB exchange rates, however,
are fixed by the government of the PRC, and a change in the exchange rate by the
PRC could have a material adverse effect on our financial statements. See "Risk
Factors."
ITEM 3. DESCRIPTION OF PROPERTY
The Company's headquarters consists of a 1,818 square meter leased
facility in Podium A of the Mansion, located at No. 386 Qingnian Street, Heping
District, Shenyang, China 110003. The Company owns the building in which the
office is located.
The Company is engaged in the development of real estate properties in
the Heping District of Shenyang, China, specifically the Huayang International
Mansion. The real estate projects in which the Company holds an interest consist
of the following:
o Haitong;
o Hotel;
o Business Center; and
o Garage.
HAITONG
The Company owns 95% of Haitong. The Haitong project consists of a
26,912.04 square meter Podium and a 56,409.86 square meter Tower, divided into
office and residential units. The Tower was completed in December 1999, and the
Podium is scheduled to be completed in March 2000. The total cost of developing
Haitong is approximately US$70 million. These costs were paid through a
combination of loans and mortgages, guranteed by Haitong and secured by its
assets, and capital contributions from shareholders. The Company currently has
loans totaling RMB 83.3 million (approximately US$10 million) outstanding which
are secured by a mortgage on the property. Of this debt, RMB 42.5 million
(US$5,132,850) accumulates interest at a rate of 5.3625%, and RMB 40.8 million
(US$4,927,536) accumulates interest at a rate of 5.85%.
HOTEL, BUSINESS CENTER AND GARAGE
The Company owns 20% of Hotel. Hotel is building a 50,000 square meter,
636 room luxury business hotel in Tower B of the Mansion. The Hotel will be
managed by Sheraton, a subsidiary of Starwood, as the Sheraton Shenyang Lido
Hotel. Construction on the Hotel is scheduled to be completed by the end of
March 2000. The total construction costs of the Hotel are approximately RMB
748,609,495 (US$90.4 million), including the costs of developing the Business
Center and Garage. The Hotel is expected to generate US$46.65 million per year
based on a 70% occupancy rate. The Garage is expected to generate US$211,000 per
annum. Business Center owns a 20,000 square meter business center in the five
story podium attached to the Hotel, which the Company expects to generate
US$16.5 million in annual revenues. The Company owns 20% of both Garage and
Business Center.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of March 1, 2000 certain information
regarding the ownership of voting securities of the Company by each stockholder
known to the management of the Company to be 1)
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the beneficial owner of more than 5% of the Company's outstanding common stock,
2) each of the directors and nominees for director of Company, and 3) all named
executive officers and directors as a group. Except as otherwise noted, the
Company believes that the beneficial owners of the common stock listed below,
based on information provided by such owners, have sole investment and voting
power with respect to such shares.
NAME AND ADDRESS OF BENEFICAL OWNER (1) COMMON STOCK
- ----------------------------------- ------------
NUMBER PERCENTAGE
------ ----------
Gao Wanjun 6,000,000 (2) 80.0%
Wang XiaoLuan 6,000,000 (2) 80.0%
Wang YuFei 0 0.0%
Wang TieJun 0 0.0%
Wang XiaoYang 0 0.0%
Lu Yan Cheng 0 0.0%
Huayang International Trust 6,000,000 (2) 80.0%
All Officers and Directors as a Group 6,000,000 (2) 80.0%
(1) Except as otherwise noted, the address of each benefical owner is Shenyang
Haitong House Properties Development, Ltd., No.386 Qingnian Street, Heping
District, Shenyang, China 110003.
(2) Includes 6,000,000 shares held by the Huayang International Trust, of which
Mr. Gao WanJun is the trustee. Mr. Gao WanJun, his wife Ms. Wang XiaoLuan and
their childeren are the beneficiaries of the trust.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The following table sets forth the directors and executive officers of
the Company, appointed to serve until their removal or resignation.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mr. Gao WanJun 45 Chairman of the Board of Directors and President
Ms. Wang YuFei 30 Secretary and Director
Ms. Wang XiaoLuan 47 Director and Chief Financial Officer
Mr. Wang TieJun 24 Director
Mr. Wang XiaoYang 45 Director
Ms. Lu Yan Cheng 45 Director
</TABLE>
------------
Each director of the Company holds office until the next annual meeting of the
stockholders, or until his successor is elected and qualified. The Company's
by-laws provide for not less than one director. The by-laws permit the Board of
Directors to fill any vacancy on the Board. Officers serve at the discretion of
the Board of Directors.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
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MR. GAO WANJUN, CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Mr. Gao has served as the Chairman of the Board of Directors, President
and CEO of the Company since December 1995. In April 1992, Mr. Gao founded
Haitong and has been serving as the General Manager since then. In April 1993
Mr. Gao founded Huayang Industry and Commerce (Shenyang) Group ("Huayang
Group"), an international group of real estate companies with operations in
China, Hong Kong and the United States. He has been serving as Chairman of
Huayang Group since April 1993.
MS. WANG YUFEI, SECRETARY AND DIRECTOR
Ms. Wang has served as Secretary and Director of the Company since
December 1995, when she joined the Company. Prior to working for the Company,
Ms. Wang was Secretary of Huayang Industry and Commerce (Shenyang) Group Co.,
Ltd., a real estate development Company operating in Shenyang, China, from April
1994 through December 1995. Ms. Wang graduated from Liaoning University.
MS. WANG XIAOLUAN, VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND DIRECTOR
Ms. Wang has served as the Vice President, CFO and Director of the
Company since December 1995. She joined Haitong in April 1992 and served as
Financial General Manager of Haitong from April 1992 to December 1999 and became
chairman of Haitong in December 1999. In October 1997 she founded Huayang
Property Management Co., Ltd. and has been serving as Chairman. She was educated
at Northeastern Finance University. She is Mr. Gao's wife.
MS. WANG XIAOYANG, DIRECTOR
Ms. Wang joined the Company in December 1995 and currently serves as
manager of the international department. Prior to joining the Company Ms. Wang
was a senior manager for international trade of Dailan Friendship Group from
April 1983 to October 1995. She was educated in Dailan Financial College.
MR. WANG TIEJUN, DIRECTOR
Mr. Wang has served as assistant financial manager of the Company since
he joined the Company in December 1995. Prior to joining the Company Mr. Wang
was a student at Shenyang Financial College.
MS. LU YANCHENG, DIRECTOR
Ms. Lu joined the Company as a financial manager in December 1995, and
she has served as adirector of the Company since December 1998. From October
1982 to June 1995 Ms. Lu was an executive in charge of the financial department
in the Shenyang Educational Bureau.
ITEM 6. EXECUTIVE COMPENSATION
Currently, none of the officers or directors are being remunerated for
their services to the Company.
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<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 30, 1997, Haitong entered into a management contract with
Huayang Real Estate Management (Shenyang) Co., Ltd. ("HREM"), of which Ms. Wan
XiaoLuan (Mr. Gao's wife and a Director of the Company) is Chairman and the
controlling shareholder, appointing HREM as the property management company for
properties in Tower A. In China, property management fees are regulated and
approved by the government. The contract did not specify amount of management
fees, but required HREM to obtain government approval for such fees. Currently,
the fee is $1.645 per square meter, which includes elevator maintenance and
heating charges. Terms of the agreement were made on an arms-length basis.
CONTROLLING SHAREHOLDER
Huayang International Trust (the "Trust"), a business domiciled on the
Isle of Man, beneficially owns 80% of the outstanding common stock of the
Company. The trust is controlled by Mr. Gao WanJun, the Chairman, President and
CEO of the Company, as Trustee. Mr. Gao, his wife Ms. Wang XiaoLuan, and their
children are the beneficiaries of the trust. Ms. Wang is the CFO and a director
of the Company.
ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 50,000,000
shares of common stock, $0.02 par value per share. On December 31, 1999 there
were issued and outstanding 7,500,807 shares of common stock.
COMMON STOCK
The holders of the Company's common stock:
o are entitled to one vote per share on all matters to be voted
on by stockholders generally, including the election of
directors;
o do not have cumulative voting rights;
o do not have preemptive, subscription or conversion rights and
there are no redemption or sinking fund provisions or rights
applicable thereto;
o are entitled to dividends and other distributions as may be
declared from time to time by the board of directors out of
any funds legally available for that purpose; and,
o will, upon the liquidation, dissolution or winding up of the
Company, share ratably in the distribution of all of the
Company's assets remaining available for distribution after
satisfaction of all of the Company's liabilities and the
payment of the liquidation preference of any outstanding
preferred stock, if such stock is at any time authorized,
issued and outstanding.
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All shares of the Company's common stock now outstanding are fully paid
and non-assessable. Reference is made to the Company's Articles of
Incorporation, By-Laws and the applicable statutes of the State of Nevada for a
more complete description of the rights and liabilities of the holders of the
Company's common stock.
ANTI-TAKEOVER EFFECTS OF OUR ARTICLES OF INCORPORATION AND BY-LAWS
Some provisions of the Company's Articles of Incorporation and By-Laws
may be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by our stockholders. These provisions include:
o Authorized But Unissued Shares. The authorized but unissued
shares of common stock are available for future issuance
without stockholder approval. These additional shares may be
utilized for a variety of corporate purposes including future
public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved common stock could
render more difficult or discourage an attempt to gain control
of the Company by means of a proxy contest, tender offer,
merger or otherwise.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's common stock is
Jersey Stock Transfer Company.
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PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE COMPANY'S COMMON EQUITY AND OTHER
SHAREHOLDER MATTERS
MARKET INFORMATION
The Company's stock was delisted from the OTC Bulletin Board on
December 15, 1999. There is currently no established public trading market for
the Company's common stock. Prior to its delisting, the Company's common stock
consistently traded at $0.25 per share. The Company currently has no outstanding
options or warrants to purchase , or securities convertible into, the common
stock of the Company. All of the Company's outstanding shares of common stock,
however, are subject to sale pursuant to Rule 144.
DIVIDENDS
The Company has not paid dividends and does not anticipate paying
dividends in the foreseeable future. The board of directors intends to retain
earnings, if any, to finance growth of the Company. Accordingly, any payment of
dividends by the Company in the future will depend upon the need for working
capital and the financial conditions of the Company at that time.
ITEM 2. LEGAL PROCEEDINGS
The Company is not a party to, nor is any of its respective properties
the subject of, any material pending legal or arbitration proceeding.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company has not changed accountants in the last three fiscal years,
and there is no disagreement with its accountants concerning accounting and
financial disclosure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
None.
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ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
LIMITATION ON DIRECTOR'S LIABILITY
In accordance with Section 78.037 of the Nevada General Corporation Law
("NGCL"), the Articles of Incorporation and By-laws provide that the directors
of the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of duty as a director except (i) for any breach
of the director's duty of loyalty to the Company and its stockholders; (ii) for
acts or omissions not in good faith or which involve intentional misconduct, or
knowing violation of law; (iii) for unlawful payments of dividends and unlawful
stock repurchases and redemptions; or (iv) for any transaction from which the
director derived an improper personal benefit. This provision does not eliminate
a director's fiduciary duties; it merely eliminates the possibility of damage
awards against a director personally which may be occasioned by certain
unintentional breaches (including situations that may involve grossly negligent
business decisions) by the director of those duties. The provision has no effect
on the availability of equitable remedies, such as injunctive relief or
rescission, which might be necessitated by a director's breach of his or her
fiduciary duties. However, equitable remedies may not be available as a
practical matter where transactions (such as merger transactions) have already
been consummated. The inclusion of this provision in the Articles of
Incorporation and By-laws may have the effect of reducing the likelihood of
derivative litigation against directors and may discourage or deter stockholders
or management from bringing a lawsuit against directors for breach of their duty
of care, even though such an action, if successful, might otherwise have
benefited the Company and its stockholders.
INDEMNIFICATION
The Articles of Incorporation and By-laws provides that the Company
shall indemnify its officers, directors, employees and agents to the fullest
extent permitted by the NGCL. Section 78.037 of the NGCL provides that the
Company may indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
a "derivative" action by or in the right of the Company) by reason of the fact
that such person is or was a director, officer, employee or agent of the
Company, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Company, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe was
unlawful. A similar standard of care is applicable in the case of derivative
actions, except that no indemnification shall be made where the person is
adjudged to be liable to the Company, unless and only to the extent that the
Supreme Court of the State of Nevada or the court in which such action was
brought determines that such person is fairly and reasonably entitled to such
indemnity and such expenses.
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PART F/S
The Company's bablance sheets as of December 31, 1999 and 1998 and the
relevant statements of operations, changes in stockholders' equity and cash
flows for the period there ended have been audited by Moore Stephens Frazer and
Torbet, LLP, independent certified public accountants, and have been prepared in
accordance with generally accepted accounting principles and pursuant to
Regulation S-B as promulgated by the Securities and Exchange Commission and are
included as follows:
INDEX
CONSOLIDATED FINANCIAL STATEMENTS - YEARS ENDED DECEMBER 31, 1999
(UNAUDITED), DECEMBER 31, 1998 (AUDITED) AND DECEMBER 31, 1997 (AUDITED)
Independent Auditor's Report
Balance Sheets
Statements of Operations
Statements of Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
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The Board of Directors
Huayang International Holdings, Inc.
and Subsidiary
Independent Auditors' Report
----------------------------
We have audited the accompanying consolidated balance sheet of
Huayang International Holdings, Inc. and subsidiary as of December 31, 1998, and
the related consolidated statements of income and comprehensive income, changes
in shareholders' equity and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the consolidated
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
Huayang International Holdings, Inc. and subsidiary as of December 31, 1998, and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
Certified Public Accountants
Walnut, California
December 13, 1999
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HUAYANG INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY EXHIBIT A
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1999, 1998 AND 1997
--------------------------------------
<TABLE>
<CAPTION>
Unaudited Audited Audited
ASSETS 1999 1998 1997
------------ ----------- ------------
ASSETS:
<S> <C> <C> <C>
Cash $ 133,909 $ 612,612 $ 64,843
Due from related companies 5,552,284 6,723,273 -
Real estate rental property, net of accumulated depreciation
of $444,487, $176,041 and $0, respectively 29,936,767 30,537,878 -
Real estate held for development and sale 8,537,500 13,698,204 50,633,836
Investment in Hotel Group 15,625,814 15,615,298 7,223,453
Property and equipment, net of accumulated depreciation of
$492,420, $391,382, and $281,946 respectively 153,979 230,383 299,238
Other assets 34,678 69,516 -
============ =========== ============
Total assets $ 59,974,931 $ 67,487,164 $ 58,221,370
============ =========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits on real estate sales $ 57,767 $ 3,332,050 $ -
Due to related companies 16,087,749 14,844,178 15,222,607
Accounts payable and accrued liabilities 2,383,200 6,655,435 18,027,305
Bank loans 17,295,731 21,382,068 15,767,670
Shareholder loans 49,995 - -
Income tax payable 2,921,669 1,026,705 -
------------ ----------- ------------
Total liabilities $ 38,796,111 $ 47,240,436 $ 49,017,582
------------ ----------- ------------
MINORITY INTEREST $ 1,040,681 $ 977,031 $ 98,807
------------ ----------- ------------
SHAREHOLDERS' EQUITY:
Common Stock, $0.02 par value, authorized 50,000,000 shares,
7,500,807 shares issued and outstanding 150,016 150,016 $ 150,016
Paid-in capital 17,346,291 17,346,291 8,954,891
Accumulated other comprehensive income 42,619 33,519 32,906
Retained earnings, Exhibit C 2,599,212 1,739,870 (32,832)
------------ ----------- ------------
Total shareholders' equity 20,138,138 19,269,696 $ 9,104,981
------------ ----------- ------------
Total liabilities and shareholders' equity $ 59,974,930 $ 67,487,163 $ 58,221,370
============ =========== ============
</TABLE>
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HUAYANG INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY EXHIBIT B
CONSOLIDATED STATEMENT OF INCOME
AND COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Unaudited Audited Audited
1999 1998 1997
-------------- ------------- -----------
REVENUES:
<S> <C> <C> <C>
Real estate sales $ 5,682,253 $ 15,919,045 $ -
Real estate rental income 858,305 196,022 -
-------------- ------------- -----------
Total revenues 6,540,558 16,115,067 -
-------------- ------------- -----------
COSTS AND EXPENSES:
Cost of real estate sold 3,685,851 12,363,532 -
Real estate operating expenses 18,005 -
Depreciation 232,883 140,463 -
General and administrative 544,302 665,655 -
-------------- ------------- -----------
Total costs and expenses $ 4,463,036 $ 13,187,655 $ -
-------------- ------------- -----------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 2,077,522 2,927,412 -
PROVISION FOR INCOME TAXES $ 1,154,530 $ 1,051,467 $ -
-------------- ------------- -----------
INCOME BEFORE MINORITY INTEREST 922,992 1,875,945 -
MINORITY INTEREST $ (63,650) $ (103,243) $ -
-------------- ------------- -----------
NET INCOME 859,342 1,772,702 -
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments $ 9,100 $ 613 $ -
-------------- ------------- -----------
COMPREHENSIVE INCOME $ 868,442 $ 1,773,315 $ -
============== ============= ===========
NET INCOME PER SHARE (basic) $ 0.11 $ 0.24 $ -
============== ============= ===========
</TABLE>
-27-
<PAGE>
HUAYANG INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY EXHIBIT C
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
Number Common Paid-in Retained
of shares stock capital earnings
-------------- ------------- ----------------- ---------------
<S> <C> <C> <C> <C>
BALANCE, January 1, 1997 7,500,807 $ 150,016 $ 6,986,935 $ (32,832)
Additions to paid in capital 1,967,956
Foreign currency translation adjustments
-------------- ------------- ----------------- ---------------
BALANCE, December 31, 1997 - Audited 7,500,807 $ 150,016 $ 8,954,891 $ (32,832)
Net income, Exhibit B 1,772,702
Additions to paid in capital 8,391,400
Foreign currency translation adjustments
-------------- ------------- ----------------- ---------------
BALANCE, December 31, 1998-Audited 7,500,807 $ 150,016 $ 17,346,291 $ 1,739,870
Net income, Exhibit B 859,342
Foreign currency translation adjustments
-------------- ------------- ----------------- ---------------
BALANCE, December 31, 1999 - Unaudited 7,500,807 $ 150,016 $ 17,346,291 $ 2,599,212
============== ============= ================= ===============
</TABLE>
Accumulated other
comprehensive
income Totals
---------------- --------------
BALANCE, January 1, 1997 $ 16,678 $ 7,120,797
Additions to paid in capital 1,967,956
Foreign currency translation adjustments 16,228 16,228
---------------- --------------
BALANCE, December 31, 1997 - Audited $ 32,906 $ 9,104,981
Net income, Exhibit B 1,772,702
Additions to paid in capital 8,391,400
Foreign currency translation adjustments 613 613
---------------- --------------
BALANCE, December 31, 1998-Audited $ 33,519 $19,269,696
Net income, Exhibit B 859,342
Foreign currency translation adjustments 9,100 9,100
---------------- --------------
BALANCE, December 31, 1999 - Unaudited $ 42,619 $20,138,138
================ ==============
-28-
<PAGE>
<TABLE>
<CAPTION>
HUAYANG INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY EXHIBIT D
Unaudited Audited Audited
1999 1998 1997
------------- ------------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 859,342 $ 1,772,702 $ -
Adjustments to reconcile net income to net cash provided by (used in)
operatingtactivities:
Gain on sales of real estate (1,996,402) (3,555,513) -
Net cash proceeds from sales of real estate 5,682,253 15,919,945 -
Decrease (increase) in real estate development costs 1,807,503 (6,880,397) (16,323,502)
Depreciation 369,497 285,477 -
Decrease in other assets 34,838 668,057 -
(Decrease) increase in account payable and accrued liabilities (4,282,751) (11,372,484) 5,427,247
(Decrease) Increase in deposits on real estate sales (3,274,283) 3,332,050 -
Increase in comprehensive income 9,100 613 16,228
Increase in income taxes payable 1,894,964 1,026,706 -
------------- ------------- ------------
-
Net cash provided by (used in) operating activities $ 1,104,061 $ 1,197,156 $ (10,880,027)
------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Hotel Group $ - $ (8,391,400) $ (1,979,735)
Purchase of property and equipment (24,634) (40,605) (58,994)
------------- ------------- ------------
Net cash used by investing activities $ (24,634) $ (8,432,005) $ (2,038,729)
------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) proceeds from short term bank loans $ (4,086,335) $ 5,614,698 $ 4,707,922
Increase (decrease) in advances from related companies 2,414,560 (7,101,702) 5,985,528
Proceeds from shareholder loans 49,995 - 1,967,956
Contributed capital - 8,391,398 -
Increase in minority interest 63,650 878,224 -
------------- ------------- ------------
Net cash (used in) provided by financing activities $ (1,558,130) $ 7,782,618 $ 12,661,406
------------- ------------- ------------
Net increase in cash (478,703) 547,769 (257,350)
CASH, beginning of year 612,612 64,843 322,193
============= ============= ============
CASH, end of year $ 133,909 $ 612,612 $ 64,843
============= ============= ============
SUPPLEMENTARY CASH FLOW INFORMATION:
Interest paid (net of interest capitalized of $666,627 in 1999
and net of interest capitalized of $1,963.401 in 1998, and
$3,554,748 in 1997) $ - $ - $ -
============= ============= ==============
$ - $ - $ -
Income taxes paid ============= ============= ==============
</TABLE>
-29-
<PAGE>
HUAYANG INTERNATIONAL HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
a. The reporting entity
--------------------
The financial statements of Huayang International Holdings, Inc. and
Subsidiary (HIHI) reflect the activities and financial transactions of
its subsidiary Shenyang Haitong House Properties Development Ltd.
(HAITONG). HIHI has a 95% ownership interest in HAITONG. HIHI also has
a less than majority ownership interest in three other companies,
Changyang International Hotel (Shenyang) Co. Ltd. (HOTEL), Changyuan
(Shenyang) Park Ltd. (GARAGE) and Changhua (Shenyang) Business Co. Ltd.
(BUSINESS CENTER) collectively referred to as HOTEL GROUP. See note 2
for further explanation as to the formation of the Company.
HIHI is incorporated under the laws of the State of Nevada in
the United States. HAITONG, HOTEL, GARAGE and BUSINESS CENTER are
incorporated under the laws of the People's Republic of China (PRC).
b. Principles of consolidation
---------------------------
The consolidated financial statements of HIHI include its
subsidiary HAITONG. All significant inter-company accounts and
transactions have been eliminated in the consolidation. HIHI accounts
for its investment in HOTEL GROUP under the equity method.
c. Nature of operations and concentration of risk
----------------------------------------------
HAITONG is in the business of developing a mixed-use
(commercial and residential) building in Shenyang City Nanhu Scientific
and Technological Development Zone, Liaoning province, People's
Republic of China. Next to this building is a hotel complex under
development by HOTEL. Both buildings are on top of a podium and a
garage, which are under development by HAITONG, BUSINESS CENTER and
GARAGE.
The real estate market and hospitality industries in PRC are
affected by various economic and political factors that are beyond the
control of HIHI. The ultimate sales of development properties of
HAITONG, in the opinion of management, will exceed the costs incurred
plus the costs to complete the development.
d. Real estate held for development and sale
-----------------------------------------
Real estate held for development and sale is stated at the
lower of cost or net realizable value. Expenditures for land
development are capitalized and are allocated to development projects
by the specific identification method. Costs are allocated to specific
units based on the ratio of the unit sales price to the estimated total
project sales price times the total project costs.
-30-
<PAGE>
e. Property and equipment
----------------------
Land use rights, building, furniture, fixtures, equipment and
automobiles are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets,
which range from 5 to 50 years.
The cost and related accumulated depreciation of assets sold
or otherwise retired are eliminated from the accounts and any gain or
loss is included in the statement of income. The cost of maintenance
and repairs is charged to income as incurred, whereas significant
renewals and betterments are capitalized. Depreciation expense for the
year ended December 31, 1997 amounted to $119,837 which has been
capitalized as part of the development costs.
HIHI acquired land use rights from The People's Republic of
China for a period of fifty years. The cost of the rights have been
capitalized to the real estate development projects and once the
constructed assets are ready for their intended use, the land use
rights are amortized over the remaining useful life.
Long-term assets of the Company are reviewed annually as to
whether their carrying value has become impaired, pursuant to the
guidelines established in Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of" (SFAS 121). The Company considers
assets to be impaired if the carrying value exceeds the future
projected cash flows from related operations. The Company also
re-evaluates the periods of amortization to determine whether
subsequent events and circumstances warrant revised estimates of useful
lives. As of December 31, 1997, the Company expects these assets to be
fully recoverable.
f. Cash and concentration of risks
-------------------------------
For purposes of the statement of cash flows, HIHI considers
all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
Cash includes cash on hand and demand deposits in accounts
maintained with state-owned banks within the People's Republic of
China. All cash in state-owned banks are not covered by insurance. HIHI
has not experienced any losses in such accounts and believes it is not
exposed to any significant risks on cash in bank deposit accounts.
Uninsured balances were approximately $64,669 as of December 31, 1997.
g. Fair value of financial instruments
-----------------------------------
HIHI's financial instruments include cash and cash
equivalents, accounts payable and bank loans. Management has estimated
that the carrying amount approximates fair value.
h. Foreign currency translation and transactions
---------------------------------------------
The financial position of HIHI's companies are determined
using United States dollars as the functional currency. Assets and
liabilities of HIHI's companies are translated at
-31-
<PAGE>
the prevailing exchange rate in effect at the balance sheet date.
Translation adjustments arising from the use of different exchange
rates from period to period are included in the cumulative translation
adjustment account in stockholders' equity.
i. Capitalized Interest
--------------------
HIHI follows the policy of capitalizing interest as a
component of building construction costs. Total interest costs incurred
for the year ended December 31, 1997 amounted to $3,554,748, which was
entirely capitalized as building construction costs.
j. Income taxes
------------
HIHI adopted Statement of Financial Accountant Standards No.
109, "Accounting for Income Taxes" (SFAS 109). SFAS 109 requires the
recognition of deferred income tax liabilities and assets for the
expected future tax consequences of temporary differences between
income tax basis and financial reporting basis of assets and
liabilities. Provision for income taxes consist of taxes currently due
plus deferred taxes.
The operations of HAITONG and HOTEL are subject to the income
tax law of People's Republic of China but not subject to the U.S.
income tax except for repatriated dividends. HIHI has tax benefits from
the net operating loss carried forward from its delisted shell Power
Capital Corporation expiring through year 2009. The utilization of the
loss to offset future income is limited by law; it is more likely than
not that such deferred tax benefit will not be realized and therefore
an valuation allowance of an equivalent amount is recorded to offset
with the deferred tax asset. The income tax effect of the temporary
differences as of December 31, 1998 consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax asset resulting from deductible
temporary differences for utilization
of net operating loss carry forwards for
income tax purposes $ 115,000
========
Valuation allowance resulting from the potential
non-utilization of net operating loss carry-
forwards for income tax purposes $ (115,000)
========
</TABLE>
No provision for deferred taxes has been made, as there are no
temporary differences at this time.
k. Use of estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Management
believes that the estimates utilized in preparing its financial
statements are reasonable and prudent. Actual results could differ from
these estimates.
-32-
<PAGE>
2 Shareholders' Equity
--------------------
HIHI has the following common shares as of December 31, 1997:
Authorized 50,000,000
Issued and outstanding 7,500,807
Par value $0.02
HIHI was formerly known as Power Capital Corporation (PCC)
which its stock was traded on the Over The Counter (OTC) securities
market under NASDAQ. PCC has been dormant for some years and has been
delisted. However, immediately prior to the acquisition and the
issuance of common shares as described below, PCC has issued and
outstanding common shares of 100,807 shares to various shareholders.
On December 29, 1995, PCC signed an Acquisition Agreement
(Agreement) as amended on January 5, 1996, with Huayang International
Trust (TRUST), a business domiciled in the Isle of Man, whereas the
TRUST would transfer its 95%, 20%, 20% and 20% investments in HAITONG,
HOTEL, GARAGE and BUSINESS CENTER, respectively, to PCC in exchange for
6,000,000 shares of common stock of PCC. HIHI recorded this acquisition
under the purchase method of accounting for a total purchase price of
approximately $17,500,000. On January 5, 1996, 6,000,000 shares were
issued to TRUST. At the date of acquisition, PCC changed its name to
HIHI.
The transfer of ownership in the above entities must be
approved by the government in the People's Republic of China. The
transfers were formally approved in March 1998. The 1997 financial
statements however have reflected the ownership of the investments as
discussed above as taking place at January 5,1996 in accordance with
the Acquisition Agreement.
On January 5, 1996, HIHI issued 1,400,000 shares of common
stock of PCC to certain entities and individuals in exchange for their
consulting services at a value of $28,000.
HHI is also authorized to issue preferred stock with a par
value of $.02. The Board of Directors is authorized to establish the
series, fix and determine the rights, preferences and limitations of
the preferred stock. As of December 31, 1997, there was no preferred
stock issued and outstanding.
3. Real estate
-----------
Real estate consists of the following:
Real estate held for development and sale $ 50,638,116
==========
The real estate is located in Shenyang, the People's Republic
of China. Certain of these properties have been pledged to secure bank
loans granted to HAITONG as more fully described in note 6.
-33-
<PAGE>
4. Investment in Hotel Group
-------------------------
Investment in HOTEL GROUP consists of the following (see note
2 for further discussion of the ownership):
Share of net assets $ 7,223,453
=========
<TABLE>
<CAPTION>
Place of Ownership Principal
Name incorporation Interest activity
---- ------------- -------- --------
<S> <C> <C> <C>
Changyang International The People's 20% Hotel
Hotel (Shenyang) Co. Ltd. Republic of China peration
(Hotel)
</TABLE>
<TABLE>
<CAPTION>
Place of Ownership Principal
Name incorporation Interest activity
---- ------------- -------- --------
<S> <C> <C> <C>
Changhua (Shenyang) The People's 20% Business
Business Co. Ltd. Republic of China center,
(Business Center) commercial and retail
Changyuan (Shenyang) The People's 20% Car parking
Park Co. Ltd. (Garage) Republic of China
</TABLE>
Shown below is summarized financial information relative to
the investments:
<TABLE>
<CAPTION>
BUSINESS
HOTEL CENTER GARAGE
----- ------ ------
<S> <C> <C> <C>
Balance Sheet:
Assets $28,562,357 $20,816,684 $18,248,125
Liabilities 16,532,791 8,794,392 6,182,721
---------- ---------- ----------
Equity 12,029,566 12,022,292 12,065,404
Other Shareholders'
Equity 9,623,653 9,617,834 9,652,322
--------- --------- ---------
HIHI, equity $ 2,405,913 $ 2,404,458 $ 2,413,082
========= ========= =========
</TABLE>
5. Due from/to related companies
-----------------------------
These amounts represent advances from the related companies to
pay for expenditures. The amounts due from/to related companies are
unsecured, interest-free and there are no fixed terms for repayment.
6. Bank loans
- -- ----------
The bank loans bear interest ranging from 8.42% to 13.32%
annually and are secured by real estate (see note 3) under development
of HAITONG and a corporate guarantee given by a related company.
-34-
<PAGE>
<TABLE>
<CAPTION>
Bank loans consist of the following:
<S> <C>
Loan from China Construction Bank, due August 30, 1997,
quarterly interest only payments at 9.50% per annum,
guaranteed by a related
company, paid off in 1998 $ 362,336
Loan from China Construction Bank due May 15, 1998, quarterly
interest only payments
at 8.42% per annum, unsecured 120,779
Loan from China Construction Bank, due May 20, 1998, quarterly
interest only payments at 8.42% per annum, secured by
properties and
guaranteed by a related company 1,207,787
Loan from China Construction Bank, due June 29, 1999,
quarterly interest only payments
at 10.30% per annum, secured by properties,
and guaranteed by a related company 1,811,682
Loan from China Construction Bank, due May 19, 1998, interest
only payments at 8.42% per annum, guaranteed by a related
company 108,700
Loan from China Construction Bank, due February 12, 1999,
interest only payments at 8.42% per annum, guarantee by a
related
company 229,480
Loan from China Construction Bank, due April 15, 1998,
interest only payments at 11.09 per annum, guaranteed by a
related
company 1,811,682
Loan from China Construction Bank, due April 30, 1998,
quarterly interest only payments at 9.50% per annum,
guaranteed by a
related company 966,230
Loan from China Construction Bank, due August 30, 1998,
quarterly interest only payments at 9.50% per annum,
guaranteed by a related
company 543,504
Loan from China Merchant Bank, due December 27, 1997, interest
only payments at 11.09% per annum, secured by bills of
exchange, paid off in 1998 271,752
</TABLE>
-35-
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Loan from China Merchant Bank, due
November 23, 1998, interest only payments
at 11.09% per annum, secured by properties 3,502,585
Loan from China Construction Bank, due December 20, 1998,
quarterly interest only payments at 11.69% per annum, secured
by
properties 1,207,787
Loan from China Industrial Bank, due August 1, 1998, quarterly
interest only payments at 13.32% per annum, secured by
properties 3,623,366
-----------
Total $15,767,670
===========
</TABLE>
Principal repayment requirements of all bank loans based on
existing terms at December 31, 1997 are as follows:
YEAR ENDING PRINCIPAL
DECEMBER 31 REPAYMENT
----------- ---------
1998 $ 13,955,988
1999 1,811,682
Thereafter -
Total interest expense for the year ended December 31, 1997
amounted to $3,554,748.
7. Segment reporting
-----------------
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131). SFAS No.
131 requires the Company to disclose information used by management to
evaluate its individual business segments. As the Company currently is
engaged in only one business segment, no additional disclosures are
required. The Company's net investment in and the operating results of
its various real estate activities may be derived directly from the
accompanying consolidated financial statements.
8. Year 2000
---------
HIHI recognizes the potential implications of the Year 2000
(Y2K) issue on systems that may contain date-related transactions,
data, embedded chips, etc. HIHI is presently on manual system and is in
the process of renovating or replacing, as necessary, the computer
applications and business processes to provide for continued services
in the new millennium. HIHI is also assessing the preparedness of
external entities that interface with HIHI. There can be no assurance
that there will not be a material adverse effect on HIHI if its actions
and/or those related third parties fail to address all significant
issues in a timely manner.
-36-
<PAGE>
The costs of HIHI's Y2K compliance efforts are expensed as
incurred and are being funded with cash flows from operations. At this
time, the costs of these efforts are not expected to have a material
effect to HIHI's financial position or the results of their operations
in any given period.
-37-
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
Exhibit
Number Description of Exhibits
- ------ -----------------------
3(a)(i) Articles of Incorporation of the Company*
3(a)(ii) Amendment to the Articles of Incorporation of the Company,
dated October 18, 1982.*
3(a)(iii) Amendment to the Articles of Incorporation of the Company,
dated January 5, 1996.*
3(b) Amended and Restated By-laws of the Company.*
10(a)(i) Loan Contract between the Shenyang Haitong House Properties
Development Co., Ltd. and Merchants Bank Shenyang Branch,
dated November 15, 1999.*
10(a)(ii) Mortgage Contract between Shenyang Haitong House Properties
Development Co., Ltd. and Merchants Bank Shenyang Branch,
dated November15, 1999.*
10(b)(i) Loan Contract between Shenyang Haitong House Properties
Development Co., Ltd. and Construction Bank of China, dated
December 9, 1999.*
10(b)(ii) Mortgage Contract between Shenyang Haitong House Properties
Development Co., Ltd. and Construction Bank of China, Dated
December 9, 1999.*
10(c)(i) Loan Contract between Shenyang Haitong House Properties
Development Co., Ltd and China Construction Bank, dated
December 29, 1999.*
10(c)(ii) Mortgage Contract between Shenyang Haitong House Properties
Development Co., Ltd and China Construction Bank, dated
December 29, 1999.*
10(d)(i) Loan Contract between Shenyang Haitong House Properties
Development Co., Ltd and China Construction Bank, dated
December 30, 1999.*
10(d)(ii) Mortgage Contract between Shenyang Haitong House Properties
Development Co., Ltd and China Construction Bank, dated
December 30, 1999.*
10(e) Management Contract between Shenyang Haitong House Properties
Development Co., Ltd. and Huayang Real Estate Management
(Shenyang) Co., Ltd.*
10(f) Form of Lease Agreement.*
10(g) Management Contract between Changyang Hotel International
(Shenyang) Co., Ltd. and Sheraton Overseas Management
Corporation, dated September 15, 1995.*
10(h) Amendment to Management Contract between Changyang Hotel
International (Shenyang) Co., Ltd. and Sheraton Overseas
Management Corporation, dated April 28, 1998.*
21 Subsidiaries of the Company.*
23.1 Consent of Moore Stevens Frazer & Torbet, LLP.*
27.1 Financial Data Schedule*
- ------------------
* Filed herewith
ITEM 2. DESCRIPTION OF EXHIBITS
-38-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
DATE: March 28, 2000 Huayang International Holdings, Inc.
By: /s/ Gao WanJun
-------------------
Name: Gao WanJun
Title: President
Pursuant to the requirements of the Section 12 of the Securities and
Exchange Act of 1934, as amended, this registration statement has been signed
below by the following persons in the capacities indicated on the 24th day of
January, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ Gao WanJun Chairman of the Board of Directors, Chief Executive
- ---------------------------------------- Officer and President
Name: Gao WanJun
/s/ Wang YuFei Secretary and Director
- ----------------------------------------
Name: Wang YuFei
/s/ Wang XiaoLuan Vice President, Chief Financial Officer and Director
- ----------------------------------------
Name: Wang XiaoLuan
/s/ Wang XiaoYang Director
- ----------------------------------------
Name: Wang XiaoYang
/s/ Wang TieJun Director
- ----------------------------------------
Name: Wang TieJun
/s/ Lu YanCheng Director
- ----------------------------------------
Name: Lu YanCheng
</TABLE>
THE STATE OF NEVADA
[GRAPHIC OMITTED][GRAPHIC OMITTED]
DEPARTMENT OF STATE
I, Wm D. Swackhamer, the duly elected Secretary of State of the State
of Nevada, do hereby certify that the annexed is a true, full and correct
transcript of the original Articles of Incorporation of
POWER OF CONSERVATION CORPORATION
---------------------------------
as the same appears on file and of record in this office.
IN WITNESS WHEREOF, I
have hereunto act
my hand and
affixed the Great
Seal of State, at
my office in
Carson City,
Nevada, this
THIRTEENTH day of
July, A.D., 1978
---------------------------------------
Secretary of State
By:______________________________________
<PAGE>
ARTICLE OF INCORPORATION
OF
POWER CONSERVATION CORPORATION
The undersigned incorporatore of Power Conservation Corporation, a
corporation formed pursuant to the laws of the State of Nevada, sign this
statement to set forth the action as follows:
FIRST: The Charter of the corporation was issued by the Secretary of
State of Nevada on July 13, 1978.
SECOND: A certified copy of the Articles of Incorporation and A
Designation of Resident Agent were filed with the Clerk of Court of Washoe
County, Reno, Nevada.
THIRD: The original Charter is inserted in the Minute Book of the
corporation.
FOURTH: A certified copy of the Articles of Incorporation is inserted
in the Minute Book of the corporation.
FIFTH: The By-Laws annexed to the Minute Book of the corporation have
been adopted for the By-Laws of Power Conservation Corporation.
SIXTH: The following named persons have been nominated and elected by
the incorporators as directors of the corporation to hold office until the first
annual meeting of shareholders and until their successors are elected and
qualified: THOMAS P. REGAN, ARTHUR SIEGE and B. J. NOBLE HASSEL.
IN WITNESS WHEREOF, we the incorporators have signed this ____________
- -------------------------------------------------.
--------------------------
Alexander H. Walker, Jr.
--------------------------
Laurie J. Bangart
--------------------------
Mary Jo Laramie
<PAGE>
ARTICLE OF INCORPORATION
OF
POWER CONSERVATION CORPORATION
* * * *
We have undersigned, have voluntarily associated ourselves
together for the purpose of forming a corporation under the laws of the State of
Nevada relating to private corporations, and to that end do hereby adopt
articles of incorporation as follows:
ARTICLE One. (NAME). The name of the corporation is:
POWER CONSERVATION CORPORATION
ARTICLE Two. (location). the address of the corporation's principal
office is Suite 1400 First National Bank Building, One East First Street, in the
City of Reno, County of Washoe, State of Nevada. The initial agent for service
of process at that address is Nevada Agency & Trust Company.
ARTICLE Three. (PURPOSES). The purposes for which the corporation is
organized are to engage in any activity or business nor in conflict with the
laws of the State of Nevada or of the United States of America, and without
limiting the generally of the foregoing, specifically:
I. (OMNIBUS). To have and to exercise all the powers now or
hereafter conferred by the laws of the State of Nevada upon
corporations organized pursuant to the laws under which the corporation
is organized and any and all acts amendatory thereof and supplemental
thereto.
II. (POWER MANAGEMENT). To engage in a general business of
power management including, but not limited to, the development and
sales of energy devices for commercial and household users whether such
inventions, devices, or programs are software or hardware.
III. (ENERGY BUREAU). To establish offices for the purpose of
testing and evaluating the use and disposition of energy and
energy-related products.
IV. (REAL PROPERTY). To purchase, or in any way acquire for
investment or for sale or otherwise, lands, contracts for the purchase
or sale of lands, buildings, improvements, and any other real property
of any kind or any interest therein, and as the consideration for same
to pay cash or to issue the capital stock, debenture bonds, mortgage
bonds, or other obligations of the corporation, and to sell, convey,
lease, mortgage, deed of trust, turn to account, or otherwise deal with
all or any part of the property of the corporation; to make and obtain
loans upon real estate, improved or
<PAGE>
unimproved, and upon personal property, giving or taking evidences of
indebtedness and securing the payment thereof by mortgage, trust deed,
pledge or otherwise; and to enter into contracts to buy or sell any
property, real or personal; to buy and sell mortgages, trust deeds,
contracts, and evidence of Indebtedness; to purchase or otherwise
acquire, for the purpose of holding or disposing of the same, real or
personal property of every kind and description, including the good
will, stock, rights, and property of any person, firm, association, or
corporation; and to draw, make, accept, indorse, discount, execute, and
issue promissory notes, bills of exchange, warrants, bonds, debentures,
and other negotiable or transferable instruments, or obligations of the
corporation, from time to time, for any of the objects or purposes of
the corporation, without restriction or limit as to amount.
V. (REAL ESTATE DEVELOPMENT). To engage in the business of
purchasing, leasing, and developing real estate, including but not
limited to, subdivisions, towns, and tracts; the construction of any
and all buildings, sewer lines, off-site improvements, and any and all
structures necessary or required in connection with the development of
real estate generally; and the doing of any and every act or thing
proper, necessary, and incidental to the general purpose of this
company.
VI. (CARRYING ON BUSINESS OUTSIDE STATE). To conduct and carry
on its business or any breach thereof in any state or territory of the
United States or in any foreign country in conformity with the laws of
such state, territory, or foreign country, and to have and maintain in
any state, territory or foreign country a business office, plant, store
or other facility.
VII. (PURPOSES TO BE CONSTRUED AS POWERS). The purposes
specified herein shall be construed both as purposes and powers and
shall be in no wise limited or restricted by reference to, or inference
from, the terms of any other clause in this or any other article, but
the purposes and powers specified in each of the clauses herein shall
be regarded as independent purposes and powers, and the enumeration of
specific purposes and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or of the general
powers of the corporation; nor shall the expression of one thing be
deemed to exclude another, although it be of like nature not expressed.
ARTICLE Four. (CAPITAL STOCK). The corporation shall have authority to
issue an aggregate of THREE MILLION (3,000,000) shares of capital stock having a
pare value of TWO CENTS ($0.02) per share.
No holder of shares of capital stock of the corporation shall be
entitled, as such, to any pre-emptive or preferential right to subscribe to any
unissued stock or any other securities which the corporation may now or
thereafter be authorized to issue.
The corporation's capital stock may be issued and sold from time to
time for such consideration as may be fixed by the Board of Directors, provided
that the consideration so fixed is not less than par value.
-2-
<PAGE>
Cumulative voting in the elections of Directors at all stockholders'
meetings, whether they be annual or special, shall not be permitted.
ARTICLE Five. (DIRECTOR). The affairs of the corporation shall be
governed by a Board of Directors of not less than three (3) directors. The names
and addresses of the members of the first Board of Directors are:
NAME ADDRESS
- ---- -------
Alexander H. Walker, Jr. 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Laurie J. Bangart 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Mary Jo Laramie 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Directors of the corporation need not be residents of the State of
Nevada and need not own shares of the corporation's stock.
ARTICLE Six. (INCORPORATORS). The name and address of each
incorporatator of the corporation is as follows:
NAME ADDRESS
- ---- -------
Alexander H. Walker, Jr. 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Laurie J. Bangart 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Mary Jo Laramie 840 Kennecott Bldg.
Salt Lake City, Utah 84133
ARTICLE Seven. (PERIOD OF EXISTENCE). The period of existence of the
corporation shall be perpetual.
ARTICLE Eight. (by-laws). the initial By-Laws of the corporation shall
be adopted by its Board of Directors. The power to alter, amend, or repeal the
By-Laws, or to adopt new By-Laws, shall be vested in the Board of Directors,
except as otherwise may be specifically provided in the By-Laws.
ARTICLE Nine. (STOCKHOLDERS MEETINGS). Meeting of stockholders shall
be held at such place within or without the State of Nevada as may be provided
by the By-Laws of the corporation. Special meetings of the stockholders may be
called by the President or any other ______________________
-3-
<PAGE>
ARTICLE Ten. (CONTRACTS OF CORPORATION). No contract or other
transaction between the corporation and any other corporation, whether or not a
majority of the share of the capital stock of such other corporation is owned by
this corporation, and no act of this corporation, and no act of this corporation
shall in any way be affected or invalidated by the fact that any of the
directors or officers of such other corporation. Any director of this
corporation, individually, or any firm of which such director may be a member,
may be a party to, or may be pecuniary or otherwise interested in any contract
or transaction of the corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of this corporation, or a majority thereof; and any director
of this corporation who is also a director or officer of such other corporation,
or who is so interested, may be counted in determining the existence of a quorum
at any meeting of the Board of Directors of this corporation that shall
authorize such contract or transaction, with like force and effect as if he were
not such director or officer or such other corporation or not so interested.
IN WITNESS WHEREOF, the undersigned Incorporators have
hereunto fixed their signatures at Salt Lake City, Utah, this 12th day of July,
1978.
------------------------------
Alexander H. Walker, Jr.
------------------------------
Mary Jo Laramie
-4-
<PAGE>
STATE OF UTAH )
)
COUNTY OF SALT LAKE )
On the 12th day of July, 1978, before me, the undersigned, a
Notary Public, personally appeared Alexander H. Walker, Jr., Laurie J. Bangart,
and Mary Jo Laramie, known to me to be the persons described in and who executed
the foregoing instrument, and who acknowledged to me that they executed the same
freely and voluntarily and for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto get my hand and affixed my
official seal the day and year in this certificate first above written.
----------------------------
Notary Public
Residing in Sandy, Utah
My commission expires:
February 22, 1980
- -----------------
<PAGE>
AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
POWER CONSERVATION CORPORATION
Pursuant to the provisions of Section 78.385 of the Nevada
Revised Statutes, Power Conservation Corporation adopts the following amendments
to its Articles of Incorporation:
1. The undersigned certify that on the 10th day of March, 1982, a Special
Meeting of the Board of Directors was duly held and convened at which there was
present a quorum of the Board of Directors meeting throughout all proceedings
and at which time the following resolutions were unanimously adopted by the
Board of Directors:
BE IT RESOLVED: That the Secretary of Power Conservation
Corporation is hereby authorized, directed and empowered to
serve notice upon each and every stockholder of the
corporation as their names and addresses appear on the books
and records of the corporation as of the close of business on
March 10, 1982, of a special meeting of shareholders to be
held and convened on March 30, 1982 at 2:00 p.m., local time,
at Suite 201, 5600 Executive Center, Charlotte, North Carolina
for the following purpose:
To amend the Articles of Incorporation to change the
name of the corporation from Power Conservation
Corporation to Power Capital Corporation.
2. A Special Meeting of the Stockholders was held on March 30, 1982, at Suite
201, 5600 Executive Center, Charlotte, North Carolina at 2:00 p.m., local time
and with regard thereto, the undersigned certify as follows:
a) Notice of the Special Meeting of Stockholders was mailed
to each and every stockholder on March 10, 1982.
b) There were present either by proxy or in person 1,333,100
shares of the 1,904,425 shares outstanding in the
corporation.
c) That the proposal to amend the Articles of Incorporation
which is set forth as follows was adopted by 1,333,100
shares and no shares were voted against the proposal.
d) The amendment to the Articles of Incorporation is as
follows:
<PAGE>
ARTICLE ONE. [NAME]. The name of corporation shall be:
POWER CAPITAL CORPORATION
IN WITNESS WHEREOF, the undersigned hereunto signature this
14th day of October, 1982.
POWER CONSERVATION CORPORATION
By______________________________
Charles Hogan
Vice President
STATE OF NORTH CAROLINA )
) ss.
COUNTY OF ________________ )
On this 18th day of October, 1982, before me, undersigned, a Notary
Public, personally appeared the elected Vice President POWER CONSERVATION
CORPORATION, known to be the person who executed the foregoing amendment the
Articles of Incorporation and who acknowledged that they executed the same
freely and voluntarily on behalf of POWER CONSERVATION CORPORATION for the uses
and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my ____ and affixed my
official seal the day and year in ____ amendment first above written.
-----------------------------------------
Notary Public
Residing in ________________
My Commission Expires:
- ---------------------
ARTICLE OF INCORPORATION
OF
POWER CONSERVATION CORPORATION
* * * *
We have undersigned, have voluntarily associated ourselves
together for the purpose of forming a corporation under the laws of the State of
Nevada relating to private corporations, and to that end do hereby adopt
articles of incorporation as follows:
ARTICLE One. (NAME). The name of the corporation is:
POWER CONSERVATION CORPORATION
ARTICLE Two. (location). the address of the corporation's principal
office is Suite 1400 First National Bank Building, One East First Street, in the
City of Reno, County of Washoe, State of Nevada. The initial agent for service
of process at that address is Nevada Agency & Trust Company.
ARTICLE Three. (PURPOSES). The purposes for which the corporation is
organized are to engage in any activity or business nor in conflict with the
laws of the State of Nevada or of the United States of America, and without
limiting the generally of the foregoing, specifically:
I. (OMNIBUS). To have and to exercise all the powers now or
hereafter conferred by the laws of the State of Nevada upon
corporations organized pursuant to the laws under which the corporation
is organized and any and all acts amendatory thereof and supplemental
thereto.
II. (POWER MANAGEMENT). To engage in a general business of
power management including, but not limited to, the development and
sales of energy devices for commercial and household users whether such
inventions, devices, or programs are software or hardware.
III. (ENERGY BUREAU). To establish offices for the purpose of
testing and evaluating the use and disposition of energy and
energy-related products.
IV. (REAL PROPERTY). To purchase, or in any way acquire for
investment or for sale or otherwise, lands, contracts for the purchase
or sale of lands, buildings, improvements, and any other real property
of any kind or any interest therein, and as the consideration for same
to pay cash or to issue the capital stock, debenture bonds, mortgage
bonds, or other obligations of the corporation, and to sell, convey,
lease, mortgage, deed of trust, turn to account, or otherwise deal with
all or any part of the property of the corporation; to make and obtain
loans upon real estate, improved or
<PAGE>
unimproved, and upon personal property, giving or taking evidences of
indebtedness and securing the payment thereof by mortgage, trust deed,
pledge or otherwise; and to enter into contracts to buy or sell any
property, real or personal; to buy and sell mortgages, trust deeds,
contracts, and evidence of Indebtedness; to purchase or otherwise
acquire, for the purpose of holding or disposing of the same, real or
personal property of every kind and description, including the good
will, stock, rights, and property of any person, firm, association, or
corporation; and to draw, make, accept, indorse, discount, execute, and
issue promissory notes, bills of exchange, warrants, bonds, debentures,
and other negotiable or transferable instruments, or obligations of the
corporation, from time to time, for any of the objects or purposes of
the corporation, without restriction or limit as to amount.
V. (REAL ESTATE DEVELOPMENT). To engage in the business of
purchasing, leasing, and developing real estate, including but not
limited to, subdivisions, towns, and tracts; the construction of any
and all buildings, sewer lines, off-site improvements, and any and all
structures necessary or required in connection with the development of
real estate generally; and the doing of any and every act or thing
proper, necessary, and incidental to the general purpose of this
company.
VI. (CARRYING ON BUSINESS OUTSIDE STATE). To conduct and carry
on its business or any breach thereof in any state or territory of the
United States or in any foreign country in conformity with the laws of
such state, territory, or foreign country, and to have and maintain in
any state, territory or foreign country a business office, plant, store
or other facility.
VII. (PURPOSES TO BE CONSTRUED AS POWERS). The purposes
specified herein shall be construed both as purposes and powers and
shall be in no wise limited or restricted by reference to, or inference
from, the terms of any other clause in this or any other article, but
the purposes and powers specified in each of the clauses herein shall
be regarded as independent purposes and powers, and the enumeration of
specific purposes and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or of the general
powers of the corporation; nor shall the expression of one thing be
deemed to exclude another, although it be of like nature not expressed.
ARTICLE Four. (CAPITAL STOCK). The corporation shall have authority to
issue an aggregate of THREE MILLION (3,000,000) shares of capital stock having a
pare value of TWO CENTS ($0.02) per share.
No holder of shares of capital stock of the corporation shall be
entitled, as such, to any pre-emptive or preferential right to subscribe to any
unissued stock or any other securities which the corporation may now or
thereafter be authorized to issue.
The corporation's capital stock may be issued and sold from time to
time for such consideration as may be fixed by the Board of Directors, provided
that the consideration so fixed is not less than par value.
-2-
<PAGE>
Cumulative voting in the elections of Directors at all stockholders'
meetings, whether they be annual or special, shall not be permitted.
ARTICLE Five. (DIRECTOR). The affairs of the corporation shall be
governed by a Board of Directors of not less than three (3) directors. The names
and addresses of the members of the first Board of Directors are:
NAME ADDRESS
- ---- -------
Alexander H. Walker, Jr. 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Laurie J. Bangart 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Mary Jo Laramie 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Directors of the corporation need not be residents of the State of
Nevada and need not own shares of the corporation's stock.
ARTICLE Six. (INCORPORATORS). The name and address of each
incorporatator of the corporation is as follows:
NAME ADDRESS
- ---- -------
Alexander H. Walker, Jr. 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Laurie J. Bangart 840 Kennecott Bldg.
Salt Lake City, Utah 84133
Mary Jo Laramie 840 Kennecott Bldg.
Salt Lake City, Utah 84133
ARTICLE Seven. (PERIOD OF EXISTENCE). The period of existence of the
corporation shall be perpetual.
ARTICLE Eight. (by-laws). the initial By-Laws of the corporation shall
be adopted by its Board of Directors. The power to alter, amend, or repeal the
By-Laws, or to adopt new By-Laws, shall be vested in the Board of Directors,
except as otherwise may be specifically provided in the By-Laws.
ARTICLE Nine. (STOCKHOLDERS MEETINGS). Meeting of stockholders shall
be held at such place within or without the State of Nevada as may be provided
by the By-Laws of the corporation. Special meetings of the stockholders may be
called by the President or any other ______________________
-3-
<PAGE>
ARTICLE Ten. (CONTRACTS OF CORPORATION). No contract or other
transaction between the corporation and any other corporation, whether or not a
majority of the share of the capital stock of such other corporation is owned by
this corporation, and no act of this corporation, and no act of this corporation
shall in any way be affected or invalidated by the fact that any of the
directors or officers of such other corporation. Any director of this
corporation, individually, or any firm of which such director may be a member,
may be a party to, or may be pecuniary or otherwise interested in any contract
or transaction of the corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of this corporation, or a majority thereof; and any director
of this corporation who is also a director or officer of such other corporation,
or who is so interested, may be counted in determining the existence of a quorum
at any meeting of the Board of Directors of this corporation that shall
authorize such contract or transaction, with like force and effect as if he were
not such director or officer or such other corporation or not so interested.
IN WITNESS WHEREOF, the undersigned Incorporators have
hereunto fixed their signatures at Salt Lake City, Utah, this 12th day of July,
1978.
------------------------------
Alexander H. Walker, Jr.
------------------------------
Mary Jo Laramie
-4-
<PAGE>
STATE OF UTAH )
)
COUNTY OF SALT LAKE )
On the 12th day of July, 1978, before me, the undersigned, a
Notary Public, personally appeared Alexander H. Walker, Jr., Laurie J. Bangart,
and Mary Jo Laramie, known to me to be the persons described in and who executed
the foregoing instrument, and who acknowledged to me that they executed the same
freely and voluntarily and for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto get my hand and affixed my
official seal the day and year in this certificate first above written.
----------------------------
Notary Public
Residing in Sandy, Utah
My commission expires:
February 22, 1980
- -----------------
<PAGE>
AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
POWER CONSERVATION CORPORATION
Pursuant to the provisions of Section 78.385 of the Nevada
Revised Statutes, Power Conservation Corporation adopts the following amendments
to its Articles of Incorporation:
1. The undersigned certify that on the 10th day of March, 1982, a Special
Meeting of the Board of Directors was duly held and convened at which there was
present a quorum of the Board of Directors meeting throughout all proceedings
and at which time the following resolutions were unanimously adopted by the
Board of Directors:
BE IT RESOLVED: That the Secretary of Power Conservation
Corporation is hereby authorized, directed and empowered to
serve notice upon each and every stockholder of the
corporation as their names and addresses appear on the books
and records of the corporation as of the close of business on
March 10, 1982, of a special meeting of shareholders to be
held and convened on March 30, 1982 at 2:00 p.m., local time,
at Suite 201, 5600 Executive Center, Charlotte, North Carolina
for the following purpose:
To amend the Articles of Incorporation to change the
name of the corporation from Power Conservation
Corporation to Power Capital Corporation.
2. A Special Meeting of the Stockholders was held on March 30, 1982, at Suite
201, 5600 Executive Center, Charlotte, North Carolina at 2:00 p.m., local time
and with regard thereto, the undersigned certify as follows:
a) Notice of the Special Meeting of Stockholders was mailed
to each and every stockholder on March 10, 1982.
b) There were present either by proxy or in person 1,333,100
shares of the 1,904,425 shares outstanding in the
corporation.
c) That the proposal to amend the Articles of Incorporation
which is set forth as follows was adopted by 1,333,100
shares and no shares were voted against the proposal.
d) The amendment to the Articles of Incorporation is as
follows:
<PAGE>
ARTICLE ONE. [NAME]. The name of corporation shall be:
POWER CAPITAL CORPORATION
IN WITNESS WHEREOF, the undersigned hereunto signature this
14th day of October, 1982.
POWER CONSERVATION CORPORATION
By______________________________
Charles Hogan
Vice President
STATE OF NORTH CAROLINA )
) ss.
COUNTY OF ________________ )
On this 18th day of October, 1982, before me, undersigned, a Notary
Public, personally appeared the elected Vice President POWER CONSERVATION
CORPORATION, known to be the person who executed the foregoing amendment the
Articles of Incorporation and who acknowledged that they executed the same
freely and voluntarily on behalf of POWER CONSERVATION CORPORATION for the uses
and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my ____ and affixed my
official seal the day and year in ____ amendment first above written.
-----------------------------------------
Notary Public
Residing in ________________
My Commission Expires:
- ---------------------
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
POWER CAPITAL CORPORATION
THE UNDERSIGNED, certify that:
1. They are the President and the Secretary, respectively, of POWER CAPITAL
CORPORATION, a Nevada corporation.
2. Article First of the corporation's Articles of Incorporation is amended and,
as amended, reads as follows:
"FIRST: The name of this corporation is
'HUAYANG INTERNATIONAL HOLDINGS,
INC.'"
3. The corporation's outstanding shares of common Stock were reverse split on a
one-for-230 basis.
IN WITNESS WHEREOF, POWER CAPITAL CORPORATION has caused these Articles
of Amendment to be signed and acknowledged by its President, Roger F. Tompkins
and its Secretary, Bruce Tompkins, this 5th day of January, 1996.
By:
--------------------------------
Roger F. Tompkins, President
-------------------------------
Bruce Tompkins, Secretary
<PAGE>
STATE OF GEORGIA
SS:
COUNTY OF DEKALB
On this 5th day of January, 1996, before me the undersigned officer
personally appeared ROGER F. TOMPKINS known personally to me to be the President
of the above-named corporation, and that he being authorized to do so, executed
the foregoing instrument for the purposes therein contained, by signing the name
of the corporation by himself as such officer, stated that the statements
therein contained are true and acknowledged to me that so executed the foregoing
instrument and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
(Notarial Seal)
----------------------------
Notary Public
On this 5th day of January, 1996, before me the undersigned officer
personally appeared BRUCE TOMPKINS known personally to me to be the Secretary of
the above-named corporation, and that he being authorized to do so, executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself as such officer, stated that the statements therein
contained are true and acknowledged to me that he so executed the foregoing
instrument and that the statements therein contained are true.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal.
(Notarial seal)
----------------------------
Notary Public
BY LAWS FOR THE REGULATION
EXCEPT AS OTHERWISE PROVIDED BY STATUTE
OR ITS ARTICLES OF INCORPORATION OF
POWER CONSERVATION CORPORATION
ARTICLE I
Offices
Section 1. PRINCIPAL OFFICE. The principal office for the transaction of
the business of the corporation is hereby fixed and located at Suite 1400 First
National Bank Building, Reno, Nevada, being the office of the Nevada Agency and
Trust Company. The Board of Directors is hereby granted full power and authority
to change said principal office from one location to another in said county.
Section 2. OTHER OFFICES. Branch or subordinate offices may at any time be
established by the Board of Directors at any place or places where the
corporation is qualified to do business.
ARTICLE II
Meetings of Shareholders
Section 1. MEETING PLACE. All annual meetings of shareholders and all other
meetings of shareholders shall be held either at the principal office or at any
other place within or without the State of Nevada which may be designated either
by the Board of Directors, pursuant to authority hereunder granted to said
Board, or by the written consent of all shareholders entitled to vote thereat,
given either before of after the meeting filed with the secretary of the
corporation.
Section 2. ANNUAL MEETINGS. The annual meetings of shareholders shall be
held on the fourth Wednesday of May each year, at the hour of 2:00 o'clock p.m.
of said day commencing with the year 1979, provided, however, that should said
day fall upon a legal
<PAGE>
holiday then any such annual meeting of shareholders shall be held at the same
time and place on the next day thereafter ensuing which is not a legal holiday.
Written notice of each annual meeting signed by the president or a vice
president, or the secretary, or an assistant secretary, or by such other person
or persons as the directors shall designate, shall be given to each shareholder
entitled to vote thereat, either personally or by mail or other means of written
communication, charges prepaid, addressed to such shareholder at his address
appearing on the books of the corporation or given by him to the corporation for
the purpose of notice. If a shareholder gives no address, notice shall be deemed
to have been given to him, if sent by mail or other means of written
communication addressed to the place where the principal office of the
corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each shareholder entitled thereto not less than ten
(10) or more than sixty (60) days before each annual meeting, and shall specify
the place, the day and the hour of such meeting, and shall also state the
purpose or purposes for which the meeting is called.
Section 3. SPECIAL MEETINGS. Special meetings of the shareholders, for any
purpose or purposes whatsoever, may be called at any time by the president or by
the Board of Directors, or by one or more shareholders holding not less than
one-fifth of the voting power of the corporation. Except in special cases where
other express provision is made by statute, notice of such special meetings
shall be given in the same manner as for annual meetings of shareholders.
Notices of any special meeting shall specify in addition to the place, day and
hour of such meeting, the purpose or purposes for which the meeting is called.
Section 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
-2-
<PAGE>
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, not in the absence
of a quorum, no other business may be transacted at any such meeting.
When any shareholders' meeting, either annul or special, is adjourned
for thirty (30) days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. Save as aforesaid, it shall not be necessary
to give any notice of an adjournment or of the business to be transacted at any
adjourned meeting, other than by announcement at the meeting at which such
adjournment is taken.
Section 5. ENTRY OF NOTICE. Whenever any shareholder entitled to vote has
been absent from any meeting of shareholders, whether annual or special, an
entry in the minutes to the effect that notice has been duly given shall be
conclusive and incontrovertible evidence that due notice of such meeting was
given to such shareholders, as required by law and the By-Laws of the
corporation.
Section 6. VOTING. At all annual and special meetings of stockholders
entitled to vote thereat, every holder of stock issued to a bona fide purchaser
of the same, represented by the holders thereof, either in person or by proxy in
writing, shall have one vote for each share of stock so held and represented at
such meetings, unless the Articles of Incorporation of the company shall
otherwise provide, in which event the voting rights, powers and privileges
prescribed in the said Articles of Incorporation shall prevail. Voting for
directors and, upon demand of any stockholder, upon any question at any meeting
shall be by ballot.
Section 7. QUORUM. The presence in person or by proxy of the holders of a
majority of the shares entitled to vote at a any meeting shall constitute a
quorum for the transaction of business. The shareholders present at a duly
called or held meeting at which a
-3-
<PAGE>
quorum is present may continue to do business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum.
Section 8. CONSENT OF ABSENTEES. The truncations of any meeting of
shareholders, either annual or special, however called and noticed, shall be as
valid as though had at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each of the shareholders entitled to vote, not present in person or
by proxy, sign a written Waiver of Notice, or a consent in person or by proxy,
sign a written Waiver of Notice, or a consent to the holding of such 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.
Section 9. PROXIES. Every person entitled to vote or execute consents shall
have the right to do so either in person or by an agent or agents authorized by
a written proxy executed by such person or his duly authorized agent and filed
with the secretary of the corporation; provided that no such proxy shall be
valid after the expiration of eleven (11) months from the date of its execution,
unless the shareholder executing it specifies therein in length of time for
which such proxy is to continue in force, which is no case shall exceed seven
(7) years from the date of its execution.
ARTICLE III
Section 1. POWERS. Subject to limitations of the Articles of Incorporation
or the By-Laws, and the provisions of the Nevada Revised Statutes as to action
to be authorized or approved by the shareholders, and subject to the duties of
directors as prescribed by the By-Laws, all corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be controlled by the Board of Directors. Without prejudice to
-4-
<PAGE>
such general powers, but subject to the same limitations, it is hereby expressly
declared that the directors shall have the following powers, to wit:
First: To select and remove all of the other officers, agents and employees
of the corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the Articles of Incorporation or the By-Laws, fix
their compensation, and require from them security for faithful service.
Second: To conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not inconsistent
with law, with the Articles of Incorporation or the By-Laws, as they may deem
best.
Third: To change the principal office of the transaction of the business of
the corporation from one location to another within the same county as provided
in Article I, Section 1, hereof; to affix and locate from time to time one or
more subsidiary offices of the corporation within or without the State of
Nevada, as provided in Article I, Section 2, hereof; to designate any place
within or without the State of Nevada for the holding of any shareholders'
meeting or meetings; and to adopt, make and use a corporate seal, and to
prescribe the forms of certificates of stock, and to alter the form of such seal
and of such certificates from time to time, as in their judgment they may deem
best, provided such seal and such certificates shall at all times comply with
the provisions of law.
Fourth: To authorize the issue of shares of stock of the corporation from
time to time, upon such terms as may be lawful, in consideration of money paid,
labor don or services actually rendered, debts or securities cancelled, or
tangible or intangible property actually received, or in the case of shares
issued as a dividend, against amounts transferred from surplus to stated
capital.
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Fifth: To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefor.
Sixth: To appoint an executive committee and other committees and to
delegate to the executive committee any of the powers and authority of the Board
in the management of the business and affairs of the corporation, except the
power to declare dividends and to adopt, amend or repeal By-Laws. The executive
committee shall be composed of one or more directors.
Section 2. NUMBER OF QUALIFICATION OF DIRECTORS. The authorized number of
directors of the corporation shall be three (3) and no more than fifteen (15).
Section 3. ELECTION AND TERM OF OFFICE. The directors shall be elected at
such annual meeting of 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. All directors shall hold office until their
respective successors are elected.
Section 4. VACANCIES. Vacancies in the Board of Directors may be filed by a
majority of the remaining directors, though less than a quorum, or by a sole
remaining director, and each director so elected shall hold office until his
successor is elected at any annual or a special meeting of the shareholders.
A vacancy or vacancies in the Board of Directors shall be deemed to
exist in case of the death, resignation or removal of any director, or if the
authorized number of directors be increased, or if the shareholders fail at any
annual or special meeting of shareholders at which
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any director or directors are elected to elect the full authorized number of
directors to be voted for at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. If Board of Directors
accept the resignation of a director tendered to take effect at a future time,
the Board or the shareholders shall have the power to elect a successor to take
office when the resignation is to become effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 5. PLACE OF MEETING. Regular meetings of the Board of Directors
shall be held at any place within or without the State which has been designated
from time to time by resolution of the Board or by written consent of all
members of the Board. In the absence of such designation regular meetings shall
be held at the principal office of the corporation. Special meetings of the
Board may be held either at a place so designated, or at the principal office.
Section 6. ORGANIZATION MEETING. Immediately following each annual meeting
of shareholders, the Board of Directors shall hold a regular meeting for the
purpose of organization, election of officers, and the transaction of other
business. Notice of such meetings is hereby dispensed with.
Section 7. OTHER REGULAR MEETINGS. Other regular meetings of the Board of
Directors shall be held without call on the fourth Wednesday of each month at
the hour of 3:00 o'clock p.m. of said day; provided, however, should said day
fall upon a legal holiday, then said meeting shall be held at the same time on
the next day thereafter ensuing which is not a legal holiday. Notice of all such
regular meetings of the Board of Directors is hereby dispensed with.
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Section 8. SPECIAL MEETINGS. Special meetings of the Board of Directors for
any purpose or purposes shall be called at any time by the president, or, if he
is absent or unable or refuses to act, by any vice president or by any two
directors.
Written notice of the time and place of special meetings shall be
delivered personally to the directors or sent to each director by mail or other
form of written communication, charges prepaid, addressed to him at his address
as it is shown upon the records of the corporation, or if it is not shown on
such records or is not readily ascertainable, at the place in which the meetings
of the directors are regularly held. In case such notice is mailed or
telegraphed, it shall be deposited in the United States mail or delivered to the
telegraph company in the place in which the principal office of the corporation
is located at least forty-eight (48) hours prior to the time of the holding of
the meeting. In case such notice is delivered as above provided, it shall be so
delivered at least twenty-four (24) hours prior to the time of the holding of
the meeting. In case such notice is delivered as above provided, it shall be so
deposited in the United States mail or delivered to the telegraph company in the
place in which the principal office of the corporation is located at least
forty-eight (48) hours prior to the time of the holding of the meeting. In case
such notice is delivered as above provided, it shall be so delivered at least
twenty-four (24) hours prior to the time of the holding of the meeting. Such
mailing, telegraphing or delivery as above provided shall be due, legal and
personal notice to such director. Section 9. NOTICE OF ADJOURNMENT. Notice of
the time and place of holding an adjourned meeting need not be given to absent
directors, if the time and place be fixed at the meeting adjourned..
Section 10. ENTRY OF NOTICE. Whenever any director has been absent from any
special meeting of the Board of Directors, as entry in the minutes to the effect
that notice has
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been duly given shall be conclusive and incontrovertible evidence that due
notice of such special meeting was given to such director, as required by law
and the By-Laws of the corporation.
Section 11. WAIVER OF NOTICE. The transaction of any meeting of the Board
of Directors, however called and noticed or wherever held, shall be as valid as
though had a meeting duly held after regular call and notice, if a quorum be
present, and if, either before or after the meeting, each of the directors not
present sign a written waiver of notice or a consent to holding such 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.
Section 12. QUORUM. A majority of the authorized number of directors shall
be necessary to constitute a quorum 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 of Directors, unless a
greater number be required by law or by the Articles of Incorporation.
Section 13. ADJOURNMENT. A quorum of the authorized number of directors
shall be necessary to constitute a quorum 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 of Directors, unless a
greater number be required by law or by the Articles of Incorporation.
Section 14. FEES AND COMPENSATION. Directors shall not receive any stated
salary for their services as directors, but by resolution of the board, a fixed
fee, with or without expenses of attendance may be allowed for attendance at
each meeting. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation therefor.
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ARTICLE IV
Officers
Section 1. OFFICERS. The officers of the corporation shall be a president,
a vice president, a secretary, and a treasurer. The corporation may also have,
at the discretion of the Board of Directors, a chairman of the Board, one or
more additional vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article. Officers other than president
and chairman of the board need not be directors. One person may hold two or more
offices, except that of president.
Section 2. ELECTION. The officers of the corporation, except such officers
as may be appointed in accordance with the provisions of Section 3 or Section 5
of this Article, shall be chosen annually the Board of Directors, and each shall
hold his office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall be elected and qualified.
Section 3. SUBORDINATE OFFICERS, ETC. The Board of Directors may appoint
such other officers as the business of the corporation may appoint such 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
the By-Laws or as the Board of Directors may from time to time determine.
Section 4. REMOVAL AND RESIGNATION. Any officer may be removed, either with
or without cause, by a majority of the directors at the time in office, at any
regular or special meeting of the Board.
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Any officer may resign at any time by giving written notice to the
Board of Directors or t the president, or to the secretary of the corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
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 the By-Laws for regular appointments to such office.
Section 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there shall
be such an officer, shall, if present, preside t all meetings of the Board of
Directors, and exercise an d perform such other power s and duties as may be
from time to time assigned to him by the Board of Directors or prescribed by the
By-Laws.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may be
given by the Board of Directors to the chairman of the board, if there be such
an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the shareholders and in the
absence of the chairman of the board, or if there be none, at all meetings of
the shareholders and in the absence of the chairman of the board, or if there be
none, at all meetings of the Board of directors. He shall be ex-officio a member
of all the standing committees, including the executive committee, if any, and
shall have the general powers and duties of management usually vested in the
office of the president of the corporation, and shall have such other power s
and duties as may be prescribed by the Board of Directors or the By-Laws.
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Section 8. VICE PRESIDENT. In the absence of disability of the president,
the vice presidents in order of their rank as fixed by the board of directors,
or if not ranked, the vice president designated by the board of directors, shall
perform all the duties of the president, and when so acting shall have all the
power s of, and be subject to all the restrictions upon the president. The vice
president shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors
or the By-Laws.
Section 9. SECRETARY. The secretary shall keep, or cause to be kept, a book
of minutes at the principal office or such other place as the Board of Directors
may order , of all meetings or directors and shareholders, 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 at directors' meetings, the
number of shares present or represented at shareholders' meetings and the
proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal office,
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.
The secretary shall give, or cause to be given, notice of all the
meetings of the shareholder and of the Board of Directors required by the
By-Laws or by law to be given, and he 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 of Directors or the By-Laws.
Section 10. TREASURER. The treasurer shall keep and maintain, or cause to
be kept and maintained, adequate and correct accounts of the properties and
business transactions of the
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corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, surplus and shares. Any surplus,
including earned surplus, paid-in surplus arising from a reduction of stated
capital, shall be classified according to source and shown in a separate
account. The books of account shall at all times be open to inspection by any
director.
The treasure 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 of Directors. He shall disburse the funds of the corporation as may
be ordered by the Board of Directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the By-Laws.
ARTICLE V
Miscellaneous
Section 1. RECORD DATE AND CLOSING STOCK BOOKS. The Board of Directors may
fix a time, in the future, not exceeding fifteen (15) days preceding the date of
any meeting of shareholders, and not exceeding thirty (30) days preceding the
date fixed for the payment of any dividend or distribution, or for the allotment
of rights, or when any change or conversion or exchange of shares shall go into
effect, as a record date for the determination of the shareholders entitled to
notice of and to vote at any such meeting, or entitled to receive any such
dividend or distribution, or any such allotment of rights, or to exercise the
rights in respect to any such change, conversion or exchange of shares, and in
such case only shareholders of record on the date so fixed shall be entitled to
notice of and to vote at such meetings, or to receive such dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any shares on the books of the corporation
after any
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record date fixed as aforesaid. The Board of Directors may close the
books of the corporation against transfers of shares during the whole, or any
part of any such period.
Section 2. INSPECTION OF CORPORATE RECORDS. The share register or duplicate
share register, the books of account, and minutes of proceedings of the
shareholders and directors or the holder of a voting trust certificate, at any
reasonable time, and for a purpose reasonably related to his interests as a
shareholder , or as the holder of a voting trust certificate, and shall be
exhibited at any time when required by the demand of ten percent (10%) of the
shares represented at any shareholders' meeting. Such inspection may be deemed
in person or by any agent or attorney, and shall include the right to make
extracts. Demand of inspection other than at a shareholder s' meeting shall be
made in writing upon the president, secretary or assistant secretary of the
corporation.
Section 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 4. ANNUL REPORT. The Board of Directors of the corporation shall
cause to be sent to the shareholders not later than one hundred twenty (120)
days after the close of the fiscal or calendar year an annual report.
Section 5. CONTRACT, ETC., HOW EXECUTED. The Board of Directors, except as
in the By-Laws otherwise provided, may authorize any officer or officers, agent
or agents, to enter into any contract, deed or lease or execute any instrument
in the name of and on behalf of the corporation, and such authority may be
general or confined to specific instances; and unless so authorized by the Board
of Directors, no officer, agent or employees shall have any power
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or authority to bind the corporation by any contract or engagement or to pledge
its credit to render it liable for any purpose or to any amount.
Section 6. CERTIFICATES OF STOCK. A certificate or certificates of shares
of the capital stock of the corporation shall be issued to each shareholder when
any such shares are fully paid up. All such certificates shall be signed by the
president or a vice president and the secretary or an assistant secretary, or be
authenticated by facsimiles of the signatures or the president and secretary or
by a facsimile of the signatures of the president and the written signatures of
the secretary or an assistant secretary. Every certificate authenticated by a
facsimile of a signature must be countersigned by a transfer agent or transfer
clerk.
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the Board of Directors or the By-Laws may
provide; provided, however, that any such certificate so issued prior to full
payment shall state the amount remaining unpaid and the terms of payment
thereof.
Section 7. REPRESENTATIONS OF SHARES OF OTHER CORPORATIONS. The president
or any vice president and the secretary or assistant secretary of this
corporation are authorized to vote, represent and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted to said officers to vote or represented on behalf of this corporation
any and all shares held by this corporation in any other corporation or
corporations may be exercised either by such officers in person or by any person
authorized so to do by proxy or power of attorney duly executed by said
officers.
Section 8. INSPECTION OF BY LAWS. The corporation shall keep in its
principal office for the transaction of business the original or a copy of the
By-Laws as amended, or
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otherwise altered to date, certificate by the secretary, which shall be open to
inspection by the shareholder s at all reasonable times during office hours.
ARTICLE VI
Amendments
Section 1. POWER OF SHAREHOLDERS. New By-Laws may be adopted or these
By-Laws may be amended or repealed by the vote of shareholder s entitled to
exercise a majority of the voting power of the corporation or by the written
assent of such shareholders.
Section 2. POWER OF DIRECTORS. Subject to the right of shareholders as
provided in Section 1 of this Article VI to adopt, amend or repeal By-Laws,
By-Laws other than a By-Law or amendment thereof changing the authorized number
of directors may be adopted, amended or repealed by the Board of Directors.
Section 3. ACTION BY DIRECTORS THROUGH CONSENT IN LIEU OF MEETING. Any
action required or permitted to be taken at any meeting of the Board of
Directors or of any committee thereof, may be taken without a meeting, if a
written consent thereto is signed by all the members of the Board or of such
committee. Such written consent shall be filed with the minutes of proceeds of
the Board or committee.
ARTICLE VII
INDEMNIFICATION
Section 1. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was director, officer, employee or agent of the
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Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 2. The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact he is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
Section 3. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding
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referred to in Sections 1 and 2 of this Article VII, or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Section 4. Any indemnification under Sections 1 and 2 of this Article VII
(unless ordered by a court of competent jurisdiction) shall be made by the
Corporation only as authorized in a specific case upon a determination that
indemnification of a director, officer, employee or agent is proper in the
circumstances because he has met the applicable standards of conduct as set
forth in Sections 1 and 2. Such determination shall be made (a) by the Board of
Directors, by a majority vote of a quorum consisting of Directors who were not
parties to such action, suit or proceeding or (b) if such quorum is not
obtainable, or even if obtainable, a quorum of such disinterested Directors so
directs, by independent legal counsel under written opinion, or (c) by the
affirmative vote of a majority of the shares entitled to vote thereon.
Section 5. Expenses incurred in defending a civil or criminal action, suit
or proceeding may be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding, as authorized in a specific case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount unless it shall ultimately be determined he is
entitled to be indemnified by the Corporation as authorized in this Article VII.
Section 6. Indemnification provided for in this Article VII shall not be
deemed exclusive of any other rights, in respect of indemnification or
otherwise, to which those seeking indemnification may be entitled under any
other By-Law or Resolution approved by affirmative vote of the holders of the
majority of the shares entitled to vote thereon, taken at a meeting, the notice
of which specified such By-Law or Resolution will be placed before the
stockholders. This provision shall apply both as to action by a director,
officer, employee or agent in his
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official capacity and as to action in another capacity while holding such office
or position. The rights of indemnification provided herein shall be available
whether or not the claim asserted against such director, officer, employee or
agent is based on matters which antedate the adoption of this provision.
Indemnification provided or authorized 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.
Section 7. The provisions of this Article VII and the several rights to
indemnification created hereby are independent and inseverable and in the event
any such provision or right shall be held by a court of competent jurisdiction
in which an action relating to such provisions or rights is brought to be
against public policy or otherwise to be unenforceable, the other provisions of
this Article VII shall remain enforceable and in full effect.
Section 8. The Board of Directors may authorize by vote of the majority of
the full Board, the Corporation to purchase or maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under such provisions of this Article VII.
Adopted by Board Resolution December 27, 1985
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MSCM No.01
Code:
LOAN CONTRACT
LENDER: Merchants Bank Shenyang Branch
BORROWER: Shenyang Haitong House Properties Development Co., Ltd.
<PAGE>
LENDER (HEREINAFTER IS REFERRED TO AS PARTY A): Merchants Bank Shenyang Branch
LEGAL REPRESENTATIVE: Sun Peipan
POST: President of The Bank
ADDRESS: 82, 11 Wei Road, Heping District
TEL: 22853476
BORROWER (HEREINAFTER IS REFERRED TO AS PARTY B): Shenyang Haitong House
Properties Development Co., Ltd.
LEGAL REPRESENTATIVE: Lee Shouzheng
POST: Chairman of Board
ADDRESS: 386, Qingnian Street, Heping District
TEL: 23180318
Party B applies a loan of circulating capital to Party A because of short of
capitals. Party A examines and agrees to grant the loan. In accordance with
relevant laws and regulations, the contract hereunder is concluded by the two
parties upon negotiated consultation.
ARTICLE 1 Type of loan:
This is the loan on mortgage.
ARTICLE 2 Currency and amount of loan: The loan is in Rmb of 25.8 million yuan.
ARTICLE 3 Purpose of loan:
The loan will be used to purchase architectural decorating materials. Without
the written approval of Party A, Party B shall not use the loan for other
purpose.
ARTICLE 4 Life loan:
The life of loan is for 12 months from November. 15th 1999 to November.. 15th
2000.
ARTICLE 5 Interest rate and interest of loan:
1. INTEREST RATE: the interest of loan shall be calculated monthly at
5.3625/oo. During the period of vitality of the contract, the interest
adjustment shall be conducted as stipulated by the People's Bank.
2. INTEREST CALCULATING: The interest of loan shall be calculated since the
date when the loan is deposited to the account of Party B and by the
actual amount of loan and days of use, once quarterly, on the 20th day of
the third month of each quarter.
3. INTEREST PAYING: Party B shall pay the interest on the very
interest-paying day, Party A may directly collect from the account of
Party B; in case Party B does not pay the interest on time, Party A has
the right to charge extra interest on the interest of loan not paid off.
ARTICLE 6 Repayint the loan:
1. Party B shall repay the capital and interest of the loan within the period
stipulated by the contract;
2. Party B may repay the loan ahead of time through negotiation with Party B
and obtain its approval.
ARTICLE 7 Clauses of guarantee:
<PAGE>
1. To the capital and interest and expenses of loan under the contract, the
unit of_____ appointed by Party B will act as the guarantor, which shall
provide Party A with irrevocable letter of guarantee. Or_____
2. Shenyang Haitong House Properties Development Ltd. shall provide mortgage
with its self-owned house (Huayang International Mantion) to the loan
under the contract. A separate contract of mortgage shall be signed. Or
3. Shall provide mortgage with______ property to the loan under the contract.
A separate contract of mortgage shall be signed.
ARTICLE 8 Rights of Party B:
1. To draw and use all the loan;
2. To refuse any additional condition;
3. To be entitled to transfer obligations to a third party with consent from
Party A.
ARTICLE 9 Obligations of Party B:
1. To provide accurate documents demanded by Party A and conditions including
opening bank, account number and balance of loan deposit, and cooperates
with Party A in the investigation, examination and inspection;
2. To accept the supervision of Party A in the application of loan capitals,
production operation and financial activities;
3. To spend the loan to purpose stipulated by the contract;
4. To fully repay the capital and interest of the loan within the period
stipulated by the contract;
5. Shall Party B transfer the rights or obligations under the contract to a
third party, a written consent shall be obtained from Party A in advance.
6. Shall change of system occurs in Party B such as contracting, lease,
mergence, joint-venture, separation, joint operation, capital reformation,
paid transfer of property, transformation of stock system, etc. Party B
shall inform Party A in advance and prepare the measures to guarantee the
paying of capital an interest of loan and all other expenses.
ARTICLE 10 Rights of Party A: Party A is entitled:
1. To demand Party B to fully repay the capital and interest of the loan
within the period stipulated by the contract;
2. To demand Party B to provide materials relating to loan;
3. To understand the production operations and financial activities of Party
B;
4. To supervise party B to spend the loan to purpose stipulated by the
contract;
5. To collect the capital and interest of the loan directly from the account
of Party B;
6. In case Party B does not fulfill the obligations under the contract, Party
A has the right to demand, as stipulated in the contract, an advance
payment of loan or stop granting the loan not used by Party B.
7. Shall change of system occurs in Party B such as contracting, lease,
mergence, joint-venture, separation, joint operation, capital reformation,
paid transfer of property, transformation of stock system, etc. Party A is
entitled to demand Party B to pay off capital and interest of loan and all
other expenses under the contract; or all the obligations under the
contract be put to the transferee approved by Party A; or execute the
guarantee approved by Party A.
ARTICLE 11 Obligations of Party A:
<PAGE>
1. To grant the loan on schedule stipulated by the contract.
2. To keep obligations, finance, Production and operation of Party B secret
unless otherwise stipulated by law.
ARTICLE 12 Party B shall specially guarantee the following:
1. Party B is established according to Chinese laws and operated legally with
legal personality, and has complete civil capacity to sign and execute the
contract.
2. The signing and executing of the contract has been fully authorized by the
board of directors or any other competent authorization.
3. The documents, Materials and vouchers etc. on Party B, guarantors,
mortgage are authentic, accurate, complete and effective, without major
errors nor neglecting important facts.
4. Party B shall respect the policy of "combined deposit, loan and
settlement" of party A: it ensures to deposit the intermittent capitals in
the process of production and operation to Party A, and entrust Party A to
carry out the settlement of Rmb and foreign currencies, to deepen the
foundation of cooperation of the two parties.
ARTICLE 13 Extension of loan:
In case Party B is not able to repay the loan due to special conditions of
production and capital operations when the loan becomes due, Party B may apply
for a extension of repaying to Party A. Party B shall make a written application
to Party A one month in advance; upon the approval of Party A, the two parties
shall sign separately an "extension agreement of the loan contract", the
contract is still good when Party A does not approve the extension; the loan
already used by Party B and the interests payable shall be paid off by Party B
as stipulated by the contract.
ARTICLE 14 Expenses:
The expenses occurred from credit investigation, inspection and notarization
etc, capital and interest of loan and all other expenses under the contract not
timely paid by Party B, Counsel fees, legal costs and travelling expenses of
Party A in order to realize the obligatory right shall all be borne by Party B,
who shall authorize Party A to collect directly from its account; for the
insufficient part, Party B ensures to pay off upon receipt of notice from Party
A, without Party A providing any certificates.
ARTICLE 15 Liabilities for breach of the contract:
1. In case Party B violates the stipulations of clause 1 and 2 of Article 9,
Party A has the right to demand a quick correction; to cases of serious
nature or Party B's not correcting exceeding the time limit, Party A has
the right to stop granting the remained loan till recovering part of all
of the loan.
2. In case Party B violates the stipulations of clause 3 of Article 9, Party
A has the right to charge an interest by daily rate of 0.5/oo to the part
of all of the loan occupied by Party B according to regulations of the
People's Bank; to cases of serious nature, Party A has the right to stop
granting the loan remained till recovering part or all of the loan.
3. In case Party B violates the stipulations of clause 4 of Article 9, Party
A has the right to charge an interest by daily rate of 0.21/oo to the loan
overdue according to regulations of the People's Bank;
4. In case Party B violates the stipulations of clause 5 and 6 of Article 9
and the obligatory rights under the contract fall through, Party A has the
right to stop
<PAGE>
granting the loan remained till recovering part or all of the loan; to the
credit capital loss of Party A due to fault of Party B, Party A has the
right to investigate and affix to part or all the responsibility of
compensation to Party B.
ARTICLE 16 Amendment and termination of the contract:
The contract may be amended and terminated upon written agreement through
negotiations or the two parties; the contract is still good before the
conclusion of the written agreement; neither party shall amend or terminate the
contract arbitrarily.
ARTICLE 17 Others
1. During execution of the contract, any tolerance of extension of Party A to
Party B's infringement or action of delay, can not damage, impair of limit
the rights and interests of Party A as the loaner; can not be regarded as
the approval to any sabotage of the contract; Party A can not be
considered to give up the right of action to present or future
infringement of Party B.
2. Party B shall still fulfill the responsibility of repaying even when the
contract or part of the clauses become invalid. In that case, Party A has
the right to terminate the contract, and demand repayment of the capital
and interest of loan and all other expenses under the contract.
3. Any notice and demand etc. Relating to the contract between Party A and
Party B shall be in written form; any telex and telegram of Party A to
Party B once sent, letters delivered to the post office, are considered to
have been received by Party B.
4. The receipt for the loan and written supplemental agreements on the
outstanding issues through negotiation are regarded as appendix to the
contract which form indivisible parts of the contract.
ARTICLE 18 Applicable laws and settlement of disputes:
1. The conclusion and termination of the contract and settlement of disputes
are subject to laws and regulations of PR china, rights and interests of
the two parties are subject to protection by laws of PR china.
2. The disputes aroused in the execution of the contract may be resolved
through negotiations between the two parties if the negotiation fails to
resolve, any party may:
1. start a suit in__________ ;
2. apply for arbitration to _________
3. After the notarization of compulsory execution of the contract, Party A
may apply to a competent people's court for compulsory execution in order
to demand the obligations overdue of Party B.
ARTICLE 19 Other supplementary terms:
ARTICLE 20 Supplementary rules
1. The contract shall come into force upon signing by the competent signers
with seal of the companies, till the completion of paying off of the
capital and interest of loan under the contract.
2. The subordinated contracts and the contract are equally authentic.
3. There are_____ original copies of the contract which are equally
authentic; Party A, Party B, the____ and the hold one each.
<PAGE>
Party A:
Merchants Bank Shenyang Branch (Seal)
Competent Signer: Sun Peipan (Signature)
Party B:
Shenyang Haitong House Properties Development Co., Ltd. (Seal)
Competent Signer: Lee Shouzheng (Signature)
November 8th, 1999
MSCM NO. 02
CODE:
MORTGAGE CONTRACT
Mortgagee: Merchants Bank Shenyang Branch
Mortgagor: Shenyang Haitong House Properties Development
Co. Ltd.
<PAGE>
MORTGAGEE: Merchants Bank Shenyang Branch (hereinafter referred to as Party A)
LEGAL REPRESENTATIVE: Sun Peipan
POST: President
ADDRESS: Shiyiwei Road, Heping District
MORTGAGOR: Shenyang Haitong House Properties Development Co., Ltd. (hereinafter
referred to as Party B)
LEGAL REPRESENTATIVE: Lee ShouZheng
POST: Board Chairman
ADDRESS: 386, Qingnian Street, Heping District
Due to:
1. The Party B (who is the borrower mentioned in the following text) applies
to the Party A for 25,800,000 yuan RBM loan. The Party A agreed to provide
this loan. Therefore, both parties signed a loan contract No. and Date
(that is called loan contract in short in the following text).
2. Shenyang Haitong House Properties Development Co. Ltd. (which is called
borrower in the following text) applied to the Party A for loan. The Party
A agreed to provide this loan. Therefore, both parties signed a loan
contract No. and Date (which is called loan contract in short in the
following text).
To assure the principal and interest and all other relevant fees could be
compensated completely, the Party B would like to take its own property or the
property of which the Party B have the right to dispose legally as security.
Through the examination of the Party A, the Party A accepted the Party B's own
property and the property of which the Party B have the right to dispose legally
as security. According to relevant rules of law, the first and second parties
consult with each other, and come to an agreement in the following items, and
conclude and sign this contract:
Article 1: The security that the Party B mortgaged
1. Name:
2. Quantity or area: 8,516.89m2
3. The buying price:
1
<PAGE>
4. The assessing price and the rate of mortgage:
5,182yuanX8,516.89m=44,134,524yuan
5. Address: No.386 Qingnian St Heping District Shenyang China.
6. Time limit of use: long term
7. The origin of ownership: self-own
8. The attestation of ownership: No.00455 of House Properties Certification
Article 2: The range of mortgage and guarantee
The mortgage and guarantee range of this contract includes not less than the
principal, interest, fine, insurance premium, and the fees to realize hypothec
under the items of this loan contract.
Article 3: The storage and responsibility of the security and its ownership
warrant
1. The security should be taken care of by the Party B or his agent during the
mortgage. The Party B or his agent should keep the security properly. In the
period of mortgage, the Party B is responsible for the repair, maintenance and
assuring that the security is well preserved, and he need subject to supervision
by the Party A at any moment.
The mortgage term is from the date of the contract going into effect to
the date when the principal, interest, and all corresponding fees are fully
repaid.
2. During the mortgage, if the activities of the Party B reduces the value
of the security, the Party A are entitled to ask the Party B stop doing it. When
the value of the security is reduced, the Party A has the right to request the
Party B to recover the value of security or afford new security that the Party A
ratifies. The Party B should bear all the payment to recover the security or
affirm new security.
3. During the mortgage, the Party B should send the ownership warrant of
the security to the Party A, the ownership warrant of the security should be in
safekeeping by the Party A. If it is not kept properly and the ownership warrant
is destroyed, the Party A should bear the responsibility to get a new ownership
warrant and payment.
Article 4: The registration of the security
1. If the security need to be registered legally, the first and second parties
should do it in corresponding offices with holding the contract and loan
contract and relevant materials in 15 days after this contract is concluded
2
<PAGE>
and signed.
2. If the security under this contract need not be registered lawfully, and
the first and second parties would like to do it, they should register the
security in the Party B's local notary office or registration management
office with holding the contract and relevant materials in 15 days after
this contract is concluded and signed.
Article 5: Insurance
According to the request of the Party A, the Party B should appoint the Party A
as the first beneficiary and insures sufficient property in the insurance
company the Party A appointed. The Party A would hold the insurance policy.
Insurance term must be longer than the time limit of loan. If the term of loan
under loan contract is prolonged, the Party B must extend the term of insurance.
If the insured suffer loss, the Party A is entitled to recall principal and
interest of loan and other fees from the insurance compensation first.
If the Party B does not insure the security, or does not extend insurance term
that should be prolonged, the Party A has the right to do it instead of the
Party B. The Party B should pay the relevant fees.
Article 6: The restriction to the disposal of security during mortgage:
In the course of mortgage, the Party B can't transfer the security under this
contract through selling, exchanging and presenting. If the Party B need to
transfer the security under this contract necessarily, he can do it, but he
must comfort to the terms as follows:
1.1 The Party B must inform the Party A in written form and apprize the
assignee the situation that the transferring property has been mortgaged.
If the Party B didn't inform the Party A or didn't apprize the assignee,
the transferring behavior is invalid.
1.2 If the Party B transfer the security at the price that is so lower than
its value that it is not enough to compensate the principal and interest
and other fees under this contract, the Party A is entitled to ask the
Party B provide relevant sufficient mortgage property. If the Party B
don't provide, he can't transfer the security.
1.3 The Party B must transfer the money that the Party B obtains by conveying
the security to the Party A's savings account completely, which will be
used to compensate the principal and interest of the loan and other fees.
1.4 After the Party B transferred the money obtained by conveying the
security to the Party A's savings account, the Party A could help the
Party B with writing off the registration of the security, and send the
3
<PAGE>
ownership warrant back to the Party B.
Without the agreement of the Party A in written form, the Party B can't
transfer, rent, re-mortgage, or transact the security under this contract
in any other improper manner.
Article 7: The Party B bears the relevant fees of insurance, notarization,
registration, transportation and keeping of the security under this contract.
Article 8: After the contract goes into effect, without the agreement of the
other side, any party can't modify or discharge this contract. If the contract
need to be modified or discharged, the two parties should come to an agreement
in written form through consulting with each other. Before the agreement is
reached, provision of this contract is still in effect.
Article 9: In the period of validity of this contract, if merger or separation
occur in the Party B, the responsibility described in this contract should be
undertaken by the company having been altered or respectively. If the Party B is
announced to be dismissed or bankrupt, the Party A has the right to dispose of
the security property preferentially.
Article 10: The Party A can dispose of security, if any of the situations as
follows occur:
1. When the term of loan prescribed in the contract expires, the borrower
can't repay the principal and interest, or when the extended term of loan
expires, the borrower still can't repay principal and interest;
2. The borrower disobeys relevant laws or breaches loan contract, and lead to
the situation that the Party A recall part or full of the loan ahead;
3. The borrower died and there is not heritor or devisee;
4. The heritor or devisee of the borrower gives up inheriting or don't accept
bequeath, and refuse fulfilling the responsibility of repaying principal
and interest of the loan;
5. The borrower is announced to be dismissed or bankrupt;
6. there occurred some situation which jeopardizes the possibility of the
realization of the Party A's creditor's rights;
Article 11: Duty of breaching faith:
1. With breaching the sixth provision, if the Party B disposes of security,
the activity is invalid. The Party A is entitled to request the Party B
stop
4
<PAGE>
damaging the Party A's hypothec immediately. In the light of actual
situation, the Party A could ask the Party B provide other security which
the Party A could accept, or dispose of the security ahead in terms of laws
and this contract;
2. If the Party B damages the Party A's economic benefit because of concealing
the situation of co-ownership, controversy, being sealed up, being
detained, or having been mortgaged, the Party B must bear corresponding
compensation duty;
3. Any of the two parties damages the other's economic benefit because of
breaching the eighth provision, it should pay the other fine that is
-percent of principal and interest of the loan under this contract.
Article 12: When the loan contract expires, if the Party B can't repay the
principal and interest and other fees, with the Party A claiming hypothec, the
security is sealed up or detained by court of people. From the time of sealing
up and detaining, the Party A has the right to charge interest separated from
the security and the legal interest that the Party B charged from the security.
Article 13: The implementation of hypothec:
1. When any situation prescribed in the tenth provision occur, hypothec could be
implemented as follows: i. The first and second parties come to an agreement to
auction, sell security or convert it into money; ii. Disposing of security in
terms of the procedure of law.
2. The Party A can share preferentially the money that is obtained by
disposing of security in above-mentioned manners. The surplus that is the
obtained money above the sum of principal, interest and other fees belong
to the Party B. The Party A can demand the deficient.
Article 14: The extermination of hypothec
When the borrower repays the principal and interest in time or ahead in the
light of term prescribed in contract, hypothec exterminates automatically. The
Party A should send the Party B's ownership warrant, attestation and insurance
policy kept by him back to the Party B. The Party A assists the Party B to write
off the registration of security.
Article 15: The settlement of the dispute
5
<PAGE>
Both parties should settle their dispute that occur in the period of the term of
the contract by consulting with each other. If the dispute is not resolvable,
each one of them can:
1. Go to to sue the other. Or
2. Go to of mediators to arbitrate the dispute.
Article 16: The mortgage contract's going into effect:
1. If the security under this contract need to be registered legally, the
contract will come into force when the security is registered and the
first and second parties sign and affix their common seal. The contract
will lose efficacy after the principal and interest and other relevant
fees are repaid.
2. If the security under this contract need not be registered lawfully, the
contract will come into force when the first and second parties sign and
affix their common seal. It will lose efficacy after the principal and
interest and other relevance fees are repaid.
Article 17: Other complementary items:
Article 18: This contract consists of four duplicates. The Party A, the Party
B, department, and registration office hold one of them respectively.
THE PARTY A:
Merchant Bank Shenyang Branch (Seal)
Authorized representative (Signature): Sun Peipan
THE PARTY B:
Shenyang Haitong House Properties Development Co. Ltd.(Seal)
Authorized representative (Signautre): Lee Shouzheng
Date: November 8th, 1999
6
Loan Contract of RMB of the Construction Bank of China
Type of loan: Circulating Capital for Industry
Code of the contract:
Borrower: Shenyang Haitong House Properties Development Co.,Ltd
Address:386,Qingnian street, Heping District
Tel: 23180318
Legal representative: Li Shouzheng
Banking institution and the account number:Construction Bank, Nanhu
Subbranch
Fax: 23180944
Post Code: 110003
Lender: The Construction Bank of China, Nanhu Subbranch
Address: 185, Minzhu Road, Heping District
Tel: 23873417
Legal representative: Chen Fengbin
Fax:
Post Code:
<PAGE>
Borrower (hereinafter is referred to as Party A): Shenyang Haitong House
Properties Development Co.Ltd. Lender (hereafter is referred to as Party B): The
Construction Bank of China, Nanhu Subbranch
Party A applies a loan to Party B, while Party B examines and agrees to grant
the loan according to Bank loan regulations.. In accordance with relevant laws
and regulations, the contract hereunder is concluded b the two parties to define
rights and obligations of each party upon negotiated consultation.
Article 1:Amount of loan. Party A borrows from Party B RMB(in words): one
million seven hundred thousand yuan.
Article 2:Purpose of loan
Party A will use the loan to purchase architectural decorating materials.
Article 3: Life of loan
The life of loan from December 9th ,1999 to December 8th , 2000.
Article 4: Interest rate and interest of loan
The interest of loan shall be calculated monthly at 5.3625%, and be settled
monthly.
The interest of loan shall be calculated since the date when the loan is
deposited at the account of Party A. During the period of vitality of the
contract, the interest adjustment shall be conducted according to stipulations
of the Peoples Bank.
Article 5: Plan of utilizing the loan
The plan of repaying the loan of Party A 1.7 million yuan in Decem.1999.
Article 6:Plan of repaying the loan
The plan of repaying the loan of Party A 1.7million yuan in Decem.2000.
In case Party A repays the loan ahead of time, it shall inform Party B 10
workdays in advance for approval.
Article 7:Mode of paying interests
Party A ensures that it shall pay the interests on schedule by transfer of
accounts
In case Party A does not pay the interests on time, Party B has the right to
withhold the amount from the account of Party A or suspend offering the loan.
Article 8:Mode of withholding payment
Party A ensures that it shall repay the loan s the stipulated in Article 6,
otherwise
Party B has the right, directly or to entrust other party, to withhold the
capital and interest of the loan and relating expenses from the account of Party
A.
<PAGE>
Article 9:Amendment and termination of the contract
1. After the contract is put into force, neither party shall amend or
terminate the contract arbitrarily.
2. In case Party A is not able to repay the loan through efforts when the loan
becomes due, Party A may apply for a extension of repaying to Party B, one
loan may only be extended once. Party A shall make a written application to
Party B 20 workdays in advance, and submit a written letter of guarantee
with a third Party As guarantor or mortgager who agrees to the extension.
Upon the approval of Party B an extension agreement of repaying shall be
signed as an appendix to the contract.
3. Shall Party A transfer the rights or obligations under the contract to a
third party, a written consent shall be obtained from Party B in advance.
The transferring becomes effective after the signing of a new loan contract
between the transferee and Party B.
4. Shall change of systems such as of mergence, separation, contracting and
transform of stock system etc. Occurs in either Party A or B, the rights or
obligations under the contract shall be enjoyed or borne by the party
concerned after the change.
Article 10:Guarante of loan
To the capital and interest and expenses of loan under the contract, the unit of
will act as the guarantor of Party A or (and )the property offered by Shenyang
Haitong House Properties Development co.,Ltd. As the mortgage.A separate
contract of guarantee or (and) mortgage shall be signed as the subordinated
contract.
Article 11:Within the vitality of the contract, shall change of operation mode
occurs in Party A such as contracting, lease, mergence, joint-venture,
separation, transformation of stock system, Party A shall inform Party B 30 days
in advance. Upon the written approval of contract of system transformation from
Party B, Party A may carry out the action of change.
Article 12:Principal rights and obligations of Party A and Party B
1. Party A is entitled to demand Party B to grant loan as stipulated by the
contract;
2. Party A shall repay the capital and interest of the loan within the period
stipulated by the contract;
3. Party A shall use the loan as stipulated and shall not transfer it for
other purpose without the written approval of Party B.
4. Party A shall provide relevant schedule, statistics, financial statement,
etc. Demanded by Party B;
5. Party B is entitled to check the application of the loan;
6. Party B is entitled to supervise capitals and operating conditions of Party
A;
7. Party B shall grant the loan on schedule stipulated by the contract.
Article 13:Liabilities for breach of the contract
1. In case Party A does not utilize the loan s agreed upon, Party B has the
right to charge interest by a daily rate of 0.05% to the sum during the
period of breach.
2. The party of the loan Party A does not repay on time is regarded as overdue
loan,
<PAGE>
Party B has the right to charge interest by a daily rate of 0.021% during
the overdue period. In case Party A is able to repay the loan but transfers
the capital on purpose to avoid repaying, Party B has the right to impose
joint loan sanctions, and charge interest by a daily rate of 0.05% to the
sum during the overdue period
3. In case Party A arbitrarily change the system of the enterprise violating
stipulations of Article 11 under the contract which results in the falling
through of the obligatory right of the loan and loss of capital, Party B
has the right to withhold part or all of the loan, and charge a fine of 30%
of the sum borrowed.
4. In case Party A violates stipulations of Article 15 under the contract,
Party B has the right to charge a fine of 30% of the sum borrowed.
5. Within the period of validity, in any one case of the following, Party B
has the right to stop granting the loan, withhold the capital and interest
of the loan or deal with the mortgage in advance, and to directly deduct
from the account of Party A:
5.1 Party A does not use the loan to purpose stipulated, and will not correct
by limited warning of Part B;
5.2 Party A submits Party B false plan, statistics and financial statement,
etc;
5.3 Incase of a loan contract with a guarantee or (and ) mortgage from a third
party , when the guarantor violates the contract or loses the capacity of
bearing joint liability, mortgager violates mortgage agreement or the
mortgage does not compensate for the capital and interest of the loan,
Party a can not provide new guarantee or (and) mortgage demanded by Party B
5.4 Party A is or well be involved in major legal action or arbitration and
other legal disputes;
5.5 Other actions caused by Party A which impair its paying capacity or want of
paying intent.
Article 14:Settlement of disputes
The disputes aroused in the execution of the contract may be resolved through
negotiations between the two parties, or a suit may be started in the local
ioples court where loan bank 9of Party B) resides.
Article 15: Other issues mutually agreed upon by the two parties:
1. Before Party A pays off the capital and interest of loan, it shall not use
the fixed assets coming from the loan of Party B to mortgage to a third
party
2. Before Party a pays off the capital and interest of loan, it shall not
provide a credit guarantee which exceeds it capacity;
3.
4.
Article 16:Any outstanding issue shall be settled according to Chinese laws,
regulations and financial rules.
Article 17:The contract shall come into force upon signing of the legal
representatives or their authorized agents with seal of the companies, till the
completion of paying off of the capital and interest of loan under the contract.
<PAGE>
Article 18:There are 3 original copies of the contract, Party A and Party B hold
one each, the guarantor (if any) holds one. There are 2 duplicates.
The Party A:
Shenyang Haitong House Properties Development Co.,Ltd(Seal)
Legal representative(or authorizaiton agent):Li Shouzheng (Signature)
December 2nd,1999
The Party B:
Construction Bank of China Shenyang Nanhu Science & Technology Development
Zone Subbranch.(Seal)
Legal representative(or authorizaiton agent):Chen Fengbin (Signature)
December 2nd,1999
<PAGE>
Loan Contract of RMB of the Construction Bank of China
Type of loan:
Code of the contract:971230-1
Borrower: Shenyang Haitong House Properties Development Co.,Ltd
Address:386,Qingnian street, Heping District
Tel: 3841118
Legal representative: Li Shouzheng
Banking institution and the account number:Construction Bank, Nanhu
Subbranch 441-263027820
Fax: 3883944
Post Code: 110003
Lender: The Construction Bank of China, Zhongshan Subbranch
Address: 261,Shifu Road, Shenhe District
Tel: 27012802
Legal representative: Shen Chunyue
Fax:
Post Code:110013
<PAGE>
Borrower (hereinafter is referred to as Party A): Shenyang Haitong House
Properties Development Co.Ltd.
Lender (hereafter is referred to as Party B): The Construction Bank of China,
Zhongshan Subbranch
Party A applies a loan to Party B, while Party B examines and agrees to grant
the loan according to Bank loan regulations.. In accordance with relevant laws
and regulations, the contract hereunder is concluded b the two parties to define
rights and obligations of each party upon negotiated consultation.
Article 1:Amount of loan.
Party A borrows from Party B RMB(in words): fifteen million yuan.
Article 2:Purpose of loan
Party A will use the loan to purchase architectural decorating materials.
Article 3: Life of loan
The life of loan from December 30th, 1997 to June 29th , 1999.
Article 4: Interest rate and interest of loan
The interest of loan shall be calculated monthly at 8.58%, and be settled
quarterly.
The interest of loan shall be calculated since the date when the loan is
deposited at the account of Party A. During the period of vitality of the
contract, the interest adjustment shall be conducted according to stipulations
of the Peoples Bank.
Article 5: Plan of utilizing the loan
The plan of repaying the loan of Party A 15.0 million yuan in Decem.1997.
Article 6:Plan of repaying the loan
The plan of repaying the loan of Party A 5.0 million yuan in June 1998; 5.0
million yuan in December 1998; 5.0 million yuan in June 1999.
In case Party A repays the loan ahead of time, it shall inform Party B 10
workdays in advance for approval.
Article 7:Mode of paying interests
Party A ensures that it shall pay the interests on schedule quarterly.
In case Party A does not pay the interests on time, Party B has the right to
withhold the amount from the account of Party A or suspend offering the loan.
Article 8:Mode of withholding payment
Party A ensures that it shall repay the loan s the stipulated in Article 6,
otherwise
Party B has the right, directly or to entrust other party, to withhold the
capital and interest of the loan and relating expenses from the account of Party
A.
<PAGE>
Article 9:Amendment and termination of the contract
1.After the contract is put into force, neither party shall amend or terminate
the contract arbitrarily.
2.In case Party A is not able to repay the loan through efforts when the loan
becomes due, Party A may apply for a extension of repaying to Party B, one loan
may only be extended once. Party A shall make a written application to Party B
20 workdays in advance, and submit a written letter of guarantee with a third
Party A's guarantor or mortgager who agrees to the extension. Upon the approval
of Party B an extension agreement of repaying shall be signed as an appendix to
the contract.
3.Shall Party A transfer the rights or obligations under the contract to a
third party, a written consent shall be obtained from Party B in advance. The
transferring becomes effective after the signing of a new loan contract between
the transferee and Party B.
4.Shall change of systems such as of mergence, separation, contracting and
transform of stock system etc. Occurs in either Party A or B, the rights or
obligations under the contract shall be enjoyed or borne by the party concerned
after the change.
Article 10:Guarante of loan
To the capital and interest and expenses of loan under the contract, the unit of
will act as the guarantor of Party A or (and )the property offered by Huayang
Industry & Commerce (Shenyang) Group co.,Ltd. As the mortgage.A separate
contract of guarantee or (and) mortgage shall be signed as the subordinated
contract.
Article 11:Within the vitality of the contract, shall change of operation mode
occurs in Party A such as contracting, lease, mergence, joint-venture,
separation, transformation of stock system, Party A shall inform Party B 30 days
in advance. Upon the written approval of contract of system transformation from
Party B, Party A may carry out the action of change.
Article 12:Principal rights and obligations of Party A and Party B
1.Party A is entitled to demand Party B to grant loan as stipulated by the
contract;
2.Party A shall repay the capital and interest of the loan within the period
stipulated by the contract;
3.Party A shall use the loan as stipulated and shall not transfer it for other
purpose without the written approval of Party B.
4.Party A shall provide relevant schedule, statistics, financial statement, etc.
Demanded by Party B;
5.Party B is entitled to check the application of the loan;
6.Party B is entitled to supervise capitals and operating conditions of Party A;
7.Party B shall grant the loan on schedule stipulated by the contract.
Article 13:Liabilities for breach of the contract
1.In case Party A does not utilize the loan s agreed upon, Party B has the right
to charge interest by a daily rate of 0.06% to the sum during the period of
breach.
2.The party of the loan Party A does not repay on time is regarded as overdue
loan , Party B has the right to charge interest by a daily rate of 0.04% during
the overdue
<PAGE>
period.
In case Party A is able to repay the loan but transfers the capital on purpose
to avoid repaying, Party B has the right to impose joint loan sanctions, and
charge interest by a daily rate of 0.06% to the sum during the overdue period
3.In case Party A arbitrarily change the system of the enterprise violating
stipulations of Article 11 under the contract which results in the falling
through of the obligatory right of the loan and loss of capital, Party B has the
right to withhold part or all of the loan, and charge a fine of 30% of the sum
borrowed.
4.In case Party A violates stipulations of Article 15 under the
contract, Party B has the right to charge a fine of 30% of the sum borrowed.
5.Within the period of validity, in any one case of the following, Party B has
the right to stop granting the loan, withhold the capital and interest of the
loan or deal with the mortgage in advance, and to directly deduct from the
account of Party A:
5.1Party A does not use the loan to purpose stipulated, and will not correct by
limited warning of Part B;
5.2Party A submits Party B false plan, statistics and financial statement, etc;
5.3Incase of a loan contract with a guarantee or (and ) mortgage from a third
party , when the guarantor violates the contract or loses the capacity of
bearing joint liability, mortgager violates mortgage agreement or the mortgage
does not compensate for the capital and interest of the loan, Party a can not
provide new guarantee or (and) mortgage demanded by Party B
5.4Party A is or well be involved in major legal action or arbitration and other
legal disputes;
5.5 Other actions caused by Party A which impair its paying capacity or want of
paying intent.
Article 14:Settlement of disputes
The disputes aroused in the execution of the contract may be resolved through
negotiations between the two parties, or a suit may be started in the local
ioples court where loan bank 9of Party B) resides.
Article 15: Other issues mutually agreed upon by the two parties:
5. Before Party A pays off the capital and interest of loan, it shall not use
the fixed assets coming from the loan of Party B to mortgage to a third party
6. Before Party a pays off the capital and interest of loan, it shall not
provide a credit guarantee which exceeds it capacity;
7.
8.
Article 16:Any outstanding issue shall be settled according to Chinese laws,
regulations and financial rules.
Article 17:The contract shall come into force upon signing of the legal
representatives or their authorized agents with seal of the companies, till the
completion of paying off of the capital and interest of loan under the contract.
Article 18:There are 5 original copies of the contract, Party A and Party B hold
one
<PAGE>
each, the guarantor (if any) holds one.
The Party A:
Shenyang Haitong House Properties Development Co.,Ltd(Seal)
Legal representative(or authorizaiton agent):Li Shouzheng (Signature)
December 30nd,1997
The Party B:
Construction Bank of China Shenyang Zhongshan Subbranch.(Seal)
Legal representative(or authorizaiton agent):Shen Chunyue (Signature)
December 30th, 1997
CHINA CONSTRUCTION BANK (LOAN)
MORTGAGE CONTRACT
SERIAL NUMBER OF CONTRACT:
MORTGAGOR (THE PARTY A): SHENYANG HAITONG HOUSE PROPERTIES
DEVELOPMENT CO.LTD(HEREAFTER REFERRED TO AS PARTY A)
ADDRESS:QINGNIAN STREET 386,HEPING DISTRICT
LEGAL REPRESENTATIVE: LEE, SHOU-CHENG
BANK ACCOUNT: NANHU SUBBRANCH OF CHINA CONSTRUCTION BANK.
ACCOUNTS:261001268
MORTGAGEE(HEREAFTER REFERRED TO AS PARTY B):NANHU SUBBRANCH OF
CHINA CONSTRUCTION BANK.
ADDRESS: 185,MINZHU ROAD ,HEPING DISTRICT.
LEGAL REPRESENTATIVE: CHEN FENGBIN
<PAGE>
To assure the performance of loan contract No. , the party A would like to take
its own property or the property of which the Party A has the right to dispose
legally as security. Through examination, the Party B accepted the Party A's
security property. According to relevant rules of law, both parties consult with
each other, and come to agreements in the following items:
ARTICLE 1:The Party A mortgages property that ix listed in security listing.
ARTICLE 2:The amount that the Party A mortgage is 1.7 millions yuan. The term of
loan is from December 9th , 1999 to December 12th ,2000.
ARTICLE 3:The Party A assures that it has the ownership or management right of
the security.
ARTICLE 4:When this contract goes into effect, the Party A should send the
ownership warrant of the security to the Party B. During the mortgage, the
ownership warrant of the security should be in safekeeping by the Party B.
ARTICLE 5:The range of mortgage and guarantee.
The sum of loan that is 1.7 millions yuan, interests, fine, compensation, and
the fees to realize creditor's rights and hypothec (which includes a retaining
fee and legal cost).
ARTICLE 6:Effectiveness of this contract is independent from the loan contract
guarantee, The invalidation of loan contract doesn't affect the effectiveness of
this contract.
ARTICLE 7:The Party A bears fees of relevant evaluation, insurance,
identification, registration and keeping.
ARTICLE 8: During the mortgage, the Party A is responsible for safekeeping of
the security, and to keep it in good condition. The Party B can examine them at
any moment.
ARTICLE 9: The Party A should insure the security in the course of mortgage and
appoint the Party B as the first beneficiary. The Party B holds the insurance
Policy.
ARTICLE 10:In the period of mortgage, if the security suffers loss that exceeds
the range of insurance, or the security is devalued due to the third party's
activity, the insurance compensation or damage compensation should be
transferred by Party A to the account pointed by the Party B.
During the mortgage, the Party A can't use this property.
ARTICLE 11: If the security is devalued, the Party A should provide the Party B
with guarantee that equals the value decreased in thirty days.
ARTICLE 12:In the period of mortgage, if the security incurs pollution to
environment or other damage, the Party A should bear the responsibility itself.
<PAGE>
ARTICLE 13:During the mortgage, without the 3 agreement of the Party Bin written
form, the Party A can't present, move, rent, transfer, re-mortgage, or transact
the security under this contract in any other improper manner.
ARTICLE 14:In period of the mortgage, with the agreement of the Party B in
written form, the money obtained by the Party A from transferring the security
should be used preferentially to repay the Party B the creditor's rights ahead.
ARTICLE 15:When the term of loan prescribed in the contract expires, if the
borrower can't repay the debt, the Party B is entitled to convert the security
into money., or auction, sell the security. The Party B can share Preferentially
the money obtained in the above-mentioned manner, and realize hypothec.
ARTICLE 16:The Party B can dispose of the security ahead and realize hypothec,
or stop providing the loan under loan contact or recall the principal and
interest having been provided ahead, if any of the situations as follows happen:
1. The Party A is announced to be dismissed or bankrupt;
2.The Party A seriously breached the duty prescribed in the fourth, eighth,
ninth, eleventh and thirteenth item of this contract, or other behavior
breaching this contract seriously take place.
3.In period of loan term, the borrower is announced to be bankrupt and
dismissed, or the company's systems modified. They induce that the Party B's
creditor's rights go by the board, the use of loan id changed, the Party A is
entangled with lawsuit, and other situation that influences enough the Party
A's compensation ability or behavior lacking of honest to repay occur.
ARTICLE 17: If the Party A damages the Party B's economic benefit because of
concealing situation of co-ownership, controversy, being sealed up, being
corresponding compensation that is 30 percent of the sum of loan. If the
compensation is not enough to offset the damage to the Party B, the Party A
should compensate the insufficient part. The party B is entitled to use the
money in the Party A's account to balance the compensation and fine.
ARTICLE 18:The money obtained by the Party B from disposing of the security
could be allotted in the order as follows:
1. Pay the fees that are needed to transact the security; 2. Repay the interest
that the Party A owes the Party B;
3. Repay the compensation, fine, and principal of loan that the Party A owes the
Party B, and so on.
4. Pay other fees.
ARTICLE 19:Other items promised.
ARTICLE 20:If the two parties don't come to an agreement on the controversy
about movable property caused by this contract, they should lodge a complaint in
the Party B's local court.
ARTICLE 21:When the security listed in the security listing is registered, this
<PAGE>
contract goes into effect.
ARTICLE 22:Both parties' legal representatives (or authorization agents) should
sign and affix their common seal on the contract. It will also efficacy after
other relevant fees are repaid.
ARTICLE 23: This contract consists of two duplicates. The two parties hold one
of them respectively.
<PAGE>
THE PARTY A:
Shenyang Haitong House Properties Development Co.,Ltd.
Legal representative (Signature): Lee, Shou-cheng
(or authorization agent)
Date:
THE PARTY B:
Construction Bank of China Shenyang Nanhu Science &Technology Development Zone
Subbranch.
Legal representative (Signature): Chen Fengbin
(or authorization agent)
Date :
Appendix: Security list
LOAN CONTRACT OF RMB OF THE CONSTRUCTION BANK OF CHINA
Type of loan: Circulating Capital for Construction
Code of the contract:
Borrower: Shenyang Haitong House Properties Development Co.,Ltd
Address:386,Qingnian street, Heping District
Tel: 23180318
Legal representative: Lee Shouzheng
Banking institution and the account number:263027820 construction
bank zhongsan office
Fax: 23180944
Post Code: 110003
Lender: The Construction Bank of China, Zhongsan Branch
Address: No.261 Shifu Road, Shenhe District
Tel: 22716104
Legal representative: Xiang DongSheng
Fax:22711245
Post Code:110013
<PAGE>
BORROWER (HEREINAFTER IS REFERRED TO AS PARTY A): Shenyang Haitong House
Properties Development Co.Ltd.
LENDER (HEREAFTER IS REFERRED TO AS PARTY B): The Construction Bank of China
Zhongsan Branch.
Party A applies a loan to Party B, while Party B examines and agrees to grant
the loan according to .. In accordance with relevant laws and regulations, the
contract hereunder is concluded b the two parties to define rights and
obligations of each party upon negotiated consultation.
ARTICLE 1:Amount of loan.
Party A borrows from Party B RMB(in words): 15 millions yuan
ARTICLE 2:Purpose of loan
Party A will use the loan to purchase architectural decorating materials.
ARTICLE 3: Life of loan
The life of loan from December 29th ,1999 to December28th , 2000.
ARTICLE 4: Interest rate and interest of loan
The interest of loan shall be calculated monthly at 5.3625/oo, and be settled
monthly . The interest of loan shall be calculated since the date when the loan
is deposited at the account of Party A. During the period of vitality of the
contract, the interest adjustment shall be conducted according to stipulations
of the People's Bank.
ARTICLE 5: Plan of utilizing the loan
The plan of utilizing the loan of Party A
ARTICLE 6:Plan of repaying the loan
In case Party A repays the loan ahead of time, it shall inform Party B 10
workdays in advance for approval.
ARTICLE 7:Mode of paying interests
Party A ensures that it shall pay the interests on schedule by transfer of
accounts
In case Party A does not pay the interests on time, Party B has the right to
withhold the amount from the account of Party A or suspend offering the loan.
ARTICLE 8:Mode of withholding payment
Party A ensures that it shall repay the loan s the stipulated in Article 6,
otherwise
Party B has the right, directly or to entrust other party, to withhold the
capital and interest of the loan and relating expenses from the account of Party
A.
ARTICLE 9:Amendment and termination of the contract
<PAGE>
1. After the contract is put into force, neither party shall amend or terminate
the contract arbitrarily.
2. In case Party A is not able to repay the loan through efforts when the loan
becomes due, Party A may apply for a extension of repaying to Party B, one
loan may only be extended once. Party A shall make a written application to
Party B 10 workdays in advance, and submit a written letter of guarantee with
a third Party A's guarantor or mortgager who agrees to the extension. Upon
the approval of Party B an extension agreement of repaying shall be signed as
an appendix to the contract.
3. Shall Party A transfer the rights or obligations under the contract to a
third party, a written consent shall be obtained from Party B in advance. The
transferring becomes effective after the signing of a new loan contract
between the transferee and Party B.
4. Shall change of systems such as of mergence, separation, contracting and
transform of stock system etc. Occurs in either Party A or B, the rights or
obligations under the contract shall be enjoyed or borne by the party
concerned after the change.
ARTICLE 10:Guarante of loan
To the capital and interest and expenses of loan under the contract, the unit of
will act as the guarantor of Party A or (and )the property offered by Shenyang
Haitong House Properties Development co.,Ltd. As the mortgage.A separate
contract of guarantee or (and) mortgage shall be signed as the subordinated
contract.
ARTICLE 11:Within the vitality of the contract, shall change of operation mode
occurs in Party A such as contracting, lease, mergence, joint-venture,
separation, transformation of stock system, Party A shall inform Party B 30 days
in advance. Upon the written approval of contract of system transformation from
Party B, Party A may carry out the action of change.
ARTICLE 12:Principal rights and obligations of Party A and Party B
1. Party A is entitled to demand Party B to grant loan as stipulated by the
contract; 2. Party A shall repay the capital and interest of the loan within the
period stipulated by the
contract;
3. Party A shall use the loan as stipulated and shall not transfer it for other
purpose without the written approval of Party B.
4. Party A shall provide relevant schedule, statistics, financial statement,
etc. Demanded by Party B;
5. Party B is entitled to check the application of the loan;
6. Party B is entitled to supervise capitals and operating conditions of Party
A; 7. Party B shall grant the loan on schedule stipulated by the contract.
ARTICLE 13:Liabilities for breach of the contract
1. In case Party A does not utilize the loan s agreed upon, Party B has the
right to charge interest by a daily rate of 0.05% to the sum during the
period of breach.
2. The party of the loan Party A does not repay on time is regarded as overdue
loan , Party B has the right to charge interest by a daily rate of 0.021%
during the overdue period.
<PAGE>
In case Party A is able to repay the loan but transfers the capital on purpose
to avoid repaying, Party B has the right to impose joint loan sanctions, and
charge interest by a daily rate of 0.05% to the sum during the overdue period
3. In case Party A arbitrarily change the system of the enterprise violating
stipulations of ARTICLE 11 under the contract which results in the falling
through of the obligatory right of the loan and loss of capital, Party B has
the right to withhold part or all of the loan, and charge a fine of 30% of
the sum borrowed.
4. In case Party A violates stipulations of ARTICLE 15 under the contract, Party
B has the right to charge a fine of 30% of the sum borrowed.
5. Within the period of validity, in any one case of the following, Party B has
the right to stop granting the loan, withhold the capital and interest of the
loan or deal with the mortgage in advance, and to directly deduct from the
account of Party A:
5.1Party A does not use the loan to purpose stipulated, and will not correct by
limited warning of Part B;
5.2Party A submits Party B false plan, statistics and financial statement, etc;
5.3In case of a loan contract with a guarantee or (and ) mortgage from a third
party ,
when the guarantor violates the contract or loses the capacity of bearing
joint liability, mortgager violates mortgage agreement or the mortgage does
not compensate for the capital and interest of the loan, Party a can not
provide new guarantee or (and) mortgage demanded by Party B
5.4Party A is or well be involved in major legal action or arbitration and other
legal disputes;
5.5Other actions caused by Party A which impair its paying capacity or want of
paying intent.
ARTICLE 14:Settlement of disputes
The disputes aroused in the execution of the contract may be resolved through
negotiations between the two parties, or a suit may be started in the local
iople's court where loan bank 9of Party B)
resides.
ARTICLE 15: Other issues mutually agreed upon by the two parties:
1. Before Party A pays off the capital and interest of loan, it shall not use
the fixed assets coming from the loan of Party B to mortgage to a third party
2. Before Party a pays off the capital and interest of loan, it shall not
provide a credit guarantee which exceeds it capacity;
3.
4.
ARTICLE 16:Any outstanding issue shall be settled according to Chinese laws,
regulations and financial rules.
ARTICLE 17:The contract shall come into force upon signing of the legal
representatives or their authorized agents with seal of the companies, till the
completion of paying off of the capital and interest of loan under the contract.
ARTICLE 18:There are 3 original copies of the contract, Party A and Party B hold
one each, the guarantor (if any) holds one. There are 2 duplicates.
<PAGE>
THE PARTY A:
Shenyang Haitong House Properties Development Co.,Ltd(Seal)
Legal representative(or authorizaiton agent):Lee Shouzheng (Signature)
December 29,1999
THE PARTY B:
The Construction Bank of China Zhongsan Branch (Seal)
Legal representative(or authorizaiton agent):Xiang Dongsheng (Signature)
December 29,1999
CHINA CONSTRUCTION BANK (LOAN)
MORTGAGE CONTRACT
SERIAL NUMBER OF CONTRACT: 142
MORTGAGOR (THE PARTY A): SHENYANG HAITONG HOUSE PROPERTIES
DEVELOPMENT CO.LTD(HEREAFTER REFERRED TO AS PARTY A)
ADDRESS:QINGNIAN STREET 386,HEPING DISTRICT
LEGAL REPRESENTATIVE: LEE SHOUZHENG
BANK ACCOUNT: ZHONGSHAN SUBBRANCH OF CHINA CONSTRUCTION BANK.
ACCOUNTS:
MORTGAGEE(HEREAFTER REFERRED TO AS PARTY B):ZHONGSHAN SUBBRANCH OF CHINA
CONSTRUCTION BANK.
ADDRESS: 261,SHIFU ROAD ,SHENHE DISTRICT.
LEGAL REPRESENTATIVE: HE DONGSHENG
<PAGE>
To assure the performance of loan contract No. 142 , the party A would like to
take its own property or the property of which the Party A has the right to
dispose legally as security. Through examination, the Party B accepted the Party
A's security property. According to relevant rules of law, both parties consult
with each other, and come to agreements in the following items:
ARTICLE 1:The Party A mortgages property that ix listed in security listing.
ARTICLE 2:The amount that the Party A mortgage is 15.0 millions yuan. The term
of loan is from December 29th , 1999 to December 28th ,2000.
ARTICLE 3:The Party A assures that it has the ownership or management right of
the security.
ARTICLE 4:When this contract goes into effect, the Party A should send the
ownership warrant of the security to the Party B. During the mortgage, the
ownership warrant of the security should be in safekeeping by the Party B.
ARTICLE 5:The range of mortgage and guarantee.
The sum of loan that is 15.0 millions yuan, interests, fine, compensation, and
the fees to realize creditor's rights and hypothec (which includes a retaining
fee and legal cost).
ARTICLE 6:Effectiveness of this contract is independent from the loan contract
guarantee, The invalidation of loan contract doesn't affect the effectiveness of
this contract.
ARTICLE 7:The Party A bears fees of relevant evaluation, insurance,
identification, registration and keeping.
ARTICLE 8: During the mortgage, the Party A is responsible for safekeeping of
the security, and to keep it in good condition. The Party B can examine them at
any moment.
ARTICLE 9: The Party A should insure the security in the course of mortgage and
appoint the Party B as the first beneficiary. The Party B holds the insurance
Policy.
ARTICLE 10:In the period of mortgage, if the security suffers loss that exceeds
the range of insurance, or the security is devalued due to the third party's
activity, the insurance compensation or damage compensation should be
transferred by Party A to the account pointed by the Party B. During the
mortgage, the Party A can't use this property.
ARTICLE 11: If the security is devalued, the Party A should provide the Party B
with guarantee that equals the value decreased in thirty days.
ARTICLE 12:In the period of mortgage, if the security incurs pollution to
environment or other damage, the Party A should bear the responsibility itself.
<PAGE>
ARTICLE 13:During the mortgage, without the 3 agreement of the Party Bin written
form, the Party A can't present, move, rent, transfer, re-mortgage, or transact
the security under this contract in any other improper manner.
ARTICLE 14:In period of the mortgage, with the agreement of the Party B in
written form, the money obtained by the Party A from transferring the security
should be used preferentially to repay the Party B the creditor's rights ahead.
ARTICLE 15:When the term of loan prescribed in the contract expires, if the
borrower can't repay the debt, the Party B is entitled to convert the security
into money., or auction, sell the security. The Party B can share Preferentially
the money obtained in the above-mentioned manner, and realize hypothec.
ARTICLE 16:The Party B can dispose of the security ahead and realize hypothec,
or stop providing the loan under loan contact or recall the principal and
interest having been provided ahead, if any of the situations as follows happen:
1. The Party A is announced to be dismissed or bankrupt;
2. The Party A seriously breached the duty prescribed in the fourth, eighth,
ninth, eleventh and thirteenth item of this contract, or other behavior
breaching this contract seriously take place.
3. In period of loan term, the borrower is announced to be bankrupt and
dismissed, or the company's systems modified. They induce that the Party B's
creditor's rights go by the board, the use of loan id changed, the Party A is
entangled with lawsuit, and other situation that influences enough the Party
A's compensation ability or behavior lacking of honest to repay occur.
ARTICLE 17: If the Party A damages the Party B's economic benefit because of
concealing situation of co-ownership, controversy, being sealed up, being
corresponding compensation that is 30 percent of the sum of loan. If the
compensation is not enough to offset the damage to the Party B, the Party A
should compensate the insufficient part. The party B is entitled to use the
money in the Party A's account to balance the compensation and fine.
ARTICLE 18:The money obtained by the Party B from disposing of the security
could be allotted in the order as follows:
1. Pay the fees that are needed to transact the security;
2. Repay the interest that the Party A owes the Party B;
3. Repay the compensation, fine, and principal of loan that the Party A owes the
Party B, and so on.
4. Pay other fees.
ARTICLE 19:Other items promised.
Nothing
ARTICLE 20:If the two parties don't come to an agreement on the controversy
about movable property caused by this contract, they should lodge a complaint in
the Party B's local court.
<PAGE>
ARTICLE 21:When the security listed in the security listing is registered, this
contract goes into effect.
ARTICLE 22:Both parties' legal representatives (or authorization agents) should
sign and affix their common seal on the contract. It will also efficacy after
other relevant fees are repaid.
ARTICLE 23: This contract consists of two duplicates. The two parties hold one
of them respectively.
THE PARTY A:
Shenyang Haitong House Properties Development Co.,Ltd.
Legal representative (Signature): Lee Shouzheng
(or authorization agent)
Date:1999-12-29
THE PARTY B:
Construction Bank of China Shenyang Zhongshan Subbranch.
Legal representative (Signature):He Dongsheng
(or authorization agent)
Date :1999-12-29
Appendix: Security list
Tower A18 floor room no:1857,1858,1859
21 floor room no:2152, 2155-2168
28 floor room no:2852, 2855-2868
LOAN CONTRACT OF RMB OF THE CONSTRUCTION BANK OF CHINA
Type of loan:
Code of the contract:
Borrower: Shenyang Haitong House Properties Development Co.,Ltd
Address:386,Qingnian street, Heping District
Tel: 23180318
Legal representative: Lee Shouzheng
Banking institution and the account number: 449-239003038
Fax: 23180944
Post Code: 110003
Lender: The Construction Bank of China, The Construction Subbranch
Address: 109, Minzhu Road
Tel: 23847490
Legal representative:
Fax:
Post Code:
<PAGE>
BORROWER (HEREINAFTER IS REFERRED TO AS PARTY A): Shenyang Haitong House
Properties Development Co.Ltd. LENDER (HEREAFTER IS REFERRED TO AS PARTY B): The
Construction Bank of China, The Construction Subbranch
Party A applies a loan to Party B, while Party B examines and agrees to grant
the loan according to .. In accordance with relevant laws and regulations, the
contract hereunder is concluded the two parties to define rights and obligations
of each party upon negotiated consultation.
ARTICLE 1:Amount of loan.
Party A borrows from Party B RMB(in words): forty million and eight hundred
thousand yuan.
ARTICLE 2:Purpose of loan
Party A will use the loan to purchase architectural decorating materials.
ARTICLE 3: Life of loan
The life of loan from December 30th 1999 to December 29th , 2000.
ARTICLE 4: Interest rate and interest of loan
The interest of loan shall be calculated monthly at 5.85/oo, and be settled
monthly .
The interest of loan shall be calculated since the date when the loan is
deposited at the account of Party A. During the period of vitality of the
contract, the interest adjustment shall be conducted according to stipulations
of the People's Bank.
ARTICLE 5: Plan of utilizing the loan
The plan of repaying the loan of Party A Year month ten thousand yuan Year month
ten thousand yuan Year month ten thousand yuan Year month ten thousand yuan Year
month ten thousand yuan Year month ten thousand yuan
ARTICLE 6:Plan of repaying the loan
The plan of repaying the loan of Party A Year month ten thousand yuan Year month
ten thousand yuan Year month ten thousand yuan Year month ten thousand yuan Year
month ten thousand yuan Year month ten thousand yuan
In case Party A repays the loan ahead of time, it shall inform Party B 10
workdays in advance for approval.
ARTICLE 7:Mode of paying interests
Party A ensures that it shall pay the interests on schedule :
In case Party A does not pay the interests on time, Party B has the right to
withhold the amount from the account of Party A or suspend offering the loan.
ARTICLE 8:Mode of withholding payment
<PAGE>
Party A ensures that it shall repay the loan s the stipulated in Article 6,
otherwise
Party B has the right, directly or to entrust other party, to withhold the
capital and interest of the loan and relating expenses from the account of Party
A.
ARTICLE 9:Amendment and termination of the contract
1. After the contract is put into force, neither party shall amend or terminate
the contract arbitrarily.
2. In case Party A is not able to repay the loan through efforts when the loan
becomes due, Party A may apply for a extension of repaying to Party B, one loan
may only be extended once. Party A shall make a written application to Party B
workdays in advance, and submit a written letter of guarantee with a third Party
A's guarantor or mortgager who agrees to the extension. Upon the approval of
Party B an extension agreement of repaying shall be signed as an appendix to the
contract.
3. Shall Party A transfer the rights or obligations under the contract to a
third party, a written consent shall be obtained from Party B in advance. The
transferring becomes effective after the signing of a new loan contract between
the transferee and Party B.
4. Shall change of systems such as of mergence, separation, contracting and
transform of stock system etc. Occurs in either Party A or B, the rights or
obligations under the contract shall be enjoyed or borne by the party concerned
after the change.
ARTICLE 10:Guarante of loan
To the capital and interest and expenses of loan under the contract, the unit of
will act as the guarantor of Party A or (and )the property offered by Shenyang
Haitong House Properties Development co.,Ltd. As the mortgage.A separate
contract of guarantee or (and) mortgage shall be signed as the subordinated
contract.
ARTICLE 11:Within the vitality of the contract, shall change of operation mode
occurs in Party A such as contracting, lease, mergence, joint-venture,
separation, transformation of stock system, Party A shall inform Party B days in
advance. Upon the written approval of contract of system transformation from
Party B, Party A may carry out the action of change.
ARTICLE 12:Principal rights and obligations of Party A and Party B
1. Party A is entitled to demand Party B to grant loan as stipulated by the
contract;
2. Party A shall repay the capital and interest of the loan within the
period stipulated by the contract;
3. Party A shall use the loan as stipulated and shall not transfer it for other
purpose without the written approval of Party B.
4. Party A shall provide relevant schedule, statistics, financial statement,
etc. Demanded by Party B;
5. Party B is entitled to check the application of the loan;
6. Party B is entitled to supervise capitals and operating conditions of Party
A;
7. Party B shall grant the loan on schedule stipulated by the contract.
<PAGE>
ARTICLE 13:Liabilities for breach of the contract
1. In case Party A does not utilize the loan s agreed upon, Party B has the
right to charge interest by a daily rate of____ to the sum during the period
of breach.
2. The party of the loan Party A does not repay on time is regarded as overdue
loan , Party B has the right to charge interest by a daily rate of during the
overdue period. In case Party A is able to repay the loan but transfers the
capital on purpose to avoid repaying, Party B has the right to impose joint
loan sanctions, and charge interest by a daily rate of_____ to the sum during
the overdue period
3. In case Party A arbitrarily change the system of the enterprise violating
stipulations of ARTICLE 11 under the contract which results in the falling
through of the obligatory right of the loan and loss of capital, Party B has
the right to withhold part or all of the loan, and charge a fine of of the
sum borrowed.
4. In case Party A violates stipulations of ARTICLE 15 under the contract, Party
B has the right to charge a fine of of the sum borrowed.
5. Within the period of validity, in any one case of the following, Party B has
the right to stop granting the loan, withhold the capital and interest of the
loan or deal with the mortgage in advance, and to directly deduct from the
account of Party A:
5.1Party A does not use the loan to purpose stipulated, and will not correct by
limited warning of Part B;
5.2Party A submits Party B false plan, statistics and financial statement, etc;
5.3In case of a loan contract with a guarantee or (and ) mortgage from a third
party ,
when the guarantor violates the contract or loses the capacity of bearing
joint liability, mortgager violates mortgage agreement or the mortgage does
not compensate for the capital and interest of the loan, Party a can not
provide new guarantee or (and) mortgage demanded by Party B
5.4Party A is or well be involved in major legal action or arbitration and other
legal disputes;
5.5Other actions caused by Party A which impair its paying capacity or want of
paying intent.
ARTICLE 14:Settlement of disputes
The disputes aroused in the execution of the contract may be resolved through
negotiations between the two parties, or a suit may be started in the local
iople's court where loan bank 9of Party B) resides.
ARTICLE 15: Other issues mutually agreed upon by the two parties:
1. Before Party A pays off the capital and interest of loan, it shall not use
the fixed assets coming from the loan of Party B to mortgage to a third party
2. Before Party a pays off the capital and interest of loan, it shall not
provide a credit guarantee which exceeds it capacity;
3.
4.
ARTICLE 16:Any outstanding issue shall be settled according to Chinese laws,
<PAGE>
regulations and financial rules.
ARTICLE 17:The contract shall come into force upon signing of the legal
representatives or their authorized agents with seal of the companies, till the
completion of paying off of the capital and interest of loan under the contract.
ARTICLE 18:There are original copies of the contract, Party A and Party B hold
one each, the guarantor (if any) holds one. There are duplicates.
THE PARTY A:
Shenyang Haitong House Properties Development Co.,Ltd(Seal)
Legal representative(or authorizaiton agent):Lee Shouzheng (Signature)
THE PARTY B:
Construction Bank of China Construction Subbranch.(Seal)
Legal representative(or authorizaiton agent):Wang Zhicheng (Signature)
CHINA CONSTRUCTION BANK (LOAN)
MORTGAGE CONTRACT
SERIAL NUMBER OF CONTRACT:
MORTGAGOR (THE PARTY A): SHENYANG HAITONG HOUSE PROPERTIES DEVELOPMENT
CO.LTD(HEREAFTER REFERRED TO AS PARTY A)
ADDRESS:QINGNIAN STREET 386,HEPING DISTRICT
LEGAL REPRESENTATIVE: LEE SHOUZHENG
BANK ACCOUNT:
ACCOUNTS:449-239003038
MORTGAGEE(HEREAFTER REFERRED TO AS PARTY B):CITY CONSTRUCTION SUBBRANCH OF CHINA
CONSTRUCTION BANK.
ADDRESS: 109,MINZHU ROAD , HEPING DISTRICT.
LEGAL REPRESENTATIVE:
To assure the performance of loan contract No. , the party A would like to take
its own property or the property of which the Party A has the right to dispose
legally as security. Through examination, the Party B accepted the Party A's
security property. According to relevant rules of law, both parties consult with
each other, and come to agreements in the following items:
<PAGE>
ARTICLE 1:The Party A mortgages property that ix listed in security listing.
ARTICLE 2:The amount that the Party A mortgage is 40.8 millions yuan. The term
of loan is from 30 December 1999 to 29 December 2000.
ARTICLE 3:The Party A assures that it has the ownership or management right of
the security.
ARTICLE 4:When this contract goes into effect, the Party A should send the
ownership warrant of the security to the Party B. During the mortgage, the
ownership warrant of the security should be in safekeeping by the Party B.
ARTICLE 5:The range of mortgage and guarantee.
The sum of loan that is 40.8 millions yuan, interests, fine, compensation, and
the fees to realize creditor's rights and hypothec (which includes a retaining
fee and legal cost).
ARTICLE 6:Effectiveness of this contract is independent from the loan contract
guarantee, The invalidation of loan contract doesn't affect the effectiveness of
this contract.
ARTICLE 7:The Party A bears fees of relevant evaluation, insurance,
identification, registration and keeping.
ARTICLE 8: During the mortgage, the Party A is responsible for safekeeping of
the security, and to keep it in good condition. The Party B can examine them at
any moment.
ARTICLE 9: The Party A should insure the security in the course of mortgage and
appoint the Party B as the first beneficiary. The Party B holds the insurance
Policy.
ARTICLE 10:In the period of mortgage, if the security suffers loss that exceeds
the range of insurance, or the security is devalued due to the third party's
activity, the insurance compensation or damage compensation should be
transferred by Party A to the account pointed by the Party B. During the
mortgage, the Party A can't use this property.
ARTICLE 11: If the security is devalued, the Party A should provide the Party B
with guarantee that equals the value decreased in thirty days.
ARTICLE 12:In the period of mortgage, if the security incurs pollution to
environment or other damage, the Party A should bear the responsibility itself.
ARTICLE 13:During the mortgage, without the 3 agreement of the Party Bin written
form, the Party A can't present, move, rent, transfer, re-mortgage, or transact
the security under this contract in any other improper manner.
ARTICLE 14:In period of the mortgage, with the agreement of the Party B in
<PAGE>
written form, the money obtained by the Party A from transferring the security
should be used preferentially to repay the Party B the creditor's rights ahead.
ARTICLE 15:When the term of loan prescribed in the contract expires, if the
borrower can't repay the debt, the Party B is entitled to convert the security
into money., or auction, sell the security. The Party B can share Preferentially
the money obtained in the above-mentioned manner, and realize hypothec.
ARTICLE 16:The Party B can dispose of the security ahead and realize hypothec,
or stop providing the loan under loan contact or recall the principal and
interest having been provided ahead, if any of the situations as follows happen:
1. The Party A is announced to be dismissed or bankrupt;
2. The Party A seriously breached the duty prescribed in the fourth, eighth,
ninth, eleventh and thirteenth item of this contract, or other behavior
breaching this contract seriously take place.
3. In period of loan term, the borrower is announced to be bankrupt and
dismissed, or the company's systems modified. They induce that the Party B's
creditor's rights go by the board, the use of loan id changed, the Party A is
entangled with lawsuit, and other situation that influences enough the Party
A's compensation ability or behavior lacking of honest to repay occur.
ARTICLE 17: If the Party A damages the Party B's economic benefit because of
concealing situation of co-ownership, controversy, being sealed up, being
corresponding compensation that is 30 percent of the sum of loan. If the
compensation is not enough to offset the damage to the Party B, the Party A
should compensate the insufficient part. The party B is entitled to use the
money in the Party A's account to balance the compensation and fine.
ARTICLE 18:The money obtained by the Party B from disposing of the security
could be allotted in the order as follows:
1. Pay the fees that are needed to transact the security;
2. Repay the interest that the Party A owes the Party B;
3. Repay the compensation, fine, and principal of loan that the Party A owes the
Party B, and so on.
4. Pay other fees.
ARTICLE 19:Other items promised.
ARTICLE 20:If the two parties don't come to an agreement on the controversy
about movable property caused by this contract, they should lodge a complaint in
the Party B's local court.
ARTICLE 21:When the security listed in the security listing is registered, this
contract goes into effect.
ARTICLE 22:Both parties' legal representatives (or authorization agents) should
sign and affix their common seal on the contract. It will also efficacy after
<PAGE>
other relevant fees are repaid.
ARTICLE 23: This contract consists of two duplicates. The two parties hold one
of them respectively.
THE PARTY A:
Shenyang Haitong House Properties Development Co.,Ltd.
Legal representative (Signature): Lee Shouzheng
(or authorization agent)
Date:99-12-28
THE PARTY B:
Construction Bank of China Shenyang City Construction Subbranch.
Legal representative (Signature):Wang Zhicheng
(or authorization agent)
Date :
Appendix: Security list:
Podium parts of 2 floor
Tower A 23 floor Room No 2352 2355-2360 2363-2368
18floor Room No 1862
Management Contract
Owner: Shenyang Haitong House Properties Development Ltd.(Party A)
Legal representative: Lee Shou-cheng
Address: No.386 Qingnian Street, Heping District, Shenyang
Tel: 23180688 23180988
Operator: Huayang Real Estate Management (Shenyang) Co.,Ltd (Party B)
Legal representative: Wang Xiaoluan
Address: No.386 Qingnian Street, Heping District, Shenyang
Tel: 23180921 23180922
The above two parties have agreed upon the following terms under the
Economic Contract Law of the People's Republic of China concerning the
management of "Huayang International Mansion":
1 Party A agreed to assign to Party B with the management of "Huayang
International Mansion" A (hereafter "Mansion") located in No.386 Qingnian
Street, Heping Distric, Shenyang.
2 Party B's management responsibilities include: keep good condition of
Owner's property and public facilities; keep the public area tidy and
clean; offer a green living environment and good security service.
3 Party A is responsible for offering Party B with office space (500m(2))
free of charge.
4 Party B should establish a Property Management Procedure and submit to
Party A for review. Party B should manage the building according to the
approved Procedure. Tenants of the Mansion shall sign a Property Contract
with Party B.
5 Party B should determine the level of management fees based on related
rules and regulations and submit the fee standard to Shenyang Price
Administration for approval. The management fee should be used by Party B
for the management of the Mansion.
6 Party B is responsible for the management of the units in Building A of
the Mansion that have not been sold or leased. Sales Department of Party A
should inform Party B promptly of the information about unsold and
unleased units.
7 Party B has the right to restrain the noncompliance action of the rules
and regulations.
8 Party A shall monitor and inspect Party B's work and fees charged
according to the management contract and related rules and regulations.
9 Party A may give Party B warnings, order Party B to make timely
correction, ask Party B to compensate for any loss incurred, and charge a
penalty to Party B for any action resulted from the following:
<PAGE>
9.1 The repair of public facilities is not in time.
9.2 The management system is not sound.
9.3 Fees are increased without permission.
9.4 The noncompliance of this contract.
10 Any transfer or subcontracting of this contract shall be agreed by Party
A.
11 Any issues unsettled in this contract shall be negotiated between Party A
and Party B. Amendments to this Contract may be signed and shall have
legal validity.
12 The contract is in quadruple with two original copies. 13 The contract
shall go into effect upon being signed by the two parties.
Owner (Party A): (seal)
Legal representative: (signature)
Date:
Operator (Party B): (seal)
Legal representative: (signature)
Date:
HUAYANG INTERNATIONAL BUILDING OFFICE LEASE AGREEMENT
LESSOR: Huayang Industry & Commerce Group Co., Ltd. (hereinafter referred to as
Party A)
LEGAL REPRESENTATIVE: Gao Wanjun
LEGAL ADDRESS: A3 No. 386 Qingnian Street, Heping District, Shenyang
LEASEE: (hereinafter referred to as Party B)
LEGAL REPRESENTATIVE:
LEGAL ADDRESS:
TELEPHONE:
I.D. NO.:
In accordance with the Economic Contract Laws of the People's Republic of China,
Party A and Party B have entered into this agreement on office lease through
friendly negotiations.
I. THE LOCATION, UNIT AND AREA OF THE LEASED OFFICE
Party A agrees to lease its office to Party B, which is numbered , located on
the floor , tower A, Huayang International Building, with a floor area of square
meters. The building is situated at 386 Qingnian Street, Heping District,
Shenyang.
II. LEASING PERIOD
The leasing period is ______ years, commencing on _______________ and ending on
__________.
III. RENT AND OTHER COSTS (IN RMB YUAN ) AND THE MODE OF PAYMENT
1. The annual rent is . Party B shall pay to Party A 1,000 yuan as deposit on
the date of signature of this agreement, and pay two months' deposit and first
rent within one week before occupying the office (the deposit is to be
calculated as rent).
2. Water, property management fee and central heating fees are included in the
rent
3. Electricity and phone bills are to be borne by Party B. 4. Mode of Payment:
to de agreed upon in supplementary clauses.
IV. OBLIGATIONS AND RESPONSIBILITIES OF PARTY A
1. To provide the leased office to party B in a timely manner.
2. To carry out periodic check of the leased office and its facilities, make
sure that Party B can use it in a safe and normal way.
3. Not to terminate the Agreement unilaterally within the validity of this
Agreement.
4. Party A has the right to revoke the leased office if any of the following
circumstances occurs:
a. Party B re-leases, transfers, contributes as a stake, share or trade the
leased office or has done anything that infringes upon Party A's ownership of
its office.
b. Party B engaged in illegal activities in the leased office and violated
public interests.
<PAGE>
c. Party B delayed paying the rent exceeding 30 days.
V. OBLIGATIONS AND RESPONSIBILITIES OF PARTY B
1. Party B shall not change the structure and function of the office.
2. Party B shall not terminate the agreement unilaterally.
3. Party B shall sign a Property Management Agreement with Party A stating that
Party A shall observe this Agreement and the rules and regulations
promulgated by the building's Property Management company.
4. Party shall take care of and protect the facilities in the leased office. And
Party B shall indemnify Party A against losses owing to Party B's fault.
5. Party B shall pay the rent and a penalty on 0.1 % daily basis if Party B does
not pay the rent in time.
6. Party B shall renew or cancel the lease 10 days before this agreement ends.
If Party B does not want to renew the lease, it shall keep the office tidy as
when the lease starts. Deposit shall be returned after Party A inspects and
accepts the office.
VI. FORCE MAJEURE
If Force Majeure specified in the law makes it impossible to implement this
Agreement, Party B shall not claim to Party A and this Agreement shall
automatically end.
VII. ATTACHMENT AND SUPPLEMENT
1. Both parties shall negotiate anything that is not covered in this Agreement.
Any supplementary clauses or agreement shall be deemed as indivisible parts
of this agreement and have the same legal effect as this Agreement.
2. This agreement is in quadruplicate, and takes immediate effect once signed
and chopped by both parties.
SUPPLEMENTARY CLAUSES:
PARTY A: Huayang Industry & Commerce Group Co., Ltd.
REPRESENTED BY:
DATE:
PARTY B:
REPRESENTED BY:
DATE:
LEASING PERIOD: FROM TILL
CHANGYANG HOTEL INTERNATIONAL (SHENYANG) CO., LTD.
AND
SHERATON OVERSEAS MANAGEMENT CORPORATION
================================================================================
MANAGEMENT CONTRACT
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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<PAGE>
MANAGEMENT CONTRACT
THIS MANAGEMENT CONTRACT made and entered into this 15th day of September, 1995,
by and between Huasheng Hotel International (Shenyang) Co., Ltd., a duly
organized and registered legal entity existing under the laws of the People's
Republic of China and having its legal address at 386 Qingnian Street, Heping
District, Shenyang, Liaoning Province, People's Republic of China (Owner), and
SHERATON OVERSEAS MANAGEMENT CORPORATION, a Delaware corporation having its
principal offices at Sixty State Street, Boston, Massachusetts 02109, U.S.A.
(Operator).
WHEREAS
(1) Owner owns or leases and has the legal right to the exclusive use and
occupation of the Site (as hereinafter defined) for the Term (as
hereinafter defined) and is in the course of designing and planning,
and proposes to construct, furnish and equip on the Site, at its own
expense, to be completed for operation by the end of 1996, an
international 5-star quality hotel complying with Sheraton Standards
(as hereinafter defined), as part of a multi-use project, known as
Huayang International Mansion, being developed by the company at
Shenyang, Liaoning Province, People's Republic of China.
(2) Operator is in the business of and experienced in ownership, managing
and operating, as well as planning, decorating, furnishing, equipping
and promoting hotels.
(3) Operator and Owner have entered into the Technical Services Agreement
(as hereinafter defined) wherein Operator has agreed to provide
assistance to Owner during the various design and construction phases
of the Huayang International Mansion and in the planning, decorating,
furnishing and equipping of the Huayang International Mansion for a
technical service fee of US$650,000.00.
(4) Owner wishes to obtain the benefits of Operator's expertise in hotel
management and operation.
(5) Owner has ownership control of the Hotel and has the legal authority to
engage Operator as the operator of the Hotel under a management
contract agreement.
NOW, THEREFORE, Owner and Operator hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01. ADDITIONAL TECHNICAL SERVICES has the meaning set forth in the Technical
Services Agreement.
1.02. AFFILIATE AND AFFILIATED COMPANY mean, save where a different meaning is
apparent, a company in which the relevant named company is a shareholder or has
management control.
<PAGE>
1.03. AGENCY ACCOUNT means an account in the name of the Hotel at the Bank, to
be used for the purposes described in Section 10.01.
1.04. AGENCY ACCOUNTS means both the Agency Account and the USS Agency Account.
1.05. APPROVED FINAL PLANS means the final plans and specifications referred to
in Article II as approved by Owner and Operator.
1.06. AVAILABLE ROOMS means the number of Hotel rooms that are available for
sale to guests which does not include house use or commercial rooms but includes
rooms which are out of order and complimentary rooms.
1.07. BANK means an internationally reputable bank selected by Owner and
approved by Operator.
1.08. BASIC FEE means an amount equal to a percentage, as particularized in
Section 7.01, of the Total Revenue for each Fiscal Year or part thereof in
question, payable net of any applicable withholding tax.
1.09. BUILDING & APPURTENANCES means a building(s) containing approximately 563
guest rooms (each with private bath) and 105 apartments, restaurants, lobbies,
bars and lounges, banquet and conference rooms, commercial space for the sale of
goods or services, elevators, back-of-the-house and parking areas, recreational
facilities, appropriate landscaping, and other related facilities together with
all installations, equipment and vehicles necessary or appropriate for the
operation thereof as an hotel complying with Sheraton Standards including, but
without limitation, life safety and fire, heating, lighting, sanitary, cleaning,
air conditioning, refrigeration, laundry and dry cleaning, built-in bar, kitchen
and office installations, equipment and vehicles.
1.10. CENTRALIZED SERVICES means Sheraton Group accounting services and training
services (including the Sheraton Account Management Effectiveness Program),
employee benefit programs, centralized bulk purchasing, joint marketing services
(including cluster advertising), joint sales offices, Sheraton Guest
Satisfaction System, Sheraton Club International Program, Sheraton executive
staff recruitment and training programs and other services as are and will be
made available generally to managed hotels in the same general geographical
location and appealing to the same market in the Sheraton hotel system in the
Sheraton Asia-Pacific Division.
1.11. CENTRALIZED SERVICES COST means the Hotel's proportionate share of the
total cost of the Centralized Services which is reasonably estimated by ITTSC to
be incurred on a system-wide basis by Sheraton in respect of the hotel.
1.12. CONTRACT means this Management Contract.
1.13. CONTRACTORS means architects, builders, engineers, project managers,
interior designers, decorators and other specialists and consultants necessary
for the design, construction, decorating, furnishing and equipping of the Hotel.
1.14. COUNTRY means the People's Republic of China (excluding Taiwan, Hong Kong
and Macau).
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<PAGE>
1.15. EFFECTIVE ASSIGNMENT DATE means the date on which an assignment as
referred to in Article XVIII is intended to take effect.
1.16. EFFECTIVE DATE means the date on which this Contract is stated to be made
and entered into and approved by the Ministry of Foreign Trade and Economic
Cooperation or its local counterpart.
1.17. ESTIMATED PARTIAL OPENING DATE means September 30, 1996 or such other date
as Owner and Operator may agree in writing as the date on which they estimate
the Hotel will be ready for partial operations in accordance with Section 4.05.
1.18. EXPATRIATES means Hotel personnel recruited by Operator from any country
other than the Country to work at the Hotel.
1.19. FINAL INSPECTION means a final inspection of the Hotel carried out jointly
by Owner and Operator prior to the scheduled Full Opening Date.
1.20. FISCAL MONTH means an accounting period containing not less than two (2)
but not more than seven (7) full weeks.
1.21. FISCAL YEAR means a calendar year (save that the first Fiscal Year shall
commence on the Partial Opening Date and end on the 31st December in the same
calendar year).
1.22. FULL FISCAL YEAR means a Fiscal Year of not less than three hundred and
sixty-five (365) days.
1.23. FULL OPENING DATE means the date on which Operator fully opens the Hotel
to the public in accordance with Section 4.05 and shall, unless otherwise agreed
by Owner and Operator, be December 30, 1996.
1.24. FURNITURE, FIXTURES & EQUIPMENT or FF&E means all furniture, furnishings,
fixtures, life safety and fire and hotel equipment in or required for the
operation of the Building & Appurtenances.
1.25. GROSS OPERATING PROFIT has the meaning set forth in Appendix B.
1.26. HANDOVER INSPECTION means a handover inspection of the Hotel carried out
jointly by Owner and Operator not less than sixty (60) days prior to the
scheduled Partial Opening Date.
1.27. HOTEL means collectively the Site, the Building & Appurtenances, all
necessary FE&E, Operating Equipment and Operating Supplies as described in the
Huayang Sheraton Hotel Facilities Guide attached hereto as Appendix F.
1.28. HOTEL DESIGN GUIDE means the Hotel Design Guide issued by ITTSC, dated May
1991, as amended, supplemented or revised from time to time.
1.29. INCENTIVE FEE means an amount equal to five per cent (5%) of the Gross
Operating Profit for each Fiscal Year or part thereof in question.
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<PAGE>
1.30. INDEPENDENT AUDITOR means Arthur Andersen & Co. ("AA"), or a certified
public accountant registered in the Country working as a correspondent of AA or
any other reputable firm of public accountants as otherwise nominated by
Operator which is registered in the Country and experienced in hotel accounting
and auditing (and Owner shall not unreasonably withhold its approval of such
nominee).
1.31. INTEREST HOLDER means any person, firm or corporation other than Owner.
1.32. ITTSC means ITT Sheraton Corporation, a corporation incorporated with
limited liability in the State of Delaware U.S.A. having its principal offices
at Sixty State Street, Boston, Massachusetts 02109, U.S.A.
1.33. LICENSE CONTRACT means the License Contract by and between Licensor and
Owner, executed on even date hereof attached as Appendix C.
1.34. LICENSE FEE has the meaning set forth in the License Contract.
1.35. LICENSES means all licenses, permits, consents, approvals and
authorizations (governmental, municipal or otherwise) required for the
ownership, construction, management and operation of the Hotel and its related
facilities in accordance with this Contract including, but not limited to:
Certificate of Occupancy; Foreign Exchange Registration Certificate obtained
from the State Administration of Foreign Exchange Control; foreign contract
business license obtained from the State Administration of Industry and
Commerce, liquor licenses for the sale of alcoholic beverages at all restaurants
and bars in the Hotel and to all guest rooms; restaurant and hotel licenses; and
all licenses, permits, consents, approvals and authorizations (governmental,
municipal or otherwise) required for the procurement and import of all necessary
FF&E, Operating Equipment, Operating Supplies, foods and beverages for the Hotel
to operate as an international five-star quality hotel meeting Sheraton
Standards.
1.36. LICENSOR means Sheraton International, Inc., a Delaware corporation and a
wholly owned subsidiary of ITTSC, and its successors and assigns.
1.37. LOCAL CURRENCY means the currency of the Country.
1.38. OPERATING EQUIPMENT means all chinaware, glassware, linens, silverware,
uniforms, utensils and other items of a similar nature, including such items
bearing the "Sheraton" name or identifying characteristics as Operator shall
consider appropriate.
1.39. OPERATING EXPENSES has the meaning set forth in Appendix B.
1.40. OPERATING SUPPLIES means all inventories of paper supplies, cleaning
materials and similar consumable items; including such items bearing the
"Sheraton" name and identifying characteristics as Operator shall consider
appropriate.
1.41. OPERATING TERM means the initial Operating Term and any extension thereof
in accordance with Sections 3.01 and 3.02.
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<PAGE>
1.42. PARTIAL OPENING DATE means the date on which Operator first opens the
Hotel for partial operations in accordance with Section 4.05.
1.43. PRE-OPENING AGENCY ACCOUNT means an account bearing the name of the Hotel
with the Bank from which all Pre-Opening Expenses shall be paid.
1.44. PRE-OPENING BUDGET means a budget with represents an estimate of
Pre-Opening Expenses.
1.45. PRE-OPENING EXPENSES means the cost and expenses in connection with the
preparation of the Hotel for opening.
1.46. PRE-OPENING SERVICES means activities associated with the preparation of
the Hotel for opening.
1.47. REPLACEMENT RESERVE means a cash reserve maintained for the purpose of
making replacements or substitutions of or additions to FF&E.
1.48. RESERVE ACCOUNT means an interest bearing account in the name of the Hotel
at a bank in the locality of the Hotel selected by Operator for the purpose of
holding the Replacement Reserve.
1.49. RESCORP means ITT Sheraton Reservations Corporation, a Delaware
corporation and a wholly owned subsidiary of ITTSC, and its successors and
assigns.
1.50. RESERVATION COST has the meaning set forth in the Reservation Service
Contract.
1.51. RESERVATION SERVICES CONTRACT means the Sheraton Reservation Services
Contract by and between Owner and Rescorp, executed on even date hereof attached
as Appendix D.
1.52. ROOM or ROOMS means a walled structure that contains a bed, bath and a
separately keyed hallway entrance.
1.53. SHERATON GROUP means ITTSC and all of its subsidiary and affiliated
companies.
1.54. SHERATON MARKS means the word "Sheraton", the Sheraton stylized "S" mark
or any other service mark, trademark, trade name emblem, insignia, slogan,
symbol, design or distinguishing characteristics associated with the Sheraton
Group, including the Chinese name of "Sheraton".
1.55. SHERATON RESERVATIONS SYSTEM means the worldwide network for the making
and confirming of reservations at Sheraton hotels throughout the world
maintained by Rescorp.
1.56. SHERATON STANDARDS means the quality standards of the Building &
Appurtenances, FF&E, Operating Equipment and Operating Supplies equivalent to
newly-constructed international hotels of similar type managed and with
technical services provided by members of the Sheraton Group meeting all of the
requirements of the Hotel Design Guide including all requisite life safety and
fire requirements.
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<PAGE>
1.57. SITE means the land located at Qingnian Street, Shenyang, PRC more
particularly described in Appendix A.
1.58. SUBSIDIARY means, in relation to any company, any other company or entity
directly or indirectly under the control of the first mentioned company. For
this purpose "control" means ownership of more than fifty percent (50%) of the
voting share capital or equivalent right of ownership of such company or entity,
or sole power to direct its policies and management whether by contract or
otherwise.
1.59. TECHNICAL SERVICES AGREEMENT means the Technical Services Agreement in
respect of the Hotel referred to in Recital (3) dated 26 June, 1995 made between
Owner and Operator.
1.60. TECHNICAL SERVICES COST has the meaning set forth in the Technical
Services Agreement.
1.61. TERM means the period between the Effective Date and the expiration of the
Operating Term of earlier termination of this Contract.
1.62. TOTAL REVENUE has the meaning set forth in Appendix B.
1.63. TURNOVER TAXES has the meaning set forth in Appendix B.
1.64. UNIFORM SYSTEM means "A Uniform System of Accounts for Hotels" (Eighth
Revised Edition, 1986 as amended, supplemented and revised from time to time) as
adopted by the American Hotel & Motel Association of the United States of
America and Canada.
1.65. US CURRENCY or US$ means the currency of the United States of America.
1.66. US$ AGENCY ACCOUNT means an account in the name of the Hotel with the Bank
to be used for the purposes described in Section 10.03.
ARTICLE II
ENGAGEMENT AND THE HOTEL
2.01. ENGAGEMENT
Owner hereby engages Operator as its sole and exclusive agent with full
authority to operate, direct, manage and supervise the Hotel during the Term for
and on behalf of Owner, in the name of Sheraton Shenyang Hotel, and for the
account of Owner, and Operator hereby accepts the engagement.
2.02. NAME OF HOTEL
During the Term, the Hotel shall be known as "Sheraton Shenyang Hotel" in
English and "___________________" in Chinese. If the Company decides to include
a "Towers" section on the top floors of the Hotel, then the Hotel will be known
as the "Sheraton Shenyang Hotel and Towers".
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2.03. DESIGN AND CONSTRUCTION OF HOTEL
(i) Owner shall, strictly in accordance with the Approved Final Plans and
Sheraton Standards and in conformity with all applicable rules and regulations
now or hereafter in force (governmental, municipal or otherwise), laws and
ordinances of the Country, at its own expense and with all reasonable diligence
design, construct, furnish and equip on the Site an international five star
hotel containing approximately 563 rooms and 105 apartments, 4000 square meters
of function space, seven restaurants, two lounges, 24-hour room service and
coffee shop, business center, tennis courts, swimming pool and recreation
facilities. Owner shall deliver to Operator for management and operation the
Hotel fully constructed, furnished and equipped in accordance with the Approved
Final Plans and Sheraton Standards.
(ii) For the foregoing purposes, Owner shall engage at its own expense
Contractors all of whom shall be subject to the prior approval of Owner and
Operator. Owner shall cause such Contractors to prepare and submit to Operator
in English full and complete plans and specification and decor and concept
themes pertaining to the Hotel complying with Sheraton Standards. All
conceptual, preliminary and final plans and specifications shall respectively be
approved by both Owner and Operator prior to the commencement of various phases
of design or construction, as the case may be, of the Hotel. The design, decor,
planning, decorating and other matters affecting the operating efficiency of the
Hotel and the selection of all FF&E. Operating Equipment and Operating Supplies
shall also be subject to the prior approval of Owner and Operator and in
particular Owner shall:
(a) submit to Operator for approval conceptual plans and specifications
showing general layout and design by 1st October 1995;
(b) submit to Operator for approval preliminary plans and
specifications by 1st November 1995;
(c) submit to Operator for approval final plans and specifications by
1st December 1995;
(d) complete the Building & Appurtenances and the installation of the
FF&E and Operating Equipment by 1st October 1996;
(e) submit to Operator for prior approval plans, specifications,
rendering and working drawings relating to the interior design and
decoration, and other matters affecting the operating efficiency of the
Hotel and the selection of all FF&E and all Operating Equipment at
various stages as requested by Operator by 1st November 1995;
(f) have developed, prior to commencement of construction if
construction has not commenced prior to the Effective Date, and in any
event within a reasonable time, not exceeding three (3) months from the
Effective Date, a financing plan approved by Operator; and
(g) provide Operator, prior to or immediately following the Partial
Opening Date, with a full inventory of all FF&E and with a full-costed
inventory of all Operating Equipment supplied by Owner in accordance
with this Article.
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The dates referred to in subparagraphs (a) to (i) inclusive may, in each case,
be changed as Owner and Operator may agree.
(iii) It is my duty of Owner to ensure that all matters to be submitted to
Operator for approval by Owner or its Contractors have been competently
prepared.
(iv) In reviewing and/or approving conceptual, preliminary or final plans and
specifications Operator shall not be responsible to Owner or any third party
with respect to the adequacy or quality of the plans and specifications or any
other matter prepared by Owner or its Contractors, or the adequacy or quality of
the construction, or the ultimate cost of the Hotel; nor shall Operator be
responsible for advising Owner or its Contractors regarding the requirements of
any law, ordinance, regulation or order governmental, municipal or otherwise)
applicable to the Hotel or for reviewing any matter submitted to it for
compliance with such requirements. Operator's approval hereunder with respect to
the above are for the sole purpose of indicating whether or not the Hotel is
constructed, furnished and equipped in compliance with the Approval Final Plans
and other matters approved by Operator and whether or not it will be acceptable
to Operator from a functional and aesthetic point of view.
(v) Approved Final Plans shall not be changed in any material manner without the
prior written approval of Owner and Operator; provided, however, that either
Owner or Operator may recommend, subject to the other's approval, such further
changes in the Approved Final Plans as are necessary to meet problems that may
arise during the period of constructing, furnishing and equipping of the Hotel.
Either Owner or Operator shall have the right to periodically inspect the
construction to determine if such construction is in conformity with the
Approved Final Plans and Sheraton Standards. Moreover, after the Partial Opening
Date, no material additions or alterations to the Building & Appurtenances
during the Term shall be made without the prior written approval of Owner and
Operator.
2.04. OWNERSHIP, FINANCING AND LICENSES
(i) Owner hereby covenants and warrants as follows:
(a) during the Term Owner shall maintain full and exclusive right of
use and occupancy of the Site (if Owner's right and interest in the
Site is derived through a lease or land use agreement then Owner agrees
to procure that such lease or land use agreement remains in full force
and effect during the Term) and full ownership of the Building &
Appurtenances, FF&E, Operating Equipment and Operating Supplies subject
only to the provisions of Article XVII and such charges, mortgages,
liens or other encumbrances as Operator may agree to in writing;
(b) it has obtained commitments for all loans or other financing
required for the construction and fitting-out of the Hotel in
accordance with the provisions of this Contract, and shall provide all
monies necessary for Operator to operate and manage the Hotel in
accordance with the provisions of this Contract; and
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(c) it shall obtain all Licenses unless any of the Licenses are
required to be in the name of Operator, whereupon Owner shall cooperate
with Operator in obtaining such of the Licenses as are so required.
(ii) Owner undertakes to maintain such right of use, ownership and Licenses
throughout the Term and further agrees that throughout the Term it will perform
all payments, terms and conditions required under any land use agreement, lease,
loan or other financing agreement in respect of the Site, Building &
Appurtenances, FF&E Operating Equipment or Operating Supplies, except as such
payments, terms or conditions may be waived or excused by the parties thereto.
Should Owner default in the performance of any of the foregoing obligations, any
member of the Sheraton Group or Operator may fulfill said obligations on Owner's
behalf and shall be reimbursed forthwith by Owner with interest or Operator may
withdraw such amounts from the Agency Accounts or the Reserve Account in whole
or in part at any time.
ARTICLE III
OPERATING TERM OF CONTRACT
3.01. The initial Operating Term of this Contract shall be a period commencing
on the Full Opening Date and terminating at midnight on December 31st of the
tenth (10) Full Fiscal Year following the Full Opening Date.
3.02. Subject to agreement by Owner, Operator shall have the right to extend the
Operating Term beyond the initial Operating Term for successive period of five
(5) years each, provided that:
(a) Operator shall have given notice to Owner of its election to extend
the Operating Term on or before the first day of January of the last
Full Fiscal Year of the initial Operating Term, or any extension
thereof then in force;
(b) Owner at such time is not entitled to terminate this Contract
pursuant to Article XXIII by reason of Operator's default; and
(c) the Operating Term shall have been extended for all prior periods
(if any).
ARTICLE IV
PRE-OPENING
4.01. PRE-OPENING SERVICES
Operator, as agent and for the account of Owner, shall have the exclusive right
to engage in Pre-Opening Services, which shall include, but shall not be limited
to, the following:
(i) recruiting, training, directing and employing all Hotel personnel;
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(ii) conducting sales and marketing activities and engaging in all other like
programs designed to attract guests to the Hotel including, but not limited to,
presale of or contracting for the rental of rooms and use of other facilities of
the Hotel, advertising promotion and publicity of the Hotel, and public
relations activities;
(iii) negotiating on behalf of Owner leases, licenses and concession agreements
for store, office space and lobby space at the Hotel;
(iv) taking all necessary steps to assist Owner to apply for and obtaining all
Licenses (in Owner's or Operator's name or both as may be required by the
issuing authority), as well as visas, residence and work permits for
Expatriates;
(v) purchasing all initial Operating Supplies, and food and beverages, to be
paid for out of the working capital furnished by Owner pursuant to Article X;
(vi) implementing ITTSC's operating policies and procedures;
(vii) enrolling the Hotel in the Sheraton Reservations System in accordance with
the Reservation Services Contract;
(viii) setting up administrative offices;
(ix) doing such other things as are necessary for the proper opening of the
Hotel.
4.02. PRE-OPENING BUDGET
For purposes of implementing the Pre-Opening Services, Operator shall prepare a
Pre-Opening Budget. The aggregate amount of the Pre-Opening Budget shall be the
minimum sum of US$5,000,000 or its equivalent in local currency which may be
revised higher by Operator from time to time following consultation with Owner
to reflect the then current cost projections, delay in partial opening beyond
the Estimated Partial Opening Date and unforeseen circumstances. Pre-Opening
Expenses shall include, but shall not be limited to:
(i) all expenses incurred by any member of the Sheraton Group and Operator in
performing Pre-Opening Services such as travel expenses (including the costs of
moving the Hotel personnel, their families and their belongings), expenses of
business entertainment, salaries (including taxes withheld and cost of fringe
benefits) of specialists as well as non-specialist executives for the time
actually spent in the performance of Pre-Opening Services (including traveling
time of Hotel personnel);
(ii) all expenses incurred in connection with setting up the administrative
offices,
(iii) the cost of pre-opening marketing, advertising, promotion and publicity;
(iv) the cost of recruiting and training the Hotel personnel including executive
personnel in preparation for partial opening of the Hotel, including the cost of
retaining outside training consultants or specialists, if necessary;
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(v) the cost of obtaining all Licenses and necessary visas, residence and work
permits, including the fees of lawyers an other consultants incidental thereto;
and
(vi) the Reservation Cost in connection with the use of the Sheraton
Reservations System prior to the Partial Opening Date of the Hotel.
4.03. PRE-OPENING AGENCY ACCOUNT
(i) Within 45 days after the Effective Date, Owner shall open, and Operator
shall assist in opening, the Pre-Opening Agency Account; only Operator's
designees shall be authorised to operate and draw from the Pre-Opening Agency
Account. Owner shall deposit in the Pre-Opening Agency Account the sum of
US$5,000,000 or its equivalent in local currency in the following manner:
(a) ten percent (10%) thereof within 30 days following the Effective
Date; and
(b) thereafter, deposit at the end of each three (3) month period,
beginning three (3 months from the date of the deposit in subparagraph
(i)(a), a sum sufficient to cover all of the estimated Pre-Opening
Expenses for the subsequent six (6) months in accordance with the
monthly cashflow projection provided by Operator.
(ii) In the event Operator anticipates a delay such that the Hotel will not be
open for partial operations in accordance with Section 4.05 on or before the
Estimated Partial Opening Date or in the event of the then current cost
projections or unforeseen circumstances requiring a revision of the Pre-Opening
Budget, Operator shall consult with Owner and Owner shall promptly, at the
request of Operator, deposit into the Pre-Opening Agency Account such additional
amounts as Operator shall reasonably estimate to represent the additional
Pre-Opening Expenses occasioned by the anticipated delay, the then current cost
projections or unforeseen circumstances, as the case may be.
(iii) If Operator at any time expends monies in excess of the amount deposited
in the Pre-Opening Agency Account either:
(a) with the consent of Owner; or
(b) by reason of Owner's not depositing additional funds into the
Pre-Opening Agency Account as provided in paragraph (ii)
Owner shall reimburse such excess amount to Operator forthwith upon demand in
U.S. currency or its equivalent in local currency.
(iv) Within one hundred and twenty (120) days following the Partial Opening
Date, Operator shall account to Owner for all payment of Pre-Opening Expenses
the remaining sum shall be transferred to the Agency Account to the extent there
is insufficient working capital therein and any amount in excess of the required
working capital amount is specified in Article X shall be forthwith paid to
Owner.
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4.04. HANDOVER AND FINAL INSPECTIONS
Following the Handover Inspection and the Final Inspection Operator shall advise
Owner on the basis of Approved Final Plans and Sheraton Standards whether the
Hotel is acceptable to Operator for partial or full operations, as the case may
be. Owner shall promptly cure all defects, deficiencies or non-conformities by
reference thereto revealed by the Handover Inspection and the Final Inspection,
as the case may be.
4.05. OPENING OF THE HOTEL
(i) Partial Opening
Operator shall open the Hotel for partial operations promptly after all
the following conditions have been satisfied and shall forthwith thereafter
confirm to Owner in writing the Partial Opening Date.
(a) the defects, deficiencies and non-conformities revealed by the
Handover Inspection have been cured as provided in Section 4.04;
(b) at least 277 of the Hotel's guest rooms, public areas, facilities,
restaurants, ballroom and all requisite life safety and fire
requirements for the Hotel are fully constructed, furnished and
equipped in accordance with the Approved Final Plans and Sheraton
Standards and such portion of the Hotel to be partially opened is, in
Operator's opinion, otherwise suitable for guest use and occupancy and
all necessary Operating Supplies; foods and beverages have been
obtained;
(c) All Licenses and visas, residence and work permits for Expatriates
required for the partial opening of the Hotel have been obtained;
(d) all insurance coverages described in Appendix E have been obtained; and
(e) adequate working capital has been furnished by Owner in accordance with
Article X.
Notwithstanding the occurrence of the Partial Opening Date, Owner shall proceed
diligently thereafter to fulfill all of its obligations hereunder regarding the
construction, furnishing and equipping of the Hotel and, upon the notice from
Operator, to cure all defects, deficiencies or non-conformities.
(ii) Partial Operations
Operator shall conduct partial operations of the Hotel for the period
commencing on the Partial Opening Date and ending on the Full Opening Date.
(iii) Full Opening
Operator shall open the Hotel for full operations promptly after all
the following conditions have been satisfied and shall forthwith thereafter
confirm for Owner in writing the Full Opening Date:
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(a) the defects, deficiencies and non-conformities revealed by the
Final Inspection have been cured as provided in Section 4.04;
(b) the Hotel has been fully constructed, furnished and equipped in
conformity with the Approved Final Plans and Sheraton Standards
including, without limitation, all life safety and fire requirements,
and is, in Operator's opinion, otherwise suitable for guest use and
occupancy and all necessary Operating Supplies, foods and beverages
have been obtained;
(c) all Licenses, visas, residence and work permits for Expatriates
required for the full operation of the Hotel have been obtained; and
(d) the entire Hotel is ready to render international five-star quality
service to guests on a fully operational basis.
Notwithstanding the occurrence of the Full Opening Date, Owner shall
proceed diligently thereafter to fulfill all of its obligations hereunder
regarding the construction, furnishing and equipping of the Hotel and, upon
notice from Operator, to cure all defects, deficiencies or non-conformities.
ARTICLE V
OPERATION OF THE HOTEL
5.01. OPERATING RESPONSIBILITY
Owner, in accordance with the terms of this Contract during the Term hereby
delegates to Operator the exclusive authority and responsibility for the
management and operation of the Hotel and Operator undertakes to operate and
manage the Hotel in accordance with the terms hereof and in the same manner as
is customary and usual in the operation of other similarly managed hotels in the
same general geographical area and appealing to the same market in the Sheraton
hotel system in the Sheraton Asia-Pacific Division subject to the operation
always being of an international five-star service standard. Owner agrees to
provide the necessary funds to maintain the Hotel as an international five-star
Hotel. Operator shall have full powers to operate and manage the Hotel and shall
make its best efforts to achieve good results.
5.02. OPERATING PLAN
Not later than sixty (60) days prior to the commencement of each Fiscal Year,
Operator shall provide to Owner, for discussion and information, an annual
operating plan for the operation of the Hotel for the forthcoming Fiscal Year
containing a detailed financial budget, a market promotion plan and a capital
expenditure plan, and Owner shall give its opinion in the form of a written
reply within thirty (30) days of receipt of such statement.
5.03. OPERATION OF THE HOTEL
(i) Operator shall have exclusive control and discretion in the operation and
management of the Hotel, including, but not limited to:
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(a) the establishment and implementation of Hotel personnel policies
(including the hiring and discharge of all the Hotel personnel), work
rules and regulations, wage rates and benefits, and employee management
and training systems;
(b) the institution and maintenance of continuous programs for the
recruitment and of training of the Hotel personnel including executive
staff;
(c) the selection and procurement of Operating Equipment, Operating
Supplies and all other items required for the operation of the Hotel,
including the selection of suppliers;
(d) the establishment of food and beverage policies (including the
pricing and selection of food and beverages), and the conduct of
catering operations outside the Hotel;
(e) the establishment and implementation of policies regarding sales,
promotion, marketing, advertising and publicity;
(f) the enrollment of the Hotel in any Centralized Services as Operator
considers appropriate;
(g) the setting of terms and conditions of admittance to guest rooms
and the Hotel facilities, charges for rooms and the other Hotel
facilities, and the establishment of guest entertainment policies;
(h) the setting of credit policies (including the entering into
agreements with credit and organizations);
(i) the maintenance of the Hotel;
(j) accounting and budgeting, and
(k) the institution of such legal proceedings, as Operator shall
consider appropriate in connection with the management and operation of
the Hotel.
(ii) For the purpose of managing and operating the Hotel, Operator may enter
into:
(a) such contracts, agreements and other undertakings as agent for
Owner as it shall consider appropriate, and Owner, upon request of
Operator, shall cooperate in finalizing all necessary documents; and
(b) a management support services agreement with any member of the
Sheraton Group providing for the payment of a fee by Operator to such
member for its expertise and assistance in connection with the
management and operation of the Hotel provided that such fees shall; be
paid by Operator from fees payable to it hereunder and shall not e
Operating Expenses.
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(iii) Operator may provide food and lodging and use of the Hotel facilities to
the Hotel personnel in accordance with the personnel policies established by
Operator. The Hotel's executive personnel and their families and visiting
Sheraton Group's executives and experts, when on hotel business, shall be
provided with food, beverage and suitable living quarters within the Hotel, as
well as the use of all the Hotel facilities; all such expenses shall be
Operating Expenses.
5.04. HOTEL PERSONNEL
(i) Operator shall have exclusive authority in hiring, directing, supervising,
instructing and discharging of all Hotel personnel, and in determining the
compensation, benefits and terms of their employment. Operator shall nominate
one candidate for each of the following positions: General Manager, Resident
Manager and Financial Controller. Owner shall have the right to interview each
candidate and shall have the right to request that Operator nominate an
additional candidate for any such position. In the event that more than one
candidate is interviewed for a position, Owner shall advise Operator of its
recommendation. Operator shall seriously consider Owner's recommendations in
making the final decisions. Owner shall nominate one candidate for each of the
two Deputy General Manager positions and the one Deputy financial Controller
position. Operator shall have the right to interview the candidates and shall
the right to request that Owner nominate an alternative candidate for any such
position. In the event that more than one candidate is interviewed for any
position, Operator shall advise Owner of its recommendation. Owner shall
seriously consider the recommendations of Operator in making the final
decisions.
The two Deputy General Managers and the Deputy Financial Controller shall report
to and take direction from Operator, and be subject to Sheraton operating
policy, procedures and code of corporate conduct. Their salaries and benefits
shall be in conformity with the policies of ITTSC established for deputy
employees of the Asia Pacific division.
Operator agrees to establish an office for Owner's representatives on the Hotel
premises.
(ii) Salaries and benefits of Expatriates shall be in conformity with the
policies of ITTSC established for expatriate employees of managed hotels in the
Sheraton hotel system in the Sheraton Asia Pacific Division. Operator, in its
discretion, may enroll the Hotel personnel in pension, medical and health, life
insurance and similar employee benefit plans. The said plans may be joint plans
for the benefit of employees at more than one hotel or motor inn owned, leased
or managed by the Sheraton Group, Operator or any of their subsidiaries or
affiliates. Employer contributions to such plans and reasonable administrative
fees, which Operator may expend in connection therewith will be Operating
Expenses hereunder, including payments required to be made to the Sheraton Group
or to any subsidiary or affiliate of the Sheraton Group under the terms of any
such plan in exchange for such Company's obligation to provide benefit
thereunder. Salaries, benefits and labor policies for local Hotel personnel
shall be handled in accordance with local labor law, provisions and practices.
(iii) Owner, with Operator's full and prompt co-operation and assistance, shall
undertake to obtain for Expatriates all necessary visas, residence and work
permits and other personnel registration documents. It shall be Owner's ultimate
responsibility and obligation to obtain all
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necessary consents, approvals and authorizations for the issuance of all such
visas, residence and work permits and other personnel registration documents.
ARTICLE VI
AGENCY RELATIONSHIP
6.01. (i) In the performance of its duties as the manager and operator of the
Hotel, Operator shall act solely as an agent of Owner. Nothing herein shall
constitute a partnership or a joint venture between Owner and Operator. Except
as otherwise provided herein, all obligations to third party incurred by
Operator in the course of its managing and operating of the Hotel shall be the
obligation of Owner, and Operator may so inform all third party with whom it
deals.
(ii) Each Hotel employee shall be the employee of Owner except that the general
manager and other executive personnel, who may for administration purposes also
be affiliated with ITTSC or another member of the Sheraton Group or any agent or
employee of Owner hired by Operator shall act as the agent or employee of Owner.
ARTICLE VII
FEES
7.01. BASIC FEE
(i) Calculation
Commencing form the Partial Opening Date, during each Fiscal Year of the Term
(and proportionately for a fraction of a Fiscal year), Owner shall, subject as
provided in paragraph (ii) pay to Operator on a monthly basis the Basic Fee for
services rendered under this Contact in relation to the management and operation
of the Hotel as follows:
First Fiscal Year 1.5% of Total Revenue
Second Fiscal Year 1.5% of Total Revenue
Third Fiscal Year 1.7% of Total Revenue
From the Fourth through the Ten Full 2% of Total Revenue
Fiscal Year
(ii) Basic Fee and Licensed Fee
Basic Fee and Licensed Fee are related to each other i the following manner.
(a) if any Fiscal Month during the Term, te amount calculated as
Licensed Fee pursuant to the License Contract is greater than the
amount calculated as Basic Fee in accordance with Section 7.01(1), and
(1) an amount equal to the Basic Fee shall be paid to Licensor as the
amount of License Fee due and payable; (2) the excess of the amount
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calculated as License Fee over and above the amount calculated as Basic
Fee shall be waived by Licensor; (3) no Basic Fe shall be paid to
Operator for such Fiscal Month; (3) no Basic Fee shall be paid to
Operator for such Fiscal Month; and (4) Operator shall, on behalf of
Owner, procure from Licensor a waiver such excess amount of Licensed
Fee, and
(b) if in any Fiscal Month during the Term, the amount calculated as
License Fee pursuant to the License Contract is less than the amount
calculated as Basic Fee in accordance with Section 7.01(i), then (1)
Licensor shall be paid in full License Fee; and (2) the excess of the
amount calculated as Basic Fee over and above the amount calculated as
License Fee shall be paid to Operator as its total Basic Fe for such
Fiscal Month; and
(c) in no event shall the aggregate total of the amount paid as License
Fee to Licensor and the amount paid as Basic Fee to Operator exceed the
amount calculated in accordance with Section (i) to be the Basic Fee
payable to Operator.
(iii) Partial Operations
During the period of partial operations of the Hotel commencing on the Partial
Opening Date and ending on the Full Opening Date, Owner shall pay a License
Fee/Basic Fee to Licensor/Operator calculated in the above described manner, and
in an Incentive Fee as hereinafter set forth. `
7.02. INCENTIVE FEE
(i) Commencing form the Partial Opening Date, during each Fiscal year of the
Term (and proportionately for a fraction of a Fiscal Year), Owner shall pay to
Operator on a monthly basis an Incentive Fe of 5% of Gross Operating Profit.
(ii) For the purposes of the Incentive Fee calculation, the amount of the
payment on account of the Inventive Fee for any given Fiscal Month shall be
Incentive Fee percentage of the cumulative Fiscal Year-to-date. Gross Operating
Profit less that amount of the payments on account of the Incentive Fee
previously paid to Operator during such Fiscal Year
7.03. PAYMENT METHOD
(i) Commencing form the Partial Opening Date, on or before the fifth day of each
Fiscal Month during the Term, Licensor/Operator shall be paid out of the Agency
Accounts its License Fee. Basic Fee and Incentive Fee for the preceding Fiscal
Month the extent there may be insufficient monies in the Agency Accounts for
such payments. Owner shall pay to Operator forthwith on demand the amounts
there.
(ii) At the end of each Fiscal Year and Following receipt by Owner of the annual
audit report an adjustment will be made based on said audit report, if
necessary, so that Licensor Operator shall have received its proper License fee.
Basic Fee and Incentive Fee as hereinabove specified for the said Fiscal Year.
Within thirty (30) days of receipt by Owner of such audit report, Operator will
either.
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(a) place in the Agency Accounts or remit to Owner, as appropriate, any
excess in the amounts it has received as fees, in respect of such
Fiscal Year; or
(b) be paid out of the Agency Account or by Owner if working capital is
insufficient, as appropriate, any deficiency in the amounts has
received as fees,
as the case bay be
(iii) In the event there is an operating loss which results in a negative Gross
Operating Profit in any Fiscal Year, it will be borne exclusively by Owner and
the amount thereof will not be applied against the Gross Operating Profit of any
other Fiscal Year for the purpose of determining the Incentive Fee for such
other Fiscal Year.
ARTICLE VIII
RESERVATION SERVICE CONTRACT
8.01. Operator shall cause Recorp to provide to the Hotel and its guests the
full benefit of the Sheraton Reservation System in accordance with the
Reservation Service Contract to the extent available at other similar managed
hotels in the same general geographical area and appealing to the same market in
the Sheraton Asia-Pacific Division. In order to facilitate the opening of the
Hotel, Operator shall enroll the Hotel in the Sheraton Reservations System no
later than six (6) month prior to the Estimated Partial Opening Date.
ARTICLE IX
WORKING CAPITAL AND AGENCY ACCOUNTANT
9.01. All monies received in the operation of the Hotel including working
capital furnished by Owner, shall be deposited into the Agency Account. Only
Operator or Operator's designees shall be authorized to operate and draw from
the Agency Account. Such monies shall not be co-mingled with Owners or
Operator's other monies. Ou of the Agency Account will be paid all Operating
Expenses. Basic Fee. Incentive Fee. License Fee. Reservation Cost in the extent
incurred after the Partial Operating Date). Centralized Services Cost, and all
other amounts due and payable to Operator or to members of the Sheraton Group
under this Contract.
9.02. Owner shall deposit into Agency Account initial working capital in the sum
US$ 1,000,000 or its equivalent in local currency as follows:
(i) thirty per cent (30%) thereof - no later than one hundred and twenty (120)
days prior to the Estimated Partial Opening Date.
(ii) thirty per cent (30%) thereof - no later than one hundred and ninety (90)
days prior to the Estimated Partial Opening Date; and
(iii) thirty per cent (30%) thereof - no later than sixty (60) days prior to the
Estimated Partial Opening Date.
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Thereafter, upon request by Operator, Owner shall promptly furnish to Operator
monies sufficient in amount to constitute normal working capital for the
uninterrupted and efficient operator of the Hotel.
9.03. Because certain goods and services which are necessary for the operation
of an international hotel may be available only outside the Country, an US$
Agency Account may be opened and maintained; only Operator or Operator's
designees shall be authorized, to operate and draw from such US$ Agency Account.
Operator shall, as necessary and appropriate, cause to be transferred from the
Agency Account to such US$ Agency Account in US currency or other foreign
currency an amount adequate to meet the Hotel's foreign obligations of the Hotel
operations such as travel agents' commissions, Expatriates' salaries, costs of
international advertising, Basic Fee, Incentive Fee, License Fee, Reservation
Cost, Centralized Services Cost and other payments payable to Operator or other
members of the Sheraton Group.
9.04. Commencing from the Partial Operating Date, on or before the last day of
each Fiscal Month during the Term. Operator shall, after payment of Basic Fee
and Incentive Fee, License Fee, Reservation Cost and Central Services Cost for
the immediate preceding Fiscal Month and any amount due and payable in respect
of Operating Expenses and after retention of working capital sufficient to
ensure the uninterrupted and efficient operation of the Hotel for the
unforseeable future or retention of sufficient monies to meet foreign
obligations. ?? of the US$ Agency Amount or replacement of my emerging
withdrawals from the Reserve Account is provided for below ??? any emergency
withdrawals form the Reserve Account as provided for below ??? ??? all remaining
monies in the Agency Account. Moreover upon the expiration or termination of
this Contract and after the payment to Operator and other members of the
Sheraton Group of all amounts due hereunder upon such expiration or termination
all remaining amounts in the Agency Accounts shall be transferred forthwith to
Owner.
9.05. The Pre-Opening Agency Account. Agency Accounts and Reserve Account shall
be maintained solely by Operator as agent for Owner.
9.06. To the extent monies necessary for the Hotel are not generated by its
operation. Owner shall cause them to be supplied to Operator. Operator in an
emergency may use the monies in the Reserve Account to defray Operating Expenses
of the Hotel and Owner shall upon request by Operator ??? such monies to be
replaced.
ARTICLE X
RESERVE FOR REPLACEMENT OR SUBSTITUTIONS OF OR
ADDITIONS TO FURNITURE, FIXTURES AND EQUIPMENT
10.01. (i) Commencing from the Partial Opening Date, during each Fiscal Year of
the Term, there shall be deducted in monthly installments 3.5% of the Total
Revenue for the preceding Fiscal Year.
(ii) Such amounts shall constitute the Replacement Reserve and shall be recorded
on the gooks of account maintain for the Hotel as "Reserve for Replacement or
Substitutions of or Additions to Furniture, Fixtures and Equipment" and shall on
the last day of each Fiscal Month
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in respect of such Fiscal Month be transferred from the Agency Account and held
in the Reserve Account; only Operator or operator's designees shall be
authorized to operate and draw from the Reserve Account.
10.02. Except as otherwise specified in the Contract, monies in the Reserve
Accounts shall be used solely for the payment of replacements or substitutions
of or additions to FF&E which may be made by Operator without Owner's consent up
to the balance it any time of the monies in the Reserve Account including all
unused accumulations thereof from earlier Fiscal Years and interest ???. Reserve
Account and all monies remaining in the Reserve Account subject as provided in
Clause 11.03 until fully used Operator shall require Owner's consent for any
expenditure in the purposes specified in the Article in excess ??? of the
balance of the amount in the Reserve Account at the relevant time.
10.03. Upon termination or expiration of ??? Contact. Operator right to any
uncommitted monies in the Reserve ??? shall cease and subject to provisions in
Article XXIII, the same shall be??? to Owner.
ARTICLE XI
REPAIRS AND MAINTENANCE AND CAPITAL IMPROVEMENTS
11.01. Operator on behalf of Owner shall from time to time make such
expenditures for repairs and maintenance as it deems necessary to keep the Hotel
in first class operating condition excluding structural repairs and changes and
extraordinary repairs to or replacement of equipment included in the definition
of Building & Appearances. If any such repairs or maintenance shall be made
necessary by my condition against the occurrence of which Owner has received
labor or material for the construction of the Hotel, then Operator may invoke
and guarantees or warranties in Owner's or Operator's name and Owner will
cooperate fully with Operator in the enforcement thereof. Such costs, subject to
an such involving of the said guarantees and warranties, shall be charged as
current year's Operating Expenses.
11.02. Operator may also make expenditures on behalf of Owner for minor capital
improvements (up to US$100,000) to the Hotel in order to maintain the Hotel as
an international five star hotel; such costs shall be change as current year's
Operating Expenses or amortized over period of years, as determined by the
Independent Auditor.
11.03. Owner may from time to time at its sole expense make such further
alteration, additions, or improvements in or to the Hotel as Owner or Operator
shall recommend and Owner and Operator agree to, all of which shall be made with
as little hindrance to the operation of the Hotel as possible.
11.04. If structural repairs or changes in the Hotel or extraordinary repairs to
or ??? of any equipment included in the definition of Building & Appearances
shall become necessary at any time during the Term to maintain the Hotel is an
international five star in a five star operating condition or ??? ??? the
application of rules or regulations, ordinances or laws now or ??? ???
governmental, municipal or otherwise ??? or ??? all such repairs, changes or
replacements shall be made by Owner at ??? expense and shall be made with as
little hindrance to the operation of
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the Hotel as possible. Owner may contest the need for repairs, changes or ???
??? therewith, it entitled to do so, but in each such event ??? shall protect
Operator from any loss, cost, ??? ??? which ??? therefrom, in such manner is
Operator shall?? ???
11.05. The provisions of this Article are without prejudice to any of Operator's
??? remedies arising out of any breach by Owner or its obligation under ??? to
construct, furnish and equip an international five star hotel meeting the
Standard.
ARTICLE XII
BOOKS, RECORDS AND STATEMENTS
12.01. Operator shall, on behalf of Owner, keep full and adequate books of ???
and other records reflecting the results of operation of the Hotel on an ???
basis, in US currency and in local currency, in accordance within the
requirements of the laws of the Country and in accordance with the Uniform
System with such exceptions as may be required by the provisions of this??? as
are consistent with ITTSC's standard practice in accounting under management
contracts generally so long as exceptions do not affect the determination of
Gross Operating Profit.
12.02. Except for record keeping for Centralized Services which shall be ??? at
the location where the principal activities occur, the books of income and all
other records relating to the operation of the Hotel shall be kept at the Hotel
and all such books of account at the Hotel shall be kept Owner or Operator and
their respective representatives at all reasonable times for examination, audit,
inspection and transportation. Upon expiration or termination of this Contract,
all such books and records forthwith shall be returned over to Owner but shall
be available to Operator at all reasonable times for inspection, audit,
examination and transaction for a period of seven (7) years.
12.03. Operator shall deliver to Owner, within ten (10) working days following
the end of each Fiscal Month, a financial statement, showing the results of the
operation of the Hotel for the immediately preceding Fiscal Month and for the
Fiscal Year to date. Such statements shall:
(i) be in the customary form prepared by Operator for a managed hotel;
(ii) be taken from the books and record maintained by Operator in the manner
hereinabove specified; and
(iii) follow the general form set forth in the Uniform System.
Operator shall be available at reasonable times to discuss with Owner the
results set forth in the financial statement and the operations of the Hotel
generally. In addition, all financial statements shall be accompanied by a
written report explaining the figures provided.
12.04. Within ninety (90) days following the end of each Fiscal Year Operator
shall deliver to Owner a financial statement certified by the Independent
Auditor registered in the PRC, showing the result of operations in the Hotel
during such Fiscal Year, and the Gross Operating Profit (Loss) for such Fiscal
Year. Owner shall be deemed to have waived any objections to and
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certified statements not specified to Operator in writing within forty-five (45)
days or receipt thereof. Any dispute is to the contents of any such statement or
any accounting matter hereunder shall be exclusively determined by the
Independent Auditor.
12.05. Both Owner and Operator shall have the right to engage independent
accountants and auditors to review the operational records and accounting books
of the Hotel as necessary. On termination of the Contract or the expiration of
the management term, an accounting firm registered in the PRC, acceptable to
Owner and Operator, shall conduct a notarized audit of the operational results
of the Hotel.
ARTICLE XIII
BOOKS, RECORDS AND STATEMENTS
13.01. Operator shall, on behalf of Owner, keep full and adequate books of ____
and other records reflecting the results of operations of the Hotel on an normal
basis, in US currency and in local currency, in accordance with the requirements
of the laws of the Country and in accordance with the Uniform System ith such
exceptions as may be required by the provisions of this Contract, provided,
however, that Operator may make such exceptions in such revenues as are
consistent with ITTCS's standard practice in accounting under management
contracts generally so long as such exceptions do not affect the determination
of Gross Operating Profit.
13.02. Except for record keeping for Centralized Services which shall be
available at the location where the principal activities occur, the books of
account and all other records relating to the operation of the Hotel shall be
kept at the Hotel and all such books of account at the Hotel shall be available
to Owner or Operator and their respective representatives at all reasonable
times for examination, audit, inspection and transcription. Upon expiration or
termination of this Contract, all such books and records forthwith shall be
returned over to Owner but shall be available to Operator at all reasonable
times for inspection, audit, examination and transaction for a period of seven
(7) years.
13.03. Operator shall delvier to Owner, within ten (10) working days following
the end of each Fiscal Month, a financial statement showing the results of the
operation of the Hotel for the immediately preceding Fiscal Month and for the
Fiscal Year to date. Such statements ahll:
(i) be in the customary form prepared by Operator for a managed hotel;
(ii) be taken from the books and records maintained by Operator in the manner
hereinabove specified; and
(iii) follow the general form set forth in eh Uniform System.
Operatgor shall be available at reasonable times to discuss with Owner the
results set forth in the financial statement and the operation of the Hotel
generally. In addition, all financial statements shall be accompanied by a
_____________ report explaining the figures provided.
13.04. Within nienty (90) days following the end of each Fiscal Year, Operator
shall deliver to Owner a financial statement certified by the Indpendnet Auditor
registered in the PRC, showing
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the results of operations of the Hotel during such Fiscal year, and the Gross
Operating Profit (Loss) for such Fiscal Year. Owner shall be deemed to hafe
waived any objections to and certified statements not specified to Operator in
writing within forthy-five (45) dfays of receipt thereof. Any dispute as to teh
conent of any such statement and any accounting matter hereunder shall be
conclusively determined by the Independent Auditor.
13.05. Both Owenr and Operator shall have the right to engage independent
accountants and auditors to review the operational records and accounting books
of the Hotel as necessary. On termination of the Contract or the expiration of
the management terms, an accounting firm registered in the PRC acceptable to
Owner and Operator shall conduct a notarised audit of the operational results of
the Hotel.
ARTICLE XIV
INSURANCE AND REAL ESTATE TAXES
14.01. Owner and Operator agree that throughout the Term, the insurance coverage
set forth in Appendix E shall be procured and maintained in the manner specified
therein.
14.02. Owner shall be responsible for payment in a timely manner of all real
estate and personal property taxes and all other taxes on property levied
against the Hotel or any of its parts, and such taxes shall not be treated as
Operating Expenses. Should Owner default in the performance of any of the
foregoing obligations, Operator may, but shall not be obliged to, fulfill said
obligations on Owner's behalf and if Operator shall fulfill any of the said
obligations, Operator shall be reimbursed forthwith by Owner with interest or
Operator may withdraw such amounts from the Agency Accounts or the Reverse
Account in whole or in part at any time and Owner shall promptly reimburse such
accounts.
ARTICLE XV
DAMAGE OR DESTRUCTION - COMPULSORY TAKING
15.01. Subsequent to Section 15.02, if the Hotel or any portion thereof is
damaged or destroyed at any time during the Term by fire, casualty or any other
case, __________ __________ shall at its own expense and with due diligence,
repair or replace the Hotel so that the Hotel shall be substantially the same so
that prior to such damages and destruction. If Owner shall fails:
(i) improvement, whichever is earlier; or
(ii) __________ complete such work diligently;
Then Operator may, at its option, either
(iii) terminate this Contract and all its obligations hereunder without any
culpability on the part of the Operator by written notice to Owner, effective as
of the date of ___________ or
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(iv) undertake or complete such work for the account of Owner to the extent of
such available insurance proceeds in which case Operator shall be entitled to be
reimbursed from such insurance proceeds.
15.02. If the Hotel is damaged or destroyed by fire or other insurable cause to
such an extent that the cost or repair or replacement as estimated by Operator
exceeds one third of the original cost of the Hotel, then:
(i) Operator may provisionally terminate this Contract and all of its
obligations hereunder without any liability on the part of Operator by written
notice to Owner effective as of the date or dispatch; or
(ii) Owner may, if it determines not to repair or replace the hotel,
provisionally terminate Operator's service by notice to Operator effective as of
the date of dispatch and payment with such notice to Operator of a net sum equal
to two (2) times the total of the immediately prior year's Basic Fee, License
Fee and Incentive Fee paid to Licensor/Operator for such period.
If thereafter at any time during the Term, Owner repairs, rebuilds or replaces
the Hotel, it shall give notice thereof to Operator no later than thirty (30)
days following the commencement of such repair, rebuilding or replacement and
Operator may within sixty (60) days following commencement of such repair,
rebuilding or replacement or receipt of such notice, whichever, is the later,
reinstate this Contract by written notice effective as of the date of dispatch
to Owner and, where applicable repayment of the net sum referred to paragraph
(b).
15.03. If the whole of the Hotel shall be taken in any expropriation,
_____________ or similar proceedings, or, if such a portion thereof shall be
taken __________ make unreasonable, in Operator's opinion, to use the remaining
portion ______ Hotel and type and ________ preceding such taking, then Operator
may, on __________ 30 days prior written notice to Owner, terminate this
Contract and all of its ____________ hereunder without any liability on the part
of Operator and any _________ (compensation) for such taking shall be equitably
apportioned between Owner and Operator after recoupment by Owner or its
constituent partners of other investments in the Hotel.
15.04. If, on a part of the Hotel, shall be so taken and the taking of such part
does not make it unreasonable, in Operator's opinion, to operate the remainder
of the Hotel, as a hotel of the type and class preceding such taking, so much of
any award compensation to Owner shall be made available as shall be reasonably
necessary for making alterations or modifications to the Hotel so as to make it
a satisfactory architectural unit as a hotel of similar type and class as prior
to the taking. The balance of the award compensation shall be equitably
apportioned between Owner and Operator.
ARTICLE XVI
CURRENCY
16.01. REMITTANCE
(i) Fee of Payments
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Operator, Licensor, Rescorp and such other members of the Sheraton Group shall
receive their respective Basic Fee, Incentive Fee, License Fee, Reservation
Cost, Centralized Services Cost, Technical Cost and payments for Additional
Technical Services in U.S. currency, with the right to remit all such payment to
themselves in U.S. currency in the United States of America after the payment or
deduction of such taxes as are necessary under the tax laws of the Country.
(ii) Expatriate Compensation
Expatriates, consultants and experts employed for the Hotel by Operator shall be
compensate in the currency of the country of which they are nationals, or a
residence or in U.S. currency, whichever of such currencies. Operator shall
elect, and with a right to repatriate such compensation via the Bank at the
exchange rate published by the Bank's Head Office, on the date payment is
effected.
(iii) Hotel Foreign Currency Expenditures
To the extent necessary in its judgment, Operator may make expenditures in
foreign currency in order to operate the Hotel in a manner which will
essentially cater to the international tourist and business trade, including
without limitation: expenditures to cover travelling expenses and living
expenses at the Hotel personnel as well as employees and executives of any
member of the Sheraton Group while engaged in travel in connection with
management of the Hotel; expenditures to convert travelling and moving expenses
of Expatriates and their family members to the extent these expenditures cannot
be made in local currency; expenditures to reimburse members of Sheraton Group
for communications sent to the Hotel by mail, cable, telephone or otherwise
foreign exchange expenditures for the importation of food, _____, Operating
Supplies, FH&EE and Operating Equipment; payment to ___ agent; advertising
agents and other payments for the selling of the Hotel's services and for
advertising and promoting; provided, however, that Operator will not be obliged
to make any such expenditures unless the Country's foreign exchange control
authorities make the appropriate foreign currency available therefor.
(iv) Owner shall provide necessary assurance from the Central Bank
Administration of Exchange Control of the Country that such foreign currency, to
the extent exchange is earned by the Hotel during the Term is available to
Operator for making the payments referred to in paragraphs (i) to (iii) and at
non-discriminatory rates of exchange, with permission to remit the same to such
places as Operator may designate.
16.02. Rate of Exchange
(i) All fees, costs and payments payable hereunder to Operator or any member of
the Sheraton Group shall be payable in US currency. However, to the extent such
fees, costs and payment are to be converted from local currency, the currency
conversion shall be calculated at the prevailing exchange rate for the purchase
of US currency published by the Bank's Head Office for payments in a similar
nature in effect on the date payment is due or on the date payment is effected,
whichever is earlier.
(ii) Moreover, for the purposes of determining the amounts of local currency to
be deducted from Total Revenue with respect to Operating Expenses which have
been paid for in foreign currency, such deduction shall be calculated at the
exchange rate in effect on the date such
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foreign currency payments become due or on the date such payments are effected,
whichever is earlier. However, to the extend (a) the Hotel receives foreign
currency, or (b) local currency is converted into foreign currency, all future
payments of Operating Expenses with such foreign currency shall be calculated at
the exchange rate in effect on the date of receipt of conversion, as the case
may be.
16.03. Termination
If at any time Operator or the event member of the Sheraton Group should be
unable for any reason for a consecutive period of three (3) months:
(i) to receive in or convert US treasury, and remit to the Unites States of
America all of any part of their respective Basic Fee, Incentive Fee, License
Fee, B_____________ Cost, Centralized Services Costs, Mechanical Services Cost
or payments for Additional Technical Services; or
(ii) to compensate Expatriates in the currency specified in Section 16.01
paragraph (ii), or if any Expatriate is unable to repatriate such currency, or
(iii) to obtain and remit the ___ and m___ of currency necessary
___________________ the expenditures referred in Section 16.01 paragraph (iii).
Operator may, on thirty (30) days prior written notice to Owner, terminate this
Covenant and all of its obligations hereunder without any liability on the part
of the Operator.
ARTICLE XVII
OWNER'S RIGHT OF SALE
17.01. During the period commencing on the Effective Date and ending on 31st
December of the fifth (5th) Full Fiscal Year of the Term. Owner shall not sell
or otherwise dispose of the Hotel or lease all or substantially all of the Hotel
to any Interest Holder and Owner shall not allow any Interest Holder which has a
controlling interest in Owner to sell or otherwise dispose of their shares or
take any other action, that would result in the loss of their controlling
interest in Owner (controlling interest being defined as ownership of not less
than fifty-one per cent (51%) of all classes of the voting stock of Owner or, if
the percentage of shareholding of Owner required under its articles of
association to convene a meeting of shareholders and to adopt resolutions is
higher controlling interest shall mean ownership of such higher percentage of
the shareholding of Owner, if Owner is a corporation, or of the ownership
interest in Owner, if Owner is not a corporation) except by descent or
distribution, in which event this restraint will bind the heirs of Owner and
Owner shall cause it devisees to be bound by this restraint, nor shall Owner
increase the number of outstanding shares of voting stock or other ownership
interest in Owner in a manner that will result in the loss of the controlling
interest, as above defined, by any Interest Holder(s).
17.02. Thereafter, if Owner or any Interest Holder desires to make such a sale
or disposal or enter into such a lease or take any action which would result in
the loss of their controlling interest, Owner shall give or cause such Interest
Holder to give Operator not less than thirty (30)
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days' advance notice of its said intention in writing, which said notice shall
indemnify in reasonable detail the owners of the proposed purchaser and shall be
accompanied by the latest audited and unaudited financial statements of the
proposed purchaser. The effective date of such notice to Operator shall be the
last in time to occur of the following:
(i) the date of the notice itself;
(ii) the date on which Operator receives from Owner a reasonably detailed
description of the proposed purchase and the _____ of the proposed purchaser; or
(iii) the date on which Operator receives from Owner the latest audited and
unaudited financial statement of the proposed:
Operator shall have the ___________________ within thirty (30) days of the
effective date of such notice to either;
(iv) terminate this Contract and all of its obligations hereunder without any
liability on the part of the Operator effective on the closing date of such
transaction; or
(v) in the case of a proposed such lease, or other destination of the Hotel,
require the proposed purchaser and proposed new Interest Holder(s) to accept the
assignment of this Contract from Owner and assume the obligations of Owner and
of the Interest Holder(s) hereunder.
If Operator elects the later option, such assignment and assumption shall be a
condition of the sale or disposition to such proposed purchaser and Operator
shall have the right to enjoin the said sale or disposition in the event that an
agreement of such assignment and assumption in form reasonably satisfactory to
Operator's lawyers and executed by the proposed purchaser and Interest Holder(s)
shall not have been delivered to Operator at least ten (10) days prior to the
said sale or disposition, or five (5) days after Operator notifies Owner of its
election or on the date of said sale or disposition by an Interest Holder or
other action taken that results in a loss of the controlling interest above
defined and Operator does not terminate this Contract, the above provisions with
respect of the Interest Holder shall continue to apply to any subsequent and
similar transaction that would result in a change of the controlling interest as
the same shall be constituted form time to time.
ARTICLE XVIII
ASSIGNMENT
18.01. Operator shall have the right to assign any of all its rights and
obligations in and under this Contract to any member of the Sheraton Group
provided that ITTSC or a subsidiary of ITTSC shall at all times own at least
fifty (50%) per cent of all classes of stock of such member.
18.02. Operator shall also have the right to assign any or all its rights and
obligations in and under this Contract to any successor or assignee of such
member which may result from any merger, consolidation or reorganization,
_________________ which requires all or substantially all of the business and
assets of ITTSC.
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18.03. Operator's right to assign shall be subject to the submission to Owner by
Operator of a detailed report of the designee(s) and the most recent financial
report of the assignee thirty (30) days prior to the Effective Assignment
______________ Owner shall not unreasonably withheld ___ such assignment.
18.04. Any such assignment shall be effected by the execution of a notice to
that effect executed by Operator as assignor and by the assignee which is
delivered not less than fifteen (15) business days in advance of the Effective
Assignment Date to Owner. The assignment shall take effect so that as from the
Effective Assignment Date.
(i) Owner and Operator shall unconditionally and irrevocably be released
from their obligations to, and relieved of their rights against each
other under this Contract; and
(ii) the assignee shall be substituted for Operator for all purposes of this
Contract, and Owner and the assignee shall assume all same obligations to, and
acquire the same rights against each other, as they would have assumed and
acquired had the assignee originally been a party to this Contract in lieu of
Operator.
18.05. Owner shall have no right to assign any of its rights and/or obligations
in and under this Contract except in accordance with Article XVII above.
ARTICLE XIX
INDEMNIFICATION
19.01. Neither Operator nor any member of the Sheraton Group shall in the
performance of this Contract be liable to Owner or to any other person, for any
act or omission, negligent, tortious or otherwise of any agent or employee of
Owner or of Operator or any member of the Sheraton Group, except, to the extent
not covered by insurance, for gross negligence, willful misconduct or fraudulent
misappropriation of funds of or by he general manager or the financial
controller of the Hotel. If any employee of Operator or any member of the
Sheraton Group in the performance of this Contract commits an act which is in
violation of the criminal laws of the Country, neither Owner nor Operator or the
Sheraton Group shall be responsible.
19.02. Other than the exceptions stated above, Owner hereby agrees to indemnify
and save harmless Operator and any member of the Sheraton Group who may perform
services hereunder, from and against any of the said entities may sustain or
incur by reason of any claim or assertion of wrongdoing, error, commission,
omission or negligence made by any person or entity (other than Owner) involving
or arising out of the performance by Operator or any member of the Sheraton
Group or any officer , agent or employee of said entries of the various duties
contemplated by this Contract, whether or not such claim or assertion involves
an allegation based on the alleged sole negligence of two or more such entities
or individuals (one or more of which any be Owner or any of its officers, agents
or employees) or on any other theory. Moreover , Owner will, at Operator's
request, assume the defense of any proceeding brought by any third party to
establish my ____ liability. The costs of any such defense shall be considered
and treated as Operating Expenses but only to the extent not recovered from or
paid directly by insurance.
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19.03. The provisions of this Article shall survive any expiration or
termination of this Contract and shall remain enforceable by Operator
notwithstanding such expiration or termination.
ARTICLE XX
USE OF THE NAME "SHERATON"
20.01. (i) During the Term Owner shall not commercially sue or refer to the word
"Sheraton" in any manner whatsoever other than in connection with the Hotel.
Moreover, no press leases or other written matter prepared by Owner for
publication in which the name "Sheraton" is used shall be published without
Licensor's and Operator's prior written approval. Upon the termination or
expiration of this Contract, such portion of the name of the Hotel which does
not contain the word "Sheraton" shall continue to be the exclusive property of
Owner. However, thereafter, neither Owner nor any other future owner or operator
of the Hotel shall have the right to use the Sheraton Marks in connection with
the operation of the Hotel or otherwise; except that Owner shall have the right
to use all the then existing FF&E, Operating Equipment and Operating Supplies
even though bearing the Sheraton Marks until fully consumed.
(ii) Notwithstanding the foregoing, if within fifteen (15) days after
termination or expiration of this Contract, Licensor or Operator offers to buy
any or all of said FF&E, Operating Equipment and Operating Supplies bearing any
Sheraton Marks, Owner shall within three (3) months cease to use such items and
shall sell such items at fair market value to Licensor or Operator as the case
may be. In the event of any dispute as to fair market value, the Independent
Auditor shall determine said value.
(iii) Upon termination or expiration of this Contract, Operator shall remove
with Owner's assistance from the Hotel any signs or other indications on the
Building & Appurtenances of any connection with Sheraton hotel system.
20.02. Notwithstanding the arbitration provisions contained in this Contract,
Operator shall have the right to seek immediately ___________________ other
relief in a court of competent jurisdiction to enforce the foregoing provisions
and Owner shall bear all of Operator's costs in connection with such
proceedings. Owner shall be deemed to have obtained indemnification against any
such cost in the event a subsequent owner or operator acts in violation of the
foregoing.
20.03. Owner acknowledges its obligations under this Article are material to the
performance of this Contract, and agrees that in addition to any other right or
remedy any member of the Sheraton Group or Operator may have at law or pursuant
hereto Owner shall indemnify and hold harmless any member of the Sheraton Group
or Operator of any loss, cost, damage or expense (including lawyer's fees which
any member of the Sheraton Group or Operator or affiliate or subsidiary thereof
may suffer as consequence of any ___ of Owner in breach of this Article.
20.04. The provisions of Article shall, where applicable, survive any expiration
or termination of this Contract and shall remain enforceable by Operator
notwithstanding such expiration or termination.
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ARTICLE XXI
FINANCING AND OFFERINGS OF OWNER
AND REPRESENTATIONS TO THIRD PARTIES
21.01. In no event may Owner represent that any member of the Sheraton Group or
Operator or any affiliate or subsidiary thereof is or in any way may be liable
for the obligations of Owner, in connection with:
(i) loans or other financing; or
(ii) any public or private offering of securities
for or in connection with the Hotel.
21.02. Nor shall Owner use, in any way, the name of any member of the Sheraton
Group, Operator or any affiliate or subsidiary thereof, in connection with the
foregoing negotiations or offerings, without the prior written approval of ITTSC
or Operator as the case may be. Owner may represent only that the Hotel is
managed by Operator.
21.03. Nor shall Owner use, in any way, in connection with the foregoing
offerings, any futures or other data either:
(i) supplied or made available by Operator to Owner in any budge, record or
account; or
(ii) complied by Owner or on Owner's behalf
in connection with the management and operation of the Hotel and the Hotel's
past, current and/or forecasted performance and profitability without the prior
written approval of Operator.
21.04. To this end, and in order to avoid any erroneous interpretation on the
part of any financing or investing person or entity: Owner and Operator agree as
follows:
(i) prior to the conclusion of any financing agreement, Owner shall furnish to
ITTSC and Operator all relevant details of such potential managing and copies of
draft documentation with respect thereto. ITTSC and Operator shall have the
right to notify any party participating in such financing of the contractual
relationship which exists between Owner and members of the Sheraton Group,
Operator its affiliates and subsidiaries, and to indicate the none of these
assumes with Owner any obligation of any nature with respect thereto;
(ii) prior to printing and issuance of any document related to a public or
private offering of securities, Owner shall furnish to ITTSC and Operator a copy
of the draft form, which shall not be published or issued without the prior
written approval of ITTSC and Operator, which in ITTSC's or Operator's opinion
could give rise to erroneous interpretations concerning the aforesaid
contractual relationship or contains figures or other data as aforesaid which in
ITTSC's or Operator's opinion is erroneous or misleading. Operator shall have
the right to require inclusion in such document of a statement implementing its
rights under this Article; and
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(iii) Owner shall promptly cause to be furnished to ITTSC and Operator legal
options satisfactory in form and substance to ITTSC and Operator, with respect
to compliance by Owner with allows and regulations which govern public or
private offerings of securities.
21.05. Owner shall cause any affiliated, subsidiary or controlling person of
Owner and any partner, or joint venture in Owner to comply with all provisions
of this Article that are applicable to any such party. Owner acknowledges its
obligations under this Article are material to the performance of this Contract,
and agrees that in addition to any other right or remedy any member of the
Sheraton Group or Operator may have at law or pursuant hereto Owner shall
indemnify and hold harmless any member of the Sheraton Group or Operator or any
affiliate or subsidiary thereof from and against any loss, cost, damage or
expense (including lawyer's fees) which any member of the Sheraton Group or
Operator or affiliate or subsidiary may suffer as a consequence of any act of
Owner in breach of this Article.
21.06. The provisions of this Article shall where applicable, survive any
expiration or termination of this Contract and shall remain enforceable by
Operator notwithstanding such expiration or termination.
21.07. The provisions of this Article shall, where applicable, survive any
expiration or termination of this Contract and shall remain enforceable by
Operator notwithstanding such expirate or termination.
ARTICLE XXII
REQUISITE APPROVALS
22.01. If any of the following conditions shall not have occurred by the dates
specified below. Operator may at any time thereafter by written notice to Owner
effective as of the date of dispatch terminate this Contract and all of its
obligations hereunder without any liability on the part of Operator:
(i) approval of this Contract and all of its Appendices by the Board of
Directors of Operator within 90 days of signing of this Contract.
(ii) receipt by Operator on or before the Effective Date of a certified
notarized and legalized copy of a resolution adopted by the Board of Directors
of Owner authorizing its entry into this Contract, the License Contract and the
Reservation Service Contract, and its consummation of the transactions
contemplated thereby and confirming authorization of the Chairman of the Board
of Directors to execute this Contract, the License Contract and the Reservation
Service Contract on Owner's behalf;
(iii) within thirty (30) days following the execution of this Contract, receipt
by Operator of the written approval of this Contract and all of its Appendices
by the Ministry of Foreign Trade and Economic Cooperation or its duly authorized
municipal or provincial commission in charge, and such other governmental
agencies or authorities (if any) as may be determined by Operator's lawyers to
be required by law or regulations to render this Contract to be and to remain
throughout the Term a valid and binding and enforceable Contract.
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(iv) within forty-five (45) days following the Effective Date, receipt by
Operator of confirmation by the Central Bank/Administratio of Exchange Control
of the Country as to availability and remittability of US currency as described
to in Section 16.01;
(v) within fifteen (15) days following the receipt by Operator of the items
referred to in paragraph (iii) and (iv) above, receipt of an opinion by lawyers
with offices in the Country to be selected and paid for by Operator confirming
the legal enforceability of this Contract in accordance with its terms;
(vi) within forty-five (45) days following the Effective Date full and complete
agreement between Owner and Operator in respect of the Approved _________ and
the plan ________ in Section 2.03 paragraph (ii) subparagraph (i).
ARTICLE XXIII
DEFAULT & TERMINATION
23.01. Event of Default
(i) The following events shall constitute events of default under this Contract:
(a) the failure by Owner or by Operator to make any payment owing to
the other or required pursuant to the terms of this Contract for a
period in excess of thirty (30) days or more after such payment is due;
or
(b) the failure of Owner to provide sufficient working capital for
operation of the Hotel; or
(c) the filing of a voluntary petition in bankruptcy or insolvency or a
petition for reorganization under any bankruptcy law by either Owner or
Operator, or the consent to an involuntary petition in bankruptcy or
the failure to vacate same within sixty (60) days, or the entering of
an order, judgment, or decree by any competent jurisdiction,
adjudicating either Owner or Operator a bankrupt or insolvent, or
approving a petition seeking reorganization, or appointing a receiver,
trustee or liquidator of all or a substantial part of such party's
assets; or
(d) any breach by either Owner or Operator of any provisions of either
the License Contract or the Reservation Service Contract; or the
failure of Owner to pay an amount payable to any member of the Sheraton
Group; or
(e) any material of Owner or Operator of any of the provisions of this
Contract or the Technical Services Agreement.
(ii) If any of such events of default shall have occurred, the non-defaulting
party may on thirty (30) days' prior written notice to the defaulting party
(five (5) days in the case of subparagraph (a) of paragraph (i)) terminate this
Contract provided that if upon receipt of such notice, the defaulting party
shall promptly and with all due diligence cure the default within the
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notice period (or in the case of subparagraph (d) or (c) of paragraph (i), if
such default is not susceptible of being cured within thirty (30) days period,
with all due diligence take action to cure the default and such action cures the
default), then such notice shall be of no force and effect.
(iii) Notwithstanding the foregoing, except as to matters referred to in
subparagraphs (a) and (b) of paragraph (i), this Contract shall not terminate if
a bona fide dispute with respect to any of the _________ events default has
arisen between the parties and such _______________ pursuant to Article XXVI.
23.02. Construction Delays
(i) In the event Owner has not submitted plans and specifications approved or
otherwise completed the necessary steps ____________________ fully completed
construction of the Building & Apprentices and the __________ and installation
of all FF&E and Operating ________ by the dates stated therein being subject to
a cumulative extension of not more than twelve (12) months for delays due to
causes beyond the reasonable _____ by Owner provided that there shall be no such
extension for any _____________ commenced more than fourteen (14) days before
Operator is notified thereof ______). Operator may, at its sole option, on
fifteen (15) days prior written notice to Owner, terminate this Contract and all
of its obligations ____________ without any liability on the part of Operator.
(ii) Moreover, if
(a) Operator should at any time prior to the Estimated Partial Opening
Date determine:
i. That the Building & Appurtenances will not be substantially
completed by the Estimated Partial Opening Date, or
ii. that the construction of the Hotel materially varies from the
Approved Final Plans, or
iii. that Owner's loans or other financing is installment to enable
Owner to comply with its obligations under this Contract;
and Owner shall not within thirty (30) days of being so advised by
Operator in writing (within ninety (90) days in the case of (iii)) have
arranged in a manner satisfactory to Operator to cure such default and
have commenced and diligently proceeded with such cure, or
(b) Operator should at any time thereafter determine that Owner is not
diligently proceeding with such cure;
then Operator may, on fifteen (15) days' prior written notice to Owner,
terminate this Contract and all of its obligations hereunder without any
liability on the part of Operator.
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23.03. TERMINATION
(i) The rights of termination granted under the Contract shall not be in
substitution for, but shall be in addition to, any and all rights and remedies
for breach of contract and other causes or action granted by applicable
provisions of law.
(ii) Upon such termination, Operator and the relevant members of the Sheraton
Group shall be paid herewith the Basic Fee, Incentive Fee, License Fee,
Reservation Cost, Centralized Services Cost, Technical Services Cost or payments
for Additional Technical Services to the date of such termination, without
prejudice to any other claims. Operator may have against Owner for breach of
this Contract.
(iii) In addition, in the event Operator terminates this Contract in accordance
with Section 23.02 or otherwise on or before the Full Opening Date. Owner shall
be liable to Operator for the fair and reasonable value of all activities and
services any member of the Sheraton Group or third parties have performed
pursuant to this Contract prior to such termination. Operator may withhold,
based on the payment standards agreed by the Owner, said fair and reasonable
value from any amounts paid by Owner to Operator hereunder prior to such
termination from the Agency Accounts or Reserve Account.
ARTICLE XXIV
CASINO
24.01. If a casino is operated in the Hotel, Operator shall have the exclusive
right to operate it. The excess of the gross amount wagered therein over the
total amount of money won by wager will be included in the Total Revenue. Such
excess, reduced by the Operating Expenses relating to the casino, will be
considered and treated as part the Gross Operating Profit.
ARTICLE XXV
GOVERNING LAW AND ARBITRATION
25.01. The Parties shall comply with PRC laws and regulations.
25.02. Subject to the proviso contained in Clause 25.03, all disputes or
differences arising in connection with the construction, interpretation and
performance of this Contract shall be settled by means of negotiation between
Owner and Operator provided that if Owner and Operator cannot settle any such
dispute or difference with thirty (30) days of first conferring, then such
dispute or difference shall be submitted to binding arbitration.
Unless otherwise agreed in writing by Owner and Operator:
(a) The arbitration shall be conducted according to UNCITRAL rules in
for as of the date of this Contract provided that in the event of any
_________ between such rules and the provisions of this Section, the
______________ of this Section shall prevail.
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(b) The arbitration shall consist of one arbitrator appointed by Owner,
one arbitrator appointed by Operator and an additional referee
arbitrator who shall be appointed by the other arbitrators. If either
Owner or Operator did not appoint an arbitrator within thirty (30) days
of reference of the dispute to arbitration, or if the Owner/
Operator-appointed arbitrators fail where applicable to appoint a
reference within thirty (30) days of the appointment of the last
Owner/Operator-appointed arbitrator, then those vacancies will be
filled by arbitrators selected by the Chairman of the Singapore Chamber
of Commerce and the arbitration shall proceed forthwith.
(c) The language of the arbitration proceedings and of reports and
documentation submitted or distributed by the arbitration shall be
English.
(d) The arbitration shall take place in Singapore. This Contract shall
be governed by the laws of Singapore.
(e) So far as Owner and Operator can procure, proceedings shall
commence as soon as possible and shall proceed thereafter with all
deliberate speed to a conclusion.
(f) Owner and Operator shall each prepare an English-language written
report briefing its position on the issues disputed. All reports shall
be provided to the members of the panel no later than sixty (60) days
after the reference of the dispute to arbitration.
(g) Owner and Operator may participate with the assistance of counsel.
A written transcript of the proceedings shall be kept and shall be
provided to either of Owner or Operator requesting it.
(h) The panel will be requested to provide written reasons for its
conclusions. In making its award(s) the panel may award pre-judgment or
post-judgment interest.
(i) The award of the panel shall be a final decision and formal
judgment on the dispute between Owner and Operator. The award may be
entered in any competent court or application may be made to any
competent court for judicial acceptance or confirmation of the award.
Neither Owner nor Operator shall seek recourse to a court of law or
other authorities in connection with any question of law arising in the
course of the arbitration nor to appeal for revision of the award.
(j) Fees shall be based upon actual arbitration and other services
rendered and not upon the amount in controversy or the amount of the
award or otherwise.
(k) Included that in respect of any claim for non-payment of any sum
pursuant to the terms of this Contract, Owner and Operator hereby
________ to the non-exclusive jurisdiction of the courts of Singapore
and the provisions of Section 25.02 shall not apply.
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ARTICLE XXVI
NOTICE
26.01. Any notice required to be given under this Contract shall be in writing
and shall be deemed to have been effectively given (i) when personally
delivered, (ii) ten (10) working days after being sent by registered or
certified mail, postage prepaid and return receipt requested, or (iii) when sent
by facsimile, telex or telegraph, in each such case addressed as follows, or to
such _________________ either Owner or Operator may subsequently designate by
notice to the other:
Owner: Huasheng Hotel International (Shenyang) Co., Ltd.
386 Qingnian Street
Heping District
Shenyang
Liaoning Province
People's Republic of China
Telex:
Fax: 86-24-385-965
Operator: Sheraton Overseas Management Corporation
Sixty State Street
Boston, Massachusetts 02109
U.S.A.
c/o Legal Department
Telex: 4-30027
Fax: 1-617-367-5636
with copies to: (a) Hotel c/o General Manager and
(b) Sheraton Asia Pacific Corporation
9/F, New World Office Building
West Wing
20 Salisbury Road
Kowloon
Hong Kong
c/o Regional Director of Operations
Telex No.: 49107 TSCAP HX
Fax No.: 852-369-5300 and
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(c) ITT Sheraton Corporation
Sixty State Street
Boston, Massachusetts 02109
U.S.A.
c/o Legal Department
Telex: 4430027
Fax: 1-617-367-5636
ARTICLE XXVII
LEGAL VALIDITY
27.01. With respect to the management and operation of the Hotel and all matters
covered by the scope of this Contract, Owner hereby confirms that in _________
of a conflict between any provision or stipulations of this Contract and the
provisions or stipulations of a joint venture contract (if any) for the
establishment of Owner and the construction of the Hotel by and between Shenyang
Sports Enterprise Company and Taiwan Kaipeng Construction Holding Co. Ltd.,
dated 1 November 1994, or the Articles of Association of Owner, or any
amendments or supplement thereto, or any contract executed by Owner or any of
its joint venture partners to which Operator is not a party, the provisions and
stipulations of this Contract shall govern and shall have ultimate legal
validity.
ARTICLE XXVIII
MISCELLANEOUS
28.01. Owner hereby agrees not to engage in any other activity or business
during the Term which will have an adverse effect on its ability to meet its
obligations set forth in this Contract, and Operator shall be advised in writing
in advance of any such activity or business to be undertaken by Owner.
28.02. To compensate for the effects on inflation Operator may rely on the
Independent Auditor to establish revisions to the figures set forth in Articles
IV and X.
28.03. In respect of all amounts payable to Operator or to other members of the
Sheraton Group under this Contract not paid on the due date or dates for payment
thereof, whether in respect of fees, reimbursement or otherwise, interest shall
be payable in US dollars at the rate of one and a half cent (1.5%) per month
compounded on a monthly basis to the extent permitted by applicable law, on
demand from the due date or dates for payment until payment, without prejudice
to any rights of termination under this Contract or to any other claims for
breach of this Contract that Operator may have against Owner in respect of such
non-payment.
28.04. The waiver of any of the terms and conditions of this Contract on any
occasion or occasions, shall not be deemed a waiver of such terms and conditions
on any future occasion.
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28.05. Except as otherwise provided herein, whenever in this Contract the
approval of Operator or Owner is required, such approval shall be in writing,
shall not be unreasonably withheld or be subject to unreasonable conditions.
28.06. Operator shall have the right to set off any liabilities of Owner to any
member of the Sheraton Group against any payments to be made to Owner under this
Contract and against all funds in the Agency Accounts and the Reserve Account,
provided that Operator provides Owner one week notice prior to any such offset.
28.07. Unless otherwise notified by Operator, all payment to be made by Owner to
Operator hereunder (as compared with payments to be withdrawn by Operator from
either the Agency Accounts or the Reserve Account) shall be made to the credit
of Operator by transfer of funds to Operator's account at the Bank or to such
other accounts as Operator may from time to time designate.
28.08. Until Owner shall advise Operator to the contrary in writing, Operator
may rely on Mr. Gao Wanjun as being authorized to take any action required or
permitted to be taken by Owner, including, without limitation, the giving of all
approvals hereunder.
28.09. Neither Operator nor any of its affiliates or subsidiaries shall, by
reason of Operator entering into this Contract, be restricted in any way from
owning, leasing, managing or licensing other hotels in its absolute discretion
wherever located.
28.10. Owner and Operator shall execute and deliver all other appropriate
supplemental contracts and other instruments and take any other action necessary
to make this Contract and all of its Appendices fully and legally effective,
binding and enforceable as between the parties and as against third parties.
28.11. The headings of the Articles and Sections of this Contract and all of its
Appendices are inserted for convenience only and are not intended to affect the
meaning of any of the provisions.
28.12. All Appendices to this Contract are an integral part of this Contract and
all terms defined in this Contract and the Appendices shall have the same
meaning throughout this Contract and its Appendices.
28.13. References in ___________________ to Articles, Sections, paragraphs,
subparagraphs and Appendices are to the Articles, Sections, paragraphs,
subparagraphs and the Appendices of this Contract. References to Articles or
Sections, except where the context otherwise requires, are references to the
relevant Article or Section in this Contract or Article in which the reference
appears. References to paragraphs and subparagraphs except where the context
otherwise requires, are references to the relevant paragraph or subparagraph in
the Section or paragraph in which the reference appears.
28.14. Owner hereby represents that in entering into this Contract Owner has not
relied on any projections of earnings, statements as to the possibility of
future success or other similar matter which may have been prepared by Operator
or any member of the Sheraton Group, and understands that no guarantee is made
or implied by Operator or any member of the Sheraton Group as to the cost of the
future financial success of the Hotel.
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28.15. This Contract constitutes the entire agreement between Owner and Operator
relating to the subject matter hereof superseding all prior agreements, oral or
written. This Contract shall be binding upon and shall insure to the benefit of
Owner and Operator and their respective successors and permitted assignees and
any members of the Sheraton Group herein referred to.
28.16. This Contract and all of its Appendices are written to English and
Chinese, to be executed by both parties. Both language versions shall have equal
force and effect, except in the case of any discrepancy, in which case the
English language version shall prevail.
IN WITNESS WHEREOF, Owner and Operator have duly executed this
Contract on the day, month and year first above written.
WITNESS: HUASHENG HOTEL INTERNATIONAL (SHENYANG) CO., LTD.
By: By:
------------------------- -------------------------
Name: Name: Gao Wanjun
------------------ Title: Chairman
Title:
------------------
WITNESS: SHERATON OVERSEAS MANAGEMENT CORPORATION
By: By:
------------------------- -------------------------
Name: Name: Edward Davie
------------------ Title: President, Asia-Pacific Region
Title:
------------------
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A-1
APPENDIX A
DESCRIPTION OF SITE
A-1
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APPENDIX B
ACCOUNTING TERMS
(i) TOTAL REVENUE shall mean all income and proceeds of every kind (whether in
cash or on credit) resulting from the operation of the resulting from the
operation of the Hotel and all of the facilities therein including, without
limitation:
(1) all income received from tenants, transient guests, lessees, licenses
and concessionaires (but not including the gross receipts of such
lessees, licensees or concessionaires) and other persons occupying
space at the Hotel and/or rendering services to the Hotel guests (but
exclusive of all consideration received at the Hotel for hotel
accommodations goods and services to be provided at other hotels
although arranged by for [ ] Operator);
(2) all income from catering operations conducted outside of the Hotel
(3) all subsidy payments, governmental allowances and awards
(4) any other form of incentive payments or awards from any [ ] whatsoever
which are attributable to the operation of the Hotel and [ ]
(5) the proceeds of business interruptions insurance actually received [ ]
Operator or Owner with respect to the operations of the Hotel [ ]
deduction from said insurance proceeds of all necessary expenses [ ] in
the adjustment or collection thereof)
(6) [ ]Turnover Taxes which have been added onto the customers' bill and
actually received by the Hotel as part of the Hotel's revenue.
(ii) GROSS OPERATING PROFIT shall mean the excess of Total Revenue over
Operating Expenses.
(iii) TURNOVER TAXES shall mean gross receipts or value added tax or similar
turnover taxes and levies and any other direct room or room sales related taxes,
fees or levies.
(iv) OPERATING EXPENSES shall mean the entire costs and expense of maintaining
conducting, and supervising the operation of the Hotel (but shall not include,
except as otherwise provided in this Contract, (a) principal of and interest on
Owner's indebtedness and any rent payable by Owner (b) depreciation and
amortization, (c) payments by Owner or Operator under any equipment leases, and
(d) the costs of any other things specified in this Contract to be done or
provided at Owner's expense) incurred by Operator directly [ ]request or is
otherwise provided in this Contract, which Operating Expenses are properly
attributable to the period under consideration under Operator's system of
accounting, including without limitation:
(1) the cost of all food and beverages sold or consumed and of all
Operating Equipment and Operating Supplies, other than initial
inventories of Operating Equipment and Operating supplies furnished by
Owner pursuant to Article II;
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(2) salaries and wages and employee benefits of Hotel personnel, including
without limitation, pension plans, medical insurance, life insurance,
travel accident insurance and bonuses, including cost of payroll taxes
and employee benefits, severance or other termination benefits and
accruals therefor, the cost of moving Hotel personnel (including
Expatriates), the families and personal belongings to the Hotel and
their return, and all other expenses not specified or referred to in
this Appendix B which are referred to as "Administrative and General
Expenses" in the Uniform System. If the general manager of the Hotel
and other Hotel executive personnel are on the payroll of ITTSC or any
member of the Sheraton Group, the cost of their salaries, bonuses,
payroll taxes and employee benefits, including family home leave,
airfares and allowances) shall be billed by said company to and be
reimbursed by owner monthly and such [ ] reimbursement shall be an
Operating Expense. Except as here and otherwise expressly provided, the
salaries or wages of other employees or executives of Operator, or any
member of the Sheraton Group shall in no event be Operating expenses,
but traveling expenses incurred by them in connection with the
management of the Hotel, including living expenses incurred during
travel, shall be Operating Expenses. Notwithstanding the foregoing, if
it becomes necessary for an employee or executive of any member of the
Sheraton Group to perform temporary services at the Hotel of a nature
normally performed by Hotel personnel, his salary (including payroll
taxes and employee benefits) as well as his traveling expenses
(including living expenses) shall be Operating Expenses;
(3) the cost of all other goods and services obtained by Operator in
connection with its operation of the Hotel including, without
limitation, heat and utilities, office supplies and services performed
by third parties;
(4) the cost of repair and maintenance of the Hotel and such amortization
charges for capital improvements as determined by the Independent
Auditor pursuant to Article XII;
(5) insurance premiums for general liability insurance, motor liability
insurance, worker's compensation insurance or similar contributions
required by employee benefits, acts, employee bonds and such use and
occupancy or other insurance as may be provided for protection against
claims, liabilities and losses arising from the operating of the Hotel
(as distinguished from any property damages insurance on the Building &
Appurtenances or its contents, business interruption insurance and
boiler and machinery insurance the cost of which will be borne by Owner
and will not be considered as Operating Expenses), and losses incurred
on my self-insured risks of the foregoing types provided that Operator
has approved in advance such self-insurance or has agreed in advance to
the unavailability of insurance to cover such risks. Premiums on
policies for more than one (1) year and/or not for a period within the
Fiscal Year in question will be pro-rated over the period of insurance,
and premiums under blanket policies will be allocated among properties
covered;
(6) all taxes, assessments and other charges (other than income taxes and
Turnover Taxes) with respect to the operation of the Hotel, and water
and sewerage charges but excluding all taxes levied or imposed against
the Hotel or its contents, such as real and personal property taxes;
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(7) legal costs and fees, and fees of any Independent Auditor, for services
relating to the obtaining of all necessary approvals of this Contract
and of matters relating thereto including any requisite registration of
Operator (as a branch, an officer or otherwise), and the operation of
the Hotel and its facilities;
(8) the costs and expenses (including salaries) incurred after the Full
Opening Date of technical consultants and specialized operational
experts for specialized services in connection with non-recurring work
on operation, functional, decorating, design or construction problems
and activities, including the reasonable fees of any member of the
Sheraton Group in connection therewith (excluding Technical Services
Cost or payment for Additional Technical Services);
(9) all expenses for advertising the Hotel and all expenses of sales
promotion and public relations activities incurred after the Partial
Opening Date;
(10) all out-of-pocket expenses and disbursements reasonably, properly and
specifically incurred by any member of the Sheraton Group pursuant to,
in the course of or directly related to the management and operation of
the Hotel under this Contract. Without limiting the generality of the
foregoing, such charges may include all reasonable travel, telephone,
telegram, radiogram, cablegram, air express and other incidental
expenses, but except as herein otherwise expressly provided, shall not
include any of the regular expenses of the offices maintained by any
member of the Sheraton Group other than offices maintained at the Hotel
for the management of the Hotel;
(11) Reservation Costs incurred after the Partial Opening Date;
(12) Centralized Services Costs;
(13) Operator's Basic Fee in excess of License Fee;
(14) License Fee under the License Contract to the extent actually payable
and; allowances for
(15) uncollectible accounts receivable in an amount proposed by Operator and
accepted by the Independent Auditor.
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APPENDIX C
LICENSE CONTRACT
LICENSE CONTRACT (this Contract), made and entered into this 15th day of
September, 1995, by and between SHERATON INTERNATIONAL INC., a Delaware
corporation having its principal offices at Sixty State Street, Boston,
Massachusetts 02109, U.S.A. (Licensor) and Huasheng Hotel International
(Shenyang) Co., Ltd., a duly organized and registered legal entity existing
under the laws of the People's Republic of China and having its legal address at
386 Qingnian Street, Hepag District, Shenyang, Liaoning Province, People's
Republic of China (Licensee).
WHEREAS
(1) Licensor is the owner of the rights in the Country to the name
Sheraton, the stylized "S" mark used in connection with the chain of
hotels bearing the name Sheraton and various other service marks,
trademarks, trade names slogans, symbols, designs, insignia, emblems
and other identifying characteristics associated with the said chain of
hotels, collectively the Sheraton Marks); and
(2) Licensee is the owner of a certain hotel located at Shenyang, Liaoning
Province, People's Republic of China to be named the Sheraton Shenyang
Hotel (the Hotel), to be operated by Sheraton Overseas Management
Corporation (Operator) pursuant to a Management Contract of even date
herewith by and between Licensee and Operator (the Management
Contract).
(3) Licensee desires to obtain for the Hotel the benefits of the use of the
aforementioned Sheraton Marks and Licensor desires to provide Licensee
therewith for a fee.
(4) All terms used herein which are not defined shall have the meanings as
defined the Management Contract.
NOW, THEREFORE, Licensor and Licensee hereby mutually covenant and agree as
follows:
ARTICLE I
USE OF THE SHERATON MARKS
Licensor hereby grants to Licensee, only within the terms and conditions of this
Contract, a non-exclusive license to use, in connection with the operation of
the Hotel, the Sheraton Marks to which Licensor has proprietary rights in the
Country.
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ARTICLE II
LICENSEE'S COVENANTS
1. Licensee acknowledges that the Sheraton Marks have acquired a primary
significance indicating that the Hotel is a part of the system of
Sheraton hotels, owned, leased, operated or franchised by Licensor or
its affiliated companies. Licensee will always acknowledge and
recognize, both before and after the expiration of this Contract, the
exclusive right of Licensor and its affiliated companies to use or to
grant to any third party the right or license to use, whether
separately as part of or in connection with other words, slogans,
symbols or designs, the Sheraton Marks, which may now or in the future
be generally used in connection with the operation of such hotels.
Except to the extent authorized hereunder, while this Contract is in
effect Licensee agrees that it will not use, imitate, or infringe upon
any of the Sheraton Marks in whole or in part. All use hereunder by
Licensee of the Sheraton Marks shall insure solely to the benefit of
the Licensor.
2. Subject to the rights of Licensee (Owner) set forth in Article XX, of
the Management Contract, upon the termination of this Contract for any
reason whatever all rights and privileges granted to Licensee hereunder
shall immediately terminate and Licensee and all persons claiming under
Licensee shall immediately cease and desist from the use of the
Sheraton Marks and from the use of supplies, equipment and other items
bearing any of such Sheraton Marks.
3. Licensee's covenants under this Article II are agreed to be
unconditional and in no way dependent upon the performance by Licensor
of any of its agreements hereunder.
4. Licensor shall have right to seek injunctive or other relief in a court
of competent jurisdiction to enforce the foregoing provisions and
Licensee shall bear all of Licensor's costs in connection with such
proceedings. Moreover, Licensee will pay to Licensor as a penalty the
sum of US$1,000 for each day that the Licensee shall be in violation of
its obligations under this Article II.
5. Licensee will enter into all contract, execute all documents and fully
cooperate with Licensor in connection with all appropriate recordings
in public offices (other than the initial registration of the Sheraton
Marks, which is Licensor's responsibility) necessary for Licensor or
preserve, protect and appropriately record its proprietary rights
herein described, and cause this Contract to be and remain throughout
the term hereof a valid and binding legal contract enforceable in he
courts of the Country. Upon the expiration or termination of this
Contract, Licensee, at Licensor's request and at its own expense, will
withdraw or cooperate with Licensor in connection with the withdrawal
of any such recordings. Moreover, Licensee hereby appoints Licensor as
its attorney with the power to do any or all of the foregoing in the
name and on behalf of Licensee.
Licensor, through its agent and attorneys, will arrange for the
preparation of all the foregoing contracts and documents, the doing of
all the foregoing acts, the effecting of all
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the foregoing recordings for the foregoing approvals. Licensee will
bear all costs incurred by Licensor in connection with the said
activities.
ARTICLE III
DEFAULT
Interest at the rate of one and a half per cent (1.5%) per month compounded on a
monthly basis to the extent permitted by applicable law, shall be payable on
demand on all fees not paid on the due dates for payment from the due date for
payment thereof until payment without prejudice to any rights of termination or
claims for breach of this Contract Licensor may have against Licensee in respect
of such non-payment.
If Licensor shall fail to pay when due any fees payable to Licensor or to comply
with its other covenants set forth herein, Licensor may terminate this Contract
with its other covenants set forth herein, Licensor may terminate this Contract
and all rights of Licensee hereunder by written notice to Licensee, sent by
prepaid registered airmail, effective on dispatch, but without prejudice to any
obligations of Licensee for any accrued fees or other liabilities or obligations
arising out of any acts or omissions or Licensee prior to such termination, and
without in any way affecting any obligations of Licensee to perform all
provisions of this Contract which are to be performed after any such
termination.
ARTICLE IV
COMPENSATION
In consideration of the issuance and continuance of the license granted pursuant
to this Contract, Licensee agrees to pay to Licensor a monthly license fee for
each calendar month or portion thereof equal to five percent (5%) of "gross room
sales" on an accurate basis from the operation of Hotel during the month (the
"License Fee"), subject as provided in Section 7.01 paragraph (1) of the
Management Contract. For purposes hereof, "gross room sales" means all revenue
derived from guest rooms and apartments rented for part-day occupancy a full
day, week or longer, provided that where a single charge is made for room and
board, an equitable portion of such charge shall be included in gross room sales
in a manner consistent with Operator's normal method of accounting for such
charges. License Fee accrued during any month will be payable on the fifth day
of the following month.
All fees payable to Licensor hereunder shall be paid in US currency, at an
address of Licensor in the United States of America (Licensor's Address),
currency conversion to be calculated at the prevailing exchange rate for
payments of a similar nature in effect on the date payment is due hereunder or
the date payment is effected, whichever is earlier. Failure of Licensee to make
any payment in US currency at Licensor's Address, for whatever reason (even if
such failure is a result of governmental order or regulation or order of any
judicial body having jurisdiction) within three (3) months of the due date
thereof, shall give Licensor the right to terminate this Contract by written
notice to Licensee, effective on dispatch. Notwithstanding the foregoing,
Licensor may, however, at its exclusive option, elect from time to time to
receive payments due hereunder in local currency by so notifying Licensee at any
time before the respective payment
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is actually received, in which event Licensee will make the payments as to which
the notice relates in local currency. The exercise of the foregoing option with
regard to any required payment hereunder shall not be denied to require Licensor
to exercise the said option with regard to any other required payment.
ARTICLE V
PROPER LAW
The governing law of this Contract shall be the governing law of the Management
Contract and any and all disputes arising under or in connection with this
Contract shall be handled in accordance with the procedures set forth in Article
XXV of the Management Contract.
ARTICLE VI
TERM
The term of this Contract shall commence on the Partial Opening Date in
accordance with the Management Contract (the Commencement Date) and shall,
subject to earlier termination as provided herein, automatically terminate upon
the termination or expiration of the said Management Contract.
ARTICLE VII
LICENSOR'S TERMINATION RIGHTS
RELATING TO GOVERNMENTAL APPROVALS
Licensor may terminate this Contract at any time by the written notice to
Licensee, effective upon dispatch, upon occurrence of any of the following
events
(a) at the proper authorities of the Country shall have failed by the
Commencement Date hereof and continue thereafter to have approved
_____________ right to receive and remit to its officers in the United
States of American US currency, all amounts of License Fee payable to
Licensor hereunder;
(b) if the Contract shall not by the Commencement Date have been
approved by all relevant governmental authorities in charge, the
approval of which is required under the law of the Country to make this
Contract a valid and binding contract enforceable in the courts of the
Country; Licensor shall also have the right to terminate this Contract
at any time after the relevant governmental authorities shall have
disapproved any application for any of the foregoing approvals.
No delay in exercising any of the foregoing rights of termination shall be
deemed a waiver thereof; provided, however, that in the event any of the
foregoing approvals are not obtained by the Commencement Date or in the event of
the disapproval of any application for any of the foregoing approvals, if
Licensee requests Licensor to waive any such right in writing, Licensor shall,
within thirty (30) days of receipt of such request, either: (i) waive the rights
not obtained by the Commencement Date or the rights to which such disapproved
application relates, as the
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case may be, or (ii) terminate Contract in the foregoing manner, and Licensor's
failure to respond to such request within such thirty (30) day period shall be
deemed a waiver of the said rights.
IN WITNESS WHEREOF, the parties have duly executed this Contract the day and
year first above written.
WITNESS: HUASHENG HOTEL INTERNATIONAL (SHENYANG) CO., LTD.
By: By:
------------------------- -------------------------
Name: Name: Gao Wanjun
------------------ Title: Chairman
Title:
------------------
WITNESS: SHERATON INTERNATIONAL INC.
By: By:
------------------------- -------------------------
Name: Name: Edward Davie
------------------ Title: President, Asia-Pacific Region
Title:
------------------
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APPENDIX D
SHERATON RESERVATION SERVICE CONTRACT
SHERATON RESERVATION SERVICE CONTRACT (this Contract), made and entered into
this 15th day of September, 1995 by and between Huasheag Hotel International
(Shenyang) Co., Ltd., a duly organised and registered legal entity existing
under the laws of People's Republic of China and having its legal address at 386
Quingnian Street, Heping District, Shenyung __ing Providence, People's Report of
China (Owner), and ITT SHERATON RESERVATIONS CORPORATION, a Delaware corporation
having its principal offices at Sixty State Street, Boston, Massachusetts 012108
U.S.A. (Rescorp.).
WHEREAS:
1. Rescorp maintains a worldwide network for the making and
confirming of reservations at Sheraton Hotels throughout the world (the System),
which is presently interconnected and contractual arrangements with other
reservations network the benefits of which the available to all Sheraton hotels.
2. Owner desires to enter the hotel to be named the "Sheraton
Shenwang Hotel" (the "Hotel"), in the System and to enjoy the benefits of the
System.
3. All terms used herein which are not defined shall have the meaning
as defined in the Management Contract by and between Owner and Sheraton Overseas
Management Contract, executed on even date hereof (the "Management Contract").
Now, therefore, Owner and Rescorp hereby mutually covenant and agree as follows:
(i) Rescorp shall provide the Hotel with the full benefit of the System,
which presently consists of a central computer (Sheraton Central
Computer) located at Braintree, Massachusetts, U.S.A. and Rescorp's
Reservation Offices located in - Austin, Texas and Raleigh, North
Carolina, U.S.A.; Singapore; Tokyo, Japan; Sydney, Australia;
Auckland, New Zealand; London, United Kingdom; Brussels, Belgium;
Milan, Italy; Bahrain, Kuwait; Hong Kong; Bangkok, Thailand and major
market cities throughout the world - any of which maintains
reservations agents which provide reservations services for all
Sheraton hotels throughout the world (herein collectively referred to
as RSO), as well as the respective advertised toll free telephone
number in the U.S.A., Canada and major market cities throughout the
world through which reservations can be made with any Sheraton Hotel
in the world. The Sheraton
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Central Computer, which maintains room availability data on all
Sheraton hotels and will maintain such data on the Hotel, is
interconnected with terminals RSO and in all Sheraton Hotels. The
System is presently interconnected with the respective reservations
networks maintained by various major airline companies and other 3rd
party Reservation sources which likewise serve a reservations sources
for all Sheraton Hotels and through which reservations are relayed
instantly to the Sheraton Central Compute. The Sheraton Central
Computer or appropriate personnel will relay to the Hotel all
reservations so received either:
(a) by relating the information to a terminal at the Hotel which is
interconnected with the Sheraton Central Computer either (i) directly
through Reservation IV Equipment or (ii) indirectly through leased
line equipment; or
(b) by telex; or by such other source of generally accepted
communication equipment that may be used in a particular location as
determined by Rescorp.
4. Owner shall be enrolled in the System on the terms and conditions
specified herein on a date to be agreed to by the parties, but no later than six
(6) months prior to the Estimated Partial Opening Date (Participation Date):
(a) Commencing on the Partial Opening Date, Owner shall pay to Rescorp
a monthly reservation participation payment (Reservation Cost) for
participation in the System evaluated on the same basis or in
accordance with the same formula as the amount payable generally by
other participants in the System. Effective and including July 1st,
1993 the Reservation Cost is six tenths of one percent (0.6%) of gross
room revenue, plus US$10.00 for each Available Room per month plus
US$4.00 for each reservation made through a Sheraton Reservation
Office to the Hotel (regardless of whether it is cancelled or not
consumed) and for the purposes of this Contract a reservation consists
of up to five (5) rooms and may be in respect of up to nine (9) adults
(plus up to nine (9) children) and maybe up to thirty-one (31) days in
length). The amounts constituting the Reservation Cost are subject to
change form time to time by Rescorp and may be in excess of the
above-stated amounts when the first payment of the Reservation Cost is
required hereunder. Such changes shall be effective upon dispatch of
notification thereof in writing by Rescorp to Owners.
(b) If the Participation Date precedes the Partial Opening Date, then
for the period commencing from the Participation Date and ending on
the Partial Opening Date, Owner shall pay to Rescorp an amount in
respect of each month prior to the Partial Opening Date per Available
Room according to the following schedule.
Month prior to the Partial Opening Date Amount o US$
--------------------------------------- ------------
sixth 5.00
fifth 5.00
fourth 6.00
third 6.00
second 7.00
first 8.00
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The above amounts are subject to change from time to time by
Rescorp. Such changes shall be effective upon dispatch of
notification thereof in writing by Rescorp. to Owner.
5. All fees hereunder are expressed in currency of the United States
of America and will be payable in such currency at Rescorp's address
above-specified or such other address in the United States of America as Rescorp
shall notify Owner. The obtaining of any necessary licenses, permits, consents,
approvals and authorisations from the proper authorities of the Country shall be
arranged in the manner set forth in the Management Contract. Failure of Owner to
make any payments hereunder in the foregoing currency at the foregoing times and
in the foregoing manner for whatever reason (even if such failure is due to
governmental order or regulation or order of a judicial body having
jurisdiction) shall be deemed as non-performance or inability to perform the
term so of this Contract giving Rescorp the right to terminate this Contract by
written notice to Owner, sent by registered airmail, postage prepaid, effective
upon dispatch; Rescorp may, however, at its exclusive option, from time to time
agree to accept payments in local currency, but any such agreement on any
occasion or occasions shall not require Rescorp to accept payments in local
currency on any other occasions.
6. Until such time as the Hotel is interconnected directly with
Sheraton Central Computer, the following provisions shall be applicable:
(a) Owner shall either: (1) maintain communication equipment as
specified by Rescorp at the Hotel to achieve and send communications
related to reservations at Sheraton Hotels, or (2) caused leased line
equipment to be installed at the Hotel with the Sheraton Central
Computer. It will be Rescorp's responsibility to make the necessary
arrangements with the company supplying the communication equipment,
but Owner shall cooperate with Rescorp in connection therewith.
(b) Owner shall be solely responsible for compliance with its
contractual obligations with the supplier of the communication
equipment and Owner shall indemnify and hold harmless Rescorp, ITT
Sheraton Corporation (ITTS, ITT Corporation and their respective
subsidiaries and affiliates from and against all liabilities, fees,
costs, expenses and damages including reasonable attorney's fees,
arising out defects in the equipment itself and will, at Rescorp's
request, assume the defense of any claim or legal proceeding brought
against any of them to establish any such liability or damages.
7. It the Hotel, in Rescorp's opinion, can be conveniently
interconnected directly to the Sheraton Central Computer at any time during the
term of this Contract, the following provisions shall be applicable:
(a) Owner shall purchase and will install at it own expense such
Reservation IV Equipment and will sub-license such Reservation IV
Equipment Software as may be necessary to interconnect the Hotel
directly with the Sheraton Central Computer, and Owner will in order
to effect the foregoing enter into with Rescorp an Equipment Purchase
and Reservation IV Equipment Software Sub-License Agreement in
Rescorp's standard form modified in Rescorp may reasonably require.
Such Reservation IV Equipment will include, but will not be limited
to:
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(i) NCR Tower 32, 120 and/or 30 mega-bytes super-microcomputer;
(ii) ITT Qume visual display units and keyboards;
(iii) NEC P7 printers (2);
(iv) Concord and NCR modem; and
(v) related cable communication
or such other equipment as Rescorp shall agree is comparable
thereto and is capable of running Reservation IV Equipment
Software, Shipping charges, import duties, taxes and the like on
such equipment are for Owner's account.
(b) Service and maintenance of the Reservation IV Equipment are
furnished at Owner's expense. Owner shall procure that any person or
persons hired for service or maintenance or designated by Rescorp
enter the Hotel and shall have access to the equipment at all
reasonable times for the purposes of installation, inspection,
maintenance or repair thereof. Owner shall not interfere or permit
interference with the equipment or permit access to the equipment for
such purposes by any person not responsible for service of maintenance
or not designated by Rescorp, nor permit any change, alteration,
addition or connection of any kind be made to the equipment except by
or under the supervision of persons responsible for service or
maintenance or designated by Rescorp.
(c) Owner acknowledges that it has no property rights in Reservation
IV Equipment Software by reason of this Contract or the Management
Contract and that Rescorp has exclusive property therein.
8. Owner hereby agrees to indemnify and hold harmless Rescorp and its
affiliated companies from and against all liability penalties and costs,
including reasonable attorney's fees, suffered by any of them as a result of
Owner's failure to perform its obligations under this Contract and Owner sill,
at Rescorp's request, assume the defense of any claim or legal proceeding in
which such liability or penalty is sought.
9. Neither Rescorp nor any of its affiliated companies shall be
liable for any damages arising from the installation, use, presence, or removal
of Reservation IV Equipment at or from Owner's premises.
10. Owner agrees to observe the practices and procedures required of
other Sheraton Hotels participating in the System.
11. Prior to the Partial Opening Date, any and all sales taxes,
property taxes, use taxes and other fees, taxes or charges levied or imposed by
any governmental body (other than manufacturer's excise taxes and taxes imposed
on any ITTSC affiliate's corporate income or franchise taxes) on the
communication system or the Reservation IV Equipment installed at the Hotel or
the Reservation IV Equipment Software or in connection with or measured by
Owner's
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participation in the System shall be Owner's obligation. Further, Owner agrees
to be liable for and make payment of any taxes imposed in the Country in respect
of any payments made or payable hereunder.
12. Interest at the rate of one and a half cent (1.5%) shall be
payable on demand on all fees not paid on the due date for payment from the due
date for payment thereof until payment, without prejudice to any rights of
termination or claims for breach of this Contract Rescorp may have against Owner
in respect of such non-payment.
13. Owner shall comply with all governmental rules and regulations
applicable to the use, operation and possession of the Reservation IV Equipment
and Reservation IV Equipment Software and will not permit others to use the same
in violation of any applicable laws or governmental rules or regulations or in
connection with any transaction or operation in violation thereof. Owner shall
not use the Reservation IV Equipment and Reservation IV Equipment Software for
any purpose other than for the purpose of transmitting or receiving Reservation
IV reservations or communications related thereto or otherwise in accordance
with operating instructions furnished by Rescorp from time to time.
14. The term of this Contract shall commence on the Effective Date
and shall continue until the termination or expiration of the Management
Contract. Upon any changes in TTSC's reservation system and policies requiring
the removal of equipment in the reservation equipment at the Hotel Rescorp will
notify Owner in writing and existing equipment shall be removed and new
equipment shall be installed in the Hotel in lieu thereof at Owner's cost and
expense. Upon such termination, expiration, or change in the reservation system,
Owner shall procure that any person designated by Rescorp may enter and remove
the Reservation IV Equipment Software from the Reservation IV Equipment and from
Owner's premises.
15. The governing law of this Contract shall be the governing law of
the Management Contract and any all disputes arising under or in connection with
this Contract shall be handled in accordance with the procedures set forth in
Article XXV of the Management Contract.
IN WITNESS WHEREOF, the parties hereto have duly executed this Contract the day
and year first above written.
WITNESS: HUASHENG HOTEL INTERNATIONAL
(SHENYANG) CO., LTD.
By: By:
------------------------- -------------------------
Name: Name: Gao Wanjun
------------------ Title: Chairman
Title:
------------------
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<PAGE>
WITNESS: ITTR SHERATON RESERVATIONS
CORPORATION
By: By:
------------------------- -------------------------
Name: Name: Edward Davie
------------------ Title: President, Asia-Pacific Region
Title:
------------------
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<PAGE>
APPENDIX E
INSURANCE
1. Owner shall provide and maintain at Owner's sole expense, at all
times during the period of construction, furnishing and equipping the Hotel,
adequate discretion, only damage resulting from war, nuclear energy, and wear,
tear and inherent vice. In addition, during such period Owner shall provide and
maintain General Liability Insurance with the coverage and limits as more
particularly set forth in subsection C(i) hereof, fully protecting Owner,
Operator, ITTSC, ITT Corp. (ITT) and their respective subsidiaries and
affiliates against any loss or damage, arising in connection with the
construction, furnishing, equipping and preparation for the opening of the
Hotel.
2. Throughout the Term, Owner, at its sole expense, shall procure and
____________.
(i) insurance policies which insure the Hotel and such of the
component parts against damage from resulting from war,
nuclear energy, wear, tear and inherent vice) for the full
100% replacement costs of the Hotel and each of its component
parts and in no event less than the minimum amount necessary
to avoid the effect of co-insurance provisions in such
policies, and Owner shall carry such other or additional
insurance in such amounts and against such risks as Operator
shall reasonably require with respect to the buildings,
facilities and contents of the Hotel, it being reasonable for
Operator to require insurance of the types and in the amounts
generally carried on hotels owned and created by the Sheraton
Group or its affiliates. The aforesaid property damage
insurance policies shall provide that the later, if any,
payable thereunder shall be adjusted with and payable to
Owner.
(ii) Business Interruption insurance covering loss of income to
both Owner and Operator for a minimum period of one year
resulting from interruption of business caused by the
occurrence of any of the risks insured against under the
proper damage instance as previously set forth in this
paragraph. The aforesaid Business Interruption insurance
policy shall provide that the loss, if any, payable thereunder
shall be adjusted with the payable to Owner and Operator as
their interests may appear; and
(iii) Boiler and machinery insurance (including use and
occupancy/loss of income) for all direct loss or damage to
property caused by an accident as defined under a standard
Boiler and Machinery policy including boilers, pressure vessel
and mechanical or electrical equipment. Said coverage shall be
in limits of note less than US10,000,000.00.)
3. Operator, agent of Owner shall throughout the Term procure and
maintain the following insurance coverage to the extent such coverage is
valuable for the Hotel either through the Hotel's participation in an insurance
program developed for managed Sheraton hotels, or in the local insurance market.
The cost of the premiums for the insurance set forth in following
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subparagraph C(i), C(ii) and C(iii) shall be paid from the Agency Account and
shall be an Operating Expense.
4. General liability insurance having a minimum per occurrence of
defense for which there shall be a limit against all claims which may be brought
anywhere in the world for bodily injury, death or damage to property of third
parties which insurance shall include coverage in the same amount against all
claims brought any where in the world arising out of alleged:
(a) false arrest, detention;
(b) liable, slander, defamation, or violation or the right of
privacy or
(c) wrongful entry or eviction.
(i) It the aforesaid coverage is not available through either a
Sheraton insurance program for managed _____________- or in
the local insurance market, then Operator shall procure and
maintain such coverage. All General Liability insurance
policies required pursuant to this subsection shall mean
Owner, Operator, ITTSC, ITT and their respective subsidiaries
and affiliates as the insureds. Employees of the foregoing
engaged in work at or on behalf of the Hotel shall also be
named as additional insured.
(ii) Motor Vehicle liability insurance, including coverage arising
out of the ownership or operation of motor vehicles for
limits, which are usual and customary for hotel motor vehicles
in the area where the Hotel is located but, in any event, not
less than limits that are required by law. If available and
customary, a US$10,000,000.00 minimum per occurrence limit, or
its local current equivalent shall be maintained (exclusive of
defense costs for which there shall be no limit) against all
claims which may brought any where in the World for bodily
injury, death or damage to property of third parties
(iii) Worker's Compensation insurance as required from time to time
under the laws of the County or other applicable jurisdiction
Operator as agent for Owner shall prepare and lodge all wages
and other returns and proposals as may be required from time
to time to effect and maintain such insurance.
Owner or Operator may each reasonably require an increase in the above limits of
insurance coverage and may reasonably require the procuring and maintaining of
other or additional insurance, provided such insurance is available. Owner and
Operator each acknowledge that it is reasonable for the other to require
insurance of the types and in the amounts generally carried at hotels owned and
operated by the Sheraton Group.
All insurance shall be in such form and with such companies as approved by
Operator and Owner, such approval not to be unreasonably withheld.
Certifies that of all policies shall be delivered to Owner and or Operator.
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(a) within thirty (30) days prior to the Partial Opening Date in the
use of the insurance required to be maintained during the Term; and
(b) less than thirty (30) days prior to the expiration date of all
policies of insurance that must be maintained subsequent to such
expiration date under the terms of this Contract.
All such certificates shall specify that the policies to which they relate
cannot be _____________ in less than thirty (30) days' prior written notice of
Operator. Should Owner ___ to supply Operator with any such certificates, the
placement of which is the responsibility of Owner within the foregoing time
limits, Operator may provide such insurance as to which such certificates are
not supplied on ___________________ in any "self-insurance" program maintained
by Operator, ITTSC, or any other affiliated or subsidiary companies, the expense
of such provision of insurance or the losses under such "self-insurance" program
to be treated as an Owner's expense and not an Operating Expense. Any advances
for such insurance made by Operator shall be reimbursed by Owner on demand.
Owner assumes all risks in connection with the adequacy of any insurance or
"self-insurance" program and waives any claim against Operator, ITTSC, ITT and
all of their respective subsidiaries and affiliates of any liability, cost,
expense arising out of any uninsured claims, in part or in full, of any nature
whatsoever. Nothing contained in this paragraph shall be construed as authoring
any "self-insurance" program not approved by Operator
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APPENDIX F
FACILITIES GUIDE
F-1
AMENDMENT AGREEMENT TO
MANAGEMENT CONTRACT
THIS AMENDING AGREEMENT TO MANAGEMENT CONTRACT ("Amendment Agreement") is made
this 28th day of April, 1998.
BETWEEN:
SHERATON OVERSEAS MANAGEMENT CORPORATION, a Delaware Corporation having its
principal offices at 60 State Street, Boston, Massachusetts, 02109, USA
("Sheraton"); and
HUAYANG INTERNATIONAL (SHENYANG) CO. LTD (formerly known as Huasheng Hotel
International (Shenyang) Co., Ltd) ("Huayang International"), CHANGHUA
(SHENYANG) BUSINESS CO., LTD. ("Changyuan") (collectively jointly and severally
referred to as "Owner") and HUAYANG INDUSTRY (SHENYANG) GROUP CO., LTD.
("Huayang Industry") organised and registered legal entities existing under the
laws of the People's Republic of Ching and having their legal address at 386
Qingnian Street, Heping District, Shenyanbg, Liaoning Province, People's
Republic of China.
WHEREAS:
1. A Management Contract was entered into on 15 September 1995 (the
"Management Contract") between Huasheng Hotel International (Shenyang)
Co., Ltd. and Sheraton Overseas Management Corporation.
2. Owner presently has the building ownership certificates with Huayang
International having the building ownership certificate to the hotel
tower, Changhua having the building ownership certificate to the
podium and Changyuan having the building certificate to the car park
being the requisite ownership rights for the Building and
Appurtenances and Owner is entitled to erect and operate a hotel and
related facilities on the portion of the site as marked in red on the
Schedule attached hereto.
3. The hotel tower, podium and car park all comprise the Hotel, as
referred to in this Amendment Agreement.
4. Owner is desirous of assuming all the rights and obligations stated to
be held by the previous Owner under the Management Contract, and the
parties hereto are desirous of amending, ratifying and confirming the
Management Contract in the manner hereinafter contained.
NOW THEREFORE, Sheraton, Owners and Huayang Industry covenant and agree as
follows:
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1. In this Amendment Agreement, reference to an Article and a Section are
to the Article and Section of the Management Contract unless the
context unless the context otherwise requires. Terms used but not
defined herein shall have the same meaning as provided in the
management Contract.
2. Section 1.06 of Article I is amended by deleting the existing Section
1.06 and replacing it with the following:
"1.06 Available Rooms means the number of Hotel rooms that are
available for sale to guests which do not include house or
in-house use or commercial rooms or, for purposes only of
calculating reservation fees, rooms let out to guests staying
in excess of one month at any one time, but includes rooms
which are not of order (provided such rooms are not out of
order for more than 30 days) and complimentary rooms."
3. Section 1.17 of Article I is amended by deleting the existing Section
1.17 and replacing it with the following:
"1.17 Estimated Partial Opening Date means June 1, 1999 or such
other date as Owners and Operator may agree in writing as the
date on which they estimate the Hotel will be ready for
partial operations in accordance with section 4.05."
4. Section 1.23 of Article I is amending by deleting the existing Section
1.23 and replacing it with the following:
"1.23 Full Opening Date means the date on which Operator fully opens
the Hotel to the public in accordance with section 4.05 and
shall, unless otherwise agreed by Owner and Operator be 1
September 1999."
5. Section 1.30 of Article I is amended by deleting the existing Section
1.30 and replacing it with the following:
"1.30 Independent Auditor means one of the major six international
accountancy firms or a certified public accounting registered
in the Country working as a correspondent of such firm which
is registered in the Country and experienced in hotel
accounting and auditing, as nominated by Owner and reasonably
approved by Operator and failing nomination by Owner shall
mean Arthur Andersen & Co."
6. Section 2.02 of Article II is amended by deleting the first sentence
and replacement it with the following:
"During the Term, the Hotel shall be known as "Sheraton Shenyang Lido
Hotel" in English and "___________________ " in Chinese."
7. Section 2.03(i) of Article II is amended by deleting the existing
Section 2.03(i) and replacing it with the following:
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<PAGE>
"(i) Owner shall, strictly in accordance with the Approved Final
Plans and Sheraton Standards and in conformity with all
applicable rules and regulations now or hereafter in force
(governmental, municipal or otherwise), laws and ordinances of
the Country, at its own expense and with all reasonable
diligence design, construct, furnish and equip on the Site of
international five star hotel containing approximately 900
bays comprising rooms, apartments and studios, function space,
restaurants, lounges, 24-hour room service and coffee shop,
business centre, swimming pool and recreation facilities.
Owner shall deliver to Operator for management and operation
of the Hotel fully constructed, furnished and equipped in
accordance with the Approved Final Plans and Sheraton
Standards.
8. Section 2.03(ii)(a) of Article II is amended by deleting the words "by
1st October 1995" and replacing them with the words "at the time of
executing this Amendment Agreement."
9. Section 2.03(ii)(b) of Article II is amended by deleting the words "by
1st November 1995" and replacing them with the words "30 days after
execution of this Amendment Agreement."
10. Section 2.03(ii)(c) of Article II is amended by deleting the words "by
1st December 1995" and replacing them with the words "60 days after
execution of this Amendment Agreement."
11. Section 2.03(ii)(d) of Article II is amended by deleting the words "by
1st November 1995" and replacing them with the words "60 days after
execution of this Amendment Agreement."
12. Section 2.3(ii)(e) of Article II is amended by deleting the words "by
1st November 1994" and replacement them with the words "60 days after
execution of this Amendment Agreement."
13. Section 4.02 of Article IV is amended by deleting the existing second
sentence and by replacing it with the following:
"The Pre-Opening Budget shall be prepared by Operator within 45 days of
the Effective Date. The Pre-Opening Budget shall then be submitted to
Owner for its approval, such approval not to be unreasonably withheld.
It is agreed it is estimated that the amount of the Pre-Opening Budget
will be a minimum sum of USD$4 million or its equivalent in local
currency. The approved Pre-Opening Budget may be revised higher by
Operator from time to time, in consultation with Owner, to reflect to
then current cost projections, delay in particular opening beyond the
Estimated Partial Opening Date and unforeseen circumstances."
14. Section 403(i) of Article IV is amended by deleting the existing
Section 4.03(i) and replacing it with the following:
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<PAGE>
Owner shall deposit in the Pre-Opening Agency Account, the sum of
$US500,000 within 30 days of the approval of the Pre-Opening Budget by
Owner. Thereafter, on a monthly basis, 30 days prior to the scheduled
expenditure as indicated in the approved Pre-Opening Budget, Owner will
pay into the Pre-Opening Account the amount scheduled for expenditure
within the next month. If for any reason, the Pre-Opening Budget has
not been approved by July 1, 1998, the amount of $US500,000 must be
deposited into the Pre-Opening Agency Account on or before August 1,
1998."
15. Section 4.05(i)(b) of Article IV is amended by deleting the existing
Section 4.05(i)(b) and replacing it with the following:
"(b) at least 200 of the Hotel's guest room floors, all public
areas, facilities, restaurants, ballroom, and all landscaping,
and all requisite life safety and fire requirements of the
Hotel, are fully constructed, furnished and equipped in
accordance with the Approved Final Plans and Sheraton
Standards and such portion of the Hotel to be partially opened
is, in Operator's opinion, otherwise suitable for guest use
and occupancy and all necessary Operating Supplies, foods and
beverages have been obtained;"
16. Section 5.02 of Article V is amended by deleting the existing Section
5.02 and replacing it with the following:
"5.02 Operating Plan
(i) Not later than ninety (90) days prior to the commencement of
each Fiscal Year, Operator shall provide to Owner, an annual
operating plan for the operation of the Hotel for the
forthcoming Fiscal Year containing a detailed financial
budget, a market promotion plan and a capital expenditure
plan. Within a period of 20 days of receipt of the draft
operating plan prepared by Operator, Owner shall advise
Operator whether it approves such operating plan or whether
the operating plan or certain items within the plan are not
approved by it. In review the operating plan, Owner must not
unreasonably withhold or delay the giving of its approval and
the Owner's approval cannot be withheld with regard to any
item in the operating plan necessary to enable the Hotel to
meet and comply with Sheraton Standards.In the event that
Owner has not advised Operator by the expiration of 20 days of
receipt by Owner of the draft operating plan, of its approval
or disapproval, the draft operating plan shall be the agreed
and approved operating plan for the forthcoming Fiscal year.
In the event that Owner advises Operator that it does not
approve of the draft operating plan or of any line item within
it, the parties agree to further review, explain and discuss
such operating plan as submitted and Operator agrees to use
reasonable endeavors to take into account Owner's reasonable
opinions and recommendations and to incorporate and amend the
draft operating plan. If agreement cannot be reached prior to
30 days before the commencement of the relevant Fiscal Year in
respect of each budget line, the figures set out in the
operating plan in respect of such budget line not agreed for
the immediately preceding Fiscal Year shall apply and all
expenditure amounts set out therein shall be increased by an
amount equal to the percentage rate of
inflation in the Country for the relevant Fiscal Year as
published and recognised by the Government or relevant
authorities of the Country. Total Revenue as forecast in the
draft operating plan, if not approved, shall be revised from
the total Revenue specified in the operating plan for the
preceding Fiscal Year, adjusted to have regard to prevailing
market conditions. In the event of Operator and Owner failing
to agree to the appropriate adjustment, the matter in dispute
relating to Total Revenue shall be submitted for determination
by the Independent Auditor who shall act as an expert and not
as an arbitrator and whose decision shall be final and
binding.
(ii) Operator will use its reasonable endeavours to comply with the
approved operating plan but the parties acknowledge that it is
a reasonable estimate of expenditures and income only and of
an intended market promotion plan and capital expenditure
plan, and Operator shall not be deemed to have given any
guarantee, warranty or representation whatsoever in connection
with any of the operating plans. For the avoidance of doubt,
any failure to comply with any operating plan shall not give
rise to rights of termination pursuant to Section 23.01."
17. Article V is amended by the addition of the following two Sections,
Sections 5.05 and 5.06.
"5.05 Owner's Representative
Owner shall appoint a representative and advise Operator of the name
and title of such representative. Owner's representative shall be its
representative to exercise the powers and to undertake the functions
and duties given and assigned to Owner under this Contract and to
discuss and communicate with Operator on all matters arising in
connection with this Contract. In addition, Owner's representative
shall have the right, at reasonable times and on prior notice to the
General Manager of the Hotel, to access, examine and make copies of all
books of account and records of and relating to the Hotel which are
maintained by Operator under this Contract.
5.06 Meetings
In addition to any other meetings held hereunder, Operator shall at the
request of Owner hold a meeting with Owner (as may be represented by
Owner's representative and all other persons designated by Owner) at
least once per month during the Operating Term at which Operator and
Owner shall review and discuss the previous and future month's
operating statements, marketing plans, cash flows, budget reviews,
capital expenditure, important personnel moves and general concerns for
Owner and Operator relating to the Hotel. Except to the extent
otherwise mutually agreed upon by Owner and Operator, all such meetings
shall be held at the Hotel.
18. Article VII is amended by deleting the existing Article VII and
replacing it with the following:
-5-
<PAGE>
"Article VII - FEES
7.01 Basic Fee
(i) Calculation
-----------
Commencing from the Partial Opening Date, during each Fiscal Year of
the Term (and proportionately for a fraction of a Fiscal Year), Owner
shall, subject as provided in paragraph (ii), pay to Operator on a
monthly basis the Basic Fee for services rendered under this Contract
in relation to the management and operation of the Hotel as follows:
(a) Where Gross Operating Profit in a Fiscal Year is between 0 to
25,000,000 Ren Min Bi, a fee of 4% of Gross Operating Profit
for that Fiscal Year;
(b) where in any Fiscal Year, Gross Operating Profit is 25,000,000
Ren Min Bi or greater, a fee equal to 8% of Gross Operating
Profit in that Fiscal Year.
After calculation of the Basic Fee, there shall be deducted from the
amount calculated the amount of the License Fee paid under the License
Contract.
(ii) Inter-relationship of Basic Fee and License Fee
-----------------------------------------------
For further clarity, it is agreed and understood that if in any year,
the Basic Fee calculated in accordance with section 7.01(i) above is
greater that the License Fee payable pursuant to the License Contract,
the License Fee determined in accordance with the License Contract is
paid to the Licensor and the difference between the Basic Fee, as
calculated in section 7.01 above is less than the amount calculated as
License Fee, pursuant to the License Contract, then the License Fee
calculated in accordance with the License Contract is payable to the
Licensor and no amount is payable to Operator as a Basic Fee.
(iii) Partial Operations
------------------
During the period of partial operations of the Hotel commencing on the
Partial Opening Date and ending on the Full Opening Date, Owner shall
pay a License Fee/Basic Fee to Licensor/Operator calculated in the
above described manner.
7.02 Payment Method
(i) Commencing from the Partial Opening Date, on or before the
fifth day of each Fiscal Month during the Term,
Licensor/Operator shall be paid out of the Agency Account its
License Fee and Basic Fee for the preceding Fiscal Months
during
(ii) At the end of each Fiscal Year and following receipt by Owner
of the annual audit report, an adjustment will be made based
on such audit report, if necessary, so that Licensor/Operator
shall have received its proper License Fee and Basic Fee
respectively as specified above for such Fiscal Year. Within
30 days of receipt by Owner of such audit report, Operator
will either:
-6-
<PAGE>
(a) place in the Agency Accounts or remit to Owner, as
appropriate, any excess in the amounts it has
received as fees, in respect of such Fiscal Year; or
(b) be paid out of the Agency Accounts or by Owner, if
working capital is insufficient, as appropriate, any
deficiency in the amounts it has received as fees,
as the case may be.
(iii) In the event there is an operating loss which results in a
negative Gross Operating Profit in any Fiscal Year, it will be
borne exclusively by Owner and the amount thereof will not be
applied against Gross Operating Profit of any other Fiscal
Year.
19. Section 10.01 of Article X is amended by deleting the second sentence
and by replacing the second sentence with the following:
"The Agency Account shall have authorized signatories of both Operator
and Owner. In respect of any payment in less than US$50,000 (or the
equivalent in local currency calculated in accordance with the
provisions of clause 16.02), and in respect of payment of the 'Basic
Fee and License Fee, only Operator's designated signatories shall be
authorised to operate and draw from the Agency Account. In respect of
any payment for any one item in excess of USD$50,000 (or its equivalent
in local currency in accordance with the provisions of clause 16.02),
both Operator's authorised designees and Owner's authorised designees
shall be authorised to operate and draw from the Agency Account
jointly. Owner shall nominate its authorised designee for purposes of
operating and drawing from the Agency Account to Operator and the bank
with an authorised alternate each in the City of Shenyang to ensure no
delays are occasioned to the operation of the Hotel and in meeting the
liabilities of the Hotel. In particular, Owner warrants to Operator
that all payroll payments shall be made when due and Owner acknowledges
payments in respect of employment contracts entered into which are a
liability of the Hotel shall be met in accordance with their terms of
payment. Operator shall promptly notify Owner of any payment of Basic
Fee and/or License Fee with supporting Computation.
20. Section 10.02 of Article 10 is amended by deleting the existing Section
10.02 and by replacing it with the following:
"10.02 Owner shall deposit monies into the Agency Account for initial
working capital as follows:
(i) no later than 120 days prior to the Estimated Partial Opening
Date, an amount of US$250,000 (or its equivalent in local
currency);
(ii) thirty (30) days prior to the Estimated Partial Opening Date,
an amount equal to three months worth of working capital, as
showing the forecast
for the first year's operations, part of the approved
Pre-Opening Budget shall be deposited;
(iii) Thereafter, amounts will be deposited into the Agency Account
in accordance with the forecasts contained in the Operating
Plan representing three months working capital requirements to
be paid each month but so that at no time will the balance in
the Agency Account be less than US$500,000, (or the equivalent
in local currency);
(iv) It is estimated this amount for initial working capital will
not be less than US$750,000.
21. Section 11.01(i) of Article XI is amended by deleting existing Section
11.01(i) and replacing it with the following:
"11.01(i) Commencing from the Partial Opening Date, there shall
be deducted in monthly installments during each
Fiscal Year of the Term, the following amounts:
(a) for the first Fiscal Year of the Term, an
amount equal to 2% of Total Revenue based on
the Operating Plan for that year;
(b) for the second Fiscal Year of the Term, an
amount equal to 3% of Total Revenue for the
preceding Fiscal Year; and
(c) for the third Fiscal Year of the Term, an
amount equal to 3% of Total Revenue for the
preceding Fiscal Year; and
22. Section 20.01(i) of Article XX is amended by deleting the first
sentence and replacing it with the following:
"During the Term, Owner shall not commercially use or refer to the word
"Sheraton" in any manner whatsoever other than in connection with the
Hotel or any factual statement that the Hotel is managed by Operator in
accordance with the terms of this Contract."
23. Section 25.02(b) of Article XXV is amended by deleting the reference to
"the Chairman of the Singapore Chamber of Commence" where it appears
and by replacing this phrase with the words "the Chairman of the Hong
Kong Chamber of Commerce."
24. Section 25.02(d) of Article XXV is amended by deleting existing Section
25.02(d) and replacing it with the following:
"25.02(d) The arbitration shall take place in Hong Kong. This
Contract shall be governed by the laws of Hong Kong."
-8-
<PAGE>
25. Section 25.03 of Article XXV is amended by deleting the reference where
it appears to "the courts of Singapore" and by replacing this phrase
with the words "the courts of Hong Kong."
26. Section 26.01 of Article XXVI is amended by adding a second address for
the Owner as follows:
"Owner: c/- Cheung Kong (Holdings) Ltd.
China Hotels Division
21/F China Building
29 Queen's Road Central
HONG KONG
Fax: 852 2530 5689"
27. Section 28.08 of Article XXVIII is amended by deleting the reference to
"Mr. Gao Wanjun" and by replacing this reference with the following
words "Owner's representative from time to time."
28. References to "Owner" in the Management Contract shall after the
execution of this Amendment Agreement be to Huayang International
hereby release Huayang Industry and Huayang Industry hereby releases
Operator and Huayang International from all the duties and obligations
stated to be held by the other parties under the Management Contract.
29. The Management Contract is amended only as expressly provided herein.
Except as provided herein, the provisions of the Management Contract
shall remain unchanged and in full force and effect and is hereby
ratified by each of the Huayang International, Changhua and Changyuan
as being binding and enforceable as between Sheraton and Owner and as
against third parties.
IN WITNESS WHEREOF Operator, Owner and Huayang Industry have duly executed this
amendment to the Management Contract on the date above written.
Sheraton Overseas Management Corporation
By: Witness By:
-------------------------- ----------------------
Name: Name :
------------------------ ---------------------
-9-
<PAGE>
Huayang International (Shenyang) Co., Ltd.
By: Witness By:
-------------------------- ----------------------
Name: Name :
------------------------ ---------------------
Changhua (Shenyang) Business Co., Ltd.
By: Witness By:
-------------------------- ----------------------
Name: Name :
------------------------ ---------------------
Changhuan (Shenyang) Park Co., Ltd.
By: Witness By:
-------------------------- ----------------------
Name: Name :
------------------------ ---------------------
Huayang Industry (Shenyang) Group Co., Ltd.
By: Witness By:
-------------------------- ----------------------
Name: Name :
------------------------ ---------------------
-10-
EXHIBIT 21
Subsidiaries of Huayang International Holdings, Inc.
<TABLE>
<CAPTION>
- ------------------------------------------------------- -----------------------------
SUBSIDIARY OWNERSHIP PERCENTAGE
<S> <C>
- ------------------------------------------------------- -----------------------------
Shenyang Haitong House Properties Development, Ltd. 95 %
- ------------------------------------------------------- -----------------------------
Huayang International Hotel Co., Ltd. 20 %
- ------------------------------------------------------- -----------------------------
Changhua Business Co., Ltd. 20 %
- ------------------------------------------------------- -----------------------------
Changyuan Car Park Co., Ltd. 20 %
- ------------------------------------------------------- -----------------------------
</TABLE>
EXHIBIT 23.1
[Letterhead of Moore Stevens Frazer and Torbet, LLP]
To Board of Directors
Huayang International Holdings, Inc.
And Subsidiary
Consent of Independent Accountants
----------------------------------
We consent to the incorporation by reference in the Registration
Statement of Huayang International Holdings, Inc. and Subsidiary on Form 10SB of
our report dated December 13, 1999 on our audits of the financial statements of
Huayang International Holdings, Inc. and Subsidiary as of December 13, 1998 and
1997 and for the years then ended, which reports are incorporated by reference
in the Form 10SB registration statement.
/s/ Moore Stevens Frazer and Torbet, LLP
----------------------------------------
Certified Public Accountants
December 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 612,612
<SECURITIES> 0
<RECEIVABLES> 6,723,273
<ALLOWANCES> 0
<INVENTORY> 13,689,204
<CURRENT-ASSETS> 15,684,814
<PP&E> 31,300,106
<DEPRECIATION> 531,845
<TOTAL-ASSETS> 68,550,854
<CURRENT-LIABILITIES> 26,835,399
<BONDS> 21,382,068
0
0
<COMMON> 150,016
<OTHER-SE> 19,119,681
<TOTAL-LIABILITY-AND-EQUITY> 67,487,164
<SALES> 16,115,067
<TOTAL-REVENUES> 16,115,067
<CGS> 13,187,655
<TOTAL-COSTS> 13,187,655
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,927,412
<INCOME-TAX> 1,051,467
<INCOME-CONTINUING> 1,772,702
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,772,702
<EPS-BASIC> .024
<EPS-DILUTED> 0
</TABLE>
