<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _____________ Commission file
number 0-25963
ASIA FIBER HOLDINGS LIMITED
(Exact name of registrant as specified in its charter)
DELAWARE
(State of other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
RM 2005, 20/F, UNIVERSAL TRADE CENTRE
3-5A, ARBUTHNOT ROAD
CENTRAL, HONG KONG
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-852-2810-6226
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, par
value $0.01 per share
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such report(s)), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [__]
Revenues for the fiscal year ended December 31, 1999 were $54,682,000.
The aggregate market value of the common equity held by non-affiliates of the
registrant as of March 13, 2000 amounted to approximately $4.62 million.
Registrant had 9,952,234 shares of common stock, $0.01 par value per share
outstanding as of March 13, 2000.
Documents Incorporated by Reference (to the extent indicated herein): None.
Transitional Small Business Disclosure Format: Yes No X
----- -----
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PART I.
BUSINESS
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
GENERAL
Asia Fiber Holdings Limited (the "Company") (HEREINAFTER, REFERENCE TO
THE "COMPANY" SHALL INCLUDE ITS SUBSIDIARIES UNLESS THE CONTEXT OTHERWISE
REQUIRES), formerly known as Asia Resources Holdings Limited, is a Delaware
corporation which acquired all of the capital stock of Far Beyond Investments
Limited, a British Virgin Islands corporation ("Far Beyond") on January 24,
2000. Far Beyond was incorporated in the British Virgin Islands on March 21,
1995 and owns a 70% equity interest in Harbin Asibao Chemical Fiber Company
Limited ("Asibao"), a Sino-foreign joint venture company that manufactures and
sells polyester fiber products.
The following is the organization chart of the Company:
<TABLE>
<S> <C> <C>
-----------------------
ASIA FIBER HOLDINGS
LIMITED
-----------------------
100%
-----------------------
FAR BEYOND HEILONGJIANG
INVESTMENTS LTD LONGDI GROUP CO.
LTD.
-----------------------
70% 30%
-----------------------
HARBIN ASIBAO
CHEMICAL FIBER CO.
LIMITED
-----------------------
100%
----------------------- ----------------------- -----------------------
POLYESTER POLYESTER POLYESTER
STAPLE FIBER FILAMENT PLANT FILAMENT PLANT
PLANT NO. 1 NO. 2
----------------------- ----------------------- -----------------------
</TABLE>
2
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FORMATION AND DEVELOPMENT
On May 10, 1982, the Company, then known as Regal International, Inc.,
became a separately publicly held corporation as a result of a spin-off from
Texas International Company. Shareholders of Texas International Company were
issued one share of the Company's common stock for each two shares of Texas
International's common stock. The Company changed its state of incorporation to
Delaware in March 1982 through a merger with a wholly-owned subsidiary organized
for that purpose.
On December 7, 1994, the New York Stock Exchange ("NYSE") suspended
trading of the Company's Common Stock pending delisting as the Company did not
meet the NYSE's criteria for continued listing. The Company decided not to
contest the delisting and the Common Stock was removed from listing and
registration on the NYSE effective February 9, 1995. The Company's Common Stock
began trading on the NASD Electronic Bulletin Board in August 1995.
On February 8, 1996, the Company acquired all of the issued and
outstanding shares of capital stock of Acewin Profits Limited, a British Virgin
Islands Corporation ("Acewin") from China Strategic Holdings Limited, a Hong
Kong company ("CSH"). Immediately following the acquisition of the capital stock
of Acewin, and as a condition thereto, the Company sold and transferred the
operating assets and real property of the Company existing as of January 31,
1996 to Regal (New) International Inc. ("New Regal"). A portion of the purchase
price was paid by delivery of a promissory note dated February 13, 1996 executed
by Harlequin Investment Holdings Limited ("Harlequin") in favor of the Company
for the sum of US $800,000 (the "Harlequin Promissory Note"); and (ii) a
promissory note dated February 13, 1996 issued by New Regal in favor of the
Company for the sum of US $900,000 (the "New Regal Promissory Note"). The
Harlequin Promissory Note bore no interest and was due and payable in one
installment on February 1, 2001. The New Regal Promissory Note bore interest at
9% per year and was payable in sixty (60) equal installments of principal and
interest. Harlequin was at the time of this transaction the beneficial owner of
approximately 55% of the then currently outstanding shares of the Company's
Common Stock. Subsequent to this transaction, Harlequin reduced its beneficial
ownership of the Company to less than 1%.
Pursuant to a Deed of Variation dated July 27, 1998 by and among the
Company, New Regal and Harlequin, Harlequin agreed and undertook to assume all
of the obligations and liabilities of New Regal under the New Regal Promissory
Note in consideration of the Company's agreement to release New Regal from all
obligations relating to the New Regal Promissory Note. All other terms of the
New Regal Promissory Note remained the same.
During 1998, New Regal and the Company agreed on a revised payment
schedule relating to the Harlequin Promissory Note. Under the revised payment
schedule, the payment of several monthly installments by New Regal in 1998 and
1999 was suspended and the outstanding principal balance was revised to be
settled in sixty (60) equal monthly installments commencing March 1999. The
Harlequin Promissory Note continued to bear interest at 9% per year during the
period of payment suspension in 1998 and 1999 and thereafter. Both the Harlequin
Promissory Note and the New Regal Promissory Note were assigned by the Company
to CSH in January 2000 as indicated below.
On September 10, 1996 the Company acquired the entire issued share
capital of Westronix Limited, a wholly-owned subsidiary of CSH ("WL") at a
consideration of US $30 million to be satisfied by a convertible promissory note
executed in favor of Horler by the Company (the "Second Horler Note"). The
Second Horler Note was a US $30 million convertible note bearing interest at 9%
per year after an initial 6-month interest-free period with all principal being
due and payable on September 10, 1999. On April 14, 1998, Horler agreed to
reduce the interest rate of the Second Horler Note from 9% to 5% per year for
the year ended December 31, 1997. In addition, Horler agreed that after December
31,
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1998, no principal repayment of the Second Horler Note would be demanded
until the Company was financially capable of doing so. However, following
January 1, 1998, the Second Horler Note continued to bear interest at 9% per
year. The Second Horler Note was paid off in January 2000 as indicated below.
On September 11, 1996, the Company disposed of all the issued and
outstanding shares of capital stock of Acewin to BTR China Holdings B.V., a
Netherlands company ("BTR"). At that time, the Company had the following
subsidiaries:
WL--a holding company incorporated in the British Virgin Islands.
China Construction Holdings Limited ("CCHL")--a company incorporated in
Hong Kong, formerly known as China Construction International Group Limited.
Hangzhou Zhongche Huantong Development Ltd. ("HZHD")--a Sino-foreign
joint venture company located in Hangzhou, Zhejiang Province, the PRC.
The Company held a 100% interest in WL. WL held a 100% interest in CCHL
which in turn held a 51% interest in HZHD. HZHD was established to develop the
Hangzhou Toll Road.
The Company filed an Amendment to its Certificate of Incorporation on
February 8, 1999 changing its name from "Regal International, Inc." to "Asia
Resources Holdings Ltd." and increasing its capital stock to 1,100,000,000
shares. On February 19, 1999, the Company effected a 1-for-138 reverse stock
split of its Common Stock which resulted in approximately 597,132 shares of
Common Stock outstanding.
On January 24, 2000, pursuant to an Acquisition Agreement dated as of
September 10, 1999 (the "Far Beyond Acquisition Agreement") by and among the
Company, Horler, Far Beyond and the shareholders of Far Beyond (the "FB
Shareholders"), the FB Shareholders transferred all of the issued and
outstanding shares of the capital stock of Far Beyond (the "Far Beyond Shares")
to the Company in exchange for 8,757,951 shares of the Common Stock of the
Company, representing approximately 88% of the outstanding shares of the Common
Stock of the Company.
Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to a Disposal Agreement (the "Disposal
Agreement") between the Company and Horler, the Company transferred to Horler
the entire share capital of WL in full and final satisfaction of the Second
Horler Note. Also, concurrently with and as a condition of such closing,
pursuant to an Assignment Agreement (the "Assignment Agreement") between the
Company and CSH, the Company assigned to CSH, in settlement of all of the
outstanding indebtedness the Company owed to CSH, the New Regal Promissory Note
and the Harlequin Promissory Note. Pursuant to the Disposal Agreement and the
Assignment Agreement (but prior to giving effect to the acquisition of the Far
Beyond Shares) the Company disposed of all of its assets other than
approximately $150,000 in cash or cash equivalents and all of its liabilities.
At the closing of the Far Beyond Acquisition Agreement, the executive
officers and directors of the Company resigned. Immediately following such
resignations, the following persons became members of the Board of Directors of
the Company: Lung Po Ching, Rui Min Zhao, Ming Xue Liu, Feng Jie Liu and Wai On
Wan. Also immediately following such resignations, the Board of Directors of the
Company elected Lung Po Ching as Chairman of the Board, Rui Min Zhao as Vice
Chairman of the Board and President, Ming Xue Liu as Vice President, Feng Jie
Liu as Chief Financial Officer and Wai On Wan as the Secretary of the Company.
4
<PAGE>
On March 14, 2000, the Company filed an Amendment to the Certificate of
Incorporation to decrease the authorized capital stock of the Company to
40,000,000 shares (consisting of 30,000,000 shares of Common Stock and
10,000,000 shares of Preferred Stock) and to change the name of the Company from
"Asia Resources Holdings Ltd." to "Asia Fiber Holdings Limited."
BUSINESS
The Company's only significant asset is its 100% equity interest in
Far Beyond. Far Beyond owns a 70% equity interest in Asibao, the principal
activity of which is the manufacture and sale of polyester fiber products.
Asibao was established as a Sino-foreign joint venture company in the PRC
between Heilongjaing Longdi Group Co. Limited ("Longdi"), a PRC state-owned
enterprise ("Longdi") and Far Beyond on October 18, 1995 with a duration of
thirty (30) years from the date of the business license. Far Beyond
contributed cash in the amount of US $8.40 million in exchange for its
seventy percent (70%) equity interest in Asibao and Longdi contributed its
operating assets, having an aggregate fair market value of US $3.60 million
in exchange for its 30% equity interest in Asibao. The registered capital of
Asibao is approximately US $12 million.
Asibao also acquired from Londgi as of January 1, 1996 other fixed
assets , including production facilities, with an aggregate fair value of US
$46.81 million pursuant to an agreement between Asibao and Londgi approved by
the relevant governmental authorities of the PRC. Asibao has assumed
substantially all of the business previously engaged in by Longdi, which
business consists primarily of the production and distribution in China of
polyester filament and polyester staple fiber. Polyester fiber is mainly used by
the textile industry for apparel, household, industrial and other fabrics.
Before the formation of Asibao, Longdi produced polyester filament and polyester
staple fiber in standardized forms and as "differential" fiber with particular
specifications.
Asibao's products are primarily distributed throughout China to a
diversified customer base and a small proportion of its products are sold
overseas. Currently, management of Asibao believes that demand in China for
polyester filament and staple fiber exceeds the locally produced supply.
THE POLYESTER INDUSTRY
INTRODUCTION
Polyester is a synthetic polymer formed by the reaction between an
organic acid (usually PTA) and organic alcohol (usually MEG). Both PTA and MEG
are petrochemical derivatives. The production of polyester involves two phases:
(1) the polymerization phase which leads to the formation of a viscous paste
known as polyester melt and (2) the processing phase in which polyester melt if
formed into a range of end products. The production process can either be
continuous from the initial reactants to the end products or it can be
interrupted (the batch process) by allowing the polyester melt to solidify. This
intermediate product, known as polyester chip, reverts to polyester melt on
reheating and can then be further processed.
At the end of the processing phase, polyester can take one of the
following forms: staple fiber, filament, resin or film. Polyester fiber (staple
and filament) was estimated to account for approximately 70% of worldwide
polyester production in 1998. It is the leading synthetic fiber in commercial
production worldwide. Polyester fiber is either drawn into continuous strands
known as filament or into bundles of strands which are then cut into short
lengths to form staple fiber. Staple fibers more closely resembles the physical
characteristics of naturally occurring fibers, such as cotton and wool. It is
typically used in pure form or blended with cotton, wool, acrylic or viscose.
Polyester fiber has the widest range of applications of any synthetic fiber.
5
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<TABLE>
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<S> <C>
APPLICATIONS INCLUDE:
Apparel Outerwear, lingerie, sweaters, socks, leisure-wear, workwear, medical staff wear
Household carpet pile and backing, upholstery, household textiles, fiberfill
Industrial Tire cord, other rubber reinforcements, geotextiles, composites, ropes and
cordage, coated fabrics, seat belts and filter media
- ------------------------------------- ----------------------------------------------------------------------------------
</TABLE>
GROWTH IN PRODUCTION
The global polyester industry has experienced significant growth over
the last decade, primarily as a result of the substitution of polyester for
other synthetic and natural materials, general economic growth (especially in
certain parts of the developing world), technological advancements and new
applications. World polyester production grew at an estimated compound annual
rate of 11.4 % between 1993 and 1998.
Processed polyester can take one of three principal forms: PET
packaging resin, fiber (either polyester staple fiber or polyester filament), or
film. The following table shows changes in world polyester production by end
products from 1993 to 1998.
<TABLE>
<CAPTION>
1993 1998 1993-1998
COMPOUND
% OF % OF ANNUAL
PRODUCTION TOTAL PRODUCTION TOTAL GROWTH
(IN THOUSANDS (IN THOUSANDS
OF TONS) OF TONS)
<S> <C> <C> <C> <C> <C>
Polyester fiber:
- Polyester filament 5,247 37.8 9,095 38.1 11.6%
- Polyester staple fiber 5,103 36.7 7,614 31.9 8.3%
PET packaging resin 2,027 14.6 5,121 21.5 20.4%
Film 954 6.9 1,310 5.5 6.5%
Others 565 4.0 731 3.0 5.3%
---- ---- ---- ----
13,896 100.0 23,871 100.0 11.4%
====== ===== ====== =====
</TABLE>
GEOGRAPHY OF PRODUCTION
In the six-year period between 1993 and 1998, respectively, most of the
growth in world polyester fiber production has occurred in Asia (excluding
Japan), where production has increased at an estimated compound annual growth
rate of approximately 14.9%. The estimated compound annual growth in production
in North America and Western Europe, where the polyester industry was originally
established, has generally been slower or negative in the same period. During
the same period, the world's second largest producer of polyester fiber, had the
largest absolute increase in polyester fiber production of approximately
2,215,000 tons. In the six-year period between 1993 and 1998, absolute world
polyester production increased by 9,975,000
6
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tons, at an estimated compound annual growth rate of 11.4 %. This gradual shift
of production base of polyester fiber has been driven by demographic and cost
considerations in general and by the relocation of the textile and apparel
industries to Asia in particular. Asia is already the world's largest producing
region for polyester fiber and the only one which is expected to increase its
market share and production over the medium and longer term. In 1998, over 70%
of production capacity of polyester fiber was located in Asia.
The followings set forth the world polyester fiber production by
countries/regions:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
WORLD POLYESTER FIBER PRODUCTION BY COUNTRIES/REGIONS
- ---------------------------------------------------------------------------------------------------------------
(IN THOUSANDS OF TONS)
1993 1998 1993-1998
COMPOUND ANNUAL
GROWTH
STAPLE STAPLE STAPLE
FIBER FILAMENT FIBER FILAMENT FIBER FILAMENT
<S> <C> <C> <C> <C> <C> <C>
North America 1,190 667 1,368 845 2.8% 4.8%
Central/South America 151 134 160 159 1.2% 3.5%
Western Europe 473 422 435 500 -1.7% 3.5%
Eastern Europe 293 170 251 171 -3.0% 0.1%
Middle East/Africa 160 180 219 302 6.5% 10.9%
South/Southeast Asia 712 754 1,666 1,653 18.5% 17.0%
East Asia 1,832 2,495 3,235 5,060 12.0% 15.2%
Taiwan 718 1,031 930 1,750 5.3% 11.2%
South Korea 489 664 675 1,300 6.7% 14.4%
PRC 625 800 1,630 2,010 21.1% 20.2%
Japan 292 425 280 405 -0.8% -1.0%
---- ---- ---- ----
Total 5,103 5,247 7,614 9,095 8.3% 11.6%
===== ===== ===== =====
- ----------------------------- ----------- ------------- ----------- -------------- ------------- --------------
</TABLE>
PRODUCT PRICES AND PRODUCERS' MARGIN
The price of polyester on the open market is dependent mainly on the
level of demand for particular products relative to production capacity and the
price of raw materials. There is also some variation in the price of polyester
as between the major regional markets of North America, Europe and the Far East.
This variation reflects the supply and demand balances within each region, the
pressure on domestic suppliers from imports, and the prevalence of tariff
barriers, both for polyester products and raw materials.
Since 1996, the prices of PTA and MEG offered by international
suppliers has been declining as a result of new production capacities, stagnant
growth in demand for polyester products and a slump in crude oil prices.
Affected by the Asian financial crisis that occurred in 1997, the prices of
polyester fiber reached the cyclical bottom in mid-1998. Since then, the
polyester industry has rebounded from the bottom with the recovery in economies
taking place in Japan, Asia and Europe. These recoveries are positive for GDP
sensitive commodity products such as polyester and textiles.
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POLYESTER INDUSTRY IN CHINA
The five (5) major synthetic fibers produced in the PRC are polyester
fiber, acrylic fiber, polyvinyl alcohol fiber, polypropylene fiber and nylon.
Polyester fiber is the most important synthetic fiber produced in the PRC
representing approximately 80% of the total domestic consumption of synthetic
fibers.
The textile and garments industry is a major sector in the Chinese
economy, accounting for approximately 9.3% of the gross value of industrial
output in 1998 (Source: Statistical Yearbook of China 1999). China has one of
the lowest per capita ratios of arable land in the world, with only 0.77
hectares per capita, and as such it cannot produce all the natural fibers for
the consumption by the textile industry. The synthetic fiber industry thus has a
key role in sustaining China's textile output. At present, the fiber consumption
in the PRC is approximately 6 kilograms per capita which is below the world's
average of 7.7 kilograms per capita.
The polyester industry in the PRC began in the 1960's, which was later
than much of the developed world. Despite its late start, the PRC has since
experienced a tremendous pace of development in the polyester industry. In 1998,
the PRC's total polyester production output of approximately 3.8 million tons
placed it as the second largest producer of polyester in the world, after the
United States.
During the initial phase of development of the PRC's polyester
industry, reliance was placed on domestic technology for research and
development and a large number of small scale plants were constructed using the
batch production method. These plants were geographically dispersed, relying on
outside suppliers of chips for their raw materials and producing a relatively
narrow range of products. From the mid-1970's to the mid-1980's, the PRC
concentrated instead on importing technology and equipment and the construction
of a few large scale complexes. Over the years, there has been rapid expansion
of production capacity, mainly focused around these large scale complexes. The
import of relatively new technology, processes, equipment and management systems
has enabled the PRC's polyester industry to develop at a rapid pace. However,
the problem remains that the industry is very fragmented with many small plants.
China had a 21.8% world market share of polyester fiber production in
1998. It is estimated that the PRC's production of polyester filament and
polyester staple fiber will be increased at an average compound annual growth
rate of approximately 4.3% and 5.0%, respectively, over the period 1998 to 2004.
POLYESTER PRODUCTION IN THE PRC
(IN THOUSANDS OF TONS)
<TABLE>
<CAPTION>
Compound
Annual
1998 1999 2000 2001 2004 Growth
<S> <C> <C> <C> <C> <C> <C>
Polyester filament 2,010 2,062 2,159 2,261 2,593 4.3%
Polyester staple fiber 1,630 1,713 1,818 1,930 2,181 5.0%
</TABLE>
It is expected that the polyester fiber sector will ultimately benefit
from China's entry into the World Trade Organization, on the back of higher
exports of textile products as the present quota system is gradually phased out
over the next five to six (6) years. The present tariff system on polyester
fiber, will likely remain, albeit at slightly lower rates. It may take five (5)
years before the average tariff of 17% falls to 9%. At the same time, a cyclical
upturn in the polyester sector plus higher export demand will likely keep
product products prices and margins high. Furthermore, China has raised export
tax rebates on textile products from 14% to 17%, which should encourage more
exports. Together with the projected growth in population and the expected
improvement in the living standards in the PRC, the demand for polyester fiber
will certainly increase significantly.
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POLYESTER CONSUMPTION IN THE PRC
(IN THOUSANDS OF TONS)
<TABLE>
<CAPTION>
Compound
Annual
1998 1999 2000 2001 2004 Growth
<S> <C> <C> <C> <C> <C> <C>
Polyester filament 2,616 2,606 2,704 2,800 3,128 3.0%
Polyester staple fiber 2,226 2,334 2,458 2,580 2,901 4.5%
</TABLE>
PRODUCTS
Asibao currently produces two main products: polyester staple fiber and
polyester filament. Asibao sells its polyester staple fiber with approximately
fifty (50) different specifications under the brand name of "Yin Chau". It sells
its polyester filament with approximately twenty-five (25) different
specifications kinds under the brand names "Asibao," "Baiyu" and "Yinling."
Asibao sells its products in over 180 factories in eighteen (18) different
provinces, cities and autonomous regions in China and eighteen (18) of its
products have been honored with the title of top quality product of the ministry
and the province in China.
The polyester staple fiber produced by Asibao has the characteristics
of high tenacity, low elongation and high resistance of heat so that it is
widely used in the textile industry. The three-dimensional crimped hollow fiber
is one of the variations of staple fiber and was introduced in the 1980s. It is
used mainly as an insulation and stuffing material for pillows, quilts,
upholstery, ski-wear, and toys, as well as for processing suede-like woven
products.
RAW MATERIALS
The principal raw material used by Asibao is polyester chip.
Approximately 85% of Asibao's total cost of sales is attributable to raw
materials. Raw materials are purchased from domestic, including Longdi,
Liaoyang Petrochemical Fiber Co., Yinshan Petrochemical Polyester Co.,
Shanghai Jinshan Petrochemical and Yizheng Chemical Fiber Company.
Asibao is not committed to any supply agreements with suppliers.
Asibao chooses its suppliers based upon the price and quality of their raw
materials.
DISTRIBUTION OF PRODUCTS
Approximately all of the Company's sales are made to domestic customers
located in Heilongjiang, Henan, Liaoning, Jilin, Shandong, Hebei, Tienjin,
Shanxi, Zhejiang, Shaaxi, Jiangsu and approximately 11 other provinces or
cities.
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From 1993 until the present, total export sales of the Company was 500
tons of its products. Demand in China for polyester staple fiber well exceeds
domestic supply and the Company has consistently sold all of the polyester
staple fiber that it has been able to produce.
In 1998, the average prices of polyester staple fiber and polyester
filament sold were approximately US $980 and US $1,278 per ton, respectively.
The customers of the Company are mainly textile factories and wholesalers of
polyester fiber. The Company's customer base is well established and
approximately 75-80% of its sales represent repeat orders to existing customers.
MARKETING
Asibao conducts its marketing efforts through its sales and marketing
division, comprised of approximately fifty-three (53) employees working in
Liaoning, Shandong, Beijing, Tienjin, Zhejiang and Heilongjiang. Approximately
thirty-one (31) of such employees are market promotion staff and after-sales
technicians and are responsible for conducting market research, sales planning,
marketing strategy, order consultation with customers, sales coordination and
control, and payment collection.
PRICING
Until the end of 1992, a control price for polyester products sold by
Chinese producers in China was set for each calendar year by the Commodities
Price Bureau in consultation with the Textile Ministry. Individual producers
could apply to the Commodities Price Bureau for permission to sell specific
products at higher prices, but not at lower prices.
In 1993, the pricing system was reformed and the price of polyester
staple fiber was deregulated while the price for its primary raw material,
polyester chip, was based on a pre-set reference control price around which
producers could adjust up or down within a range of ten percent (10%) for
standard products.
However, in 1994, the pricing system was reformed once again and now
the producers themselves may determine the prices of polyester chip, as well as
polyester staple fiber. In response to these changes, Asibao reviews pricing
policy on a quarterly basis and adjusts prices according to such factors as
changes in demand, international product prices, costs of raw materials and
exchange rates. The sales prices for all orders are now determined by direct
negotiations with the customers and slightly favorable terms are granted to
regular customers.
COMPETITION
In the domestic market, Asibao's main competitors are mainly large
manufacturers located close to the coastal regions. Such competitors include
Yizheng Chemical Fiber Company Limited, Tianjin Petrochemical Company, Liaoyaong
Petrochemical Fiber Company, Shanghai Petrochemical Polyester Factory and
Guangdong Zinhui Chemical Fiber Factory, among others.
Asibao competes with domestic producers on the basis of product
quality, wide variety of product specifications, delivery performance and
after-sales services. Far Beyond believes that Asibao has a pricing advantage
over its competitors due to a number of factors including, economies of sale,
its ability to purchase cheaper raw materials through various channels and its
use of the raw materials in its production of not only the polyester staple
fiber, but also the polyester filament.
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Longdi owns a polyester chip plant that commenced operations in 1996
with a production capacity of 80,000 tons of polyester chip per annum. On
January 10, 1996, Longdi and Asibao entered into a purchase agreement pursuant
to which Longdi agreed to guarantee the supply of polyester chip to Asibao at a
5% to 10% discount to the prevailing market prices offered to other purchasers
of polyester chip with a right of first refusal to Asibao.
Far Beyond believes that product price is the major competitive
advantage that Asibao has over importers of similar products. The import prices
of staple fibers and filament are generally about 20% higher than those of
Asibao. Presently, the domestic market in China is protected by tariffs on
imported chip and staple fiber. Even if China becomes a signatory of GATT and
import tariffs decrease, Far Beyond anticipates that the PRC government will
likely promulgate appropriate regulations to protect local manufacturers against
overseas dumping.
RESEARCH AND DEVELOPMENT
The research and development division for both Asibao and Longdi are
centralized within the organizational structure of Longdi and is known as the
research institute. The research institute originated in 1983 and provides
technical expertise for the improvement of the production facilities. The
research institute also provides advanced technical training for employees.
Asibao shares the costs incurred for the services provided by that division.
MANAGEMENT AND EMPLOYEES
Asibao employs approximately 1,100 employees. The number of employees,
categorized by function, is approximately as follows:
<TABLE>
<CAPTION>
Function Number of Employees
- -------- -------------------
<S> <C>
Production, Engineers and Technicians 1,055
Sales and Marketing 15
Accounting, General and Administration 42
</TABLE>
ITEM 2. PROPERTIES
As of December 31, 1999, the Company had no office or facility for U.S.
operations. The head office and production facilities of the Company are located
in Harbin City, the capital of the Heilongjiang province (the "Facilities"). The
Facilities are leased by Longdi to the Company pursuant to a 30-year lease,
commencing January 1, 1996 at a rate of US $121,000 per year. The rental rate is
adjustable, based on further mutual negotiation, every three years. The
factories and office buildings cover a total area of approximately 317,000
square meters, comprising 244,000 square meters for production plants and 73,000
square meters for warehouses and offices.
The Company's production facilities at present consist of a polyester
staple fiber plant and polyester filament plant nos. 1 and 2. All plant and
machinery at these factories are owned by the Company. Long term land use rights
for the land on which these facilities are situated are held by Longdi. Other
supporting facilities, including a power plant and a thermo-electricity plant,
are provided by Longdi at agreed rates.
All land in the PRC is owned by the government. According to the PRC
law, land may be leased (under land use rights) for certain periods of time to
businesses. While Chinese law expressly protects the
11
<PAGE>
status and rights of Sino-foreign joint venture enterprises, including their
right to use land during the term of their respective joint venture contracts,
the state reserves the right, in extreme and exceptional circumstances, to
terminate the joint venture and provide compensation therefor. In such an event,
a joint venture's right to use land would terminate and all facilities would
revert to the state in exchange for just compensation. Although management sees
little risk in not having title to the land use rights, no assurances can be
given that such land use rights may not be terminated by the government.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On November 30, 1999, the stockholders of the Company held a special
meeting (the "Special Meeting") at which the stockholders approved (1) the
Disposal Agreement and the Assignment Agreement ("Proposal I") and (2) an
amendment to the Certificate of Incorporation of the Company to decrease the
authorized Common Stock of the Company from 1,100,000,000 shares to 30,000,000
shares and to change the name of the Company from "Asia Resources Holdings
Limited" to "Asia Fiber Holdings Limited" ("Proposal II").
The record date for the Special Meeting was October 15, 1999 (the
"Record Date"). 344,849 shares (or approximately 57.7%) of the Common Stock
outstanding as of the Record Date voted for Proposal I, while 5,799 shares of
the Common Stock outstanding as of the Record Date voted against Proposal I.
1,632 shares of the Common Stock outstanding as of the Record Date abstained
with regard to Proposal I. 344,745 shares (or approximately 57.7%) of the Common
Stock outstanding as of the Record Date voted for Proposal II, while 6,067
shares of the Common Stock outstanding as of the Record Date voted against
Proposal II. 1,632 shares of the Common Stock outstanding as of the Record Date
abstained with regard to Proposal II.
12
<PAGE>
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock was listed on the New York Stock Exchange
("NYSE") under the symbol RGL until December 7, 1994, at which time the NYSE
suspended its trading due to the Company's failure to meet the continued listing
requirements. On February 5, 1995, the Common Stock of the Company was removed
from registration and listing on the NYSE. The Company's Common Stock began
trading on the NASD OTC Electronic Board in August 1995. The Company's current
symbol is ASRS. The following information sets forth the high and low prices in
dollars per shares for the Common Stock of the Company during the periods
indicated. Such prices reflect prices between dealers in securities and do not
include any retail markup, markdown or commission and may not necessarily
represent actual transactions. The information set forth below was provided by
Dow Jones Interactive Quotes and Market Data.
<TABLE>
<CAPTION>
High* Low*
<S> <C> <C>
1997
First Quarter (through March 31, 1997) 12 61/64 2 5/32
Second Quarter (through June 30, 1997) 4 5/16 2 5/32
Third Quarter (through September 30, 1997) 2 5/32 2 5/32
Fourth Quarter (through December 31, 1997) 2 5/32 2 5/32
1998
First Quarter (through March 31, 1998) 2 5/32 2 5/32
Second Quarter (through June 30, 1998) 2 5/32 2 5/32
Third Quarter (through September 30, 1998) 2 49/64 1 3/8
Fourth Quarter (through December 31, 1998) 2 49/64 2 5/32
1999
First Quarter (through March 31, 1999) 4 3/4 1/4
Second Quarter (through June 30, 1999) 4 1/2 1/4
Third Quarter (through September 30, 1999) 4 1/2 1 1/4
Fourth Quarter (through December 31, 1999) 35 3/4
</TABLE>
*On February 18, 1999, the Company effectuated a 1-for-138 reverse
stock split of the common stock of the Company. The high and low price
quotations for 1997 and 1998 have been adjusted to reflect the 1-for-138 reverse
stock split.
On March 13, 2000, the closing bid price for the Common Stock as
reported by the OTC Electronic Bulletin Board was $.625.
On March 13, 2000 there were approximately 7,147 stockholders of record
for the Common Stock of the Company. As of such date, 9,952,234 shares of Common
Stock were outstanding.
No dividends have been declared or paid on the common stock of the
Company since the Company's incorporation. It is the current policy of the Board
of Directors to retain earnings, if any, to provide funds for the Company's
operations. The payment of dividends is at the discretion of the Board of
Directors, and dividends may be paid only out of current earnings and profits or
retained earnings.
13
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
Consolidated Financial Statements of Far Beyond Investments Limited ("Far
Beyond") and related Notes thereto, and other financial information included
elsewhere herein. The financial statements of Far Beyond are prepared in
conformity with generally accepted accounting principles of the United States
("US GAAP").
RESULTS OF OPERATIONS
The following table shows the selected consolidated income statement
data of Far Beyond and its subsidiaries for the three fiscal years ended
December 31, 1997, 1998 and 1999. The data should be read in conjunction with,
and qualified in their entirety by reference to, the Consolidated Financial
Statements of Far Beyond and related Notes thereto and other financial
information included elsewhere therein:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Year Ended December 31,
1997 1998 1999 1999
(In thousands) (RMB) (RMB) (RMB) (US $)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales 494,897 460,448 452,218 54,682
Cost of sales (407,852) (375,559) (364,174) (44,036)
-------------- ------------- -------------- -------------
Gross profit 87,045 84,889 88,044 10,646
Gross profit margin 17.6% 18.4% 19.5% 19.5%
Other income - - 913 110
Selling and administrative expenses (18,658) (19,795) (29,863) (3,610)
Financial expenses, net (17,406) (10,694) (4,978) (602)
-------------- ------------- -------------- -------------
Income before income taxes 50,981 54,400 54,116 6,544
Income taxes - (4,168) (268) (33)
-------------- ------------- -------------- -------------
Income before minority interests 50,981 50,232 53,848 6,511
Minority interests (16,831) (16,502) (17,301) (2,092)
-------------- ------------- -------------- -------------
Net income 34,150 33,730 38,547 4,419
============== ============= ============== =============
</TABLE>
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
14
<PAGE>
SALES AND GROSS PROFIT MARGIN
Total sales for the year ended December 31, 1999, decreased by RMB 8.2
million (US $992,000) or 1.8% to RMB 452.2 million (US $54.7 million), compared
to RMB 460.4 million (US $55.7 million) for the corresponding period in 1998.
The total sales volume for the year ended December 31, 1999 decreased by 3.4%
compared to that of the corresponding period in 1998. As a series of
anti-smuggling campaigns and expansionary fiscal policies were launched by the
PRC government during the year, the over-supply of polyester products in the
domestic market was considerably reduced. This has resulted in a marginal
increase in both the selling prices and sales volume of polyester fibers
product, with the exception of staple fibers. Marginal decreases in selling
prices and sales volume of staple fibers were mainly due to the decreasing price
of cotton during 1999, and the demand and selling price of staple fibers were
vulnerable to the selling price of cotton. As the sales of staple fibers
accounted for 57% of total sales in 1999, the decreasing sales of staple fibers
more than offset the increasing sales of other polyester fiber products and
accounted for the overall decrease in sales.
The increase in gross profit margin from 18.4% in 1998 to 19.5% in 1999
was mainly due to the slightly increase in selling prices of polyester fiber
products (except for staple fiber).
OTHER INCOME
Other income for the year ended December 31, 1999 represented cash
dividend income received from the investment in the Heilongjiang Longdi Limited
Liability Company.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased by RMB 10.1 million (US
$1.2 million) or 50.9% to RMB 29.9 million (US $3.6 million) in 1999 from RMB
19.8 million (US $2.4 million) in 1998. The following events occurred in 1999
that attributed to the overall increase in selling and administrative expenses:
(a) Far Beyond's subsidiary, Harbin Asibao Chemical Fiber Co.,
Ltd. ("Asibao"), made provision of RMB 12.1 million (US $1.5
million) in 1999 (1998: nil) on certain trade receivables
recovery of which was considered by management to be doubtful.
(b) Asibao incurred professional and consultancy fee for tax
filing in the PRC and settled claims for damages due to
sub-standard quality of product sold of approximately RMB 1.1
million (US $133,000) (1998: nil).
(c) There was a decrease in transportation expenses by RMB 2.6
million (US $314,000) as a result of a 25-30% charge reduction
by PRC railway authorities during the year.
FINANCIAL EXPENSES, NET
Net financial expenses decreased by RMB 5.7 million (US $691,000) or
53.5% to RMB 5.0 million (US $602,000) in 1999 from RMB 10.7 million (US $1.3
million) in 1998. The decrease was primarily due to the decrease in the average
bank borrowing rate from 8.7% in 1998 to 7.6% in 1999 and the increase in
interest income on the amount due from Heilongjiang Longdi Group Co., Ltd.
("HLG").
15
<PAGE>
INCOME TAXES
Under the current British Virgin Islands' Law, any dividends Far Beyond
will distribute in the future, and capital gains arising from Far Beyond's
investment are not subject to income taxes in the British Virgin Islands.
Asibao is governed by the Income Tax Laws of the PRC. Being a
Sino-foreign joint venture established in the Harbin Economic Development Zone
and being awarded the status of "advanced technology enterprise", Asibao is
exempted from income taxes for a period of two years commencing from its first
profitable year and is entitled to a preferential income tax rate of 15% for the
remaining years of the Joint Venture with a 50% reduction for 3 consecutive
years commencing from its third profitable year. 1998 and 1999 are the third and
fourth profitable years, respectively, and the income taxes are provided
accordingly, based on the preferential income tax rate of 15%.
Asibao has, however, successfully claimed 3 years' tax-free holiday in
1999 under certain tax regulations for the advanced technology enterprises
issued by the local government. Accordingly, income taxes provided in 1998 were
reversed in 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
SALES AND GROSS PROFIT MARGIN
Total sales for the year ended December 31, 1998, decreased by RMB 34.4
million (US $4.2 million) or 7.0% to RMB 460.4 million (US $55.7 million),
compared to RMB 494.9 million (US $59.8 million) for the corresponding period in
1997. The total sales volume for the year ended December 31, 1998 increased by
2.9% compared to that of the corresponding period in 1997. While only the sales
volume of hollow fiber increased, sales volume of other polyester fibers
decreased. The decrease in sales volume, except hollow fiber, was primarily due
to the persistent over-supply of polyester fiber products in the PRC domestic
market during the period as a result of the smuggling and dumping activities of
other manufacturers, especially in Korea and Taiwan. In view of the persistence
of smuggling and low price imports, the PRC Government has taken a series of
stringent anti-smuggling measures to enforce import quotas and high tariffs that
shield the domestic market from foreign competitions form July 1998 onwards. In
June 1998, the customers anticipated that the prices of polyester fibers would
rise upon the launching of anti-smuggling measures that would cause a decrease
in supply, especially for hollow fiber whose supply is comparatively scarce in
the domestic market. High order flow, particularly during the period June to
August 1998, of hollow fiber product which resulted in an overall increase in
sales volume of this product.
The average selling prices of polyester fiber products in 1998 dropped
by 1-21%, compared to 1997, attributing to the decrease in overall sales. The
downward pressure on prices came from the decreasing cost of polyester chips and
the revised pricing policy. The decrease in cost of polyester chips was mainly a
result of the enlarged production capacity of Taiwanese and South Korean
manufacturers as well as the smuggling and dumping activities during 1998.
The gross profit margin increased from 17.6% in 1997 to 18.4% in 1998,
primarily due to the fact that the decrease in selling prices of polyester fiber
was more than compensated by the decrease in cost of polyester chips.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses increased by RMB 1.1 million (US
$137,000) or 6.1% to RMB 19.8 million (US $2.4 million) in 1998 from RMB 18.7
million (US $2.3 million) in 1997. During the year,
16
<PAGE>
Asibao assumed certain transportation expenses amounting to approximately RMB
3.2 million (US $388,000) which were previously borne by certain customers as a
goodwill exercise for certain key customers. The resulting increase in
transportation expenses was partially offset by the decrease in administrative
expenses as less overhead was allocated by HLG on certain shared facilities for
the temporary closure of operation of one of Asibao's filament factories of
Asibao for repair, maintenance and equipment replacement during 1998.
FINANCIAL EXPENSES, NET
Net financial expenses decreased by RMB 6.7 million (US $812,000) or
38.6% to RMB 10.7 million (US $1.3 million) in 1998 from RMB 17.4 million (US
$2.1 million) in 1997. The decrease was primarily due to the decrease in the
average bank borrowing rate from 9.5% in 1997 to 8.7% in 1998 and interest
income charged on the amount due from HLG. in 1998 which was interest-free in
1997.
INCOME TAXES
Under the current British Virgin Islands' Law, any dividends Far Beyond
will distribute in the future, and capital gains arising from Far Beyond's
investment are not subject to income taxes in the British Virgin Islands.
Asibao is governed by the Income Tax Laws of the PRC. Being a
Sino-foreign joint venture established in the Harbin Economic Development Zone
and being awarded the status of "advanced technology enterprise", Asibao is
exempted from income taxes for a period of two years commencing from its first
profitable year and is entitled to a preferential income tax rate of 15% for the
remaining years of the Joint Venture with a 50% reduction for 3 consecutive
years commencing from its third profitable year. 1997 is the second profitable
year and, therefore, no income taxes are provided. 1998 is the third profitable
year and, therefore, income taxes are provided based on the preferential income
tax rate of 15%.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Filed herewith are the following financial statements:
Consolidated Financial Statements for the Years ended December 31,
1999, 1998 and 1997.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective November 24, 1999, the Company dismissed Arthur Anderson &
Co. ("Anderson") as the Company's independent accountants. The dismissal of
Anderson was approved by the Company's Board of Directors.
Anderson audited the Company's financial statements for the years ended
December 31, 1998 and 1997. Anderson's report for such periods did not contain
an adverse opinion or a disclaimer of opinion, nor was the report qualified or
modified as to uncertainty, audit scope or accounting principles.
During the period from January 1, 1997 to December 31, 1998, there were
no disagreements with Anderson on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreement, if not resolved to the satisfaction of Anderson, would have caused
such firm to make reference to the subject matter of the disagreement in
connection with its reports on the Company's financial statements. In addition,
there were no such events as described under Item 304(a)(1)(IV)(B) of Regulation
S-B during the fiscal year ended December 31, 1999 and the subsequent interim
periods through March 24, 2000.
17
<PAGE>
The Company has provided Anderson with a copy of the disclosures
contained herein, and has requested that it furnish the Company with a letter
addressed to the Securities and Exchange Commission stating whether it agrees
with the statements made by the Company in response to Item 304(a) regarding its
involvement with the Company as independent accountants and, if not, stating the
respects in which it does not agree.
18
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The following table and text sets forth the names and ages of all
directors and executive officers of the Company and the key management personnel
as of December 31, 1999. The Board of Directors of the Company is comprised of
only one class. All of the directors will serve until the next annual meeting of
stockholders and until their successors are elected and qualified, or until
their earlier death, retirement, resignation or removal. Executive officers
serve at the discretion of the Board of Directors, and are appointed to serve
until the first Board of Directors meeting following the annual meeting of
stockholders. Also provided is a brief description of the business experience of
each director and executive officer and the key management personnel during the
past five years and an indication of directorships held by each director in
other companies subject to the reporting requirements under the Federal
securities laws.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Lung Po Ching 53 Chairman of the Board
Rui Min Zhao 51 Vice Chairman of the Board and President
Ming Xue Liu 52 Vice President and Director
Fing Jie Liu 52 Chief Financial Officer and Director
Wai On Wan 26 Secretary and Director
</TABLE>
MR. LUNG PO CHING, has been the Chairman of the Board of the Company
since January 24, 2000. Mr. Ching has been involved for more than 20 years in
the management of production and technology of industrial enterprises in the
PRC. Mr. Ching graduated from the Harbin Military and Engineering Institute in
1968 and holds the title of Senior Engineer. Mr. Ching is also the president of
two US corporations, one of which is listed on the NASDAQ Stock Exchange and the
other is included on the OTC Bulletin Board operated by the NASD.
MR. RUI MIN ZHAO, has been the Vice Chairman of the Board and President
of the Company since January 24, 2000. Mr. Zhao is also the General Manager of
Asibao. Mr. Zhao has many years of experience in the management of chemical
fiber and textile enterprises. He has won several titles and awards such as the
"National Medal of Outstanding Entrepreneur", the "National Model Worker of
Textile Industry" and the "May First Labor Medal". Mr. Zhao graduated from the
department of mechanical engineering of Harbin Industrial University in 1975.
MR. MING XUE LIU, has been the Vice President and a Director of the
Company since January 24, 2000. Mr. Liu has been involved in the production and
technological improvement of synthetic fiber manufacturing since 1975. Mr. Liu
has extensive experiences in working with and for foreign as well as in foreign
companies. He graduated from Heilongjiang University in 1975 with a
concentration in macro-molecular.
19
<PAGE>
MR. FENG JIA LIU, has been the Chief Financial Officer and a Director
of the Company since January 24, 2000. Mr. Liu has over 30 years of financial
management experiences. Mr. Liu graduated from Forestry Institute in
Heilongjiang Province in 1967 with a concentration in financial management.
MR. WAI ON WAN, has been the Secretary and a Director of the Company
since January 24, 2000. Mr. Wan has been involved in corporate strategy and
business development for high-tech industry. He was the Founder and Co-CEO of
Iconcept.net Ltd., a company which focuses on providing web solution services to
local companies. Mr. Wan graduated from Rutgers University, New Jersey in 1996
with a concentration in Finance.
ITEM 10. EXECUTIVE COMPENSATION
COMPENSATION AGREEMENTS
No executive officer received compensation during 1998 or 1999.
There are currently no long-term employment or consulting agreements
between the Company and the executive officers or directors of the Company.
BOARD OF DIRECTORS
During the year ended December 31, 1999, two meetings of the Board of
Directors were held. Additionally, certain corporate actions were also conducted
by unanimous written consent of the Board of Directors. Directors are reimbursed
for travel and other expenses relating to meetings of the Board of Directors and
its committees. Richard N. Gray received $10,000 in 1998 for serving as a
director of the Company.
STOCK OPTION PLAN
No stock options or stock appreciation rights were granted to any
directors or officers of the Company during 1998 or 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 13, 2000
with respect to (i) the beneficial ownership of the Common Stock of the Company
by each beneficial owner of more than 5% of the outstanding shares of Common
Stock of the Company, each director, each executive officer and all executive
officers and directors of the Company as a group, (ii) the number of shares of
Common Stock owned by each such person and group and (iii) the percent of the
Company's Common Stock so owned.
As used in this section, the term beneficial ownership with respect to
a security is defined by Rule 13d-3 under the Exchange Act as consisting of sole
or shared voting power (including the power to vote or direct the vote) and/or
sole or shared investment power (including the power to dispose of or direct the
disposition of) with respect to the security through any contract, arrangement,
understanding, relationship or otherwise, subject to community property laws
where applicable. Each person has sole voting and investment power with respect
to the shares of Common Stock, except as otherwise indicated. Beneficial
ownership consists of a direct interest in the shares of Common Stock, except as
otherwise indicated.
20
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------- ------------------------------ -------------------------------
Percentage of
Number of Shares of Outstanding Common
Name and Address Common Stock Stock Beneficially
of Beneficial Owner Beneficially Owned Owned
- ---------------------------------------------- ------------------------------ -------------------------------
<S> <C> <C>
Hearty Holdings Limited 4,046,174 40.66%
Rm. 2005 Universal Trade Centre
3-5A Arbuthnot Road
Central, Hong Kong
Megastone Development Limited 1,734,074 17.42%
20/F Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Central, Hong Kong
Liu Ming Xue (1) 2,023,087 20.33%
Rm. 2005 Universal Trade Centre
3-5A Arbuthnot Road
Central, Hong Kong
Cao Yu Shan (1) 2,023,087 20.33%
Rm. 2005 Universal Trade Centre
3-5A Arbuthnot Road
Central, Hong Kong
Well Gain Investments Limited 700,636 7.0%
Room 2103-2104
21/F Treasure Centre
42 Hung To Road
Kwun Tong, Hong Kong
Zhu Yi Xin (2) 700,636 7.0%
Rm. 2005 Universal Trade Centre
3-5A Arbuthnot Road
Central, Hong Kong
NJI No. 2 Investment Fund 1,992,434 20.0%
6 Battery Road, No. 42-01
Singapore 049909
</TABLE>
(1) Messieurs Liu and Cao each own 50% of the share capital of Hearty Holdings
Limited.
(2) Mr. Zhu owns all of the share capital of Well Gain Investments Limited.
CHANGES IN CONTROL
The Company is unaware of any contract or other arrangement, the
operation of which may at a subsequent date result in a change in control of the
Company.
21
<PAGE>
ITEM 12. CERTAIN TRANSACTIONS
Pursuant to a supplementary shareholders' agreement (the "Guaranteed
Distribution Agreement") dated May 18, 1998 between CCHL and the Chinese joint
venture partner of HZHD (the "Chinese Partner"), the Chinese Partner agreed to
pay CCHL a fixed annual income of RMB 15,300,000 (the "Guaranteed Distribution")
from January 1, 1998 through the expiration of the joint venture period of HZHD.
Any surplus income generated from the Hangzhou Toll Road in excess of the amount
of the Guaranteed Distribution would belong to the Chinese Partner and any
shortfall would be made up by the Chinese Partner. In addition, as part of the
Guaranteed Distribution Agreement, an amount of RMB 178,500,000 would be paid to
CCHL upon the expiration of the joint venture period of HZHD and the assets of
the joint venture would be surrendered to the Chinese Partner at no further
consideration. This Guaranteed Distribution Agreement was subject to approvals
by the authorities which originally approved the set up of the joint venture. To
date, the approvals have not been obtained despite efforts by the management of
the joint venture and the Company.
On April 14, 1998, Horler, a wholly-owned subsidiary of CSH, a major
shareholder of the Company, agreed to reduce the interest rate of the Second
Horler Note from 9% to 5% per year for the year ended December 31, 1997. In
addition, Horler agreed that after December 31, 1998, no principal repayment of
the Second Horler Note would be demanded until the Company was financially
capable of doing so. However, following January 1, 1998, the Second Horler Note
continued to bear interest at 9% per year.
On July 27, 1998 the Company, Harlequin and New Regal entered into a
Deed of Variation pursuant to which Harlequin agreed and undertook to assume all
of the obligations and liabilities of New Regal under the New Regal Promissory
Note in consideration of the Company's agreement to release New Regal from all
obligations relating to the New Promissory Note. All other terms of the New
Regal Promissory Note remained the same. At that time, Richard N. Gray was a
director of the Company. Mr. Gray was also a director of GHL (Senior ) Pension
Fund, of which Harlequin was a wholly-owned subsidiary.
During 1998, New Regal and the Company agreed on a revised payment
schedule relating to the Harlequin Promissory Note. Under the revised payment
schedule, the payment of several monthly installments by New Regal in 1998 and
1999 was suspended and the outstanding principal balance was revised to be
settled in sixty (60) equal monthly installments commencing March 1999. The
Harlequin Promissory Note continued to bear interest at nine percent (9%) per
year during the period of payment suspension in 1998 and 1999 and thereafter.
The Company paid to CSH management fees of US $155,000 per year for
1997 and 1998 and US $38,000 during the three months ended March 31, 1999 for
the office space and administrative support it shared with CSH.
HZHD guaranteed bank borrowing of a company related to CSH in the
amount of RMB 56 million and RMB 93 million as of December 31, 1997 and 1998,
respectively.
CSH committed to provide continuing financial support to the Company to
the extent of CSH's interest in the Company for the period ending on December
31, 1999.
On January 24, 2000, pursuant to the Far Beyond Acquisition Agreement
by and among the Company, Horler, Far Beyond and the FB Shareholders transferred
all of the issued and outstanding shares of the capital stock of Far Beyond to
the Company in exchange for 8,757,951 shares of the
22
<PAGE>
Common Stock of the Company, representing approximately 88% of the outstanding
shares of the Common Stock of the Company.
Concurrently with and as a condition of the closing of the Far Beyond
Acquisition Agreement, pursuant to the Disposal Agreement between the Company
and Horler, the Company transferred to Horler the entire share capital of WL in
full and final satisfaction of the Second Horler Note. Also, concurrently with
and as a condition of such closing, pursuant to the Assignment Agreement between
the Company and CSH, the Company assigned to CSH, in settlement of the
outstanding indebtedness the Company owed to CSH, the New Regal Promissory Note
and the Harlequin Promissory Note.
23
<PAGE>
PART IV
<TABLE>
<S> <C>
(a)(1) Financial Statement
(2) Exhibits
Exhibit Number Title
- -------------- -----
2.1(1) Acquisition Agreement
2.2(2) Disposal Agreement
2.3(3) Assignment Agreement
3.1* Certificate of Incorporation as filed with the Delaware Secretary of State with
amendments.
3.2* Bylaws
21.1* Subsidiaries of the Company
27.1* Financial Data Schedule for the year ended December 31, 1999 (US $)
27.2* Financial Data Schedule for the year ended December 31, 1999 (RMB)
</TABLE>
(1) Incorporated herein by reference to Exhibit C of the Proxy Statement
of the Company filed on November 2, 1999.
(2) Incorporated herein by reference to Exhibit A of the Proxy Statement
of the Company filed on November 2, 1999.
(3) Incorporated herein by reference to Exhibit B of the Proxy Statement
of the Company filed on November 2, 1999.
*Filed herein
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by Asia
Resources during the fourth quarter of 1999.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
ASIA FIBER HOLDINGS LIMITED
By: /s/ Rui Min Zhao
--------------------------------
Rui Min Zhao
President
Dated: March 30, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By: Rui Min Zhao Dated: March 30, 2000
-----------------------------------
Rui Min Zhao
President and Vice Chairman of the Board
By: /s/ Feng Jie Liu Dated: March 30, 2000
-----------------------------------
Feng Jie Liu
Chief Financial Officer and Director
(principal financial and accounting officer)
By: /s/ Lung Po Ching Dated: March 30, 2000
-----------------------------------
Lung Po Ching
Chairman of the Board
By: /s/ Ming Xue Liu Dated: March 30, 2000
-----------------------------------
Ming Xue Liu
Vice President and Director
By: /s/ Wan Wai On Dated: March 30, 2000
-----------------------------------
Wan Wai On
Secretary and Director
</TABLE>
25
<PAGE>
FAR BEYOND INVESTMENTS LIMITED AND SUBSIDIARY
CONTENTS
<TABLE>
<CAPTION>
Pages
<S> <C>
Report of Independent Auditors F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Income F-3
Consolidated Statements of Changes in Shareholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F6 - F20
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Far Beyond Investments Limited
We have audited the accompanying consolidated balance sheets of Far Beyond
Investments Limited (the "Company") and its subsidiary (collectively the
"Group") as of December 31, 1998 and 1999 and the related consolidated
statements of income, cash flows and changes in shareholders' equity for each of
the years ended December 31, 1997, 1998 and 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Group as of December 31, 1998 and 1999, and the consolidated results of its
operations and its cash flows for each of the years ended December 31, 1997,
1998 and 1999 in conformity with accounting principles generally accepted in the
United States of America.
/s/ Ernst & Young
- --------------------
Hong Kong
February 2, 2000
F-1
<PAGE>
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1998 and 1999
(Amounts in thousands except share and per share data)
<TABLE>
<CAPTION>
Notes 1998 1999 1999
RMB RMB US$
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents 5,456 8,427 1,019
Trade receivables, less provision for doubtful debts
of RMB12,128 in 1999 and nil in 1998 6 75,185 56,868 6,877
Bills receivable 5,399 1,300 157
Other receivables and prepayments 731 561 68
Inventories 7 38,611 26,789 3,239
Amount due from a minority joint venture partner 12 94,513 261,070 31,568
Amounts due from related companies 12 11,539 29,161 3,526
------- ------- -------
TOTAL CURRENT ASSETS 231,434 384,176 46,454
FIXED ASSETS 8 191,379 133,642 16,160
INVESTMENT 9 11,050 13,390 1,619
DEFERRED INCOME TAXES 5 2,242 2,042 247
------- ------- -------
TOTAL ASSETS 436,105 533,250 64,480
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Bank loans 10 179,400 177,880 21,509
Accounts payable 1,896 4,315 522
Deposits from customers 12,060 44,280 5,354
Accrued liabilities and other payables 36,471 29,677 3,589
Amount due to a director 12 1,168 5,734 693
Amounts due to related companies 12 3,457 12,098 1,463
Income taxes payable 2,468 536 65
Dividend payable 3,912 19,961 2,413
------- ------- -------
TOTAL CURRENT LIABILITIES 240,832 294,481 35,608
MINORITY INTERESTS 19,035 21,988 2,659
------- ------- -------
TOTAL LIABILITIES AND MINORITY INTERESTS 259,867 316,469 38,267
------- ------- -------
COMMITMENTS AND CONTINGENCIES 15
SHAREHOLDERS' EQUITY
Ordinary shares, par value of US$1 each
Authorized:
30,000,000 ordinary shares
Issued and fully paid:
75,000 ordinary shares 622 622 75
Additional paid-in capital 11 65,960 69,931 8,456
Reserves 14 11,637 15,845 1,916
Retained earnings 97,663 130,002 15,720
Accumulated other comprehensive income 356 381 46
------- ------- -------
TOTAL SHAREHOLDERS' EQUITY 176,238 216,781 26,213
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 436,105 533,250 64,480
======= ======= =======
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-2
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 and 1999
(Amounts in thousands except share and per share data)
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1997 1998 1999 1999
Notes RMB RMB RMB US$
<S> <C> <C> <C> <C> <C>
SALES, including finished goods sold to
related parties of RMB15,545,
RMB10,361 and RMB17,912 in 1997,
1998 and 1999, respectively 494,897 460,448 452,218 54,682
COST OF SALES, including raw materials
purchased from related parties of
RMB286,463, RMB275,041 and
RMB247,156;
finished goods purchased from related
parties of RMB nil, RMB nil and
RMB18,344;
utility charges paid to related parties of
RMB28,302, RMB23,941 and
RMB26,409;
rental expenses for leasing of plant and
machinery from related parties of
RMB1,004, RMB1,004 and RMB1,004
in 1997, 1998 and 1999, respectively (407,852) (375,559) (364,174) ( 44,036)
------- ------- ------- -------
GROSS PROFIT 87,045 84,889 88,044 10,646
OTHER INCOME, NET, including dividend income
of RMB nil, RMB nil and RMB1,030
from an associate company of the
Company's minority shareholders in 1997,
1998 and 1999, respectively - - 913 110
SELLING AND ADMINISTRATIVE
EXPENSES (18,134) (19,271) (17,735) (2,144)
PROVISION FOR DOUBTFUL DEBTS - - (12,128) (1,466)
FINANCIAL EXPENSES, NET, including
interest income from related party of RMB
nil, RMB5,242 and RMB8,360
in 1997, 1998 and 1999, respectively 4 (17,406) (10,694) (4,978) (602)
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 51,505 54,924 54,116 6,544
INCOME TAXES 5 - (4,568) (268) (33)
------- ------- ------- -------
INCOME BEFORE MINORITY
INTERESTS 51,505 50,356 53,848 6,511
MINORITY INTERESTS (16,831) (16,502) (17,301) (2,092)
------- ------- ------- -------
NET INCOME 34,674 33,854 36,547 4,419
======= ======= ======= =======
EARNINGS PER SHARE 3(k) 462.32 451.39 487.29 58.92
======= ======= ======= =======
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-3
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 and 1999
(Amounts in thousands except share and per share data)
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1997 1998 1999 1999
Notes RMB RMB RMB US$
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 622 65,960 4,190 36,582 356 107,710
Net income and comprehensive
income - - - 34,674 - 34,674
Transfer to/(from) reserves 14 - - 3,676 ( 3,676) - -
------- ------- ------- ------- ------- -------
Balance at December 31, 1997 622 65,960 7,866 67,580 356 142,384
Net income and comprehensive
income - - - 33,854 - 33,854
Transfer to/(from) reserves 14 - - 3,771 ( 3,771) - -
------- ------- ------- ------- ------- -------
Balance at December 31, 1998 622 65,960 11,637 97,663 356 176,238
Gain on sales of fixed assets to
the Company's minority
shareholder attributable to the
Group 11 - 3,971 - - - 3,971
Net income - - - 36,547 - 36,547
Currency translation adjustments - - - - 25 25
-------
Comprehensive income 36,572
-------
Transfer to/(from) reserves 14 - - 4,208 ( 4,208) - -
------- ------- ------- ------- ------- -------
Balance at December 31, 1999 622 69,931 15,845 130,002 381 216,781
======= ======= ======= ======= ======= =======
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-4
<PAGE>
FAR BEYOND INVESTMENTS LIMITED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
AS OF DECEMBER 31, 1997, 1998 and 1999
(Amounts in thousands except share and per share data)
<TABLE>
<CAPTION>
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1997 1998 1999 1999
RMB RMB RMB US$
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income 34,674 33,854 36,547 4,419
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 17,614 17,581 17,209 2,081
Minority interests 16,831 16,502 17,301 2,092
Decrease/(increase) in assets:
Trade receivables 12,322 (15,560) 18,317 2,215
Bills receivable 37,199 4,080 4,099 496
Other receivables and prepayments (356) 379 170 21
Inventories 12,116 13,835 11,822 1,429
Amount due from related companies 18,384 (332) 332 40
Deferred income taxes - 200 200 24
Increase/(decrease) in liabilities:
Accounts payable (977) (1,569) 2,419 293
Deposits from customers (30,366) (11,996) 32,220 3,896
Accrued liabilities and other payables 9,179 10,857 356 43
Amount due to a director (468) 506 4,566 552
Amount due to related companies (37,224) (7,718) (1,641) (198)
Income taxes payable - 2,468 (1,932) (234)
------- ------- ------- -------
Net cash provided by operating activities 88,928 63,087 141,985 17,169
------- ------- ------- -------
CASH FLOWS USED IN INVESTING
ACTIVITIES
Purchases of fixed assets (1,836) (561) (1,017) (123)
Proceeds on sales of fixed
assets to related party - - 47,218 5,710
Advances to a minority joint
venture partner (91,212) (19,416) (166,557) (20,140)
Increase in investment - (3,900) (9,490) (1,148)
Amounts due from related companies (1,009) (283) (17,954) (2,171)
Advances to related companies 186 (186) 10,282 1,243
------- ------- ------- -------
Net cash used in investing activities (93,871) (24,346) (137,518) (16,629)
------- ------- ------- -------
CASH FLOWS PROVIDED BY/(USED IN)
FINANCING ACTIVITIES
Proceeds from bank borrowings 2,660 138,800 177,880 21,509
Repayments of bank borrowings - (139,200) (179,400) (21,693)
Dividend paid to minority joint venture partner - (39,757) - -
------- ------- ------- -------
Net cash provided by/(used in) financing activities 2,660 (40,157) (1,520) (184)
------- ------- ------- -------
Exchange differences on cash and cash equivalents - - 24 3
------- ------- ------- -------
Net increase/(decrease) in cash and cash equivalents (2,283) (1,416) 2,971 359
Cash and cash equivalents, at beginning of year 9,155 6,872 5,456 660
------- ------- ------- -------
Cash and cash equivalents, at end of year 6,872 5,456 8,427 1,019
======= ======= ======= =======
</TABLE>
The accompanying notes form an integral part of these consolidated financial
statements.
F-5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
Far Beyond Investments Limited (the "Company" or "Far Beyond") was
incorporated in the British Virgin Islands on March 21, 1995. The
Company's principal activity is to conduct activities through its
subsidiary and its principal investment is a 70% equity interest in Harbin
Asibao Chemical Fibre Co., Limited ("Asibao" or the "Joint Venture"). The
principal activity of Asibao is the manufacture and sale of synthetic
fibre products.
Asibao was established as a Sino-foreign joint venture company in the
People's Republic of China (the "PRC") between Heilongjiang Londgi Group
Co., Limited ("HLG") (30%) and Far Beyond (70%) on October 18, 1995 with a
tenure of 30 years from the date of the business licence. The tenure can
be extended by agreement between the joint venture partners with the
necessary approval from the relevant government agencies. The registered
capital of Asibao is US$12 million, contributed by HLG as to US$3.60
million (approximately RMB29.88 million) and by Far Beyond as to US$8.40
million (approximately RMB69.72 million).
2. BASIS OF PRESENTATION
The consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
("US GAAP"). This basis of accounting differs from that used in the
statutory financial statements of the Joint Venture in the PRC which are
prepared in accordance with the accounting principles and the relevant PRC
financial regulations.
The principal adjustment made to the statutory financial statements of the
Joint Venture to conform with US GAAP is the reclassification of the staff
bonus and welfare reserve appropriation from reserves to a charge to
income.
3. PRINCIPAL ACCOUNTING POLICIES
(a) BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiary. The results of the subsidiary acquired
during the year are consolidated from its acquisition date. All
material intercompany balances and transactions have been eliminated
on consolidation.
F-6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
3. PRINCIPAL ACCOUNTING POLICIES (continued)
(b) CASH AND CASH EQUIVALENTS
The Group considers cash and cash equivalents to include cash on
hand and deposits with banks with original terms of maturity of
three months or less at the date of acquisition.
At December 31, 1999, cash and cash equivalents included foreign
currency deposits equivalent to RMB4,521 (US$547) (1998: RMB166
(US$20)).
(c) INVENTORIES
Inventories are stated at the lower of cost and market value. Cost
is determined on the weighted average cost basis and, in the case of
work in progress and finished goods, comprises direct materials,
direct labour and an appropriate portion of overheads.
Market value is based on estimated selling prices less any further
costs expected to be incurred for completion and disposal.
(d) FIXED ASSETS AND DEPRECIATION
Fixed assets are stated at cost less accumulated depreciation.
Depreciation is calculated on the straight-line basis to write off
the cost less estimated residual value of each asset over its
estimated useful life. The estimated useful lives of fixed assets
are as follows:
Plant, machinery and equipment 8 - 15 years
Motor vehicles 10 years
(e) INVESTMENT
The unlisted equity investment, not being the subsidiary or company
over which the Group is in a position to exercise a significant
influence or to control the financing and operating decisions, is
accounted for by the cost method.
F-7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
3. PRINCIPAL ACCOUNTING POLICIES (continued)
(f) REVENUE RECOGNITION
Sales represent the invoiced value of goods sold, net of returns and
allowances. Revenue is recognised upon delivery of goods to
customers.
(g) FOREIGN CURRENCY TRANSACTIONS
The financial records of the Company are maintained in Hong Kong
dollars. The records of the Company are translated into Renminbi
("RMB") using the respective applicable rates of exchange quoted by
the People's Bank of China (the "Exchange Rates") prevailing at the
dates of the transactions. Monetary assets and liabilities in Hong
Kong dollars and other foreign currencies are translated using the
applicable Exchange Rates at the respective balance sheet dates. The
resulting exchange gains or losses are reported separately as a
component of shareholders' equity.
The financial records of Asibao are maintained in RMB. In preparing
these financial statements, foreign currency transactions and
monetary assets and liabilities denominated in foreign currencies
are translated into RMB using the applicable Exchange Rates.
Monetary assets and liabilities denominated in foreign currencies
are translated into RMB at the applicable Exchange Rates at the
respective balance sheet dates. The resulting exchange gains or
losses are credited or charged to the statements of income.
Translation of amounts from RMB into United States dollars ("US$")
for the convenience of the reader has been made at the Exchange Rate
on December 31, 1999 of US$1.00 = RMB8.27 and, accordingly, differs
from the underlying foreign currency amounts. No representation is
made that the RMB amounts could have been, or could be, converted
into US$ at that rate on December 31, 1999 or at any other date.
The market risks associated with changes in exchange rates and the
restriction over the convertibility of RMB into foreign currencies
are discussed in note 16 to the financial statements.
(h) INCOME TAXES
Income taxes are determined under the liability method as required
by Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes".
(i) COMPREHENSIVE INCOME
The Group adopted Statement of Financial Accounting Standards No.
130 "Comprehensive Income" ("SFAS 130") in 1998, which established
standards for reporting and display of comprehensive income/loss and
its components. SFAS 130 requires foreign currency translation
adjustments to be included in other comprehensive income/loss.
Accumulated other comprehensive income/loss, which consists of the
foreign currency translation adjustments only, is reported in the
consolidated statements of shareholders' equity. The adoption of
SFAS 130 did not have a material effect on the Group's financial
position or results of operations.
F-8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
3. PRINCIPAL ACCOUNTING POLICIES (continued)
(j) RETIREMENT BENEFITS
The Company does not have any retirement plans while Asibao has a
defined contribution retirement plan for its staff. As stipulated by
the regulations of the PRC Government, Asibao is required to make an
annual contribution to an insurance company equivalent to 15% of its
annual basic salaries paid to its PRC staff. All staff of Asibao are
covered under the plan and upon retirement, the retired staff are
entitled to a monthly pension payment borne by the above-mentioned
insurance company under the plan. Asibao is not responsible for any
payments beyond the contributions to the plan as noted above.
The contributions to the retirement plans for the employees are
charged to the statement of income as services are provided. The
amounts of contribution paid by Asibao, which were charged to the
consolidated statements of income, were RMB2,022 for the year ended
December 31, 1999 (1998: RMB2,019 and 1997: RMB2,134).
(k) EARNINGS PER SHARE
The calculation of earnings per share is based on the weighted
average number of ordinary shares of 75,000, 75,000 and 75,000
outstanding during each of the years ended December 31, 1997, 1998
and 1999, respectively.
(l) USE OF ESTIMATES
The preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
(m) COMPARATIVE AMOUNTS
Certain comparative amounts have been reclassified to conform with
the current year's presentation.
4. FINANCIAL EXPENSES, NET
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
RMB RMB RMB
<S> <C> <C> <C>
Interest expenses (17,870) (16,129) (13,495)
Interest income 363 5,434 8,515
Foreign exchange gains, net 101 1 2
------ ------ ------
(17,406) (10,694) ( 4,978)
====== ====== ======
</TABLE>
F-9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
5. INCOME TAXES
Under the current British Virgin Islands' law, any dividends the Company
will distribute in the future, and capital gains arising from the
Company's investments are not subject to income taxes in the British
Virgin Islands.
Asibao is governed by the Income Tax Laws of the PRC. Being a Sino-foreign
joint venture established in the Harbin Economic Development Zone and
being awarded the status of "advanced technology enterprise", Asibao is
exempted from income taxes for a period of two years commencing from its
first profitable year and is entitled to a preferential income tax rate of
15% for the remaining years of the Joint Venture with a 50% reduction for
3 consecutive years commencing from its third profitable year. No current
income taxes were provided for the year ended December 31, 1997 because it
was the second profitable year. The year ended December 31, 1998 was the
third profitable year and the income taxes were provided accordingly.
Asibao's net income originated in the PRC.
During 1999, Asibao was successful in a claim to the local tax bureau for
an additional tax-free holiday for the year ended December 31, 1998, the
Company's third profitable year. Accordingly, the preferential income tax
rate of 15% for the remaining years of the Joint Venture with a 50%
reduction for 3 consecutive years commenced for the year ended December
31, 1999, the Company's fourth profitable year, under certain tax
regulations for the advanced technology enterprises issued by the local
government. As a result, the Company was given an income tax credit
relating to 1998 to be applied against income taxes for the year ended
December 31, 1999.
The component of the provision/(benefit) for income taxes are as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
RMB RMB RMB
<S> <C> <C> <C>
Current income taxes, including tax credit
of RMB4,368 received in 1999 but related
to 1998 - 4,368 68
Deferred income taxes - 200 200
------ ------ ------
- 4,568 268
====== ====== ======
</TABLE>
F-10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
5. INCOME TAXES (continued)
A reconciliation between the actual income tax expense and income taxes
computed by applying the statutory PRC tax rate applicable to foreign
investment enterprises operating in the Harbin Development Zone in the PRC
to the income before income taxes is as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
RMB RMB RMB
<S> <C> <C> <C>
Statutory PRC income tax rate 15% 15% 15%
Provision computed at statutory rate 7,726 8,239 8,117
Impact of tax holiday/benefit of Asibao
(RMB108.27 (1998: RMB53.87 and
1997: RMB 103.33) per ordinary share
based on 75,000 (1998: 75,000 and 1997:
75,000) ordinary shares) (7,750) (4,040) (8,120)
Item which gives rise to no tax benefit:
Net losses of the Company 225 177 198
Others ( 201) 192 73
----- ----- -----
Provision for income taxes - 4,568 268
===== ===== =====
</TABLE>
The impact of tax holiday/benefit for the year ended December 31, 1997 and
1998 represented the full exemption from income taxes and 50% reduction of
income taxes granted by the local tax bureau in the PRC to Asibao,
respectively.
In addition to the 50% reduction of income taxes for the year ended
December 31, 1999, the impact of tax holiday/benefit for the current year
includes a tax credit received in 1999 for the year ended December 31,
1998 for which Asibao was successful in claiming from the local tax bureau
during 1999.
Deferred income taxes relates primarily to temporary differences on
revaluation of fixed assets between Asibao's PRC financial statements for
tax purposes and its US GAAP financial statements.
F-11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
6. TRADE RECEIVABLES
<TABLE>
<CAPTION>
1998 1999
RMB RMB
<S> <C> <C>
Trade receivables 75,185 68,996
Less: Provision for doubtful debts - (12,128)
------ ------
75,185 56,868
====== ======
</TABLE>
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
RMB RMB RMB
<S> <C> <C> <C>
Movement of provision for doubtful debts:
Balance at beginning of year - - -
Provision for the year - - 12,128
------ ------ ------
Balance at end of year - - 12,128
====== ====== ======
7. INVENTORIES
</TABLE>
<TABLE>
<CAPTION>
1998 1999
RMB RMB
<S> <C> <C>
Raw materials 32,393 21,453
Work in progress 3,819 2,480
Finished goods 4,306 4,763
------ ------
40,518 28,696
Less: Provision for inventories ( 1,907) ( 1,907)
------ ------
38,611 26,789
====== ======
</TABLE>
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
RMB RMB RMB
<S> <C> <C> <C>
Movement of provision for inventories:
Balance at beginning of year 1,907 1,907 1,907
Provision for the year - - -
------ ------ ------
Balance at end of year 1,907 1,907 1,907
====== ====== ======
</TABLE>
F-12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
8. FIXED ASSETS
<TABLE>
<CAPTION>
1998 1999
RMB RMB
<S> <C> <C>
Cost:
Plant, machinery and equipment 243,361 188,226
Motor vehicles 891 1,418
------- -------
244,252 189,644
Accumulated depreciation (52,873) (56,002)
------- -------
Net book value 191,379 133,642
======= =======
</TABLE>
9. INVESTMENT
The balance represents the investment in unlisted shares in Heilongjiang
Longdi Limited Liability Company ("Longdi"), an associated company of HLG,
in which the Group does not have a significant influence over its
operating and financing policies.
10. BANK LOANS
<TABLE>
<CAPTION>
1998 1999
RMB RMB
<S> <C> <C>
Short term bank loans denominated in RMB 179,400 177,880
======= =======
</TABLE>
Certain of the Group's short term bank loans amounting to RMB86,080 (1998:
RMB179,400) are secured by corporate guarantees given by HLG and Longdi
(1998: by HLG). The weighted average interest rate for the Group's short
term bank loans was 7.55% (1998: 8.58%) per annum as at December 31, 1999.
F-13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
11. ADDITIONAL PAID-IN CAPITAL
During 1999, certain of the Group's fixed assets were sold to HLG at a
gain of RMB5,673. The portion of such gain attributable to the Group
amounted to RMB3,971 has been accounted for in the additional paid-in
capital account.
12. RELATED PARTY BALANCES AND TRANSACTIONS
The Group's amounts due from/to related companies owned and/or controlled
by HLG comprise:
<TABLE>
<CAPTION>
1998 1999
RMB RMB
<S> <C> <C>
Due from related companies:
Harbin Long Xing Chemical Fibre Co. Ltd ("Long Xing") 606 -
Heilongjiang North Chemical Fibre Company
("North Chemical") 6,692 10,503
Heilongjian Dragon Flying Chemical Fibre Company
("Dragon Flying") 453 -
Heilongjiang Longdi Economic Trading Co. Ltd. 3,456 18,058
Heilongjiang Longdi Staff's Family Members
Factory ("Factory") 332 -
Harbin Hua Jia Construction Materials Co. Ltd. - 600
------ ------
11,539 29,161
====== ======
Due from a minority joint venture partner - HLG 81,230 247,787
====== ======
Due to related companies:
Heilongjiang Longdi Adibao Company 850 -
Dragon Rising 2,607 8,488
Dragon Flying - 1,816
Factory - 1,794
------ ------
3,457 12,098
====== ======
</TABLE>
Except for the balance with HLG which bears interest at the prevailing
3-month bank loans interest rate in the PRC, the balances with the above
related companies and a director are unsecured and interest-free.
F-14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
12. RELATED PARTY BALANCES AND TRANSACTIONS (continued)
A significant portion of transactions undertaken by the Group has been
effected with HLG and companies owned and/or controlled by HLG, as
follows:
(a) PURCHASES OF POLYESTER CHIPS
Pursuant to a purchase agreement dated January 10, 1996 between
Longdi and Asibao, Longdi agreed to guarantee the supply of
polyester chips, to Asibao at a 5% - 10% discount to the prevailing
market prices offered to other purchasers of polyester chips with a
first right of refusal to Asibao. The discount was agreed based on
mutual negotiation and after taking into account the savings in
transportation costs (excluding packaging costs) and wastage on
transportation. In addition, an additional 3% discount was also
granted by Longdi to allow for savings of packaging materials as a
result of the reduced distance of transportation. The polyester
chips purchased from Longdi or its subsidiary, Long Xing, through
HLG in 1999 amounted to RMB239,053 (1998: RMB260,247 and 1997:
RMB276,862).
(b) LEASE OF FACTORIES AND OFFICE BUILDINGS
Pursuant to the supplementary Restructuring Agreement, as amended,
HLG agreed to lease to Asibao the factories and office buildings in
Harbin, the PRC commencing on January 1, 1996. The rental agreement
is for a period of 15 years at an annual rental of RMB1,004, which
is adjustable, based on further mutual negotiation, every three
years.
(c) SALES OF POLYESTER PRODUCTS
Pursuant to a resolution passed on July 18, 1996 by the directors of
Longdi in respect of its 1995 dividend distribution, in lieu of 1995
cash dividends payable by Longdi to its minority shareholders, these
minority shareholders were allowed by Longdi to apply their dividend
rights to purchase certain types of polyester products from Asibao
at a discount of RMB300 per tonne for the period from July 1, 1996
to June 30, 1997. Such discount utilised by these minority
shareholders was borne by Longdi in the form of reduced dividend
distribution thereto and was reimbursed by Longdi to Asibao.
The total amount of the polyester products sold to Longdi's minority
shareholders during 1997 under the above scheme were RMB74,713,
including the above-mentioned discount (effectively the dividend
distributed to these minority shareholders) of RMB2,388.
F-15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
12. RELATED PARTY BALANCES AND TRANSACTIONS (continued)
(d) Other transactions with related companies are summarized as follows:
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
RMB RMB RMB
<S> <C> <C> <C>
Sales of finished goods to HLG 10,766 7,146 15,245
Sales of finished goods to Dragon
Rising 4,529 2,889 2,667
Sales of finished goods to Factory 250 326 -
Sales of fixed assets to HLG - - 47,218
Interest income charged to HLG - 5,242 8,360
Purchase of raw materials from HLG ( 9,601) ( 14,794) ( 6,522)
Purchase of raw materials from
Dragon Rising - - ( 1,581)
Purchase of finished goods from
Dragon Flying - - ( 2,877)
Purchase of finished goods from HLG - - ( 15,467)
Utilities charged by HLG ( 28,302) ( 23,941) ( 26,409)
======= ======= =======
</TABLE>
13. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Year ended Year ended Year ended
December 31, December 31, December 31,
1997 1998 1999
RMB RMB RMB
<S> <C> <C> <C>
Cash paid during the year for:
Interest expenses 17,870 16,129 13,495
====== ====== ======
Income taxes paid - 1,900 2,000
====== ====== ======
</TABLE>
F-16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
14. RESERVES AND DISTRIBUTION OF PROFITS
The Company's ability to pay dividends is primarily dependent on the
Company receiving distributions from its subsidiary, Asibao. In accordance
with the relevant PRC regulations and the articles of association of
Asibao, appropriations of the net income as reflected in its statutory
financial statements will be allocated to each of the general reserve,
enterprise expansion reserve and staff bonus and welfare reserve,
respectively, as determined by the resolution of the board of directors
annually.
The appropriations to general reserve and enterprise expansion reserve
attributable to the Company totalling RMB15,845 were reflected as reserves
in the consolidated balance sheet as at December 31, 1999 (1998: 11,637
and 1997: RMB7,866).
The staff bonus and welfare reserve are set aside for the provision of
bonus and welfare benefits to the employees of Asibao. In accordance with
US GAAP, the amounts designated for payments of staff bonus and welfare
benefits to employees have been charged to income before arriving at the
net consolidated income. The staff bonus and welfare benefits to employees
charged to the statement of income amounted to RMB601 for the year ended
December 31, 1999 (1998: RMB539 and 1997: RMB525).
As described in note 2 to the consolidated financial statements, the net
income as reported in the US GAAP financial statements differs from those
as reported in the statutory financial statements. In accordance with the
relevant laws and regulations in the PRC, the profits available for
distribution are based on the statutory financial statements. At December
31, 1999, the Group's share of the distributable profits of Asibao
amounted to RMB143,486 (1998: RMB106,041).
15. COMMITMENTS AND CONTINGENCIES
As at December 31, 1999, the Group had the following commitments:
(i) The future minimum payments under the operating leases for factories
and office buildings located in the PRC for a period of 15 years
commencing on January 1, 1996 are as follows:
<TABLE>
<CAPTION>
RMB
Payable in:
<S> <C>
2000 1,004
2001 1,004
2002 1,004
2003 1,004
2004 1,004
Thereafter 6,024
------
Total minimum lease payments 11,044
======
</TABLE>
Rental expense under the operating leases for the year ended
December 31, 1999 amounted to RMB1,004 (1998: RMB1,004 and 1997:
RMB1,004).
F-17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
16. FOREIGN CURRENCY EXCHANGE
RMB is not freely convertible into foreign currencies.
Effective from January 1, 1994, a single rate of exchange is quoted daily
by the People's Bank of China (the "Exchange Rate"). However, this does
not imply convertibility of RMB into United States dollars ("US$") or
other foreign currencies. All foreign exchange transactions continue to
take place either through the Bank of China or other institutions
authorized to buy and sell foreign currencies at the exchange rates quoted
by the People's Bank of China. Approval of foreign currency payments by
the Bank of China or other institutions requires submitting a payment
application form together with suppliers' invoices, shipping documents and
signed contracts.
The Exchange Rates at December 31, 1997, 1998 and 1999 were US$1: RMB8.29,
US$1: RMB8.28 and US$1: RMB8.27, respectively.
17. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of the Group's cash and cash equivalents, trade
receivables, bills receivable and accounts payable approximate their fair
value because of their short maturity period.
The carrying amounts of the balances with a minority joint venture
partner, directors and related companies are reasonable estimates of the
fair values due to the short maturity of these assets and liabilities.
It was not practicable to estimate the fair values of the Group's cost
method investment in non-traded investments because of the lack of quoted
market prices and the inability to estimate fair values without incurring
excessive costs. The carrying amounts of RMB13,390 at December 31, 1999
represent the Group's best estimates of current economic values of this
investment.
The carrying amounts of the bank loans approximate their fair value based
on the borrowing rates currently available for bank loans with similar
terms and average maturity.
18. CONCENTRATION OF CREDIT RISKS
The financial instruments which potentially subject the Group to a
significant concentration of credit risk consist are principally the
following:
(i) Cash deposits
The Group places its cash deposits with various PRC State-owned
banks.
F-18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
18. CONCENTRATION OF CREDIT RISKS (continued)
(ii) Trade receivables
The Group manufactures and sells synthetic fibre products to garment
manufacturers in the PRC. Concentration of credit risks with respect
to trade receivables is limited due to the large number of entities
comprising the Group's customer base.
Management considers that the Group's current customers are
generally creditworthy and credit is extended based on an evaluation
of the customers' financial conditions and, therefore, generally
collateral is not required.
As of December 31, 1999, trade receivables totalled RMB56,868 (1998:
RMB75,185) and are generally due within 60 days.
(iii) Bills receivable
As of December 31, 1999, bills receivable amounted to RMB1,300
(1998: RMB5,399) and their collectability was guaranteed by banks.
The bills receivable have normal terms of maturity of four to six
months.
(iv) Due from related companies
The balances due from related companies include the advances to and
trade receivables from related companies.
The Group does not require collateral and all of the balances are
unsecured.
(v) Due from a minority joint venture partner
The balance due from a minority joint venture partner includes the
advances to HLG less the amounts payable to HLG for purchase of raw
materials and utilities.
The Group does not require collateral and all of the balances are
unsecured.
F-19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands except share and per share data)
19. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
The Group's operating assets and primary source of income and cash flows
are located in the PRC, and may be adversely affected by significant
political, economic and social uncertainties in the PRC. Although the PRC
government has been pursuing economic reform policies for the past 21
years, no assurance can be given that the PRC government will continue to
pursue such policies or that such policies may not be significantly
altered, especially in the event of a change in leadership, social or
political disruption or unforeseen circumstances affecting the PRC's
politicial, economic and social conditions. There is also no guarantee
that the PRC government's pursuit of economic reforms will be consistent
or effective.
The Group is dependent on HLG and its subsidiaries for providing
substantially all of the supply of polyester chips and some auxiliary
materials. While Asibao has entered into an agreement with Longdi which
requires Long Xing, an associated company of HLG, to prioritize allocation
of polyester chips in favor of Asibao, there can be no assurances that
this agreement will result in continued allocations of satisfactory
supplies of polyester chips.
Currently, a large proportion of the Group's revenue comes from the sales
of synthetic fibre products manufactured in the PRC, which is vulnerable
to an increase in the level of competition or a change in the supply and
demand relationship in the synthetic fibre industry in the PRC.
20. SUBSEQUENT EVENT
Pursuant to an acquisition agreement entered into between a company listed
on the National Association of Securities Dealers Over-the-counter
"Bulletin Board" (the "Shell"), the Shell's principal shareholders, Far
Beyond and its shareholders dated 10 September 1999, the Shell agreed to
acquire all of the issued and outstanding ordinary shares of Far Beyond in
exchange for a total of 8,757,951 shares of common stocks of the Shell
with a par value of US$0.01 per share (the "Shell Common Stock"), which
shares of the Shell Common Stock shall equal, in the aggregate, 88% of the
aggregate issued and outstanding Shell Common Stock.
The closing date of such acquisition was 24 January 2000.
21. SEGMENT FINANCIAL INFORMATION
The Group is engaged in the manufacture and sale of synthetic fibre
products. Its assets, operations and customer base are principally within
the PRC.
F-20
<PAGE>
CERTIFICATE OF INCORPORATION
OF
REGAL INTERNATIONAL, INC.
The undersigned, for the purposes of forming a corporation pursuant to
Sections 101 and 102 of the General Corporation Law of the State of Delaware,
does hereby certify as follows:
FIRST: The name of the corporation is REGAL INTERNATIONAL, INC.
SECOND: The registered office or place of business of the corporation in
the State of Delaware is to be located at No. 100 West Tenth Street, in the City
of Wilmington, County of New Castle. The name and address of its registered
agent is The Corporation Trust Company, No. 100 West Tenth Street, Wilmington,
Delaware.
THIRD: The nature of the business of the corporation and the objects and
purposes to be transacted, promoted and carried on by it are to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: A. Authorized Shares. The aggregate number of shares which this
corporation shall have authority to issue is 30,000,000 shares consisting of
20,000,000 shares of common stock having a par value of $0.10 per share (the
"Common Stock") and 10,000,000 shares of preferred stock having a par value of
$0.10 per share (the "Preferred Stock").
B. Preferred Stock. Shares of Preferred Stock may be issued from
time to time in one or more series as may from time to time be determined by the
Board of Directors, each of said series to be distinctly designated. All shares
of any one series of Preferred Stock shall be alike in every particular, except
that there may be different dates from which dividends,
<PAGE>
if any, thereon shall be cumulative, if made cumulative. The voting powers, if
any, and the designations, preferences and relative, participating, optional or
other special rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other series
at any time outstanding; and, subject to the provisions of subparagraph 1 of
Paragraph D of this Article FOURTH, there is hereby expressly vested in the
Board of Directors of the corporation the authority to issue one or more series
of Preferred Stock and to fix in the resolution or resolutions providing for the
issue of such stock adopted by the Board of Directors of the corporation the
voting powers, if any, and the designations, preferences and relative,
participating, optional orother special rights, and the qualifications,
limitations or restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares
of Preferred Stock which shall constitute such series. The designation of a
series of preferred stock need not include the words "preferred" or "preference"
and may be designated "special" or other distinctive term. Unless otherwise
provided in the resolution issuing such series, the number of shares of any
series of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the Board of Directors in the
manner prescribed by law;
(2) The rate and times at which, and the terms and conditions
upon which, dividends, if any, on Preferred Stock of such series shall be paid,
the extent of the preference or relation, if any, of such dividends to the
dividends payable on any other class or classes, or series of the same or other
classes of stock and whether such dividends shall be cumulative or
non-cumulative and, if cumulative, the date from which such dividends shall be
cumulative;
2
<PAGE>
(3) Whether the series shall be convertible into, or
exchangeable for, at the option of the holders of Preferred Stock of such series
or the corporation or upon the happening of a specified event, shares of any
other class or classes or any other series of the same or any other class or
classes of stock of the corporation, and the terms and conditions of such
conversion or exchange, including provisions for the adjustment of any such
conversion rate in such events as the Board of Directors shall determine;
(4) Whether or not Preferred Stock of such series shall be
subject to redemption at the option of the corporation or the holders of such
series or upon the happening of a specified event, and the redemption price or
prices and the time or times at which, and the terms and conditions upon which,
Preferred Stock of such series may be redeemed;
(5) The rights, if any, of the holders of Preferred Stock of
such series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or winding-up, of the
corporation;
(6) The terms of the sinking fund or redemption or
purchase account, if any, to be provided for the Preferred Stock of such series;
and
(7) Subject to subparagraph 5 of Paragraph D of this
Article FOURTH, whether such series of Preferred Stock shall have full, limited
or no voting powers including, without limiting the generality of the foregoing,
whether such series shall have the right, voting as a series by itself or
together with other series of Preferred Stock or all series of Preferred Stock
as a class, to elect one or more directors of the corporation if there shall
have been a default in the payment of dividends on any one or more series of
Preferred Stock or under such other circumstances and on such conditions as the
Board of Directors may determine.
3
<PAGE>
C. Common Stock.
(1) After the corporation has complied with the
requirements, if any, fixed in accordance with the provisions of Paragraph B of
this Article FOURTH with respect to (a) dividends on series of Preferred Stock
(in accordance with the relative preferences among such series) and (b) the
setting aside of sums as sinking funds or redemption or purchase accounts for
series of Preferred Stock (in accordance with the relative preferences among
such series), and subject further to any other conditions which may be fixed in
accordance with the provisions of Paragraph B of this Article FOURTH, then, and
not otherwise, the holders of Common Stock shall be entitled to receive such
dividends (either in cash, stock or otherwise) as may be declared from time to
time by the Board of Directors out of assets of the corporation legally
available therefor and the holders of the Preferred Stock shall not be entitled
to participate in any such dividends.
(2) After distribution in full of the preferential
amount, if any, to be distributed to the holders of aeries of Preferred Stock
(in accordance with the relative preferences among such series) in the event of
voluntary or involuntary liquidation, distribution, dissolution or winding-up,
of the corporation, the holders of the Common Stock shall be entitled to receive
all of the remaining assets of the corporation, tangible and intangible, of
whatever kind available for distribution to shareholders, ratably in proportion
to the number of shares of Common Stock held by them respectively.
(3) Except as may otherwise be required by law, each holder of
Common Stock shall have one vote in respect of each share of Common Stock hold
by him on all matters voted upon by the shareholders.
4
<PAGE>
D. Other provisions.
(1) No holder of any of the shares of any class or series
of stock or of options, warrants or other rights to purchase shares of any class
or series of stock or of other securities of the corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any class or
series or any additional shares of any class or series to be issued by reason of
any increase of the authorized capital stock of the corporation of any class or
series, or bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock of the corporation of any class or
series, or carrying any right to purchase stock of any class or series, but any
such unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock, or
carrying any right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations or
associations (including such holders or others) and upon such terms an may be
deemed advisable by the Board of Directors in the exercise of its sole
discretion.
(2) The relative powers, preferences and rights of each
series of Preferred Stock in relation to the powers, preferences and rights of
each other series of Preferred Stock shall, in each case, be as fixed from time
to time by the Board of Directors in the resolution or resolutions adopted
pursuant to authority granted in Paragraph B of this Article FOURTH. The
consent, by class or series vote or otherwise, of the holders of such of the
series of Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other series of
Preferred Stock whether or not the powers, preferences and rights of such other
series shall be fixed by the Board of Directors as senior to or on a parity
with, the powers, preferences and rights of such outstanding series, or any of
them;
5
<PAGE>
provided, however, that the Board of Directors may provide in the resolution or
resolutions as to any series of Preferred Stock adopted pursuant to Paragraph B
of this Article FOURTH the conditions, if any, under which the consent of the
holders of a majority (or such greater proportion as shall be fixed therein) of
the outstanding shares of such series shall be required for the issuance of any
or all other series of Preferred Stock.
(3) Subject to the provisions of subparagraph 2 of this
Paragraph D, shares of any series of Preferred Stock may be issued from time to
time as the Board of Directors of the corporation shall determine and on such
terms and for such consideration as shall be fixed by the Board of Directors.
(4) Shares of authorized Common Stock may be issued from
time to time as the Board of Directors of the corporation shall determine and on
such terms and for such consideration as shall be fixed by the Board of
Directors.
(5) The number of authorized shares of Common Stock and
of Preferred Stock may, without a class or series vote, be increased or
decreased from time to time (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the stock
of the corporation entitled to vote thereon.
(6) At all meetings of shareholders, a majority in
interest of the shares entitled to vote at such meeting, represented in person
or by proxy, shall constitute a quorum.
(7) Notwithstanding any other provision of this
Certificate of incorporation or the By-laws of this corporation, no action by
the shareholders of this corporation to remove or elect directors of this
corporation or to amend, adopt or repeal the By-
6
<PAGE>
laws of this corporation may be taken other than at an annual or special meeting
of said shareholders. Without a meeting or without prior notice, the
shareholders of this corporation may not act by written consent to elect or
remove directors of this corporation or to adopt, amend or repeal the By-laws of
this corporation.
(8) Special meetings of shareholders may be called only
by the Board of Directors and the power of shareholders to call a special
meeting for any and all purposes whatsoever is specifically denied.
FIFTH: All of the corporate powers of this corporation shall be vested in
and exercised by a Board of Directors. The number of directors of the
corporation shall be fixed by, or in the manner provided in, the By-laws of the
corporation, but shall not be less than five (5) nor more than twelve (12). The
number of directors constituting the initial Board shall be five (5).
The Board of Directors shall be divided into three classes as nearly equal
in number as may be with the initial term of office of Class I expiring at the
annual meeting of shareholders in 1983, of Class II expiring at the annual
meeting of shareholders in 1984, and of Class III expiring at the annual meeting
of shareholders in 1985.
At each annual meeting of shareholders, directors chosen succeed those
whose terms then expire shall be elected for a full term of office expiring at
the third succeeding annual meeting of shareholders after their election. When
the number of directors is increased by amendment to the By-laws of the
corporation, and any newly created directorships are filled by the Board of
Directors, there shall be no classification of such additional directors until
the next annual meeting of shareholders. Subject to the foregoing, directors
elected to fill a vacancy shall hold
7
<PAGE>
office for a term expiring at the annual meeting at which the term of the class
to which they shall have been elected expires. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director. The shareholders of the corporation are expressly prohibited
from cumulating their votes in any election of directors of the corporation.
SIXTH: By-laws of the corporation may be adopted, amended or repealed by a
majority vote of the entire Board of Directors or by the affirmative vote of the
holders of 80% or more of the corporation's stock outstanding and entitled to
vote at the meeting at which any By-law is adopted, amended or repealed. Such
By-laws may contain any provision for the regulation and management of the
affairs of the corporation and the rights or powers of its shareholders,
directors, officers or employees not inconsistent with statute or this
Certificate of Incorporation.
SEVENTH: A. Except as not forth in Paragraph D of this Article SEVENTH,
after any Person (as hereinafter defined) becomes the owner of more than 5%
of the outstanding shares of stock of the corporation entitled to vote, the
affirmative vote of the holders of not less than 80% of all stock entitled to
vote thereon shall be required for approval of:
(1) A merger or consolidation of the corporation with or
into such Person, or
(2) Any sale or lease of all, substantially all, or any
substantial part of the assets of the corporation to such Person, or
(3) Any sale or lease to the corporation or any
subsidiary thereof of any assets (except assets having a fair market value in
the aggregate, whether sold or leased in
8
<PAGE>
one or more transactions of less than $2,000,000) in exchange for voting
securities (or securities convertible into voting securities or options,
warrants or rights to purchase voting securities or securities convertible into
voting securities) of the corporation or any subsidiary thereof by such Person,
or
(4) Any reclassification of securities, recapitalization
or other transaction (except redemptions permitted by the terms of the security
redeemed or repurchases of the securities for cancellation or for deposit in the
corporation's treasury) designed to decrease the number of holders of stock of
the corporation entitled to vote.
B. Definitions.
(1) "Person" shall mean any corporation, partnership,
association, trust (other than any trust holding stock of the employees of the
corporation pursuant to any stock purchase, ownership or employee benefit plan
of the corporation) business entity, estate or individual or any Affiliate (as
hereinafter defined) of any of the foregoing.
(2) "Affiliate" shall mean any corporation, partnership,
association, trust, business entity, estate or individual who, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, a Person or has entered into, expressly or
implicitly, an agreement, arrangement or understanding with a Person concerning
any of the transactions described in Paragraph A of this Article SEVENTH.
(3) "Control" shall mean the possession, directly or
indirectly, of power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise.
9
<PAGE>
(4) A Person shall be deemed to be the owner of any
shares of stock of the corporation:
(a) of which he is, directly or indirectly, the
record or beneficial owner,
(b) which he has the right (whether immediately
or upon the lapse of time) to acquire pursuant to any agreement or understanding
or upon exercise of conversion rights, warrants or options or otherwise,
(c) which are directly or indirectly owned of
record or beneficially (including shares deemed to be owned through application
of subparagraph B(4)(b) above) by any Affiliate of such Person, or
(d) which are directly or indirectly owned of
record or beneficially (including shares deemed owned through application of
subparagraph B(4) (b) above) by any other corporation, person or entity with
which such Person or any Affiliate of such Person has any agreement, arrangement
or understanding, express or implied, for the purpose of acquiring, holding,
voting or disposing of stock of the corporation.
For the purposes of this Article SEVENTH the outstanding shares of stock of
the corporation shall include shares deemed owned through the application of
subparagraphs (b) , (c) and (d) of subsection B(4) above but shall not include
any other shares which may be issuable pursuant to any agreement or upon
exercise of conversion rights, warrants, options or otherwise.
10
<PAGE>
C. The Board of Directors shall have the power and duty to
determine for purposes of this Article SEVENTH on the basis of information known
to the Board of Directors, whether:
(1) A Person owns (as defined in subparagraph B(4) above)
more than 5% of the outstanding stock of the corporation entitled to vote,
(2) A corporation, person, or entity is an "Affiliate" of
a Person,
(3) A transaction falls within the categories described
in Paragraph A of this Article SEVENTH, and
(4) The memorandum of understanding referred to in
Paragraph D below is substantially consistent with the actual transactions
undertaken, which transactions are purported to be undertaken pursuant thereto.
Any such determination shall be conclusive and binding for all purposes of
this Article SEVENTH.
D. The provisions of this Article SEVENTH shall not apply to:
(1) Any transaction described in Paragraph A with
respect to which the Board of Directors of the corporation has approved a
memorandum of understanding with such Person prior to the time that Person
became an owner of more than 5% of the outstanding shares of stock of the
corporation entitled to vote; or
11
<PAGE>
(2) Any transaction described in Paragraph A between
the corporation or any subsidiary thereof and any corporation or other entity
over which the corporation and its subsidiaries have majority voting control.
EIGHTH: A director of this corporation shall not in the absence of fraud be
disqualified by his office from dealing contracting with this corporation either
as a vendor, purchaser or otherwise, nor in the absence of fraud shall any
transaction or contract of this corporation be void or voidable or affected by
reason of the fact that any director, or any firm of which any director is a
member, or any corporation of which any director is an officer, director or
shareholder, is in any way interested in such transaction or contract; provided
that at the meeting of the Board of Directors or of a committee thereof having
authority in the premises, authorizing or confirming said contract or
transaction, the existence of an interest of such director, firm or corporation
is disclosed or made known and there shall be present a quorum of the Board of
Directors or of the directors constituting such committee, and such contract or
transaction shall be approved by a majority of such quorum, which majority shall
consist of directors not so interested or connected. A director shall not be
liable to account to this corporation for any profit realized by him from or
through any such transaction or contract of this corporation ratified or
approved as aforesaid, by reason of the fact that he or any firm of which he is
a member or any corporation of which he is an officer, director or shareholder
was interested in such transaction or contract. Directors so interested may be
counted when present at meetings of the Board of Directors or of such committee
for the purpose of determining the existence of a quorum. Any contract,
transaction or act of this corporation or of the Board of Directors or of any
committee thereof (whether or not approved or ratified as hereinbefore provided)
which shall be ratified by a majority in interest of shareholders voting at any
annual
12
<PAGE>
meeting or any special meeting at which a quorum is present called for such
purpose or approved in writing by a majority in interest of the shareholders
having voting power without a meeting, shall be as valid and as binding as
though ratified by every shareholder of this corporation.
NINTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its shareholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or shareholder thereof, or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the shareholders or class of shareholders of this corporation, as the case may
be, to be summoned in such manner as the said Court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and said reorganization shall,
if sanctioned by the Court to which the said application has been made, be
binding on all the creditors or class of creditors, and/or on all the
shareholders or class of shareholders of this corporation, as the case may be,
and also on this corporation.
TENTH: Notwithstanding any other provision of this Certificate of
Incorporation or the By-laws of this corporation (and in addition to any other
vote that may be required by law, this Certificate of Incorporation or the
By-laws of this corporation), the affirmative vote of the
13
<PAGE>
holders of 80% of all stock of this corporation entitled to vote in elections of
directors (considered for this purpose as one class) shall be required to amend,
alter, change, or repeal subparagraphs 7 and 8 of Paragraph D of Article FOURTH,
and Article FIFTH, SIXTH, SEVENTH or TENTH of the Certificate of Incorporation.
ELEVENTH: The name and address of the incorporator is as follows:
Name Address
------ -------
Robert A. Waldman Seventh Floor, National Foundation Center
3545 Northwest Fifty-Eighth Street
Oklahoma City, Oklahoma 73112
IN WITNESS WHEREOF the undersigned, being the sole incorporator hereinabove
named, hereby further certifies that the facts herein stated are true and,
accordingly, has hereunto affixed his signature this 4th day of March 1982.
-------------------------------------
Robert A. Waldman,
Sole Incorporator
14
<PAGE>
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF PREFERRED STOCK
OF
REGAL INTERNATIONAL, INC.
* * *
Regal International, Inc., a corporation organized and existing under
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
That, pursuant to authority conferred upon the Board of Directors by
the Restated Certificate of Incorporation (as amended) of said corporation, and
pursuant to the provisions of section 151 of Title 8 of the Delaware Code of
1953, said Board of Directors, by the unanimous written consent of its members,
filed with the minutes of the board, adopted a resolution providing for the
designation, preferences and relative, participating, optional or other rights,
and the qualifications, limitations or restrictions thereof, of the 2,500,000
shares of Series A and the 1,500,000 shares of Series B preferred stock, which
resolution is as follows:
RESOLVED: That the Corporation adopt the Description of Preferred
Stock, attached hereto as Exhibit A, and made a part hereof,
in the form presented to this Meeting for purposes of issuing
its currently authorized Class of Preferred, $.10 par value,
stock; except that if the New York Stock Exchange shall
indicate its disapproval of the provisions in said Description
which authorize the holders of the Preferred Stock to elect up
to one-third of the members of the Board of Directors, the
appropriate officers of the Corporation shall be authorized
and directed to revise said Description accordingly.
<PAGE>
IN WITNESS WHEREOF, said Secretary has caused this certificate to be
signed by Dr. Gilbert D. Beinhocker, Chairman of the Board of Directors, and
attested by Robert A. Trevisani, its Secretary, this _____day of December, 1987.
____________________________________
By:_________________________________
Chairman of the Board of Directors
ATTEST:
By:
_______________________________
Secretary
<PAGE>
REGAL INTERNATIONAL, INC.
RESTATED AND AMENDED DESCRIPTION OF
PREFERRED STOCK (SEPTEMBER 13, 1987),
SERIES A AND SERIES B
1. DESIGNATION. 4,000,000 shares of the class of $.10 par value
Preferred Stock, authorized under the Certificate of Incorporation of Regal
International, Inc. (the "Corporation") shall be designated as "Series A" and
"Series B" Preferred Stock, as provided hereunder. The remaining shares of $.10
par value Preferred Stock authorized not so designated shall not be subject to
the provisions of this Restated Description of Preferred Stock, Series A and
Series B.
Series A shall consist of 2,500,000 shares of Preferred Stock. Series B
shall consist of 1,500,000 shares of Preferred Stock. The rights, privileges and
obligations appertaining to Series A and Series B of the Preferred Stock shall
be identical, except as to rights to convert such shares, as more particularly
described in Section 6 below.
The Stated Value of Series A shall be $.80 per share and the Stated
Value of Series B shall be $4.50 per share and each shall be appropriately
adjusted to reflect any stock dividend, stock split or similar recapitalization
affecting the Preferred Stock occurring after the initial issuance of the
Preferred Stock.
2. DIVIDENDS. The holders of shares of Series A and Series B
(hereinafter sometimes collectively referred to as "Preferred Stock") shall be
entitled to receive out of any current earnings of this Corporation at the time
legally available for the declaration of dividends at the rate of 9 percent per
annum of the Stated Value thereof, and no more, payable in cash annually, or at
such intervals as the Board of Directors may from time to time determine, when
and as declared by the Board of Directors. Dividends on the preferred shares
first issued shall accrue
<PAGE>
from the date of issuance of such shares, and dividends on all preferred shares
thereafter issued shall accrue from the day following the last day of the period
for which dividends have already been paid on outstanding preferred shares.
Dividends on all issued and outstanding preferred shares shall accrue from day
to day, whether or not earned or declared. Such dividends shall be payable
before any dividends shall be declared or paid upon or set apart for the common
shares, and shall be cumulative, so that if any year or years dividends upon the
outstanding preferred shares at rate of 9 percent per annum of the stated value
thereof shall not have been paid thereon or declared and set apart therefor, the
amount of the deficiency shall be fully paid or declared and set apart for
payment, but without interest, before any distribution, whether by way of
dividend or otherwise, shall be declared or paid upon, or set apart for, the
common shares.
3. LIQUIDATION PREFERENCE. (a) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation (herein
referred to as a "Liquidation"), then, before any payment shall be made to or
set apart for the holders of Common Stock, the holders of shares of Preferred
Stock shall be entitled to be paid out of the assets of the Corporation
available for distribution to its stockholders a per-share amount (the
"Preferred Liquidation Preference") equal to the stated value of the Preferred
Stock so held, plus, in the case of each share, an amount equal to any dividends
declared but unpaid thereon. If, upon any Liquidation, the assets of the
Corporation available for distribution to its stockholders shall be insufficient
to pay the holders of shares of Preferred Stock the aggregate amount of their
respective stated values, the holders of Preferred Stock shall share ratably in
any distribution of assets of the Corporation in proportion to the respective
amounts which would otherwise be payable in respect of the Preferred Liquidation
Preference if all amounts payable on or with respect to such shares were paid in
full.
2
<PAGE>
(b) For purposes of this Section 3, if any assets
distributed to stockholders upon Liquidation consist of property other than
cash, the amount of such distribution shall be deemed to be the fair market
value thereof at the time of such distribution, as determined in good faith by
the Board of Directors of the Corporation.
4. MERGER. (a) Subject to Section 4(c), any Merger (as
defined in the following sentence) shall be deemed to be a Liquidation for
purposes of payment of the Preferred Liquidation Preference pursuant to Section
3(a). The term "Merger" shall mean, collectively, (i) any merger, reorganization
or consolidation of the Corporation into or with any other corporation or
entity, unless the stockholders of the Corporation immediately prior thereto
shall, immediately thereafter, hold as a group the right to cast at least a
majority of the votes of voting securities of the resulting or surviving
corporation or entity on any matter on which any such holders of voting
securities shall be entitled to vote, (ii) the sale, conveyance, transfer,
license, lease or other disposition of all or substantially all of the assets of
the Corporation, (iii) the issuance (in a single transaction or series of
related transactions) by the Corporation of shares of Common Stock (or options,
warrants or other securities or subscription rights of the Corporation which
are, either directly or indirectly, exercisable or exchangeable for, or
convertible into, Common Stock (herein collectively referred to as "Convertible
Securities") which represent more than 50% of the outstanding shares of Common
Stock (assuming the exercise, exchange or conversion of all Convertible
Securities) of the Corporation immediately after such issuance, or (iv) the
sale, conveyance or transfer of shares of Common Stock by stockholders of the
Corporation (in a single transaction or series of related transactions) to a
single purchaser or a group of affiliated purchasers which results in the
acquisition by said purchaser or group of affiliated purchasers of more than 50%
of the then issued and outstanding shares of Common
3
<PAGE>
Stock. Notwithstanding anything to the contrary contained herein, the term
Merger shall not include any of the transactions listed in the preceding
sentence, if such transaction is approved by the vote by the holders of a
majority of the shares of Preferred Stock, voting as a single class.
(b) In the event of a Merger where securities or other
non-cash property is received from the acquiring corporation, each holder of
Preferred Stock shall have the right to elect to receive cash, such securities
or other non-cash property, or a combination thereof, in payment of the stated
value pursuant to Section 3(a).
(c) In the event of an impending Merger under any of
clauses (i) through (iv) of Section 4(a), each holder of Preferred Stock shall
have the right to elect the benefits of the provisions of Section 6(a)(iii)
hereof in lieu of having such Merger be deemed to be a Liquidation under this
Section 4, such election to be exercisable by written notice delivered to the
Corporation no later than three days prior to the closing of such Merger.
5. VOTING. Each holder of outstanding shares of Preferred Stock
shall be entitled to one vote per share of Preferred Stock held. Except as
provided to the contrary herein, or by provisions of applicable law, holders of
Preferred Stock shall vote together with the holders of Common Stock and any
other class or series of stock as a single class on all matters presented to the
stockholders except with respect to the conversion of Preferred Stock.
6. OPTIONAL CONVERSION. The holders of Preferred Stock shall have
conversion rights as follows:
(a) RIGHT TO CONVERT. (i) Any holder of Preferred
Stock shall have the right at any time to convert any or all of the Preferred
Stock held into fully paid and nonassessable shares of the common, $.10 par
value stock, ("Common Stock") of the Corporation in accordance with the
applicable Conversion Price described in Section 6(a)(ii), as provided
4
<PAGE>
herein. The effective date of such Conversion shall be the date of delivery to
the Corporation of notice so to convert, as provided in Section 6(b)(i) hereof.
(ii) Upon a vote by the holders of a majority of
the shares of the Preferred Stock, voting as a single class, all shares of
Preferred Stock shall be converted into fully paid and nonassessable shares of
the Common, $.10 par value Stock, ("Common Stock") of the Corporation at the
rates of 3 shares of Common Stock for each share of Series A Preferred Stock and
as to each share of Series B Preferred Stock at a rate equal to "x" shares of
Common Stock for each share of Series B Preferred Stock, where "x" equals the
Stated Value of $4.50 divided by the average market price per share of Common
Stock for the thirty day period prior to the effective date granted by the
Securities and Exchange Commission for an offering of rights to acquire Series B
Preferred Stock, less a 24% discount from such average market price, whichever
is applicable ("Conversion Price"). In the event that a holder of Preferred
Stock would be entitled to receive a fractional share of Common Stock upon such
conversion, such holder of Preferred Stock will instead receive a single share
of Common Stock instead of such fractional share of Common Stock.
(iii) If at any time or from time to time there
shall be any Merger (as defined in Section 4) of the Corporation, then, PROVIDED
that the election described in the last paragraph of this Section 6(a)(iii) is
made, as a part of such Merger, provision shall be made so that the holders of
Preferred Stock shall thereafter each be entitled to receive, upon conversion of
each share of the Preferred Stock, the number of shares of stock or other
securities or property of the Corporation, or of the successor corporation
resulting from such Merger, to which a holder of the amount of Common Stock
deliverable upon conversion of such share of Preferred Stock would have been
entitled on such Merger. In any such case, appropriate adjustment shall be
5
<PAGE>
made in the application of the provisions of this Section 6 with respect to the
rights of the holders of the Preferred Stock after such Merger to the end that
the provisions of this Section 6 (including adjustment of the Conversion Price
then in effect and the number of shares purchasable upon conversion of the
Preferred Stock) shall be applicable after such Merger in as nearly equivalent a
manner as may be practicable.
Each holder of Preferred Stock shall have the right to elect treatment
under this Section 6(a)(iii) in lieu of Section 4, such election to be
exercisable by written notice delivered to the Corporation no later than three
days prior to the closing of such Merger.
(b) MECHANICS OF CONVERSION. (i) On and after the date
any holder of Preferred Stock elects to convert Preferred Stock as provided in
Section 6(a)(i) hereof, he shall so notify the Corporation in writing or on and
after the effective date of the Conversion of Preferred Stock, as stated in the
vote of Preferred Stockholders so to convert, as provided in Section 6(a)(ii)
hereof, each holder of a certificate(s) representing ownership of outstanding
shares of Preferred Stock shall be entitled, upon surrender of such
certificate(s) at the office or agency of the Corporation designated for the
purpose, to receive in exchange therefor certificate(s) representing the number
of shares of Common Stock into which the number of Preferred represented by such
certificate(s) are to be converted, pursuant to application of the Conversion
Price. In the event of a conversion as provided in Section 6(a)(ii) hereof,
until so surrendered, each outstanding certificate representing ownership of
shares of Preferred Stock shall be deemed for all purposes to evidence only the
ownership of the shares of Common Stock into which such shares of Preferred
Stock shall have been converted, as provided in Section 6(a) hereof.
6
<PAGE>
Otherwise, all rights with respect to the Preferred Stock, including
the rights to receive dividends thereon, notices and to vote, shall immediately
cease and terminate upon the effective date of the conversion of the Preferred
Stock, as provided in Section 6(a) hereof.
(ii) If certificate(s) representing ownership
of shares of Common Stock is (are) to be issued in a name other than that in
which the certificate representing ownership of the shares of Preferred Stock
is registered, then the Corporation shall require that the certificate(s)
representing ownership of the shares of Preferred Stock to be converted shall
be properly endorsed for transfer.
(iii) The Corporation shall at all times when
the Preferred Stock shall be outstanding, reserve and keep available out of
its authorized but unissued stock, for the purpose of effecting the
conversion of the Preferred Stock, such number of its duly authorized shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of Preferred Stock. Before taking any
action which would cause Common Stock, upon the conversion of Preferred
Stock, to be issued below the then par value of the shares of Common Stock,
the Corporation will take any corporate action which may, in the opinion of
its counsel, be necessary in order that the corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock to the
holders of Preferred Stock.
(iv) Upon the conversion of Preferred Stock,
any declared but unpaid dividends on the Preferred Stock shall be paid upon
surrender of certificates representing ownership of the shares of Preferred
Stock as provided herein.
(v) Upon the effective date of the conversion
of the Preferred Stock as provided in Section 6(a) hereof, the shares of
Common Stock issuable upon such conversion shall be deemed to be outstanding,
and the holder thereof shall be entitled to exercise and enjoy
7
<PAGE>
all rights with respect to such shares of Common Stock, including the rights, if
any, to receive notices and to vote. All certificates representing such shares
of Preferred Stock, from and after such effective date of conversion of the
Preferred Stock, shall be deemed to have been retired and cancelled and shall
not be reissued.
(c) ADJUSTMENTS TO CONVERSION PRICE. (i) For so longer as
the shares of Preferred Stock remain outstanding, if the Corporation declares a
dividend or other distribution payable in shares of Common Stock or Preferred
Stock (other than such a dividend or distribution payable only to holders of
Preferred Stock), or subdivides its outstanding shares of Common Stock into a
larger number or combines its outstanding shares of Common Stock into a smaller
number, than the Conversion Price in effect immediately prior to such dividend,
other distribution, subdivision or combination, as the case may be, shall
forthwith be appropriately adjusted to reflect the effect of such dividend,
other distribution, subdivision or combination.
(ii) Whenever the Conversion Price shall be
adjusted with respect to the Preferred Stock as provided in this Section
6(c), the Corporation shall forthwith prepare a statement, certified by the
Chief Financial Officer of the Corporation, showing in detail the facts
requiring such adjustment and the Conversion Price for the Preferred Stock
that shall be in effect after such adjustment and shall cause a copy of such
statement to be delivered or sent to each holder of record of Preferred Stock.
7. REDEMPTION OPTION. (i) At such time as the Corporation shall
determine in its discretion to be in the best interests of the Corporation, the
Corporation shall have the right to redeem all or any portion thereof of the
outstanding shares of Series A and Series B, as a single class, in proportion to
the shares of Series A and Series B then outstanding. Such redemption shall be
effected by the payment in cash of the Stated Value of each share of Preferred
Stock to
8
<PAGE>
the holder of record as of the date of the redemption which shall be determined
by the Corporation and hereunder ("Call Date") plus an amount equal to all
dividends accrued but unpaid on each share of Preferred Stock as of the Call
Date. On and after the Call Date, each outstanding certificate representing
ownership of shares of Preferred Stock shall be deemed for all purposes to
evidence only the right to receive the redemption price for such shares, as
provided herein. Otherwise, all rights with respect to the Preferred Stock,
including the rights to receive dividends thereon and notices and to vote shall
immediately cease and terminate upon the Call Date. The Corporation may deposit
the redemption price of all then outstanding shares of Preferred Stock with a
bond or trust company for the pro rata benefit of the holders of such
outstanding shares. Any funds unclaimed at the end of six years from the date of
such deposit shall be repaid to the Corporation.
(ii) At least thirty, but not more than,
ninety days before any Call Date as determined by the Corporation, the
Corporation shall give notice by mail and by publication in such manner as
may be prescribed by the applicable provisions of the law or the
Corporation's By-laws, to the holders of record of the Preferred Stock of the
exercise of such option and the means by which such shares of Preferred Stock
are to be surrendered to the Corporation and the redemption price for such
shares of Preferred Stock, as provided herein, is to be paid.
8. NOTICES. All notices or other communications required to be
given hereunder shall be sent by first class certified or registered mail,
return receipt requested, postage prepaid, if to the Corporation, at the address
of its principal office or, if to a holder of Preferred Stock, at such holder's
address last shown on the records of the transfer agent for the Preferred Stock.
9. BOARD OF DIRECTORS. The Board of Directors of the Corporation
shall have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers
9
<PAGE>
specifically granted to the Corporation or as may be necessary or advisable in
the administration hereof, including, without limitation, the right and power to
interpret the provisions hereof.
10
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
REGAL INTERNATIONAL, INC.
*********
Regal International, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the stockholders of Regal International,
Inc., held on November 17, 1987, the stockholders adopted and approved the
following amendments to the Certificate of Incorporation of said corporation, in
accordance with the provisions of Section 242 and 212 of the General Corporation
Law of the State of Delaware:
RESOLVED: That the Certificate of Incorporation be amended by adding a
new Article denominated as Article Twelfth, in the following form:
"TWELFTH: To the extent permitted by law, a director of the corporation
shall in any one year be personally liable to the corporation or to the
stockholders of the corporation for monetary damages suffered on
account of any action taken or omitted to be taken by him as a director
constituting a breach of his fiduciary duty as a director only to the
extent of directors' fees (including committee fees and attendance
fees) paid during such year by the corporation to such director for
serving as a director of the corporation. The limitation of liability
set forth in the first sentence of this Article Twelfth shall not apply
to liability of a director for (i) any breach of his duty of loyalty to
the corporation or to the stockholders of the corporation, (ii) acts or
omissions not in good faith which involve intentional misconduct or a
knowing violation of laws, (iii) paying a dividend or approving a stock
repurchase or redemption which was illegal under Section 174 of title 8
of the Delaware Code, or (iv) any transaction from which he derived an
improper personal benefit. Any repeal or modification of this Article
TWELFTH shall be prospective only, and shall not adversely affect any
limitation on the personal liability of a director of the corporation
existing at the time of such repeal or modification."
RESOLVED: That the Certificate of Incorporation be amended by deleting
in its entirety the text of Section A of Article FOURTH and substituting in
place thereof the following:
"A. AUTHORIZED SHARES. The aggregate number of shares which this
corporation shall have authority to issue is 85,000,000 shares
consisting of 75,000,000 shares of common stock having a part value of
$0.10 per share (the "Common Stock") and 10,000,000 shares of preferred
stock having a par value of $0.10 per share (the "Preferred Stock")."
<PAGE>
IN WITNESS WHEREOF, said Regal International, Inc. has caused this
certificate to be executed by Gregory P. Plunkett, its Vice-Chairman, and
attested to by Jonathan M. Moulton, its Assistant Secretary, this 18th day of
November, 1987.
By:
---------------------------------
Gregory P. Plunkett
Vice Chairman
ATTEST:
By:
------------------------------------
Jonathan M. Moulton
Assistant Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF REGAL INTERNATIONAL, INC.
Regal International, Inc., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the stockholders of Regal International,
Inc., held on May 25, 1993, the stockholders adopted and approved the following
amendments to the Certificate of Incorporation of said corporation, in
accordance with the provisions of Section 242 and 212 of the General Corporation
Law of the State of Delaware:
RESOLVED: That the Certificate of Incorporation be amended by deleting
in its entirety the text of Section A of Article FOURTH and substituting in
place thereof the following:
"A. Authorized Shares. The aggregate number of shares which this
corporation shall have authority to issue is 160,000,000 shares consisting of
150,000,000 shares of common stock having a par value of $0.01 per share (the
"Common Stock") and 10,000,000 shares of preferred stock having a par value of
$0.10 per share (the "Preferred Stock").
IN WITNESS WHEREOF, said Regal International, Inc. has caused this
certificate to be executed by Girish Sharma, its Chairman, and attested to by
Janak Desai, its President, this ____ day of June, 1993.
By:
---------------------------------
Girish Sharma, Chairman
ATTEST:
By:
-----------------------------------------
Janak Desai, President
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION OF REGAL INTERNATIONAL, INC.
(Pursuant to Section 242 of
the Delaware General Corporation Law)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
The undersigned, Chung Cho Yee, Mico and Ma Wai Man, Catherine, being
the President and Secretary, respectively, of Regal International, Inc., a
Delaware corporation (the "Corporation"), do hereby certify as follows:
1. The Certificate of Incorporation of the Corporation is hereby
amended pursuant to Section 242(a)(1) of the General Corporation Law of the
State of Delaware to provide for the name change by amending Article First as
follows:
FIRST: The name of the corporation is ASIA RESOURCES HOLDINGS LTD.
2. The Certificate of Incorporation of the Corporation is hereby
amended pursuant to Section 242(a)(3) of the General Corporation Law of the
State of Delaware by deleting in its entirety the text of the following sections
of Article Fourth and substituting in place thereof the following:
FOURTH: A. Authorized Shares. The total number of shares of stock which
the Corporation is authorized to issue is 1,110,000,000 shares,
consisting of 1,100,000,000 shares of common stock having a par value
of $0.01 per share (the "Common Stock") and 10,000,000 shares of
preferred stock having a par value of $0.10 per share (the "Preferred
Stock"). Effective on February 19, 1999, the common stock shall be
reconstituted such that 1 new share of common stock shall be issued in
exchange for each 138 outstanding shares of common stock.
D. Other Provisions. (7) The action by the shareholders
of this Corporation to remove or elect directors of this Corporation,
or to amend, adopt or repeal the Bylaws of this Corporation, may be
taken at an annual meeting or special meeting of said shareholders, or
the shareholders of this Corporation may act by written consent to
elect or remove directors of this Corporation or to adopt, amend or
repeal the Bylaws of this Corporation, subject to other provisions of
this Certificate of Incorporation.
3. The Certificate of Incorporation of the Corporation is hereby
amended pursuant to Section 242 of the General Corporation Law of the State of
Delaware by deleting in its entirety the text of Article Fifth and substituting
in place thereof the following:
<PAGE>
FIFTH: All of the corporate powers of this Corporation shall be vested
in and exercised by a Board of Directors. The number of directors of
the Corporation shall be fixed by, or in a manner provided in, the
Bylaws of the Corporation, but shall not be less than three (3).
4. The Certificate of Incorporation of the Corporation is hereby
amended pursuant to Section 242 of the General Corporation Law of the State of
Delaware by deleting in its entirety the text of Article Sixth and substituting
in place thereof the following:
SIXTH: Bylaws of the Corporation may be adopted, amended or repealed by
a majority vote of the holders of the Corporation's stock outstanding
and entitled to vote at the meeting at which any Bylaw is adopted,
amended or repealed. Such Bylaws may contain any provision for the
regulation and management of the affairs of the Corporation and the
rights or powers of its shareholders, directors, officers or employees
not inconsistent with statute or the Certificate of Incorporation.
5. The Certificate of Incorporation of the Corporation is hereby
amended pursuant to Section 242 of the General Corporation Law of the State of
Delaware by amending Article Seventh as follows:
SEVENTH: A. Except as set forth in paragraph D of this Article SEVENTH,
after any Person (as hereinafter defined) becomes the owner of more
than 5% of the outstanding shares of stock of the Corporation entitled
to vote, the affirmative vote of the majority of the holders of all
stock entitled to vote thereon shall be required for approval of:
(1) A merger or consolidation of the Corporation with or into such
Person, or
(2) Any sale or lease of all, substantially all, or any
substantial part of the assets of the Corporation to such
Person, or
(3) Any sale or lease to the Corporation or any subsidiary thereof
of any assets (except assets having a fair market value in the
aggregate, whether sold or leased in one or more transactions,
of less than $2,000,000) in exchange for voting securities (or
securities convertible into voting securities or options,
warrants or rights to purchase voting securities or securities
convertible into voting securities) of the Corporation or any
subsidiary thereof by such Person, or
(4) Any reclassification of securities, recapitalization or other
transaction (except redemptions permitted by the terms of the
security redeemed or repurchases of the securities for
cancellation or for deposit in the Corporation's treasury)
designed to decrease the number of holders of stock of the
Corporation entitled to vote.
2
<PAGE>
6. The Certificate of Incorporation of the Corporation is hereby
amended pursuant to Section 242 of the General Corporation Law of the State of
Delaware by amending Article Tenth as follows:
TENTH: Notwithstanding any other provision of the Certificate of
Incorporation or by Bylaws of this Corporation (and in addition to any
other vote that may be required by law, the Certificate of
Incorporation or the Bylaws of this Corporation), the affirmative vote
of the majority holders of all stock of this Corporation entitled to
vote shall be required to amend, alter, change, or repeal subparagraphs
7 and 8 of Paragraph D of Article FOURTH, and Article FIFTH, SIXTH,
SEVENTH or TENTH of the Certificate of Incorporation.
7. In accordance with Section 242 and 212 of the General
Corporation Law of the State of Delaware, the stockholders of the Corporation
adopted and approved the above amendments to the Certificate of Incorporation
of the Corporation at a special meeting of the Corporation's stockholders
held on October 27, 1998.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment as of January 29, 1999 and DO HEREBY CERTIFY, that the facts stated in
this Certificate of Amendment are true and correct.
---------------------------------------
Chung Cho Yee, Mico, President
---------------------------------------
Ma Wai Man, Catherine, Secretary
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CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF ASIA RESOURCES HOLDINGS LTD.
We, the undersigned, being the President and Secretary, respectively,
of Asia Resources Holdings Ltd. (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware,
DO HEREBY CERTIFY:
FIRST: That Article First of the Certificate of Incorporation of
the Corporation is hereby amended to read as follows:
"FIRST: The name of the corporation is Asia Fiber Holdings
Limited."
SECOND: That Section A of Article Fourth of the Certificate of
Incorporation of the Corporation is hereby amended to read as follows:
"FOURTH: A. Authorized Shares. The total number of shares of
stock which the Corporation is authorized to issue is 40,000,000
shares, consisting of 30,000,000 shares of common stock having a par
value of $0.01 per share (the "Common Stock") and 10,000,000 shares of
preferred stock having a par value of $0.01 per share (the "Preferred
Stock")."
THIRD: That the stockholders of the Corporation duly adopted the
foregoing amendments to the Certificate of Incorporation of the Corporation at a
special meeting of the Corporation's stockholders held on November 30, 1999 in
accordance with the provisions of Sections 211 of the General Corporation Law of
the State of Delaware.
FOURTH: That the foregoing amendments to the Certificate of
Incorporation of the Corporation were duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
The undersigned further declare under penalty of perjury under the laws
of the State of Delaware, that the matters set forth in this Certificate are
true and correct of their own knowledge.
Dated: March 13, 2000
---------------------------------
Ching Lung Po
President
---------------------------------
Wan Wai On
Secretary
<PAGE>
BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR ITS
CERTIFICATE OF INCORPORATION, OF
REGAL INTERNATIONAL, INC.
A DELAWARE CORPORATION
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The principal executive office
of the corporation shall be located as directed by the board of directors.
SECTION 2. OTHER OFFICES. Other business offices may at any time be
established by the board of directors at any place or places by them or where
the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of stockholders shall be
held at the principal executive office of the corporation, or at any other place
within or without the State of Delaware which may be designated either by the
board of directors or by the written consent of all persons entitled to vote
thereat and not present at the meeting, given either before or after the meeting
and filed with the secretary of the corporation.
SECTION 2. ANNUAL MEETINGS. The annual meetings of stockholders shall
be fixed by the board of directors. At such meetings directors shall be elected,
reports of the affairs of the corporation shall be considered, and any other
business may be transacted which is within the powers of the stockholders.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders, for
the purpose of taking any action permitted by the stockholders under the
Delaware General Corporation Law and the certificate of incorporation of the
corporation, may be called at any time by the chairman of the board or the
president, or by the board of directors, or by one or more holders of shares
entitled to cast in the aggregate not less than twenty percent (20%) of the
votes at the meeting. Upon request in writing that a special meeting of
stockholders be called for any proper purpose, directed to the chairman of the
board, president, vice president or secretary by any person (other than the
board of directors) entitled to call a special meeting of stockholders, the
officer forthwith shall cause notice to be given to stockholders entitled to
vote that a meeting will be held at a time requested by the person or persons
calling the meeting, not less than thirty-five (35) nor more than sixty (60)
days after receipt of the request.
SECTION 4. NOTICE OF ANNUAL OR SPECIAL MEETING. Written notice of each
annual or special meeting of stockholders shall be given not less than ten (10)
nor more than sixty (60)
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days before the date of the meeting to each stockholder entitled to vote
thereat. Such written notice shall be given either personally or by mail or
other means of written communication, charges prepaid, addressed to such
stockholder at his address appearing on the books of the corporation or given by
him to the corporation for the purpose of notice. If any notice or report
addressed to the stockholder at the address of such stockholder appearing on the
books of the corporation is returned to the corporation by the United States
Postal Service as unable to deliver the notice or report to the stockholder at
such address, all future notices or reports shall be deemed to have been duly
given without further mailing if the same shall be available for the stockholder
upon written demand of the stockholder at the principal executive office of the
corporation for a period of one (1) year from the date of the giving of the
notice or report to all other stockholders. If a stockholder gives no address,
notice shall be deemed to have been given him if sent by mail or other means of
written communication addressed to the place where the principal executive
office of the corporation is situated, or if published at least once in some
newspaper of general circulation in the county in which said principal executive
office is located.
Any such notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in accordance with the
foregoing provisions, executed by the secretary, assistant secretary or any
transfer agent of the corporation, shall be prima facie evidence of the giving
of the notice.
SECTION 5. QUORUM. The presence in person or by proxy of the holders of
a majority of the shares entitled to vote at any meeting shall constitute a
quorum for the transaction of business at any meeting of stockholders. The
stockholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
SECTION 6. ADJOURNED MEETING AND NOTICE THEREOF. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the vote of a majority of the shares, the holders of which
are either present in person or represented by proxy thereat, but in the absence
of a quorum at the commencement of the meeting, no other business may be
transacted at such meeting.
When any stockholders' meeting, either annual or special, is adjourned
for thirty (30) days or more, or if after adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given as in
the case of an original meeting. Except as provided above, it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by announcement of the time
and place thereof at the meeting at which such adjournment is taken.
SECTION 7. VOTING. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the Delaware General
Corporation Law (relating to voting of shares held by a fiduciary, in the name
of a corporation, or in joint ownership). The stockholders may vote by voice
vote or by ballot; provided, however, that all elections for director shall be
by ballot. If a quorum is present, the affirmative vote of the majority of the
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shares represented at the meeting and entitled to vote on any matter shall be
the act of the stockholders, unless the vote of a greater number of voting by
classes is required by the Delaware General Corporation Law or the certificate
of incorporation.
SECTION 8. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETING. The
transactions of any meeting of stockholders, 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 persons entitled to
vote, not present in person or by proxy, or who, though present, has, at the
beginning of the meeting, properly objected to the transaction of any business
because the meeting was not lawfully called or convened, or to particular
matters of business legally required to be included in the notice, but not so
included, signs 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. Neither the business to be transacted at nor the purpose
of any regular or special meeting of stockholders need be specified in any
written waiver of notice or consent, except that if action is taken or proposed
to be taken for approval of any of those matters specified in paragraph (e) of
Section 4 above, the waiver of notice or consent shall state the general nature
of the proposal.
SECTION 9. ACTION WITHOUT MEETING. Directors may be elected without a
meeting by a consent in writing, setting forth the action so taken, signed by
all of the persons who would be entitled to vote for the election of directors,
provided that, without prior notice except as hereinafter set forth, a director
may be elected at any time to fill a vacancy not filled by the directors by the
written consent of persons holding a majority of the outstanding shares entitled
to vote for the election of directors.
Any other action which, under any provision of the Delaware General
Corporation Law, may be taken at a meeting of the stockholders, may be taken
without a meeting, and without prior notice except as hereinafter set forth, if
a consent in writing, setting forth the action so taken, is signed by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted, unless the consents
of all stockholders entitled to vote have been solicited in writing.
Unless, as provided in Section 12 of this Article II, the board of
directors has fixed a record date for the determination of stockholders entitled
to notice of and to give such written consent, the record date for such
determination shall be the day on which the first written consent is given. All
such written consents shall be filed with the secretary of the corporation.
Any stockholder giving a written consent, or the stockholder's proxy
holders, or a transferee of the shares or a personal representative of the
stockholder or their respective proxy holders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the secretary of the corporation.
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SECTION 10. PROXIES. Every person entitled to vote or execute consents
shall have the right to do so either in person or by one or more agents
authorized by a written proxy executed by such person or his duly authorized
agent and filed with the secretary of the corporation. Subject to the Delaware
General Corporation Law in the case of any proxy which states that it is
irrevocable, any proxy duly executed shall continue in full force and effect
until (i) an instrument revoking it or a duly executed proxy bearing a later
date is filed with the secretary of the corporation prior to the vote pursuant
thereto, (ii) the person executing the proxy attends the meeting and votes in
person, or (iii) written notice of the death or incapacity of the maker of such
proxy is received by the corporation before the vote pursuant thereto is
counted; provided that no such proxy shall be valid after the expiration of
three (3) years from the date of its execution, unless otherwise provided for in
the proxy. The dates contained on the forms of proxy shall presumptively
determine the order of execution of the proxies, regardless of the postmark
dates on the envelopes in which they are mailed.
Without limiting the manner in which a stockholder may authorize
another person or persons to act for him as proxy, the following shall
constitute a valid means by which a stockholder may grant such authority.
(a) A stockholder may execute a writing authorizing another person
or persons to act for him as proxy. Execution may be accomplished by the
stockholder or his authorized officer, director, employee or agent signing such
writing or causing his or her signature to be affixed to such writing by any
reasonable means including, but not limited to, by facsimile signature.
(b) A stockholder may authorize another person or persons to act
for him as proxy by transmitting or authorizing the transmission of a telegram,
cablegram, or other means of electronic transmission to the person who will be
the holder of the proxy or to a proxy solicitation firm, proxy support service
organization or like agent duly authorized by the person who will be the holder
of the proxy to receive such transmission, provided that any such telegram,
cablegram or other means of electronic transmission must either set forth or be
submitted with information from which it can be determined that the telegram,
cablegram or other electronic transmission was authorized by the stockholder. If
it is determined that such telegrams, cablegrams or other electronic
transmissions are valid, the inspectors or, if there are no inspectors, such
other persons making that determination shall specify the information upon which
they relied.
(c) Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission described in Paragraphs (a) or (b)
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
SECTION 11. INSPECTORS OF ELECTION. In advance of any meeting of
stockholders, the board of directors may appoint any person or persons other
than nominees for office as inspectors of election to act at such meeting or any
adjournment thereof. If inspectors of election be not so appointed, the chairman
of any such meeting may, and on the request of any stockholder or his proxy
shall, make such appointment at the meeting. The number of inspectors shall be
either one (1) or three (3). If appointed at a meeting on the request of one or
more
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stockholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one (1) or three (3) inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may, and on the request of any stockholder or a
stockholder's proxy shall, be filled by appointment by the board of directors in
advance of the meeting, or at the meeting by the chairman of the meeting.
The duties of such inspectors shall be as prescribed by the Delaware
General Corporation Law and shall include: determining the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum, the authenticity, validity and effect of proxies;
receiving votes, ballots or consents; hearing and determining all challenges and
questions in any way arising in connection with the right to vote; counting and
tabulating all votes or consents; determining when the polls shall close;
determining the result; and such acts as may be proper to conduct the election
or vote with fairness to all stockholders.
The inspectors of election shall perform their duties impartially, in
good faith, to the best of their ability and as expeditiously as is practical.
If there are three (3) inspectors of election, the decision, act or certificate
of a majority is effective in all respects as the decision, act or certificate
of all. Any report or certificate made by the inspectors of election is prima
facie evidence of the facts stated therein.
SECTION 12. RECORD DATE FOR STOCKHOLDER NOTICE, VOTING AND GIVING
CONSENTS. For purposes of determining the stockholders entitled to notice of any
meeting or to vote or entitled to give consent to corporate action without a
meeting, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) days nor less than ten (10) days before the date of
any such meeting nor more than sixty (60) days before any such action without a
meeting, and in this event only stockholders of record on the date so fixed are
entitled to notice and to vote or to give consents, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Delaware General
Corporation Law.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the business day next preceding the day on which notice is given, or
if notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held.
(b) The record date for determining stockholders entitled to give
consent to corporate action in writing without a meeting, (i) where no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the board is required by the
Delaware General Corporation Law, shall be at the close of business on the day
on which the board adopts the resolution relating to that action, or the
sixtieth (60th) day before the date of such other action, whichever is later.
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ARTICLE III
DIRECTORS
SECTION 1. POWERS. Subject to the provisions of the Delaware General
Corporation Law, and to any limitations in the certificate of incorporation and
these bylaws, relating to action required to be approved by the stockholders or
approved by the outstanding shares, all corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed by, the board of directors. Without prejudice to such general powers,
but subject to the same limitations, it is hereby expressly declared that the
board of directors shall have the following powers, to wit:
(a) To select and remove all the officers, agents and employees of
the corporation, prescribe such powers and duties for them as may not be
inconsistent with law, with the certificate of incorporation or with these
bylaws, fix their compensation and require from them security for faithful
service.
(b) To conduct, manage and control the affairs and business of the
corporation, and to make such rules and regulations therefor not inconsistent
with law, or with the certificate of incorporation or with these bylaws, as they
may deem best.
(c) To change the principal executive office and principal office
for the transaction of the corporation from one location to another; to fix and
locate from time to time one or more subsidiary offices of the corporation
within or without the State of Delaware; to designate any place within or
without the State of Delaware for the holding of any stockholders' 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.
(d) To authorize the issuance of shares of stock of the
corporation from time to time, upon such terms as may be lawful.
(e) 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.
SECTION 2. NUMBER AND QUALIFICATION OF DIRECTORS. The authorized number
of directors shall be no less than three, and shall be such maximum number of
persons as may be determined from time to time by affirmative vote of a majority
of the entire board of directors or by action of the stockholders of the
Corporation. Any decrease in the number of directors shall be effective at the
time of the next succeeding annual meeting of the stockholders unless there
shall be vacancies in the board of directors, in which case such decrease may
become effective at any time prior to the next succeeding annual meeting to the
extent of the number of such vacancies. Each director shall hold office until
his successor shall have been elected and
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qualified, or until his death, or until he shall have resigned, or have been
removed, as hereinafter provided in these Bylaws.
SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be elected
at each annual meeting of stockholders 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 stockholders held for that purpose. All directors shall
hold office until their respective successors are elected and qualified, subject
to the Delaware General Corporation Law and the provisions of these bylaws with
respect to vacancies on the board of directors.
SECTION 4. VACANCIES. A vacancy in the board of directors shall be
deemed to exist in case of the death, resignation or removal of any director, or
if the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by order of court or convicted of a
felony, or if the authorized number of directors be increased, or if the
stockholders fail, at any annual or special meeting of stockholders at which any
director or directors are elected, to elect the full authorized number of
directors to be voted for at that meeting.
Vacancies in the board of directors, except for a vacancy created by
the removal of a director, may be filled 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 an
annual or a special meeting of the stockholders. A vacancy in the board of
directors created by the removal of a director may only be filled by the vote of
a majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of the holders of a
majority of the outstanding shares entitled to vote.
The stockholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors. Any such election by
written consent shall require the consent of holders of a majority of the
outstanding shares entitled to vote.
Any director may resign effective upon giving written notice to the
chairman of the board, the chief executive officer, the president, the secretary
or the board of directors of the corporation, unless the notice specifies a
later time for the effectiveness of such resignation. If the board of directors
accepts the resignation of a director tendered to take effect at a future time,
the board of directors or the stockholders shall have power to elect a successor
or 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 of Delaware which has
been designated from time to time by resolution by the board or by written
consent of all members of the board of directors. In the absence of such
designation, regular meetings shall be held at the principal executive office of
the corporation. Special meetings of the board may be held either at a place so
designated or at the principal executive office.
SECTION 6. ANNUAL MEETING. Immediately following each annual meeting of
stockholders, the board of directors shall hold a regular meeting at the place
of said annual
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meeting or at such other place as shall be fixed by the board of directors, for
the purpose of organization, election of officers, and the transaction of other
business. Call and notice of such meetings are hereby dispensed with.
SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the board
of directors shall be held without call on the date and at the time which the
board of directors may from time to time designate; provided, however, that
should the day so designated fall upon a Saturday, Sunday or legal holiday
observed by the corporation at its principal executive office, then said meeting
shall be held at the same time on the next day thereafter ensuing which is a
full business day. Notice of all such regular meetings of the board of directors
is hereby dispensed with.
SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors
for any purpose or purposes shall be called at any time by the chairman of the
board, the president, any vice president, the secretary or by any director.
Special meetings of the board of directors shall be held upon four (4)
days' written notice or twenty-four (24) hours' notice given personally or by
telephone, telegraph, telex or other similar means of communication. Any such
notice shall be addressed or delivered to each director at such director's
address as it is shown upon the records of the corporation or as may have been
given to the corporation by the director for purposes of notice or, if such
address is not shown on such records or is not readily ascertainable, at the
place in which the meetings of the directors are regularly held.
Notice by mail shall be deemed to have been given at the time a written
notice is deposited in the United States mail, postage prepaid. Any other
written notice shall be deemed to have been given at the time it is personally
delivered to the recipient or is delivered to a common carrier for transmission,
or actually transmitted by the person giving the notice by electronic means, to
the recipient. Oral notice shall be deemed to have been given at the time it is
communicated to the recipient or to a person at the office of the recipient who
the person giving the notice has reason to believe will promptly communicate it
to the recipient.
Any notice shall state the date, place and hour of the meeting. Notice
given to a director in accordance with this section shall constitute due, legal
and personal notice to such director.
SECTION 9. ACTION AT A MEETING: QUORUM AND REQUIRED VOTE. The presence
of a majority of the authorized number of directors at a meeting of the board of
directors constitutes a quorum for the transaction of business, except 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, or the
same number, after disqualifying one or more directors from voting, is required
by law, by the certificate of incorporation or by these bylaws. A meeting at
which a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, provided that any action taken is
approved by at least a majority of the required quorum for such meeting.
SECTION 10. VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS. The
transactions of any meeting of the board of directors, however called and
noticed or wherever held, shall be as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present
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and if, either before or after the meeting, each of the directors not present or
who, though present, has prior to the meeting or at its commencement, protested
the lack of proper notice to him, signs 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 or the meeting.
SECTION 11. ADJOURNMENT. A majority of the directors present, whether
or not constituting a quorum, may adjourn any board of directors' meeting to
another time or place.
SECTION 12. NOTICE OF ADJOURNMENT. If a meeting is adjourned for more
than twenty-four (24) hours, notice of any adjournment to another time or place
shall be given prior to the time of the adjourned meeting to the directors who
were not present at the time of adjournment; otherwise, 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 13. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Members
of the board of directors may participate in a meeting through use of conference
telephone or similar communications equipment, so long as all members
participating in such meeting can hear one another. Participating in a meeting
as permitted in this Section constitutes presence in person at such meeting.
SECTION 14. ACTION WITHOUT MEETING. Any action by the board of
directors may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board and shall have the same force and effect as a unanimous vote of such
directors.
SECTION 15. FEES AND COMPENSATION. Directors and members of committees
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
board of directors.
SECTION 16. COMMITTEES. The board of directors may, by resolution
adopted by a majority of the authorized number of directors, designate an
executive and other committees, each consisting of two (2) or more directors, to
serve at the pleasure of the board of directors, and may prescribe the manner in
which proceedings of any such committee meetings of such committee may be
regularly scheduled in advance and may be called at any time by any two (2)
members thereof; otherwise, the provisions of these bylaws with respect to
notice and conduct of meetings of the board of directors shall govern. Any such
committee, to the extent provided in a resolution of the board of directors,
shall have all of the authority of the board of directors, except as limited by
the Delaware General Corporation Law.
ARTICLE IV
OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a chief executive
officer, a president, a secretary and a chief financial officer. The corporation
may also have, at the discretion of the board of directors, a chairman of the
board, one or more vice presidents, one or
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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. Any number of offices may be held by the same person.
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 6 of this Article, shall be chosen annually by, and shall serve at the
pleasure of, the board of directors, and each shall hold his office until he or
she shall resign or shall be removed or otherwise disqualified to serve, or his
or her successor shall be elected and qualified.
SECTION 3. SUBORDINATE OFFICER. The board of directors or the chief
executive officer may appoint such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these bylaws or as the
board of directors may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Subject to the rights, if any, of
an officer under any contract of employment, any officer may be removed, either
with or without cause, by the board of directors, at any regular or special
meeting thereof, or, except in case of an officer chosen by the board of
directors, by any officer upon whom such power or removal may be conferred by
the board of directors.
Any officer may resign at any time by giving written notice to the
board of directors, or to the president or to the secretary of the corporation.
Any resignation is without prejudice to the rights, if any, of the corporation
under any contract to which such officer is a party. 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 these bylaws for regular election or appointment to such
office.
SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there
be such an office, shall preside at all meetings of the board of directors and
exercise and perform such other powers and duties as may be from time to time
assigned to him by the board of directors or prescribed by these bylaws.
SECTION 7. CHIEF EXECUTIVE OFFICER. 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 chief executive officer 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 stockholders and 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 power and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws.
10
<PAGE>
SECTION 8. PRESIDENT. The president shall be the chief operating
officer of the corporation, and in the event of absence or disability of the
chief executive officer, or if no chief executive officer has been appointed by
the board of directors, shall perform all the duties of the chief executive
officer, and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the chief executive officer.
SECTION 9. VICE PRESIDENTS. In the absence or disability of the
president, the vice presidents in order of their rank as fixed by the board of
directors or, if not ranked, a vice president designated by the board of
directors, if there be such an officer or officers, shall perform all the duties
of the president, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents, if
there be such an officer or officers, 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 these bylaws.
SECTION 10. SECRETARY. The secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive office
or such other place as the board of directors may order, a book of minutes of
all meetings and actions, of the stockholders, the board directors and all
committees thereof, with the time and place of holding of meetings, 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 stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent, or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the stockholders 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.
SECTION 11. CHIEF FINANCIAL OFFICER. The chief financial officer shall
keep and maintain, or cause to be kept and maintained, adequate and colored
accounts of the properties and business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board 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 chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these bylaws.
SECTION 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. In the
absence or disability of the secretary or the chief financial officer, their
duties shall be performed and their powers exercised, respectively, by any
assistant secretary or any assistant treasurer which the board of directors
may have elected or appointed. The assistant secretaries and the assistant
11
<PAGE>
treasurers shall have such other duties and powers as may have been delegated
to them, respectively, by the secretary or the chief financial officer or by
the board of directors.
ARTICLE V
INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND OTHER AGENTS
SECTION 1. DEFINITIONS. For the purpose of this Article V, "agent"
means any person who is or was a director, officer, employee or other agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or was a director,
officer, employee or agent of a foreign or domestic corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; "proceeding" means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and "expenses" includes, without limitation,
attorneys' fees and any expenses of establishing a right to indemnification
under Section 4 or Section 5(c) of this Article V.
SECTION 2. ACTIONS BY THIRD PARTIES. The corporation shall indemnify
any person who was or is a party, or is threatened to be made a party, to any
proceeding (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was an agent of the corporation,
against expenses, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such proceeding to the fullest extent
permitted by the laws of the State of Delaware as they may exist from time to
time.
SECTION 3. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. 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 by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person is or was an agent of the corporation, against expenses
actually and reasonably incurred by such person in connection with the defense
or settlement of such action to the fullest extent permitted by the laws of the
State of Delaware as they may exist from time to time.
SECTION 4. ADVANCE OF EXPENSES. Expenses incurred in defending any
proceeding may be advanced by the corporation prior to the final disposition of
such proceeding upon receipt of a request therefor and an undertaking by or on
behalf of the agent to repay such amount unless it shall be determined
ultimately that the agent is not entitled to be indemnified as authorized in
this Article V.
SECTION 5. CONTRACTUAL NATURE. The provision of this Article V shall be
deemed to be a contract between the corporation and each director and officer
who serves in such capacity at any time while this Article is in effect, and any
repeal or modification thereof shall not affect any rights or obligations then
existing with respect to any state of facts then or theretofore existing or any
action, suit or proceeding theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
12
<PAGE>
SECTION 6. INSURANCE. Upon and in the event of a determination by the
board of directors to purchase such insurance, the corporation shall purchase
and maintain insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not the corporation would have the
power to indemnify the agent against such liability under the provisions of this
Article V. All amounts received by an agent under any such policy of insurance
shall be applied against, but shall not limit, the amounts to which the agent is
entitled pursuant to the foregoing provisions of this Article V.
SECTION 7. ERISA. To assure indemnification under this provision of all
such persons who are or were "fiduciaries" of an employee benefit plan governed
by the Employee Retirement Income Security Act of 1974, as amended from time to
time ("ERISA"), the provisions of this Article V shall, except as limited by
Section 410 of ERISA, be interpreted as follows: an "other enterprise" shall be
deemed to include an employee benefit plan; the corporation shall be deemed to
have requested a person to serve as an employee of an employee benefit plan
where the performance by such person of his duties to the corporation also
imposes duties on, or otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a person
with respect to an employee benefit plan in the performance of such person's
duties for a purpose reasonably believed by such person to be in compliance with
ERISA and the terms of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the corporation.
ARTICLE VI
GENERAL CORPORATE MATTERS
SECTION 1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING. For
purposes of determining the stockholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any right in respect of any other lawful action (other than as provided
in Section 12 of Article II of these bylaws), the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) days before any
such action, and in that case only stockholders of record on the date so fixed
are entitled to receive the dividend, distribution, or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Delaware General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
SECTION 2. INSPECTION OF CORPORATE RECORDS. The accounting books and
records, the records of stockholders, and minutes of proceedings of the
stockholders and the board and committees of the board of directors of the
corporation and any subsidiary of the corporation shall be open to inspection
upon the written demand on the corporation of any stockholder or holder of a
voting trust certificate at any reasonable time during usual business hours, for
a purpose reasonably related to such holder's interests as a shareholder or as
the holder of such
13
<PAGE>
voting trust certificate. Such inspection by a stockholder or holder of a
voting trust certificate may be made in person or by an agent or attorney,
and the right of inspection includes the right to copy and make extracts.
Every director shall have the absolute right at any reasonable time to
inspect and copy all books, records and documents of every kind and to inspect
the physical properties of the corporation. Such inspection by a director may be
made in person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
SECTION 3. INSPECTION OF BYLAWS. The corporation shall keep in its
principal executive office in California, or if its principal executive office
is not in California, then at its principal business office in California (or
otherwise provide upon written request of any stockholder) the original or a
copy of the bylaws as amended or otherwise altered to date, certified by the
secretary, which shall be open to inspection by the stockholders at all
reasonable times during office hours.
SECTION 4. 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 5. CONTRACTS AND INSTRUMENTS; HOW EXECUTED. The board of
directors, except as in these bylaws otherwise provided, may authorize any
officer or officers, agent or agents, to enter into any contract 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 or
ratified by the board of directors, no officer, agent or employee shall have any
power or authority to bind the corporation by any contract or engagement or to
pledge its credit or to render it liable for any purpose or to any amount.
SECTION 6. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the chairman of the board or the president or a vice president
and by the chief financial officer or an assistant treasurer or the secretary or
any assistant secretary, certifying the number of shares and the Class or series
of shares owned by the stockholder. Any of the signatures on the certificate may
be facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent or registrar before such certificate is
issued, it may be issued by the corporation with the same effect as if such
person were an officer, transfer agent or registrar at the date of issue.
Any such certificate shall also contain such legend or other statement
as may be required by applicable state securities laws, the federal securities
laws, and any agreement between the corporation and the stockholders thereof
Certificates for shares may be issued prior to full payment under such
restrictions and for such purposes as the board of directors or these bylaws may
provide; provided, however, that on any certificate issued to represent any
partly paid shares, the total amount of the consideration to be paid therefor
and the amount paid thereon shall be stated.
14
<PAGE>
Except as provided in this Section 6, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
canceled at the same time. The board of directors may, however, in case any
certificate for shares is alleged to have been lost, stolen, or destroyed,
authorize the issuance of a new certificate in lieu thereof, and the corporation
may require that the corporation be given a bond or other adequate security
sufficient to indemnify it against any claim that may be made against it
(including expense or liability) on account of the alleged loss, theft, or
destruction of such certificate of the issuance of such new certificate.
SECTION 7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The
president or any other officer or officers authorized by the board of directors
or the president are each authorized to vote, represent and exercise on behalf
of the corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of the corporation. The
authority herein granted may be exercised either by any such officer in person
or by any other person authorized so to do by proxy or power of attorney duly
executed by said officer.
SECTION 8. CONSTRUCTION AND DEFINITIONS. Unless the context otherwise
requires, the general provisions, rules of construction and definitions
contained in the Delaware General Corporation Law shall govern the construction
of these bylaws. Without limiting the generality of the foregoing, the masculine
gender includes the feminine and neuter, the singular number includes the plural
and the plural number includes the singular, and the term "person" includes a
corporation as well as a natural person.
ARTICLE VII
AMENDMENTS TO BYLAWS
SECTION 1. AMENDMENT BY STOCKHOLDERS. New bylaws may be adopted or
these bylaws may be amended or repealed by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that if the certificate of incorporation of the corporation sets forth
the number of authorized directors of the corporation, the authorized number of
directors may be changed only by an amendment of the certificate of
incorporation.
15
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES
<TABLE>
<CAPTION>
COMPANY JURISDICTION OF ORGANIZATION
<S> <C>
Far Beyond Investments Limited British Virgin Islands Company
Harbin Asibao Chemical Fiber Company Limited Sino-Foreign Joint Venture Company
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<CIK> 0000357434
<NAME> Asia Resources Holdings Ltd.
<MULTIPLIER> 1,000
<CURRENCY> RENMINBI YUAN
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 8.27
<CASH> 1,019
<SECURITIES> 0
<RECEIVABLES> 6,877
<ALLOWANCES> 0
<INVENTORY> 3,239
<CURRENT-ASSETS> 46,454
<PP&E> 22,932
<DEPRECIATION> 6,772
<TOTAL-ASSETS> 64,480
<CURRENT-LIABILITIES> 35,608
<BONDS> 0
0
0
<COMMON> 75
<OTHER-SE> 26,138
<TOTAL-LIABILITY-AND-EQUITY> 64,480
<SALES> 54,682
<TOTAL-REVENUES> 54,682
<CGS> 44,036
<TOTAL-COSTS> 44,036
<OTHER-EXPENSES> 3,610
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 602
<INCOME-PRETAX> 6,544
<INCOME-TAX> (33)
<INCOME-CONTINUING> 4,419
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,419
<EPS-BASIC> 58.92
<EPS-DILUTED> 58.92
</TABLE>
