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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
------
Powerhouse Resources, Inc.
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock
- --------------------------------------------------------------------------------
(Title of Class of Securities)
199780107
-----------------------------------------------------
(CUSIP Number)
Tong Mei Mei, on hehalf of Chung An Investments Limited,
14/F Onfem Tower, 29 Wyndham Street, Central, Hong Kong. Tel: (852) 28682048
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
Option Agreement DD. February 8, 1998
-------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-l(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ ]. (A fee is
not required only if the reporting person: (1) has a previous statement on file
reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13a-l(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the Notes)
<PAGE>
SCHEDULE 13D
CUSIP No. 199780107
-------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR l.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Tong Mei Mei
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS*
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO [ ]
ITEMS 2(d) or 2(e)
No
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Bahamas
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
Total number of shares presently estimated to be 769230760 on existing
voting structure.
- --------------------------------------------------------------------------------
NUMBER OF | | SOLE VOTING POWER
SHARES | | 769230760
BENEFICIALLY |-----------------------------------------------------------------
OWNED BY | | SHARED VOTING POWER
EACH | | Nil
REPORTING |-----------------------------------------------------------------
WITH | | SOLE DISPOSITIVE POWER
| | As for 7
|-----------------------------------------------------------------
| | SHARED DIPOSITIVE POWER
| | Nil
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
As for 7
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11 EXCLUDES CERTAIN SHARES* [ ]
N/A
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
58.98% Estimated
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
- --------------------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
13 D FILING
-----------
SUPPLEMENTARY STATEMENT
-----------------------
Item 1: Security And Issurer
- ----------------------------
Class Of Equity Securities : Common Stock
Issurer : Powerhouse Resources, Inc.
Principal Executive Offices : 1764 Platte Street
Suite 200 (River Side)
Denver
Colorado 80202
U.S.A.
Item 2: Identity And Background
- -------------------------------
Name : Chung An Investment Limited
Registration : Bahamas
Address : Registered Office
P.O. Box CB 12751, Nassau,
New Providence, Bahamas
Principal Business : Investment Holding Company
Details Of Directors : See Attached
Details Of Controlling
Corporations And Their Directors : See Attached
<PAGE>
<TABLE>
<CAPTION>
DIRECTORS OF WELLSAME INVESTMENT LIMITED
- ----------------------------------------
BUSINESS PRINCIPAL PREVIOUS SECURITIES
DIRECTORS ADDRESS OCCUPATION CONVICTIONS VIOLATIONS NATIONALITY
--------- ------- ---------- ----------- ---------- -----------
Reference to
General (a) (b) (c) (d) (e) (f)
Instructions
<S> <C> <C> <C> <C> <C> <C>
(i) YUEN Wai 23F, New Company No No Peoples'
World Tower II, Director Republic Of
18 Queen's China
Road Central,
Hong Kong
(ii) MENG Xiao - Do - - Do - No No - Do -
Jing
(iii) LU Zhu Jiang - Do - - Do - No No - Do -
(iv) WU Yue Hua - Do - - Do - No No - Do -
DIRECTORS OF BOWEN LIMITED
BUSINESS PRINCIPAL PREVIOUS SECURITIES
DIRECTORS ADDRESS OCCUPATION CONVICTIONS VIOLATIONS NATIONALITY
--------- ------- ---------- ----------- ---------- -----------
Reference to
General (a) (b) (c) (d) (e) (f)
Instructions
(i) LIM Eng Suan 14F, Onfem Merchant No No British
Tower, 29
Wyndham
Street, Central,
Hong Kong
(ii) LAI Shuk Chun - Do - - Do - No No Hong Kong
(British National
Overseas)
(iii) TONG Mei Mei - Do - - Do - No No - Do -
SHAREHOLDERS OF WELLSAME INVESTMENT LIMITED
- -------------------------------------------
Name : YUEN Wai
Shareholding : 100%
Registration : 23F, New World Tower II, 18 Queen's Road Central,
Address Hong Kong
Principal Business : Company Director
SHAREHOLDERS OF BOWEN LIMITED
- -----------------------------
Name : LAI Cheuk Kiu
Shareholding : 100%
Registration : Offshore Group Chambers, P.O. Box N-341, Nassau,
Address New Providence Bahamas
</TABLE>
<PAGE>
ITEM 3 : SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
- ----------------------------------------------------------
- - A loan has already been made to Powerhouse Resources, Inc. for US $1
million, on 1st April 1998, funded from working capital.
- - The exercise of the option can take place on or before 31st July 1998 or if
extended at the lender's discretion will result in the conversion of the
loan together with accrued interest as part of a total subscription of US
$3,00,000 which is to be converted into common stock in the company. Based
on the net asset value per share as at 31st December 1997, as confirm by
the auditors on the previous estimate the net tangible asset value per
share was 0.39 cents, indicating that some 769,230,760 shares would be
issued for US $3 million
- - The precise source of the funds will be determined nearer the time of the
option being exercised.
ITEM 4 : Purpose Of Transaction
- -------------------------------
(a) Additional Acquisition or disposition of securities - none presently
planned
(b) Extraordinary corporate transaction - none presently planned
(c) Sale or transfer of assets - none presently planned
(d) Changes in board of directors - none presently planned
(e) Changes in capitalisation or dividend policy - possible reverse stock
split, 1 for 200 present estimate of ratio
(f) Any other material change in capitalisation or dividend policy - none
presently planned
(g) Changes in charter - none presently planned
(h) Causing class delisting - none presently planned
(i) Class terminated - none presently planned
(j) Any similar action - none presently planned
<PAGE>
ITEM 5 : INTEREST IN SECURITIES OF THE ISSURER
- ----------------------------------------------
(a) Present issue 465,622,810
To be issued 96,440,000
----------
535,062,810
===========
(b) Following exercise of option
New shares to be issued : 769,230,760 or 58.98% of revised total shares
(c) Recent transaction - None
(d) Person with power to direct - None
(e) Date of cessation - Not applicable
ITEM 6 : CONTRACTS ETC
- ----------------------
* Finders fee - Langston Finance
7,500,000 common shares of 1 cent par value
ITEM 7 : MATERIAL TO BE FILED AS EXHIBITS
- -----------------------------------------
* Facility agreement dated February 5, 1998
Signature
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date June 26, 1998
Signature
/s/ Tong Mei Mei
- -------------------------
Name/Title
Tong Mei Mei / Director
Dated the 5th Day of February 1998
----------------------------------
POWERHOUSE RESOURCES, INC.
As Borrower
CHUNG AN INVESTMENTS LIMITED
As Lender
-----------------------------------------------
FACILITY AGREEMENT
relating to a term loan facility of
US$1,000,000
-----------------------------------------------
ANGELA WANG & CO
Solicitors
15th Floor Entertainment Building
30 Queen's Road Central
Hong Kong
(Our Ref : AW/970700)
<PAGE>
TABLE OF CONTENTS
-----------------
Clause Page
- ------ ----
1. Interpretation 1
2. Amount and Purpose 4
3. Conditions Precedent 5
4. Drawing 6
5. Interest 7
6. Repayment, Extension and Prepayment 7
7. Fees and Expenses 7
8. Representations and Warranties 8
9. Undertakings 10
10. Changes in Circumstances 13
11. Payments 15
12. Default 16
13. Indemnity 18
14. Further Provisions 19
Schedule 1 - List of Joint Venture Contracts for New Projects
Schedule 2 - Promissory Note
Schedule 3 - Memorandum of Charge
Schedule 4 - Stock Option Agreement
Schedule 5 - Deed of Cancellation
<PAGE>
THIS FACILITY AGREEMENT is made on 5th February 1998.
BETWEEN :
(1) POWERHOUSE RESOURCES, INC., a company incorporated in the State of
Colorado, U.S.A. having its registered office at 1624 Market Street, Suite
303, Denver, Colorado, U.S.A. (the "Borrower");
AND
(2) CHUNG AN INVESTMENTS LIMITED, a company incorporated in the Bahamas and
having its registered office at P O Box CB-12751, Nassau, New Providence,
Bahamas (the "Lender").
WHEREBY IT IS AGREED :-
- -----------------------
1. INTERPRETATION
1.1 Definitions : In this Agreement the following expressions have, except
where the context otherwise requires, the meanings respectively shown
opposite them :-
Business Day a day (other than a Saturday or Sunday) on which the Lender
is open in Hong Kong for the transaction of business of the
nature required by this Agreement and also, in relation to a
day on which a payment is required, in the place where such
payment is to be made in accordance with this Agreement
Provided that "Business Day" when referred to in the
definition of "LIBOR" shall mean only a day on which banks
are open in London for transaction of business of the nature
required by this Agreement;
Common Shares the Common Shares of the Borrower of par value of US$0.01
each;
Deed of the deed of assignment between Powerhouse Electric and
Assignment Emerging Utilities Limited dated 25 September 1997;
Deed of the deed of cancellation between Powerhouse Electric and
Cancellation Emerging Utilities Limited in substantially the form
attached hereto in Schedule 5;
Disclosure the disclosure letter dated 20 January 1998 from the
Letter Borrower to the Lender;
Drawing the amount of the drawing made or to be made under the
Facility following the delivery of a Drawing Notice under
clause 4.1;
Drawing Notice a notice of drawing duly completed and signed on behalf of
the Borrower;
1
<PAGE>
Drawing Period the period commencing on the date of this Agreement
and ending on the close of business in Hong Kong on the date
falling 7 days from the date of this Agreement;
Event of any of the events mentioned in clause 12.1;
Default
Facility the term loan facility the terms and conditions of which are
set out in this Agreement;
Governmental any action, authorization, consent, approval, licence,
Approval lease, ruling, permit, tariff, rate certification,
exemption, filing or registration by or with any
Governmental Authority;
Governmental any governmental department, commission, board, bureau,
Authority agency, regulatory authority, instrumentality, judicial or
administrative body, domestic or foreign, national,
provincial or local having jurisdiction over the matter or
matters in question;
Joint Venture the joint venture companies formed pursuant to the Joint
Companies Venture Contracts to carry out the Projects;
Joint Venture the three joint venture contracts namely : (1) between
Contracts Powerhouse Electric and Guangdong Huilai County's Penhui
Power Co Ltd ( ) dated 24 September 1994 for the development
and operation of the Guangdong Huilia Kuicheng Power Station
and to construct and operate the Guangdong Huilai Kuicheng
1x3,960 kilowatt diesel fuel power station; (2) between
Powerhouse Electric and Guangdong Huilai County's Penhui
Power Co Ltd ( ) dated 24 September 1994 for the development
and operation of the Guangdong Huilai Shenquan Power Station
and to construct and operate the Guangdong Huilai Shenquan
1x3,960 kilowatt diesel fuel power station; (3) between
Powerhouse Electric and Guangdong Fengshun County's Fenglian
Power Co Ltd ( ) dated 25 September 1994 for the development
and operation of the Guangdong Fengshun Kiucheng Power
Station and to construct and operate the Guangdong Fengshun
1x3,960 kilowatt diesel fuel power station; and the 5 joint
venture contracts for new projects details of which are set
out in the Schedule 1 to this Agreement;
Loan the aggregate principal amount of the Drawing made and for
the time being outstanding;
Loan Period the period from the date of Drawing until the Repayment
Date;
Margin two per cent (2.0%);
Memorandum a mortgage of all the Borrower's shares in its wholly owned
of Charge subsidiary Powerhouse Electric executed by the Borrower in
favour of the Lender in the substantially form attached
hereto in Schedule 3;
2
<PAGE>
Powerhouse Powerhouse Electric Limited, a company incorporated in the
Electric Bahamas which is a wholly owned subsidiary of the Borrower;
PRC Partners the parties to the Joint Venture Contracts other than
Powerhouse Electric;
Projects the power projects referred to in the Joint Venture
Contracts;
Promissory Note the promissory note for US$1,000,000 executed by the
Borrower in favour of the Lender in respect of the Loan in
substantially the form attached hereto in Schedule 2;
Repayment Date subject to the terms of this Agreement, the date 30
September 1998 on which the Loan shall be repaid unless such
date is extended in accordance with Clause 6.2;
Security the Promissory Note and the Memorandum of Charge;
Documents
Security any mortgage, charge, pledge, lien, right of set off,
Interest encumbrance or any security interest or preferential
arrangement whatsoever, howsoever created or arising;
Stock Option the Stock Option Agreement between the Lender and the
Agreement Borrower in Agreement the substantially form attached hereto
in Schedule 4;
Subsidiary has the meaning ascribed to it in the Companies Ordinance
(Cap 32) of the Laws of the Hong Kong Special Administrative
Region;
LIBOR the rate per annum as determined (which determination shall
be conclusive) by the Lender to be equal to the arithmetic
mean (rounded upwards, if necessary to the nearest whole
multiple of one sixteenth of one per cent) of the respective
rates of each of the banks as selected by the Lender whose
rates appear on the screen page designated LIBO published or
reported by Reuters Limited through its Reuters monitor
service or any equivalent successor to such page (the
"Reuters Screen") as the rate at which it is offering
deposits in dollars for a period comparable to that for
which such rate is to be determined in the London interbank
market at or about 11.00 a.m. (London time) on the second
Business Day before the proposed date of the Drawing or date
for which computation of LIBOR is required for the purposes
of this Agreement;
$, US$ and the lawful currency of the United States of America and in
dollars relation to all payments to be made under this Agreement,
same day funds settled through the New York Clearing House
Interbank Payment System or such other funds as may for the
time being be customary for the settlement in New York City
of international payments in dollars.
3
<PAGE>
1.2 Construction : Except where the context otherwise requires, any reference
in this Agreement to :-
an "agreement" also includes a concession, contract, deed, franchise,
licence, treaty or undertaking (in each case, whether oral or written);
the "assets" of any person shall be construed as a reference to the whole
or any part of its business, undertaking, property, assets and revenues
(including any right to receive revenues);
the "Borrower"and the "Lender", include references to their respective
successors in title, permitted assigns and permitted transferees;
an "Event of Default" includes a reference to any event which, with the
giving of notice and/or the lapse of time and/or a determination being made
under the relevant sub-clause, would constitute an Event of Default;
a "guarantee" also includes any other obligation (whatever called) of any
person to pay, purchase, provide funds (whether by way of the advance of
money, the purchase of or subscription for shares or other securities, the
purchase of assets or services, or otherwise) for the payment of, indemnify
against the consequences of default in the payment of, or otherwise be
responsible for, any indebtedness of any other person;
"indebtedness" includes any obligation (whether present or future, actual
or contingent, secured or unsecured, as principal or surety or otherwise)
for the payment or repayment of money;
a "law" includes common or customary law and any constitution, decree,
judgment, legislation, order, ordinance, regulation, statute, treaty or
other legislative measure in any jurisdiction or any present or future
directive, regulation, request or requirement (in each case, whether or not
having the force of law but, if not having the force of law, the compliance
with which is in accordance with the general practice of persons to whom
the directive, regulation, request or requirement is addressed);
a "month" shall be construed as a reference to a period starting on one day
in a calendar month and ending on the numerically corresponding day in the
next calendar month (and references to "months" shall be construed
accordingly) save that, if there is no numerically corresponding day in the
month in which a period ends, that period shall end on the last day in that
later month and that, where any such period would otherwise end on a
non-Business Day, it shall end on the next Business Day unless that day
falls in the calendar month succeeding that in which it otherwise would
have ended, in which case it shall end on the next preceding Business Day;
and
"Subsidiary" and "Subsidiaries" includes a Subsidiary and Subsidiaries for
the time being of the Borrower whether or not existing or created or
acquired before or after the date of this Agreement.
1.3 Clause headings are for ease of reference only.
2. AMOUNT AND PURPOSE
------------------
2.1 Amount : The maximum aggregate principal amount of the Facility is
$1,000,000 (one million dollars).
4
<PAGE>
2.2 Purpose : The Facility shall be made available to the Borrower at its
office in Hong Kong and shall be used to finance the Projects, complete the
outstanding audits of the Borrower and its Subsidiaries, prepare the
necessary documents for the re-listing of the Borrower's shares on NASDAQ
and associated legal and professional fees and working capital as approved
by the Lender from time to time.
3. CONDITIONS PRECEDENT
--------------------
3.1 Conditions Precedent : The Facility shall become available to the Borrower
after the Lender has received the documents listed below, in each case, in
form and content satisfactory to the Lender :-
(a) letters of consent from the PRC Partners to the change of registered
and beneficial ownership of the entire issued share capital of
Powerhouse Electric under the terms of the Memorandum of Charge;
(b) the Deed of Cancellation duly executed by Powerhouse Electric and
Emerging Utilities Limited;
(c) the Memorandum of Charge duly executed by the Borrower;
(d) the Stock Option Agreement duly executed by the Borrower;
(e) the Promissory Note duly executed by the Borrower;
(f) the resignation of the Borrower's representatives on the Board of the
Directors of Powerhouse Electric and the resignation of the Borrower's
representatives on the Board of Directors of the Joint Venture
Companies other than Mr Dennis Dowd and Mr Sam Leung Kam Sham;
(g) certified copies of board resolutions of the Borrower, Powerhouse
Electric and Emerging Utilities Limited approving the terms of the
Deed of Cancellation, and of the Borrower approving the terms of this
Agreement, the Memorandum of Charge and Promissory Note;
(h) opinion letter from a firm of lawyers in People's Republic of China as
to the effect of the Deed of Cancellation and the Memorandum of Charge
on the Joint Venture Contracts and such other matters as the Lender
may require and in terms satisfactory to the Lender;
(i) opinion letter from a firm of lawyers in the United States of America
as to the enforceability of this Agreement, the Promissory Note, the
Stock Option Agreement and the Memorandum of Charge and such other
matters as the Lender may require and in terms satisfactory to the
Lender;
5
<PAGE>
(j) opinion letter from a firm of lawyers in the British Virgin Islands as
to the registration and enforceability of the Memorandum of Charge and
such other matters as the Lender may require and in terms satisfactory
to the Lender;
(k) an agreement and deed of undertaking from such numbers of shareholders
of the Borrower as shall be sufficient to pass a resolution to
increase the share capital of the Borrower undertaking (inter alia) to
retain ownership of their shares and to vote their shares in favour of
increasing the authorised capital of the Borrower sufficiently to
enable the Common Shares to be issued and allotted to the Lender in
accordance with the terms of the Stock Option Agreement;
(l) that a Settlement Agreement is entered into with Combined Energy Inc
in terms satisfactory to the Lender and the initial deposit of
US$100,000.00 having been paid by the Borrower to Combined Energy Inc;
and
(m) any other documents as the Lender may require.
3.2 Notice : The Lender shall notify the Borrower after it has received all
documents in accordance with clause 3.1.
4. DRAWING
-------
4.1 Drawing : If :
(a) no Event of Default has occurred or would occur as a result of the
making of the Drawing;
(b) the Lender has actually received a Drawing Notice by 11.00 a.m. (Hong
Kong time) on the third Business Day or such later date as the Lender
may agree before the proposed date of the Drawing;
(c) there has been no material adverse change in the financial condition
of the Borrower since the date of the Disclosure Letter;
(d) each of the representations and warranties mentioned in clause 8.1
remains accurate at the date of the Drawing as if given on that date
by reference to the facts and circumstances then existing;
(e) LIBOR can be determined in respect of the Loan Period for the proposed
Drawing,
then, subject to the provisions of this Agreement, the Borrower may on a
Business Day during the Drawing Period, but not thereafter, request for a
single Drawing under the Facility.
4.2 Amount : The amount of the Drawing shall be US$1,000,000.
4.3 Irrevocability : A Drawing Notice shall be irrevocable and, subject to
clause 10, the Borrower shall borrow the stated amount on the stated date.
4.4 Escrow Account :
(a) The proceeds of the Drawing shall be paid into a separate escrow
account of the Borrower opened specifically for the purpose of
receiving and disbursing the Loan in accordance with the purpose set
out in Clause 2.2 at a bank in Hong Kong approved by the Lender.
(b) Such escrow account shall be operated by one signatory appointed by
the Lender and one signatory appointed by the Borrower.
6
<PAGE>
(c) The signatories appointed by the Borrower for the purpose of operating
the escrow account shall be Mr Dennis Dowd and Mr Sam Leung Kam Sham
and the signatories appointed by the Lender shall be Mr Chung Ho and
Mr Lai Cheuk Kiu.
(d) Payments from the escrow account will only be made in accordance with
budgets approved by the Lender unless otherwise agreed by the Lender.
5. INTEREST
--------
5.1 Period : Interest shall be payable in one lump sum on the Repayment Date in
respect of the entire Loan Period.
5.2 Rate : The rate of interest payable on Drawing for the Loan Period shall be
the rate per annum (as determined by the Lender) to be the aggregate of the
Margin and LIBOR which the Lender shall notify to the Borrower.
5.3 Payment : Interest under this Agreement shall be calculated on the basis of
actual days elapsed with monthly rests and a 360-day year.
6. REPAYMENT, EXTENSION AND PREPAYMENT
-----------------------------------
6.1 Repayment : Subject to the provisions of this Agreement, the amount of the
Loan shall be repaid in one lump sum together with all interest accrued
thereon on the Repayment Date.
6.2 Extension : The Lender may in its sole discretion without giving any
reasons therefor extend the Repayment Date to on or before 31 October 1998
by written notice to the Borrower at any time prior to 31 July 1998, in
which case the entire outstanding loan and all interest thereon and other
charges under this Agreement and the Security Documents shall be repayable
on or before 31 October 1998.
6.3 Prepayment : The Borrower shall not be entitled to prepay the Loan except
as required under this Agreement.
7. FEES AND EXPENSES
-----------------
7.1 Expenses : The Borrower shall on demand pay, in each case on the basis of a
full indemnity :-
(a) to the Lender, all expenses (including legal, printing, publicity and
out-of-pocket expenses) incurred in connection with the negotiation,
preparation or completion of this Agreement; and
(b) to the Lender, all expenses (including legal and out-of-pocket
expenses) incurred in connection with any variation, consent or
approval relating to this Agreement or in connection with the
preservation, the enforcement or the attempted preservation or
enforcement of any of the rights of the Lender under this Agreement.
7
<PAGE>
7.2 Stamp Duty : The Borrower shall pay any stamp, documentary and other duties
and taxes to which this Agreement may be subject or give rise and shall
fully indemnify the Lender from and against any losses or liabilities which
it may incur as a result of any delay or omission by the Borrower to pay
any such duties or taxes.
8. REPRESENTATIONS AND WARRANTIES
------------------------------
8.1 The Borrower acknowledges that the Lender has entered into this Agreement
in full reliance on representations by the Borrower in the following terms;
and the Borrower now warrants to the Lender that :-
(a) Status : the Borrower is duly incorporated with limited liability and
validly existing under the laws of the State of Colorado in the U.S.A;
(b) Powers and Authorisations : the documents which contain or establish
the Borrower's constitution incorporate provisions which authorise,
and all necessary corporate action has been taken to authorise, and
all authorisations of any governmental or other authority have been
duly and unconditionally obtained and are in full force and effect
which are required to authorise, the Borrower to own its assets, carry
on its business as it is now being conducted, and sign and deliver,
and perform the transactions contemplated in, this Agreement and the
Security Documents to which it is party and this Agreement and the
Security Documents to which it is party constitute valid and binding
obligations of the Borrower enforceable in accordance with their
terms;
(c) Non-violation : neither the signing and delivery of this Agreement and
the Security Documents nor the performance of any of the transactions
contemplated therein will :-
(i) contravene or constitute a default under any provision contained
in any agreement, instrument, law, judgment, order, licence,
permit or consent by which the Borrower or any of its assets is
bound or affected; or
(ii) cause any limitation on it or the powers of its directors,
whether imposed by or contained in any document which contains or
establishes its constitution or in any law, order, judgment,
agreement, instrument or otherwise, to be exceeded;
(d) Consents : no registration, recording, filing or notarisation of this
Agreement or any of the Security Documents and no payment of any duty
or tax and no other action whatsoever is necessary or desirable to
ensure the validity, enforceability or priority in the relevant
jurisdictions of the liabilities and obligations of the Borrower or
the rights of the Lender under this Agreement and the Security
Documents;
(e) No Default : no event has occurred which constitutes, or which with
the giving of notice and/or the lapse of time and/or a relevant
determination would constitute, a contravention of, or default under,
any agreement or instrument by which the Borrower or any of its assets
is bound or affected, being a contravention or default which might
either have a material adverse effect on the business, assets or
condition of the Borrower or materially and adversely affect its
ability to observe or perform its obligations under this Agreement;
8
<PAGE>
(f) Litigation : save as disclosed in the Disclosure Letter no litigation,
arbitration or administrative proceeding or claim which might by
itself or together with any other such proceedings or claims either
have a material adverse effect on its business, assets or condition or
materially and adversely affect its ability to observe or perform its
obligations under this Agreement, is presently in progress or pending
or, to the best of the knowledge, information and belief of the
Borrower, threatened against the Borrower or any of its assets;
(g) Tax Liabilities : all necessary returns have been delivered by or on
behalf of the Borrower to the relevant taxation authorities and the
Borrower is not in default in the payment of any taxes of a material
amount, and no material claim is being asserted with respect to taxes
which is not disclosed in the Disclosure Letter;
(h) No Security : none of the assets of the Borrower is affected by any
Security Interest, and the Borrower is not a party to, nor is it or
any of its assets bound by, any order, agreement or instrument under
which the Borrower is, or in certain events may be, required to
create, assume or permit to arise any Security Interest, other than
any permitted under clause 9.1(a) or disclosed in writing to the
Lender on or before the date of this Agreement;
(i) Shareholding in Powerhouse Electric : the Borrower is the registered
and beneficial owner of the entire issued share capital of Powerhouse
Electric;
(j) Governmental Approvals in respect of the Projects : all Governmental
Approvals necessary in connection with (i) the due execution and
delivery of, and performance by Powerhouse Electric and the PRC
Partners of their respective obligations and the exercise of their
respective rights under, the Joint Venture Contracts and (ii) the
construction and operation of the Projects as contemplated by the
Joint Venture Contracts to be obtained by the Borrower or any other
person have been duly obtained, were validly issued, are in full force
and effect, are not subject to appeal, are held in the name of
Powerhouse Electric and are free from conditions or requirements
compliance with which could reasonably be expected to have a material
adverse effect on the Borrower's or Powerhouse Electric's ability to
perform its obligations hereunder or under the Security Documents or
the Joint Venture Contracts or which the Borrower does not reasonably
expect to be able to satisfy. There is no proceeding pending or, to
the best knowledge of the Borrower, threatened that seeks or may be
expected to rescind, terminate, modify or suspend any such
Governmental Approval. The information set forth in each application
and other written material submitted by the Borrower or Powerhouse
Electric to the applicable Governmental Authority in connection with
each such Governmental Approval is accurate and complete in all
material respects. The Projects will conform to and comply in all
material respects with all Governmental Approvals and the Joint
Venture Contracts applicable thereto and all applicable laws. The
Borrower has no reason to believe that the Lender will not be
entitled, without undue expense or delay, to the benefit of each
Governmental Approval upon the exercise of remedies under the Security
Documents. The Borrower has furnished the Lender with a true and
complete copy of each Governmental Approval heretofore obtained or
made by the Borrower;
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(k) Licenses and other Rights : the Borrower has all licences, trademarks,
trade names, service marks, copyright, patents or agreements with
respect to the usage of technology or other permits that are necessary
for the Projects without any conflict with the rights of any other
person and without any obligation to pay royalties or license fees
therefor in amounts in excess of those already disclosed to the
Lender;
(l) Joint Venture Contracts : each Joint Venture Contract constitutes
legal, valid and binding obligations of the parties thereto
enforceable in accordance with its terms;
(m) Disclosure : the written information furnished by the Borrower in
connection with the Projects and set out in the Disclosure Letter does
not contain any untrue statement or omit to state any fact the
omission of which makes the statements therein, in the light of the
circumstances under which they were made, misleading, and all
expressions of expectation, intention, belief and opinion contained
therein were honestly made on reasonable grounds after due and careful
enquiry by the Borrower; and
(n) Information : the Borrower has fully disclosed in writing to the
Lender all facts relating to the Borrower which the Borrower knows or
should reasonably know and which are material for disclosure to the
Lender in the context of this Agreement.
8.2 Survival : The representations and warranties set out in this clause 8
shall survive the signing and delivery of this Agreement and the making of
each Drawing.
9. UNDERTAKINGS
------------
9.1 The Borrower undertakes with the Lender that, from the date of this
Agreement until all its liabilities under this Agreement have been
discharged :
(a) Ranking and Negative Pledge : the liabilities of the Borrower under
this Agreement rank and will at all times rank at least equally and
rateably (pari passu) in point of priority and security with all its
other liabilities (both actual and contingent) except :-
(i) liabilities which are subject to liens or rights of set off
arising in the normal course of the Borrower's and any
Subsidiary's business and the aggregate amount of which is not
material; and
(ii) liabilities which are preferred solely by Colorado and United
States law and not by reason of any Security Interest,
and the Borrower will not create or permit to exist over all or any
part of the Borrower's business or assets, and will procure and ensure
that each Subsidiary will not create or permit to exist over all or
any part of that Subsidiary's business or assets, any Security
Interest (other than any permitted under sub-paragraphs (i) and (ii)
above and other than any disclosed in writing to the Agent on or
before the date of this Agreement pursuant to clause 8.1(h));
(b) Purpose : the Borrower will use the Loan only for the purposes
stated in clause 2.2;
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(c) Consents : the Borrower will maintain in full force and effect
all relevant Governmental Approvals and other authorisations
(governmental and otherwise) and will promptly make all reports
and filings and do all such other things and will obtain any
further authorisation or Governmental Approval which may become
necessary to enable it to perform any of the transactions
contemplated by this Agreement and the Security Documents and to
undertake the Projects;
(d) Default : if the Borrower becomes aware of the occurrence of an
Event of Default it will forthwith notify the Lender and provide
the Lender with full details of any steps which it is taking, or
is considering taking, in order to remedy or mitigate the effect
of the Event of Default or otherwise in connection with it and it
will from time to time on request deliver to the Lender a
certificate signed by an Authorised Director confirming that no
Event of Default has occurred or is subsisting;
(e) Conduct of Business : the Borrower will conduct its businesses in
a proper and efficient manner and will not make any investments
or conduct operations other than those in the ordinary course of
its business;
(f) Accounts : it will deliver to the Lender :-
(i) as soon as available its audited consolidated accounts;
(ii) as soon as available unaudited consolidated accounts;
(iii)details of significant developments in any litigation,
arbitration or administrative proceedings commenced by or
against the Borrower or in respect of which the Borrower is
involved;
(iv) at the same time as sent to its shareholders, any other
documents or information sent to its shareholders as such;
(v) promptly, such additional financial or other information as
the Lender may from time to time reasonably request;
(g) Preparation of Accounts : the financial statements referred to in
paragraph (f) shall be prepared on a basis consistently applied
in accordance with generally accepted accounting principles in
the United States and these financial statements shall give a
true and fair view of the results of the operations of the
affairs of the Borrower and its Subsidiaries for the period to
which the financial statements are made up and shall disclose or
reserve against all liabilities (actual or contingent) of the
Borrower and its Subsidiaries;
(h) Compliance with Laws; Adverse Regulatory Changes : the Borrower
shall comply with and ensure that Powerhouse Electric complies
with all applicable laws. The Borrower shall from time to time
obtain all Governmental Approvals as shall now or hereafter be
necessary under any applicable law in connection with the
construction, operation or maintenance of the Projects and shall
comply with all such Governmental Approvals. The Borrower shall
promptly furnish a true and complete copy of each such
Governmental Approval to the Lender. The Borrower shall use its
best efforts to contest any proceedings before any Governmental
Authority and to resist any proposed adverse changes in any
applicable law to the extent that such proceedings or changes are
directed specifically toward the Projects or could reasonably be
expected to materially and adversely affect the financial
condition of the Borrower or the ability of the Borrower or
Powerhouse Electric to observe or perform any of its obligations
under this Agreement, the Security Documents or the Joint Venture
Contracts;
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(i) Project Construction, Operation and Maintenance : the Borrower
shall (or shall procure that Powerhouse Electric shall) (i) cause
the Projects to be duly constructed and completed in accordance
with generally accepted construction engineering practice and
generally accepted construction procedures; (ii) maintain,
preserve and operate the Projects and all of its other properties
necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted, and
in accordance with generally accepted prudent construction
engineering practices; and (iii) restore, replace or rebuild its
property, or any part thereof now or hereafter damaged or
destroyed by any casualty (whether or not insured against or
insurable) except any such property that the Borrower determines
in good faith with the approval of the Lender (which approval
shall not be unreasonably delayed or withheld) not to be
necessary to the conduct of its business or the business of
Powerhouse Electric;
(j) Insurance : the Borrower shall and shall procure that Powerhouse
Electric keep their respective business and assets (which shall
without limitation include the Projects and all buildings,
equipment, machinery, vehicles and other assets used in or
otherwise relating to the Projects) insured with reputable
underwriters or insurance companies in the manner and to the
extent usual for companies carrying on a business such as that
carried on by it and, from time to time upon the request of the
Lender, furnish to the Lender evidence as to its compliance with
its obligations under this paragraph;
(k) Inspection : the Borrower shall permit and shall procure that the
PRC Partners permit representatives of the Lender and any
professional advisers appointed by the Lender for the purposes of
this Agreement to visit and inspect its and Powerhouse Electric's
Projects, to examine their books of record and account and any
documents received by any of them from any other party in
connection with the Projects, to make copies and abstracts
therefrom, and to discuss their affairs, finances and accounts
with their principal officers, engineers and independent
accountants and professional advisers (and by this provision the
Borrower authorises and shall procure that Powerhouse Electric
authorises such accountants and professional advisers to discuss
with such persons such affairs, finances and accounts, whether or
not a representative of the Borrower or Powerhouse Electric is
present, but after prior notice to the Borrower or Powerhouse
Electric, as the case may be, of such discussions), all at such
reasonable times during business hours and at such intervals as
such person may desire. Without limiting the foregoing, the
representatives of the Lender and any professional advisers
appointed by the Lender shall have the right to inspect the
Projects from time to time and to witness and verify any
performance tests conducted pursuant to or in connection with
this Agreement or the Joint Venture Contract. The Borrower shall
at all times cause a complete set of the original plans (and all
supplements thereto) relating to the Projects to be maintained at
the Projects' sites and available for inspection by such
representatives;
(l) Progress of the Project : the Borrower shall notify the Lender of
each stage of completion of the Project and shall furnish to the
Lender promptly such information or documents in relation to the
Project as the Lender may require from time to time;
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(m) Borrower's Indebtedness : save for the Loan, the Borrower shall
not, without the prior written consent of the Lender make any
loans, incur any indebtedness, give any guarantee or indemnity to
or for the benefit of any person or otherwise voluntarily assume
any liability, whether actual or contingent, in respect of any
obligation of any other person, save in the ordinary course of
business;
(n) Dividends : the Borrower shall not declare any dividends without
the prior written consent of the Lender;
(o) Auditor : the Borrower shall appoint auditors acceptable to the
Lender for each of its financial years;
(p) Directors : the Borrower shall permit the Lender to appoint two
directors of the Borrower, the initial appointees being Mr Chung
Ho and Mr Robin De Morgan. If requested by the Lender, the
Borrower shall procure that the directors appointed by the
Borrower of Powerhouse Electric or the Joint Venture Companies
shall resign and directors nominated by the Lender appointed in
their place;
(q) Further Assurance : the Borrower will from time to time on
request by the Lender do or procure the doing of all such acts
and will execute or procure the execution of all such documents
as the Lender may consider necessary or desirable for giving full
effect to this Agreement or securing to the Lender the full
benefits of all rights, powers and remedies conferred upon each
of them in this Agreement.
10. CHANGES IN CIRCUMSTANCES
------------------------
10.1 Illegality : If the Lender determines that the introduction, imposition or
variation of any law or any change in the interpretation or application of
any law makes it unlawful or impracticable without breaching such law for
it to allow all or part of the Facility or the Loan to remain outstanding
or to fund all or part of the Drawing or the Loan or to give effect to any
of its obligations under this Agreement or to charge or receive interest at
the rate applicable :-
(a) the Lender shall notify the Borrower and the Lender's obligation to
fund the Drawing shall forthwith be suspended and the Facility shall
be suspended to such extent;
(b) the Borrower shall, upon being so notified, prepay to the Lender all
of the Loan in accordance with clause 10.5 on such date as the Lender
shall certify to be necessary to comply with the relevant law and the
Facility shall be cancelled.
10.2 Increased Costs : Where the Lender determines that, as a result of the
introduction or variation of any law or any change in the interpretation or
application of any law (which shall for this purpose include any removal or
modification of any exemption currently in force of the Borrower or the
Lender), or compliance with any request (whether or not having the force of
law) from any central bank or other fiscal, monetary or other authority or
agency (including, without limitation, a directive or request which affects
the manner in which the Lender allocates capital resources to its
obligations under this Agreement), the cost to the Lender of making or
maintaining or funding the Loan is increased or the amount of any sum
received or receivable by it in respect of the Loan or the effective return
to it under this Agreement is reduced or it is obliged to make any payment
(except in respect of tax on its overall net income) or foregoes any
interest or other return on, or calculated by reference to, the amount of
any sum received or receivable by it from the Borrower under this
Agreement, then :-
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(a) the Lender shall notify the Borrower of such event promptly upon its
becoming aware of such event;
(b) the Borrower shall, within 14 days of such notification, pay to the
Lender such amounts as the Lender from time to time and at any time
(including after a prepayment of part of the Loan) notifies the
Borrower to be necessary to compensate it for such increased cost,
reduction, payment or forgone interest or return; and
(c) at any time thereafter, so long as the circumstances giving rise to
the obligation to make the compensating payment continue :-
(i) at the Borrower's irrevocable election, by notice to the Lender,
the Lender's obligation to fund in the Drawing shall terminate
and the Facility shall be cancelled to such extent; and
(ii) the Borrower may upon giving the Lender not less than 30 days'
notice which shall be irrevocable, prepay to the Lender the Loan
subject to and in accordance with clauses 10.4 and 10.5.
10.3 Market Disruption : If, in relation to the Loan Period :-
(i) the Lender determines that, by reason of circumstances affecting the
London interbank market generally, reasonable and adequate means do
not or will not exist for ascertaining under clause 5.2 a rate of
interest applicable to the Drawing, the Loan or any part of it; or
(ii) the Lender is notified that deposits in dollars are not in the
ordinary course of business available in the London interbank market
for a period equal to the Loan Period in amounts sufficient to fund
the Loan;
the Lender shall forthwith notify the Borrower, and
(a) no Drawing shall be made while such circumstances continue to exist
and, at the Borrower's irrevocable election (by notice to the Lender),
the Facility may be cancelled;
(b) whilst such circumstances exist the Lender shall negotiate with the
Borrower for a period of seven (7) days with a view to agreeing an
alternative basis for continuing the Loan. Any alternative basis
agreed in writing by the Lender shall take effect in accordance with
its terms. If no agreement is reached within seven (7) days of the
Lender's notification to the Borrower of the existence of the
circumstances referred in this clause, the Facility shall be
cancelled.
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10.4 Prepayment : Where the Borrower has given notice under clause 10.2 to
prepay the Loan :-
(a) the Borrower shall provide the Lender with satisfactory evidence that
all authorisations necessary to the prepayment have been
unconditionally obtained;
(b) the amount of the prepayment shall become due and payable on expiry of
the period specified in the notice to the Lender; and
10.5 Amount : On prepaying the Loan under this clause, the Borrower shall pay to
the Lender accrued interest on the Loan together with all other amounts due
to the Lender as may be applicable provided that for the avoidance of
doubt, no premium or penalty shall be payable on such prepayment but the
Borrower shall indemnify the Lender in respect of any cost or loss incurred
by the Lender for breaking any interest or funding period.
10.6 Certificates : Any determination or notification by the Lender concerning
any matter referred to in this clause shall, in the absence of manifest
error, be conclusive evidence as to that matter and shall be binding on the
Borrower and the Lender.
11. PAYMENTS
--------
11.1 By the Borrower : All payments to be made by the Borrower for the account
of the Lender shall be made in dollars not later than 10.00 a.m. (Hong Kong
time) on the relevant day to such account as the Lender may have notified
the Borrower in writing.
11.2 Withholdings : All payments by the Borrower under this Agreement, whether
in respect of principal, interest, fees or any other item, shall be made in
full without any deduction or withholding (whether in respect of set off,
counterclaim, duties, taxes, charges or otherwise whatsoever) unless the
deduction or withholding is required by applicable laws in which event the
Borrower shall :-
(a) ensure that the deduction or withholding does not exceed the minimum
amount legally required;
(b) forthwith pay to the Lender such additional amount so that the net
amount received by the Lender will equal the full amount which would
have been received by it had no such deduction or withholding been
made;
(c) pay to the relevant taxation or other authorities within the period
for payment permitted by applicable laws the full amount of the
deduction or withholding (including, but without prejudice to the
generality of the foregoing, the full amount of any deduction or
withholding from any additional amount paid pursuant to this
subclause);
(d) furnish to the Lender, as soon as practicable and in any event not
more than 10 days after the period for payment permitted by applicable
laws a copy of an official receipt of the relevant taxation or other
authorities involved for all amounts deducted or withheld as
aforesaid; and
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11.3 Judgment Currency : If, under any applicable law, whether as a result of a
judgment against the Borrower or the liquidation of the Borrower or for any
other reason, any payment under or in connection with this Agreement is
made or is recovered in a currency (the "other currency") other than that
in which it is required to be paid hereunder (the "original currency")
then, to the extent that the payment to the Lender (when converted at the
rate of exchange on the date of payment or, in the case of a liquidation,
the latest date for the determination of liabilities permitted by the
applicable law) falls short of the amount unpaid under this Agreement, the
Borrower shall as a separate and independent obligation, fully indemnify
the Lender against the amount of the shortfall; and for the purposes of
this subclause "rate of exchange" means the rate at which the Lender is
able on the relevant date to purchase the original currency with the other
currency.
11.4 Date : If any payment would otherwise be due on a day which is not a
Business Day, it shall be due on the next succeeding Business Day or, if
that Business Day falls in the following month of the year, on the
preceding Business Day Provided that if the Repayment Date falls on a date
which is not a Business Day, it shall be deemed for all purposes to fall on
the preceding Business Day.
12. DEFAULT
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12.1 Events
If :-
(a) Non-payment : the Borrower fails to pay any amount due under this
Agreement or the Security Documents on the due date or on demand, if
so payable;
(b) Breach of Obligation : the Borrower fails to observe or perform any of
its obligations under this Agreement or the Security Documents or
under any undertaking or arrangement entered into in connection
therewith, other than an obligation of the type referred to in clause
12.1(a) and, in the case of a failure capable of being remedied, the
Lender does not determine, within seven (7) days after the Borrower
became aware of the failure, that it has been remedied to the Lender's
satisfaction;
(c) Misrepresentation : any representation, warranty or statement which is
made (or acknowledged to have been made) by the Borrower in this
Agreement or the Security Documents or which is contained in any
certificate, statement, legal opinion or notice provided under or in
connection with this Agreement or the Security Documents proves to be
incorrect in any material respect, or if repeated at any time with
reference to the facts and circumstances subsisting at such time would
not be accurate in all material respects;
(d) Invalidity : any provision of this Agreement, the Security Documents
or the Joint Venture Contracts is or becomes for any reason invalid or
unenforceable;
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(e) Disposal of assets : any of the Borrower or Powerhouse Electric
transfers or disposes of, or threatens to transfer or dispose of, by
one or more transactions or series of transactions (whether related or
not) the whole or any part amounting in value to 20% or more of its
business or assets unless in the normal course of its business;
(f) Cessation of business : any of the Borrower or Powerhouse Electric
changes or threatens to change the nature or scope of its business,
suspends or threatens to suspend a substantial part of the present
business operations which it now conducts directly or indirectly, or
any Governmental Authority expropriates or threatens to expropriate or
nationalise or seize or compulsorily acquire all or part of the assets
of the Borrower or Powerhouse Electric and the result of any of the
foregoing is, in the determination of the Lender, materially and
adversely to affect its financial condition or the Borrower's ability
to observe or perform its obligations under this Agreement or the
Security Documents or the Joint Venture Contracts;
(g) Cross-default : any indebtedness of the Borrower or of Powerhouse
Electric becomes due or capable of being declared due before its
stated maturity, any guarantee or similar obligation of the Borrower
or of Powerhouse Electric is not discharged at maturity or when called
or the Borrower or Powerhouse Electric goes into default under, or
commits a breach of, any instrument or agreement relating to any such
indebtedness, guarantee or other obligation;
(h) Appointment of receiver, legal process : an encumbrancer takes
possession of, or a trustee, receiver or similar officer is appointed
in respect of, all or any part of the business or assets of the
Borrower or of Powerhouse Electric or distress or any form of
execution is levied or enforced upon or sued out against any such
assets and is not discharged within seven days of being levied,
enforced or sued out, or any Security Interest which may for the time
being affect any of its assets becomes enforceable;
(i) Insolvency, etc. : the Borrower or Powerhouse Electric becomes unable
to pay its debts as they fall due or suspends or threatens to suspend
making payments (whether of principal or interest) with respect to all
or any class of its debts or otherwise becomes or is declared
insolvent;
(j) Composition, Winding-Up : the Borrower or Powerhouse Electric convenes
a meeting of its creditors or proposes or makes any arrangement or
composition with, or any assignment for the benefit of, its creditors
or a petition is presented or a meeting is convened for the purpose of
considering a resolution or other steps are taken for the winding up
of the Borrower or Powerhouse Electric (other than for the purposes of
and followed by a reconstruction previously approved in writing by the
Lender, unless during or following such reconstruction the Borrower or
Powerhouse Electric becomes or is declared to be insolvent);
(k) Analogous Proceedings : anything analogous to any of the events
specified in paragraphs (h), (i) or (j) occurs under the laws of any
applicable jurisdiction;
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(l) Moratorium : the government of Hong Kong, the People's Republic of
China or United States or any competent authority thereof declares or
requests a moratorium on the payment of any of the Borrower's or
Powerhouse Electric's indebtedness or the government of Hong Kong, the
People's Republic of China or United States commences negotiations
with any of the Borrower's or Powerhouse Electric's creditors with a
view to a general readjustment or rescheduling of any of its
indebtedness or any other restriction is imposed or sought to be
imposed by the government of Hong Kong, the People's Republic of China
or United States or any competent authority thereof which restricts or
might restrict or otherwise adversely affect full and punctual payment
by the Borrower of all or any of their respective obligations under
this Agreement or the Security Documents;
(m) Abandonment of Project : the Borrower or Powerhouse Electric shall, in
the opinion of the Lender, have abandoned the Projects or any of them;
(n) Compulsory Acquisition : there shall be any circumstance or event in
consequence of which the Projects or any portion thereof shall be
temporarily or permanently condemned or seized or taken by any
Governmental Authority under power of eminent domain or otherwise;
(o) Security in Jeopardy : if in the Lender's opinion the construction or
operation of the Projects or the security created by any of the
Security Documents is in jeopardy, or the security created by the
Security Documents is incapable of being perfected or registered;
(p) Material Adverse Change : a material adverse change occurs in the
financial condition or operating environment of the Borrower or
Powerhouse Electric;
(q) Event affecting Borrower : any event occurs or circumstances exist
which, in the reasonable opinion of the Lender, affects or may affect
the ability of the Borrower to perform any of its obligations under
this Agreement or any of the Security Documents,
then, at once or at any time thereafter, the Lender upon the request of the
Lender shall, by notice to the Borrower, declare the Loan to be immediately
due and payable and the Facility to be cancelled, whereupon the Loan shall
become so due and payable together with accrued interest thereon and any
other amounts then payable under this Agreement and the Security Documents.
13. INDEMNITY
---------
13.1 As a separate and independent obligation, the Borrower shall fully
indemnify the Lender from and against any expense, loss, damage or
liability (as to the amount of which the certificate of the Lender shall,
in the absence of manifest error, be conclusive) which it may incur as a
consequence of the occurrence of any Event of Default, of any failure to
borrow in accordance with a Drawing Notice or of any prepayment under this
Agreement or otherwise in connection with this Agreement. Without prejudice
to its generality, the foregoing indemnity shall extend to any interest,
fees or other sums whatsoever paid or payable on account of any funds
borrowed in order to carry any unpaid amount and to any loss (including
loss of profit), premium, penalty or expense which may be incurred in
liquidating or employing deposits from third parties acquired to make,
maintain or fund the Loan (or any part of the Loan) or any other amount due
or to become due under this Agreement.
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14. FURTHER PROVISIONS
------------------
14.1 Evidence of Indebtedness : In any proceedings relating to this Agreement a
statement as to any amount due to the Lender under this Agreement which is
certified as being correct by an officer of the Lender and shall unless
otherwise provided in this Agreement, and save for manifest error, be prima
facie evidence that such amount is in fact due and payable.
14.2 Application of Moneys : If any sum paid or recovered in respect of the
liabilities of the Borrower under this Agreement is less than the amount
then due, the Lender may apply that sum to interest, fees or any other
amount due under this Agreement in such proportions and order and generally
in such manner as the Lender shall determine.
14.3 Rights Cumulative, Waivers : The rights of the Lender under this Agreement
are cumulative, may be exercised as often as they consider appropriate and
are in addition to their rights under the general law. The rights of the
Lender in relation to this Facility and/or the Loan (whether arising under
this Agreement or under the general law) shall not be capable of being
waived or varied otherwise than by an express waiver or variation in
writing; and in particular any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or variation of
that or any other such right; any defective or partial exercise of any of
such rights shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on its
part or on its behalf shall in any way preclude it from exercising any such
right or constitute a suspension or any variation of any such right.
14.4 Notices : Any notice or communication under or in connection with this
Agreement shall be in writing and shall be delivered personally, or by
post, facsimile or telex to the addresses given in this Agreement or at
such other address as the recipient may have notified to the other parties
in writing. Proof of posting or despatch of any notice or communication to
the Borrower shall be deemed to be proof of receipt :-
(a) in the case of a letter, on the seventh Business Day after posting;
(b) in the case of any notice or communication made by facsimile, when
confirmed by an activity report indicating that the correct number of
pages was sent to the correct facsimile number and that such facsimile
message was well-received;
(c) in the case of any notice or communication made by telex, when
despatched and the correct answerback is received.
Any communication to the Lender must actually be received by the Lender
before such communication becomes effective.
14.5 English Language : All notices or communications under or in connection
with this Agreement shall be in the English language or, if in any other
language, accompanied by a translation into English. In the event of any
conflict between the English text and the text in any other language, the
English text shall prevail.
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14.6 Invalidity of any provision : If any of the provisions of this Agreement
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired.
14.7 Conflict with Promissory Note : In the event of any conflict between the
provisions of this Agreement and the Promissory Note, the provisions of
this Agreement shall prevail.
14.8 Benefit of Agreement :
(a) This Agreement shall benefit and be binding on the parties, their
respective successors and any permitted assignee or transferee of some
or all of a party's rights or obligations under this Agreement. Any
reference in this Agreement to any party shall be construed
accordingly.
(b) The Borrower shall not assign its rights or transfer its obligations
under this Agreement or any part thereof.
(c) The Lender may assign its rights under this Agreement or any part
thereof or transfer its obligations hereunder or any part thereof (the
consent by the Borrower to such transfer being hereby irrevocably
given by the Borrower to the Lender).
14.9 Choice of Law : This Agreement is governed by, and shall be construed in
accordance with, the laws of the Hong Kong Special Administrative Region.
14.10 Submission to Jurisdiction and Waiver of Immunity :
(a) The Borrower irrevocably :-
(i) submits to the non-exclusive jurisdiction of the courts of the
Hong Kong Special Administrative Region;
(ii) consents to service of process by mail or in any other manner
permitted by the relevant law;
(iii)waives any objections on the ground of venue or forum non
conveniens or any similar grounds.
(b) The Borrower irrevocably waives and agrees not to claim any immunity
from suits and proceedings (including actions in rem) and from all
forms of execution or attachment to which it or its property is now or
may hereafter become entitled under the laws of any jurisdiction and
declares that such waiver shall be effective to the fullest extent
permitted by such laws.
(c) The Borrower shall at all times maintain an agent for service of
process in Hong Kong. Such agent shall be Mr Sam Leung Kam Sham of C-3
28/F Elizabeth House, 254 Gloucester Road, Hong Kong and any writ,
judgment or other notice of legal process shall be sufficiently served
on the Borrower if delivered to such agent at its address for the time
being. The Borrower undertakes not to revoke the authority of the
above agent and if, for any reason, any such agent no longer serves as
agent of the Borrower to receive service of process, the Borrower
shall promptly appoint another such agent, shall advise the Lender
thereof and shall deliver promptly to the Lender the acceptance by
such agent of its appointment.
20
<PAGE>
SIGNED BY THE AUTHORISED REPRESENTATIVES OF THE PARTIES.
SIGNED by /s/ Dennis Dowd, Sam Leung, and Mark Chapman )
)
for and on behalf of )
Powerhouse Resources Inc )
in the presence of :- )
SIGNED by /s/ Yuen Wai )
)
for and on behalf of )
Chung An Investments Limited )
in the presence of :- )
21
Schedule 2
----------
Promissory Note
---------------
<PAGE>
PROMISSORY NOTE
US$1,000,000.00 Hong Kong
6th February 1998
FOR VALUE RECEIVED, the undersigned POWERHOUSE RESOURCES, INC., a company
incorporated in the State of Colorado, U.S.A. having its registered office at
1624 Market Street, Suite 303, Denver, Colorado, U.S.A. (the "Payor") hereby
promises to pay to CHUNG AN INVESTMENTS LIMITED, a company incorporated in the
Bahamas and having its registered office at P O Box CB-12751, Nassau, New
Providence, Bahamas (the "Payee"), on 30 September 1998 unless before 31 July
1998 the Payee shall in its sole discretion give written notice to the Payor to
the effect that the time for repayment has been extended to on or before 31
October 1998, the principal sum of One Million United States Dollars
(US$1,000,000.00) with interest on the unpaid balance from the date of this
Promissory Note (the "Note") until paid at the London Inter Bank Offered Rate
("LIBOR") plus two per cent (2%) per annum on a monthly rest basis in accordance
with this Note.
1. Repayment
---------
The outstanding principal balance of this Note together with all accrued
interest thereon (unless the Payee shall have exercised the option referred
to in Clause 4 of this Note) shall be payable in one lump sum on 30
September 1998 unless before 31 July 1998 the Payee shall in its sole
discretion give written notice to the Payor to the effect that the time for
repayment has been extended to on or before 31 October 1998.
2. Payments of Principal and Interest
----------------------------------
2.1 Payment of principal and interest hereunder shall be paid by the Payor to
the Payee at 14th Floor, Onfem Tower, 20 Wyndham Street, Hong Kong, or at
such other place in Hong Kong as the Payee shall specify, in lawful money
of the United States of America and in immediately available funds.
2.2 Any payments under this Note shall be applied (to the extent thereof) first
to accrued interest, if any, then to the outstanding principal balance of
this Note.
3. Prepayment
----------
The outstanding principal balance and accrued interest of this Note may not
be prepaid in whole or in part at any time.
4. Option to Convert Indebtedness into Shares
------------------------------------------
The Payee has the right exercisable by notice in writing to the Payor to
offset the principal and accrued interest under this Note against amounts
which may become owing by Payee to Payor under the Stock Option Agreement
dated 6th February 1998 between the Payor and Payee.
5. Security
--------
The obligations of the Payor under this Note shall be secured by the charge
in favour of the Payee of the entire legal and beneficial shareholding in
the Payor's wholly owned subsidiary Powerhouse Electric Limited in
accordance with the terms of the Memorandum of Charge dated 6th February
1998 between the Payor and the Payee.
1
<PAGE>
6. Events of Default
-----------------
6.1 The entire outstanding principal balance and accrued interest of this Note
until the date of payment shall become automatically due and payable upon
the occurrence of any of the following events (each, an "Event of Default")
:-
(a) The Payor shall file a voluntary petition or a petition is filed
against the Payor for adjudication as a bankrupt or insolvent or for
reorganization under any bankruptcy or similar laws;
(b) The Payor shall make a general assignment for the benefit of its
creditors;
(c) A receiver or trustee or officer performing similar functions is
appointed for the Payor or for its assets;
(d) Any other type of insolvency proceeding is instituted against the
Payor for dissolution or liquidation, settlement of claims against, or
the winding up of the affairs of, the Payor; or
(e) The board of directors of the Payor unanimously considers that the
continuation of the business of the Payor is or will be detrimental to
the interests of the Payee.
6.2 If an Event of Default occurs and is continuing, the Payee may pursue any
available remedy by proceeding at law or in equity to collect the payment
of principal of or interest on the outstanding principal balance of this
Note or to enforce the performance of any provision of this Note, including
requiring the Payor to sell the business of Payor.
6.3 If any attorney solicitor or barrister is engaged by Payee to enforce or
defend any provision of this Note or any related credit or security
agreement, whether or not as a consequence of any default or event of
default, with or without the filing of any legal action, proceeding or
appeal, or appearance in any bankruptcy proceeding, then Payor shall
immediately pay on demand all legal fees and all other costs incurred by
Payee on an indemnity basis.
7. No Transfers
------------
This Note is not transferable by the Payee, without the prior written
consent of the Payor.
8. Lost or Destroyed Note
----------------------
Upon receipt by the Payor of evidence reasonably satisfactory to the Payor
of the loss, theft, destruction or mutilation of this Note, and in the case
of any such loss, theft, or destruction, upon delivery of indemnity
reasonably satisfactory to the Payor or, in case of any such mutilation,
upon surrender and cancellation of this Note, the Payor will issue a new
Note of like tenor in lieu of this Note.
9. Miscellaneous
-------------
2
<PAGE>
9.1 Waiver
------
Any term, provision or condition of this Note may be waived in writing at
any time by the party which is entitled to the benefits thereof. No failure
or delay on the part of the Payee in the exercise of any power, right or
privilege hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such power, right or privilege preclude other or
further exercise thereof or of any other right, power or privilege. All
rights and remedies existing hereunder are cumulative to, and not exclusive
of, any rights or remedies otherwise available.
9.2 Amendment and Modification
--------------------------
Subject to applicable law, this Note may be amended, modified and
supplemented by written agreement of the Payor and the Payee at any time
with respect to the terms contained herein. The term "Note" shall mean this
instrument as originally executed or if later amended or supplemented, then
as so amended or supplemented.
9.3 Governing Law
-------------
This Note and the obligations of the Payor and the rights of the Payee
shall be governed by and construed in accordance with the laws of the Hong
Kong Special Administrative Region. The Payor unconditionally submits to
the non-exclusive jurisdiction of the courts of the Hong Kong Special
Administrative Region.
9.4 Agent for Service of Process
----------------------------
Payor hereby irrevocably appoints Mr Sam Leung Kam Sham of C3, 28th Floor,
Elizabeth House, 254 Gloucester Road, Hong Kong as its agent for the
service of process in the Hong Kong Special Administrative Region in
relation to any matter arising out of this Note. If such process agent
ceases to have an address in the Hong Kong Special Administrative Region,
Payor irrevocably agrees to appoint a new process agent and to deliver to
Payee within 14 days a copy of a written acceptance of appointment by the
process agent. Nothing contained in this note shall affect the right to
serve process in any other manner permitted by law or the right to bring
proceedings in any other jurisdiction for the purposes of the enforcement
or execution of any judgement or other settlement in any other court.
9.5 Time of the Essence
-------------------
Time is of the essence with respect to every provision of this Note.
9.6 Authority
---------
Payor represents that : (a) it has all requisite power and authority to
execute and deliver this Note; and (b) the person or persons executing this
Note on behalf of the Payor are duly authorized to do so.
9.7 Notices
-------
Any notice or communication under or in connection with this Note shall be
in writing and shall be delivered personally, or by post or facsimile to
the addresses given in this Note or at such other address as the recipient
may have notified to the other parties in writing. Proof of posting or
despatch of any notice or communication to the Borrower shall be deemed to
be proof of receipt :
3
<PAGE>
(a) in the case of a letter, on the seventh business day after posting;
(b) in the case of any notice or communication made by facsimile, when
confirmed by an activity report indicating that the correct number of
pages was sent to the correct facsimile number and that such facsimile
message was well-received.
THIS PROMISSORY NOTE has been executed by Payor on the day and year first above
written.
THE COMMON SEAL of )
POWERHOUSE RESOURCES, INC. )
was affixed in the presence of :- )
4
Schedule 3
----------
Memorandum of Charge
--------------------
<PAGE>
DATED THE 6TH DAY OF FEBRUARY 1998
----------------------------------
POWERHOUSE RESOURCES, INC.
as Chargor
and
CHUNG AN INVESTMENTS LIMITED
as Lender
-----------------------------
MEMORANDUM OF CHARGE
-----------------------------
ANGELA WANG & CO
Solicitors
15th Floor Entertainment Building
30 Queen's Road Central
Hong Kong
(Our ref : g:\aw\ct\970700memo.wpd)
<PAGE>
C O N T E N T S
---------------
CLAUSE HEADING PAGE
- ------ ------- ----
1. INTERPRETATION 1
2. CHARGING PROVISIONS 2
3. CONTINUING SECURITY 2
4. WARRANTIES 3
5. UNDERTAKINGS 4
6. INDEMNITY 5
7. ENFORCEMENT AND DIVIDENDS 5
8. POWERS OF CHARGEE 6
9. DISTRIBUTION OF PAYMENTS 7
10. DELEGATION 7
11. EXCLUSION OF LIABILITY 7
12. FURTHER ASSURANCE 8
13. POWER OF ATTORNEY 8
14. PROTECTION OF THIRD PARTIES 8
15. AVOIDANCE OF PAYMENTS 8
16. REMEDIES, WAIVERS AND CONSENTS 9
17. BENEFIT OF SECURITY 9
18. PARTIAL INVALIDITY 9
19. COMMUNICATIONS 9
20. GOVERNING LAW AND JURISDICTION 10
SCHEDULE 1 - NOTICE OF ASSIGNMENT 11
SCHEDULE 2 - ACKNOWLEDGEMENT OF NOTICE 12
<PAGE>
THIS MEMORANDUM OF CHARGE is made on 6th day of February 1998.
BETWEEN :-
- -------
(1) POWERHOUSE RESOURCES, INC., a company incorporated in the State of
Colorado, U.S.A. whose registered office is at 1624 Market Street, Suite
303, Denver, Colorado, U.S.A. ("the Chargor"); and
(2) CHUNG AN INVESTMENTS LIMITED, a company incorporated in the Bahamas and
having its registered office at P O Box CB-12751, Nassau, New Providence,
Bahamas ("the Lender").
WHEREAS :-
- -------
(A) By a Facility Agreement dated 5th February 1998 between the Lender and the
Chargor (the "Facility Agreement"), the Lender agreed to lend the Chargor
the sum of US$1,000,000.00 upon the terms and conditions set out therein.
(B) By a Promissory Note dated 5th February 1998 in favour of the Lender (the
"Promissory Note"), the Chargor promised to repay to the Lender the sum of
US$1,000,000.00 together with all interest accrued thereon borrowed from
the Lender under the Facility Agreement.
(C) In order to secure its obligations under the Facility Agreement and the
Promissory Note, the Chargor has agreed to enter into this Memorandum of
Charge.
IT IS AGREED as follows :-
- -----------------------
1. INTERPRETATION
--------------
(A) Definitions : In this Memorandum of Charge, except to the extent that
the context requires otherwise :-
"Charged Property" means the Charged Securities and all
other assets and properties charged
under or pursuant to Clause 2;
"Charged Securities" means the stocks, shares and other
securities specified in Clauses 2(A) and
2(B) and shall include any stocks,
shares or other securities acceptable to
the Lender which are given by the
Chargor or deposited with or transferred
to the Lender in substitution for, or in
addition to, the stocks, shares or
securities for the time being or at any
time charged under this Memorandum of
Charge;
"Powerhouse Electric" means Powerhouse Electric Limited, a
company incorporated in the British
Virgin Islands;
"Indebtedness" means all sums which are or at any time
may be or become due or owing by the
Chargor to the Lender, actually or
contingently, under or in connection
with the Facility Agreement and the
Promissory Note.
1
<PAGE>
(B) This Memorandum of Charge : Except to the extent that the context
otherwise requires, any reference to "this Memorandum of Charge"
includes any document which is supplemental hereto or which is
expressed to be collateral herewith or which is entered into pursuant
to or in accordance with the terms hereof.
(C) The Facility Agreement and the Promissory Note : All references in
this Memorandum of Charge to the Facility Agreement and the Promissory
Note are to the Facility Agreement and the Promissory Note as from
time to time amended, modified or supplemented.
(D) Headings and Clauses : Headings in this Memorandum of Charge, which
are inserted for convenience only, shall be ignored in construing this
Memorandum of Charge. Unless the context otherwise requires, words
denoting the singular number only shall include the plural and vice
versa. Any reference to the neuter genders shall include the masculine
gender. Save where otherwise indicated, references to the "Clauses"
and the "Schedules" are to be construed as references to the clauses
of, and the schedules to, this Memorandum of Charge.
2. CHARGING PROVISIONS
-------------------
(A) Charged Securities : The Chargor as legal and beneficial owner and as
a continuing security for the payment and discharge of the
Indebtedness and for the observance and performance of its obligations
under the Facility Agreement and the Promissory Note and this
Memorandum of Charge, hereby charges in favour of the Lender with the
intent that it shall take effect by way of first fixed charge, and
assigns absolutely to the Lender, all its issued ordinary shares in
the capital of Powerhouse Electric.
(B) Dividends : The security created by this Memorandum of Charge shall
affect, and the Charged Securities include, (i) all dividends paid or
payable on any of the Charged Securities, (ii) all stocks, shares and
other securities (together with all dividends paid or payable
thereon), rights, moneys or other property paid, distributed, accruing
or offered at any time (by way of dividend, bonus, redemption, rights,
preference, option, warrant or otherwise) on, to or in respect of or
in substitution for any of the Charged Securities and (iii) the
proceeds of sale and redemption and any payment or receipt of, on, or
in respect of any of the Charged Securities.
3. CONTINUING SECURITY
-------------------
(A) Continuing Security : The security created by this Memorandum of
Charge shall constitute and be a continuing security notwithstanding
any partial or intermediate settlement of account or reduction or
repayment of any part of the Indebtedness or any other matter or thing
whatsoever, and shall be in addition to and shall not be in any way
prejudiced or affected by any collateral or other security from time
to time held or judgment or other relief obtained by the Lender for
all or any part of the Indebtedness nor shall any such collateral or
other security, judgment or order or any lien to which the Lender may
be otherwise entitled or the liability of the Chargor or any others
not parties hereto for all or any part of the Indebtedness be in any
way prejudiced or affected by this Memorandum of Charge.
2
<PAGE>
(B) Unconditionality of Security : The security created by this Memorandum
of Charge shall not be discharged or affected by (i) any time,
indulgence, waiver or consent at any time given to the Chargor or any
other person, (ii) any amendment to the Promissory Note, this
Memorandum of Charge or any other security, guarantee or indemnity,
(iii) the making or absence of any demand on the Chargor or any other
person for payment, (iv) the enforcement or absence of enforcement of
the Facility Agreement or the Promissory Note, this Memorandum of
Charge or any other security, guarantee or indemnity, (v) the release
of any other security, guarantee or indemnity (including the release
of any of the Charged Property), (vi) the dissolution, amalgamation,
reconstruction, reorganisation of the Chargor or any other person (or
the commencement of any of the foregoing), (vii) the illegality,
invalidity or unenforceability of or any defect in any provision of
the Facility Agreement or the Promissory Note, this Memorandum of
Charge or any other security, guarantee or indemnity or any of the
obligations of any of the parties thereunder, or (viii) any other
matter or thing whatsoever.
4. WARRANTIES
----------
(A) By Chargor : The Chargor warrants to and for the benefit of the Lender
and in relation to the Charged Property charged by it under this
Agreement as follows:-
(i) Powers : it has the power to enter into and perform and comply
with its obligations under and to create the security expressed
to be created by this Memorandum of Charge;
(ii) Authorisation and Consents : all action, conditions and things
required to be taken, fulfilled and done (including the obtaining
of any necessary consents) in order (a) to enable it lawfully to
enter into, exercise its rights (if any), and perform and comply
with its obligations under this Memorandum of Charge (including
the creation of the security expressed to be created by this
Memorandum of Charge), (b) to ensure that those obligations and
such security are valid, legally binding and enforceable and, in
the case of such security, will rank ahead of any other present
or future security on the Charged Property or any part thereof
and (c) to make this Memorandum of Charge admissible in evidence
in the courts of the Special Administrative Region of Hong Kong
have been taken, fulfilled and done;
(iii)Non Violation of Laws, etc : neither its entry into, exercise of
its rights (if any) and/or performance of or compliance with its
obligations under this Memorandum of Charge (including the
creation of the security expressed to be created by this
Memorandum of Charge) does or will violate, or exceed any
borrowing or other powers or restrictions granted or imposed
under or pursuant to, (a) any law to which it is subject or (b)
any agreement to which it is a party or which is binding on it or
its assets and do not and will not result in the creation of, or
oblige it to create, any security over those assets;
(iv) Obligations Binding : its obligations under this Memorandum of
Charge and the security expressed to be created by this
Memorandum of Charge are valid, binding and enforceable and, in
the case of such security, will rank ahead of any other present
or future security on or over the Charged Property or any part
thereof;
3
<PAGE>
(v) Litigation : no litigation, arbitration or administrative
proceeding is current or pending or, so far as it is aware,
threatened to restrain the entry into, exercise of its rights (if
any) under and/or performance or endorsement of or compliance
with its obligations under, or the creation of the security
expressed to be created by, this Memorandum of Charge;
(vi) No Default : no event of default or potential event of default
(in relation to it) has occurred or will occur as a result of the
Chargor's entry into this Memorandum of Charge and it is not in
breach of or default under any agreement to an extent or in a
manner which has or could have a material adverse effect on it;
(vii)Ownership : it is and will at all times be the sole and
beneficial owner of the Charged Property;
(viii) Charged Securities : all the Charged Securities charged by it
are fully paid or credited as fully paid; and
(ix) Existing Security : no security exists on or over any of the
Charged Property except for the security created by this
Memorandum of Charge.
(B) Repetition : The Chargor warrants to and for the benefit of the Lender
that each of the warranties in sub-Clause (A) above made by it will be
correct and complied with in all respects at all times during the
continuance of the security created by this Memorandum of Charge as if
repeated then by reference to the then existing circumstances.
5. UNDERTAKINGS
------------
The Chargor hereby undertakes to the Lender that :-
(i) Transfer of Powerhouse Electric Shares : immediately following
signature of this Memorandum of Charge, it will deliver to the Lender
duly completed and signed instruments of transfer in favour of the
Lender or its nominee in respect of all its shares in Powerhouse
Electric together with the relevant share certificates and certified
copies of a Board Resolution of Powerhouse Electric approving (inter
alia) the transfer of all its issued shares in Powerhouse Electric in
accordance with the terms of this Memorandum of Charge;
(ii) Notice : it will give to Powerhouse Electric or (as the case may be)
its corporate secretary a notice of the charge or assignment of the
securities and rights to such Charged Securities in the form of
Schedule 1 (or in such other form as the Lender may require) and
procure that Powerhouse Electric or its corporate secretary delivers
to the Lender an acknowledgement of such notice of charge or
assignment in the form of Schedule 2 (or in such other form as the
Lender may require); and
(iii)General Covenants : during the continuance of the security created by
this Memorandum of Charge :-
(a) Charged Property : it will not (and will not agree, conditionally
or unconditionally, to) sell, transfer, lend or otherwise dispose
of or give any conditional or unconditional option, warrant or
other right to subscribe for, purchase or otherwise acquire, or
create (or agree, conditionally or unconditionally, to create) or
have outstanding any security on or over, any of the Charged
Property charged by it or any interest therein, except for the
security created by this Memorandum of Charge;
4
<PAGE>
(b) Value of Charged Property : it will not take or omit to take any
action which act or omission could materially and adversely
affect or could diminish the value of any of the Charged Property
charged by it or which may result in any alteration or impairment
of this Memorandum of Charge or any of the rights created hereby.
It will at its own expense promptly take all action which is at
any time necessary or desirable to protect the value of its
interest in and rights to, and the Lender's interests in and
rights to, the Charged Property; and
(c) Rights Issues, etc : it will on demand duly pay any calls,
subscription moneys and/or other moneys payable on or in respect
of the Charged Securities charged by it. If the Chargor does not
do so, the Lender may (but shall not be obliged to) do so and, if
the Lender does so, the Chargor shall on demand indemnify the
Lender against such payment together with interest thereon for
the period beginning on the date of such payment and ending on
the date on which the Lender has been indemnified in full by the
Chargor.
6. INDEMNITY
---------
(A) To Lender : The Lender shall be indemnified by the Chargor from and
against all actions, losses, claims, proceedings, costs, demands and
liabilities which may be suffered by the Lender by reason of any
failure of the Chargor to perform its obligations (if any) under this
Memorandum of Charge or in the execution or purported execution of any
of the rights, powers, remedies, authorities or discretions vested in
the Lender under or pursuant to this Memorandum of Charge.
(B) Repayment of Moneys : If the Lender sees fit to implement its rights
hereunder with respect to the Charged Property or if the Lender makes
any payment in respect of, or pursuant to, this Memorandum of Charge,
all moneys so expended by the Lender for the purposes aforesaid shall
on demand be repaid by the Chargor.
7. ENFORCEMENT AND DIVIDENDS
-------------------------
(A) Consolidation : No restrictions imposed by any ordinance, enactment or
law on any immediate or other power of sale, or on the consolidation
of mortgages or charges or other securities, shall apply to the
security created by this Memorandum of Charge.
(B) Enforcement : The security created by this Memorandum of Charge shall
become immediately enforceable and the power of sale and other powers
conferred by law (as varied and extended by this Memorandum of Charge)
and all the other powers conferred on the Lender by this Memorandum of
Charge shall be immediately exercisable at any time after the Chargor
shall have failed to pay or satisfy when due any part or parts of the
Indebtedness or the occurrence of any other event of default under the
Facility Agreement or the Promissory Note.
5
<PAGE>
8. POWERS OF CHARGEE
-----------------
(A) Certain powers : The Lender shall have power at any time after the
security created by this Memorandum of Charge shall have become
enforceable either in its own name or in the name of the Chargor and
without notice to the Chargor or any other person :-
(i) Sell : to sell, exchange, convert into money or otherwise dispose
of or realise or concur in selling, exchanging, converting into
money or otherwise disposing of or realising such part of the
Charged Property as is necessary to discharge the Indebtedness
and to secure the observance and performance of the Chargor's
obligations under the Facility Agreement, the Promissory Note and
this Memorandum of Charge either by public offer or private
contract and for such consideration and on such terms as it may
think fit and so that (without prejudice to the generality of the
foregoing) it may do any of those things for a consideration
consisting of cash, debentures or other obligations, shares,
stock or other valuable consideration and any such consideration
may be payable or deliverable in a lump sum whether immediately
or on a deferred basis or by instalments spread over such period
as it may think fit;
(ii) Compromise : to settle, adjust, refer to arbitration, compromise
and arrange any claims, accounts, disputes, questions and demands
relating in any way to the Charged Property or any part thereof;
(iii)Legal Actions : to bring, prosecute, enforce, defend and abandon
all such actions, suits and proceedings in relation to the
Charged Property or any part thereof as may seem to it to be
expedient; and
(iv) Other Powers : to do all such other acts and things as it may
consider necessary or desirable for the realising of the Charged
Property or any part thereof or incidental or conducive to any of
the matters, powers or authorities conferred on it under or by
virtue of this Memorandum of Charge and to exercise in relation
to the Charged Property or any part thereof all such powers,
authorities and things as it would be capable of exercising if it
were the absolute beneficial owner of the same.
In any sale or disposal referred to in paragraph (i), the Lender may itself
purchase the Charged Property or any part thereof free from any right of
redemption on the part of the Chargor which is hereby waived and released.
(B) Third Parties : The Chargor agrees that, upon any sale or disposal of
the Charged Property or any part thereof which the Lender shall make
or purport to make under the provisions of this Charge, a statement in
writing from the Lender that the security created by this Charge has
become enforceable and that the power of sale has become exercisable
shall be conclusive evidence of the fact in favour of any purchaser or
other person to whom any of the Charged Property may be transferred
and such purchaser or other person will take the same free of any
rights of the Chargor. The Chargor undertakes to indemnify the Lender
against any claim which may be made against the Lender by such
purchaser or any other person by reason of any defect in its title to
the Charged Property.
(C) Powers Additional : The powers conferred by this Memorandum of Charge
in relation to the Charged Property or any part thereof on the Lender
shall be in addition to and not in substitution for the powers
conferred on mortgagees under law, which shall apply to the security
created by this Memorandum of Charge except insofar as they are
6
<PAGE>
expressly or impliedly excluded. Where there is any ambiguity or
conflict between the powers conferred by law and those conferred by
this Memorandum of Charge as aforesaid, then the terms of this
Memorandum of Charge shall prevail to the extent that the law permits
derogation or waiver of a power conferred by law.
(D) Certificates Conclusive : A certificate by the Lender as to any sum
payable to it under this Memorandum of Charge, and any other
certificate, determination, notification or opinion of the Lender
provided for in this Memorandum of Charge, shall be conclusive in the
absence of manifest error.
9. DISTRIBUTION OF PAYMENTS
------------------------
All moneys received pursuant to this Memorandum of Charge and/or the powers
hereby conferred shall be applied in the following manner and order :-
(i) Charges : in or towards payment of any fees and any costs, charges and
expenses incurred by the Lender then due and payable under this
Memorandum of Charge;
(ii) Indebtedness : in or towards payment to the Lender of the
Indebtedness; and
(iii)Surplus : in payment of any surplus to the Chargor or other person
entitled thereto.
10. DELEGATION
----------
The Lender may at any time and from time to time delegate by power of
attorney or in any other manner to any person or persons or fluctuating
body of persons all or any of the powers, authorities and discretions which
are for the time being exercisable by the Lender under this Memorandum of
Charge in relation to the Charged Property or any part thereof and any such
delegation may be made upon such terms and conditions (including power to
sub-delegate) and subject to such regulations as the Lender may think fit
and the Lender shall not be in any way liable or responsible to the Chargor
for any loss or damage arising from any act, default, omission or
misconduct on the part of any such delegate or sub-delegate.
11. EXCLUSION OF LIABILITY
----------------------
(A) The Lender : The Lender shall not in any circumstances or for any
other reason whatsoever be liable to account to the Chargor or any
other person for anything except the Lender's own actual receipts or
be liable to the Chargor or any other person for any loss or damage or
diminution in price arising from any realisation by the Lender of the
Charged Property or any part thereof or from any act, default or
omission of the Lender in relation to the Charged Property or from any
exercise or non-exercise by the Lender of any power, authority or
discretion conferred upon it in relation to the Charged Property or
any part thereof by or pursuant to this Memorandum of Charge unless
such loss or damage shall be caused by the Lender's own fraud.
7
<PAGE>
(B) Delegate : All the provisions of sub-Clause (A) above shall apply in
respect of the liability of any such delegate or sub-delegate as
aforesaid in all respects as though every reference in the said
sub-Clause (A) to the Lender were instead a reference to such delegate
or sub-delegate.
12. FURTHER ASSURANCE
-----------------
The Chargor shall at its own expense execute and do all such assurances,
acts and things as the Lender may reasonably require facilitating the
realisation of the Charged Property and the exercise of all powers,
authorities and discretions vested in the Lender or in any such delegate or
sub-delegate as aforesaid and shall in particular execute all transfers,
conveyances, assignments and assurances of such property (whether to the
Lender or to its nominees) and give all notices, orders and directions
which the Lender may think expedient. For the purposes of this Clause, a
certificate in writing by the Lender to the effect that any particular
assurance, act or thing required by it is reasonably required shall be
conclusive evidence of such fact.
13. POWER OF ATTORNEY
-----------------
(A) Appointment : The Chargor hereby by way of security irrevocably
appoints the Lender and every such delegate or sub-delegate as
aforesaid to be its attorney and on its behalf and in its name or
otherwise to execute and do all such assurances, acts and things which
the Chargor ought to do under the covenants and provisions contained
in this Memorandum of Charge and generally in its name or otherwise
and on its behalf to exercise all or any of the powers, authorities
and discretions conferred by or pursuant to this Memorandum of Charge
on the Lender or any such delegate or sub-delegate and (without
prejudice to the generality of the foregoing) to seal and deliver and
otherwise perfect any deed, assurance, agreement, instrument or act
which it may deem proper in or for the purpose of exercising any of
such powers, authorities and discretions.
(B) Ratification : The Chargor hereby ratifies and confirms and agrees to
ratify and confirm whatever any such attorney as is mentioned in
sub-Clause (A) above shall do or purport to do in the exercise or
purported exercise of all or any of the powers, authorities and
discretions referred to in sub-Clause.
14. PROTECTION OF THIRD PARTIES
---------------------------
No person dealing with the Lender or with any such delegate or sub-delegate
as aforesaid shall be concerned to enquire whether any event has happened
upon which any of the powers, authorities and discretions conferred by or
pursuant to this Memorandum of Charge in relation to the Charged Property
or any part thereof are or may be exercisable by the Lender or by any such
delegate or sub-delegate or otherwise as to propriety or regularity of acts
purporting or intended to be in exercise of any such powers.
15. AVOIDANCE OF PAYMENTS
---------------------
No assurance, security or payment which may be avoided under any law
relating to winding-up or insolvency and no release, settlement or
discharge given or made by the Lender on the faith of any such assurance,
security or payment, shall prejudice or affect its right to enforce the
security created by this Memorandum of Charge in respect of the full extent
of the moneys hereby secured. Any such release, settlement or discharge
shall be deemed to be made subject to the condition that it will be void,
if any payment or security which the Lender may previously have received or
may thereafter receive from any person in respect of the Indebtedness, is
set aside under any applicable law or proves to have been for any reason
invalid.
8
<PAGE>
16. REMEDIES, WAIVERS AND CONSENTS
------------------------------
(A) Rights/Remedies : No failure on the part of the Lender to exercise,
and no delay on its part in exercising, any right or remedy under this
Memorandum of Charge will operate as a waiver thereof, nor will any
single or partial exercise of any right or remedy preclude any other
or further exercise thereof or the exercise of any other right or
remedy. The rights and remedies provided in this Memorandum of Charge
are cumulative and not exclusive of any rights or remedies provided by
law.
(B) Waiver/Consent : Any waiver or consent by the Lender under this
Memorandum of Charge must be in writing and may be given subject to
any conditions thought fit by the person giving that waiver or
consent. Any waiver or consent shall be effective only in the instance
and for the purpose for which it is given.
17. BENEFIT OF SECURITY
-------------------
This Charge shall be binding upon and enure to the benefit of each party
hereto and its successors and assigns. The Chargor may assign or transfer
all or any part of its rights, benefits and obligations hereunder with the
prior written consent of the Lender.
18. PARTIAL INVALIDITY
------------------
The illegality, invalidity or unenforceability of any provision of this
Memorandum of Charge under the law of any jurisdiction shall not affect its
legality, validity or enforceability under the law of any other
jurisdiction nor the legality, validity or enforceability of any other
provision.
19. COMMUNICATIONS
--------------
(A) Address : Each demand, notice or other communication under this
Memorandum of Charge shall be made by facsimile, telex or otherwise in
writing. Each communication or document to be delivered to any party
under this Memorandum of Charge shall be sent to it at the facsimile
or telex number or address, and marked for the attention of the
person, from time to time designated by that party to the other party
for the purpose of this Memorandum of Charge. The initial address so
designated by each party are set out at the end of this Memorandum of
Charge.
(B) Deemed Delivery : A demand, notice or other communication made or
given to any party in accordance with sub-Clause (A) above shall be
effective (notwithstanding that it is returned undelivered) and shall
be deemed to be received by it, if sent by facsimile or telex, on the
same day or, in any other case, when left at the address required by
subClause (A) above or seven days after being sent by prepaid
registered post (by airmail, if to another country) addressed to that
address.
9
<PAGE>
20. GOVERNING LAW AND JURISDICTION
------------------------------
(A) Governing Law : This Memorandum of Charge shall be governed by, and
construed in accordance with, the laws of the Special Administrative
Region of Hong Kong.
(B) Hong Kong Courts : The parties hereby irrevocably agree that the
courts of the Special Administrative Region of Hong Kong are to have
jurisdiction to settle any disputes which may arise out of or in
connection with this Memorandum of Charge and that, accordingly, any
legal action or proceedings arising out of or in connection with this
Memorandum of Charge may be brought in those courts and the Chargor
irrevocably submits to the non-exclusive jurisdiction of those courts.
(C) Agent for Service : The Chargor shall at all times maintain an agent
for service of process in Hong Kong. Such agent shall be Mr Sam Leung
Kam Sham of C3, 28th Floor, Elizabeth House, 254 Gloucester Road, Hong
Kong and any writ, judgment or other notice of legal process shall be
sufficiently served on the Chargor if delivered to such agent at its
address for the time being. The Chargor undertakes not to revoke the
authority of the above agent and if, for any reason, any such agent no
longer serves as agent of the Chargor to receive service of process,
the Chargor shall promptly appoint another agent, shall advise the
Lender thereof and shall deliver promptly to the Lender the acceptance
by such agent of its appointment.
10
<PAGE>
SCHEDULE 1
----------
NOTICE OF ASSIGNMENT
--------------------
7 February 1998
To: Powerhouse Electric Limited
c/o Island Secretaries Limited
8th Floor, Yu Yuet Lai Building
43 Wyndham Street
Hong Kong
Dear Sirs
We hereby give you notice that by a Memorandum of Charge (the "Charge") dated
6th February 1998 made between ourselves and Chung An Investments Limited, a
company incorporated in the Bahamas (the "Lender"), we have charged in favour of
the Lender, and assigned in accordance with the terms of the Charge to the
Lender, all of our right, title and interest in and to, inter alia, all our
shares in the capital of Powerhouse Electric Limited. You are hereby directed to
deal with all such securities in accordance with the instructions of the Lender.
This notice and the instructions herein contained are irrevocable and may not be
revoked, modified or varied without the consent in writing of the Lender.
Please acknowledge to myself and the Lender the receipt of this notice in the
form of the acknowledgement detached.
Yours faithfully
By
---------------------------------------
for and on behalf of
Powerhouse Resources Inc
11
<PAGE>
SCHEDULE 2
----------
ACKNOWLEDGEMENT OF NOTICE
-------------------------
7 February 1998
To: (1) Powerhouse Resources Inc
(2) Chung An Investments Limited
Dear Sirs
We acknowledge receipt of a notice of assignment dated 7th February 1998 of
which the above is a copy, and :-
(1) confirm that we have received no notice of any prior charge,
assignment or other security over the securities referred to in the
notice; and
(2) confirm that we will comply with the directions to us contained in the
notice.
Yours faithfully
For and on behalf of
Powerhouse Electric Limited
By :
Name :
Title :
12
<PAGE>
IN WITNESS WHEREOF this Memorandum of Charge has been entered into on the date
stated at the beginning.
The Chargor
- -----------
POWERHOUSE RESOURCES INC
at 1624 Market Street, Suite 303, Denver,
Colorado, U.S.A.
Fax Number : (303) 964 9244
Attention : Mr Sam Leung Kam Sham
The Common Seal of POWERHOUSE )
RESOURCES INC was affixed in the )
presence of :- )
The Lender
- ----------
CHUNG AN INVESTMENTS LIMITED
at 14th Floor, Onfem Tower, 20 Wyndham Street,
Hong Kong
Fax Number : (852) 2868 5186
Attention : Mr Chung Ho/Mr Robin De Morgan
The Common Seal of )
CHUNG AN INVESTMENTS )
LIMITED was affixed in the presence of :- )
13
Schedule 4
----------
Stock Option Agreement
----------------------
<PAGE>
Dated the 6th day of February 1998
----------------------------------
POWERHOUSE RESOURCES, INC.
and
CHUNG AN INVESTMENTS LIMITED
-----------------------------------------
STOCK OPTION AGREEMENT
-----------------------------------------
ANGELA WANG &CO
Solicitors
15th Floor Entertainment Building
30 Queen's Road Central
Hong Kong
(ORef : AW/970700)
<PAGE>
STOCK OPTION AGREEMENT
----------------------
THIS AGREEMENT is made this 6th day of February 1998.
PARTIES
- -------
(1) POWERHOUSE RESOURCES, INC., a company incorporated in the State of
Colorado, U.S.A. having its registered office at 1642 Market Street, Suite
303, Denver, Colorado 80202, U.S.A. ("Powerhouse"); and
(2) CHUNG AN INVESTMENTS LIMITED, a company incorporated in the Bahamas and
having its registered office at P O Box CB-12751, Nassau, New Providence,
Bahamas ("the Investor").
DEFINITIONS
- -----------
In this Agreement unless otherwise defined all words shall have the same
meanings as defined in the Facility Agreement dated 5th February 1998 between
Powerhouse and the Investor the following words shall have the following
meanings :-
"the Board" the Board of Directors of Powerhouse;
"Common Shares" the Common Shares of Powerhouse of par value of US$0.01
each;
"Powerhouse Powerhouse Electric Limited, a company incorporated in the
Electric" British Virgin Islands which is a 100% subsidiary of
Powerhouse;
"the Initial the 3 initial projects of Powerhouse Electric, in the Joint
Projects" Venture contracts namely : (1) between Powerhouse Electric
and Guangdong Huilai County's Penhui Power Co Ltd ( ) dated
24 September 1994 for the development and operation of the
Guangdong Huilai Kuicheng Power Station and to construct and
operate the Guangdong Huilai Kuicheng 1x3,960 kilowatt
diesel fuel power station; (2) between Powerhouse Electric
and Guangdong Huilai County's Penhui Power Co Ltd ( ) dated
24 September 1994 for the development and operation of the
Guangdong Huilai Shenquan Power Station and to construct and
operate the Guangdong Huilai Shenquan 1x3,960 kilowatt
diesel fuel power station; (3) between Powerhouse Electric
and Guangdong Fengshun County's Fenglian Power Co Ltd ( )
dated 25 September 1994 for the development and operation of
the Guangdong Fengshun Kiucheng Power Station and to
construct and operate the Guangdong Fengshun 1x3,960
kilowatt diesel fuel power station;
"the New Projects" the projects in respect of which Powerhouse Electric has
signed joint venture agreements as listed in the Schedule 1
hereto;
"Option" the option exercisable pursuant to Clause 2.2 below;
"Option Notice" a notice exercising an Option given pursuant to Clause 2
below;
1
<PAGE>
"the Option Period" the period commencing on the date of this Agreement and
ending on 31 July 1998 unless the Investor shall in its sole
discretion have given written notice prior to 31 July 1998
to Powerhouse extending such period to 31 October 1998;
"Option Shares" such number of Common Shares ranking pari passu with the
existing issued shares of Powerhouse as shall have a value
of US$3,000,000.00 based on the price of share and which
number is currently estimated to be 769,230,760 Common
Shares representing approximately 58.98% of the entire
issued share capital of Powerhouse, as confirmed by the
auditors of Powerhouse;
"price of share" the price of share shall be the NAV per share as at 31
December 1997 as confirmed by the auditors of Powerhouse in
accordance with the usual General Accepted Accounting
Principles recognised by the accountancy profession in the
United States and to be confirmed by the Investor.
Powerhouse shall procure that any adjustment arising from
such audit review shall be confirmed by the auditors of
Powerhouse no later than 15 April 1998;
"NAV per share" the Net Asset Value per Common Share. NAV per share is the
value of all principal assets of Powerhouse less the value
of all principal liabilities of Powerhouse as divided by the
total number of issued Common Shares;
"Relevant Period" the period from the date hereof until Completion or the
termination of this Agreement whichever is later;
"Reorganisation" in relation to Powerhouse any increase in issued share
capital any capitalisation of profits or reserves any rights
issue or offer by way of rights consolidation sub-division
reduction of capital purchase of own shares or other
reorganisation or adjustment relating to the share or loan
capital of Powerhouse and any scheme or amalgamation or
reconstruction affecting Powerhouse;
"Transfer Terms" that all the Option Shares shall be issued and allotted free
from any encumbrance and together with all rights attaching
thereto as at the date of issue of the Option Shares;
"Completion" the performance by Powerhouse and the Investor of the
obligations assumed by them respectively under Clause 5.2;
"Completion Date" the date of completion of the issue and allotment of the
Option Shares being the date ten business days after the
service of a valid Option Notice;
"NASDAQ" The National Association of Security Dealers' Automated
Quotation System, New York, U.S.A.;
"Disclosure Letter" the letter of disclosure from Powerhouse to the Investor
dated 20 January 1998;
2
<PAGE>
"Encumbrance" any charge lien equity third party right option right of
presumption or any other encumbrance priority or security
interest of whatsoever nature.
Reference to any statute or statutory provision includes a reference to that
statue or statutory provision as from time to time amended extended or
re-enacted.
Unless otherwise specified in any particular case words importing the singular
include the plural words importing any gender include every gender and words
importing persons include bodies corporate and unincorporate and (in each case)
vice versa.
Reference to a party include where the context admits references to his personal
representatives and successors in title.
Reference to clauses and other provisions are reference to clauses and other
provisions of this Agreement.
The headings shall not affect interpretation.
RECITALS
- --------
(a) The Board at the date hereof comprises Anil Kumar, Vinod Kumar, Dennis
Dowd, Mark Chapman, Malcolm Stone and Sam Leung.
(b) The authorized share capital of Powerhouse is US$7,800,000 divided into
780,000,000 Common Shares at par of US$0.01 each and US$20,000,000 divided
into 20,000,000 shares of Preferred Stock at par of US$1.00 each.
(c) The total Common Shares currently issued are 465,622,810 Common Shares.
(d) It has been estimated that 535,062,810 Common Shares will be on issue as at
31 December 1997 as detailed in Exhibit C to the Disclosure Letter.
(e) Powerhouse Electric has commenced the Initial Projects but requires
additional funding to complete the Initial Projects, to commence the New
Projects and to fund the operation of Powerhouse.
(f) The Investor by a Promissory Note in connection with a Facility Agreement
and Memorandum of Charge is lending to Powerhouse the sum of US$1,000,000
upon the terms set out therein.
(g) The Common Shares of Powerhouse were suspended on NASDAQ in the Spring of
1996. Powerhouse will use part of the money borrowed in (f) above for
application for re-listing of its Common Shares on NASDAQ to enable trading
in those shares to resume.
(h) The Investor wishes to enter into an Option to subscribe for new Common
Shares on the terms of this Agreement.
AGREEMENT
- ---------
1. Effect of this Agreement
------------------------
3
<PAGE>
This Agreement shall cease to have legal validity or effect after the
Option Period, unless otherwise extended by the parties hereto.
2. Option
------
2.1 In consideration of the mutual covenants and agreements contained herein,
Powerhouse has agreed to grant to the Investor the call option set out in
Clause 2.2.
2.2 Powerhouse hereby grants to the Investor the call option to subscribe for
the Option Shares at the price of share, upon exercise of which Powerhouse
will become bound to issue and allot and the Investor will become bound to
complete the subscription of the Option Shares on the Transfer Terms.
2.3 The Option must be exercised by notice in writing signed by or on behalf of
the Investor or by the Investor's solicitors on behalf of the Investor and
must be served only during the Option Period failing which it will (subject
to as provided in Clause 9.7) lapse and cease to have any further effect.
An Option Notice once given may not be withdrawn except with the written
consent of Powerhouse.
2.4 The Option granted above shall be exercised by the Investor in its sole
discretion absolutely and the Investor shall not be called upon by
Powerhouse or any third party to disclose the reason for exercising or not
exercising such Option.
2.5 If the Option (subject to Clause 2.3 above) is exercised then the
provisions of Clause 4 will apply and such other provisions of this
Agreement as are relevant to completion of the purchase of the Option
Shares.
2.6 Notwithstanding the provisions of the Option being granted herein, if
Powerhouse's Common Shares are re-listed for trading on NASDAQ during the
Option Period, the Investor must exercise the Option within 14 days or such
period as may be agreed between the Investor and Powerhouse after the date
of the re-listing of Powerhouse's Common Shares for trading on NASDAQ
failing which the Option will lapse and cease to have any further effect.
3. Waiver of Rights
----------------
3.1 During the Relevant Period Powerhouse undertakes with the Investor namely
as follows :-
(i) to procure that no dividend shall be paid to the shareholders of
Powerhouse;
(ii) not to permit unless specifically permitted so to do in writing by the
Investor :-
(a) the issue of or the creation or issue or grant of any right to
acquire or call for the issue of any shares of any description in
the capital of Powerhouse other than the Option Shares;
(b) any reduction of capital of Powerhouse;
(c) any substantial alteration in the nature of the business of
Powerhouse;
(d) any disposal of all or substantially all of the assets of the
Powerhouse or of all or substantially all of the undertakings or
assets of Powerhouse and its subsidiaries;
4
<PAGE>
(e) the Board shall not pass any resolution without the concurrence
of the Investor for so long as the Promissory Note in connection
with the Facility Agreement and Memorandum of Charge and any
subsequent further advances lent by the Investor to Powerhouse
and interest thereon remain unpaid;
(f) Powerhouse shall not create nor permit any of its subsidiaries to
create any second or further charge on the security pledged or
mortgaged under the Memorandum of Charge referred to in Clause
3.1(ii)(e) above.
4. Payment and Price
-----------------
4.1 On exercise of the Option the Investor shall be obliged to pay to
Powerhouse the sum of US$3,000,000 for the Option Shares.
4.2 On Completion of the Option, the Investor shall have the option to apply
the money representing the principal and interest still outstanding under
the Facility Agreement and Promissory Note as part payment of the sum of
US$3,000,000 in Clause 4.1 above.
5. Completion
----------
5.1 Completion of the subscription for the Option Shares shall take place at
the offices of the Investor's Solicitors or at such other place as may be
agreed at 12 noon on the Completion Date provided that if such day is not a
business day then Completion shall take place at 12 noon on the first
business day thereafter.
5.2 On Completion :
Powerhouse shall upon payment of the consideration for the Option Shares:
(a) issue and allot the Option Shares to the Investor or as it shall
direct;
(b) deliver all relevant share certificates and other documents of title
in respect of the Option Shares to the Investor;
(c) procure registration of the Option Shares in the records of Powerhouse
forthwith (subject to due stamping at the expense of the Investor) in
the name of the Investor or as it shall direct;
(d) do such things and execute such documents as shall be necessary as the
Investor may reasonably request to give effect to the subscription for
the Option Shares on the Transfer Terms; and
(e) use its best endeavours to register the Option Shares and list them
for trading under the applicable US securities laws as soon as
practicable following Completion.
5.3 If any provisions of Clause 5.2 are not complied with on the date fixed for
Completion the party not in default may without prejudice to its other
rights and remedies :-
(i) defer Completion to a date not more than 14 days after such date and
so that the provisions of this Clause 5 shall apply to Completion as
so deferred;
5
<PAGE>
(ii) proceed to Completion so far as practicable (without prejudice to its
rights hereunder); or
(iii)rescind the contract of sale arising by virtue of the exercise of the
Option whereupon this Agreement shall terminate.
5.4 If Powerhouse fails to issue and allot the Option Shares as aforesaid Mr
Dennis Dowd and Mr Sam Leung, severally, Directors of Powerhouse shall be
entitled to receive and give a good discharge for the US$3,000,000 on
behalf of Powerhouse (but shall not be bound to earn any interest thereon)
and Powerhouse hereby irrevocably appoints Mr Dennis Dowd and Mr Sam Leung,
severally, each as its attorney-in-fact to execute and deliver on behalf of
Powerhouse such documents and instruments and to take or cause to be taken
such other actions on behalf of Powerhouse as may be necessary or desirable
in the opinion of such attorney-in-fact in his absolute discretion to
effect the issue to the Investor or its designee of the Option Shares and
Powerhouse hereby ratifies and confirms all such acts and deeds of such
attorney-in-fact done pursuant to this power.
6. Ownership and Alienation
------------------------
6.1 Powerhouse warrants to the Investor that, at the time of executing of this
Agreement it is entitled to enter into this Agreement and to issue and
allot the Option Shares and that apart from this Agreement such shares are
free from any pre-emption rights.
6.2 Powerhouse undertakes to the Investor that during the Relevant Period it
will not dispose of any interest in the Option Shares or any right
attaching thereto (save as may be required pursuant to their obligations
under this Agreement) or create or allow to be created any Encumbrances
over such shares or agree (whether subject to any condition precedent or
condition subsequent or other) to do any of such things.
7. Duration of Obligation
----------------------
7.1 This Agreement shall terminate on the expiry of the Option Period if no
Option Notice shall have been served on or prior to such time provided that
in the event that the Option shall not be validly exercised during the
Option Period this Agreement shall terminate on the expiry of the Option
Period.
7.2 If any Option Notice shall have been served on or prior to the expiry of
the Option Period this Agreement shall terminate upon the fulfilment of the
parties' obligations hereunder.
7.3 On any termination of this Agreement the rights and obligations of the
parties hereunder shall cease and determine save in respect of any
antecedent breach of this Agreement.
8. Notice
------
8.1 Any notice required or permitted to be given hereunder shall be in writing
and shall be sent to its registered office from time to time or to such
other address as may be designated by notice to the other parties in
accordance with this Clause. Any such notice shall be delivered personally
or sent in a pre-paid letter by the recorded delivery when delivered and if
by recorded delivery shall be deemed effective seven days after posting
(and proof that the envelope containing the notice (or direction) was
properly addressed and sent prepaid shall be sufficient evidence of
service).
6
<PAGE>
9. General
-------
9.1 This Agreement may not be assigned in whole or in part but is binding upon
and shall enure for the benefit of the successors of the parties hereto.
9.2 No variation of this Agreement shall be effective unless made in writing.
9.3 This Agreement shall be governed by and construed in accordance with the
laws of the Hong Kong Special Administrative Region and the parties hereby
submit to the non-exclusive jurisdiction of the courts of the Hong Kong
Special Administrative Region.
9.4 Powerhouse hereby irrevocably appoints Mr Sam Leung Kam Sham of C3, 28th
Floor, Elizabeth House, 254 Gloucester Road, Hong Kong as the agent for the
service of process in the Hong Kong Special Administrative Region in
relation to any matter arising out of this Agreement. If such process agent
ceases to have an address in the Hong Kong Special Administrative Region,
Powerhouse irrevocably agrees to appoint a new process agent and to deliver
to the Investor within 7 days a copy of a written acceptance of appointment
by the process agent.
9.5 The failure by any of the parties hereto at any time to require performance
by any other party or to claim a breach of any term of this Agreement shall
not be deemed to be waiver of any right under this Agreement.
9.6 The parties hereto shall use their respective reasonable endeavors to
procure that any necessary third parties shall execute and do all such
further deeds documents and things as any party may reasonably require by
notice in writing to any other party to carry the provisions of this
Agreement into full force and effect and (so far as they are able) shall do
everything necessary to give effect to the spirit and intent of this
Agreement.
9.7 Any date or period mentioned in this Agreement may be extended by written
agreement between the parties hereto but as regards any date or period
(whether or not extended as aforesaid) time shall be of the essence of this
Agreement.
9.8 Subject as specifically provided herein Powerhouse shall bear its own costs
and expenses relating to this Agreement and all stamp duty payable in
respect of the grant of Option and the allotment of the Option Shares.
7
<PAGE>
SCHEDULE 1
----------
NEW PROJECTS
------------
Joint Venture Companies Capacity
----------------------- --------
Detail Total
------ -----
MW MW
-- --
1. Jiangsu Liyang Santa Electric 4 X 4 16
Power Company Limited
Hekou Township
Liyang City
Jiangsu Province
PRC
2. Zhejiang Province Yongkang City Yingkang 3 X 4 12
Electric Power Company Limited
Yongkang City
Zhejiang Province
PRC
3. Jiangsu Yangzhong Mingzhu Power 4 X 4 16
Company Limited
Development Zone in Yangzhong City
Jiangsu Province
PRC
4. Guangdong Haifeng Huiying Power Plant 4 X 4 16
Haifeng City
Guangdong Province
PRC
5. Guangdong Lufeng Jinxiang Power Company 50 50
Lufeng City --
Guangdong Province
PRC
110
---
[THE ABOVE FUTURE PROJECTS ARE LISTED IN ORDER OF PRIORITY]
8
<PAGE>
EXECUTED as a deed in two originals the day and year first before written.
THE COMMON SEAL of Powerhouse )
Resources Inc was affixed in the presence )
presence of :- )
THE COMMON SEAL of Chung An )
Investments Limited was affixed in )
the presence of :- )
9
