SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
--------------- ---------------
Commission File No. 0-20877
MAN SANG HOLDINGS, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 87-0539570
- --------------------------------- ---------------------------------
(State or other jurisdiction
of incorporation or organization (IRS Employer Identification No.)
21/F Railway Plaza, 39 Chatham Road South
Tsimshatsui, Kowloon, Hong Kong
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(Address of principal executive offices)
(852) 2317 5300
---------------------------
(Issuer's telephone number)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
As of January 24, 1997, 4,304,862 shares of Common Stock of the issuer were
outstanding.
<PAGE>
MAN SANG HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1996 and
December 31, 1996.............................................. 1
Consolidated Statements of Income - For the three
and nine months ended December 31, 1996 and 1995............. 2
Consolidated Statements of Cash Flows - For the nine months
ended December 31, 1996 and 1995 .............................. 3
Notes to Consolidated Financial Statements..................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 5
PART II - OTHER INFORMATION.............................................. 7
SIGNATURES............................................................... 8
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Unaudited)
(Amounts expressed in thousands)
<TABLE>
<CAPTION>
December 31, 199 March 31, 1996
---------------- --------------
US HK$ HK$
<S> <C> <C> <C>
ASSETS
Current assets:
Cash 2,305 17,815 9,602
Accounts receivable, net 5,946 45,965 33,809
Advances to related parties - - 50
Inventories 18,436 142,513 85,941
Prepaid expenses 223 1,723 1,194
Property held for sale 336 2,598 -
Other current assets 553 4,275 6,749
------ ------- -------
Total current assets 27,799 214,889 137,345
Property, plant and equipment, net 3,759 29,058 9,697
Real estate investment, net 3,341 25,821 26,199
------ ------- -------
Total assets 34,899 269,768 173,241
====== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings 9,219 71,263 56,625
Current portion of long-term debt 201 1,557 363
Accounts payable 3,073 23,755 22,429
Advances from related companies - - 2,815
Accrued payroll and employee benefits 325 2,514 1,248
Other accrued liabilities 1,022 7,897 10,130
Income taxes payable 213 1,645 21
------ ------- -------
Total current liabilities 14,053 108,631 93,631
Long-term debt 1,144 8,840 178
------ ------- -------
Shareholders' equity:
Common stock, par value $0.001 17 133 93
Preferred stock, par value $0.001
Series A - 1 1
Series B convertible and redeemable - - -
Additional paid-in capital 5,249 40,570 1,907
Retained earnings 14,357 110,983 77,205
Cumulative translation adjustments 79 610 226
------ ------- -------
Total shareholders' equity 19,702 152,297 79,432
Total liabilities and
shareholders' equity 34,899 269,768 173,241
</TABLE>
See accompanying notes to condensed consolidated financial statements
1
<PAGE>
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31
(Amounts expressed in thousands except share data)
<TABLE>
<CAPTION>
Three Months Ended December 31, Nine Months Ended December 31,
------------------------------- ------------------------------
1996 1995 1996 1995
--------------------- --------- ------------------ ---------
US$ HK$ HK$ US$ HK$ HK$
<S> <C> <C> <C> <C> <C> <C>
Net sales 7,350 56,820 42,130 22,777 176,070 159,102
Cost of goods sold 4,586 35,449 27,107 14,323 110,717 106,330
----- --------- --------- ------ --------- ---------
Gross profit 2,764 21,371 15,023 8,454 65,353 52,772
Rental income, gross 176 1,355 849 476 3,678 2,487
Selling, general and
administrative expenses:
Pearls 1,133 8,764 7,288 3,545 27,407 23,131
Real estate investment 173 1,332 657 381 2,943 1,594
----- --------- --------- ------ --------- ---------
Operating income 1,634 12,630 7,927 5,004 38,681 30,534
Interest expense 216 1,672 112 607 4,692 2,920
Interest income 40 310 334 75 578 557
Other income 48 370 55 158 1,221 790
----- --------- --------- ------ --------- ---------
Income before income
taxes 1,506 11,638 8,204 4,630 35,788 28,961
Provision for income
taxes 143 1,107 (79) 260 2,010 917
----- --------- --------- ------ --------- ---------
Net income 1,363 10,531 8,283 4,370 33,778 28,044
===== ========= ========= ====== ========= =========
Earnings per common share 0.38 2.93 3.01 1.22 9.41 10.20
===== ========= ========= ====== ========= =========
Weighted average common
and common equivalent
shares outstanding 3,590,301 2,750,000 3,590,301 2,750,000
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
<PAGE>
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED DECEMBER 31,
(Amounts expressed in thousands)
<TABLE>
<CAPTION>
Nine Months Ended December 31,
------------------------------
1996 1995
------------------ ----------
US$ HK$ HK$
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 4,370 33,778 28,044
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 275 2,129 1,671
Loss (gain) on sale of property,
plant and equipment32 252 (11)
Changes in operating assets and
liabilities
Accounts receivable (1,517) (11,729) (7,266)
Inventories (7,293) (56,377) 2,894
Prepaid expenses 199 1,539 (5,275)
Other current assets 53 408 -
Income taxes receivable - - 338
Accounts payable 126 976 (21,063)
Accrued payroll and employee benefits 163 1,264 2,671
Other accrued liabilities (291) (2,253) (101)
Income taxes payable 210 1,624 (268)
------- -------- --------
Net cash (used in) provided by
operating activities) (3,673) (28,389) (1,634)
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and
equipment (3,102) (23,979) (958)
Proceeds from sale of property,
plant and equipment 26 198 241
------- -------- --------
Net cash (used in) investing activities (3,076) (23,781) (717)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 1,340 10,360 -
Repayment of long-term debt (65) (504) (287)
Increase in short-term borrowings 15,531 120,055 144,248
Repayment of short-term borrowings (13,810) (106,752) (154,506)
Increase in bank overdrafts 39,224 303,204 124,122
Repayment of bank overdrafts (39,058) (301,922) (111,652)
Advances from related parties 18 139 2,896
Repayments to related parties (376) (2,904) (3,522)
Net proceeds from issuance of Series
B preferred stock 5,007 38,703 -
------- -------- --------
Net cash provided by financing
activities 7,811 60,379 1,299
------- -------- --------
Net increase in cash 1,062 8,209 2,216
Exchange adjustments 1 4 864
Cash at beginning of period 1,242 9,602 4,783
-------- -------- --------
Cash at end of period 2,305 17,815 7,863
======= ======== ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest and finance charges 682 5,270 3,298
======= ======== ========
Income taxes 50 386 847
======= ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE>
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
December 31, 1996
(Unaudited)
1. INTERIM FINANCIAL PRESENTATION
The interim financial statements are prepared pursuant to the requirements
for reporting on Form 10- QSB. The March 31, 1996 balance sheet data was
derived from audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The
interim financial statements and notes thereto should be read in
conjunction with the financial statements and notes included in the
Company's Form 10-KSB for the year ended March 31, 1996. In the opinion of
management, the interim financial statements reflect all adjustments of a
normal recurring nature necessary for a fair presentation of the results
for the interim periods presented.
On October 10, 1996, the Company effected a 1-for-4 reverse stock split.
Accordingly, the reverse split has been reflected in the accompanying
financial statements for each period presented and earnings per share has
been computed using this revised equity structure.
On December 7, 1996, the Company's subsidiary, Man Sang Jewellery Co. Ltd.,
formed a wholly-owned subsidiary in the People's Republic of China known as
Tangzhu Jewellery Goods (Shenzhen) Co. Ltd. The new subsidiary specializes
in processing larger sizes of Chinese cultured pearls, South Sea pearls and
Tahitian black pearls.
2. CURRENCY PRESENTATION AND FOREIGN CURRENCY TRANSLATION
Assets and liabilities of foreign subsidiaries are translated at period end
exchange rates, while revenues and expenses are translated at average
exchange rates during the period. Adjustments arising from translating
foreign currency financial statements are reported as a separate component
of stockholders' equity. Gains or losses from foreign currency transactions
are included in income. Aggregate net foreign currency gains or losses were
immaterial for all periods.
The consolidated financial statements of the Company are maintained, and
its consolidated financial statements are expressed, in Hong Kong dollars.
The translations of HK dollar amounts into US dollars are for convenience
only and have been made at the rate of HK$7.73 to US$1, the approximate
free rate of exchange at December 31, 1996. Such translations should not be
construed as representations that the Hong Kong dollar amounts could be
converted into US dollars, at that rate or any other rate.
3. SHAREHOLDERS' EQUITY
During the nine months ended December 31, 1996, the Company sold 6,760
shares of Series B convertible preferred stock, par value $0.001 each, for
$6,760,000. The Series B preferred shares were convertible into common
stock commencing on or after 45 days following the sale of such shares.
Each Series B preferred share was convertible into the number of shares of
common stock determined by dividing US$1,000 by an amount equal to the
lesser of (1) the market price of the common stock on the closing date of
the sale of such shares or (2) 70% of the average closing bid price of the
common stock for the five trading days preceding the conversion. The right
of the holders of Series B preferred shares to convert such shares into
common stock expired on December 31, 1997.
During the nine months ended December 31, 1996, all of the Series B
preferred shares were converted into common stock of the Company resulting
in the issuance of 1,304,822 shares of common stock (after giving effect to
a 1-for-4 reverse split of the Company's common stock effective October 10,
1996).
4
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
MATERIAL CHANGES AND RESULTS OF OPERATIONS
Net sales increased by HK$17.0 million during the nine months ended
December 31, 1996 to HK$176.1 million, representing 10.7% growth, compared to
net sales of HK$159.1 million during the same period in 1995. The increase in
net sales was attributable to implementation of the Company's plan to alter its
sales mix with an emphasis on increased sales of higher margin cultured pearls.
Cultured pearls, including Chinese cultured pearls, Japanese cultured pearls and
South Sea Pearls, represented 68% of net sales during the nine months ended
December 31, 1996 as compared to 59% of net sales during the same period in
1995.
Gross profits increased by HK$12.6 million, or 23.9%, to HK$65.4 million
for the nine months ended December 31, 1996 compared to HK$52.8 million for the
same period in 1995. As a percentage of sales, gross profits increased from
33.2% in 1995 to 37.1% in 1996. The increase in gross profits and gross profit
margins resulted from the overall increase in sales and an increase in the
percentage of higher margin cultured pearls.
Rental income increased by HK$1.2 million, or 48.0%, to HK$3.7 million for
the nine months ended December 31, 1996 compared to HK$2.5 million for the same
period in 1995. The increase in gross rental income was attributable to an
increase in occupancy rate from 54% to 93%, respectively, in the Man Sang
Industrial City facility located in the People's Republic of China.
Selling, general and administrative expenses ("SG&A") during the nine
months ended December 31, 1996 totaled HK$30.3 million, consisting of HK$27.4
million attributable to pearl operations and HK$2.9 million attributable to real
estate operations, as compared to HK$24.7 million, consisting of HK$23.1 million
attributable to pearl operations and HK$1.6 million attributable to real estate
operations, during the same period in 1995, an increase of HK$5.6 million, or
22.7%. The increase in SG&A was primarily due to increased marketing expenses
associated with the higher sales volume, including exhibition expenses and
advertising and promotion expenses for trade shows and increased salaries
attributable to hiring of additional staff to support the expanded scope of
operations and increases in management salaries. As a percentage of net sales,
SG&A from pearl operations increased from 14.5% to 15.6%.
Net interest expense increased by HK$1.7 million, or 70.8%, to HK$4.1
million for the nine months ended December 31, 1996, from HK$2.4 million for the
same period in 1995. The increase in net interest expense was due principally to
an increase in short-term borrowings during the current fiscal year. The
increase in short-term borrowings was principally used to finance higher
inventory holding costs associated with higher levels of production and sales.
The Company's average borrowing rate decreased to 9.5% per annum for the nine
months ended December 31, 1996 from 12.2% per annum for the year ended March 31,
1996.
MATERIAL CHANGES IN FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of HK$106.3 million
and cash balances of HK$17.8 million as compared to a working capital balance of
HK$43.7 million and a cash balance of HK$9.6 million at March 31, 1996. The
improvement in working capital was attributable to a combination of (i) cash
flows from profitable operations and (ii) the receipt of HK$38.7 million of net
proceeds from the sale of convertible preferred stock during the period.
Inventories increased by HK$56.6 million to HK$142.5 million at December
31, 1996 from HK$85.9 million at March 31, 1996. The increase in inventories was
attributable to higher purchasing and production to meet increased demand for
the Company's Chinese cultured pearls as a result of a large decrease in the
supply of Japanese cultured pearls and because of a change in the mix of the
inventory to a higher percentage of more expensive cultured pearls. Inventories
of Chinese cultured pearls and South Sea pearls increased by HK$21.9 million and
HK$31.1 million, respectively, during the period. The increase in inventories
has been primarily financed with short-term borrowings and proceeds from the
sale of convertible preferred stock.
5
<PAGE>
Accounts receivable increased to HK$46.0 million at December 31, 1996 from
HK$33.8 million at March 31, 1996. The increase in accounts receivable was
attributable to slightly more favorable credit terms offered to selected
customers. The average turnover of accounts receivable for the nine months ended
December 31, 1996 was 67 days as compared to 60 days for the year ended March
31, 1996.
Property, plant and equipment increased by HK$19.4 million to HK$29.1
million at December 31, 1996 from HK$9.7 million at March 31, 1996. The increase
was principally a result of (1) expenditure of HK$3.1 million on leasehold
improvements relating to the relocation of the Company's offices to its current
location in August 1996 and (2) the acquisition by the Company in November 1996
of a leasehold property for HK$18.7 million, which property is used by the
Company's president as residential accomodation. The Company intends to sell the
residential property previously used by its president in the near future when,
and if, a favorable price can be obtained. Based on current market prices, the
Company expects to sell such property at a profit.
At December 31, 1996, the Company had utilized approximately HK$71.3
million of its credit facilities as compared to HK$53.9 million which had been
utilized at March 31, 1996. The increase in borrowings under the Company's
credit facilities was mainly attributable to an installment loan of HK$10.0
million and a short term bank facility of HK$7.0 million used to finance the
acquisition of the leasehold property utilized as the residence of the
president.
During the nine months ended December 31, 1996, the Company issued
convertible preferred stock raising approximately HK$38.7 million net of
offering costs. At December 31, 1996, all 6,760 shares of Series B convertible
preferred stock issued had been converted to common stock at a price equal to
70% of the average closing bid price of the common stock for the five trading
days preceding the conversion. As a result of such conversions, the Company
issued approximately 1,304,822 shares of common stock (after giving effect to a
1-for-4 reverse split of the Company's common stock effective October 10, 1996).
6
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
(a) On November 15, 1996, an annual meeting of shareholders of Man Sang
Holdings, Inc. was held in Orlando, Florida.
(b) The following directors were elected (by the votes indicated) at such
meeting: Ricky Cheng Chung Hing (10,000,000 For, 0 Against, 1,250,000
Abstaining), Cheng Tai Po (10,000,000 For, 0 Against, 1,250,000
Abstaining), Sam Sio Kam Seng (10,000,000 For, 0 Against, 1,250,000
Abstaining), Amy Yan Sau Man (10,000,000 For, 0 Against, 1,250,000
Abstaining), Sonny Hung Kwok Wing (10,000,000 For, 0 Against,
1,250,000 Abstaining), Matthew Lai Chau Ming (10,000,000 For, 0
Against, 1,250,000 Abstaining) and Ernest Yuen Ka Lok (10,000,000 For,
0 Against, 1,250,000 Abstaining).
(c) In addition to the election of directors as noted above, the following
matters were voted upon at such meeting:
(i) Approval of 1996 Stock Option Plan (10,000,000 For, 0 Against and
1,250,000 Abstentions and Broker Non-Votes).
(ii) Ratification of appointment of Deloitte Touche Tohmatsu as the
Company's independent certifying accountants (10,000,000 For, 0
Against and 1,250,000 Abstentions and Broker Non-Votes).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Man Sang Holdings, Inc. 1996 Stock Option Plan
10.2 Tenancy Agreement dated June 24, 1996 re: executive offices
27 Financial Data Schedules
(b) Reports on Form 8-K
None
7
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
MAN SANG HOLDINGS, INC.
Date: January 31, 1997 /s/ Sam Sio
------------------------------------------
Sam Sio
Chief Executive Officer
Date: January 31, 1997 /s/ Frederick Cheng
------------------------------------------
Frederick Cheng
Chief Financial Officer
8
MAN SANG HOLDINGS, INC.
1996 STOCK OPTION PLAN
1. Purpose. The purpose of this MAN SANG HOLDINGS, INC. 1996 STOCK OPTION
PLAN ("Plan") is to encourage ownership of common stock, $.001 par value
("Common Stock"), of MAN SANG HOLDINGS, INC., a NEVADA corporation (the
"Company"), by eligible key employees, consultants and directors of the Company
and its Affiliates (as defined below) and to provide increased incentive for
such employees, consultants and directors to render services and to exert
maximum effort for the business success of the Company. In addition, the Company
expects that this Plan will further strengthen the identification of employees,
consultants and directors with the shareholders. Certain options to be granted
under this Plan are intended to qualify as Incentive Stock Options ("ISOs")
pursuant to Section 422 of the Internal Revenue Code of 1986, as amended
("Code"), while other options granted under this Plan will be nonqualified
options which are not intended to qualify as ISOs ("Nonqualified Options"),
either or both as provided in the agreements evidencing the options as provided
in Section 6 hereof. As used in this Plan, the term "Affiliates" means any
"parent corporation" of the Company and any "subsidiary corporation" of the
Company within the meaning of Sections 424(e) and (f), respectively, of the
Code.
2. Administration.
2.1 Composition of the Compensation Committee. This Plan shall be
administered by the Compensation Committee (the "Committee") designated by the
Board of Directors of the Company (the "Board"), which shall also designate the
Chairman of the Committee. If the Company is governed by Rule 16b-3 promulgated
by the Securities and Exchange Commission ("Commission") pursuant to the
Securities Exchange Act of 1934, as amended ("Exchange Act"), no director shall
serve as a member of the Committee unless the director is a "non-employee
director" within the meaning of such Rule 16b-3. Members of such Committee shall
only be eligible to receive stock options under this Plan if such stock options
are granted in accordance with Rule 16b-3.
2.2 Committee Action. The Committee shall hold its meetings at such times
and places as it may be determine. A majority of its members shall constitute a
quorum, and all determinations of the Committee shall be made by not less than a
majority of its members. Any decision or determination reduced to writing and
signed by a majority of the members shall be fully effective as if it had been
made by a majority vote of its members at a meeting duly called and held. The
Committee may designate the Secretary of the Company or other Company employees
to assist the Committee in the administration of this Plan, and may grant
authority to such persons to execute award agreements or other documents on
behalf of the Committee and the Company. Any duly constituted committee of the
Board satisfying the qualifications of this Section 2 may be appointed as the
Committee.
<PAGE>
2.3 Committee Expenses. All expenses and liabilities incurred by the
Committee in the administration of this Plan shall be borne by the Company. The
Committee may employ attorneys, consultants, accountants or other persons.
3. Stock Reserved. Subject to adjustment as provided in Section 6.11
hereof, the aggregate number of shares of Common Stock that may be optioned
under this Plan is 1,000,000. The shares subject to this Plan shall consist of
authorized but unissued shares of Common Stock and shares previously issued and
held in treasury by the Company and such number of shares shall be and is hereby
reserved for sale for such purpose. Any of such shares which may remain unsold
and which are not subject to outstanding options at the termination of this Plan
shall cease to be reserved for the purpose of this Plan, but until termination
of this Plan or the termination of the last of the options granted under this
Plan, whichever last occurs, the Company shall at all times reserve a sufficient
number of shares to meet the requirements of this Plan. Should any option expire
or be canceled prior to its exercise in full, the shares theretofore subject to
such option may again be made subject to an option under this Plan.
4. Eligibility. The persons eligible to participate in this Plan as a
recipient of options ("Optionee") shall include only key employees, consultants
and directors of the Company or its Affiliates at the time the option is
granted. An employee or consultant who has been granted an option hereunder may
be granted an additional option or options, if the Committee shall so determine.
5. Grant of Options.
5.1 Committee Discretion. The Committee shall have sole and absolute
discretionary authority (i) to determine, authorize, and designate those key
employees, consultants and directors of the Company or its Affiliates who are to
receive options under this Plan, (ii) to determine the number of shares of
Common Stock to be covered by such options and the terms thereof, and (iii) to
determine the type of option granted: ISOs, Nonqualified Options or a
combination of ISOs and Nonqualified Options; provided that consultants and
directors who are not employees of the Company may not receive any ISOs. The
Committee shall thereupon grant options in accordance with such determination as
evidenced by a written option agreement. Subject to the express provisions of
this Plan, the Committee shall have discretionary authority to prescribe, amend
and rescind rules and regulations relating to this Plan, to interpret this Plan,
to prescribe and amend the terms of the option agreements (which need not be
identical) and to make all other determinations deemed necessary or advisable
for the administration of this Plan.
5.2 Shareholder Approval. All options granted under this Plan are subject
to, and may not be exercised before, the approval of this Plan by the
shareholders prior to the first anniversary date of the Board meeting held to
approve this Plan, by the affirmative vote of the holders of a majority of the
outstanding shares of the Company present, or represented by proxy, and entitled
to vote thereas or written consent in accordance with the laws of the State of
Nevada; provided that if such approval by the shareholders of the Company is not
forthcoming, all options previously granted under this Plan shall be void.
2
<PAGE>
5.3 Limitation on Incentive Stock Options. The aggregate fair market value
(determined in accordance with Section 6.2 of this Plan at the time the option
is granted) of the Common Stock with respect to which ISOs may be exercisable
for the first time by any Optionee during any calendar year under all such plans
of the Company and its Affiliates shall not exceed $100,000.
6. Terms and Conditions. Each option granted under this Plan shall be
evidenced by an agreement, in a form approved by the Committee, which shall be
subject to the following express terms and conditions and to such other terms
and conditions as the Committee may deem appropriate.
6.1 Option Period. The Committee shall promptly notify the Optionee of the
option grant and a written agreement shall promptly be executed and delivered by
and on behalf of the Company and the Optionee, provided that the option grant
shall expire if a written agreement is not signed by said Optionee (or his agent
or attorney) and returned to the Company within 60 days from date of receipt by
the Optionee of such agreement. The date of grant shall be the date the option
is actually granted by the Committee, even though the written agreement may be
executed and delivered by the Company and the Optionee after that date. Each
option agreement shall specify the period for which the option thereunder is
granted (which in no event shall exceed ten years from the date of grant in the
case of an ISO) and shall provide that the ISO shall expire at the end of such
period. If the original term of an option is less than ten years from the date
of grant, the option may be amended prior to its expiration, with the approval
of the Committee and the Optionee, to extend the term so that the term as
amended is not more than ten years from the date of grant. However, in the case
of an ISO granted to an individual who, at the time of grant, owns stock
possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or its Affiliate ("Ten Percent Stockholder"),
such period shall not exceed five years from the date of grant.
6.2 Exercise Price. The exercise price of each share of Common Stock
subject to each option granted pursuant to this option is granted and, in the
case of ISOs, shall not be less than 100% of the fair market value of a share of
Common Stock on the date the option is granted, as determined by the Committee.
In the case of ISOs granted to a Ten Percent Stockholder, the exercise price
shall not be less than 110% of the fair market value of a share of Common Stock
on the date the option is granted. The exercise price of each share of Common
Stock subject to a Nonqualified Option under this Plan shall be determined by
the Committee prior to granting the option. The Committee shall set the exercise
price for each share subject to a Nonqualified Option at such price as the
Committee in its sole discretion shall determine, provided that the exercise
price of each share of Common Stock subject to a Nonqualified Option shall not
be less than 85% of the fair market value of a share of Common Stock on the date
the option is granted as determined by the Committee.
3
<PAGE>
For all purposes under this Plan, the fair market value of a share of
Common Stock on a particular date shall be equal to the mean of the reported
high and low sales prices of the Common Stock on the Nasdaq Stock Market on that
date, or if no prices are reported on that date, on the last preceding date on
which such prices of the Common Stock are so reported. If the Common Stock is
not traded on the Nasdaq Stock Market at the time a determination of its fair
market value is required to be made hereunder, its fair market value shall be
deemed to be equal to the average between the closing bid and ask prices of the
Common Stock on the most recent date the Common Stock was publicly traded. In
the event the Common Stock is not publicly traded at the time a determination of
its value is required to be made hereunder, the determination of its fair market
value shall be made by the Committee in such manner as it deems appropriate.
6.3 Exercise Period. The Committee may provide in the option agreement that
an option may be exercised immediately or over the period of the grant and in
whole or in increments. However, no portion of any option may be exercisable by
an Optionee prior to the approval of this Plan by the shareholders of the
Company.
6.4 Procedure for Exercise. Options shall be exercised by the delivery by
the Optionee of written notice to the Secretary of the Company setting forth the
number of shares of Common Stock with respect to which the option is being
exercised. The notice shall be accompanied by, at the election of the Optionee
and as permitted by the Committee in the Agreement granting such options, (i)
cash, cashier's check, bank draft, or postal or express money order payable to
the order of the Company, (ii) certificates representing shares of Common Stock
theretofore owned by the Optionee duly endorsed for transfer to the Company,
(iii) an election by the Optionee to have the Company withhold the number of
shares of Common Stock the fair market value, less the exercise price, of which
is equal to the aggregate exercise price of the shares of Common Stock issuable
upon exercise of the option, or (iv) any combination of the preceding, equal in
value to the full amount of the exercise price. Notice may also be delivered by
telecopy provided that the exercise price of such shares is received by the
Company via wire transfer on the same day the telecopy transmission is received
by the Company. The notice shall specify the address to which the certificates
for such shares are to be mailed. An option to purchase shares of Common Stock
in accordance with this Plan, shall be deemed to have been exercised immediately
prior to the close of business on the date (i) written notice of such exercise
and (ii) payment in full of the exercise price for the number of share for which
options are being exercised, are both received by the Company and the Optionee
shall be treated for all purposes as the record holder of such shares of Common
Stock as of such date.
As promptly as practicable after receipt of such written notice and
payment, the Company shall deliver to the Optionee certificates for the number
of shares with respect to which such option has been so exercised, issued in the
Optionee's name or such other name as Optionee directs; provided, however, that
such delivery shall be deemed effected for all purposes when a stock transfer
agent of the Company shall have deposited such certificates in the United States
mail, addressed to the Optionee at the address specified pursuant to this
Section 6.4.
4
<PAGE>
6.5 Termination of Employment. If an employee to whom an option is granted
ceases to be employed by the Company or its affiliates for any reason other than
death or disability or if a director or consultant to whom an option is granted
ceases to serve on the Board or as a consultant for any reason other than death
or disability, any option which is exercisable on the date of such termination
of employment or cessation of serving on the Board or cessation of service as a
consultant shall expire three-months from the date of such termination or
cessation but in no event may the option be exercised after its expiration under
the terms of the option agreement.
6.6 Disability or Death. In the event the Optionee dies or is determined
under this Plan to be disabled while the Optionee is employed by the Company or
its Affiliates, acts as consultant or while serves on the Board of the Company,
the options previously granted to the Optionee may be exercised (to the extent
the Optionee would have been entitled to do so at the date of death or the
determination of disability) at any time and from time to time, within a
three-month period after such death or determination of disability, by the
Optionee, the guardian of the Optionee's estate, the executor or administrator
of the Optionee's estate or by the person or persons to whom the Optionee's
rights under the option shall pass by will or the laws of descent and
distribution, but in no event may the option be exercised after its expiration
under the terms of the option agreement. An Optionee shall be deemed to be
disabled if, in the opinion of a physician selected by the Committee, the
Optionee is incapable of performing services for the Company of the kind the
Optionee was performing at the time the disability occurred by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or to be of long, continued and indefinite duration. The date of
determination of disability for purposes hereof shall be the date of such
determination by such physician.
6.7 Transferability. An option granted pursuant to this Plan shall not be
assignable or otherwise transferable by the Optionee otherwise than by
Optionee's will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined in the code or Title I of the
Employee Retirement Income Security Act, as amended, or the rules thereunder.
During the lifetime of an Optionee, an option shall be exercisable only by such
Optionee. Any heir or legatee of the Optionee shall take rights granted herein
and in the option agreement subject to the terms and conditions hereof and
thereof. No such transfer of any option to heirs or legatees of the Optionee
shall be effective to bind the Company unless the Company shall have been
furnished with written notice thereof and a copy of such evidence as the
Committee may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions hereof.
6.8 Incentive Stock Options. Each option agreement may contain such terms
and provisions as the Committee may determine to be necessary or desirable in
order to qualify under the Code of option designated as an incentive stock
option.
6.9 No Rights as Shareholder. No Optionee shall have any rights as a
shareholder with respect to shares covered by an option until the option is
exercised by written notice and accompanied by payment as provided in Section
6.4 above.
5
<PAGE>
6.10 Extraordinary Corporate Transactions. The existence of outstanding
options shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations, exchanges, or other changes in the Company's capital structure
or its business, or any merger or consolidation of the Company, or any issuance
of Common Stock or other securities or subscription rights thereto, or any
issuance of bonds, debentures, preferred or prior preference stock ahead of or
affecting the Common Stock or the rights thereof, or the dissolution or
liquidation of the Company, or any sale or transfer of all or any part of its
assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise. If the Company recapitalizes or otherwise
changes its capital structure, or merges, consolidates, sells all of its assets
or dissolves (each of the forgoing a "Fundamental Change"), then thereafter upon
any exercise of an option theretofore granted the Optionee shall be entitled to
purchase under such option, in lieu of the number of shares of Common Stock as
to which option shall then be exercisable, the number and class of shares of
stock and securities to which the Optionee would have been entitled pursuant to
the terms of the Fundamental Change if, immediately prior to such Fundamental
Change, the Optionee had been the holder of record of the number of shares of
Common Stock as to which such option is then exercisable. If (i) the Company
shall not be the surviving entity in any merger or consolidation (or survives
only as a subsidiary of another entity), (ii) the Company sells all or
substantially all of its assets to any other person or entity (other than a
wholly-owned subsidiary), (iii) any person or entity (including a "group" as
contemplated by Section 13(d)(3) of the Exchange Act) acquires or gains
ownership or control of (including, without limitation, power to vote) more than
50% of the outstanding shares of Common Stock, (iv) the Company is to be
dissolved and liquidated, or (v) as a result of or in connection with a
contested election of directors, the persons who were directors of the Company
before such election shall cease to constitute a majority of the Board (each
such event in clauses (i) through (v) above is referred to herein as a
"Corporate Change"), the committee, in its sole discretion, may accelerate the
time at which all or a portion of an Optionee's options may be exercised for a
limited period of time before or after a specified date.
6.11 Changes in Capital Structure. If the outstanding shares of Common
Stock or other securities of the Company, or both, for which the option is then
exercisable shall at any time be changed or exchanged by declaration of a stock
dividend, stock split, combination of shares or recapitalization, the number and
kind of shares of Common Stock or other securities which are subject to this
Plan or subject to any options theretofore granted, and the exercise prices,
shall be appropriately and equitably adjusted so as to maintain the
proportionate number of shares or other securities without changing the
aggregate exercise price.
6.12 Acceleration of Options. Except as hereinbefore expressly provided,
(i) the issuance by the Company of shares of stock of any class of securities
convertible into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to subscribe
therefor, or upon conversion of shares or obligations of the Company convertible
into such shares or other securities, (ii) the payment of a dividend in property
other than Common Stock, or (iii) the occurrence of any similar transaction, and
in any case whether or not for fair value, shall not affect, and no adjustment
by reason thereof shall be made with respect to, the number of shares of Common
Stock subject to options thereto fore granted or the purchase price per share,
6
<PAGE>
unless the Committee shall determine in its sole discretion that an adjustment
is necessary to provide equitable treatment to Optionee. Notwithstanding
anything to the contrary contained in this Plan, the Committee may in its sole
discretion accelerate the time at which any option may be exercised, including,
but not limited to, upon the occurrence of the events specified in this Section
6.
7. Amendments or Termination. The Board may amend, alter or discontinue
this Plan, but no amendment or alteration shall be made which would impair the
rights of any Optionee, without his consent, under any option theretofore
granted, or which, without the approval of the shareholders, would: (i) except
as is provided in Section 6.11 of this Plan, increase the total number of shares
reserved for the purposes of this Plan, (ii) change the class of persons
eligible to participate in this Plan as provided in Section 4 of this Plan,
(iii) extend the applicable maximum option period provided for in Section 6.1 of
this Plan, (iv) extend the expiration date of this Plan set forth in Section 14
of this Plan, (v) except as provided in Section 6.11 of this Plan, decrease to
any extent the exercise price of any option granted under this Plan or (vi)
withdraw the administration of this Plan from the Committee.
8. Compliance With Other Laws and Regulations. This Plan, the grant and
exercise of options thereunder, and the obligation of the Company to sell and
deliver shares under such options, shall be subject to all applicable federal
and state laws, rules and regulations and to such approvals by any governmental
or regulatory agency as may be required. The Company shall not be required to
issue or deliver any certificates for shares of Common Stock prior to the
completion of any registration or qualification of such shares under any federal
or state law or issuance of any ruling or regulation of any government body
which the Company shall, in its sole discretion, determine to be necessary or
advisable. Any adjustments provided for in Sections 6.10, .11 and .12 of this
Plan shall be subject to any shareholder action required by Nevada corporate
law.
9. Purchase for Investment. Unless the options and shares of Common Stock
covered by this Plan have been registered under the Securities Act of 1933, as
amended, or the Company has determined that such registration is unnecessary,
each person exercising an option under this Plan may be required by the Company
to give a representation in writing that such person is acquiring such shares
for his or her own account for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.
10. Taxes.
10.1 The Company may make such provisions as it may deem appropriate for
the withholding of any taxes which it determines is required in connection with
any options granted under this Plan.
10.2 Notwithstanding the terms of Section 10.1, each Optionee must pay all
taxes required to be withheld by the Company or paid by the Optionee in
connection with the exercise of a Nonqualified Option.
7
<PAGE>
11. Replacement of Options. The Committee from time to time may permit an
Optionee under this Plan to surrender for cancellation any unexercised
outstanding option and receive from the Company in exchange an option for such
number of shares of Common Stock as may be designated by the Committee. The
Committee may, with the consent of the person entitled to exercise any
outstanding option, amend such option, including reducing the exercise price of
any option to not less than the fair market value of the Common Stock at the
time of the amendment and extending the term thereof.
12. No Right to Employment. Employees shall be considered to be in the
employment of the Company so long as they remain employees of the Company or its
Affiliates. Any questions as to whether and when there has been a termination of
such employment and the cause of such termination shall be determined by the
Committee, and its determination shall be final. Nothing contained herein shall
be construed as conferring upon the Optionee the right to continue in the employ
of the Company or its Affiliates, nor shall anything contained herein be
construed or interpreted to limit the "employment at will" relationship between
the Optionee and the Company or its Affiliates. The option agreements may
contain such provisions as the Committee may approve with reference to the
effect of approved leaves of absence.
13. Liability of Company for Non-Issuance of Shares and Tax Consequences.
The Company and any Affiliates which is in existence or hereafter comes into
existence shall not be liable to an Optionee or other persons as to:
13.1 The non-issuance or sale of shares as to which the Company has been
unable to obtain from any regulatory body having jurisdiction the authority
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any shares hereunder; and
13.2 Any tax consequence expected, but not realized, by any Optionee or
other person due to the exercise of any option granted hereunder.
14. Effectiveness and Expiration of Plan. This Plan shall be effective on
the date of adoption by the Board. If the shareholders of the Company fail to
approve this Plan within twelve months of the date of the Board adoption, this
Plan shall terminate and all options previously granted under this Plan shall
become void and of no effect. This Plan shall expire ten years after the date of
the Board adopts this Plan and thereafter no option shall be granted pursuant to
this Plan.
15. Non-Exclusivity of this Plan. Neither the adoption by the Board nor the
submission for approval of this Plan to the shareholders of the Company shall be
construed as creating any limitations on the power of the Board to adopt such
other incentive arrangements as it may deem desirable, including without
limitation, the granting of restricted stock or stock options otherwise than
under this Plan, and such arrangements may be either generally applicable or
applicable only in specific cases.
8
<PAGE>
16. Governing Law. This Plan and any agreements hereunder shall be
interpreted and construed in accordance with the laws of the State of Nevada and
applicable federal law.
17. Cashless Exercise. The Committee also may allow cashless exercises as
permitted under the Federal Reserve Board's Regulation T, subject to applicable
securities law restrictions, or by any other means which the Committee
determines to be consistent with this Plan's purpose and applicable law. The
proceeds from such a payment shall be added to the general funds of the Company
and shall be used for general corporate purposes.
IN WITNESS WHEREOF, and as conclusive evidence of the adoption of the
foregoing by directors of the Company, Man Sang Holdings, Inc. has caused these
presents to be duly executed in its name and behalf by its proper officers
thereunto duly authorized as of this 17th day of October, 1996.
MAN SANG HOLDINGS, INC.
By:
----------------------------------------
Name: Ricky Cheng
Title: President
ATTEST:
- ---------------------------
Secretary
9
Dated the 24th day of June 1996.
SAME FAST LIMITED
and
MAN SANG JEWELLERY COMPANY LIMITED
******************************************
TENANCY AGREEMENT
******************************************
REGISTERED in the Land Registry by Memorial
No. UB 6679777 on 18 July 1996
/s/ illegible
------------------------------------
FOR LAND REGISTRAR
PAUL K. C. CHAN & CO.
Solicitors
Room 801,
Chinachem Tower,
34-37 Connaught Road Central,
Hong Kong
Ref: PC/AT/av/2871
Disk Ref: b:conv29:2871nt01.ta
<PAGE>
THIS AGREEMENT is made the 24th day of June One Thousand Nine Hundred and
Ninety Six.
PARTIES
BETWEEN the parties more particularly described and set out in the First
Schedule hereto.
WHEREBY IT IS AGREED as follows:
DESCRIPTION OF PREMISES
1. DESCRIPTION OF PREMISES
The Landlord shall let and the Tenant shall take on an "as is" basis ALL
THAT the premises more particularly described and set out in the Second
Schedule hereto and for identification purposes only more particularly
shown on the plan annexed hereto and thereon colored Pink and Pink hatched
Black (hereinafter referred to as "the said Premises") forming part of the
messuages erections and buildings known as Railway Plaza, No. 39 Chatham
Road South, Kowloon, Hong Kong (hereinafter referred to as "the said
Building") erected on ALL THOSE pieces or parcels of ground situate lying
and being at Hong Kong and respectively registered in the Land Registry as
The Remaining Portion of Kowloon Inland Lot No. 10453, Kowloon Inland Lot
No. 8511 and The Remaining Portion of Kowloon Inland Lot No. 7700
(hereinafter referred to as "the said Land") TOGETHER with the right in
common with the Landlord and all others having the like right to use and
enjoy all entrances, staircases, landings, passages and lavatories in the
said Building in so far as the same are necessary for the proper use and
enjoyment of the said Premises AND ALSO TOGETHER with the right in common
as aforesaid to use and enjoy all escalators, lifts and central
air-conditioning and heating services (if any) intended for common use and
provided and installed in the said Building whenever the same shall be
operating for the term and at the rent more particularly described and set
out in the Third Schedule hereto.
2. TERM AND RENT DEPOSITS
The Tenant shall on the signing of this Agreement deposit to the Landlord
the sums more particularly described and set out in the Third Schedule
hereto (hereinafter referred to as "the said deposit") representing the
aggregate of 3 months rent and air-conditioning charge and management fee
to secure the due performance and observance of the agreements,
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<PAGE>
stipulations and conditions herein contained and on the part of the Tenant
to be observed and performed. At the expiration or sooner determination of
this Agreement if the Tenant shall have paid all rent or air conditioning
charge and management fee or other sums payable hereunder and if there
shall be no breach non-observance or non-performance of any of the
agreements, stipulations or conditions herein contained on the Tenant's
part to be observed and performed the Landlord shall refund to the Tenant
the said deposit within twenty-one (21) days after delivery of vacant
possession of the said Premises to the Landlord but without any interest
thereon but if there shall be any rent or air conditioning charge and
management fee or other sums payable hereunder in arrears the Landlord
shall be entitled to apply the said deposit towards payment of such arrears
and if there shall be breach non-observance or non-performance of any of
the agreements, stipulations or conditions herein contained on the Tenant's
part to be observed and performed the Landlord shall be entitled to apply
the said deposit or such part or parts thereof towards remedying such
breach (in so far as this may be possible) in which event the Tenant shall
within seven (7) days of a written demand by the Landlord as a condition
precedent to the continuation of the tenancy hereby created deposit with
the LANDLORD the amount by which the said deposit may have been reduced (a
certificate issued by the Landlord in this connection shall be conclusive
and binding upon the Tenant save for manifest errors) and if the Tenant
shall fail so to do the Landlord shall forthwith be entitled to forfeit the
tenancy hereby created and to re-enter on the said Premises and to
determine this Agreement in which event the Landlord shall be entitled to
deduct sums sufficient to compensate the Landlord for all losses costs and
expenses suffered as a result thereof from the said deposit without
prejudice to any other right or remedy of the Landlord hereunder. In no
event however shall the Tenant be entitled to treat payment of the said
deposit as payment of the rent or the air conditioning charge and
management fee or other charges or fees payable hereunder.
3. TENANT'S OBLIGATIONS
The Tenant to the intent that the obligations hereunder shall continue
throughout the term hereby agrees with the Landlord as follows:
(a) TO PAY RENT
To pay the rent on the days and in the manner herein provided for
payment thereof.
(b) TO PAY RATES TAX, ETC.
To pay and discharge all rates, taxes, assessments, duties, charges,
impositions and outgoings of an annual or recurring nature now or
hereafter to be assessed, imposed, charged, or levied by the
Government of Hong Kong or other lawful authority upon the said
Premises or upon the owner or occupier thereof (Crown Rent and
Property Tax and expenses of a capital or non-occurring nature alone
excepted).
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<PAGE>
(c) TO PAY SERVICE CHARGES AND DEPOSITS.
To pay and discharge punctually during the term all deposits and
charges for gas, water, electricity, telephone and other services
whatsoever now or at any time hereafter consumed by the Tenant and
chargeable in respect of the said Premises and to pay and discharge
all necessary deposits for the supply of gas, water, electricity,
telephone and other services for the common area and the common
service facilities of the said Building when required and to comply
with all requirements of the gas, water, electricity, telephone and
other services authorities or suppliers relating to the use of such
services authorities or the fitting out of the said Premises by the
Tenant Provided That if there shall be more than one tenant to share
the use of one gas, water or electricity meter (as the case may be)
then the charges for the supply of gas, water or electricity (as the
case may be) to such tenants shall be shared and paid by the said
tenants in proportion.
(d) TO PAY AIR CONDITIONING AND SERVICE CHARGES
i. TO PAY AIR CONDITIONING AND SERVICE CHARGES
To pay the Landlord punctually during the term such monthly
contribution towards the costs, charges and expenses for the
maintenance and supply of air conditioning and management
services or otherwise as shall be required by the Landlord and
unless and until otherwise demanded by the Landlord such monthly
contribution shall be such sum as more particularly specified in
the Third Schedule hereto.
(ii) ADJUSTMENT OF AIR CONDITIONING CHARGE AND MANAGEMENT FEE
If at any time during the term the operating cost relative to the
supply of the air conditioning and management services or
otherwise shall have risen the Landlord shall have the right from
time to time to increase the air conditioning and management
service charges in proportion to the said increase whose
assessment shall be conclusive.
(iii) OPERATING HOURS OF AIR CONDITIONING
The Landlord and/or the manager charged with the management of
the said Building during the term of the tenancy ("the Manager")
reserves the right to change the operating hours of the central
air conditioning system of and in the said Building.
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<PAGE>
(iv) EXTRA AIR CONDITIONING CHARGE AND MANAGEMENT FEE FOR EXTENDED
HOURS OF AIR CONDITIONING
Should the Tenant require the operating hours of the air
conditioning be extended, the Tenant shall pay to the Landlord or
the Manager (where applicable) such extra and additional charges
at such hourly rate or monthly contribution as shall be
determined by the Landlord or the Manager (where applicable) from
time to time for the supply of extended hours of air
conditioning.
(v) TO PAY COST OF REPAIRING AIR CONDITIONING PLANT IF DAMAGED BY
NEGLECT OF TENANT
To reimburse to the Landlord the cost of repairing or replacing
any air conditioning units or any part of the air conditioning
apparatus or installation within the said Premises which is
damaged or defective unless the Tenant can prove that the defect
or damaged condition hereinbefore referred to was due to the
negligence of the Landlord or any of its contractors, servants,
employees or agents.
(e) TO SUBMIT LAYOUT PLANS FOR APPROVAL
(i) The Tenant shall within fourteen (14) days upon receipt of the
Fit Out Guide in respect of the said Building at its own cost and
expense prepare and submit layout plans and specifications to the
Landlord and the Manager for their approval. Failure of the
Tenant to submit the layout plans and specifications within the
prescribed time for approval shall not entitle the Tenant to any
extension of the commencement date of the tenancy hereby created
nor to any extension of the payment of the rent or air
conditioning charge and management fee payable by the Tenant
hereunder.
(ii) TO FIT OUT IN ACCORDANCE WITH APPROVED LAYOUT PLANS
To fit out the said Premises at the Tenant's expense in
accordance with such layout plans and specifications as shall
have been first submitted to and approved in writing by the
Landlord and the Manager in a good and proper workmanlike fashion
and in all respects in a style and manner appropriate to a first
class office and commercial building and so to maintain the same
throughout the term in good repair and condition to the
satisfaction of the Landlord and the Manager. In the event of
such approval being requested, it shall be a condition precedent
to the granting thereof that the Tenant shall
- 5 -
<PAGE>
pay to the Landlord and the Manager all fees and costs incurred
by the Landlord and the Manager in employing architects,
engineers, professionals, specialist and/or consultants to vet
examine and scrutinize such layout plans and specifications. Such
approval from the Landlord and the Manager shall in no event
relieve the Tenant from the responsibility to obtain all
necessary permits and licenses pertaining to the fitting out
works and the Tenant shall give all notices required and shall
comply with all Ordinance, rules, regulations and all regulations
and by-laws of any public utility company or authority. The
Tenant shall not cause or permit to be made any variations to the
approved layout plans and specifications or to the interior
design or layout of the said Premises without the prior approval
in writing of the Landlord and the Manager. An administration fee
will be charged for any services provided or deemed necessary to
be provided by the Landlord and the Manager in respect of the
fitting out works of the Tenant.
(f) COVENANTS FOR REPAIR
At the expense of the Tenant to keep the interior of the said Premises
including but not limited to the flooring or interior plaster or other
finishes or rendering to walls, floors and ceilings and the Landlord's
fixtures and fittings therein and all additions thereto including all
doors, windows, air conditioning fancoils, electrical installations
and wirings, toilet equipments, ventilators, fire fighting equipments,
flush system apparatus and water apparatus in good repair and
condition to the satisfaction of the Landlord and to well and
sufficiently preserve repair and maintain the same and to deliver up
the same to the Landlord at the expiration or sooner determination of
the term in like condition. In particular, but without in any way
limiting the foregoing:
(i) TO PAY COST OF REPLACING BROKEN WINDOWS, ETC.
To reimburse to the Landlord the cost of replacing all broken
and/or damaged windows, shutters, glass or plate glass (if any)
of or in the said Premises or the said Building whether the same
be broken or damaged by the negligence of the Tenant or any of
its servants, employees, agents, invitees, licensees or customers
or by circumstances beyond the control of the Tenant.
(ii) TO INSTALL, REPAIR OR REPLACE ELECTRICAL WIRINGS, ETC. WITHIN THE
PREMISES
At the expense of the Tenant to install, repair or replace, if so
required by the appropriate supply company, statutory undertaker
or authority as the case may be under the terms of any
Electricity Supply or similar Ordinance for the time being in
force or any Orders in Council or Regulations made thereunder
- 6 -
<PAGE>
all electrical wirings installations and fittings installed by
the Tenant within the said Premises.
(iii) TO KEEP SANITARY APPARATUS IN GOOD REPAIR AND CONDITION
At the expense of the Tenant to keep the water tanks, drains,
pipes, toilets, lavatories, sanitary or plumbing apparatus and
other water apparatus (hereinafter collectively referred to as
"the Sanitary Apparatus") used exclusively by the Tenant and its
servants, employees, agents, invitees, licensees and customers in
good, clean and tenantable repair and condition to the
satisfaction of the Landlord and in accordance with the
regulations or by-laws of all Public Health and other government
authorities concerned and to pay to the Landlord on demand all
costs and expenses incurred by the Landlord in cleaning,
clearing, repairing or replacing any of the Sanitary Apparatus
choked, impeded, blocked or stopped up owing to the careless or
improper use or neglect by the Tenant or any of its servants,
employees, agents, invitees, licensees or customers.
(iv) TO PAY COST OF REPLACING LIGHT BULBS
To reimburse to the Landlord the cost of replacing any damaged,
broken, defective or burned out electric light bulbs, tubes and
globes in the said Premises which are provided by the Landlord.
(v) TO BE RESPONSIBLE FOR ANY LOSS OR DAMAGE CAUSED TO ANY PROPERTY
OR ANY PERSON
To be wholly responsible for any loss damage or injury caused to
any property or to any other person whomsoever directly or
indirectly through the defective or damaged condition of any part
of the interior of the said Premises and/or the fixtures and
fittings therein and/or all additions thereto the repair or
maintenance of which is the responsibility of the Tenant
hereunder and to make good the same by payment or otherwise and
to indemnify and keep indemnified the Landlord against all
actions proceedings, claims and demands made upon the Landlord in
respect of any such loss, damage or injury and all costs and
expenses (including legal costs on a full indemnity basis)
incurred by the Landlord incidental thereto.
(vi) TO PROTECT INTERIOR FROM STORM OR TYPHOON
To take all reasonable precautions to protect the interior of the
said Premises
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<PAGE>
from storm or typhoon damage and in the event of such damage
being incurred to repair the damage or restore the said Premises
to a proper state and condition in accordance with the covenants
for repair contained in this Clause 3(f).
(g) EMPLOY CLEANING CONTRACTOR
(i) The Tenant shall employ a cleaning contractor at its own expense
for the cleaning of the said Premises in the event that the
Tenant shall not have employed its own staff for cleaning of the
said Premises.
(ii) TO BE RESPONSIBLE FOR REMOVAL OF GARBAGE AND REFUSE
The cleaning contractor shall be responsible for the removal and
disposal of all garbage or refuse each and every day from the
said Premises to such location as shall be specified by the
LANDLORD and/or the Manager in the manner and subject to such
reasonable rules and regulations prescribed by the Landlord
and/or the Manager from time to time and until such time as such
garbage or refuse is removed from the said Building to keep
within the said Premises the same securely sealed in containers
of a design as specified by the Landlord and/or the Manager from
time to time.
(iii) TO COOPERATE WITH CLEANING CONTRACTOR AND OTHERS
To render full cooperation to the cleaning contractor and tenants
or occupiers of the other parts of the said Building with a view
to keep the said Premises and the said Building at all times in a
neat and tidy condition.
(h) TO PAY THE COST OF AFFIXING OR REPLACING TENANT'S NAME ON THE
DIRECTORY BOARD
To pay to the Landlord or its agents immediately upon demand the cost
of affixing, repairing, altering or replacing as may be necessary the
Tenant's name on the Directory Board (if any) provided by the Landlord
or the Manager. The Tenant's name so appearing on the Directory Board
in English and Chinese in uniform lettering and characters designed by
the Landlord or the Manager (where applicable) shall strictly be in
accordance with that appearing in this Agreement or its trading
name(s) with or without its registered trademark or logo subject to
the Tenant's request unless prior written consent to name otherwise
has first been obtained from the Landlord. The Tenant shall, in the
event of the Tenant changing its name, notify the Landlord at least
seven (7) days prior to such change of name.
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(i) TO ENSURE SECURITY EQUIPMENT IN GOOD ORDER
To ensure at all times that all fire alarms, fire fighting equipments,
rolling shutters and other equipments for security purpose provided by
the Landlord shall not be disrupted, interrupted, damaged or caused to
be defective through the act, default or neglect of the Tenant or any
of its servants, employees, agents, invitees, licensees or customers.
(j) TO PERMIT LANDLORD TO ENTER AND VIEW
(i) To permit the Landlord and all persons authorized by it at all
reasonable times to enter into and upon the said Premises to view
and inspect the state of repair and condition of the said
Premises or any part or parts thereof, to take inventories
thereof and to carry out any works or repairs which is required
to be done in the opinion of the Landlord. The Landlord shall be
entitled, without incurring therefor any liability whatsoever
whether tortious or otherwise, in the event of an emergency or if
the Tenant shall fail to permit entrance pursuant hereto forcibly
to enter the said Premises and the Tenant shall pay the cost of
repairing and making good any damage thereby caused.
(ii) TO PERMIT THE LANDLORD TO TAKE PROSPECTIVE TENANTS OR PURCHASERS
TO VIEW
During the three months immediately preceding the expiration of
the term hereby granted the Landlord or its authorized agents
shall be at liberty to take prospective new Tenantss or
purchasers to view the interior of the said Premises and to
display an advertisement outside the said Premises offering the
said Premises for letting or sale.
(k) TO EXECUTE REPAIRS ON RECEIPT OF NOTICES
(i) On receipt of any notice form the Landlord or its authorized
agents specifying any works or repairs required to be done and
the time in which they are to be done and which are the
responsibility of the Tenant hereunder, forthwith to comply with
such notice.
(ii) TO PERMIT LANDLORD TO REPAIR AND MAKE GOOD THE PREMISES
If the Tenant shall fail within fourteen (14) days of such
notice, or such shorter period as shall be appropriate in case of
emergency, to proceed to commence and then to continue diligently
and expeditiously to comply with
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such notice in all respects or if the Tenant shall at any time
make default in the performance of any of the agreements
stipulations and conditions herein contained for or in relating
to the repair, decoration, preservation, protection or
maintenance of the said Premises or any part or parts thereof it
shall be lawful for the Landlord and all persons authorized by
the Landlord including but not limited to its agents, servants
and workmen to enter upon the said Premises and to carry out all
or any of the works referred to in such notice and the cost of so
doing and all expenses incurred thereby shall be paid by the
Tenant to the Landlord on demand and shall forthwith be
recoverable by the Landlord as debt by action Provided That if
the Tenant shall fail to pay such debt within fifteen (15) days,
the Landlord shall in addition be entitled to charge interest
thereon but no such entry, repair, decoration, preservation,
protection or maintenance shall prejudice the Landlord's right of
re-entry and forfeiture hereinafter contained.
(l) TO INFORM LANDLORD OF DAMAGE OR ACCIDENT
To give notice in writing to the Landlord or its authorized agents as
soon as practicable after the Tenant shall have become aware of any
accident or of any damage caused or that may be caused to the said
Premises, the fixtures or fittings provided therein by the Landlord,
the water pipes, the gas pipes, the electrical wirings, the lifts, the
common services facilities, the said Building or any persons thereon
and of any defects or want of repair thereof.
(m) TO OBEY THE HOUSE RULES
(i) To obey and comply strictly with the Management House rules (if
any) made by the Manager subject to the provisions of the deed of
Mutual Covenant and Management Agreement and to furnish first
class service to customers and not to conduct the business of the
Tenant in such manner as to prejudice the goodwill and reputation
of the said Building as a first class office and commercial
building. The House Rules in force at the date hereof may be
revoked or amended by the Manager at any time and from time to
time subject to the provisions of the Deed of Mutual Covenant and
Management Agreement.
(ii) TO OBEY AND COMPLY WITH ALL NOTICES AND ANNOUNCEMENTS MADE BY
LANDLORD OR MANAGER
To obey and comply with such rules, regulations or requirements
stated in notices or announcements as may from time to time be
made imposed,
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adopted, introduced or amended by the Landlord and/or the Manager
and/or its agents in respect of the said Building.
(n) TO COMPLY WITH DMC AND FIT OUT GUIDE
(i) To obey and comply with and to keep the Landlord indemnified
against the breach of any of the provisions of the Deed of Mutual
Covenant and Management Agreement and/or the Fit Out Guide (if
any).
(ii) TO COMPLY WITH ALL ORDINANCES, ETC.
To obey and comply with and to keep the Landlord indemnified
against the breach of all Ordinances, regulations, by-laws,
rules, requirements, directions and orders of any Government or
other competent authority relating to the use of and the conduct
and carrying on of the Tenant's business in the said Premises as
specified in the Fourth Schedule hereto or to any other act,
deed, matter or thing done, permitted, suffered or omitted
therein or thereon by the Tenant or any servant, employee, agent,
invitee, licensee or customer of the Tenant and to notify the
Landlord forthwith in writing of any notice received from the
Manager of any statutory or public authority concerning or in
respect of a possible breach of this Clause 3(n).
(o) TO BE RESPONSIBLE FOR CONTRACTORS, SERVANTS, AGENTS AND LICENSEES
(i) To be responsible to the Landlord for the acts, neglects,
defaults and omissions of all contractors, servants, employees,
agents, invitees, licensees or customers of the Tenant as if they
were the acts, neglects, defaults and omissions of the Tenant and
for the purposes of this Agreement "licensee" shall include any
person present in, using or visiting the said Premises with the
consent of the Tenant expressed or implied.
(ii) TO INDEMNIFY THE LANDLORD AGAINST ALL ACTIONS ETC.
To indemnify and keep the Landlord indemnified from and against
all actions, proceedings, claims and demands whatsoever brought
or made by the tenants and occupiers of the other parts of the
said Building and any third party and all costs and expenses
(including legal costs on a full indemnity basis) incurred by the
Landlord thereby arising in respect of any act or liability
caused by or arising from the act, breach of duty, neglect or
default (irrespective of whether wilful or not) of the Tenant or
any of its contractors, servants, employees, agents, invitees,
licensees or customers including but
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not limited to any breach or non-observance or non-performance of
any of the agreements stipulations and conditions herein
contained and on the Tenant's part to be observed and performed
or by reason of any water or smoke or offensive smell or odor
originating from the said Premises.
(p) TO YIELD UP AT THE END OF TERM
To quietly yield up the said Premises together with all the Landlord's
fixtures, fittings and additions therein and thereto without
compensations for any alterations or improvements made to the said
Premises at the expiration or sooner determination of the term and/or
this agreement in good clean and tenantable repair and condition
notwithstanding any rule of law or equity to the contrary Provided
That the Tenant shall at the Tenant's expense remove all personal
property, fixtures and fittings and additions therein and thereto of
the Tenant and make good all damage caused by such removal and
reinstate the said Premises to the condition they were in at the
commencement of the term and thereupon to surrender to the Landlord
all keys giving access to all parts of the said Premises held by the
Tenant and to permit the Landlord to remove at the Tenant's expense
all name-plates, letterings, characters, posters, flags, signboards,
decorations, advertising matters or other device whatsoever relating
to the Tenant from the said Premises, the said Building or any part or
parts thereof and to make good any damage caused by such removal at
the Tenant's expense.
4. TENANT'S RESTRICTIVE COVENANTS
The Tenant hereby agrees with the Landlord that unless it has obtained the
prior written consent of the Landlord on such terms and conditions as the
Landlord may impose together with such consent;
(a) USE OF THE PREMISES
(i) Not to use or permit or suffer the said Premises or any part or
parts thereof to be used for an purpose other than as specified
in the Fourth Schedule hereto and at the expense of the Tenant to
obtain all necessary and appropriate licences and/or permits
necessary for the carrying on of the Tenant's business and to
comply with any local legislation, regulations and Government
requirements and any subsequent amendments (if any) relating to
such user on the said Premises and at all times to keep current
valid and subsisting all such licences and/or permits.
(ii) NOT TO USE FOR ILLEGAL, IMMORAL, ETC. USE
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Not to use or permit or suffer the said Premises to be used for
any gambling, improper, illegal, immoral or political purpose.
(iii) NOT TO USE PREMISES AS SLEEPING QUARTERS OR DOMESTIC PREMISES
Not to use or permit or suffer the said Premises or any part or
parts thereof to be used as a sleeping quarters or as domestic
premises within the meaning of any Landlord and Tenant
legislation or other legislation for the time being in force nor
to allow any person to remain in the said Premises overnight.
(b) NOT TO PREPARE FOOD OR PERMIT ODORS
Not to prepare or permit or suffer to be prepared any food in the said
Premises or to cause or permit any odors or noxious smell which shall
in the opinion of the Landlord be offensive or unusual to be produced
upon, permeated through or emanated from the said Premises.
(c) NOT TO USE PREMISES FOR MANUFACTURE OR STORAGE OF GOODS
Not to use or permit or suffer the said Premises or any part or parts
thereof to be used for the manufacture or storage of goods or
merchandise other than storage for the purpose of and in quantities
consistent with the user of the said Premises as specified in the
Fourth Schedule hereto.
(d) NOT TO PRODUCE MUSIC OR NOISE AUDIBLE OUTSIDE
Not to produce or permit or suffer to be produced any music or noise
(including sound produced by broadcasting or an apparatus or any
equipment capable of producing, reproducing, receiving or recording
sound) so as to be audible outside the said Premises.
(e) NOT TO CAUSE ANY NUISANCE OR ANNOYANCE
Not to do or permit or suffer to be done any act or thing in or upon
the said Premises or any part or parts thereof which in the opinion of
the Landlord may constitute a nuisance or annoyance or give cause for
complaint from the Landlord or tenants or occupiers of the other parts
of the said building or in any adjoining or neighboring building.
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(f) NOT TO BREACH CROWN LEASE OF CAUSE INSURANCE TO BE VOIDED OR PREMIUM
INCREASED
Not to do or permit or suffer to be done any act, deed, matter or
thing whatsoever which will amount to a breach or non-observance of
any of the terms and conditions under which the said Land is held from
the Crown or of the Deed of Mutual Covenant and Management Agreement
under which the Landlord holds the said Premises or whereby any
insurance on the said Premises or the said Building against loss or
damage by fire, storm, typhoon, other insurable perils and/or claims
by third parties for the time being in force may be rendered void or
voidable or whereby the premium thereof may be increased Provided That
if as the result of any act, deed, matter or thing done permitted or
suffered by the Tenant, the premium on any such policy of insurance
shall be increased, the Landlord shall be entitled without prejudice
to any other remedy hereunder to recover from the Tenant the amount of
any such increase and further the Tenant shall keep the Landlord fully
indemnified against all losses damages claims and demands sustained by
or made against the Landlord by any person as a result of any breach
by the Tenant of this Clause 4(f) Provided That notwithstanding
anything herein contained the Landlord does not warrant that any or
adequate insurance against fire or any other risks exists in respect
of the said Premises and/or the said building and/or all or any of the
goods or property stored therein by the Tenant And the Tenant shall be
responsible in any event for insurance of its property in the said
Premises.
(g) NOT TO KEEP ARMS OR COMBUSTIBLE OR HAZARDOUS GOODS IN THE PREMISES
Not to keep or store or permit or suffer to be kept or stored in this
said Premises, any arms, ammunitions, gun-powder, saltpetre, kerosene
or other explosives inflammable combustible or hazardous substance.
(h) NOT TO MAKE OR PERMIT ANY ALTERATIONS OR ADDITIONS
Not without the prior written consent of the Landlord to make or
permit any alterations or additions or partitions to be made in or to
the said Premises or any part or parts thereof nor to pull down, alter
or remove any doors windows additions partitions or fixtures and
fittings thereof nor to make any alterations to the fire prevention
system or to the electrical wirings and installations therein nor to
install any air conditioning plant, machinery or equipment therein nor
to cut maim or injure nor to suffer to be cut maimed or injured any
doors, windows, walls, beams, structural members or fabric thereof.
The Tenant shall be responsible for obtaining the Building Authority
or any other government authorities' consent for such alterations
additions or partitions in or to the said Premises at its own expense
and
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the Tenant further undertakes to comply with all Government's
requirements and regulations relating thereto. At the expiration or
sooner determination of the term the Tenant shall at its own expense
remove all such alterations or additions or partitions so erected or
installed by the Tenant and restore the said Premises to its original
tenantable state as at the commencement of the term to the
satisfaction of the Landlord.
(i) NOT TO INSTALL ELECTRICAL WIRINGS IN PREMISES WITHOUT LANDLORD'S
APPROVAL
Not to lay affix attach or install any electrical wirings or cables in
the said Premises without the prior written consent of the Landlord
and in carrying out any electrical installations and/or wiring works,
the Tenant shall use only a contractor approved by the Landlord in
writing for such purpose.
(j) NOT TO DAMAGE TOILET FACILITIES
Not to use or permit or suffer the toilet facilities provided by the
Landlord to be used for any purpose other than that for which they are
intended and not to throw or permit or suffer to be thrown therein an
foreign substance of any kind and the Tenant shall pay to the Landlord
on demand all costs and expenses incurred by the Landlord in making
good any breakage, blockage or damage resulting from a violation of
this Clause 4(j).
(k) NOT TO DAMAGE MAIN STRUCTURE, WALLS, CEILINGS AND OTHER COMMON SERVICE
FACILITIES
(i) Not to damage, mark or deface or permit or suffer to be damaged,
marked or defaced any main structure, fixtures and fittings,
decorations, installations, lifts or other common service
facilities including air conditioning units, cloakrooms, service
pantries, halls, passageways, staircases, drainage wells, walls
and ceilings of the said Building outside the said Premises, and
to pay on demand to the Landlord all costs and expenses incurred
by the Landlord in repairing, making good the damage or cleaning
the same.
(ii) NOT TO DRIVE NAILS ETC. INTO CEILINGS, WALLS OR FLOORS
Not without the prior written consent of the Landlord to drive or
insert or permit or suffer to be driven or inserted any nails,
screws, hooks, brackets or similar articles into the ceilings,
walls or floors of the said Premises and any other parts of the
said Building outside the said Premises.
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(l) DISPLAY NAME-PLATE OR SIGNBOARD ETC.
Not without the prior written consent of the Landlord and/or the
Manager to exhibit or display within outside or at the exterior of the
said Premises any name-plate, poster, flag, notice, advertisement,
sign-board, decoration, sign or other device, whether illuminated or
not, which may be visible from outside of the said Premises except in
such space and in such form style and manner with lettering and
characters approved by the Landlord and/or the Manager.
(m) NOT TO ALTER LOCKS
Not without the prior written consent of the Landlord to alter the
existing locks, bolts and fittings on the entrance doors to the said
Premises nor to install any additional locks, bolts or fittings
thereon.
(n) NOT TO ENCUMBER OR OBSTRUCT PASSAGES AND COMMON AREAS
Not to encumber or obstruct or permit or suffer to be encumbered or
obstructed with any boxes, cartons, packages, rubbish, refuse,
dustbins, garbage cans, furniture, chattels, or store of any goods, or
other obstruction of any kind or nature any of the entrances, exits,
staircases, landings, passageways, lifts, corridors, lavatories,
lobbies or other parts of the said Building in common use so that the
same are at all times kept clear and free of any obstructions of any
nature and the Landlord shall in addition to any other remedies which
the Landlord may have hereunder be entitled without notice and at the
Tenant's expenses to remove and dispose of as it sees fit any such
obstructions aforesaid without incurring any liability therefor
whatsoever whether tortious or other wise to the Tenant or any other
person whomsoever and the Tenant shall on demand pay or reimburse to
the Landlord all costs and expenses incurred in such removal.
(o) NOT TO LAY WIRINGS OR CABLES ETC. IN COMMON AREAS
Not to lay install affix or attach any wirings, cables, pipes or other
articles or things in or upon any of the entrances, exits, staircases,
landings, passageways, corridors, lavatories, lobbies or any other
common areas of the said building outside the said Premises.
(p) PROHIBITION OF SUBLETTING OR TRANSFER
(i) Not to assign underlet or otherwise part with the possession of
or transfer the said Premises or any part or parts thereof or any
interest therein or permit or suffer any arrangement or
transaction whereby any person or persons who
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is/are not a party to this Agreement obtains or obtain the use
possession enjoyment or occupation of the said Premises or any
part or parts thereof irrespective of whether any rental or other
consideration is given therefor. The tenancy created pursuant to
this Agreement shall be personal to the Tenant named in this
Agreement and without in any way limiting the generality of the
foregoing, the following acts and events shall, unless previously
approved in writing by the Landlord, be deemed to be breaches of
this Clause 4(p):
A. In the case of a Tenant which is a partnership any change in
the constitution of the partners including the taking in of
one or more new partners whether on the death or retirement
of an existing partner or otherwise:
B. In the case of a Tenant who is an individual (including a
sole surviving partner of a partnership Tenant) the death,
insanity or other disability of that individual, to the
intent that no right to use, possess, occupy or enjoy the
said Premises or any par thereof shall vest in the executor,
administrator, personal representative, next of kin,
trustee, receiver or committee of any such individual:
C. In the case of a Tenant which is a limited company
incorporated in accordance with the laws of Hong Kong or
elsewhere any take-over, reconstruction, amalgamation,
merger, voluntary liquidation or change in the person or
persons who owns or own a majority of its voting share or
who otherwise has or have effective control thereof.
D. The giving by the Tenant of a Power of Attorney or similar
authority whereby the donee of the Power obtains the right
to use, possess, occupy or enjoy the said Premises or any
part or parts thereof or does in fact use, possess, occupy
or enjoy the same:
E. The change of the Tenant's business name without the prior
written consent of the Landlord.
(q) NOT TO KEEP ANIMALS OR PETS AND TO PREVENT INFESTATION
Not to keep or permit or suffer to be kept any animals, birds or pets
inside the said Premises and to take all such steps and precautions at
such intervals as shall be required by the Landlord and to the
satisfaction of the Landlord to prevent the said Premises or any part
or parts thereof from becoming infested by termites, rats, mice,
cockroaches or any other pests or vermin and in the event of any such
infestation to
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permit the same to be remedied by contractor appointed by the Landlord
at the Tenants' own cost and expense.
(r) NOT TO PERMIT TOUTING OR SOLICITING OF BUSINESS
Not to permit any canvassing, peddling, touting or soliciting for
business or distributing of any booklets, literatures, promotional
items, pamphlets, notices or advertising matters to be conducted
outside or near the said Premises or in any part or parts of the said
Building.
(s) MOVEMENT OF HEAVY MACHINERY EQUIPMENT ETC. WITH LANDLORD'S CONSENT
Not to move any heavy machinery equipment freight bulky item or
fixtures and fittings which would impose a weight on any part of the
flooring in excess of the maximum loading capacity referred to in
Clause 4(w) hereof in and out of the said Building without obtaining
the Landlord's prior written consent. The Tenant shall indemnify and
keep the Landlord indemnified against all damage sustained by any
person or property and for any damages or monies as well as legal
costs on a full indemnity basis incurred by the Landlord in settlement
of any actions, claims, proceedings or demands in connection therewith
and for all costs and expenses incurred by the Landlord in repairing
any damage to the said building and its appurtenances resulting from
the movement of any heavy machinery equipment freight bulky item or
fixtures and fittings by the Tenant.
(t) NOT TO HANG BLINDS OR AERIAL ETC.
Not to hang, fix or erect any Venetian blinds or sun blinds of any
description, shelters or coverings, wire or aerial wirings or other
things whatsoever on any exterior part of the said Building including
the roof and the exterior wall of the said Premises nor to do or
permit to be done any act or thing which may or will alter the
external appearance of the said Building.
(u) NOT TO HANG LAUNDRY
Not to use or cause or permit the use of the entrances, exits, halls,
lobbies, corridors, staircase, landings, passageways, lavatories and
other common areas of the said building for the purpose of drying
laundry or hanging or placing or storing any articles or things
thereon or therein and not to permit the Tenant's servants, employees,
agent, invitees, licensees and customers to use the same for loitering
or eating.
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(v) NOT TO USE LIFTS FOR CARRIAGE OF CARGOES
Not to permit or suffer the lifts to be used for the carriage of
cargoes, goods and other articles or things exceeding the maximum
loading limit specified therefor by a notice affixed therein.
(w) NOT TO EXCEED FLOOR LOADING
Not without the prior written consent of the Landlord to bring onto or
suspend in or from or permit or suffer to be brought onto or suspended
in or from the said Premises any equipment apparatus or machinery
which imposes a weight on any part of the flooring of the premises in
excess of the existing floor loading capacity of the said Building.
The Landlord shall be entitled to prescribe the maximum weight and
permitted locations of safes and other heavy equipment apparatus or
machinery and may require the same to stand on supports of such
dimension and material to distribute the weight as the Landlord may
consider necessary.
(x) EXCLUSION OF LANDLORD'S LIABILITY
Not to hold the Landlord liable or responsible in any way to the
Tenant or to any other person whomsoever in respect of any injury
damage or loss of business or other liability whatsoever which may be
suffered by the Tenant or by any other person or any property
howsoever caused and in particular, but without limitation, caused by
or through or in any way owing to:
(i) any defect in or failure or need for repair or overhaul of the
supply of electricity, gas, water, telephone, air conditioning,
lifts or other services whatsoever or any surge reduction
variation interruption or termination in the supply of such
services;
(ii) any typhoon, landslide, subsidence of the ground, escape of fire,
smoke, fumes or other substance or thing from anywhere within the
said Building, any seepage, overflow or leakage of water from any
pipes, drains or fire services system or anywhere within the said
building or the influx of rain water or sea water into the said
Premises or the said Building or any escape of electric current
from electric wirings cables or ducts situate upon or in any way
connected with the said Building or any part or parts thereof or
dropping or falling of any article object or material whatsoever
including cigarette ends, glass or tiles from anywhere within the
said Building, or vibrations from an floor office or premises in
the said Building or in the adjoining or neighboring building.
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(iii)any defective or damaged condition of the said Premises or any
part or parts thereof or the Landlord's fixtures and fittings
therein;
(iv) any misconduct negligence or breach of duties on the part of the
Manager;
(v) any act, neglect or default of the Tenant or to other tenants and
occupiers or any of their servants, employees, agents, invitees,
licensees or customers of the other parts of the said Building or
the adjoining or neighboring building;
(vi) any failure or breakage of glass or plate glass of or in the said
Premises or the said Building.
5. LANDLORD'S COVENANTS THE LANDLORD HEREBY AGREES WITH THE TENANT as follows:
(a) TO PAY CROWN RENT AND PROPERTY TAX
To pay the Crown rent and Property Tax and all expenses of a capital
or non-recurring nature attributable to or payable in respect of the
said Building.
(b) TO PROCURE MANAGER TO KEEP MAIN STRUCTURE ETC.
To procure the Manager to keep the roof of the said Building and the
main structure, entrances, exists, lobbies, lifts, escalators,
corridors, staircases, landings, passageways, canopy, lavatories and
other common areas of and in the said Building and the common service
facilities therein in a good state of repair and condition Provide
That the Landlord shall not incur any liability for any breach of
obligation under this Clause 5(b) unless and until written notice of
any defect or want of repair or bad condition shall have been
previously given by the Tenant to the Landlord and the Landlord shall
have failed to take reasonable steps to repair or remedy the same
after the lapse of a reasonable time from the date of service of such
notice.
(c) TENANT SHALL HAVE QUIET ENJOYMENT
That the Tenant paying the rent, rates, air conditioning charge and
management fee and all other outgoings hereby agreed to be paid on the
days and in the manner herein provided for payment of the same and
observing and performing the agreements, stipulations and conditions
herein contained and on the Tenant's part to be observed and performed
shall peacefully hold and enjoy the said Premises during the term
without any interruption by the Landlord or any person lawfully
claiming under or in trust for the Landlord.
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6. IT IS HEREBY FURTHER EXPRESSLY AGREED AND DECLARED as follows:
(a) LATE PAYMENT PENALTY
If the Tenant shall have failed to pay the rent, rates, air
conditioning charge and management fee and all outgoings payable
hereunder in respect of the said Premises within seven (7) days from
the day due for payment thereof, the Landlord shall without prejudice
to its other rights and remedies hereunder or otherwise, be entitled
to charge and the Tenant shall be liable to pay to the Landlord
interest on the arrears of rent or outstanding amount of rates, air
conditioning charge and management fee and all outgoings thereof at
the rate of (as well before as after any judgment) three (3) %
percentum per month from the date the same is due until the actual
date of payment together with all legal costs and expenses incurred by
the Landlord on a full indemnity basis for the purpose of recovering
the arrears or outstanding sums in Court or otherwise from the Tenant
and shall be a debt due from the Tenant to the Landlord and be
forthwith recoverable by action. The Landlord shall also be entitled
to disconnect or discontinue the supply of services, including but not
limited to air conditioning, water, electricity, gas to the said
Premises and/or to the Tenant without prior notice to the Tenant.
(b) RATES ON ACCOUNT
The Tenant shall pay the rates in respect of the said Premises
quarterly in advance upon receipt of the debit note from the Landlord.
(c) LANDLORD'S RIGHT OF RE-ENTRY ETC.
If the rent, rates, air conditioning charge and management fee or all
outgoings payable hereunder or any part hereof shall be unpaid for
fifteen (15) days after that same shall become payable (in the case of
the rent whether legally or formally demanded or not) or if the Tenant
shall fail or neglect to observe or perform any of the agreements,
stipulations or conditions herein contained and on the Tenant's part
to be observed and performed or if the Tenant shall become bankrupt,
or being a corporation shall go into liquidation by whatsoever reasons
or for whatsoever purposes, or if any petition shall be filed for the
winding up of the Tenant, or if the Tenant shall otherwise become
insolvent or make any composition or arrangement with creditors, or
shall suffer any execution to be levied on the said Premises or
otherwise on the Tenant's 's goods, then and in any such case it shall
be lawful for the Landlord at any time thereafter to forfeit the
tenancy hereby created and to re-enter on the said Premises or any
part or parts thereof and to recover possession of the said Premises
in the name of the whole whereupon this Agreement shall absolutely
cease and determine but without prejudice to any right of action by
the
- 21 -
<PAGE>
Landlord in respect of any outstanding breach or non-observance or
non-performance of any of the agreements, stipulations and conditions
herein contained or to the Landlord's right to deduct all loss and
damage thereby incurred from the said deposit paid by the Tenant in
accordance with Clause 2 hereof.
(d) WRITTEN NOTICE SHALL BE SUFFICIENT
A written notice served by the Landlord on the Tenant in manner
hereinafter mentioned to the effect that the Landlord thereby
exercised the power of forfeiture and/or re-entry herein contained
shall be full and sufficient exercise of such power without physical
entry on the part of the Landlord.
(e) ACCEPTANCE OF RENT NOT WAIVER OF BREACH OF COVENANT
Acceptance of rent by the Landlord shall not be deemed to operate as a
waiver by the Landlord of any right to proceed against the Tenant in
respect of any breach non-observance or non-performance by the Tenant
of any of the agreements, stipulations and conditions herein contained
and on the Tenant's part to be observed and performed.
(f) FORCE MAJEURE
If the said Premises or any part or parts thereof shall be rendered
inaccessible or destroyed or so damaged by fire, typhoon, Act of God,
force majeure or at any time during the term the said Premises or the
said Building or any part or parts thereof shall be condemned as a
dangerous structure or a demolition order or closure order of the
relevant Government authorities shall become operative in respect of
the said Premises or the said Building or any part or parts thereof or
other cause beyond the control of the Landlord and not attributable
directly to any act or default of the Tenant as to be rendered unfit
for commercial use and occupation or inaccessible and subject to the
insurance policy or policies for such risks effected by the Landlord
(if any) shall not have been rendered void or voidable or payment of
policy moneys refused in whole or in part in consequence of any act or
neglect or default of the Tenant, the rent, rates, air conditioning
charge and management fee and all outgoings or a part thereof
proportionate to the damage sustained shall cease to be payable until
the said Premises shall have been restored or reinstated or rendered
accessible Provided Always That the Landlord shall be under no
obligation to repair or reinstate the said Premises And Provided
Further That without prejudice to the foregoing if the whole or
substantially the whole of the said Premises shall have been destroyed
or rendered unfit for use and occupation and shall not have been
repaired or reinstated within three (3) months of the occurrence of
the destruction or damage then either party shall be entitled at any
time before the same are so repaired and
- 22 -
<PAGE>
reinstated to terminate this Agreement by notice in writing to the
other and thereupon this Agreement and the term shall determine as
from the date on which they were rendered unfit for use and occupation
or inaccessible but without prejudice to the rights and remedies of
either party against the other in respect of any antecedent claim or
liability hereunder. In the event of any disagreement between the
parties hereto on the application of this Clause 6(f) then the subject
of disagreement shall be referred to a single arbitrator for
settlement in accordance with the provisions of the Arbitration
Ordinance for the time being in force.
(g) LANDLORD NOT LIABLE FOR BREAKDOWN IN AIR CONDITIONING SYSTEM
The Landlord shall not in any circumstances be liable to the Tenant
for any defect in or mechanical breakdown or failure or need for
repair or overhaul of the air conditioning system nor shall the rent
or air conditioning charge and management fee abate or cease to be
payable on account thereof Provided Also That if the air conditioning
system shall wholly breakdown or cease to operate for any period of
fourteen (14) or more consecutive days, the due proportion of the air
conditioning charge and management fee attributable to the maintenance
of the air conditioning system but not the rent shall cease to be
payable from the first day after the end of such period of fourteen
(14) consecutive days until the air conditioning system again
commences operating.
(h) TENANT RESPONSIBLE FOR ACTS OF SERVANTS, VISITORS, ETC.
For the purpose of these presents any act, default, neglect or
omission of any servants, employees, agents, invitees, licensees or
customers (as hereinbefore defined) of the Tenant shall be deemed to
be the act, default, neglect or omission of the Tenant.
(i) DISTRESS FOR RENT
For the purpose of Part III of the Landlord and Tenant (Consolidation)
Ordinance, Chapter 7 of the Laws of Hong Kong, and for the purpose of
this Agreement, the rent payable in respect of the said Premises shall
be and be deemed to be in arrear if not paid in advance at the time
and in the manner stipulated in Clause 3(a) hereof.
(j) WAIVER
To the extent that the Tenant can lawfully do so, the Tenant hereby
expressly agrees to deprive itself of and to waive all rights (if any)
to protection against eviction or ejectment afforded by any existing
or future legislation from time to time in force and
- 23 -
<PAGE>
applicable to the said Premises or to the tenancy hereby created and
the Tenant agrees to deliver up vacant possession of the said Premises
to the Landlord on the expiration or sooner termination of the tenancy
hereby created notwithstanding any rule of law or equity to the
contrary.
(k) NON-WAIVER
No condoning, excusing or overlooking by the Landlord of any default
breach or non-observance, or non-performance by the Tenant at any time
or times of any of the Tenant's obligations herein contained shall
operate as a waiver of the Landlord's rights hereunder in respect of
any continuing or subsequent default, breach or non-observance or
non-performance or so as to defeat or affect in any way the rights and
remedies of the Landlord hereunder in respect of any such continuing
or subsequent default or breach and no waiver by the Landlord shall be
inferred from or implied by anything done or omitted by the Landlord
unless expressed in writing, and signed by the Landlord. Any consent
given by the Landlord shall operate as a consent only for the
particular matter to which it relates and in no way shall be
considered as a waiver or release of any of the provisions hereof nor
shall it be construed as dispensing with the necessity of obtaining
the specific written consent of the Landlord in the future unless
expressly so provided.
(l) LANDLORD'S RIGHT TO EXHIBIT SELLING OR LETTING NOTICE
During the three months immediately preceding the expiration of the
term hereby created, the Landlord shall be at liberty to affix and
maintain without interference upon any external part of the said
Premises notice or advertisement stating that the premises are to be
let or to be sold and such other information in connection therewith
as the Landlord shall deem fit.
(m) SERVICE OF NOTICES
Any notice required to be served hereunder shall, if to be served on
the Tenant, be sufficiently served if addressed to the Tenant and sent
by prepaid post to or delivered at the said Premises or the tenant's
last known place of business or registered office or residence in Hong
Kong and, if to be served on the Landlord, shall be sufficiently
served if addressed to the Landlord or such other person as may be
notified in writing to the Tenant and sent by prepaid post to or
delivered at the registered office of the Landlord or any other
address which the Landlord may notify to the Tenant from time to time.
In the case of a notice sent by prepaid post as aforesaid, service
shall be deemed to have been effected two (2) days after the date of
posting.
- 24 -
<PAGE>
(n) RENAME OF BUILDING
The Landlord shall at any time and from time to time during the term
hereby granted be entitled to change the name or re-name or give
consent to the other party to name or re-name the said Building or any
part or parts thereof with any such name or style as in its sole
discretion may determine on giving not less than two (2) months notice
to the Tenant of its intention so to do and in respect thereof the
Landlord shall not be liable for any damages to the Tenant or be made
a party to any other proceedings or for costs or expenses of
whatsoever nature incurred by the Tenant as a result of such change.
(o) LEGAL COSTS AND EXPENSES
Each party shall bear its own legal costs and disbursements of and
incidental to the preparation approval and completion of this
Agreement and the Tenant further agrees and undertakes to reimburse
the Landlord half share of all legal costs and disbursements payable
by the Landlord to Messrs. Paul K. C. Chan & Co. upon signing of this
Agreement provided that any stamp duty and registration fees, if any,
payable hereon and the duplicate shall be borne and paid by the
parties hereto in equal shares.
7. ASSIGNMENT
In the event that this Agreement or the said Premises or any part or parts
thereof is/are assigned to other person(s) ("the new Landlord") by the
Landlord, the following provisions shall apply:
(1) the Tenant, subject to and at the direction of the Landlord, shall
accept and acknowledge the new Landlord as the new Landlord in respect
of the said Premises or any part or parts thereof assigned as
aforesaid to whom the Tenant thereafter shall become liable according
to the terms and conditions of this Agreement and shall enter into a
Deed of Novation and/or Transfer or other agreement(s) or document(s)
with the new Landlord and the Landlord at the cost of the new Landlord
and/or the Landlord in such reasonable form and content as
satisfactory to the Landlord and the new Landlord for the purposes of
confirming the release, discharge and cessation of all liabilities and
obligations of the Landlord hereunder including but not limited to the
Landlord's obligation in respect of the refund of the said deposit
hereunder (so far as they relate to the said Premises or any part or
parts thereof assigned as aforesaid) and the continuation of the
liabilities and obligations of the Tenant hereunder to give effect to
or (as the case may be) to confirm the assumption and taking up by the
new Landlord in lieu of the Landlord of all the Landlord's liabilities
and obligations hereunder including but not limited to the Landlord's
obligation in
- 25 -
<PAGE>
respect of the refund of the said deposit hereunder (so far as they
relate to the said Premises or any part or parts thereof assigned as
aforesaid);
(2) upon the assignment of this Agreement or the said Premises or any part
or parts thereof and the new Landlord thereof agreeing to assume take
up all the Landlord's liabilities and obligations hereunder, all the
Landlord's liabilities and obligations hereunder including without
limitation its obligations to refund the said deposit to the Tenant
hereunder (so far as they relate to the said Premises or any part or
parts thereof assigned as aforesaid) whether contractual or other wise
shall absolutely cease and be taken up by the new Landlord and the
Tenant shall only seek refund of the said deposit (subject always to
the terms and conditions contained in this Agreement) from the new
Landlord.
8. RENT FREE PERIOD
Notwithstanding anything to the contrary contained in this Agreement, the
Tenant shall be entitled to a rent-free period for a period of three (3)
months from 1st July 1996 to 30th September 1996 (both days inclusive)
provided that during the said period the Tenant shall be responsible for
and pay all the rates, air conditioning charges and management fees, and
all other outgoings payable by the Tenant in respect of the said Premises
under the terms and conditions of this Agreement.
9. OPTION TO RENEW
(a) If the Tenant shall be desirous of taking a tenancy of the said
Premises for a further term of Three (3) years from the expiration of
the term hereby granted the Tenant shall not earlier than six (6)
months nor later than three (3) months before the expiration of the
term hereby granted give to the Landlord notice in writing of its
desire and the said option shall be deemed to have lapsed and be of no
further effect whatsoever if not so exercised within the
abovementioned time. If as at the termination of the tenancy hereby
created the Tenant shall have paid all rent hereby reserved and shall
have performed and observed the agreements, stipulations and
conditions herein contained on its part to be performed and observed
then the Landlord shall grant to the Tenant and the Tenant shall take
a new Tenancy Agreement in respect of the said Premises for the
further term of Three (3) years commencing immediately after the
expiration of the term hereby granted at the then prevailing open
market rent to be determined in accordance with sub-clause (c) hereto.
A notice once having been given by the Tenant to the Landlord
hereunder shall be irrevocable and shall be binding on the Tenant.
(b) During the penultimate month immediately preceding the expiration of
the term hereby created the Landlord shall notify the Tenant of the
Landlord's assessment of
- 26 -
<PAGE>
the open market rental for the said further term of Three (3) years
and the Tenant shall within fourteen (14) days upon receipt of such
notice lodge with the Landlord a written notice accepting or rejecting
the Landlord's assessment. If the Tenant agrees to the Landlord's
assessment and accept such assessment at the time and in the manner as
aforesaid, the Landlord's assessment shall be the new rent payable by
the Tenant during the said further term of Three (3) years or if the
Tenant shall fail to lodge such notice at the time and in the manner
as aforesaid then the Landlord's assessment shall be deemed to be the
open market rental for the said further term of Three (3) years.
(c) If, within fourteen (14) days of the lodging of the said notice
referred to in sub-clause (b) hereof, the parties shall be unable to
agree the new rent payable by the Tenant for the said further term of
Three (3) years either the Tenant shall be entitled to terminate the
tenancy hereby created on the original expiry date of the term hereby
granted or either the Landlord or the Tenant may serve a notice upon
the other calling for an independent surveyor and valuer (hereinafter
referred to as "the Surveyor") to be appointed to determine the new
rent. The Surveyor may be appointed by agreement between the Landlord
and the Tenant or in default of such agreement the surveyor may be
appointed at the request of either of the parties hereto in the first
instance by the Chairman or President (as the case may be) for the
time being of The Royal Institution of Chartered Surveyors (Hong Kong
Branch) or in default of such appointment the Surveyor may be
appointed at the request of either of the parties hereto by the
Chairman or President (as the case may be) for the time being of the
Hong Kong Institute of Surveyors or equivalent professional body. The
Surveyor's decision as to what shall be the new rent shall be
conclusive and binding on the parties hereto.
(d) In determining the new rent the Surveyor shall act as an expert and
not as an arbitrator and shall take into account the open market
rental (including for this purpose any management fees payable) for
prime commercial accommodation or in similar commercial buildings in
Hong Kong to those of the Building obtainable at the time of
commencement of the further term of Three (3) years on the following
assumptions that at that date:
(i) no work which has been carried out thereon by the Tenant or its
permitted sub-tenants (if any) or predecessors in title has
diminished the rental value of the said Premises and that in case
the said Premises have been destroyed or damaged, they have been
fully reinstated and restored;
(ii) the said Premises are available for letting by a willing Landlord
to a willing Tenant without a premium but with vacant possession;
- 27 -
<PAGE>
(iii)that the covenants herein contained on the part of the Tenant
have been fully performed and observed.;
But disregarding:
(iv) any effect on rent of the fact that the Tenant has been in
occupation of the said Premises;
(v) any goodwill attached to the said Premises by reason of the
carrying on thereat of the business of the Tenant;
(vi) any increase in rental value of the said Premises attributable to
any special improvement to the said Premises or any par thereof
carried out by the Tenant with the Landlord's consent where
required including any special improvements made by the Landlord
at the expense of the Tenant prior to the commencement or during
the continuance of the term.
(e) The Surveyor shall afford to each of the parties hereto an opportunity
to make representations to him.
(f) If the Surveyor shall die delay or become unwilling or incapable of
acting or if for any other reason the Chairman or President (as the
case may be) for the time being of the Royal Institution of Chartered
Surveyors Hong Kong Branch or the Chairman or President (as the case
may be) for the time being of the Hong Kong Institute of Surveyors as
the case may be or the person acting on his behalf shall in his
absolute discretion think fit he may by writing discharge the Surveyor
and appoint another in his place.
(g) If the new rent shall not have been determined before the commencement
of the said further term of Three (3) years, pending determination of
the new rent the Tenant shall continue to pay monthly on account of
the new rent the rent that was payable by the Tenant in respect of the
period immediately prior to the beginning of the said further term of
Three (3) years and within ten (10) days of the determination of the
new rent, the Tenant shall pay to the Landlord the difference between
the rent actually paid by the Tenant during the period pending
determination plus such amount of interest as may be directed by the
Surveyor.
(h) Irrespective of any assessment or determination of the open market
rental for the said Premises in no case shall the new rent that shall
be payable by the Tenant for the said further term of Three (3) years
be less than the rent more particularly described and set out in the
Third Schedule hereto.
- 28 -
<PAGE>
(i) The costs and expenses of the Surveyor including the cost of his
appointment shall be borne by the Tenant unless the open market rental
determined by the Surveyor shall be less than that assessed by the
Landlord in accordance with sub-clause (b) hereof in which case all
costs and expenses of the Surveyor shall be borne by the Landlord and
the Tenant in equal shares and each party shall bear all other costs
and expenses incurred by themselves in respect of or in connection
with any rent review separately.
(j) The said further term of Three (3) years shall be granted by the
Landlord to the Tenant on the same terms and conditions as are herein
contained whenever appropriate except Clauses 8, 9 and 20 and except
that:
A. under the said further term of Three (3) years the said deposit
paid hereunder shall be increased to an amount representing the
aggregate of three months' new rent and three months' new air
conditioning charges and management fees determined by the
parties hereto in accordance with the provisions set out
hereinbefore.
B. provided that the said further term of Three (3) years shall not
be terminated before its expiry date for whatever reason and the
Tenant shall not be released from its obligation under Clause
3(p) hereof.
10. MANAGEMENT REGULATIONS
(a) The Landlord reserves the right from time to time and by notice in
writing to the Tenant to Make impose adopt and introduce and
subsequently supplement amend or abolish if necessary such reasonable
regulations as it may consider necessary for the management operation
and maintenance of the said Building including without limitation
those regulations relating to the use of the common service
facilities, the lifts and the use of the loading and unloading areas
(if any) in the said Building.
(b) Such regulations shall be supplementary to the terms and conditions of
this Agreement and shall bind the Tenant and any breach of the
regulations shall be deemed to be a breach of this Agreement for which
the Landlord may exercise all or any of its rights or remedies
hereunder.
(c) Such regulations shall not in any way derogate from the terms and
conditions of this Agreement. In the event of conflict between such
regulations and the terms and conditions of this Agreement the terms
and conditions of this Agreement shall prevail.
- 29 -
<PAGE>
11. JOINT AND SEVERAL LIABILITY
Where more than one person is named as the Tenant in the First Schedule
hereto all such persons shall sign this Agreement and shall be jointly and
severally liable for the performance and observance of the terms,
conditions, and agreements contained herein and on the part of the Tenant
to be performed and observed.
12. NO PREMIUM
The Tenant acknowledges that no fine premium key money or other
consideration has been paid by the Tenant to the Landlord for the grant of
the tenancy hereby created and that the rent is the best rent which can
reasonably obtained without a premium.
13. NO WARRANTY
The Landlord does not warrant that the said Premises together with the
fixture and fittings thereto are fit for the purposes for which they are
let or for any other purposes whatsoever intended to be used by the Tenant
and shall not be liable or responsible to the Tenant for any damages or
loss in respect thereof.
14. FULL AGREEMENT
This Agreement sets out the full agreement reached between the parties
hereto and no other representations have been made or warranties given
relating to the Landlord or the Tenant or the said Building or the said
Premises and if any such representation or warranty has been made given or
implied the same is hereby waived.
15. LAW
This Agreement shall be governed and construed in all respects in
accordance with the laws of Hong Kong.
16. MARGINAL NOTES
The Marginal notes are intended only for guidance and reference and do not
form part of this Agreement nor shall any of the provisions in this
Agreement be construed or interpreted by reference thereto or in any way
affected or limited thereby.
- 30 -
<PAGE>
17. MISCELLANEOUS
Unless the context otherwise requires, words herein importing the masculine
gender shall include the feminine and neuter and words herein in the
singular shall include the plural and vice versa and the expression
"person" or "persons" shall include firms and/or corporations.
18. LEGAL REPRESENTATION
The Tenant hereby declares that the Tenant understands the effect of this
Agreement and that the Tenant has not been subject to any undue pressure to
sign the same and further agrees and declares that Messrs. Paul K. C. Chan
& Co., solicitors act solely as the solicitors for the Landlord in the
preparation and execution of this Agreement and that the Tenant has been
duly requested and advised by Messrs. Paul K. C. Chan & Co. to seek
independent legal advice on this Agreement or any of the provisions herein
contained prior to signing of this Agreement. Notwithstanding the aforesaid
advice, the Tenant hereby confirms and declares that the Tenant fully
understands the contents and effects of this Agreement and that the Tenant
requires no independent legal advice hereon.
19. MORTGAGEE'S CONSENT
IT IS HEREBY FURTHER AGREED by the parties hereto as follows:
The said Premises are at present subject to a Mortgage registered in the
Land Registry by Memorial No. 6611234 and made between the Landlord as
Mortgagor of one part and the Yien Yieh Commercial Bank Limited as
Mortgagee of the other part. This Agreement is conditional upon the written
consent of the said Mortgagee being obtained and in the event of the said
mortgagee failing or refusing to give such consent as aforesaid, this
Agreement shall become null and void and the Tenant shall immediately
vacate the said Premises and all sums paid hereunder by the Tenant to the
Landlord shall be returned to the Tenant without interest or compensation.
20. LICENSE FEE-FREE CLAUSE
The Landlord hereby grants to the Tenant a license-at-will to use and
occupy the Premises for the purpose of inspection and measurement for
fitting out purpose of the same of the period form the 25th day of June
1996 to the 30th day of June 1996 (both days inclusive) free of license fee
provided that the Tenant shall during the said period observe and comply
with all terms and conditions herein contained with such modifications only
as are necessary to make the same applicable to the license hereby granted.
- 31 -
<PAGE>
21. TENANTS RIGHT TO USE FURNITURE, FIXTURES AND CHATTELS
Notwithstanding anything herein contained to the contrary, it is hereby
expressly agreed by the parties hereto that the Tenant shall during the
term of this tenancy have the right to use the furniture, fixtures and
chattels as set out in the Fifth Schedule hereto ("the Furniture") without
payment of any additional rent and charges therefor upon the following
terms and conditions:
(a) That the Tenant shall not remove permit or cause to be removed any
item of the Furniture from the said Premises save for the purposes of
repair or replacement.
(b) The Landlord shall have the same right as set out in Clause 3(j)(i)
hereof to enter into the said premises upon prior notice to view the
condition of the Furniture and the same right as set out in Clause
3(k)(ii) to cause repair thereto at the costs and expenses of the
Tenant of which written notice has been received by the Tenant and
which the Tenant has failed to repair within 14 days of receipt of
such notice, or such shorter period as shall be appropriate in case of
emergency.
(c) That the Tenant shall maintain and keep the Furniture in good clean
and substantial repair and condition (fair wear and tear excepted).
(d) That the Tenant shall at the expiration or sooner determination of
this Agreement deliver up to the Landlord the Furniture and replace
with articles of similar value any items of the Furniture which are
removed, missing, lost or so destroyed or damaged as to be incapable
of repair owing to the default or neglect of the Tenant.
22. THE PLAN
The parties hereto declare and acknowledge that the use, occupation and
enjoyment of the Corridor on the 21st Floor of the said Building as shown
colored Pink hatched Black on the plan annexed hereto for identification
purpose is subject to compliance of the Building Ordinance (Cap. 123) and
Fire Service Ordinance (Cap. 95) of the Laws of Hong Kong and subject also
to the rights of ingress and egress for the Landlord, Hong Chun Development
Limited and Chi Wen Trading Company Limited and their licensees, assignees
and others along the Corridor leading from the common staircase and lifts
to the Air Conditioning Handling Unit Room and the Meter Room colored
Yellow on the said Plan.
23. SHOWROOM AND STRONGROOM
It is hereby agreed by the parties hereto that the Tenant shall at its own
costs and expenses be entitled to erect a showroom (not exceeding 300
square feet) and a strongroom (not exceeding 600 square feet) in the said
Premises for the purpose of its business as may be
- 32 -
<PAGE>
approved by the Landlord in accordance with Clause 3(e) herein and the
Tenant shall remove the said showroom and strongroom and reinstate the said
Premises in accordance with Clause 3(p) herein.
THE FIRST SCHEDULE ABOVE REFERRED TO
LANDLORD: SAME FAST LIMITED (illegible) whose registered office is
situate at 36th Floor, Rooms 3601-05, China Resources
Building, 26 Harbour Road, Hong Kong.
TENANT: MAN SANG JEWELLERY COMPANY LIMITED (illegible) whose
registered office is situate at 14th Floor, Sands Building,
17 Hankow Road, Tsimshatsui, Kowloon, Hong Kong.
THE SECOND SCHEDULE ABOVE REFERRED TO
The entire office on 21st Floor and the Corridor on 21st Floor, No. 39
Chatham Road South, Kowloon, Hong Kong erected on the said Land.
- 33 -
<PAGE>
THE THIRD SCHEDULE ABOVE REFERRED TO
TERM OF TENANCY: Three (3) Years commencing on 1st July 1996 and expiring
on 30th June 1999.
RENT: HK$326,400.00 per calendar month (exclusive of rates,
air conditioning charge and management fee and all
outgoings of every description) payable in advance
without any deductions whatsoever on the first day of
each and every calendar month and the first of such
payment is to be paid on the 1st October 1996 Provided
That the Tenant shall be entitled to the rent-free
period in Clause 8 hereof.
AIR CONDITIONING CHARGE: HK$32,640.00 per calendar month in advance clear of all
AND MANAGEMENT FEE deductions on the first day of each and every calendar
month subject to such increase as may from time to time
be imposed by the Manager charged with the management
of the said Building during the term of the tenancy.
DEPOSIT: The sum of HK$1,077,120.00, particulars as follows:
(i) HK$979,200.00 being Three (3) months' rental
deposit;
(ii) HK$97,920.00 being Three (3) months' air
conditioning charge and management fee deposit.
THE FOURTH SCHEDULE ABOVE REFERRED TO
The said Premises shall only be used for office purpose and for no other purpose
whatsoever.
- 34 -
<PAGE>
THE FIFTH SCHEDULE ABOVE REFERRED TO
1. Suspended ceiling grid, ceiling tiles and light boxes
2. Standard fire sprinkler system
3. Full central air conditioning system
4. Wall plaster with paint
- 35 -
<PAGE>
AS WITNESS the hands of the parties hereto the day and year first above written.
SIGNED by Mr. Tian Wei, }
its director, }
for and on behalf of the }
Landlord }
}
in the presence of: }
For and on behalf of
/s/ illegible SAME FAST LIMITED
- ------------------------------
Anita Vachani
Clerk to Messrs. Paul K.C. Chan & Co /s/ illegible
Solicitors, Hong Kong -----------------------------------
Authorized Signature(s)
SIGNED by Mr. Cheng Tai Po, } For and on behalf of
its director, } MAN SANG JEWELLERY CO., LTD.
for and on behalf of the }
Tenant }
}
in the presence of: } /s/ illegible
-----------------------------------
Authorized Signature(s)
/s/ illegible
- ------------------------------
Anita W. S. Tong
Solicitor
Hong Kong
RECEIVED on the day and year }
first above written of and }
from the Tenant the sum }
of HONG KONG DOLLARS ONE }
MILLION AND SEVENTY-SEVEN } HK$1,077,120.00
THOUSAND ONE HUNDRED AND }
TWENTY ONLY Hong Kong }
Currency } For and on behalf of
being the deposit }
above-mentioned to be paid by } SAME FAST LIMITED
the Tenant to the Landlord }
/s/ illegible
-----------------------------------
Authorized Signature(s)
- 36 -
<PAGE>
WITNESS at to signature only:
/s/ illegible I hereby verify the signature of
- ------------------------------ Anita Vachani:
Anita Vachani
Clerk to Messrs. Paul K. C. Chan & Co. /s/ illegible
Solicitors, Hong Kong -----------------------------------
Anita W. S. Tong
Solicitor, Hong Kong
- 37 -
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000807630
<NAME> MAN SANG HOLDINGS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,305
<SECURITIES> 0
<RECEIVABLES> 5,946
<ALLOWANCES> 0
<INVENTORY> 18,436
<CURRENT-ASSETS> 27,799
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0
0
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</TABLE>
