<PAGE> 1
MAN SANG HOLDINGS, INC.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1997
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 NUMBER: 33-10639-NY
MAN SANG HOLDINGS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 87-0539570
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER NO.)
INCORPORATION OR ORGANIZATION)
21/F RAILWAY PLAZA, 39 CHATHAM ROAD SOUTH, TSIMSHATSUI, KOWLOON, HONG KONG
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICERS)
(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 DECEMBER 31, 1997, 4,305,960 SHARES OF COMMON STOCK OF THE
REGISTRANT WERE OUTSTANDING.
<PAGE> 2
MAN SANG HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
December 31, 1997 and March 31, 1997..............................F-1
Consolidated Statements of Income -
For the three months ended December 31, 1997 and 1996 and nine
months ended December 31, 1997
and 1996..........................................................F-3
Consolidated Statements of Cash Flows -
For the nine months ended December 31,1997
and 1996..........................................................F-4
Notes to Condensed Consolidated
Financial Statements..............................................F-5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations..........................................................1
PART II - OTHER INFORMATION...........................................................5
SIGNATURE.............................................................................8
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(Amounts expressed in thousands except share data)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1997
US$ HK$ HK$
--- --- ---
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 10,885 84,138 16,928
Accounts receivable, net of allowance for doubtful 6,093 47,101 47,505
accounts of HK$1,192 as of December 31, 1997 and
HK$1,000 as of March 31, 1997
Inventories
Raw materials 615 4,756 12,432
Work in progress 7,854 60,713 39,531
Finished goods 14,695 113,595 87,600
-------- -------- --------
23,164 179,064 139,563
Prepaid expenses 315 2,436 1,357
Other current assets 907 7,010 3,795
Marketable securities 1,601 12,374 --
Income taxes receivable 2 15 437
-------- -------- --------
Total current assets 42,967 332,138 209,585
Long term investments 702 5,430 --
Property, plant and equipment 5,992 46,315 41,086
Accumulated depreciation (1,338) (10,344) (8,224)
-------- -------- --------
4,654 35,971 32,862
Real estate investment 4,042 31,244 28,009
Accumulated depreciation (313) (2,418) (1,981)
-------- -------- --------
3,729 28,826 26,028
-------- -------- --------
Total assets 52,052 402,365 268,475
======== ======== ========
</TABLE>
F-1
<PAGE> 4
CONSOLIDATED BALANCE SHEET (UNAUDITED) - CONTINUED
(Amounts expressed in thousands except share data)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1997
US$ HK$ HK$
--- --- ---
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term bank borrowings 196 1,515 51,596
Current portion of long-term debt 288 2,228 1,498
Accounts payable 2,415 18,670 23,882
Accrued payroll and employee benefits 1,233 9,534 7,832
Other accrued liabilities 1,861 14,387 9,375
Income taxes payable 415 3,208 395
------- -------- -------
Total current liabilities 6,408 49,542 94,578
Long-term debt
Secured bank loans 1,486 11,486 8,333
Capital lease obligations 80 617 169
------- -------- -------
1,566 12,103 8,502
Minority interests 10,862 83,963 --
Stockholders' equity:
Common stock, par value US$0.001 4 33 33
- authorized: 25,000,000 shares;
issued and outstanding: 4,305,960 shares
Series A preferred stock, par value US$0.001 -- 1 1
- authorized, issued and outstanding: 100,000 shares;
(entitled in liquidation to US$2,500 (HK$19,325))
Series B convertible preferred stock, par value US$0.001 -- -- --
- authorized: 100,000 shares
Additional paid-in capital 17,608 136,112 46,059
Retained earnings 15,649 120,963 117,840
Cumulative translation adjustments (45) (352) 1,462
------- -------- -------
Total stockholders' equity 33,216 256,757 165,395
------- -------- -------
Total liabilities and stockholders' equity 52,052 402,365 268,475
======= ======== =======
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-2
<PAGE> 5
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31
(Amounts expressed in thousands except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, NINE MONTHS ENDED DECEMBER 31,
1997 1996 1997 1996
US$ HK$ HK$ US$ HK$ HK$
--- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C>
Net sales 6,971 53,882 56,820 25,089 193,937 176,070
Cost of goods sold 4,141 32,010 35,449 15,074 116,520 110,717
----- ------ ------ ------ ------- -------
Gross profit 2,830 21,872 21,371 10,015 77,417 65,353
Rental income, gross 175 1,352 1,355 554 4,286 3,678
Business tax 8 63 67 25 195 185
----- ------ ------ ------ ------- -------
167 1,289 1,288 529 4,091 3,493
Selling, general and administrative expenses
- Pearls 1,821 14,077 8,764 5,383 41,608 27,407
- Real estate investment 137 1,059 1,265 332 2,563 2,758
----- ------ ------ ------ ------- -------
Operating income 1,039 8,025 12,630 4,829 37,337 38,681
Non-operating items
- Gain on disposal of property - - - 1,089 8,415 -
- Interest income 220 1,704 310 1,762 13,618 578
- Other income 28 217 370 85 654 1,221
- Interest expense 96 740 1,672 417 3,224 4,692
----- ------ ------ ------ ------- -------
Income before income taxes 1,191 9,206 11,638 7,348 56,800 35,788
Income taxes (credit) (286) (2,213) 1,107 380 2,934 2,010
----- ------ ------ ------ ------- -------
Income before minority interests 1,477 11,419 10,531 6,968 53,866 33,778
Minority interests 384 2,972 - 844 6,522 -
----- ------ ------ ------ ------- -------
Net income 1,093 8,447 10,531 6,124 47,344 33,778
===== ===== ====== ===== ====== ======
Basic earnings per common share 0.25 1.96 2.45 1.42 11.00 9.41
===== ===== ====== ===== ====== ======
Diluted earnings per common share 0.24 1.83 2.45 1.38 10.70 8.48
===== ===== ====== ===== ====== ======
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-3
<PAGE> 6
FOR THE NINE MONTHS ENDED DECEMBER 31
(Amounts expressed in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED DECEMBER 31,
1997 1996
US$ HK$ HK$
--- --- ---
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income 6,124 47,344 33,778
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 389 3,007 2,129
(Gain) Loss on sale of property (1,089) (8,415) 252
Provision for doubtful debts 25 192 --
Minority interests 844 6,522 --
Changes in operating assets and liabilities:
Accounts receivable 27 205 (11,729)
Inventories (5,220) (40,352) (56,377)
Prepaid expenses (140) (1,081) 1,539
Other current assets (420) (3,250) 408
Marketable securities (1,601) (12,374) --
Income taxes receivable 54 421 --
Accounts payable (629) (4,866) 976
Accrued payroll and employee benefits 221 1,708 1,264
Other accrued liabilities 654 5,058 (2,253)
Income taxes payable 364 2,816 1,624
------- -------- --------
Net cash used in operating activities (397) (3,065) (28,389)
------- -------- --------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (1,079) (8,338) (23,979)
Expenditure on real estate investment (421) (3,257) --
Purchase of long-term investment (702) (5,430) --
Proceeds from sale of property 1,426 11,025 198
------- -------- --------
Net cash used in investing activities (776) (6,000) (23,781)
------- -------- --------
CASH FLOW FROM FINANCING ACTIVITIES:
Increase in long-term debt 750 5,796 10,360
Repayment of long-term debt (189) (1,464) (504)
Increase in short-term bank borrowings 9,480 73,281 120,055
Repayment of short-term bank borrowings (14,213) (109,866) (106,752)
Increase in bank overdrafts 30,933 239,114 303,204
Repayment of bank overdrafts (32,679) (252,611) (301,922)
Advances from related parties -- -- 139
Repayments to related parties -- -- (2,904)
Net proceeds from issuance of shares by a subsidiary 15,965 123,413 --
Net proceeds from issuance of convertible preferred stock -- -- 38,703
------- -------- --------
Net cash provided by financing activities 10,047 77,663 60,379
------- -------- --------
Net increase in cash and cash equivalents 8,874 68,598 8,209
Cash and cash equivalents at beginning of period 2,190 16,928 9,602
Exchange adjustments (179) (1,388) 4
------- -------- --------
Cash and cash equivalents at end of period 10,885 84,138 17,815
======= ======== ========
SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION
Cash (refund) paid during the period for:
Interest and financing charges 424 3,278 5,270
------- -------- --------
Income taxes (39) (301) 386
------- -------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements
F-4
<PAGE> 7
MAN SANG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
(UNAUDITED)
1. INTERIM FINANCIAL PRESENTATION
The interim financial statements are prepared pursuant to the requirements for
reporting on Form 10-Q. The March 31, 1997 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 annual report of Man Sang Holdings, Inc. (the "Holding
Company," and together with its subsidiaries, the "Company") on Form 10-KSB for
the fiscal year ended March 31, 1997 ("Fiscal 1997"). 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.
Since March 31, 1997, the Company has adopted the following additional policy
regarding Marketable Securities:
Marketable Securities consist of investments in securities traded on the Hong
Kong Stock Exchange, and are stated at market value. All marketable securities
are defined as trading securities under the provision of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities" (SFAS 115) and unrealized holding gains and losses are
reflected in earnings. Market value is determined by the most recently traded
price of the security at the balance sheet date. Net realized gains or losses
are determined on the FIFO cost method.
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 translations are included in
income. Aggregate net foreign currency gains or losses were immaterial for all
periods.
The financial records of the Company are maintained, and its consolidated
financial statements are expressed, in Hong Kong dollars. The translations of
Hong Kong dollar amounts into United States 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, 1997. Such translations should not be construed as
representations that Hong Kong dollar amounts could be converted into United
States dollars at that rate or any other rate.
F-5
<PAGE> 8
3. EARNINGS PER SHARE ("EPS")
Per share data is calculated using the weighted average number of shares of
common stock outstanding during the period.
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share". This statement provides for the calculation of basic and diluted EPS,
which is different from the current calculation of primary and fully diluted
EPS, and requires statement of such EPS information for all prior periods
presented. In this regard, the computation of the basic and diluted EPS of
common stock of the Company for the quarter ended December 31, 1996 and for the
nine-month period ended December 31, 1996 are disclosed as follows:
The Company has 100,000 shares of authorized Series B Convertible Preferred
Stock, par value US$0.001 per share ("Series B Preferred Stock"). In or around
July 1996, the Company sold and issued 6,760 shares of Series B Preferred Stock
for an aggregate purchase price of US$6.76 million. Shares of Series B Preferred
Stock were convertible into shares of common stock commencing on or after 45
days following the sales of such shares of Series B Preferred Stock. Each share
of Series B Preferred Stock was convertible into the number of shares of common
stock determined by dividing US$1,000 by an amount equal to the lesser of (i)
the market price of the common stock on the closing date of the sale of such
shares of Series B Preferred Stock or (ii) 70% of the average closing bid price
of the common stock for the five trading days preceding the conversion. All
6,760 shares of Series B Preferred Stock were converted into 5,223,838 shares of
common stock, of which 5,219,448 shares were issued in Fiscal 1997, before the
1-for-4 reverse stock split which the Company effected in October 1996, and the
balance of 4,390 shares of common stock issuable upon conversion of Series B
Preferred Stock were issued as 1,098 shares of common stock (post reverse stock
split) during the nine-month period ended December 31, 1997.
For the quarter ended December 31, 1996, the weighted average number of shares
of common stock issued upon the conversion of Series B Preferred Stock were
5,218,614. After giving effect to the 1-for-4 reverse stock split effected in
October 1996, the weighted average number of shares of common stock outstanding
for the quarter was 4,304,862.
For the nine-month period ended December 31, 1996, the weighted average number
of shares of common stock issued upon the conversion of Series B Preferred Stock
were 2,361,121. After giving effect to the 1-for-4 reverse stock split effected
in October 1996, the weighted average number of shares of common stock
outstanding for the period was 3,590,280.
F-6
<PAGE> 9
<TABLE>
<CAPTION>
For the Quarter Ended December 31, 1996
Earnings Shares EPS
(Numerator) (Denominator)
----------- -------------
HK$ HK$
<S> <C> <C> <C>
Basic EPS
Net income available
to common stockholders 10,531,000 4,304,862 2.45
====
Effect of dilutive
Securities Series B
Preferred Stock -- --
---------- ---------
Diluted EPS
Net income available to
common stockholders,
including conversion 10,531,000 4,304,862 2.45
========== ========= ====
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended December 31, 1996
Earnings Shares EPS
(Numerator) (Denominator)
----------- -------------
HK$ HK$
<S> <C> <C> <C>
Basic EPS
Net income available
to common stockholders 33,778,000 3,590,280 9.41
====
Effect of dilutive
Securities Series B
Preferred Stock - 393,623
---------- ---------
Diluted EPS
Net income available to
common stockholders,
including conversion 33,778,000 3,983,903 8.48
========== ========= ====
</TABLE>
Pursuant to the Man Sang Holdings, Inc. 1996 Stock Option Plan (the "Plan"), the
Holding Company granted, on September 16, 1997, non-qualified stock options (the
F-7
<PAGE> 10
"Holding Company Options") to the directors and certain senior employees of the
Company to purchase, in aggregate, 850,000 shares of common stock of the Holding
Company, at an exercise price of US$1.22 per share (which represented 85% of the
fair market value of the common stock on the date of grant as determined
pursuant to Article 6.2 of the Plan). Fifty percent (50%) of such Holding
Company Options are exercisable on or after September 16, 1998 and the balance
are exercisable on or after September 16, 1999; however, no Holding Company
Option may be exercised after September 16, 2007.
On September 8, 1997, Man Sang International Limited, a subsidiary incorporated
in the British Virgin Islands ("MSIL"), adopted a share option scheme (the
"Scheme") to grant options to purchase MSIL ordinary shares (the "MSIL Options")
to any full-time employee of MSIL or any of MSIL's subsidiaries (an "MSIL
Employee"). Pursuant to the Scheme, MSIL may, at any time until the end of the
day on September 7, 2007, and from time to time, grant MSIL Options to any MSIL
Employee, at an exercise price of not less than 80% of the average of the
closing prices of MSIL ordinary shares on The Stock Exchange of Hong Kong
Limited for the five trading days immediately preceding the date of grant or the
nominal value of MSIL ordinary shares of HK$0.10 per share, whichever is higher.
The maximum number of shares in respect of which MSIL Options may be granted
under the Scheme may not exceed such number of shares as shall represent 10% of
the issued share capital of MSIL from time to time excluding any shares issued
upon the exercise of MSIL Options granted pursuant to the Scheme.
Pursuant to the Scheme, the MSIL Options may be exercised by the grantee at any
time during the two-year option period commencing on the expiry of six months
after the date on which such MSIL Option is accepted and expiring on the last
day of the two-year period or the end of the day on September 7, 2007, whichever
is earlier.
MSIL granted, on October 16, 1997 and December 3, 1997, MSIL Options to certain
MSIL Employees to purchase 38,600,000 and 8,650,000 ordinary shares of MSIL
respectively, at the exercise price of HK$0.6208 per share and HK$0.446 per
share respectively. The MSIL Options granted were accepted by grantees on
October 20, 1997 and December 8, 1997 respectively. They may be exercised during
the two-year periods commencing April 20, 1998 and June 8, 1998 respectively.
F-8
<PAGE> 11
In light of the dilutive effect of the Holding Company Options and the MSIL
Options, the computation of the basic and diluted earnings per share of common
stock of the Company for the quarter and the nine-month period ended on December
31, 1997 are disclosed as follows:
<TABLE>
<CAPTION>
For the Quarter Ended December 31, 1997
Earnings Shares EPS
(Numerator) (Denominator)
----------- -------------
HK$ HK$
<S> <C> <C> <C>
Basic EPS
Net income available to
common stockholders 8,447,000 4,305,960 1.96
====
Dilutive Holding Company - 301,322
Options
Dilutive MSIL Options (36,281) -
---------- ---------
Diluted EPS
Income available to
common stockholders,
assuming exercise of
all Holding Company Options &
MSIL Options 8,410,719 4,607,282 1.83
========= ========= ====
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended December 31, 1997
Earnings Shares EPS
(Numerator) (Denominator)
----------- -------------
HK$ HK$
<S> <C> <C> <C>
Basic EPS
Net income available to
common stockholders 47,344,000 4,305,960 11.0
====
Dilutive Holding Company Options - 116,106
Dilutive MSIL Options (16,929) -
---------- ---------
Diluted EPS
Income available to
common stockholders,
assuming exercise of
all Holding Company Options &
MSIL Options 47,327,071 4,422,066 10.7
========== ========= ====
</TABLE>
F-9
<PAGE> 12
Based on the above calculations, the Holding Company Options and the MSIL
Options had no material dilutive effect on the basic EPS for the quarter ended
December 31, 1997 and the nine-month period ended December 31, 1997. The Company
has elected to account for the Holding Company Options using the Fair Value
Method. The fair value of each Holding Company Option was calculated to be
US$0.63 using the Black-Scholes Model, with the assumptions as follows:
(a) risk free interest rate of 5.9%;
(b) no dividends shall be paid;
(c) expected life of 2 years; and
(d) expected volatility of 63%.
The effect on consolidated EPS of warrants issued by MSIL, which enable its
holders to purchase ordinary shares of MSIL, was not included in the computation
of diluted EPS because the exercise price of the warrants was greater than the
average market price of such ordinary shares.
4. NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, the FASB issued two new disclosure standards. Results of
operations and financial position will not be affected by implementation of
these new standards.
SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in equity
except those resulting from investments by, and distributions to, owners. Among
other disclosures, SFAS No. 130 requires that all items that are required to be
recognized under current accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements.
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, which supersedes SFAS No. 14, Financial Reporting for Segments of a
Business Enterprise, establishes standards for the way that public enterprises
report information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS No. 131
defines operating segments as components of an enterprise about which separate
financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing
performance.
Both of these new standards are effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Due to the recent issuance of these standards,
management has been unable to fully evaluate the impact, if any, they may have
on future financial statement disclosures.
F-10
<PAGE> 13
5. SIGNIFICANT EVENTS
On November 8, 1997, the Company made an investment of Reminbi 5.1 million (HK$5
million) for a 19.5% stake in a pearl farm located in Nan'ao County in Guangdong
Province of the People's Republic of China through a cooperative joint venture.
The total investment and registered capital of the joint venture is Reminbi
26.16 million.
On December 18, 1997, one of the Company's subsidiaries entered into a
provisional agreement to purchase certain real property located at Flat A on
33rd floor of Valverde, 11 May Road, Hong Kong for HK$15,050,000. The Company
intends to hold such property on a long-term basis and provide accommodation to
senior executives in such property. The Company paid a sum of HK$1,505,000 as
deposit, and on January 2, 1998, entered into an Agreement for Sale and Purchase
for such property.
On January 19, 1998, the Company's Board of Directors approved a capital
investment of approximately HK$8 million to renovate, improve and expand the
Company's pearl processing plant in the People's Republic of China.
F-11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine-Month Period Ended December 31, 1997 Compared to Nine-Month Period Ended
December 31, 1996
Net sales during the nine-month period ended December 31, 1997 totaled HK$194.0
million, representing a 10.1% increase, compared to net sales of HK$176.0
million during the same period in 1996. The increase in net sales was mainly
attributable to the increase by 25.3% in the sales of cultured pearls during the
period over the same period in 1996.
Gross profit for the nine-month period ended December 31, 1997 increased by
HK$12.1 million to HK$77.4 million, representing a 18.5% increase over the gross
profit of HK$65.3 million for the same period in 1996. As a percentage of net
sales, gross profit increased from 37.1% for the nine-month period ended
December 31, 1996 to 39.9% for the same period in 1997. The increase in gross
profit and gross profit margin resulted from increased sales and an increased
proportion of sales of higher margin cultured pearls. Cultured pearls, including
Chinese cultured pearls, Japanese cultured pearls, Tahitian pearls and South Sea
pearls, represented 76.7% of net sales during the nine-month period ended
December 31, 1997, compared with 67.4% during the same period in 1996.
Gross rental income for the nine-month period ended December 31, 1997 increased
by HK$0.6 million to HK$4.3 million, representing a 16.5% increase from HK$3.7
million for the same period in 1996. The increase in gross rental income was due
principally to the increase in rental rate of the Man Sang Industrial City
facility located in Shenzhen in Guangdong Province, People's Republic of China,
despite the decrease in occupancy rate from 93% for the nine-month period ended
December 31, 1996 to 82% for the same period in 1997.
Selling, general and administrative expenses ("SG & A") during the nine-month
period ended December 31, 1997 totaled HK$44.2 million, consisting of HK$41.6
million attributable to pearl operations and HK$2.6 million attributable to real
estate operations, compared with HK$30.2 million, consisting of HK$27.4 million
attributable to pearl operations and HK$2.8 million attributable to real estate
operations, during the same period in 1996, an increase of HK$14 million, or
46.4%. The increase in SG & A was primarily due to increased salaries for
additional staff to support expanding operations, increased management
compensation for one additional executive officer, an accrual for a special
performance bonus of HK$3.75 million which were accrued at year end of fiscal
1997, increased provision for increased legal and professional fees expected to
be incurred by MSIL in order to comply as a public company the rules and
regulations of The Stock Exchange of Hong Kong Limited and other regulatory
bodies, increased rental payments for the current administrative office,
increased depreciation expenses attributable to certain fixed assets acquired
in October 1996. As a percentage of net sales, SG & A for pearl operations
increased from 15.6% for the nine-month period ended December 31, 1996 to 21.5%
for the same period in 1997, while SG & A for real estate operations decreased
from 1.6% for the nine-month period ended December 31, 1996 to 1.3% for the
same period
1
<PAGE> 15
in 1997.
Gain on disposal of property for the nine-month period ended December 31, 1997
was HK$8.4 million which was principally derived from the sale of a leasehold
property ("Leasehold Property") on May 1, 1997 for HK$11.0 million.
Interest income for the nine-month period ended December 31, 1997 increased by
HK$13.0 million to HK$13.6 million. The increase was principally due to an
interest income earned from the funds deposited for the subscription of the
initial public offering of MSIL.
Interest expense for the nine-month period ended December 31, 1997 decreased by
HK$1.5 million to HK$3.2 million, representing a 31.3% decrease from the
interest expense of HK$4.7 million for the same period in 1996. The decrease was
due principally to the decrease in short-term bank borrowings. The decrease in
short-term bank borrowings was due to the increased cash flow generated from
internal operations, the sale of the Leasehold Property and the new funds raised
from the initial public offering of MSIL. The Company's average short-term bank
borrowing rate was 9.871% per annum for the nine-month period ended December 31,
1997 and it was 9.5% per annum for the same period in 1996.
Income taxes for the nine-month period ended December 31, 1997 increased by
HK$0.9 million to HK$2.9 million, representing a 46.0% increase from the income
taxes of HK$2.0 million for the same period in 1996. The significant increase in
the income taxes was principally due to the interest income of approximately
HK$11.4 million derived from the funds deposited for the subscription of the
initial public offering of MSIL. Such interest income was treated as Subpart F
income pursuant to the provisions of Sections 951 through 964 of the Internal
Revenue Code of 1986, as amended.
Three-Month Period Ended December 31, 1997 to Three-Month Period Ended December,
1996
Net sales during the quarter ended December 31, 1997 totalled HK$53.9 million,
representing a 5.2% decrease, compared to net sales of HK$56.8 million during
the same period. Nevertheless, the gross profit for the quarter ended December
31, 1997 increased by HK$0.5 million, representing a 2.3% increase as compared
to the gross profit of the corresponding period of the prior year. The gross
profit margin increased from 37.6% for the quarter ended December 31, 1996 to
40.6% for the same period in 1997. The increase in gross profit and gross profit
margin resulted from increased sales of higher margin cultured pearls. Cultured
pearls represented 79.0% of net sales during the quarter ended December 31,
1997, compared with 68.9% during the same period in 1996. Due to the seasonality
of the Company's business, the third quarter of each fiscal year is normally a
low season.
Gross rental income for the quarter ended December 31, 1997 had an insignificant
decrease as compared with the same period of prior year. This was due to the
increase in gross rental rate together with the decrease in occupancy rate of
the Man Sang Industrial City facility.
SG & A during the quarter ended December 31, 1997 totalled HK$15.1 million,
consisting of
2
<PAGE> 16
HK$14.1 million attributable to pearls operations and HK$1.0 million
attributable to real estate operations, compared with HK$10.0 million,
consisting of HK$8.8 million attributable to pearl operations and HK$1.3 million
attributable to real estate operations, during the same period in 1996, an
increase of HK$5.1 million, or 50.9.%. The increase in SG & A was primarily due
to increased salaries for additional staff to support expanding operations,
increased management compensation for one additional executive officer, an
accrual for a special performance bonus of HK$1.25 million which were not
accrued in the same period of prior year, increased provision for increased
legal and professional fees expected to be incurred by MSIL in order to comply
as a public company the rules and regulations of The Stock Exchange of Hong
Kong Limited and other regulatory bodies. As a percentage of net sales, SG & A
for pearl operations increased from 15.4% for the quarter ended December 31,
1996 to 26.1% for the same period in 1997, while SG & A for real estate
operations decreased from 2.2% for the quarter ended December 31, 1996 to 2.0%
for the same period in 1997.
Interest income for the quarter ended December 31, 1997 increased by HK$1.4
million to HK$1.7 million. Interest expense for the quarter ended December 31,
1997 decreased by HK$1.0 million to HK$0.7 million. These were principally due
to the increased working capital arisen from cash flow generated from internal
operations, proceeds from sales of the Leasehold Property, the new funds raised
from the issue of shares by MSIL and the decrease in short-term borrowings.
Income taxes credit of HK$2.2 million for the quarter ended December 31, 1997
was arisen from the overprovision for income taxes in the prior period.
Although the Company has experienced strong growth during the nine-month period
ended December 31, 1997, the recent developments in the financial and currency
markets in Asia and the general state of economy in certain Asian countries may
affect, to a certain extent, the results of operations and financial condition
of the Company for the remaining of the fiscal 1998, as some of the pearl
products of the Company may be considered luxury consumer goods, the demand for
which has been affected to a certain extent by the changes in the overall demand
for luxury goods in Asian markets. However, because the Company produces,
markets and sells a full range of pearls and pearl jewellery products and the
Company has increased its marketing efforts in Europe and North America,
resulting in Europe and North America accounting for an increased share of the
Company's net sales for the nine-month period ended December 31, 1997, compared
with the same period in 1996, the Company's management believes the Company is
positioned to minimize any material adverse impact such recent developments in
Asia may have on the Company.
Material Changes in Financial Condition, Liquidity and Capital Resources
At December 31, 1997, the Company had working capital of HK$ 282.6 million and
cash of HK$84.1 million, compared with working capital of HK$115.0 million and
cash of HK$16.9 million at March 31, 1997. The significant increase in working
capital was attributable to the following reasons:
3
<PAGE> 17
(a) net proceeds of approximately HK$123.6 million was raised from the
initial public offering of MSIL;
(b) interest income of about HK$11.4 million was earned from funds
deposited for subscription monies of the initial public offering of
MSIL; and
(c) a combination of increased cash flow generated from internal operations
and the proceeds from the sale of the Leasehold Property during the
nine-month period ended December 31, 1997.
In addition, the Company had available working capital facilities totaling
HK$81.6 million with various banks at December 31, 1997. Such banking facilities
include letter of credit arrangements, import loans, overdraft protection and
other facilities commonly utilized in the jewellery business. All such banking
facilities bear interest at floating rates generally based on prime lending
rates and are subject to annual review. At December 31, 1997, the Company had
utilized approximately HK$1.5 million of its credit facilities with HK$80.1
million unutilized.
The Company believes that funds to be generated from internal operations, the
existing banking facilities and the new equity funds raised by MSIL will enable
the Company to meet the working capital requirements in the foreseeable future.
4
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
Pursuant to the Man Sang Holdings, Inc. 1996 Stock Option Plan (the
"Plan"), the Holding Company granted, on September 16, 1997, non-qualified stock
options (the "Holding Company Options") to the directors and certain senior
employees of the Company to purchase, in aggregate, 850,000 shares of common
stock of the Holding Company, at an exercise price of US$1.22 per share (which
represented 85% of the fair market value of the common stock on the date of
grant as determined pursuant to Article 6.2 of the Plan). Fifty percent (50%) of
such Holding Company Options are exercisable on or after September 16, 1998 and
the balance are exercisable on or after September 16, 1999; however, no Holding
Company Option may be exercised after September 16, 2007. The Holding Company
granted the Holding Company Options in accordance with Rule 701 promulgated
under the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
Exhibit No. Description
3.1 Restated Articles of Incorporation of Man Sang
Holdings, Inc., including the Certificate of
Designation, Preferences and Rights of a Series of
100,000 Shares of Preferred Stock, $.001 Par Value,
Designated "Series A Preferred Stock", filed on
January 12, 1996 (1)
3.2 Certificate of Designation, Preferences and Rights of
a Series of 100,000 Shares of Preferred Stock, $.001
Par Value, Designated "Series B Preferred Stock",
dated April 1, 1996 (2)
5
<PAGE> 19
3.3 Amended Bylaws of Man Sang Holdings, Inc., effective
as of January 10, 1996 (1)
10.1 Acquisition Agreement, Dated December __, 1995,
between Unix Source America, Inc. and the
Shareholders of Man Sang International (B.V.I.)
Limited (1)
10.2 Tenancy Agreement, dated June 24, 1996, between Same
Fast Limited and Man Sang Jewellery Company Limited
(3)
10.3 Man Sang Holding, Inc. 1996 Stock Option Plan (3)
10.4 Service Agreement, dated September 8, 1997, between
Man Sang International Limited and Cheng Chung
Hing (5)
10.5 Service Agreement, dated September 8, 1997, between
Man Sang International Limited and Cheng Tai Po (5)
10.6 Service Agreement, dated September 8, 1997, between
Man Sang International Limited and Hung Kwok
Wing (5)
10.7 Service Agreement, dated September 8, 1997, between
Man Sang International Limited and Sio Kam Seng (5)
10.8 Service Agreement, dated September 8, 1997, between
Man Sang International Limited and Ng Hak Yee (5)
10.9 Service Agreement, dated September 8, 1997, between
Man Sang International Limited and Yan Sau Man
Amy (5)
10.10 Contract dated November 8, 1997, between Nan'ao
Shaohe Pearl Seawater Culture Co., Ltd. of Guangdong
Province, People's Republic of China, Man Sang
Jewellery Co., Ltd. of Hong Kong and Chung Yuen
Company o/b Golden Wheel Jewellery Mfr. Ltd. of Hong
Kong to establish a cooperative joint venture in
Nan'ao County, Guangdong Province, People's Republic
of China
10.11 Agreement dated January 2, 1998, between Overlord
Investment Company Limited and Excel Access Limited,
a subsidiary of the Company, pursuant to which Excel
Access Limited will purchase certain real property
located at Flat A, 33rd Floor, of Valverde, 11 May
Road, Hong Kong for HK$15,050,000
13.1 Annual report to security holders (4)
6
<PAGE> 20
27.1 Financial data schedule
99.1 Share Option Scheme of Man Sang International
Limited, a subsidiary of the Company
- ------------------------------------------------
(1) Incorporated by reference to the exhibits filed with the Company's
Current Report on Form 8-K dated January 8, 1996
(2) Incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form 8-A dated June 17, 1996
(3) Incorporated by reference to the exhibits filed with the Company's
Quarterly Report on Form 10-QSB for the quarterly period ended December
31, 1996
(4) Incorporated by reference to the Form 10-KSB/A for the fiscal year
ended March 31, 1997
(5) Incorporated by reference to the exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1997
(B) Report on Form 8-K:
Form 8-K
Dated September 12, 1997
Item reported : Item 5 - MSIL's initial public offering
Form 8-K/A
Date of earlier event reported: September 12, 1997
Item reported: Item 5 - MSIL's initial public offering
7
<PAGE> 21
SIGNATURE
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: February 27, 1998
/s/ Patrick Ng
Patrick Ng
Chief Financial Officer
8
<PAGE> 22
INDEX TO EXHIBITS
The following documents are filed herewith or have been included as exhibits to
previous filings with the Securities and Exchange Commission and are
incorporated by reference as indicated below.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
3.1 Restated Articles of Incorporation of Man Sang Holdings, Inc.,
including the Certificate of Designation, Preferences and
Rights of a Series of 100,000 Shares of Preferred Stock, $.001
Par Value, Designated "Series A Preferred Stock", filed on
January 12, 1996 (1)
3.2 Certificate of Designation, Preferences and Rights of a Series
of 100,000 Shares of Preferred Stock, $.001 Par Value,
Designated "Series B Preferred Stock", dated April 1, 1996 (2)
3.3 Amended Bylaws of Man Sang Holdings, Inc., effective as of
January 10, 1996 (1)
10.1 Acquisition Agreement, Dated December __, 1995, between Unix
Source America, Inc. and the Shareholders of Man Sang
International (B.V.I.) Limited (1)
10.2 Tenancy Agreement, dated June 24, 1996, between Same Fast
Limited and Man Sang Jewellery Company Limited (3)
10.3 Man Sang Holding, Inc. 1996 Stock Option Plan (3)
10.4 Service Agreement, dated September 8, 1997, between Man Sang
International Limited and Cheng Chung Hing (5)
10.5 Service Agreement, dated September 8, 1997, between Man Sang
International Limited and Cheng Tai Po (5)
10.6 Service Agreement, dated September 8, 1997, between Man Sang
International Limited and Hung Kwok Wing (5)
10.7 Service Agreement, dated September 8, 1997, between Man Sang
International Limited and Sio Kam Seng (5)
10.8 Service Agreement, dated September 8, 1997, between Man Sang
International Limited and Ng Hak Yee (5)
10.9 Service Agreement, dated September 8, 1997, between Man Sang
International Limited and Yan Sau Man Amy (5)
10.10 Contract dated November 8, 1997, between Nan'ao Shaohe Pearl
Seawater Culture Co., Ltd. of Guangdong Province, People's
Republic of China, Man Sang Jewellery Co., Ltd. of Hong Kong
and Chung Yuen Company o/b Golden Wheel Jewellery Mfr. Ltd.
of Hong Kong to establish a cooperative joint venture in
Nan'ao County, Guangdong Province, People's Republic of
China
10.11 Agreement dated January 2, 1998, between Overlord Investment
Company Limited and Excel Access Limited, a subsidiary of the
Company, pursuant to which Excel Access Limited will purchase
certain real property located at Flat A, 33rd Floor, of
Valverde, 11 May Road, Hong Kong for HK$15,050,000
13.1 Annual report to security holders (4)
</TABLE>
9
<PAGE> 23
<TABLE>
<CAPTION>
<S> <C>
27.1 Financial data schedule
99.1 Share Option Scheme of Man Sang International Limited, a
subsidiary of the Company
</TABLE>
- -----------------------------------------
(1) Incorporated by reference to the exhibits filed with the Company's
Current Report on Form 8-K dated January 8, 1996
(2) Incorporated by reference to the exhibits filed with the Company's
Registration Statement on Form 8-A dated June 17, 1996
(3) Incorporated by reference to the exhibits filed with the Company's
Quarterly Report on Form 10-QSB for the quarterly period ended December
31, 1996
(4) Incorporated by reference to the Form 10-KSB/A for the fiscal year
ended March 31, 1997
(5) Incorporated by reference to the exhibits filed with the Compnay's
Quarterly Report on Form 10-Q for the quarterly period ended September
30, 1997
10
<PAGE> 1
SHANTOU CITY SHAOHE PEARL SEAWATER CULTURED CO., LTD.
CONTRACT
<PAGE> 2
CONTRACT
CHAPTER 1 - GENERAL PROVISIONS
Art. 1 In accordance with the China-Foreign Cooperative Joint Venture Law of
the People's Republic of China and other laws and regulations of China
on foreign-related matters, in adherence to the principles of equality
and mutual benefit and after friendly negotiations, Nan'ao Shaohe Pearl
Seawater Culture Co., Ltd. of Guangdong Province, Man Sang Jewellery
Co., Ltd. of Hong Kong and Chung Yuen Company o/b Golden Wheel
Jewellery Mfr. Ltd. of Hong Kong agree to jointly establish a
cooperative joint venture in Nan'ao County, Guangdong Province, the
People's Republic of China and therefore, have reached the following
terms and conditions for mutual observance.
CHAPTER 2 - COOPERATIVE JOINT VENTURE PARTIES
Art. 2 The parties to the cooperative joint venture shall be:
Party A: Nan'ao Shaohe Pearl Seawater Culture Co.,
Ltd. of Guangdong Province, registered with the Administration
for Industry and Commerce of Nan'ao County, Guangdong Province
Legal address: Zei'ao Bay, Shen'ao, Nan'ao County, Guangdong Province
Legal representative: Xie Shaohe, Chairman of Board, of Chinese
nationality
Banker: Industrial and Commercial Bank of China, Nan'ao Sub-branch
Bank account no.: 02450122-279
Telephone: 0754-5713588
Party B: Man Sang Jewellery Co., Ltd., registered in
Hong Kong, China
Legal address: 21/F, Railway Plaza, 39 Chatham Road South, Tsim Sha
Tsui, Kowloon, Hong Kong
Banker: The Hongkong and Shanghai Banking Corporation Limited, at
673 Nathan Road, Mongkok, Kowloon, Hong Kong
Bank account no: 580-077790-001
Telephone: 00852-23175300
- 1 -
<PAGE> 3
Legal representative: Cheng Tai Po, Vice-Chairman of
Board, of Hong Kong, China nationality
Party C: Chung Yuen Company o/b Golden Wheel Jewellery
Mfr. Ltd., registered in Hong Kong, China
Legal representative: Cheung Pui Hung, Managing Director,
of Hong Kong, China nationality
Legal address: 16E, Alpha House, 27-33 Nathan Road, Tsim Sha Tsui,
Kowloon, Hong Kong
Banker: The Hongkong and Shanghai Banking Corporation Limited,
Kowloon Hotel Branch
Bank account no.: 508-035607-001
Telephone: 00852-23683122
CHAPTER 3 - ESTABLISHMENT OF COOPERATIVE JOINT VENTURE
Art. 3 Party A, Party B and Party C hereby agree to establish Shantou City
Shaohe Pearl Seawater Cultured Co., Ltd. (hereinafter referred to as the
"Company") as a cooperative joint venture in China according to the
Chinese-Foreign Cooperative Joint Venture Law of the People's Republic
of China and other laws and regulations of China on foreign-related
matters.
The Chinese name of the Company shall be: [ ]
The English name of the Company shall be: Shantou City Shaohe
Pearl Seawater Cultured Co., Ltd.
The legal address of the Company shall be Zei'ao Bay, Shen'ao,
Nan'ao County, Guangdong Province.
Art. 4 All activities of the Company shall comply with the laws, regulations
and decrees of the People's Republic of China.
Art. 5 The Company shall be a limited liability company. Party A, Party B and
Party C shall bear the liabilities of the Company to the extent of
their respective capital contributions to the Company and shall share
any profits, risks or losses of the Company in the ratio determined
hereunder.
- 2 -
<PAGE> 4
Art. 6 Objective: Adhering to the principles of equality, mutual
benefit and sincere cooperation, the Parties shall employ advanced and
appropriate techniques and scientific operation and management skills
to cultivate and process quality seawater pearls and endeavor to
achieve high competitiveness of the products in the international
market in respect of quality and price, in order that each of the
Parties can obtain satisfactory economic results.
Art. 7 Scope and scale of business of the Company: -
Scope of business: to produce and sell seawater cultured pearls and
other seawater cultivated products which are not subject to the export
quota and licensing by the State.
Scale of production: starting from the year 2002, to cultivate 5
million oysters and produce 1,000 kg of pearls per year, in order to
achieve an annual production value of RMBY.25 million.
CHAPTER 4 - TOTAL INVESTMENT AND REGISTERED CAPITAL
Art. 8 The total investment and registered capital of the Company shall be
RMBY.26.16 million, including fixed assets of RMBY.6.82 million, current
assets of RMBY.12.80 million and working capital of RMBY.6.54 million.
A China-registered accountant shall be appointed to verify the capital
contributed by each of the Parties and issue a capital verification
report.
Art. 9 The registered capital of the Company shall not be decreased during the
term of the Company. Any increase or transfer of the registered capital
of the Company shall be subject to the unanimous approval of the Board
of Directors and shall be reported to the original approval authority
for its approval. Upon such approval, the relevant registration change
procedures shall be completed with the administrative authority for
industry and commerce.
CHAPTER 5 - CONDITIONS FOR COOPERATION
Art. 10 The conditions for cooperation among the three Parties shall be as
follows:
Party A shall provide land use rights, leased sea area, buildings,
cultivation facilities, oysters under cultivation and other assets (as
more particularly described in the Capital Verification Report no. Shan
Qi Wei (1997) 45 of the Shantou City Qixin Auditors' Firm), which have a
total value of RMBY.19.62 million.
- 3 -
<PAGE> 5
Party B shall provide foreign exchange in cash with a value equivalent
to RMBY.5.10 million (as converted by taking the mean of the buying
rates and selling rates prevailing during the month of actual
contribution).
Party C shall provide foreign exchange in cash with a value equivalent
to RMBY.1.44 million (as converted by taking the mean of the buying
rates and selling rates prevailing during the month of actual
contribution).
Art. 11 Each Party shall pay their capital contribution in full within one
month after the date of issue of the Business License of the Company.
Art. 12 If additional capital contribution to the Company is necessary for its
production, such additional capital contribution shall be paid by
Party A, Party B and Party C in the ratio of 75 : 19.5 : 5.5
respectively after the unanimous approval of the Board of Directors
for such additional capital contribution has been obtained. Any
mortgage of the Company's assets for obtaining a loan or other
financing from overseas or a domestic financial institution shall be
valid only with the authorization of the Board of Directors of the
Company. The interest and other fees so incurred shall be deemed
expenditure of the Company and the risks so incurred shall be borne by
the Company.
Any transfer by a Party of all or part of its rights or obligations
hereunder shall be subject to the unanimous consent of the other
Parties and the approval of the original approval authority. Under the
same conditions, the other Parties shall have the right of first
refusal to such transfer.
CHAPTER 6 - RESPONSIBILITIES OF THE PARTIES
Art. 13 The parties shall perform the following responsibilities:
Party A: 1. to make registration for the Company with the relevant
governmental authorities of China and obtain the Approval
Certificate and the Business License;
2. to provide the land use rights, leased sea area,
buildings, cultivation facilities and oysters under
cultivation for the use of the Company as provided for
under Articles 10 and 11 hereof;
3. to recruit qualified management personnel, production
workers and other necessary personnel for the Company;
4. to assist the Company in purchasing (or leasing)
facilities, materials, office supplies, means of
transportation and telecommunications equipment in China;
- 4 -
<PAGE> 6
5. to second certain personnel to be responsible for the
daily production and operation of the Company; and
6. to be responsible for other matters as may be entrusted
by the Company.
Party B: 1. to pay its capital contribution in full
for the use of the Company as provided for under
Articles 10 and 11 hereof;
2. to assist the Company in seeking loans from financial
institutions in China or overseas;
3. to purchase products of the Company on a priority basis
under the same price condition;
4. to be responsible for technical learning and advertising
for the Company in China and abroad, and to provide the
Company with relevant economic information; and
5. to be responsible for other matters as may be entrusted
by the Company.
Party C: 1. to pay its capital contribution in full
for the use of the Company as provided for under
Articles 10 and 11 hereof; and
2. to be responsible for other matters as may be entrusted
by the Company.
CHAPTER 7 - SALE OF PRODUCTS
Art. 14 Products of the Company shall be sold in Mainland China, Hong Kong,
Macao and overseas markets. 90% of its products shall be for sale
overseas and 10% for sale in Mainland China.
Price of the products: total cost + reasonable profit = ex-factory
price
CHAPTER 8 - BOARD OF DIRECTORS
Art. 15 The Company shall establish its Board of Directors according to the
law. The date of registration of the Company shall be deemed the date
of establishment of its Board of Directors. The Board shall consist
of five Directors, three of whom shall be appointed by Party A, one by
Party B and one by Party C. The Chairman of Board shall be one of the
Directors appointed by Party A and the Vice Chairman shall be the
Director appointed by Party B.
- 5 -
<PAGE> 7
Art. 16 The Board of Directors shall be the highest authority of the Company
and shall decide all important matters of the Company. A decision
on any of the following important matters may be made only with the
consensus of the Board:
1. amendment of the Articles of Association of the
Company;
2. increase or transfer of the registered capital of
the Company;
3. termination or dissolution of the Company;
4. amalgamation of the Company with other economic
organizations;
5. other important matters which consensus of the
Board on a decision is required.
A decision on any other matters shall be made only with the consent
of more than half of the number of the Directors.
Art. 17 Each Director shall have a term of office for three years and shall
be eligible for another term upon reappointment. Each Party shall
have the right to appoint or replace a Director, subject to the
number of Directors which such Party shall have the right to
appoint, provided that the Board of Directors shall be notified in
writing of such appointment or replacement.
Art. 18 The Chairman of Board shall be the legal representative of the
Company. The Vice Chairman of Board shall assist the Chairman in
his work. In case the Chairman fails to perform his duties, the
Vice Chairman shall perform his duties on his behalf.
Art. 19 The Board of Directors shall meet at least once a year. The Board
meetings shall be convened and presided by the Chairman. Upon
request by more than one-third of the Directors, the Chairman may
convene an extraordinary Board meeting. Minutes of the Board
meetings shall be properly kept.
CHAPTER 9 - OPERATIONAL AND MANAGERIAL STRUCTURE
Art. 20 The Company shall have one General Manager, who shall be under the
leadership of Board. The post of the General Manager shall also
be taken up by the Chairman of Board. Functional departments
shall be set up to meet the needs of the Company in respect of
cultivation, processing and business.
Art. 21 The General Manager shall be directly responsible to the Board of
Directors, carry out the resolutions of the Board and organize the
daily operation and management of the Company in respect of
research and application of production techniques, and
cultivations, processing and sale of products.
- 6 -
<PAGE> 8
Art. 22 Any senior management personnel of the Company intending to resign
shall apply in writing to the Board one month in advance. In case
any of such senior management personnel has committed graft or
serious dereliction of duties, the Board may terminate his
appointment or dismiss him.
CHAPTER 10 - ACCOUNTING, TAXATION, FOREIGN EXCHANGE AND INSURANCE
Art. 23 Specific plans shall be formulated for the accounting system of the
Company in accordance with the relevant laws and regulations of
China, statutes on accounting system of foreign-invested enterprises
and the actual management requirements of the Company and shall be
submitted to the Board for its approval.
Art. 24 The calendar year shall be taken as the fiscal year of the Company.
In other words, the fiscal year of the Company shall begin on
January 1 and end on December 31 of the same year. The accounting
system of the Company shall adopt the internationally used accrual
basis and debit and credit accounting system. Renminbi shall be
taken as the base bookkeeping currency. Any transactions in a
foreign currency shall be recorded in such foreign currency and the
base bookkeeping currency as converted in the exchange rate at the
time the transaction is actually made.
Art. 25 The Company shall establish a bookkeeping system in accordance with
the relevant rules. All vouchers shall be recorded in Chinese. The
accounting department shall prepare accounting statements
periodically. The annual accounts shall be audited by a
China-registered accountant, who shall then issue an auditor's
report. The auditor's report, annual account and profits
distribution plan of each year shall be submitted to the Board of
Directors.
Art. 26 The Company shall open and maintain a relevant foreign currency
account and a Renminbi account with a bank approved to conduct
foreign exchange business by the administration for foreign exchange
in the place of registration of the Company. Except only
transactions which may be settled in cash, all transactions of the
Company shall be settled through the bank.
Art. 27 The Company shall pay taxes according to the taxation laws. Upon
application to and approval by the taxation authority according to
the taxation laws, the Company may enjoy exemption for or reduction
of enterprise income tax and/or other preferential treatments.
Art. 28 Insurance shall be obtained for the property of the Company from an
property insurance company in China. Matters relating to the
insurance for property shall be decided by the Board.
- 7 -
<PAGE> 9
CHAPTER 11 - DISTRIBUTION OF PROFITS AND SHARING OF RISKS
Art. 29 The Three Funds shall be appropriated in the required proportion
from the annual profits of the Company after income tax has been
paid in the tax period according to the law. Any profits or losses
shall be shared among Party A, Party B and Party C in the ratio
75% : 19.5% : 5.5%.
CHAPTER 12 - LABOR MANAGEMENT AND TRADE UNION
Art. 30 The Company shall establish a trade union organization according to
the Constitution of a Trade Union in China, provide convenience for
its necessary activities and appropriate 2% of the total salary
actually paid, as funds for the trade union.
Art. 31 Recruitment, resignation, wages, welfare, labor insurance, labor
protection and labor discipline of staff and workers of the Company
shall be dealt with according to the Provisions on Labor Management
in Enterprises with Foreign Investment and shall be reported to the
labor authority in the place of registration of the Company.
CHAPTER 13 - TERM OF JOINT VENTURE AND DISPOSAL
OF ASSETS UPON ITS EXPIRATION
Art. 32 The term of the Company shall be 11 years and shall begin from the
date of issue of the Business License of the Company.
Art. 33 If Party A, Party B and Party C unanimously consent to an
extension of the term of the Company, an application for such
extension shall be made in writing to the original approval
authority six months prior to the expiration of the original term
after the Board of Directors has passed the relevant resolution.
The term shall become extended upon approval by the original
approval authority.
Art. 34 Upon expiration or earlier termination of the term of the Company,
the Company shall be liquidated according to the law. Net assets
of the Company after its liquidation shall be distributed among
Party A, Party B and Party C according to the ratio in which any
profits of the Company are distributed among the Parties.
- 8 -
<PAGE> 10
CHAPTER 14 - AMENDMENT, VARIATION AND TERMINATION OF CONTRACT
Art. 35 Any amendment or variation of this Contract shall be subject to
the signing of an agreement to such effect in writing by Party A,
Party B and Party C and the approval of the original approval
authority.
Art. 36 In the event that this Contract fails to be performed because of
earthquakes, natural disasters, wars or other force majeure, or
operation of the Company fails to continue because of continual
losses, the term of the Company and this Contract may be terminated
earlier upon unanimous consent of the Board of Directors and the
approval of the original approval authority.
Art. 37 In the event that non-performance or serious breach by any Party
hereto of the obligations provided in this Contract or the Articles
of Association of the Company causes failure of the operation of
the Company to be continued, such Party shall be deemed to have
terminated this Contract unilaterally. The non-breaching Parties
shall have the right to claim damages from the breaching Party and
to apply to the original approval authority for earlier termination
of the term of the Company and this Contract, as provided in this
Contract. If Party A, Party B and Party C agree to continue the
operation of the Company, the breaching Party shall compensate the
financial losses caused to the non-breaching Parties.
CHAPTER 15 - LIABILITY FOR BREACH
Art. 38 If Party A, Party B or Party C fails to promptly and fully pay the
capital contribution as required by Articles 10 and 11 hereof, the
breaching Party shall pay the non-breaching Parties a breach
penalty equivalent to 5% of the capital contribution originally
payable, for each overdue month starting from the first month
after the original due date. If any capital contribution is overdue
for three months, the non-breaching Parties shall have the right to
terminate this Contract according to Article 37 hereof and claim
damages from the breaching Party for losses caused in addition to
the accumulative breach penalties as required above.
CHAPTER 16 - APPLICABLE LAW
Art. 39 The formation, validity, interpretation and performance of this
Contract or settlement of disputes relating to this Contract shall
be governed by the laws of the People's Republic of China.
- 9 -
<PAGE> 11
CHAPTER 17 - SETTLEMENT OF DISPUTES
Art. 40 Any disputes caused by or relating to the performance of this
Contract shall be settled by Party A, Party B and Party C through
friendly consultation. If any dispute fails to be settled through
friendly consultation, the dispute shall be submitted to the
Foreign Economic and Trade Arbitration Commission of the China
Council for the Promotion of International Trade for arbitration in
accordance with its arbitration rules. The award of such
arbitration shall be final and binding on each of the Parties.
The cost for arbitration shall be borne by the losing Party.
CHAPTER 18 - MISCELLANEOUS
Art. 41 This Contract shall become effective upon signing by the legal
representatives of Party A, Party B and Party C and then approval
by the approval authority. Any amendment or supplemental contract
shall have the same effect as this Contract.
Art. 42 This Contract shall be written in Chinese in four originals. Party
A, Party B and Party C shall each hold one of the originals and
the remaining original shall be filed with the approval authority.
Several copies of this Contract shall be made and they shall have
the same effect as the originals.
Party A: [Seal of Nan'ao Shaohe Pearl Seawater Culture Co., Ltd.]
Legal representative: Xie Shaohe
Party B: [Seal of Man Sang Jewellery Co., Ltd.]
Legal representative: Cheng Tai Po
Party C: [Seal of Chung Yuen Company o/b Golden Wheel Jewellery Mfr. Ltd.]
Legal representative: Cheung Pui Hung
Date of signing: November 8, 1997
Place of signing: Chenghai City, Guangdong Province, China
- 10 -
<PAGE> 1
THIS AGREEMENT is made the 2nd day of January 1998. BETWEEN:
(1) OVERLORD INVESTMENT COMPANY LIMITED whose registered office is situate at
12th Floor, No. 3 Lockhart Road, Hong Kong (the "Vendor") and
(2) EXCEL ACCESS LIMITED whose registered office is situate at Room 1B, 26th
Floor, Lucky Commercial Centre, 103 Des Voeux Road, Central, Hong Kong
(the "Purchaser").
WHEREAS:
(1) By an Agreement for Sale and Purchase dated 24th September 1996 made
between Mid-Levels Portfolio (Valverde) Limited (the "Head Vendor") as
vendor of the one part and the Vendor as purchaser of the other part (the
"Principal Agreement") the Head Vendor agreed to sell and the Vendor
agreed to purchase All Those premises more particularly described in the
First Schedule hereto (the "said premises") for the price and upon the
terms and conditions set out therein.
(2) The Vendor has agreed to sell and the Purchaser has agreed to purchase
the said premises for the price of HK$15,050,000.00 subject to the
Principal Agreement and upon the terms and conditions hereinafter
contained.
IT IS HEREBY AGREED by and between the parties hereto as follows:
1. The Vendor shall sell and the Purchaser shall purchase All Those the said
premises and all the estate right title property claim and demand
whatsoever of the Vendor therein and thereto subject to the Principal
Agreement.
2. (a) The purchase money shall be HK$15,050,000.00 which shall be paid
by the Purchaser in manner set out in the Second Schedule hereto.
(b) In respect of each payment of the purchase price or any part thereof
required to be made hereunder, the Purchaser shall deliver to the
Vendor's solicitors on the date on which such payment is required to
be made hereunder a cashier order issued or a cheque certified good
for payment by a licensed bank in Hong Kong in favour of the Vendor
and/or the person(s) or party(ies) entitled to such payment(s) for the
relevant amount.
(c) Without prejudice to any other remedy hereunder, the Vendor shall be
entitled to demand and receive payment of interest on the amount of
any part of the purchase price not paid on its due date at the rate of
2% per annum above the prime rate specified by The Hongkong and
Shanghai Banking Corporation Limited from time to time calculated from
the date on which the same ought to have been paid by the Purchaser to
the date of actual payment.
<PAGE> 2
3. The purchase shall be completed at the offices of Messrs. P.C. Woo & Co.
during the office hours of 10:00 a.m. to 12:00 noon on weekday and 10:00
to 10:30 a.m. on Saturdays within 13 days of the Purchaser being notified
in writing that an occupation permit or a temporary occupation permit
covering the said premises has been issued and the Head Vendor is in a
position validly to assign the said premises to the Purchaser. Any
notification given pursuant to this Clause shall be deemed to have been
validly given if sent by post to the Purchaser at the address of the
Purchaser last known to the Vendor or its solicitors and shall be deemed
to have been received on the expiry of 48 hours after the date of posting.
4. The Vendor declares that Messrs. P.C. Woo & Co. are the Vendor's Agents
(the "Agents") for the purposes of receiving all moneys payable to the
Vendor pursuant to this Agreement including the balance of the purchase
money payable upon completion.
5. The Vendor further declares that the payment to the Agents of any
deposit, instalments of the purchase money (if any) and the balance
thereof shall be a full and sufficient discharge of the Purchaser's
obligations hereunder.
6. The Vendor may revoke the authority of the Agents and appoint other
solicitors as agents in their place. No such revocation shall be valid
unless it:
(a) is in writing addressed to the Purchaser; and
(b) is delivered to the Purchaser care of Messrs. Yuen & Partners, his
solicitors, at least seven clear days prior to completion; and
(c) specifically identified this Agreement.
7. On completion, the Vendor shall procure that the Head Vendor will execute
a proper assignment or other assurance of the said premises direct to the
Purchaser free from incumbrances but subject to the Government Grant
specified in the First Schedule hereto and the Vendor will also join in to
execute such Assignment as confirmor to assign and confirm the said
premises to the Purchaser and the purchaser shall be entitled to vacant
possession of the said premises from the date of completion.
8. On completion, the Purchaser shall pay the balance of the purchase price
as described in the Second Schedule hereto to the Vendor together with
arrears interest thereon which may become payable under Clause 2(c) hereof
and the Purchaser shall further pay to the Manager appointed under the
Deed of Mutual Covenant in respect of the said premises such sum and
deposits specified in Clause 6(b) to (h) of the Principal Agreement and
shall also pay all utility deposits required to be made in respect of the
said premises.
9. Any requisitions or objections in respect of the title or otherwise
arising out of this Agreement shall be delivered in writing to the
Vendor's solicitors within seven business
- 2 -
<PAGE> 3
days after receipt of the title deeds by the Purchaser's solicitors. The
Purchaser shall be deemed to the satisfied with the title to the said
premises and to have accepted the Vendor's title to the said premises if
requisitions on and/or objections to the Vendor's title are not delivered
to the Vendor's solicitors within the time aforesaid or if no further
requisitions or objections are raised within seven business days after
the reply by the Vendor's solicitors to the requisitions or objections
raised by the Purchaser or the Purchaser's solicitors and in this respect
time shall be of the essence of the agreement. If the Purchaser shall
make and insist on any objection or requisition in respect of the title
or otherwise which the Vendor shall be unable or (on the grounds of
difficulty, delay or expense or on any other reasonable ground) unwilling
to remove or comply with the Vendor shall notwithstanding any previous
negotiations or litigation, be at liberty on giving to the Purchaser or
his Solicitors not less that five working days' notice in writing to
annual the sale, in which case unless the objection or requisition shall
have been in the meantime withdrawn, the sale shall at the expiration of
the notice be annulled the Purchaser in that event entitled to a return
of the deposit and other sums of money already paid on account of the
purchase money forthwith but without interest, costs or compensation
provided such refund is made within 7 days from the date of rescission.
10. (a) The said premises are sold subject to and with the benefit of the
Government Grant and for the residue of the term of years created
thereby and with any right of renewal thereby granted and subject to
all easements (if any) subsisting therein.
(b) No error mis-statement or mis-description shall annul the sale nor
shall any compensation be allowed in respect thereof save and except
where such error mis-statement or mis-description relates to matter
materially and adversely affecting the value or user of the said
premises.
11. Such of the title deeds and documents as relate exclusively to the said
premises will be, at the cost and expenses of the Purchaser, delivered to
the Purchaser. All other title deeds and documents in the possession of
the Vendor will be retained by him and he will, if required, give to the
Purchaser a covenant for production and delivery of copies and for sale
custody thereof to be prepared by and at the expense of the Purchaser.
12. (a) Subject as hereinafter provided each party shall bear his own
solicitors' costs of an incidental to the preparation completion and
registration of this Agreement.
(b) The Purchaser shall pay to Messrs. P.C. Woo & Co. Solicitors, a due
proportion of the costs of and incidental to the preparation stamping
registration and completion of the Deed of Mutual Covenant and
Management Agreement (if any) and the plans thereto referred to in the
Principal Agreement or the entire costs of a certified copy thereof
(including the fees for preparation of the plans to such certified
copy).
(c) The architect's fees for the plan(s) to be annexed to the Assignment
shall be borne
- 3 -
<PAGE> 4
and paid by the Purchaser.
(d) Each party shall bear his own solicitors' costs of and incidental to
the preparation approval and execution of the Assignment Provided
Further that if the Purchaser shall request the Vendor and/or the Head
Vendor to execute more that one assignment in respect of the said
premises the Purchaser shall on completion pay the additional costs
charged by the Vendor's and/or the Head Vendor's solicitors (at half
scale costs) for their approval; and if the Purchaser requires the
Vendor and/or the Head Vendor to assign the said premises to his
nominee or sub-purchaser the Purchaser shall on completion pay the
additional costs charged by the Vendor's and/or the Head Vendor's
solicitors for the perusal of any instrument of Nomination or Sub-sale
Agreement.
13. (a) The stamp duty and land registration fees payable pursuant to this
sale and purchase shall be borne by the Purchaser.
(b) The Purchaser shall indemnify the Vendor against all claims
proceedings actions brought by the Collector of Stamp Revenue against
the Vendor arising from a breach of this Clause which shall survive
completion.
(c) The parties hereto hereby declare that they fully understand and
acknowledge that no other date than the date of the preliminary
agreement specified in paragraph 7 of the Third Schedule hereto, the
date of this Agreement and the date of the subsequent Assignment
pursuant hereto (which respective dates will be filled in the
Questionnaire Form I.R.S.D.26 for stamping purpose) may be claimed as
the relevant dates for valuation of the said premises.
(d) There shall if the Vendor so requires be included in the Assignment a
covenant in favour of the Vendor and/or the Head Vendor by the
Purchaser to perform his obligation under this Clause and such
covenant shall be expressed to be one which is annexed to the said
premises and binding on the Purchaser his executors administrators
successors in title and assigns.
14. The Vendor shall show a good title to the said premises at is own expense
and produce to the Purchaser for his perusal such certified or other
copies of any deeds or documents of title, wills and matters of public
record as may be necessary to complete such title. The costs of verifying
the title, including search fees shall be borne by the Purchaser who shall
also if he requires certified copies of any documents in the Vendor's
possession relating to other property retained by the Vendor as well as to
the said premises pay the costs of such certified copies.
15. Time shall in every respect be of the essence of this Agreement.
16. Should the Purchaser fail to observe or comply with any of the terms and
conditions
- 4 -
<PAGE> 5
herein contained, the Vendor may give to the Purchaser notice in writing
calling upon the Purchaser to make good his default and in the event of the
Purchaser failing within fourteen days from the date of service of such
notice fully to make good his default the Vendor may by a further notice in
writing forthwith determine this Agreement and the Vendor shall thereupon
be entitled to re-enter upon the said premises and repossess the same if
possession shall have been given to the Purchaser free from any right or
interest of the Purchaser therein and the Vendor shall be entitled to
forfeit all the deposits paid hereunder. Upon determination of this
Agreement, the Vendor may resell the said premises either by public auction
or by private contract subject to such stipulations as the Vendor may think
fit and any increase in price on resale shall belong to the Vendor.
Without prejudice to the Vendor's right to recover the actual loss which
may flow from the Purchaser's breach of this Agreement, on such resale any
deficiency in price shall be made good and all expenses attending such
resale shall be borne by the Purchaser and such deficiency and expenses
shall be recoverable by the Vendor as and for liquidated damages. On the
exercise of the Vendor's right to determine this Agreement as aforesaid the
Vendor shall have the right, if this Agreement shall have been registered
at the Land Registry or any New Territories Land Registry, to register at
the Land Registry or the relevant New Territories Land Registry a Memorial
signed by the Vendor evidencing such determination. Upon registration of
such Memorial in the Land Registry, a tenant, purchaser, mortgagee or any
other person dealing with the Vendor shall not be bound to see or enquire
whether the Vendor or the Purchaser was entitled to terminate and/or
rescind and/or annul this Agreement and so far as regards the safety and
protection of any such tenant, purchaser, mortgagee or any other person
this Agreement shall be deemed to have been duly terminated and/or
rescinded and/or annulled and the remedy (if any) of the Purchaser against
the Vendor shall be in damages only. If the Purchaser shall have entered
into possession of the said premises, he shall forthwith vacate the same.
17. In the event of the Vendor failing to complete the sale in accordance
with the terms hereof, then all deposit moneys paid by the Purchaser to
the Vendor shall be returned to the Purchaser forthwith who shall also be
entitled to recover from the Vendor such further damages (if any) over and
above the deposits as the Purchaser may sustain by reason of such failure
on the part of the Vendor, it shall not be necessary for the Purchaser to
tender an Assignment to the Vendor for execution before taking proceedings
to enforce specific performance of this Agreement.
18. (a) The Purchaser acknowledges that he is aware of the fact that the
Property is now charged by the Vendor to Standard Chartered Bank
(hereinafter called the "Lender") under an Equitable Mortgage
Memorial No. 6791833 (hereinafter called the "Equitable Mortgage").
The Purchaser hereby expressly agrees and declares that
notwithstanding the Equitable Mortgage the Purchaser consents to the
deposit money mentioned in Second Schedule being paid and released
to the Vendor Provided such release and payments also complied with
the conditions and terms of the Second Schedule and waivers any
claims or demand against Messrs. P.C. Woo & Co. in respect of the
payment and release of the deposit
- 5 -
<PAGE> 6
money to the Vendor.
(b) The Vendor warrants that the balance of purchase price
payable by the Purchaser hereunder shall be sufficient to discharge
the Equitable Mortgage.
(c) The Vendor hereby agrees and undertakes to discharge the
Equitable Mortgage on or before completion of the sale and purchase
hereof.
(d) And the Vendor agrees to send to the Purchaser a certified
true copy of the Power of Attorney (if applicable) supporting the
execution of the said discharge and if such Power of Attorney is
executed more than 12 months prior to the execution of the said
discharge, a Statutory Declaration to be made by the Vendor under
section 5(4) of the Powers of Attorney Ordinance (Chapter 31) that
at the time of the execution of the said discharge in favour of the
Vendor, the Vendor did not know of the revocation of the Power of
Attorney under which the said discharge was executed to the Vendor
or a confirmation from the Chargee that the Power of Attorney was
still valid and subsisting at the material time.
19. The Vendor is selling the said premises as confirmor under and by virtue
of the Principal Agreement and will only be required to give in the
subsequent Assignment the usual limited covenant that the Vendor has not
encumbered the said premises.
20. The Agreement is subject to and with the benefit of the Principal
Agreement and the Purchaser agrees and undertakes to be bound by and
observe and perform all the terms and conditions contained in the
Principal Agreement as if the Purchaser were a party thereto insofar as
such terms and conditions are not inconsistent with or inapplicable to the
terms and conditions herein contained.
21. (a) The Vendor hereby agrees and undertakes with the Purchaser that:
(i) the Vendor will duly perform and observe all the terms and
conditions contained in the Principal Agreement; and
(ii) in the event of any breach or non-performance or any term or
condition in the Principal Agreement on the part of the Head
Vendor, the Vendor will, upon being required by the Purchaser so
to do, (at the cost and expense of the Purchaser and subject to
the indemnity hereinafter contained) take all necessary steps and
actions which are reasonable and prudent to procure the due
performance and observance by the Head Vendor of its obligation
and the terms and conditions under the Principal Agreement
Provided that the Purchaser shall indemnify the Vendor against all
losses, costs, expenses, claims, damages, liabilities and actions
which the Vendor may incur or sustain as a result of taking any
such step or action.
- 6 -
<PAGE> 7
(iii) the Principal Agreement is good, valid and enforceable in full
force and effect.
(b) In the event of the Vendor becoming entitled to exercise any
right of rescission under the Principal Agreement, the Vendor shall,
within 5 working days after the Vendor becomes aware of the
existence of such right, notify the Purchaser in writing of such
right, and irrespective of whether or not such notice has been given
by the Vendor, the Purchaser shall, notwithstanding any provisions
herein contained to the contrary, be entitled to rescind this
Agreement by serving written notice of rescission on the Vendor. In
addition, the Purchaser shall be entitled within 5 working days
after the receipt of such notification by the Vendor to direct the
Vendor in writing to refrain from exercising such right and the
Vendor shall not exercise any right of rescission under the
Principal Agreement unless the direction is revoked by the Purchaser
or unless the Purchaser shall fail to give any direction to the
Vendor within 5 working days of receipt of the Vendor's notice under
this sub-clause, in which event, the Vendor shall be entitled to
exercise or to refrain from exercising such right of rescission as
the Vendor may think fit.
(c) The Purchaser shall indemnify the Vendor against all losses,
costs, expenses, damages, liabilities, claims and actions which the
Vendor may incur or sustain as a result of the Vendor refraining
from exercising any right of rescission under the Principal
Agreement pursuant to the direction of the Purchaser.
(d) The Purchaser shall not be entitled to exercise the right of
rescission under clause 21(b) above if (i) the Purchaser has given
direction to the Vendor to refrain from exercising any right of
rescission under the Principal Agreement; (ii) such direction
remains unrevoked and (iii) the Vendor has not acted contrary to
such direction.
(e) In the event of the Purchaser serving notice of rescission on
the Vendor pursuant to clause 21(b) above or in the event of the
Vendor exercising any right of rescission under the Principal
Agreement where the Purchaser has failed to give any direction
pursuant to clause 21(b) above or such direction has been revoked by
the Purchaser, then (without prejudice to the rights of the Vendor
under clause 21(c) above), this Agreement shall be rescinded and the
Vendor shall repay to the Purchaser all or such part of the purchase
price as shall have been paid by the Purchaser, the payment of such
amounts to be in full and final settlement of all claims by the
Purchaser against the Vendor hereunder.
(f) If the Head Vendor fails to complete the building within the
specified period provided in the Principal Agreement and the Vendor
elects to wait for completion, the Vendor shall on completion
account and pay to the Purchaser all interest payable by the Head
Vendor to the Vendor under the Principal Agreement due to delay in
completing the building.
- 7 -
<PAGE> 8
(g) The Vendor shall not without the prior written consent of the
Purchaser:
(i) make or agree any amendment or modification to be made to the
Principal Agreement;
(ii) agree to the cancellation or termination of the Principal
Agreement; or
(iii) agree to waive or to release any of the obligations of the Head
Vendor under the Principal Agreement.
22. Any notice required to be given hereunder shall be deemed to have been
validly given if addressed to the party to whom the notice is given and
sent by ordinary prepaid post to the address of such party above given or
to his last known address if a notification of the change of address has
previously been given to the other party or his solicitors and shall be
deemed to have been served on the expiry of forty eight hours after the
date of posting.
23. This Agreement supersedes a Provisional Agreement dated 18th December
1997 made between the parties on the same terms and all representations
made by any party or its agent to the other of the parties hereto prior to
the signing of the said Provisional Agreement and this Agreement.
24. It is hereby declared that (if the context permits or requires) the
singular number shall include the plural and the masculine feminine and
neuter genders shall include the others of them.
25. The sale and purchase herein shall include the furniture and fixtures
more particularly described in the "Inventory of Furniture" annexed
hereto.
26. For the purpose of Section 29B(1) of the Stamp Duty Ordinance the parties
specify and declare the information disclosed in the Third Schedule hereto
to be true to the best of their knowledge and belief.
- 8 -
<PAGE> 9
THE FIRST SCHEDULE
The Property
All Those 80 equal undivided 9, 100th parts or shares of and in INLAND LOT NO.
8213 and of and in Valverde ( ) No. 11 May Road, Hong Kong
(the "Development") together with the sole and exclusive right and privilege to
hold use occupy and enjoy All That Flat A on the 33rd Floor of the Development.
The Government Grant
The Government Lease for the term of 75 years commencing from 21st August 1911
with an option of renewal for one further term of 75 years deemed to have been
granted pursuant to Section 14(1) of the Conveyancing and Property Ordinance
(Cap. 219) upon deemed compliance with the terms and conditions of certain
Agreement and Conditions of Exchange dated 24th March 1970 made between His
Excellency the Governor and Humphreys Estate and Finance Company, Limited and
deposited and registered in the Land Registry as Conditions of Exchange No.
9660, as varied or modified by a Modification Letter dated 1st June 1995 and
registered in the Land Registry by Memorial No. 6314901 and shall include any
subsequent extensions or other variations or modifications thereto or renewals
thereof.
- 9 -
<PAGE> 10
THE SECOND SCHEDULE
The purchase money mentioned in Clause 2 hereof shall be paid by the Purchaser
as follows:
(1) HK$752,500.00 being the initial deposit and in part payment of
purchase price which has been paid by the Purchaser
to the Vendor direct prior to the signing of this
Agreement.
(2) HK$752,500.00 being the further deposit and in part payment of
purchase price to be paid by the Purchaser to the
Vendor upon the signing of this Agreement. The said
further deposit to be paid to the Vendor's solicitors
as stakeholders who may release the same to the
Vendor provided that the balance of purchase price is
sufficient to discharge the Equitable Mortgage
Memorial No. 6791833 and the title of the said
premises has been accepted by the Purchaser's
solicitors pursuant to Clause 9 hereof.
(3) HK$13,545,000.00 being the balance of purchase price to be paid on
completion of Assignment.
- 10 -
<PAGE> 11
THE THIRD SCHEDULE
1. The name and address of the Vendor and of the Purchaser of the Property:
Please see page 1 of this Agreement.
2. If the Vendor or Purchaser is an individual, his identification number:
Not applicable
3. If the Vendor or Purchaser is not an individual but is registered under
the Business Registration Ordinance (Cap. 310), the business registration
number of the Vendor or Purchaser:
Please see page 1 of this Agreement
4. The description and location of the said premises:
Please refer to the First Schedule of this Agreement
5. A statement as to whether the said premises is residential property or
non-residential property, within the meanings of Section 29A(1) of the
Stamp Duty Ordinance:
The said premises is residential property
6. The date on which the agreement for sale was made:
Please see page 1 of this Agreement
7. If the agreement for sale was preceded by an unwritten sale agreement, or
an agreement for sale, made between the same parties and on the same
terms, the date on which the first such agreement was made:
The 18th day of December 1997
8. A statement as to whether or not a date has been agreed for a conveyance
on sale pursuant to the agreement for sale and, if so, that date:
Please see clause 3 of this Agreement
9. A statement as to whether or not there is an agreed consideration for the
conveyance on sale that is to, or may, take place pursuant to the
agreement for sale and, if so, the amount of value of the consideration:
- 11 -
<PAGE> 12
Please see clause 2 of this Agreement
10. The amount or value of any other consideration which each person
executing the document knows has been paid or given, or has been agreed to
be paid or given, to any person for or in connection with the agreement
for sale or any conveyancing on sale pursuant to that agreement (excluding
legal expenses), together with the name, address, and the identification
number or business registration number of each person receiving or to
receive such consideration, and a description of the benefit to which the
consideration relates:
Estate agent's commission payable by the Vendor: HK$150,500.00
Estate agent's commission payable by the Purchaser: HK$150,500.00
Name of Agent:
Address of Agent:
Business Registration No.:
N/A
11. If the Purchaser has not executed the agreement, a statement as to
whether or not, to the best of the knowledge of each person executing the
agreement, the Purchaser knew, at the time the agreement was made, that it
affected him:
Name:
HKID Card No.:
N/A
"INVENTORY OF FURNITURE"
All the fitting and fixtures to be provided by the Head Vendor.
- 12 -
<PAGE> 13
SIGNED by Agnes Chan Chau Leung )
) OVERLORD INVESTMENT CO LTD.
for and on behalf of the Vendor in the )
presence of: )
SIGNED by Cheng Tai Po )
Director ) EXCEL ACCESS LIMITED
for and on behalf of the Purchaser in the )
presence of: )
RECEIVED the above-mentioned sum of )
DOLLARS SEVEN HUNDRED FIFTY )
TWO THOUSAND FIVE HUNDRED ) OVERLORD INVESTMENT CO LTD.
ONLY (being the initial deposit and in part )
payment of purchase price). ) the Vendor
- 13 -
<PAGE> 14
Dated the 2nd day of January 1998
OVERLORD INVESTMENT COMPANY LIMITED
to
EXCEL ACCESS LIMITED
____________________________________________
AGREEMENT
for Sub-sale and Purchase
of
80 equal undivided 9,1000th parts or shares
of and in Inland Lot No. 8213 (Flat A on
33rd Floor of Valverde No. 11 May Road,
Hong Kong)
____________________________________________
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> HONG KONG DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 7.73
<CASH> 84,138,000
<SECURITIES> 12,374,000
<RECEIVABLES> 48,293,000
<ALLOWANCES> 1,192,000
<INVENTORY> 179,064,000
<CURRENT-ASSETS> 332,138,000
<PP&E> 46,315,000
<DEPRECIATION> 10,344,000
<TOTAL-ASSETS> 402,365,000
<CURRENT-LIABILITIES> 49,542,000
<BONDS> 14,331,000
0
1,000
<COMMON> 33,000
<OTHER-SE> 256,723,000
<TOTAL-LIABILITY-AND-EQUITY> 402,365,000
<SALES> 53,882,000
<TOTAL-REVENUES> 55,234,000
<CGS> 32,010,000
<TOTAL-COSTS> 15,199,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (74,000)
<INTEREST-EXPENSE> 740,000
<INCOME-PRETAX> 9,206,000
<INCOME-TAX> (2,213,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,447,000
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.83
</TABLE>
<PAGE> 1
Dated 8 September 1997
MAN SANG INTERNATIONAL LIMITED
________________________
SHARE OPTION SCHEME
________________________
BAKER & McKENZIE
14th FLOOR, HUTCHISON HOUSE
10 HARCOURT ROAD
HONG KONG
<PAGE> 2
CONTENT
<TABLE>
<CAPTION>
Clause Description Page
- ------ ----------- ----
<S> <C> <C>
1. DEFINITIONS............................................ 1
2. CONDITIONS............................................. 3
3. DURATION AND ADMINISTRATION............................ 3
4. GRANT OF OPTION........................................ 3
5. SUBSCRIPTION PRICE..................................... 4
6. EXERCISE OF OPTIONS.................................... 4
7. LAPSE OF OPTION........................................ 6
8. MAXIMUM NUMBER OF SHARES AVAILABLE FOR SUBSCRIPTION.... 6
9. REORGANISATION OF CAPITAL STRUCTURE.................... 7
10. SHARE CAPITAL.......................................... 7
11. DISPUTES............................................... 8
12. ALTERATION OF THE SCHEME............................... 8
13. TERMINATION............................................ 8
14. MISCELLANEOUS.......................................... 8
</TABLE>
<PAGE> 3
MAN SANG INTERNATIONAL LIMITED
SHARE OPTION SCHEME
1. DEFINITIONS
1.01 In this Scheme the following expressions have the following meanings:
"Adoption Date" means 8 September 1997 (the date on which the Scheme is
adopted by resolution of the shareholders of the Company in
general meeting);
"Auditors" means the auditors for the time being of the Company;
"Board" means the board of directors of the Company or a duly
authorised committee thereof;
"Commencement Date" means, in respect of any particular Option, the date upon
which the Option is accepted in accordance with the Scheme;
"Company" means Man Sang International Limited;
"Employee" means any full-time employee of the Company or any
Subsidiary including any executive director of the company
or any Subsidiary;
"Grantee" means any Employee who accepts the offer of the grant of
any Option in accordance with the terms of the Scheme or
(where the context so permits) a person entitled to any
such Option in consequence of the death of the original
Grantee;
1
<PAGE> 4
"Offer Date" means the date on which an Option is offered to an
Employee;
"Option" means an option to subscribe for Shares granted pursuant
to the Scheme;
"Option Period" means a period of 2 years commencing on the expiry of 6
months after the Commencement Date and expiring on the
last day of the 2-year period or the tenth anniversary of
the Adoption Date, whichever is the earlier;
"Scheme" means this share option scheme in its present or any
amended form;
"Shares" means shares of $0.10 each (or of such other nominal
amount as shall result from a sub-division or a
consolidation of such shares from time to time) of the
Company;
"Subscription Price" means the price per Share at which a Grantee may subscribe
for Shares on the exercise of an Option as described in
Clause 5;
"Subsidiary" means a company which is for the time being and from time
to time a subsidiary (within the meaning of Section 2 of
the Companies Ordinance, Chapter 32 of the Laws of Hong
Kong, as amended from time to time) of the Company;
"trading day" means a day on which The Stock Exchange of Hong Kong
Limited is open for the trading of securities; and
"$" means Hong Kong dollars.
2
<PAGE> 5
1.02 Clause headings are inserted for convenience of reference only and shall
be ignored in the interpretation of the Scheme. References herein to
Clauses are to clauses of this Scheme.
2. CONDITIONS
This Scheme shall take effect subject to the passing of the necessary
resolution to adopt the Scheme by the shareholders of the Company in
general meeting and is conditional upon the Listing Committee of The Stock
Exchange of Hong Kong Limited granting approval of this Scheme and any
Options which may be granted under this Scheme and the listing of and
permission to deal in any Shares to be issued pursuant to the exercise of
Options under this Scheme.
3. DURATION AND ADMINISTRATION
3.01 Subject to Clause 13, the Scheme shall be valid and effective for a
period of 10 years commencing on the Adoption Date, after which period no
further Options will be issued but the provisions of this Scheme shall
remain in full force and effect in all other respects.
3.02 The Scheme shall be subject to the administration of the Board whose
decision (save as otherwise provided herein) shall be final and binding on
all parties.
4. GRANT OF OPTION
4.01 On and subject to the terms of the Scheme, the Board shall be entitled at
any time and from time to time within 10 years after the Adoption Date to
offer to grant to any Employee as the Board may in its absolute discretion
select, and subject to such conditions as the Board may think fit, an
Option to subscribe for such number of Shares as the Board may determine
at the Subscription Price.
4.02 An offer of the grant of an Option shall be made to an Employee by letter
in such form as the Board may from time to time determine requiring the
Employee to undertake to hold the Option on the terms on which it is to be
granted and to be bound by the provisions of the Scheme and shall remain
open for acceptance by the Employee concerned for a period of 28 days from
the date upon which it is made provided that no such offer shall be open
for acceptance after the tenth anniversary of the Adoption Date or after
the Scheme has been terminated.
3
<PAGE> 6
4.03 An Option shall be deemed to have been granted and accepted when the
duplicate letter comprising acceptance of the Option duly signed by the
Grantee together with a remittance in favour of the Company of HK$10 by
way of consideration for the grant thereof is received by the Company.
Such remittance shall in no circumstances be refundable.
4.04 Any offer of the grant of an Option may be accepted in respect of less
than the number of Shares in respect of which it is offered provided that
it is accepted in respect of such number of Shares as represents a board
lot for the purposes of trading on The Stock Exchange of Hong Kong Limited
or an integral multiple thereof. To the extent that the offer of the
grant of an Option is not accepted within 28 days (or such shorter period
referred to in Clause 4.02) in the manner indicated in Clause 4.03, it
will be deemed to have been irrevocably declined.
5. SUBSCRIPTION PRICE
The Subscription Price shall be determined by the Board being not less than
80 per cent of the average of the closing prices of the Shares on The Stock
Exchange of Hong Kong Limited as stated in such Exchange's daily quotation
sheets for the 5 trading days immediately preceding the Offer Date or the
nominal value of the Shares, whichever is the higher.
6. EXERCISE OF OPTIONS
6.01 An Option shall be personal to the Grantee and shall not be assignable
and no Grantee shall in any way sell, transfer, charge, mortgage, encumber
or create any interest in favour of any third party over or in relation to
any Option.
6.02 An Option may be exercised in whole or in part in the manner as set out
in Clauses 6.03 and 6.04 by the Grantee (or, as the case may be, his or
her legal personal representatives) giving notice in writing to the
Company stating that the Option is thereby exercised and the number of
Shares in respect of which it is exercised. Each such notice must be
accompanied by a remittance for the full amount of the Subscription Price
for the Shares in respect of which the notice is given. Within 28 days
after receipt of the notice and the remittance and, where appropriate,
receipt of the Auditors' certificate pursuant to Clause 9, the Company
shall allot the relevant Shares to the Grantee (or his or her legal
personal representatives) credited as fully paid.
6.03 Subject as hereinafter provided in this Scheme, the Option may be
exercised by the Grantee at any time during the Option Period provided
that:-
(a) in the event of the Grantee ceasing to be an Employee for any reason
other than his
4
<PAGE> 7
or her death or the termination of his or her employment on one or
more of the grounds specified in Clause 7(d), the Grantee may
exercise the Option up to his or her entitlement at the date of
cessation (to the extent not already exercised) within the period of
1 month following the date of such cessation, which date shall be the
last actual working day with the Company or the relevant Subsidiary
whether salary is paid in lieu of notice or not;
(b) in the event that the Grantee ceases to be an Employee by reason of
death and none of the events which would be a ground for termination
of his or her employment under Clause 7(d) arises, the legal personal
representative(s) of the Grantee shall be entitled within a period of
12 months from the date of death (or such longer period as the Board
may determine) to exercise the Option in full (to the extent not
already exercised);
(c) if a general offer (whether by takeover offer or scheme of arrangement
or otherwise in like manner) is made to all the holders of Shares (or
all such holders other than the offeror and /or any person controlled
by the offeror and/or any person acting in concert with the offeror)
and such offer becomes or is declared unconditional, the Grantee (or
his or her legal personal representatives) shall be entitled to
exercise the Option in full (to the extent not already exercised) at
any time within 14 days after the date on which the offer becomes or
is declared unconditional; and
(d) in the event of an effective resolution being passed for the
voluntary winding-up of the Company, the Grantee (or his or her legal
personal representatives) may by notice in writing to the Company
within 21 days after the date of such resolution elect to be treated
as if the Option (to the extent not already exercised) had been
exercised immediately before the passing of such resolution either to
its full extent or to the extent specified in the notice, such notice
to be accompanied by a remittance for the full amount of the
Subscription Price for the Shares in respect of which the notice is
given, whereupon the Grantee will be entitled to receive out of the
assets available in the liquidation pari passu with the holders of
Shares such sum as would have been received in respect of the Shares
the subject of such election.
6.04 The Shares to be allotted upon the exercise of an Option will be subject
to all the provisions of the bye-laws of the Company for the time being in
force and will rank pari passu with the fully paid Shares in issue on the
date of allotment and accordingly will entitle the holders to participate
in all dividends or other distributions paid or made on or after the date
of allotment other than any dividend or other distribution previously
declared or recommended or resolved to be paid or made with respect to a
record date which shall be before the date of allotment.
5
<PAGE> 8
7. LAPSE OF OPTION
An Option shall lapse automatically (to the extent not already exercised)
on the earliest of:
(a) subject to Clause 6.03(b), the expiry of the Option Period;
(b) the expiry of any of the periods referred to in Clause
6.03(a), (b), (c) or (d);
(c) subject to Clause 6.03(d), the date of the commencement of
the winding-up of the Company;
(d) the date on which the Grantee ceases to be an Employee by
reason of the termination of his or her employment on any one or
more of the grounds that he or she has been guilty of misconduct, or
has committed an act of bankruptcy or has become insolvent or has
made any arrangement or composition with his or her creditors
generally, or has been convicted of any criminal offence involving
his or her integrity or honesty or (if so determined by the Board)
on any other ground on which an employer would be entitled to
terminate his or her employment at common law or pursuant to any
applicable laws or under the Grantee's service contract with the
Company or the relevant Subsidiary. A resolution of the Board or
the board of directors of the relevant Subsidiary to the effect that
the employment of a Grantee has or has not been terminated on one or
more of the grounds specified in this Clause 7(d) shall be
conclusive; or
(e) the date on which the Grantee commits a breach of Clause
6.01.
8. MAXIMUM NUMBER OF SHARES AVAILABLE FOR SUBSCRIPTION
8.01 The maximum number of Shares in respect of which Options may
be granted (together with Options exercised and Options then
outstanding) under the Scheme will not, when aggregated with any
Shares subject to any other schemes involving the issue or grant of
options over Shares or other securities by the Company to, or for
the benefit of, directors, executives and/or employees of the Group,
exceed such number of Shares as shall represent 10 per cent of the
issued share capital of the Company from time to time excluding any
Shares issued upon the exercise of Options granted pursuant to the
Scheme.
8.02 No employee shall be granted an Option which, if exercised in
full, would result in such Employee becoming entitled to subscribe
for such number of Shares as when aggregated with the total number
of Shares already issued under all the Options previously granted to
him which have been exercised and issuable under all the Options
previously granted to him which are for the time being subsisting
and
6
<PAGE> 9
unexercised, would exceed 25 per cent of the aggregate number of
Shares for the time being issued and issuable under the Scheme.
8.03 Subject to Clauses 8.01 and 8.02, the number of Shares
subject to Options and to the Scheme may be adjusted, in such manner
as the Auditors shall certify in writing to the Board to be fair and
reasonable, in the event of any alternation in the capital structure
of the company whether by way of capitalization of profits or
reserves, rights issue, consolidation, subdivision or reduction of
the share capital of the Company provided that no such adjustment
shall be made in the event of an issue of Shares as consideration in
respect of a transaction to which the Company is a party.
9. REORGANISATION OF CAPITAL STRUCTURE
In the event of any alteration in the capital structure of the Company
whilst any Option remains exercisable, whether by way of capitalization
of profits or reserves, rights issue, consolidation, subdivision or
reduction of the share capital of the Company (other than an issue of
Shares as consideration in respect of a transaction to which the Company
is a party), such corresponding alterations (if any) shall be made in:
(a) the number of Shares subject to the Option so far as
unexercised; and/or
(b) the Subscription Price; and/or
(c) the method of exercise of the Option,
as the Auditors shall certify in writing to the Board to be in their
opinion fair and reasonable, provided that any alteration shall be made
on the basis that the proportion of the issued share capital of the
Company to which a Grantee is entitled after such alteration shall remain
the same as that to which he was entitled before such alteration, but so
that no such alteration shall be made the effect of which would be to
enable any Share to be issued at less than its nominal value. The
capacity of the Auditors in this Clause 9 is that of experts and not of
arbitrators and their certification shall be final and binding on the
Company and the Grantees.
10. SHARE CAPITAL
The exercise of any Option shall be subject to the members of the Company
in general meeting approving any necessary increase in the authorised
share capital of the Company. Subject thereto the Board shall make
available sufficient authorised but unissued share capital of the Company
to meet subsisting requirements on the exercise of Options.
7
<PAGE> 10
11. DISPUTES
Any dispute arising in connection with the Scheme (whether as to the
number of Shares the subject of an Option, the amount of the
Subscription Price or otherwise) shall be referred to the decision of
the Auditors who shall act as experts and not as arbitrators and whose
decision shall be final and binding.
12. ALTERATION OF THE SCHEME
The Scheme may be altered in any respect by resolution of the Board
except that the provisions of the Scheme as to:
(a) the definitions of "Employee" and "Grantee" and "Option Period" in
Clause 1.01; and
(b) the provisions of Clauses 3.01, 4.01, 4.02, 5, 6, 7, 8, 9 and this
Clause 12 shall not be altered to the advantage of Grantees or
prospective Grantees except with the prior sanction of a resolution
of the Company in general meeting, provided that no such alteration
shall operate to affect adversely the terms of issue of any Option
granted or agreed to be granted prior to such alteration except
with the consent or sanction of such number of Grantees as shall
together hold Options in respect of not less than three-fourths in
nominal value of all Shares then subject to Options granted under
the Scheme and provided further that any alterations to the terms
and conditions of the Scheme which are of a material nature shall
first be approved by The Stock Exchange of Hong Kong Limited,
except where such alterations take effect automatically under the
existing terms of the Scheme.
13. TERMINATION
The Company by resolution in general meeting or the Board may at any
time terminate the operation of the Scheme and in such event no further
Options will be offered but the provisions of the Scheme shall remain in
force in all other respects.
14. MISCELLANEOUS
14.01 The Company shall bear the costs of establishing and administering the
Scheme.
14.02 A Grantee shall be entitled to receive copies of all notices and other
documents sent by Company to holders of Shares.
8
<PAGE> 11
14.03 Any notice or other communication between the Company and a Grantee may
be given by sending the same by prepaid post or by personal delivery to,
in the case of the Company, its principal place of business in Hong Kong
at 21st Floor, Railway Plaza, 39 Chatham Road South, Tsimshatsui, Hong
Kong or as notified to the Grantees from time to time and, in the case
of the Grantee, his or her address in Hong Kong as notified to the
Company from time to time.
14.04 Any notice or other communication served by post:
(a) by the Company shall be deemed to have been served 24 hours after
the same was put in the post; and
(b) by the Grantee shall not be deemed to have been received until the
same shall have been received by the Company.
14.05 A Grantee shall be responsible for obtaining any governmental or other
official consent that may be required by any country or jurisdiction in
order to permit the grant or exercise of the Option. The Company shall
not be responsible for any failure by a Grantee to obtain any such
consent or for any tax or other liability to which a Grantee may become
subject as a result of his or her participation in the Scheme.
14.06 The Scheme and all Options granted hereunder shall be governed by and
construed in accordance with Hong Kong law.
9
