Dated the 5th Day of February 1998
----------------------------------
POWERHOUSE RESOURCES, INC.
As Borrower
▇▇▇▇▇ AN INVESTMENTS LIMITED
As Lender
-----------------------------------------------
FACILITY AGREEMENT
relating to a term loan facility of
US$1,000,000
-----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇ & CO
Solicitors
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
(Our Ref : AW/970700)
TABLE OF CONTENTS
-----------------
Clause Page
------ ----
1. Interpretation 1
2. Amount and Purpose 4
3. Conditions Precedent 5
4. Drawing 6
5. Interest 7
6. Repayment, Extension and Prepayment 7
7. Fees and Expenses 7
8. Representations and Warranties 8
9. Undertakings 10
10. Changes in Circumstances 13
11. Payments 15
12. Default 16
13. Indemnity 18
14. Further Provisions 19
Schedule 1 - List of Joint Venture Contracts for New Projects
Schedule 2 - Promissory Note
Schedule 3 - Memorandum of Charge
Schedule 4 - Stock Option Agreement
Schedule 5 - Deed of Cancellation
THIS FACILITY AGREEMENT is made on 5th February 1998.
BETWEEN :
(1) POWERHOUSE RESOURCES, INC., a company incorporated in the State of
Colorado, U.S.A. having its registered office at ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇.▇.▇. (the "Borrower");
AND
(2) ▇▇▇▇▇ AN INVESTMENTS LIMITED, a company incorporated in the Bahamas and
having its registered office at P O Box CB-12751, Nassau, New Providence,
Bahamas (the "Lender").
WHEREBY IT IS AGREED :-
-----------------------
1. INTERPRETATION
1.1 Definitions : In this Agreement the following expressions have, except
where the context otherwise requires, the meanings respectively shown
opposite them :-
Business Day a day (other than a Saturday or Sunday) on which the Lender
is open in Hong Kong for the transaction of business of the
nature required by this Agreement and also, in relation to a
day on which a payment is required, in the place where such
payment is to be made in accordance with this Agreement
Provided that "Business Day" when referred to in the
definition of "LIBOR" shall mean only a day on which banks
are open in London for transaction of business of the nature
required by this Agreement;
Common Shares the Common Shares of the Borrower of par value of US$0.01
each;
Deed of the deed of assignment between Powerhouse Electric and
Assignment Emerging Utilities Limited dated 25 September 1997;
Deed of the deed of cancellation between Powerhouse Electric and
Cancellation Emerging Utilities Limited in substantially the form
attached hereto in Schedule 5;
Disclosure the disclosure letter dated 20 January 1998 from the
Letter Borrower to the Lender;
Drawing the amount of the drawing made or to be made under the
Facility following the delivery of a Drawing Notice under
clause 4.1;
Drawing Notice a notice of drawing duly completed and signed on behalf of
the Borrower;
1
Drawing Period the period commencing on the date of this Agreement
and ending on the close of business in Hong Kong on the date
falling 7 days from the date of this Agreement;
Event of any of the events mentioned in clause 12.1;
Default
Facility the term loan facility the terms and conditions of which are
set out in this Agreement;
Governmental any action, authorization, consent, approval, licence,
Approval lease, ruling, permit, tariff, rate certification,
exemption, filing or registration by or with any
Governmental Authority;
Governmental any governmental department, commission, board, bureau,
Authority agency, regulatory authority, instrumentality, judicial or
administrative body, domestic or foreign, national,
provincial or local having jurisdiction over the matter or
matters in question;
Joint Venture the joint venture companies formed pursuant to the Joint
Companies Venture Contracts to carry out the Projects;
Joint Venture the three joint venture contracts namely : (1) between
Contracts Powerhouse Electric and Guangdong Huilai County's Penhui
Power Co Ltd ( ) dated 24 September 1994 for the development
and operation of the Guangdong Huilia Kuicheng Power Station
and to construct and operate the Guangdong Huilai Kuicheng
1x3,960 kilowatt diesel fuel power station; (2) between
Powerhouse Electric and Guangdong Huilai County's Penhui
Power Co Ltd ( ) dated 24 September 1994 for the development
and operation of the Guangdong Huilai Shenquan Power Station
and to construct and operate the Guangdong Huilai Shenquan
1x3,960 kilowatt diesel fuel power station; (3) between
Powerhouse Electric and Guangdong Fengshun County's Fenglian
Power Co Ltd ( ) dated 25 September 1994 for the development
and operation of the Guangdong Fengshun Kiucheng Power
Station and to construct and operate the Guangdong Fengshun
1x3,960 kilowatt diesel fuel power station; and the 5 joint
venture contracts for new projects details of which are set
out in the Schedule 1 to this Agreement;
Loan the aggregate principal amount of the Drawing made and for
the time being outstanding;
Loan Period the period from the date of Drawing until the Repayment
Date;
Margin two per cent (2.0%);
Memorandum a mortgage of all the Borrower's shares in its wholly owned
of Charge subsidiary Powerhouse Electric executed by the Borrower in
favour of the Lender in the substantially form attached
hereto in Schedule 3;
2
Powerhouse Powerhouse Electric Limited, a company incorporated in the
Electric Bahamas which is a wholly owned subsidiary of the Borrower;
PRC Partners the parties to the Joint Venture Contracts other than
Powerhouse Electric;
Projects the power projects referred to in the Joint Venture
Contracts;
Promissory Note the promissory note for US$1,000,000 executed by the
Borrower in favour of the Lender in respect of the Loan in
substantially the form attached hereto in Schedule 2;
Repayment Date subject to the terms of this Agreement, the date 30
September 1998 on which the Loan shall be repaid unless such
date is extended in accordance with Clause 6.2;
Security the Promissory Note and the Memorandum of Charge;
Documents
Security any mortgage, charge, pledge, lien, right of set off,
Interest encumbrance or any security interest or preferential
arrangement whatsoever, howsoever created or arising;
Stock Option the Stock Option Agreement between the Lender and the
Agreement Borrower in Agreement the substantially form attached hereto
in Schedule 4;
Subsidiary has the meaning ascribed to it in the Companies Ordinance
(Cap 32) of the Laws of the Hong Kong Special Administrative
Region;
LIBOR the rate per annum as determined (which determination shall
be conclusive) by the Lender to be equal to the arithmetic
mean (rounded upwards, if necessary to the nearest whole
multiple of one sixteenth of one per cent) of the respective
rates of each of the banks as selected by the Lender whose
rates appear on the screen page designated LIBO published or
reported by Reuters Limited through its Reuters monitor
service or any equivalent successor to such page (the
"Reuters Screen") as the rate at which it is offering
deposits in dollars for a period comparable to that for
which such rate is to be determined in the London interbank
market at or about 11.00 a.m. (London time) on the second
Business Day before the proposed date of the Drawing or date
for which computation of LIBOR is required for the purposes
of this Agreement;
$, US$ and the lawful currency of the United States of America and in
dollars relation to all payments to be made under this Agreement,
same day funds settled through the New York Clearing House
Interbank Payment System or such other funds as may for the
time being be customary for the settlement in New York City
of international payments in dollars.
3
1.2 Construction : Except where the context otherwise requires, any reference
in this Agreement to :-
an "agreement" also includes a concession, contract, deed, franchise,
licence, treaty or undertaking (in each case, whether oral or written);
the "assets" of any person shall be construed as a reference to the whole
or any part of its business, undertaking, property, assets and revenues
(including any right to receive revenues);
the "Borrower"and the "Lender", include references to their respective
successors in title, permitted assigns and permitted transferees;
an "Event of Default" includes a reference to any event which, with the
giving of notice and/or the lapse of time and/or a determination being made
under the relevant sub-clause, would constitute an Event of Default;
a "guarantee" also includes any other obligation (whatever called) of any
person to pay, purchase, provide funds (whether by way of the advance of
money, the purchase of or subscription for shares or other securities, the
purchase of assets or services, or otherwise) for the payment of, indemnify
against the consequences of default in the payment of, or otherwise be
responsible for, any indebtedness of any other person;
"indebtedness" includes any obligation (whether present or future, actual
or contingent, secured or unsecured, as principal or surety or otherwise)
for the payment or repayment of money;
a "law" includes common or customary law and any constitution, decree,
judgment, legislation, order, ordinance, regulation, statute, treaty or
other legislative measure in any jurisdiction or any present or future
directive, regulation, request or requirement (in each case, whether or not
having the force of law but, if not having the force of law, the compliance
with which is in accordance with the general practice of persons to whom
the directive, regulation, request or requirement is addressed);
a "month" shall be construed as a reference to a period starting on one day
in a calendar month and ending on the numerically corresponding day in the
next calendar month (and references to "months" shall be construed
accordingly) save that, if there is no numerically corresponding day in the
month in which a period ends, that period shall end on the last day in that
later month and that, where any such period would otherwise end on a
non-Business Day, it shall end on the next Business Day unless that day
falls in the calendar month succeeding that in which it otherwise would
have ended, in which case it shall end on the next preceding Business Day;
and
"Subsidiary" and "Subsidiaries" includes a Subsidiary and Subsidiaries for
the time being of the Borrower whether or not existing or created or
acquired before or after the date of this Agreement.
1.3 Clause headings are for ease of reference only.
2. AMOUNT AND PURPOSE
------------------
2.1 Amount : The maximum aggregate principal amount of the Facility is
$1,000,000 (one million dollars).
4
2.2 Purpose : The Facility shall be made available to the Borrower at its
office in Hong Kong and shall be used to finance the Projects, complete the
outstanding audits of the Borrower and its Subsidiaries, prepare the
necessary documents for the re-listing of the Borrower's shares on NASDAQ
and associated legal and professional fees and working capital as approved
by the Lender from time to time.
3. CONDITIONS PRECEDENT
--------------------
3.1 Conditions Precedent : The Facility shall become available to the Borrower
after the Lender has received the documents listed below, in each case, in
form and content satisfactory to the Lender :-
(a) letters of consent from the PRC Partners to the change of registered
and beneficial ownership of the entire issued share capital of
Powerhouse Electric under the terms of the Memorandum of Charge;
(b) the Deed of Cancellation duly executed by Powerhouse Electric and
Emerging Utilities Limited;
(c) the Memorandum of Charge duly executed by the Borrower;
(d) the Stock Option Agreement duly executed by the Borrower;
(e) the Promissory Note duly executed by the Borrower;
(f) the resignation of the Borrower's representatives on the Board of the
Directors of Powerhouse Electric and the resignation of the Borrower's
representatives on the Board of Directors of the Joint Venture
Companies other than ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ Sham;
(g) certified copies of board resolutions of the Borrower, Powerhouse
Electric and Emerging Utilities Limited approving the terms of the
Deed of Cancellation, and of the Borrower approving the terms of this
Agreement, the Memorandum of Charge and Promissory Note;
(h) opinion letter from a firm of lawyers in People's Republic of China as
to the effect of the Deed of Cancellation and the Memorandum of Charge
on the Joint Venture Contracts and such other matters as the Lender
may require and in terms satisfactory to the Lender;
(i) opinion letter from a firm of lawyers in the United States of America
as to the enforceability of this Agreement, the Promissory Note, the
Stock Option Agreement and the Memorandum of Charge and such other
matters as the Lender may require and in terms satisfactory to the
Lender;
5
(j) opinion letter from a firm of lawyers in the British Virgin Islands as
to the registration and enforceability of the Memorandum of Charge and
such other matters as the Lender may require and in terms satisfactory
to the Lender;
(k) an agreement and deed of undertaking from such numbers of shareholders
of the Borrower as shall be sufficient to pass a resolution to
increase the share capital of the Borrower undertaking (inter alia) to
retain ownership of their shares and to vote their shares in favour of
increasing the authorised capital of the Borrower sufficiently to
enable the Common Shares to be issued and allotted to the Lender in
accordance with the terms of the Stock Option Agreement;
(l) that a Settlement Agreement is entered into with Combined Energy Inc
in terms satisfactory to the Lender and the initial deposit of
US$100,000.00 having been paid by the Borrower to Combined Energy Inc;
and
(m) any other documents as the Lender may require.
3.2 Notice : The Lender shall notify the Borrower after it has received all
documents in accordance with clause 3.1.
4. DRAWING
-------
4.1 Drawing : If :
(a) no Event of Default has occurred or would occur as a result of the
making of the Drawing;
(b) the Lender has actually received a Drawing Notice by 11.00 a.m. (Hong
Kong time) on the third Business Day or such later date as the Lender
may agree before the proposed date of the Drawing;
(c) there has been no material adverse change in the financial condition
of the Borrower since the date of the Disclosure Letter;
(d) each of the representations and warranties mentioned in clause 8.1
remains accurate at the date of the Drawing as if given on that date
by reference to the facts and circumstances then existing;
(e) LIBOR can be determined in respect of the Loan Period for the proposed
Drawing,
then, subject to the provisions of this Agreement, the Borrower may on a
Business Day during the Drawing Period, but not thereafter, request for a
single Drawing under the Facility.
4.2 Amount : The amount of the Drawing shall be US$1,000,000.
4.3 Irrevocability : A Drawing Notice shall be irrevocable and, subject to
clause 10, the Borrower shall borrow the stated amount on the stated date.
4.4 Escrow Account :
(a) The proceeds of the Drawing shall be paid into a separate escrow
account of the Borrower opened specifically for the purpose of
receiving and disbursing the Loan in accordance with the purpose set
out in Clause 2.2 at a bank in Hong Kong approved by the Lender.
(b) Such escrow account shall be operated by one signatory appointed by
the Lender and one signatory appointed by the Borrower.
6
(c) The signatories appointed by the Borrower for the purpose of operating
the escrow account shall be ▇▇ ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ Sham
and the signatories appointed by the Lender shall be ▇▇ ▇▇▇▇▇ Ho and
▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇.
(d) Payments from the escrow account will only be made in accordance with
budgets approved by the Lender unless otherwise agreed by the Lender.
5. INTEREST
--------
5.1 Period : Interest shall be payable in one lump sum on the Repayment Date in
respect of the entire Loan Period.
5.2 Rate : The rate of interest payable on Drawing for the Loan Period shall be
the rate per annum (as determined by the Lender) to be the aggregate of the
Margin and LIBOR which the Lender shall notify to the Borrower.
5.3 Payment : Interest under this Agreement shall be calculated on the basis of
actual days elapsed with monthly rests and a 360-day year.
6. REPAYMENT, EXTENSION AND PREPAYMENT
-----------------------------------
6.1 Repayment : Subject to the provisions of this Agreement, the amount of the
Loan shall be repaid in one lump sum together with all interest accrued
thereon on the Repayment Date.
6.2 Extension : The Lender may in its sole discretion without giving any
reasons therefor extend the Repayment Date to on or before 31 October 1998
by written notice to the Borrower at any time prior to 31 July 1998, in
which case the entire outstanding loan and all interest thereon and other
charges under this Agreement and the Security Documents shall be repayable
on or before 31 October 1998.
6.3 Prepayment : The Borrower shall not be entitled to prepay the Loan except
as required under this Agreement.
7. FEES AND EXPENSES
-----------------
7.1 Expenses : The Borrower shall on demand pay, in each case on the basis of a
full indemnity :-
(a) to the Lender, all expenses (including legal, printing, publicity and
out-of-pocket expenses) incurred in connection with the negotiation,
preparation or completion of this Agreement; and
(b) to the Lender, all expenses (including legal and out-of-pocket
expenses) incurred in connection with any variation, consent or
approval relating to this Agreement or in connection with the
preservation, the enforcement or the attempted preservation or
enforcement of any of the rights of the Lender under this Agreement.
7
7.2 Stamp Duty : The Borrower shall pay any stamp, documentary and other duties
and taxes to which this Agreement may be subject or give rise and shall
fully indemnify the Lender from and against any losses or liabilities which
it may incur as a result of any delay or omission by the Borrower to pay
any such duties or taxes.
8. REPRESENTATIONS AND WARRANTIES
------------------------------
8.1 The Borrower acknowledges that the Lender has entered into this Agreement
in full reliance on representations by the Borrower in the following terms;
and the Borrower now warrants to the Lender that :-
(a) Status : the Borrower is duly incorporated with limited liability and
validly existing under the laws of the State of Colorado in the U.S.A;
(b) Powers and Authorisations : the documents which contain or establish
the Borrower's constitution incorporate provisions which authorise,
and all necessary corporate action has been taken to authorise, and
all authorisations of any governmental or other authority have been
duly and unconditionally obtained and are in full force and effect
which are required to authorise, the Borrower to own its assets, carry
on its business as it is now being conducted, and sign and deliver,
and perform the transactions contemplated in, this Agreement and the
Security Documents to which it is party and this Agreement and the
Security Documents to which it is party constitute valid and binding
obligations of the Borrower enforceable in accordance with their
terms;
(c) Non-violation : neither the signing and delivery of this Agreement and
the Security Documents nor the performance of any of the transactions
contemplated therein will :-
(i) contravene or constitute a default under any provision contained
in any agreement, instrument, law, judgment, order, licence,
permit or consent by which the Borrower or any of its assets is
bound or affected; or
(ii) cause any limitation on it or the powers of its directors,
whether imposed by or contained in any document which contains or
establishes its constitution or in any law, order, judgment,
agreement, instrument or otherwise, to be exceeded;
(d) Consents : no registration, recording, filing or notarisation of this
Agreement or any of the Security Documents and no payment of any duty
or tax and no other action whatsoever is necessary or desirable to
ensure the validity, enforceability or priority in the relevant
jurisdictions of the liabilities and obligations of the Borrower or
the rights of the Lender under this Agreement and the Security
Documents;
(e) No Default : no event has occurred which constitutes, or which with
the giving of notice and/or the lapse of time and/or a relevant
determination would constitute, a contravention of, or default under,
any agreement or instrument by which the Borrower or any of its assets
is bound or affected, being a contravention or default which might
either have a material adverse effect on the business, assets or
condition of the Borrower or materially and adversely affect its
ability to observe or perform its obligations under this Agreement;
8
(f) Litigation : save as disclosed in the Disclosure Letter no litigation,
arbitration or administrative proceeding or claim which might by
itself or together with any other such proceedings or claims either
have a material adverse effect on its business, assets or condition or
materially and adversely affect its ability to observe or perform its
obligations under this Agreement, is presently in progress or pending
or, to the best of the knowledge, information and belief of the
Borrower, threatened against the Borrower or any of its assets;
(g) Tax Liabilities : all necessary returns have been delivered by or on
behalf of the Borrower to the relevant taxation authorities and the
Borrower is not in default in the payment of any taxes of a material
amount, and no material claim is being asserted with respect to taxes
which is not disclosed in the Disclosure Letter;
(h) No Security : none of the assets of the Borrower is affected by any
Security Interest, and the Borrower is not a party to, nor is it or
any of its assets bound by, any order, agreement or instrument under
which the Borrower is, or in certain events may be, required to
create, assume or permit to arise any Security Interest, other than
any permitted under clause 9.1(a) or disclosed in writing to the
Lender on or before the date of this Agreement;
(i) Shareholding in Powerhouse Electric : the Borrower is the registered
and beneficial owner of the entire issued share capital of Powerhouse
Electric;
(j) Governmental Approvals in respect of the Projects : all Governmental
Approvals necessary in connection with (i) the due execution and
delivery of, and performance by Powerhouse Electric and the PRC
Partners of their respective obligations and the exercise of their
respective rights under, the Joint Venture Contracts and (ii) the
construction and operation of the Projects as contemplated by the
Joint Venture Contracts to be obtained by the Borrower or any other
person have been duly obtained, were validly issued, are in full force
and effect, are not subject to appeal, are held in the name of
Powerhouse Electric and are free from conditions or requirements
compliance with which could reasonably be expected to have a material
adverse effect on the Borrower's or Powerhouse Electric's ability to
perform its obligations hereunder or under the Security Documents or
the Joint Venture Contracts or which the Borrower does not reasonably
expect to be able to satisfy. There is no proceeding pending or, to
the best knowledge of the Borrower, threatened that seeks or may be
expected to rescind, terminate, modify or suspend any such
Governmental Approval. The information set forth in each application
and other written material submitted by the Borrower or Powerhouse
Electric to the applicable Governmental Authority in connection with
each such Governmental Approval is accurate and complete in all
material respects. The Projects will conform to and comply in all
material respects with all Governmental Approvals and the Joint
Venture Contracts applicable thereto and all applicable laws. The
Borrower has no reason to believe that the Lender will not be
entitled, without undue expense or delay, to the benefit of each
Governmental Approval upon the exercise of remedies under the Security
Documents. The Borrower has furnished the Lender with a true and
complete copy of each Governmental Approval heretofore obtained or
made by the Borrower;
9
(k) Licenses and other Rights : the Borrower has all licences, trademarks,
trade names, service marks, copyright, patents or agreements with
respect to the usage of technology or other permits that are necessary
for the Projects without any conflict with the rights of any other
person and without any obligation to pay royalties or license fees
therefor in amounts in excess of those already disclosed to the
Lender;
(l) Joint Venture Contracts : each Joint Venture Contract constitutes
legal, valid and binding obligations of the parties thereto
enforceable in accordance with its terms;
(m) Disclosure : the written information furnished by the Borrower in
connection with the Projects and set out in the Disclosure Letter does
not contain any untrue statement or omit to state any fact the
omission of which makes the statements therein, in the light of the
circumstances under which they were made, misleading, and all
expressions of expectation, intention, belief and opinion contained
therein were honestly made on reasonable grounds after due and careful
enquiry by the Borrower; and
(n) Information : the Borrower has fully disclosed in writing to the
Lender all facts relating to the Borrower which the Borrower knows or
should reasonably know and which are material for disclosure to the
Lender in the context of this Agreement.
8.2 Survival : The representations and warranties set out in this clause 8
shall survive the signing and delivery of this Agreement and the making of
each Drawing.
9. UNDERTAKINGS
------------
9.1 The Borrower undertakes with the Lender that, from the date of this
Agreement until all its liabilities under this Agreement have been
discharged :
(a) Ranking and Negative Pledge : the liabilities of the Borrower under
this Agreement rank and will at all times rank at least equally and
rateably (pari passu) in point of priority and security with all its
other liabilities (both actual and contingent) except :-
(i) liabilities which are subject to liens or rights of set off
arising in the normal course of the Borrower's and any
Subsidiary's business and the aggregate amount of which is not
material; and
(ii) liabilities which are preferred solely by Colorado and United
States law and not by reason of any Security Interest,
and the Borrower will not create or permit to exist over all or any
part of the Borrower's business or assets, and will procure and ensure
that each Subsidiary will not create or permit to exist over all or
any part of that Subsidiary's business or assets, any Security
Interest (other than any permitted under sub-paragraphs (i) and (ii)
above and other than any disclosed in writing to the Agent on or
before the date of this Agreement pursuant to clause 8.1(h));
(b) Purpose : the Borrower will use the Loan only for the purposes
stated in clause 2.2;
10
(c) Consents : the Borrower will maintain in full force and effect
all relevant Governmental Approvals and other authorisations
(governmental and otherwise) and will promptly make all reports
and filings and do all such other things and will obtain any
further authorisation or Governmental Approval which may become
necessary to enable it to perform any of the transactions
contemplated by this Agreement and the Security Documents and to
undertake the Projects;
(d) Default : if the Borrower becomes aware of the occurrence of an
Event of Default it will forthwith notify the Lender and provide
the Lender with full details of any steps which it is taking, or
is considering taking, in order to remedy or mitigate the effect
of the Event of Default or otherwise in connection with it and it
will from time to time on request deliver to the Lender a
certificate signed by an Authorised Director confirming that no
Event of Default has occurred or is subsisting;
(e) Conduct of Business : the Borrower will conduct its businesses in
a proper and efficient manner and will not make any investments
or conduct operations other than those in the ordinary course of
its business;
(f) Accounts : it will deliver to the Lender :-
(i) as soon as available its audited consolidated accounts;
(ii) as soon as available unaudited consolidated accounts;
(iii)details of significant developments in any litigation,
arbitration or administrative proceedings commenced by or
against the Borrower or in respect of which the Borrower is
involved;
(iv) at the same time as sent to its shareholders, any other
documents or information sent to its shareholders as such;
(v) promptly, such additional financial or other information as
the Lender may from time to time reasonably request;
(g) Preparation of Accounts : the financial statements referred to in
paragraph (f) shall be prepared on a basis consistently applied
in accordance with generally accepted accounting principles in
the United States and these financial statements shall give a
true and fair view of the results of the operations of the
affairs of the Borrower and its Subsidiaries for the period to
which the financial statements are made up and shall disclose or
reserve against all liabilities (actual or contingent) of the
Borrower and its Subsidiaries;
(h) Compliance with Laws; Adverse Regulatory Changes : the Borrower
shall comply with and ensure that Powerhouse Electric complies
with all applicable laws. The Borrower shall from time to time
obtain all Governmental Approvals as shall now or hereafter be
necessary under any applicable law in connection with the
construction, operation or maintenance of the Projects and shall
comply with all such Governmental Approvals. The Borrower shall
promptly furnish a true and complete copy of each such
Governmental Approval to the Lender. The Borrower shall use its
best efforts to contest any proceedings before any Governmental
Authority and to resist any proposed adverse changes in any
applicable law to the extent that such proceedings or changes are
directed specifically toward the Projects or could reasonably be
expected to materially and adversely affect the financial
condition of the Borrower or the ability of the Borrower or
Powerhouse Electric to observe or perform any of its obligations
under this Agreement, the Security Documents or the Joint Venture
Contracts;
11
(i) Project Construction, Operation and Maintenance : the Borrower
shall (or shall procure that Powerhouse Electric shall) (i) cause
the Projects to be duly constructed and completed in accordance
with generally accepted construction engineering practice and
generally accepted construction procedures; (ii) maintain,
preserve and operate the Projects and all of its other properties
necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted, and
in accordance with generally accepted prudent construction
engineering practices; and (iii) restore, replace or rebuild its
property, or any part thereof now or hereafter damaged or
destroyed by any casualty (whether or not insured against or
insurable) except any such property that the Borrower determines
in good faith with the approval of the Lender (which approval
shall not be unreasonably delayed or withheld) not to be
necessary to the conduct of its business or the business of
Powerhouse Electric;
(j) Insurance : the Borrower shall and shall procure that Powerhouse
Electric keep their respective business and assets (which shall
without limitation include the Projects and all buildings,
equipment, machinery, vehicles and other assets used in or
otherwise relating to the Projects) insured with reputable
underwriters or insurance companies in the manner and to the
extent usual for companies carrying on a business such as that
carried on by it and, from time to time upon the request of the
Lender, furnish to the Lender evidence as to its compliance with
its obligations under this paragraph;
(k) Inspection : the Borrower shall permit and shall procure that the
PRC Partners permit representatives of the Lender and any
professional advisers appointed by the Lender for the purposes of
this Agreement to visit and inspect its and Powerhouse Electric's
Projects, to examine their books of record and account and any
documents received by any of them from any other party in
connection with the Projects, to make copies and abstracts
therefrom, and to discuss their affairs, finances and accounts
with their principal officers, engineers and independent
accountants and professional advisers (and by this provision the
Borrower authorises and shall procure that Powerhouse Electric
authorises such accountants and professional advisers to discuss
with such persons such affairs, finances and accounts, whether or
not a representative of the Borrower or Powerhouse Electric is
present, but after prior notice to the Borrower or Powerhouse
Electric, as the case may be, of such discussions), all at such
reasonable times during business hours and at such intervals as
such person may desire. Without limiting the foregoing, the
representatives of the Lender and any professional advisers
appointed by the Lender shall have the right to inspect the
Projects from time to time and to witness and verify any
performance tests conducted pursuant to or in connection with
this Agreement or the Joint Venture Contract. The Borrower shall
at all times cause a complete set of the original plans (and all
supplements thereto) relating to the Projects to be maintained at
the Projects' sites and available for inspection by such
representatives;
(l) Progress of the Project : the Borrower shall notify the Lender of
each stage of completion of the Project and shall furnish to the
Lender promptly such information or documents in relation to the
Project as the Lender may require from time to time;
12
(m) Borrower's Indebtedness : save for the Loan, the Borrower shall
not, without the prior written consent of the Lender make any
loans, incur any indebtedness, give any guarantee or indemnity to
or for the benefit of any person or otherwise voluntarily assume
any liability, whether actual or contingent, in respect of any
obligation of any other person, save in the ordinary course of
business;
(n) Dividends : the Borrower shall not declare any dividends without
the prior written consent of the Lender;
(o) Auditor : the Borrower shall appoint auditors acceptable to the
Lender for each of its financial years;
(p) Directors : the Borrower shall permit the Lender to appoint two
directors of the Borrower, the initial appointees being ▇▇ ▇▇▇▇▇
Ho and ▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇. If requested by the Lender, the
Borrower shall procure that the directors appointed by the
Borrower of Powerhouse Electric or the Joint Venture Companies
shall resign and directors nominated by the Lender appointed in
their place;
(q) Further Assurance : the Borrower will from time to time on
request by the Lender do or procure the doing of all such acts
and will execute or procure the execution of all such documents
as the Lender may consider necessary or desirable for giving full
effect to this Agreement or securing to the Lender the full
benefits of all rights, powers and remedies conferred upon each
of them in this Agreement.
10. CHANGES IN CIRCUMSTANCES
------------------------
10.1 Illegality : If the Lender determines that the introduction, imposition or
variation of any law or any change in the interpretation or application of
any law makes it unlawful or impracticable without breaching such law for
it to allow all or part of the Facility or the Loan to remain outstanding
or to fund all or part of the Drawing or the Loan or to give effect to any
of its obligations under this Agreement or to charge or receive interest at
the rate applicable :-
(a) the Lender shall notify the Borrower and the Lender's obligation to
fund the Drawing shall forthwith be suspended and the Facility shall
be suspended to such extent;
(b) the Borrower shall, upon being so notified, prepay to the Lender all
of the Loan in accordance with clause 10.5 on such date as the Lender
shall certify to be necessary to comply with the relevant law and the
Facility shall be cancelled.
10.2 Increased Costs : Where the Lender determines that, as a result of the
introduction or variation of any law or any change in the interpretation or
application of any law (which shall for this purpose include any removal or
modification of any exemption currently in force of the Borrower or the
Lender), or compliance with any request (whether or not having the force of
law) from any central bank or other fiscal, monetary or other authority or
agency (including, without limitation, a directive or request which affects
the manner in which the Lender allocates capital resources to its
obligations under this Agreement), the cost to the Lender of making or
maintaining or funding the Loan is increased or the amount of any sum
received or receivable by it in respect of the Loan or the effective return
to it under this Agreement is reduced or it is obliged to make any payment
(except in respect of tax on its overall net income) or foregoes any
interest or other return on, or calculated by reference to, the amount of
any sum received or receivable by it from the Borrower under this
Agreement, then :-
13
(a) the Lender shall notify the Borrower of such event promptly upon its
becoming aware of such event;
(b) the Borrower shall, within 14 days of such notification, pay to the
Lender such amounts as the Lender from time to time and at any time
(including after a prepayment of part of the Loan) notifies the
Borrower to be necessary to compensate it for such increased cost,
reduction, payment or forgone interest or return; and
(c) at any time thereafter, so long as the circumstances giving rise to
the obligation to make the compensating payment continue :-
(i) at the Borrower's irrevocable election, by notice to the Lender,
the Lender's obligation to fund in the Drawing shall terminate
and the Facility shall be cancelled to such extent; and
(ii) the Borrower may upon giving the Lender not less than 30 days'
notice which shall be irrevocable, prepay to the Lender the Loan
subject to and in accordance with clauses 10.4 and 10.5.
10.3 Market Disruption : If, in relation to the Loan Period :-
(i) the Lender determines that, by reason of circumstances affecting the
London interbank market generally, reasonable and adequate means do
not or will not exist for ascertaining under clause 5.2 a rate of
interest applicable to the Drawing, the Loan or any part of it; or
(ii) the Lender is notified that deposits in dollars are not in the
ordinary course of business available in the London interbank market
for a period equal to the Loan Period in amounts sufficient to fund
the Loan;
the Lender shall forthwith notify the Borrower, and
(a) no Drawing shall be made while such circumstances continue to exist
and, at the Borrower's irrevocable election (by notice to the Lender),
the Facility may be cancelled;
(b) whilst such circumstances exist the Lender shall negotiate with the
Borrower for a period of seven (7) days with a view to agreeing an
alternative basis for continuing the Loan. Any alternative basis
agreed in writing by the Lender shall take effect in accordance with
its terms. If no agreement is reached within seven (7) days of the
Lender's notification to the Borrower of the existence of the
circumstances referred in this clause, the Facility shall be
cancelled.
14
10.4 Prepayment : Where the Borrower has given notice under clause 10.2 to
prepay the Loan :-
(a) the Borrower shall provide the Lender with satisfactory evidence that
all authorisations necessary to the prepayment have been
unconditionally obtained;
(b) the amount of the prepayment shall become due and payable on expiry of
the period specified in the notice to the Lender; and
10.5 Amount : On prepaying the Loan under this clause, the Borrower shall pay to
the Lender accrued interest on the Loan together with all other amounts due
to the Lender as may be applicable provided that for the avoidance of
doubt, no premium or penalty shall be payable on such prepayment but the
Borrower shall indemnify the Lender in respect of any cost or loss incurred
by the Lender for breaking any interest or funding period.
10.6 Certificates : Any determination or notification by the Lender concerning
any matter referred to in this clause shall, in the absence of manifest
error, be conclusive evidence as to that matter and shall be binding on the
Borrower and the Lender.
11. PAYMENTS
--------
11.1 By the Borrower : All payments to be made by the Borrower for the account
of the Lender shall be made in dollars not later than 10.00 a.m. (Hong Kong
time) on the relevant day to such account as the Lender may have notified
the Borrower in writing.
11.2 Withholdings : All payments by the Borrower under this Agreement, whether
in respect of principal, interest, fees or any other item, shall be made in
full without any deduction or withholding (whether in respect of set off,
counterclaim, duties, taxes, charges or otherwise whatsoever) unless the
deduction or withholding is required by applicable laws in which event the
Borrower shall :-
(a) ensure that the deduction or withholding does not exceed the minimum
amount legally required;
(b) forthwith pay to the Lender such additional amount so that the net
amount received by the Lender will equal the full amount which would
have been received by it had no such deduction or withholding been
made;
(c) pay to the relevant taxation or other authorities within the period
for payment permitted by applicable laws the full amount of the
deduction or withholding (including, but without prejudice to the
generality of the foregoing, the full amount of any deduction or
withholding from any additional amount paid pursuant to this
subclause);
(d) furnish to the Lender, as soon as practicable and in any event not
more than 10 days after the period for payment permitted by applicable
laws a copy of an official receipt of the relevant taxation or other
authorities involved for all amounts deducted or withheld as
aforesaid; and
15
11.3 Judgment Currency : If, under any applicable law, whether as a result of a
judgment against the Borrower or the liquidation of the Borrower or for any
other reason, any payment under or in connection with this Agreement is
made or is recovered in a currency (the "other currency") other than that
in which it is required to be paid hereunder (the "original currency")
then, to the extent that the payment to the Lender (when converted at the
rate of exchange on the date of payment or, in the case of a liquidation,
the latest date for the determination of liabilities permitted by the
applicable law) falls short of the amount unpaid under this Agreement, the
Borrower shall as a separate and independent obligation, fully indemnify
the Lender against the amount of the shortfall; and for the purposes of
this subclause "rate of exchange" means the rate at which the Lender is
able on the relevant date to purchase the original currency with the other
currency.
11.4 Date : If any payment would otherwise be due on a day which is not a
Business Day, it shall be due on the next succeeding Business Day or, if
that Business Day falls in the following month of the year, on the
preceding Business Day Provided that if the Repayment Date falls on a date
which is not a Business Day, it shall be deemed for all purposes to fall on
the preceding Business Day.
12. DEFAULT
-------
12.1 Events
If :-
(a) Non-payment : the Borrower fails to pay any amount due under this
Agreement or the Security Documents on the due date or on demand, if
so payable;
(b) Breach of Obligation : the Borrower fails to observe or perform any of
its obligations under this Agreement or the Security Documents or
under any undertaking or arrangement entered into in connection
therewith, other than an obligation of the type referred to in clause
12.1(a) and, in the case of a failure capable of being remedied, the
Lender does not determine, within seven (7) days after the Borrower
became aware of the failure, that it has been remedied to the Lender's
satisfaction;
(c) Misrepresentation : any representation, warranty or statement which is
made (or acknowledged to have been made) by the Borrower in this
Agreement or the Security Documents or which is contained in any
certificate, statement, legal opinion or notice provided under or in
connection with this Agreement or the Security Documents proves to be
incorrect in any material respect, or if repeated at any time with
reference to the facts and circumstances subsisting at such time would
not be accurate in all material respects;
(d) Invalidity : any provision of this Agreement, the Security Documents
or the Joint Venture Contracts is or becomes for any reason invalid or
unenforceable;
16
(e) Disposal of assets : any of the Borrower or Powerhouse Electric
transfers or disposes of, or threatens to transfer or dispose of, by
one or more transactions or series of transactions (whether related or
not) the whole or any part amounting in value to 20% or more of its
business or assets unless in the normal course of its business;
(f) Cessation of business : any of the Borrower or Powerhouse Electric
changes or threatens to change the nature or scope of its business,
suspends or threatens to suspend a substantial part of the present
business operations which it now conducts directly or indirectly, or
any Governmental Authority expropriates or threatens to expropriate or
nationalise or seize or compulsorily acquire all or part of the assets
of the Borrower or Powerhouse Electric and the result of any of the
foregoing is, in the determination of the Lender, materially and
adversely to affect its financial condition or the Borrower's ability
to observe or perform its obligations under this Agreement or the
Security Documents or the Joint Venture Contracts;
(g) Cross-default : any indebtedness of the Borrower or of Powerhouse
Electric becomes due or capable of being declared due before its
stated maturity, any guarantee or similar obligation of the Borrower
or of Powerhouse Electric is not discharged at maturity or when called
or the Borrower or Powerhouse Electric goes into default under, or
commits a breach of, any instrument or agreement relating to any such
indebtedness, guarantee or other obligation;
(h) Appointment of receiver, legal process : an encumbrancer takes
possession of, or a trustee, receiver or similar officer is appointed
in respect of, all or any part of the business or assets of the
Borrower or of Powerhouse Electric or distress or any form of
execution is levied or enforced upon or sued out against any such
assets and is not discharged within seven days of being levied,
enforced or sued out, or any Security Interest which may for the time
being affect any of its assets becomes enforceable;
(i) Insolvency, etc. : the Borrower or Powerhouse Electric becomes unable
to pay its debts as they fall due or suspends or threatens to suspend
making payments (whether of principal or interest) with respect to all
or any class of its debts or otherwise becomes or is declared
insolvent;
(j) Composition, Winding-Up : the Borrower or Powerhouse Electric convenes
a meeting of its creditors or proposes or makes any arrangement or
composition with, or any assignment for the benefit of, its creditors
or a petition is presented or a meeting is convened for the purpose of
considering a resolution or other steps are taken for the winding up
of the Borrower or Powerhouse Electric (other than for the purposes of
and followed by a reconstruction previously approved in writing by the
Lender, unless during or following such reconstruction the Borrower or
Powerhouse Electric becomes or is declared to be insolvent);
(k) Analogous Proceedings : anything analogous to any of the events
specified in paragraphs (h), (i) or (j) occurs under the laws of any
applicable jurisdiction;
17
(l) Moratorium : the government of Hong Kong, the People's Republic of
China or United States or any competent authority thereof declares or
requests a moratorium on the payment of any of the Borrower's or
Powerhouse Electric's indebtedness or the government of Hong Kong, the
People's Republic of China or United States commences negotiations
with any of the Borrower's or Powerhouse Electric's creditors with a
view to a general readjustment or rescheduling of any of its
indebtedness or any other restriction is imposed or sought to be
imposed by the government of Hong Kong, the People's Republic of China
or United States or any competent authority thereof which restricts or
might restrict or otherwise adversely affect full and punctual payment
by the Borrower of all or any of their respective obligations under
this Agreement or the Security Documents;
(m) Abandonment of Project : the Borrower or Powerhouse Electric shall, in
the opinion of the Lender, have abandoned the Projects or any of them;
(n) Compulsory Acquisition : there shall be any circumstance or event in
consequence of which the Projects or any portion thereof shall be
temporarily or permanently condemned or seized or taken by any
Governmental Authority under power of eminent domain or otherwise;
(o) Security in Jeopardy : if in the Lender's opinion the construction or
operation of the Projects or the security created by any of the
Security Documents is in jeopardy, or the security created by the
Security Documents is incapable of being perfected or registered;
(p) Material Adverse Change : a material adverse change occurs in the
financial condition or operating environment of the Borrower or
Powerhouse Electric;
(q) Event affecting Borrower : any event occurs or circumstances exist
which, in the reasonable opinion of the Lender, affects or may affect
the ability of the Borrower to perform any of its obligations under
this Agreement or any of the Security Documents,
then, at once or at any time thereafter, the Lender upon the request of the
Lender shall, by notice to the Borrower, declare the Loan to be immediately
due and payable and the Facility to be cancelled, whereupon the Loan shall
become so due and payable together with accrued interest thereon and any
other amounts then payable under this Agreement and the Security Documents.
13. INDEMNITY
---------
13.1 As a separate and independent obligation, the Borrower shall fully
indemnify the Lender from and against any expense, loss, damage or
liability (as to the amount of which the certificate of the Lender shall,
in the absence of manifest error, be conclusive) which it may incur as a
consequence of the occurrence of any Event of Default, of any failure to
borrow in accordance with a Drawing Notice or of any prepayment under this
Agreement or otherwise in connection with this Agreement. Without prejudice
to its generality, the foregoing indemnity shall extend to any interest,
fees or other sums whatsoever paid or payable on account of any funds
borrowed in order to carry any unpaid amount and to any loss (including
loss of profit), premium, penalty or expense which may be incurred in
liquidating or employing deposits from third parties acquired to make,
maintain or fund the Loan (or any part of the Loan) or any other amount due
or to become due under this Agreement.
18
14. FURTHER PROVISIONS
------------------
14.1 Evidence of Indebtedness : In any proceedings relating to this Agreement a
statement as to any amount due to the Lender under this Agreement which is
certified as being correct by an officer of the Lender and shall unless
otherwise provided in this Agreement, and save for manifest error, be prima
facie evidence that such amount is in fact due and payable.
14.2 Application of Moneys : If any sum paid or recovered in respect of the
liabilities of the Borrower under this Agreement is less than the amount
then due, the Lender may apply that sum to interest, fees or any other
amount due under this Agreement in such proportions and order and generally
in such manner as the Lender shall determine.
14.3 Rights Cumulative, Waivers : The rights of the Lender under this Agreement
are cumulative, may be exercised as often as they consider appropriate and
are in addition to their rights under the general law. The rights of the
Lender in relation to this Facility and/or the Loan (whether arising under
this Agreement or under the general law) shall not be capable of being
waived or varied otherwise than by an express waiver or variation in
writing; and in particular any failure to exercise or any delay in
exercising any of such rights shall not operate as a waiver or variation of
that or any other such right; any defective or partial exercise of any of
such rights shall not preclude any other or further exercise of that or any
other such right; and no act or course of conduct or negotiation on its
part or on its behalf shall in any way preclude it from exercising any such
right or constitute a suspension or any variation of any such right.
14.4 Notices : Any notice or communication under or in connection with this
Agreement shall be in writing and shall be delivered personally, or by
post, facsimile or telex to the addresses given in this Agreement or at
such other address as the recipient may have notified to the other parties
in writing. Proof of posting or despatch of any notice or communication to
the Borrower shall be deemed to be proof of receipt :-
(a) in the case of a letter, on the seventh Business Day after posting;
(b) in the case of any notice or communication made by facsimile, when
confirmed by an activity report indicating that the correct number of
pages was sent to the correct facsimile number and that such facsimile
message was well-received;
(c) in the case of any notice or communication made by telex, when
despatched and the correct answerback is received.
Any communication to the Lender must actually be received by the Lender
before such communication becomes effective.
14.5 English Language : All notices or communications under or in connection
with this Agreement shall be in the English language or, if in any other
language, accompanied by a translation into English. In the event of any
conflict between the English text and the text in any other language, the
English text shall prevail.
19
14.6 Invalidity of any provision : If any of the provisions of this Agreement
becomes invalid, illegal or unenforceable in any respect under any law, the
validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired.
14.7 Conflict with Promissory Note : In the event of any conflict between the
provisions of this Agreement and the Promissory Note, the provisions of
this Agreement shall prevail.
14.8 Benefit of Agreement :
(a) This Agreement shall benefit and be binding on the parties, their
respective successors and any permitted assignee or transferee of some
or all of a party's rights or obligations under this Agreement. Any
reference in this Agreement to any party shall be construed
accordingly.
(b) The Borrower shall not assign its rights or transfer its obligations
under this Agreement or any part thereof.
(c) The Lender may assign its rights under this Agreement or any part
thereof or transfer its obligations hereunder or any part thereof (the
consent by the Borrower to such transfer being hereby irrevocably
given by the Borrower to the Lender).
14.9 Choice of Law : This Agreement is governed by, and shall be construed in
accordance with, the laws of the Hong Kong Special Administrative Region.
14.10 Submission to Jurisdiction and Waiver of Immunity :
(a) The Borrower irrevocably :-
(i) submits to the non-exclusive jurisdiction of the courts of the
Hong Kong Special Administrative Region;
(ii) consents to service of process by mail or in any other manner
permitted by the relevant law;
(iii)waives any objections on the ground of venue or forum non
conveniens or any similar grounds.
(b) The Borrower irrevocably waives and agrees not to claim any immunity
from suits and proceedings (including actions in rem) and from all
forms of execution or attachment to which it or its property is now or
may hereafter become entitled under the laws of any jurisdiction and
declares that such waiver shall be effective to the fullest extent
permitted by such laws.
(c) The Borrower shall at all times maintain an agent for service of
process in Hong Kong. Such agent shall be ▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇ Sham of ▇-▇
▇▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and any writ,
judgment or other notice of legal process shall be sufficiently served
on the Borrower if delivered to such agent at its address for the time
being. The Borrower undertakes not to revoke the authority of the
above agent and if, for any reason, any such agent no longer serves as
agent of the Borrower to receive service of process, the Borrower
shall promptly appoint another such agent, shall advise the Lender
thereof and shall deliver promptly to the Lender the acceptance by
such agent of its appointment.
20
SIGNED BY THE AUTHORISED REPRESENTATIVES OF THE PARTIES.
SIGNED by /s/ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇▇ )
)
for and on behalf of )
Powerhouse Resources Inc )
in the presence of :- )
SIGNED by /s/ ▇▇▇▇ ▇▇▇ )
)
for and on behalf of )
▇▇▇▇▇ An Investments Limited )
in the presence of :- )
21