Schedule 4
----------
Stock Option Agreement
----------------------
Dated the 6th day of February 1998
----------------------------------
POWERHOUSE RESOURCES, INC.
and
XXXXX AN INVESTMENTS LIMITED
-----------------------------------------
STOCK OPTION AGREEMENT
-----------------------------------------
XXXXXX XXXX &CO
Solicitors
15th Floor Entertainment Building
00 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx
(XXxx : AW/970700)
STOCK OPTION AGREEMENT
----------------------
THIS AGREEMENT is made this 6th day of February 1998.
PARTIES
-------
(1) POWERHOUSE RESOURCES, INC., a company incorporated in the State of
Colorado, U.S.A. having its registered office at 0000 Xxxxxx Xxxxxx, Xxxxx
000, Xxxxxx, Xxxxxxxx 00000, X.X.X. ("Powerhouse"); and
(2) XXXXX AN INVESTMENTS LIMITED, a company incorporated in the Bahamas and
having its registered office at P O Box CB-12751, Nassau, New Providence,
Bahamas ("the Investor").
DEFINITIONS
-----------
In this Agreement unless otherwise defined all words shall have the same
meanings as defined in the Facility Agreement dated 5th February 1998 between
Powerhouse and the Investor the following words shall have the following
meanings :-
"the Board" the Board of Directors of Powerhouse;
"Common Shares" the Common Shares of Powerhouse of par value of US$0.01
each;
"Powerhouse Powerhouse Electric Limited, a company incorporated in the
Electric" British Virgin Islands which is a 100% subsidiary of
Powerhouse;
"the Initial the 3 initial projects of Powerhouse Electric, in the Joint
Projects" Venture contracts namely : (1) between Powerhouse Electric
and Guangdong Huilai County's Penhui Power Co Ltd ( ) dated
24 September 1994 for the development and operation of the
Guangdong Huilai Kuicheng Power Station and to construct and
operate the Guangdong Huilai Kuicheng 1x3,960 kilowatt
diesel fuel power station; (2) between Powerhouse Electric
and Guangdong Huilai County's Penhui Power Co Ltd ( ) dated
24 September 1994 for the development and operation of the
Guangdong Huilai Shenquan Power Station and to construct and
operate the Guangdong Huilai Shenquan 1x3,960 kilowatt
diesel fuel power station; (3) between Powerhouse Electric
and Guangdong Fengshun County's Fenglian Power Co Ltd ( )
dated 25 September 1994 for the development and operation of
the Guangdong Fengshun Kiucheng Power Station and to
construct and operate the Guangdong Fengshun 1x3,960
kilowatt diesel fuel power station;
"the New Projects" the projects in respect of which Powerhouse Electric has
signed joint venture agreements as listed in the Schedule 1
hereto;
"Option" the option exercisable pursuant to Clause 2.2 below;
"Option Notice" a notice exercising an Option given pursuant to Clause 2
below;
1
"the Option Period" the period commencing on the date of this Agreement and
ending on 31 July 1998 unless the Investor shall in its sole
discretion have given written notice prior to 31 July 1998
to Powerhouse extending such period to 31 October 1998;
"Option Shares" such number of Common Shares ranking pari passu with the
existing issued shares of Powerhouse as shall have a value
of US$3,000,000.00 based on the price of share and which
number is currently estimated to be 769,230,760 Common
Shares representing approximately 58.98% of the entire
issued share capital of Powerhouse, as confirmed by the
auditors of Powerhouse;
"price of share" the price of share shall be the NAV per share as at 31
December 1997 as confirmed by the auditors of Powerhouse in
accordance with the usual General Accepted Accounting
Principles recognised by the accountancy profession in the
United States and to be confirmed by the Investor.
Powerhouse shall procure that any adjustment arising from
such audit review shall be confirmed by the auditors of
Powerhouse no later than 15 April 1998;
"NAV per share" the Net Asset Value per Common Share. NAV per share is the
value of all principal assets of Powerhouse less the value
of all principal liabilities of Powerhouse as divided by the
total number of issued Common Shares;
"Relevant Period" the period from the date hereof until Completion or the
termination of this Agreement whichever is later;
"Reorganisation" in relation to Powerhouse any increase in issued share
capital any capitalisation of profits or reserves any rights
issue or offer by way of rights consolidation sub-division
reduction of capital purchase of own shares or other
reorganisation or adjustment relating to the share or loan
capital of Powerhouse and any scheme or amalgamation or
reconstruction affecting Powerhouse;
"Transfer Terms" that all the Option Shares shall be issued and allotted free
from any encumbrance and together with all rights attaching
thereto as at the date of issue of the Option Shares;
"Completion" the performance by Powerhouse and the Investor of the
obligations assumed by them respectively under Clause 5.2;
"Completion Date" the date of completion of the issue and allotment of the
Option Shares being the date ten business days after the
service of a valid Option Notice;
"NASDAQ" The National Association of Security Dealers' Automated
Quotation System, New York, U.S.A.;
"Disclosure Letter" the letter of disclosure from Powerhouse to the Investor
dated 20 January 1998;
2
"Encumbrance" any charge lien equity third party right option right of
presumption or any other encumbrance priority or security
interest of whatsoever nature.
Reference to any statute or statutory provision includes a reference to that
statue or statutory provision as from time to time amended extended or
re-enacted.
Unless otherwise specified in any particular case words importing the singular
include the plural words importing any gender include every gender and words
importing persons include bodies corporate and unincorporate and (in each case)
vice versa.
Reference to a party include where the context admits references to his personal
representatives and successors in title.
Reference to clauses and other provisions are reference to clauses and other
provisions of this Agreement.
The headings shall not affect interpretation.
RECITALS
--------
(a) The Board at the date hereof comprises Xxxx Xxxxx, Xxxxx Xxxxx, Xxxxxx
Xxxx, Xxxx Xxxxxxx, Xxxxxxx Xxxxx and Xxx Xxxxx.
(b) The authorized share capital of Powerhouse is US$7,800,000 divided into
780,000,000 Common Shares at par of US$0.01 each and US$20,000,000 divided
into 20,000,000 shares of Preferred Stock at par of US$1.00 each.
(c) The total Common Shares currently issued are 465,622,810 Common Shares.
(d) It has been estimated that 535,062,810 Common Shares will be on issue as at
31 December 1997 as detailed in Exhibit C to the Disclosure Letter.
(e) Powerhouse Electric has commenced the Initial Projects but requires
additional funding to complete the Initial Projects, to commence the New
Projects and to fund the operation of Powerhouse.
(f) The Investor by a Promissory Note in connection with a Facility Agreement
and Memorandum of Charge is lending to Powerhouse the sum of US$1,000,000
upon the terms set out therein.
(g) The Common Shares of Powerhouse were suspended on NASDAQ in the Spring of
1996. Powerhouse will use part of the money borrowed in (f) above for
application for re-listing of its Common Shares on NASDAQ to enable trading
in those shares to resume.
(h) The Investor wishes to enter into an Option to subscribe for new Common
Shares on the terms of this Agreement.
AGREEMENT
---------
1. Effect of this Agreement
------------------------
3
This Agreement shall cease to have legal validity or effect after the
Option Period, unless otherwise extended by the parties hereto.
2. Option
------
2.1 In consideration of the mutual covenants and agreements contained herein,
Powerhouse has agreed to grant to the Investor the call option set out in
Clause 2.2.
2.2 Powerhouse hereby grants to the Investor the call option to subscribe for
the Option Shares at the price of share, upon exercise of which Powerhouse
will become bound to issue and allot and the Investor will become bound to
complete the subscription of the Option Shares on the Transfer Terms.
2.3 The Option must be exercised by notice in writing signed by or on behalf of
the Investor or by the Investor's solicitors on behalf of the Investor and
must be served only during the Option Period failing which it will (subject
to as provided in Clause 9.7) lapse and cease to have any further effect.
An Option Notice once given may not be withdrawn except with the written
consent of Powerhouse.
2.4 The Option granted above shall be exercised by the Investor in its sole
discretion absolutely and the Investor shall not be called upon by
Powerhouse or any third party to disclose the reason for exercising or not
exercising such Option.
2.5 If the Option (subject to Clause 2.3 above) is exercised then the
provisions of Clause 4 will apply and such other provisions of this
Agreement as are relevant to completion of the purchase of the Option
Shares.
2.6 Notwithstanding the provisions of the Option being granted herein, if
Powerhouse's Common Shares are re-listed for trading on NASDAQ during the
Option Period, the Investor must exercise the Option within 14 days or such
period as may be agreed between the Investor and Powerhouse after the date
of the re-listing of Powerhouse's Common Shares for trading on NASDAQ
failing which the Option will lapse and cease to have any further effect.
3. Waiver of Rights
----------------
3.1 During the Relevant Period Powerhouse undertakes with the Investor namely
as follows :-
(i) to procure that no dividend shall be paid to the shareholders of
Powerhouse;
(ii) not to permit unless specifically permitted so to do in writing by the
Investor :-
(a) the issue of or the creation or issue or grant of any right to
acquire or call for the issue of any shares of any description in
the capital of Powerhouse other than the Option Shares;
(b) any reduction of capital of Powerhouse;
(c) any substantial alteration in the nature of the business of
Powerhouse;
(d) any disposal of all or substantially all of the assets of the
Powerhouse or of all or substantially all of the undertakings or
assets of Powerhouse and its subsidiaries;
4
(e) the Board shall not pass any resolution without the concurrence
of the Investor for so long as the Promissory Note in connection
with the Facility Agreement and Memorandum of Charge and any
subsequent further advances lent by the Investor to Powerhouse
and interest thereon remain unpaid;
(f) Powerhouse shall not create nor permit any of its subsidiaries to
create any second or further charge on the security pledged or
mortgaged under the Memorandum of Charge referred to in Clause
3.1(ii)(e) above.
4. Payment and Price
-----------------
4.1 On exercise of the Option the Investor shall be obliged to pay to
Powerhouse the sum of US$3,000,000 for the Option Shares.
4.2 On Completion of the Option, the Investor shall have the option to apply
the money representing the principal and interest still outstanding under
the Facility Agreement and Promissory Note as part payment of the sum of
US$3,000,000 in Clause 4.1 above.
5. Completion
----------
5.1 Completion of the subscription for the Option Shares shall take place at
the offices of the Investor's Solicitors or at such other place as may be
agreed at 12 noon on the Completion Date provided that if such day is not a
business day then Completion shall take place at 12 noon on the first
business day thereafter.
5.2 On Completion :
Powerhouse shall upon payment of the consideration for the Option Shares:
(a) issue and allot the Option Shares to the Investor or as it shall
direct;
(b) deliver all relevant share certificates and other documents of title
in respect of the Option Shares to the Investor;
(c) procure registration of the Option Shares in the records of Powerhouse
forthwith (subject to due stamping at the expense of the Investor) in
the name of the Investor or as it shall direct;
(d) do such things and execute such documents as shall be necessary as the
Investor may reasonably request to give effect to the subscription for
the Option Shares on the Transfer Terms; and
(e) use its best endeavours to register the Option Shares and list them
for trading under the applicable US securities laws as soon as
practicable following Completion.
5.3 If any provisions of Clause 5.2 are not complied with on the date fixed for
Completion the party not in default may without prejudice to its other
rights and remedies :-
(i) defer Completion to a date not more than 14 days after such date and
so that the provisions of this Clause 5 shall apply to Completion as
so deferred;
5
(ii) proceed to Completion so far as practicable (without prejudice to its
rights hereunder); or
(iii)rescind the contract of sale arising by virtue of the exercise of the
Option whereupon this Agreement shall terminate.
5.4 If Powerhouse fails to issue and allot the Option Shares as aforesaid Xx
Xxxxxx Xxxx and Xx Xxx Xxxxx, severally, Directors of Powerhouse shall be
entitled to receive and give a good discharge for the US$3,000,000 on
behalf of Powerhouse (but shall not be bound to earn any interest thereon)
and Powerhouse hereby irrevocably appoints Xx Xxxxxx Xxxx and Xx Xxx Xxxxx,
severally, each as its attorney-in-fact to execute and deliver on behalf of
Powerhouse such documents and instruments and to take or cause to be taken
such other actions on behalf of Powerhouse as may be necessary or desirable
in the opinion of such attorney-in-fact in his absolute discretion to
effect the issue to the Investor or its designee of the Option Shares and
Powerhouse hereby ratifies and confirms all such acts and deeds of such
attorney-in-fact done pursuant to this power.
6. Ownership and Alienation
------------------------
6.1 Powerhouse warrants to the Investor that, at the time of executing of this
Agreement it is entitled to enter into this Agreement and to issue and
allot the Option Shares and that apart from this Agreement such shares are
free from any pre-emption rights.
6.2 Powerhouse undertakes to the Investor that during the Relevant Period it
will not dispose of any interest in the Option Shares or any right
attaching thereto (save as may be required pursuant to their obligations
under this Agreement) or create or allow to be created any Encumbrances
over such shares or agree (whether subject to any condition precedent or
condition subsequent or other) to do any of such things.
7. Duration of Obligation
----------------------
7.1 This Agreement shall terminate on the expiry of the Option Period if no
Option Notice shall have been served on or prior to such time provided that
in the event that the Option shall not be validly exercised during the
Option Period this Agreement shall terminate on the expiry of the Option
Period.
7.2 If any Option Notice shall have been served on or prior to the expiry of
the Option Period this Agreement shall terminate upon the fulfilment of the
parties' obligations hereunder.
7.3 On any termination of this Agreement the rights and obligations of the
parties hereunder shall cease and determine save in respect of any
antecedent breach of this Agreement.
8. Notice
------
8.1 Any notice required or permitted to be given hereunder shall be in writing
and shall be sent to its registered office from time to time or to such
other address as may be designated by notice to the other parties in
accordance with this Clause. Any such notice shall be delivered personally
or sent in a pre-paid letter by the recorded delivery when delivered and if
by recorded delivery shall be deemed effective seven days after posting
(and proof that the envelope containing the notice (or direction) was
properly addressed and sent prepaid shall be sufficient evidence of
service).
6
9. General
-------
9.1 This Agreement may not be assigned in whole or in part but is binding upon
and shall enure for the benefit of the successors of the parties hereto.
9.2 No variation of this Agreement shall be effective unless made in writing.
9.3 This Agreement shall be governed by and construed in accordance with the
laws of the Hong Kong Special Administrative Region and the parties hereby
submit to the non-exclusive jurisdiction of the courts of the Hong Kong
Special Administrative Region.
9.4 Powerhouse hereby irrevocably appoints Xx Xxx Xxxxx Kam Sham of C3, 28th
Xxxxx, Xxxxxxxxx Xxxxx, 000 Xxxxxxxxxx Xxxx, Xxxx Xxxx as the agent for the
service of process in the Hong Kong Special Administrative Region in
relation to any matter arising out of this Agreement. If such process agent
ceases to have an address in the Hong Kong Special Administrative Region,
Powerhouse irrevocably agrees to appoint a new process agent and to deliver
to the Investor within 7 days a copy of a written acceptance of appointment
by the process agent.
9.5 The failure by any of the parties hereto at any time to require performance
by any other party or to claim a breach of any term of this Agreement shall
not be deemed to be waiver of any right under this Agreement.
9.6 The parties hereto shall use their respective reasonable endeavors to
procure that any necessary third parties shall execute and do all such
further deeds documents and things as any party may reasonably require by
notice in writing to any other party to carry the provisions of this
Agreement into full force and effect and (so far as they are able) shall do
everything necessary to give effect to the spirit and intent of this
Agreement.
9.7 Any date or period mentioned in this Agreement may be extended by written
agreement between the parties hereto but as regards any date or period
(whether or not extended as aforesaid) time shall be of the essence of this
Agreement.
9.8 Subject as specifically provided herein Powerhouse shall bear its own costs
and expenses relating to this Agreement and all stamp duty payable in
respect of the grant of Option and the allotment of the Option Shares.
7
SCHEDULE 1
----------
NEW PROJECTS
------------
Joint Venture Companies Capacity
----------------------- --------
Detail Total
------ -----
MW MW
-- --
1. Jiangsu Liyang Santa Electric 4 X 4 16
Power Company Limited
Hekou Township
Liyang City
Jiangsu Province
PRC
2. Zhejiang Province Yongkang City Yingkang 3 X 4 12
Electric Power Company Limited
Yongkang City
Zhejiang Province
PRC
3. Jiangsu Yangzhong Mingzhu Power 4 X 4 16
Company Limited
Development Zone in Yangzhong City
Jiangsu Province
PRC
4. Guangdong Haifeng Huiying Power Plant 4 X 4 16
Haifeng City
Guangdong Province
PRC
5. Guangdong Lufeng Jinxiang Power Company 50 50
Lufeng City --
Guangdong Province
PRC
110
---
[THE ABOVE FUTURE PROJECTS ARE LISTED IN ORDER OF PRIORITY]
8
EXECUTED as a deed in two originals the day and year first before written.
THE COMMON SEAL of Powerhouse )
Resources Inc was affixed in the presence )
presence of :- )
THE COMMON SEAL of Xxxxx An )
Investments Limited was affixed in )
the presence of :- )
9
