09:30 LIFESTYLE INT'L<01212> - Announcement & Resumption (3) Deposit: Upon the Lease becoming unconditional, Sogo HK shall provide HK Island with a bank guarantee issued by a licensed bank in Hong Kong reasonably acceptable to HK Island for an amount up to HK$6,000,000 for a period of not less than one year as security for Sogo HK's due and punctual performance of the terms and conditions under the Lease Before the expiry of the then existing bank guarantee, Sogo HK shall provide a renewed or new bank guarantee as security for Sogo HK's due and punctual performance of the terms and conditions under the Lease for another period of not less than one year (or such shorter period representing the remaining term of the Lease) until the expiry or termination of the Lease provided that the maximum amount secured under the bank guarantee shall be HK$6,000,000 for each year in the first 10 years and HK$10,000,000 for each year as from the 11th year of the Lease Condition Precedent: If so required by the Listing Rules, the Lease will be subject to approval by Independent Shareholders of the Company, being the holding company of Sogo HK Sogo HK shall pay certain other miscellaneous charges to HK Island under the Lease, such as the sharing of the fees received by Sogo HK (if any) for displaying promotional materials on the glass walls or windows at the entrance of The Amazon or the 24-hour passage connected to the Premises payable on a monthly basis at a rate determined by the parties after arm's length negotiation and are considered by the Directors to be on normal commercial terms and fair and reasonable and the vetting fee for HK Island's approving certain fitting out works of Sogo HK on an actual expense basis subject to a maximum amount of HK$120,000 for each vetting paybable before commencement of any work. Sogo HK is also responsible for the Government rates for the Premises. The rental, the Air-conditioning Charges and Management Fees and other charges and fees payable under the Lease will be paid by Sogo HK in cash from cashflow generated from operation and internal resources of the Group. If vacant possession of the Premises is not delivered by the existing occupiers thereof to HK Island or HK Island is unable to deliver vacant possession of the Premises to Sogo HK in the state and condition required under the Lease despite HK Island's best effort by 15 October 2005 at the latest, the Lease shall be deemed to be cancelled unless otherwise agreed by the parties. The Lease will also be subject to certain right of early termination by HK Island in case of redevelopment of the whole of The Amazon. There is no break clause in the Lease which will entitle any party to serve notice to the other party to terminate the Lease before its expiry. The Directors consider that a long term tenancy of the Premises from HK Island will enable Sogo HK to expand its department store operation at a prime location in Tsimshatsui unaffected by market rent fluctuation. This will also enhance its operation efficiency by avoiding any unnecessary interruption to the business operation of Sogo HK caused by relocation of the department store, offering better commitment and business arrangement with its consignors or concessionaires in the department store or its subtenants. Further, it is currently estimated that the initial cost to be incurred by Sogo HK to complete the interior decoration and fitting out work for the Premises will be around HK$100 million which will be funded by internal resources of the Group. The Directors therefore consider that it is normal commercial practice to have a long-term tenancy arrangement for department store operation and the 15 years' term of the tenancy is to the best interest of the Group. The independent financial adviser of the Company, Access Capital Limited, has confirmed to the Company that it is normal business practice for lease of this type to be of 15 years. Details of the opinion of the independent financial adviser relating to the term of the Lease will be included in the circular of the Company. The Company is required to disclose further information in the circular to demonstrate compliance of Rule 14A.35(1), in particular, why a longer period exceeding 3 years for the Lease is required.