EXHIBIT 10.1
CONTRACT
Chapter 1. General Provisions
Qingxian Cement Factory, China, and Heng Fai China Industries Ltd.,
Hong Kong, in accordance with The Law of the People's Republic of China on
Chinese-Foreign Contractual Joint Ventures and other relevant laws and
regulations of the People's Republic of China and through friendly negotiations
on the principle of equality and mutual benefit, agree to the establishment in
Qingxian County, Cangzhou, China, of a contractual joint venture, the contract
of which is as follows.
Chapter 2. The Parties
1. The Parties of this Contract:
Qingxian Cement Factory (hereinafter referred to as Party A),
registered in Qingxian.
Legal address: 47, Group 9, Lizhen, Qingzhou, Qingxian.
Legal representative: Zhang Jicheng.
Position: Factory director.
Nationality: P.R. China.
Heng Fai China Industries Ltd. (hereinafter referred to as
Party B), registered in Hong Kong.
Legal address: 7th Floor, Baskerville House, 22 Ice Street,
Central, Hong Kong. Legal representative: Heng Fai Chan.
Position: Chairman of the Board.
Nationality: Britain.
Chapter 3. Incorporation
2. Party A and Party B, in accordance with The Law of the People's
Republic of China on Chinese-Foreign Contractual Joint Ventures and other
relevant laws and regulations, agree to the incorporation of the Contractual
Joint Venture (hereinafter referred to as the CJV), Cangzhou Jiuhe Cement Co.,
Ltd., within the territory of the People's Republic of China.
3. The name of the CJV shall be: Cangzhou Jiuhe Cement Co., Ltd. Legal
address: East Nanhuan Road, Qingxian, Hebei.
4. All the activities of the CJV must be governed by the laws, decrees
and pertinent rules and regulations of the People's Republic of China.
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5. The CJV shall be a limited liability corporation. The two Parties
shall share the profits according to the prescribed rate and shall share the
risks and losses according to their capital to the CJV. On the day the two
Parties inject into the CJV their due capital the distributable profits produced
by the existing production line of Party A during the construction period of the
new production line shall be distributed at the rate of 3:7, i.e. Party A shall
get 30% of the total profits produced by the existing production line of Party A
and Party B shall get 70% of the total profits. After the new production line is
put into operation, the distributable profits produced by the CJV shall first go
to Party B until a total amount of 17 million RBM yuan which is the total
contribution of Party B to the CJV. After that, the distributable profits
produced by the CJV shall be distributed to Party A and Party B at the rate of
4.5:5.5:, i.e. Party A shall have 45% of the total profits and Party B shall
have 55% of the total profits.
Chapter 4. Business Objectives, Scope and Scale
6. The objectives of the CJV shall be, on the basis of economic
cooperation and technical exchange and by adopting domestic advanced
technologies, to improve the quality of cement through scientific management so
that the cement the CJV produced shall enjoy priority both in quality and price
in the market competition and to increase economic returns and satisfactory
profits.
7. The business scope of the CJV shall be to produce and sell cement.
8. The business scale of the CJV shall be to produce, annually, 171,00
[sic] tons of portland blast-furnace cement.
Chapter 5. Total Investment and Registered Capital
9. The total investment of the CJV shall be 28 million RMB yaun.
10. The two Parties shall contribute to the CJV a total of 24 million
RMB yuan as the registered capital, of which Party A shall contribute 7 million
which shall be 30% of the total registered capital and Party B shall contribute
1.954 million USD (equal to 17 million RMB yuan) which shall be 70% of the total
registered capital.
11. The two Parties shall contribute to the CJV in the following
manner:
Party A shall inject all the equipment and facilities of the 71000-ton
production line and other fixed assets. The injection shall be valued for the
purpose of equity participation at 7 million RMB yuan.
Party B shall inject a total of U.S. dollars 1.954 in cash.
12. The two Parties, subject to the prescriptions, shall inject all
their respective capital within 6 months after obtaining the business license.
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13. In case one Party should transfer part or all of its contributions
to a third Party, it must have the consent of the other Party and obtain the
approval from the initial authorities concerned. When one Party should transfer
part or all of its contributions, the other Party shall enjoy the priority in
purchasing it.
Chapter 6. Responsibilities
14. Party A and Party B shall assume the responsibilities set forth
below:
Responsibilities of Party A:
1) Applying for and obtaining approval and business license from
China's authorities concerned; business registration;
2) Injecting in time due capital into the CJV according to the
Stipulations of Articles 11 and 12 of this Contract;
3) Purchasing and leasing for the CJV equipment, raw materials, office
equipment, vehicles and telecommunication sets;
4) Water, electricity and transportation;
5) Employing Chinese managerial and technical personnel and other work
force needed;
6) Foreign working staffs' entry visa, work certificate and travel;
7) Other affairs entrusted by the CJV.
Responsibilities of Party B:
1) Injecting into the CJV due capital according to the Stipulations of
Articles 11 and 12 of this Contract;
2) Entrusted by the CJV, purchasing equipment and raw materials for the
CJV outside China;
3) Injecting into Party A's bank 100,000 RMB yuan within 10 days after
this Contract is signed as the first contribution;
4) Other affairs entrusted by the CJV.
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Chapter 7. The Board of Directors
15. The day on which the CJV is registered shall be the day on which
the Board of Directors is established.
16. The Board shall consist of 5 members, two of which, including the
Vice-chairman, shall be appointed by Party A, and three of which, including the
Chairman, shall be appointed by Party B. The terms of the Directors shall be 4
years and they shall continue their terms upon appointment by each Party.
17. The Board shall be the highest authority to decide all the
important businesses of the CJV.
The following items shall have the unanimous consent of the Board:
1) Modification of the Articles of Association;
2) Termination and disincorporation of the CJV;
3) Increasing and transferring of the registered capital of the CJV;
4) Merging of the CJV with other economic organizations.
Decisions for other affairs shall be made by simple majority of the
Board.
18. The Chairman of the Board shall be the legal representative of the
CJV. When the Chairman is not able to perform his duties, he shall appoint
temporarily the Vice-Chairman or other Directors to be his representative.
19. The Chairman shall at least convene the Board meeting once a year.
Temporary meetings shall be called by the Chairman at the proposal of one third
of the Directors. The records of the meetings shall be kept.
Chapter 8. Managerial Organs
20. The CJV shall establish the managerial organs to be in charge of
the daily operation. The candidate for the General Manager shall be nominated by
Party A and the candidates for the two deputy managers shall be nominated by
both Party A and Party B respectively. Both the General Manager and the deputy
General Managers shall be finally appointed by the Board and their terms shall
be four years.
21. The General Manager, with the assistance of the deputy managers,
shall carry out all the decisions by the Board and Direct the daily operation of
the CJV. The deputy General Manager nominated by Party B shall be the standing
General Manager in charge of the finance of the CJV. Decisions on important
issues of the CJV shall come into effect only with the
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signatures by both the General Manager and the deputy General Manager. The Board
shall specify the issues requiring the signatures of both the General Manager
and the deputy General Manager.
A number of department managers shall be appointed in charge
of their departments respectively. They shall handle business assigned by the
general manager and the deputy General Manager and be responsible to the General
Manager and the deputy General Managers.
22. The Board shall at any time make decisions to discharge the general
manager and the deputy general managers in case they should engage in
malpractice for selfish end and severely neglect their duties.
Chapter 9. Purchase of Materials
23. Raw materials, fuel, spare parts, vehicles for transport and office
equipment (hereinafter are referred to as the material) shall be purchased first
in China under the same circumstances.
24. When Party B, entrusted by the CJV, purchases the materials for the
CJV at international market, Party B shall have the consent of Party A on the
price and the quality of the material, Party A may send agents to participate in
the purchase in case considering it necessary.
Chapter 10. Labor
25. The employing and dismissing of workers, the employees' wages,
labor insurance, welfare, reward and punishment shall be made by the Board in
accordance with the Regulations of the People's Republic of China on the Labor
Management in Chinese-Foreign Equity Joint Ventures and the Rules for the
implementation of these Regulations and shall be specified in the contracts by
and between the CJV and the Labor Union or by and between the CJV and the
individual employee respectively.
The labor contracts shall be reported to the local labor
management for reference after the contracts are signed.
26. The Board shall make decisions for the employment of senior
employees recommended by the two Parties and shall make decisions for the wages,
insurance, welfare and travel expenses for these senior employees.
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Chapter 11. Tax, Finance and Audit
27. The CJV shall pay all the due taxes according to the relevant laws
and regulations of the People's Republic of China.
28. The employees of the CJV shall pay the due individual income tax
and the individual regulating tax according to the laws of PRC on individual
income.
29. The CJV shall, in accordance with the Law of the People's Republic
of China on Chinese-Foreign Contractual Joint Ventures, withdraw reserve fund,
enterprise extension fund, employees' welfare fund and bonus fund. The ratio of
these funds per year shall be decided by the Board according to the operation of
the CJV.
30. The accounting year of the CJV shall coincide with the calendar
year, i.e. from January 1 to December 31 on the Gregorian calendar.
All the CJV's accounting books, statements and documents shall be made
in Chinese.
31. The CJV shall invite the public accountants chartered in China to
examine and retrace its finance and shall report the results to the Board and
the General Manager.
In case Party B thinks it necessary to invite foreign auditors to carry
out annual audit, Party A shall agree to it and Party B shall bear all the
expenses.
32. The General Manager shall, within the first three months of each
operating year, be in charge of making the balance sheet, the statement of
profits and losses and the program of distributing the profits and shall report
them to the Board for approval.
Chapter 12. Duration for Cooperation
33. The term of the CJV shall be 30 years. The day on which the
business license is issued shall be the day on which the CJV is established.
The CJV shall, at one Party's proposal and with the approval of the
Board, submit, 6 months prior to the expiration of the CJV, an application to
the Ministry of Foreign Trade and Economic Cooperation or the authorities
entitled by the Ministry for prolonging the CJV.
Chapter 13. Property of the CJV at the Expiration
34. The residual assets of the CJV shall belong to Party A at the
expiration of the CJV. In case this Contract should be terminated in advance,
the CJV shall carry out the liquidation, and the assets after liquidation shall
first be distributed to each Party as the balance between the profits each Party
has already got and the contribution each Party made to the CJV,
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and the surplus after this distribution shall be paid to each Party at the
prescribed rate, i.e. Party A shall get 30% of the surplus and Party B shall get
70% of the surplus.
Chapter 14. Insurance
35. The CJV shall have insurances in The People's Insurance Company of
China. The kinds of insurance, the insured value and the term shall be decided
by the Board according to the rules of the Insurance Company.
Chapter 15. Modification, Change and Dissolution of This Contract
36. A written agreement shall be made and signed by both Parties to
modify this Contract. The modified contract shall come into effect only with the
approval of the authorities concerned.
37. In case there is accidental force so that this Contract cannot be
carried out, or in case there are successive losses so that the CJV cannot
continue its operation, the cooperation shall be terminated and this Contract
shall be dissolved in advance with the unanimous consent of the Board and with
the approval of the initial authorities concerned.
38. In case one Party should fail to perform its duties or severely
breach the stipulations of this Contract and breach severely the stipulations of
the Articles of Association so that the operation of the CJV cannot be continued
or the operation goals cannot be achieved, it will all be considered to break
the Contract unilaterally, and the other Party shall have the right to claim
from the break promiser and shall have the right to, according to the rules of
this Contract and with the approval of the initial authorities concerned,
terminate this Contract. In case both Parties should agree to continue the
cooperation, the break promiser shall indemnify the CJV for the losses incurred.
Chapter 16. Liabilities for the Breach of this Contract
39. In case one Party should fail to contribute in time the capital to
the CJV specified in Chapter 5 of this Contract and still fail to make the
contribution after 3 months, the observant Party shall have the right to
terminate this Contract according to Article 38 of this Contract and shall have
the right to claim from the break promiser.
40. In case this Contract and the appendices cannot be implemented or
part of them cannot be implemented due to one Party's fault, this Party shall
bear the responsibilities. In case this contract and the appendices cannot be
implemented or part of them cannot be implemented due to both Parties' fault,
each Party shall bear its own responsibilities according to the actual
situation.
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Chapter 17. Force Majeure
41. In case there should be earthquake, typhoon, flood, fire, war and
other unpredicted Force Majeure whose occurrence cannot be prevented and whose
aftermath cannot be avoided so that this Contract should fail to be carried out
according to the agreed schedule, the Party who meets with the accidents shall
inform the other Party by telegram of the accident and the details of the
accident within 15 days and provide the other Party with the valid documents
issued by the local notary office which bear the descriptions for the
unimplementation or partial unimplementation or for delaying implementation of
this Contract, and the two Parties shall, according to the aftermath of the
accident, hold negotiations on whether or not to dissolve this Contract or
partly to implement this Contract or to delay the implementation of this
Contract.
Chapter 18. Law Affairs
42. The conclusion, validity, interpretation and implementation of this
Contract shall be governed by the laws of the People's Republic of China.
Chapter 19. Disputes
43. All disputes in connection with this Contract or the execution
thereof shall be resolved through friendly negotiation. Where no settlement can
be reached, the disputes shall be referred to the Arbitration Committee of the
China Council for the Promotion of International Trade for arbitration according
to the rules of the Arbitration Committee. The decisions of the Arbitration
Committee shall be accepted as final and binding upon both Parties. The losing
Party shall bear the arbitration expenses.
44. During arbitration, the articles of this Contract shall continue to
be carried out except those parts under arbitration.
Chapter 20. The Contractual Language
45. This Contract is made in the Chinese language.
Chapter 21. Validity of This Contract and Others
46. The appendices, including the Articles of Association and the List
of Imported Materials, shall all be parts of this Contract.
47. This Contract and the appendices shall come into force on the day
of approval by the Ministry of Foreign Trade and the Economic Cooperation of the
People's Republic of China or by entitled authorities by the Ministry.
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48. In case one Party should send notices to the other Party by fax or
telegram and the notices should involve the other Party's right and liabilities,
it shall send the other Party a letter bearing the same information. The
addresses of both Parties in this Contract shall be the addresses to which to
send the information.
49. This Contract is signed by the legal representatives from both
Parties on June 25, 1994 in Cangzhou, China.
Party A: Party B:
Qingxian Cement Factory Heng Fai China Industries Limited
Legal Representative: Legal Representative:
/s/ Zhang Jicheng /s/ Fai H. Chan
- ---------------------------------- -----------------------------
Zhang Jicheng Fai H. Chan
June 25, 1994
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Supplementary Agreement
This Supplementary Agreement is made by and between China Qingxian
Cement Factory (hereinafter referred to as Party A) and Heng Fai China
Industries Limited, Hong Kong (hereinafter referred to as Party B) on the basis
of equality and mutual benefit and in accordance with the Law of the People's
Republic of China on Chinese-Foreign Contractual Joint Ventures and other
relevant laws and regulations and with the Contract and the Articles of
Association of Cangzhou Jiuhe Cement Co., Ltd (hereinafter referred to as the
CJV).
1. Party B, in order to continue the operation in the initial period of
the CJV, shall agree to the use by the CJV of the existing working capital of
Party A for one year after the CJV is established and the CJV shall pay Party A
the interest according to the interest rate of the contemporaneous bank loan and
shall pay back the capital to Party A by installment within the current year.
The CJV shall apply for loan from banks for the shortage of the working capital.
2. The two Parties shall inject into the CJV their due capital within 6
months from the day on which the business license is issued. Party B shall,
within 10 days after the Contract of the CJV is signed, inject into Party A's
account 11,500 US dollars (equal to 100,000 RMB yuan) as the first contribution
of Party B. In case Party A should fail to perform its duties specified in the
Contract and the Articles of Association of the CJV before the business license
is obtained, Party B shall have the right to terminate the Contract and Party A
shall pay back to Party B the first contribution. In case Party B should fail to
perform the Contract and the Articles of Association, Party A shall have the
right to terminate the Contract and the first contribution of Party B shall
finally belong to Party A.
3. Appropriation of Profits
Profits of the CJV shall be distributed to each Party every six months
according to the prescribed rate. The distributing program and the amount
payable to each Party shall be published within 2 months after each
semi-accounting year.
4. Party A shall agree to the commission of Cangzhou Keng Fong
Investment & Consultancy Co., Ltd (hereinafter referred to as CZ Keng Fong) by
Party B to act as Party B's agent in charge of all affairs of Party B in the
CJV.
1) On the day Party B makes its due contribution to the CJV, Party A
and Party B shall pay CZ Keng Fong a consulting fee which is 3% of the total
contribution of Party B, of which Party A shall pay 0.9% and Party B shall pay
2.1%. The consulting fee shall be entered into the CJV's organization expenses
as the item of deferred assets.
2) After the first contribution of Party B to the CJV, Party A shall
agree that a team of three members by CZ Keng Fong representing Party B will
come to the Cement Factory to carry out examination of the Factory and present a
report on whether to continue or terminate the Contract.
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3) Party A shall agree, after Party B injects all the due capital into
the CJV, that CZ Keng Fong, entitled by Party B, will send accountants and
managerial personnel to the CJV to participate in the daily management of the
CJV. The wages and salaries of the personnel shall be paid by the CJV to CZ Keng
Fong.
5. The Board of Directors shall appoint the first General Manager and
the deputy General Manager who are nominated by Party A and shall appoint the
standing deputy General Manager who is nominated by CZ Keng Fong and entitled by
Party B. The wages of the standing deputy Manager entitled by Party B shall be
paid by the CJV per month to CZ Keng Fong.
6. This Supplementary Agreement, as the major appendix to the Contract
of the CJV, shall be of the equal validity of the Contract.
7. All disputes in connection with this Agreement shall be settled
through friendly negotiations. Where no settlement can be reached, the disputes
shall be submitted to the Arbitration Committee of the China Council for the
Promotion of International Trade or its Shenzhen Office for arbitration. The
decisions of the Arbitration Committee shall be accepted as final and binding
upon both Parties.
8. After this Agreement comes into effect, both Parties shall observe
it earnestly. In case one Party should fail to perform this Agreement, the other
Party shall have the right to claim from it.
9. This Agreement is made in the Chinese language.
10. This Agreement shall come into force with the signatures of the
representatives from both Parties and with the approval of Cangzhou Bureau of
Foreign Trade and Economic Cooperation.
11. This Agreement is signed by the authorized representatives from
both Parties on June 25, 1994 in Cangzhou, China.
Party A: Party B:
Qingxian Cement Factory Heng Fai China Industries Limited
Legal Representative: Legal Representative:
/s/ Zhang Jicheng /s/ Fai H. Chan
- ------------------------------------- --------------------------------
Zhang Jicheng Fai H. Chan
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I hereby certify that the foregoing is a fair and accurate translation
of this document which was originally prepared in Chinese.
/s/ Heng Fai Chan
Heng Fai Chan, President
Heng Fai China Industries, Inc.
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