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EXHIBIT 10.1(a)
SINO-FOREIGN CO-OPERATION CONTRACT
ZINDART TOYS (DONGGUAN) COMPANY LIMITED
1. General Principle
For the purpose of promoting economic co-operation between the parties
to this Contract, Dongguan Hengli Trading General Company and Zindart
Industrial Company Limited, upon friendly negotiations and based on the
principles of equality and mutual benefit, entered into this Contract in
Dongguan, PRC on 8 September 1994 in relation to the joint operation of
toys business, the terms of which are as follows:
2. The Parties
(1) Dongguan Hengli Trading General Company (hereinafter called
"Party A")
Registered Address: Hengquan Lu, Hengli, Dongguan, PRC
Legal Representative: Chen Ren-fei, Manager, PRC Nationality
(2) Zindart Industrial Company Limited (hereinafter called
"Party B")
Registered Address: Flats C & D, 25/F, Block 1, Taiping
Industrial Centre, 57 Ting Kok Road,
Tai Po, N.T., HK
Legal Representative: Wu Hai-Lin, Chairman of the Board,
Australian Nationality
3. Co-operative ("Co-op.") Enterprise
Name of Co-op. Enterprise: Zindart Toys (Dongguan) Company Limited
Registered Address: Xincheng Industrial District, Hengli,
Dongguan, PRC
Legal Representative: Wu Hai-lin, Chairman of the Board
Period of Co-operation: 15 years, as from the date of issuance
of the Co-op. Enterprise's business
license
The Co-op. Enterprise shall have the status of a PRC legal person, and
all activities shall comply with the relevant PRC laws, decrees and
pertinent rules.
4. Conditions of Co-operation and Sharing of Profits
Party A shall be responsible for provision of water and electricity
supply facilities, domestic product sales and administration.
Party B shall be responsible for investing HK$34 million on interest-
free terms, made up of the following:
- Facilities HK$14 million
- Working Capital HK$2 million
- Construction of Factory Premises and Living Areas HK$10 million
- Land Use Rights over 80,216 m(squared) of land
transferred by Dongguan Hengli Property
Development Co. HK$8 million
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Total investment capital of the Co-op. Enterprise HK$34 million
Total Registered Capital HK$34 million
Upon an audit by a PRC registered accountant of Party B's investment capital
of HK$34 million, the Co-op. Enterprise shall issue an investment
verification report to Party B. No depreciation charges shall be deducted
from this investment capital, and at the end of the co-operation period, all
fixed assets and land use rights shall belong to Party B.
Total Profits = Revenue generated by the Co-op. Enterprise LESS production
costs and other expenses; each party pays its own Income Tax; a deduction of
the "3 Reserve Funds" applies to post-tax profits; post-tax profits/losses
shall be split in the proportion of 10% : 90% (A:B)
Party B's post-tax profits may be remitted outside PRC in accordance with
the Provisional Regulations of the PRC on Exchange Control, through a
Dongguan bank which provides for foreign exchange settlements, to the bank
account designated by Party B.
Just before the expiry of the Period of Co-operation, if Party B could not
resume its investment capital, both parties may negotiate and extend the
Period of Co-operation accordingly, but they shall first seek approval from
the original examination and approval body.
5. Production and Sales
Agreed scope of business operations: production, further processing and
sales of alloy and plastic toys
Annual production: 10,000 tons
International Sales: 80% (Party B's responsibility)
Domestic Sales: 20% (Party A's responsibility)
Price of all products shall be fixed and the products shall be underwritten;
price is set at cost plus a reasonable profit margin, and shall be reviewed 1/2
yearly by the Board of Directors.
Preference shall be given to purchasing in PRC of all equipment, raw materials,
assessories etc. required by the Co-op. Enterprise if similar terms are
offered in both the PRC and international markets. Where importing is
necessary, the Co-op. Enterprise may arrange for the importing from abroad, or
appoint Party B to purchase the same from abroad. The amount of expenditure
shall be approved by both parties. In this case, Party B shall assign personnel
to supervise the installation of the equipment and to carry out production
skills training, so that the products meet the quality standards.
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6. Enterprise Management
Both parties shall appoint personnel to constitute the Board of
Directors, being the highest authority within the Co-op. Enterprise. It
shall have 9 members - 3 from Party A, 6 from Party B. The Chairman to
be appointed by Party B; the 2 Vice Chairmen to be appointed by A & B
respectively; the rest shall be Directors. Chairman and Directors shall
each have a tenure of 4 years, and may be extended by the appointing
parties. If at the expiry of their tenures no indication of extension is
given to them, then it is deemed to be an extension. The Board of
Directors' powers are set out in the Co-op. Enterprise's Articles of
Association.
The Board of Directors shall employ 1 general manager and 1 assistant
general manager to carry out the resolutions of the Board of Directors.
The terms of their employment and their powers are set out in the Co-op.
Enterprise's Articles of Association. If either the general manager or
the assistant general manager shall be guilty of corruption or serious
misconduct, the Board of Directors may by resolution remove him at any
time.
7. Wages and Welfare
The Board of Directors shall set the standard of wages, allowances,
bonuses etc. having regard to the relevant PRC Government's regulations,
other co-operative enterprises' existing methods, and Dongguan City's
actual inflation rate. Such standards shall be reasonably reviewed
upwards annually.
According to the Labour Department's regulation, before commencing its
operations, the Co-op. Enterprise shall approach the Dongguan Labour
Insurance Company to apply for the PRC party's employees' social labour
insurance, and to participate in employee injury insurance.
8. Finance, Accounting and Foreign Exchange Management
The Co-op. Enterprise is an independent legal entity. The
implementation of its accounting system is based on the relevant
provisions laid down by the PRC Government's finance and taxation
departments. The RMB is the base currency for accounting purposes.
All expenses relating to the Co-op. Enterprise's purchase of equipment
and raw materials shall be evidenced by the relevant receipts in order
to become valid. Receipts issued by foreign countries and the Hong
Kong/Macau Districts shall be accompanied by the relevant PRC customs
and excise declaration form and Duty Rate.
The Co-op. Enterprise may open foreign currency and RMB accounts at a
bank in Dongguan which provides for foreign exchange settlements. Such
bank shall manage and supervise all receipts and outgoings from
operations. Remittances of Party B's earnings abroad in accordance with
this Contract shall be done by the bank through which Party B opens its
banking accounts.
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9. REGISTRATION, TAXATION AND INSURANCE
The Co-op. Enterprise shall be registered with the PRC State
Administration for Industry and Commence (SAIC), obtain a business
licence, and be registered with the local taxation department. All
taxes shall be paid in accordance with the relevant PRC Government
taxation regulations. All insurance policies shall be taken out with
the People's Insurance Company, Dongguan Branch.
10. PORT OF IMPORT OF MATERIALS
All imports of machinery equipment, raw materials and packaging
materials, and all exports of finished goods, shall be done via any of
the Guangdong ports.
11. PERFORMANCE OF CONTRACT
Party B shall contribute the whole of its investment capital within 1
year after the date of approval of this Contract (first 15% of such
capital shall be contributed within 3 months after the issuance of the
business licence). Failure to do so without sufficient reason is
treated as Party B's breach of this Contract and a voluntary termination
of the co-operation; if sufficient reason is given, then 1 month's
extension is granted; failure to do so despite such extension is treated
as Party B's breach of this Contract and a voluntary termination of the
co-operation. The party not in breach may, in the above situation, apply
for unilateral termination of the co-operation, and request the party
in breach to compensate its losses.
Once this Contract is approved by the relevant PRC Government
departments, neither party shall terminate this Contract without cause.
Where under extraordinary circumstances one of the parties requests
termination of this Contract, such request shall be raised 6 months
before the proposed termination date, be consented to by both parties,
and the procedures for termination be carried out for approval by the
original examination and approval authorities. Where one party
terminates without cause or breaches this Contract, it shall compensate
the other party for losses suffered due to such termination/breach.
12. FORCE MAJEURE
In the event of fire etc. or other unforeseen circumstances directly
affecting the performance of this Contract by either party, the party
so affected shall forthwith by telex notify the other party of such
events, and shall within 15 days produce supporting documents (issued
by the notary public office in the district in which such events
occurred) in relation to such events. Depending on the extent to which
this Contract is affected by such events, both parties shall decide on
whether or not to continue with the whole or part of this Contract, or
an extension to the time of performance thereof, the decision shall be
submitted for approval by the original examination and approval
authorities.
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13. TRADE MARKS
The policies for the use of trade marks on the Co-op. Enterprise's
products for domestic and foreign sales shall be determined between the
parties, but shall in any case comply with the rules regarding
application for registration in the relevant countries (districts) in
which the products are sold.
14. ARBITRATION
During the term of this Contract, if any dispute arises, both parties
shall enter into negotiations in order to resolve the dispute. If the
dispute is not resolved by means of negotiations, it shall be submitted
to the China International Economic and Trade Arbitration Commission
(CIETAC) (Shenzhen Branch) for arbitration and resolution, whose
decision shall be final.
15. SUPPLEMENTAL PRINCIPLES
Upon signing of this Contract by both parties, it shall come into force
on the date of its approval by the relevant PRC Government authorities.
Should there be any matters which have not been addressed in this
Contract, both parties may, upon negotiations, amend or supplement the
same. The approval by the original examination and approval authorities
of such amendments or supplements shall become part of this Contract.
PARTY A PARTY B
Dongguan Hengli Trading General Company Zindart Industrial Company Ltd.
Hengquan Lu. Hengli, Dongguan City, PRC Flats C & D, 25/F, Block 1, Taiping
Industrial Centre, 57 Ting Kok Road,
Tai Po, N.T., HK
Tel : 337 1829 Tel : 665 6992
Signed by Legal Representative: Signed by Legal Representative:
Chop of Dongguan Hengli Trading Chop of Zindart Industrial Company
General Company affixed Limited affixed
Date : 8 September 1994
at Dongguan City, PRC