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EXHIBIT 10.2(a)
SINO-FOREIGN CO-OPERATION CONTRACT
ZINDART (XINXING) TOYS (GUANGDONG) COMPANY LIMITED
CHAPTER I GENERAL PRINCIPLE
Guangzhou Xinjiao Huangbu Economic Development Company and Zindart (Xinxing)
Toys (Guangzhou) Company Limited hereby agree to enter into this Contract to
establish a co-operative enterprise in Guangzhou, Guangdong Province, PRC, in
accordance with the Law of the PRC on Sino-Foreign Co-operative Enterprise and
other relevant laws and regulations of China, and based on the principles of
equality and mutual benefit, and through friendly negotiations.
CHAPTER II THE PARTIES
Article 1 The parties to this contract are:
PARTY A:
GUANGZHOU XINJIAO HUANGBU ECONOMIC DEVELOPMENT COMPANY, an enterprise duly
incorporated in accordance with the laws of the PRC and registered with the
State Administration for Industry and Commerce, Haizhu District Branch,
Guangdong Province, PRC.
Registered Address: Huangbu Village, Xinjiao Town, Haizhu District,
Guangdong Province, PRC
Legal Representative: Gao Jing-fei, Manager, Chinese Nationality
PARTY B:
ZINDART (XINXING) TOYS (GUANGZHOU) COMPANY LIMITED ("PARTY B"), a company duly
incorporated in accordance with the laws of Hong Kong and registered with the
Hong Kong Business Registry.
Registered Address: Flats C & D, 25th Floor, Taiping Industrial Centre, 57
Ting Kok Road, Tai Po, N.T., Hong Kong.
Legal Representative: Wu Hailin, President, Australian Nationality
CHAPTER III ESTABLISHMENT OF CO-OPERATIVE ENTERPRISE
Article 2 Based on the Law of the PRC on Sino-Foreign Co-operative
Enterprise and other relevant laws and regulations of China,
the parties agree to establish Zindart (Xinxing) Toys
(Guangzhou) Company Limited ("the Company").
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Article 3 Name of Company: Zindart (Xinxing) Toys (Guangzhou)
Company Limited
Registered Address: 51, Xingang Road East, Guangzhou,
Guangdong, PRC
Article 4 All activities of the Company must be in compliance with the
laws, rules and regulations of the PRC.
Article 5 The Company shall be independently audited, self-balancing with
its debt liabilities limited to its assets. Each party's
liability for the Company's debts shall be determined in
accordance with its individual Conditions of Co-operation.
CHAPTER IV PURPOSE, SCOPE AND SCALE OF OPERATION
Article 6 Purpose: Strengthening economic co-operation and
technological exchange utilising advanced and
practical technology and scientific management
methods; producing high-quality goods and
developing new products; to be internationally
competitive in both pricing and quality; and
attaining for each party to this Contract
satisfactory economic benefits.
Article 7 Scope: Production, processing and sales of alloy and
plastic toys.
Article 8 Scale: Production of goods amounting to HK$50-60
million per year.
CHAPTER V TOTAL INVESTMENT AND REGISTERED CAPITAL
Article 9 Total Investment Capital HK$14 million
Article 10 Total Registered Capital HK$14 million
Article 11 Conditions of Co-operation:
Party A: Provision of land, factory premises, part of
the equipment, and water and electricity
supply facilities
Party B: Provision of equipment and working capital
worth HK$14 million in total, and be
responsible for the Company's technique
management.
Article 12 The parties shall contribute the registered capital into the
Company, and shall provide the Conditions of Co-operation,
within 6 months after the date of issuance of the business
license,
Article 13 Where one party to this Contract transfers all or part of its
Conditions of Co-operation to a third party, consent must be
obtained from the other party to this Contract, and shall be
approved by the original examining and approving authorities.
The other party shall also have a right of first refusal of
these Conditions of Co-operation.
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CHAPTER VI OBLIGATIONS OF PARTIES
Article 14 Unless otherwise provided in this Contract, the parties shall
perform the following obligations. All expenses incurred which
are necessary for completion of these obligations shall be borne
by the Company.
Party A's Obligations
1. To apply for approval and registration, and to obtain
the business license, from the relevant administrative
departments of the PRC Government for the purpose of
establishing the Company;
2. To assist the Company in the purchasing or leasing
within PRC of equipment, raw materials, fuel, office
supplies, motor vehicles, facilities for
telecommunication, etc.;
3. To assist the Company in connecting workable
infrastructures for supply of water, electricity and
traffic;
4. To assist the Company in employing operational
management personnel, technicians, labourers and other
necessary staff;
5. To assist foreign national staff members in applying for
entry visas, working permits and travelling formalities;
and
6. To handle other matters assigned by the Company.
Party B's Obligations
1. To transport all mechanical equipment and materials,
being its contribution into the Company, into a port in
Guangdong Province;
2. To purchase all mechanical equipment and materials
outside PRC at the Company's request;
3. To supply the necessary technicians for the purpose of
installation of equipment, test-runs and
test-productions, and also supply skilled personnel in
production and inspection;
4. To train the Company's skilled personnel and labourers;
5. The foreign party which is responsible for technological
exchange shall also ensure that the Company shall
constantly produce goods which meet the contractual
requirements within the stipulated time;
6. To handle other matters assigned by the Company.
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CHAPTER VII PRODUCT SALES
Article 15 The products of the Company shall be sold in the following
manner:-
Sales abroad: 70%; Domestic sales: 30%
Article 16 The Company may directly sell the products abroad.
Article 17 Domestic sales of the Company's products may be done through the
PRC Commodities or Commercial Departments by way of underwriting
or agency, or may be sold directly by the Company.
Article 18 The Company may, on obtaining approval from the relevant PRC
Government department, establish product service outlets within
or outside China, for the purpose of providing after sales
product services.
CHAPTER VIII BOARD OF DIRECTORS
Article 19 The Board of Directors of the Company shall be established as at
the date of registration of the Company.
Article 20 The Board of Directors shall have 9 members - 3 from Party A, 6
from Party B. The Chairman shall be appointed by Party B; the
Vice Chairman by Party A. The Chairman shall serve the Board for
4 years, and may be extended by the appointing parties.
Article 21 The Board of Directors is the highest authority within the
Company, and shall decide on all important matters. Resolutions
on all significant issues shall be decided on a unanimous vote;
resolutions on all other matters shall be passed by a majority
vote of two-thirds of the directors present.
The following is a list of matters which require unanimous
voting:-
1. Deciding on and approving important reports raised by the
general manager (e.g. development planning, annual
operational reports, funds, borrowing, etc.);
2. Approving financial statements, budgets and profit sharing
policies;
3. Amending the Company's important policies and regulations;
4. Deciding on establishing outlets;
5. Amending the Articles of Association of the Company;
6. Reviewing decision to cease business of or terminate the
Company, or to merge with or acquire other business
entities;
7. Deciding on the employment of the general manager, assistant
general manager, chief engineer, chief accountant, auditor,
etc.
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8. Deciding on matters in relation to the Company's winding up
at the end of the Term of Co-operation.
Article 22 The Chairman of the Board of Directors shall be the legal
representative of the Company. Where for whatever reason the
Chairman could not carry out his obligations, he may authorise
the Vice Chairman or other Directors to be the representative
for the time being.
Article 23 At least one meeting of the Board of Directors shall be held
annually, and the Chairman shall call and convene the meeting.
Upon request by at least one-third of the total number of
Directors, a provisional meeting of the Board of Directors may
be held. Minutes shall be filed accordingly.
CHAPTER IX BUSINESS MANAGEMENT OFFICE
Article 24 The Company shall establish a management office to be
responsible for its daily management work. The management office
shall have one general manager and 2 assistant general managers,
all of whom shall be employed by the Board of Directors with a
tenure of 2 years.
Article 25 The general manager shall be responsible for carrying out the
resolutions of the Board of Directors, and organising and
overseeing the day to day business management of the Company.
The assistant general managers shall assist the general manager
in carrying out these duties.
The business management department may appoint various
department heads to be in charge of each department's work, to
carry out the tasks assigned by the general manager and to be
responsible thereto.
Article 26 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.
CHAPTER X PURCHASE OF RAW MATERIALS AND EQUIPMENT
Article 27 Preference shall be given to purchasing of all raw materials,
accessories, transportation vehicles and office supplies in the
PRC if similar terms are offered by both the PRC and
international markets.
Article 28 Where the Company appoints Party B to purchase equipment from
non-PRC markets, Party A's personnel shall be invited to
participate therein.
CHAPTER XI LABOUR MANAGEMENT
Article 29 The policies on recruitment, dismissal, wages, labour insurance,
welfare, discipline, etc. of the Company's staff shall be
determined by the Board of Directors having regard to the
Regulations of the PRC on Labour Management in Sino-Foreign
Joint Equity Enterprises and its Implementing Measures, and the
Company shall enter into labour contracts with the trade union
organisation in collectively or individually.
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On signing of the labour contracts, they shall be submitted to
the original examining and approving authorities for filing.
Article 30 The Board of Directors shall by resolution set the standards of
wages, social insurance, welfare, travelling allowances etc.,
and decide on the employment of management personnel.
CHAPTER XII TAXATION, FINANCE, ACCOUNTING
Article 31 The Company shall pay taxes in accordance with the PRC laws and
regulations.
Article 32 All foreign staff members of the Company shall pay individual
income tax in accordance with the Individual Income Tax Law of
the PRC, and all staff members of PRC nationality shall pay
individual income adjustment tax in accordance with the
Provisional Rules of the PRC on Individual Income Adjustment
Tax.
Article 33 The Company's financial accounting system shall be set out in
compliance with Accounting Law of the PRC and Law of the PRC on
Accounting Systems of Sino-Foreign Joint Venture Enterprises
having regard to the specific requirements of the enterprise
aggregate, and shall be submitted to the Finance Department of
Guangzhou City for filing.
Article 34 The Company may, in accordance with the provisions of the Law of
the PRC on Sino-Foreign Joint Venture Enterprises, withhold
funds for the reserve foundation, enterprise development
foundation and employee benefits and awards foundation. The
proportion as to how much to withhold every year shall be
determined by the Board of Directors depending on the status of
the business operations.
Article 35 The fiscal year of the JV Enterprise shall coincide with the
calendar year, i.e. from 1 January to 31 December on the
Gregorian calendar. All vouchers, account books, statements and
financial statements shall be written in Chinese.
Article 36 The Company shall appoint PRC-registered accountants to carry
out audits to the Company's accounts, and shall submit the
result of such audit to the Board of Directors and general
manager.
Where one party to the Contract wishes to appoint other
accountants to audit the Company's accounts for the year, the
other party shall give consent thereto, and the expenses for
such audit shall be borne by the party requesting the
appointment.
Article 37 During the first month of each fiscal year, the general manager
shall prepare the balance sheet, profit and loss statement and
profit sharing report of the previous fiscal year, and submit
the same to the Board of Directors for approval.
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CHAPTER XIII FOREIGN EXCHANGE CONTROL
ARTICLE 38 All matters of the Company concerning foreign exchange shall
be handled in accordance with the Provisional Regulations
Governing Foreign Exchange of the PRC and the pertaining
regulations.
ARTICLE 39 The Company shall open separate USD and RMB banking accounts.
ARTICLE 40 All foreign currency receipts of the Company shall be deposited
with the Bank of China or other banks designated by the State
General Administration of Exchange Control. All foreign
currency outgoings shall be paid out of the Company's foreign
currency savings account. The Company shall resolve its own
balance of foreign exchange income and expenditure.
ARTICLE 41 The foreign currency component of wages and other legitimate
income of foreign, Hong Kong and Macau staff members of the
Company, after payment of individual income tax, may be remitted
abroad in accordance with the law. Party B's foreign currency
profits may also be remitted abroad in accordance with the law
after payment of profits tax.
CHAPTER XIV PROFIT SHARING
ARTICLE 42 Profit sharing shall be in the following proportions:
Party A: 20%; Party B: 80%
CHAPTER XV TERM OF CO-OPERATION
ARTICLE 43 Term = 15 years, commencing on the date of issuance of the
Company's business licence.
On request by one of the parties and by unanimous resolution
of the Board of Directors, an application may be submitted to
the original examining and approving authorities, at least 6
months before the expiry of the Term, for extension of the Term.
CHAPTER XVI ASSET MANAGEMENT AT EXPIRY OF TERM
ARTICLE 44 At the expiry of the Term, the Company shall be liquidated in
accordance with the laws. All surplus assets at the end of the
liquidation process shall be distributed according to the
Conditions of Co-operation.
CHAPTER XVII INSURANCE
ARTICLE 45 The various types of insurances of the Company shall be taken
out with insurance companies in PRC. The insurance amount and
period of insurance shall be determined by the Company based
on the requirements of the PRC insurance companies.
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CHAPTER XVIII AMENDMENT, ALTERATION AND TERMINATION
ARTICLE 46 Amendments to this Contract shall be effected by written
agreement between both parties, and shall be approved by the
original examining and approving authorities before they become
legally effective.
ARTICLE 47 Where, due to situations beyond both parties' control, the
provisions of this Contract may not be carried out, or where
the Company may no longer carry on its business due to
continuing losses, the Company may, by unanimous resolution by
the Board of Directors and approved by the original examining
and approving authorities, terminate this Contract before expiry
of the Term.
ARTICLE 48 Where one party fails to perform or seriously breaches any of
the provisions of this Contract or the Articles of Association,
affecting the Company in such a way that it may no longer be
operated or meet its purpose of operation, the other party shall
not only have the right to demand compensation from the
defaulting party, but also to apply to the original examining
and approving authorities for termination of this Contract.
Where both parties agree to continue with this Contract, the
defaulting party shall compensate the Company for all economic
losses suffered.
CHAPTER XIX LIABILITY
ARTICLE 49 Where one party fails to contribute the capital and provide
co-operation in accordance with the provisions of Chapter V
herein, it shall, as of the first month of such failure, pay to
the other party 3% of its total capital contribution for each
month of continuing failure. Where such failure continues for 3
months, then not only shall the defaulting party pay a total of
9% of its total capital contribution to the other party, but the
other party shall, in accordance with Article 48 herein, have
the right to terminate this Contract and demand compensation
from the defaulting party.
ARTICLE 50 Where, due to one party's breach, this Contract and its
supplements may not be performed or fully performed, the
defaulting party shall bear all responsibilities of such breach.
Where both parties are in breach, then each party shall,
depending on the circumstances of the case, bear its own
responsibilities in relation to the breach.
ARTICLE 51 To ensure the performance of this Contract and its supplements,
both parties shall provide bank guarantees for performance of
this Contract.
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CHAPTER XX FORCE MAJEURE
Article 52 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. At the end of such
events, the affected party shall forthwith continue to perform
the remainder of this Contract.
CHAPTER XXI APPLICABLE LAW
Article 53 The formation, force, interpretation and performance of, and
resolution of disputes under, this Contract shall be governed
by the law of the PRC.
CHAPTER XXII DISPUTE RESOLUTION
Article 54 Where any dispute arises during, and in relation to, the
performance of this Contract, 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 CIETAC for arbitration and resolution, whose decision shall
be final and binding on the parties.
Article 55 During the process of arbitration, the parties shall continue
to perform the parts of this Contract which are not in dispute.
CHAPTER XXIII LANGUAGE
Article 56 This Contract shall be written in the Chinese language.
CHAPTER XXIV CONTRACT AND MISCELLANEOUS
Article 57 All supplemental documents formed in accordance with the
provisions of this Contract shall form part of this Contract.
Article 58 This Contract and its supplements shall come into force as from
the date of their approval by the original examining and
approving authorities.
Article 59 Where notices involving the rights and obligations of each
party are sent to the other party by telex or by facsimile,
notices in writing regarding the same shall forthwith be served
at the parties' respective registered addresses provided herein.
Article 60 This Contract is signed by the parties' respective authorised
representatives in Guangzhou, PRC, on 26 December 1993.
Chop of Party A affixed Chop of Party B affixed