1
Exhibit 10.2(b)
SINO-FOREIGN CO-OPERATION
ZINDART (XINXING) TOYS (GUANGZHOU)
COMPANY LIMITED
SUPPLEMENTAL CONTRACT
Party A: Guangzhou Xinjiao Huangbu Economic Development
Company Xinxing Toys Factory
Party B: Zindart Industrial Company Limited
By a Co-operation Contract dated 26 December 1993 signed and sealed by both
Party A and Party B ("the Co-op. Contract"), Zindart (Xinxing) Toys (Guangzhou)
Company Limited ("the Co-op. Company") was established. Owing to the fact that
Party A is unfamiliar with the international toys market, together with its lack
of experience in the operation and management of toys, the directors of both
parties negotiated with each other based on the principles of equality, mutual
benefit and mutual trust. Following Party B's request, Party A shall transfer
all the operation rights and business management of the Co-op. Company to Party
B, in accordance with the terms below:
1. Party B's Management Period
1-1-1997 to 31-12-1997 (However, the Renewal Contract dated January
1995 has been expired, therefore this Contract prevails)
2. Party A's Responsibilities
(i) Assist Party B in liaising with the various departments of this
district, including water supply, electricity supply, public
order, fire services, safety, health, environmental protection,
etc.;
(ii) Assist Party B in the management of the factory's
administration and technical support work;
(iii) Assist Party B in the proper resolution of any labour disputes
amongst the temporary labour;
(iv) Co-ordinate public relations and procedures for import/export
customs declarations;
(v) Assist Party B in employing labour and managing staff in
accordance with PRC's governmental policies.
3. Party B's Responsibilities
To be fully responsible for the Co-op. Company's production, operation,
management and safety facilities.
2
4. Regarding Clause 42 of the Co-op. Contract in relation to the sharing
of profits, both Parties agree as follows:
(i) Party B guarantees that Party A will annually receive a sum
representing depreciation charges and fixed profits, and for
1997 such sum shall be HK$2.1 million. Party B shall pay such
sum at the end of each quarter in equal monthly instalments,
failing which Party B shall pay to Party A an additional 5% of
such sum representing late charges.
(ii) Party B shall be entitled to all the profits of the Co-op.
Company, and Party A shall have no right to share in any of
those profits save for the depreciation charges and fixed
profits as outlined in (i) above.
5. Given that Party A will not assign its directors to the direct
management of the Co-op. Company, Party B agrees that during its
Management Period, it shall pay to Party A the sum of RMBY200,000,
payable during the last quarter of the year.
6. At the end of the Management Period, all of the assets originally
contributed by Party A, including land, factory premises, part of the
facilities such as 2 sets of 280kW electricity generators, 46 paint
spray cabinets, 3 wind pumps, 3 water pumps, and 1 set of electric
current alternator (250kN), shall be returned to Party A; Party B shall
be responsible for repairing, or compensating Party A, any damage or
shortage, whichever is the case, in relation to these assets.
7. During the Management Period, Party B may construct new factory premises
and resident quarters, or make extensions to the existing factory
premises and resident quarters, where the production development so
requires. At the end of the Management Period where Party B does not
renew the lease to the factory premises and resident quarters, the new
or extended factory premises and resident quarters, whichever is the
case, shall be transferred to Party A without compensation.
8. Party B shall be responsible for payment of all relevant taxes and
charges in relation to the production operations.
9. Party B shall be fully responsible for fire prevention and occupational
safety measures, in accordance with the requirements of the labour and
fire service authorities in the district.
10. The existing members of staff employed by the PRC party to Xinxing Toys
Factory shall, in principle, be retained, and their wages and welfare
shall be determined in accordance with the original policies. Where any
individual employee does not match a job description, Party B shall have
the right to dismiss such employee, but such dismissal shall only take
place after negotiations between both parties, and consent being given
by Party A; the relevant employees shall be referred to Party A to be
dealt with accordingly.
11. Party B is self-owned and self-operated, and shall be responsible for
its own profits and losses.
3
12. All activities in relation to production operation shall be in compliance
with the relevant laws and regulations of he PRC; Party B shall be held
responsible for any liability incurred and loss suffered as a result of any
breach of these PRC laws and regulations at any stage of the internal or
external production activities.
13. Both parties agree that the term of this Contract shall be one year. If
during this period there are any important changes to PRC governmental
policies, rendering the contents of this Contract inconsistent therewith,
both parties shall accordingly make the necessary adjustments or amendments
to this Contract in the spirit of friendly consultation.
14. At the end of the term of this Contract, any renewal of this Contract shall
be separately negotiated between the parties.
15. If Party B terminates this Contract before the end of the term, Party B
shall pay to Party A the fixed profits for one full year, together with the
management fees of 200,000, before Party B may so terminate this Contract.
Signed by Party A's Representative Signed by Party B's Representative
Chop of Guangzhou Xinjiao Huangbu Chop of Zindart Industrial Co. Ltd.
Economic Development Company
Date: November 1996 (Renewal of Contract)