Beijing Zhida Development Company
Party A
Morceli, Limited Corp
Party B
Joint Venture Contract
Beijing DaDu International Jockey Club Co. Ltd.
Beijing China
29 April, 1997
CONTRACT OF JOINT VENTURE
BEIJING DADU INTERNATIONAL JOCKEY CLUB CO. LTD.
CHAPTER 1
GENERAL PROVISIONS
In accordance with the "LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON CHINESE-
FOREIGN EQUITY JOINT VENTURES" and other relevant Chinese laws and regulations,
BEIJING ZHIDA DEVELOPMENT COMPANY, CHINA AND MORCELI LIMITED CORPORATION
adhering to the principle of equality and mutual benefit and through friendly
consultations agree to jointly invest to set up a joint venture enterprise in
Beijing, the People's Republic of China. The contract hereunder is concluded.
CHAPTER 2
PARTIES TO THE JOINT VENTURE
ARTICLE 1
Parties to this contract are as follows: BEIJING ZHIDA DEVELOPMENT COMPANY
(hereinafter referred to as PARTY A) duly registered in
Beijing, China with its legal address at 21 Liujiayao BeiLi Fengrai District
Beijing, 100075 P.R. China
Legal representative: Du Lianlu
Position: General Manager
Nationality: China
MORCELI LIMITED (hereinafter referred to as PARTY B) duly registered in
Nevada, United States, with its legal address at 5555 N. Grand Boulevard, Suite
200, Oklahoma City, OK 93112, U.S.A.
Legal representative: Ronald G. Sparks
Position: President
Nationality: U.S.A.
CHAPTER 3
ESTABLISHMENT OF THE JOINT VENTURE COMPANY
ARTICLE 2
In accordance with the "LAW OF THE PEOPLE'S REPUBLIC OF CHIN A ON CHINESE-
FOREIGN EQUITY JOINT VENTURES" and other relevant Chinese laws and regulations,
both parties to the joint venture agree to set up BEIJING DADU INTERNATIONAL AL
JOCKEY CLUB CO. LTD.
ARTICLE 3
The name in Chinese of the joint venture company is:
(chinese script in this area)
The name in foreign language of the joint venture company is:
BEIJING DADU INTERNATIONAL JOCKEY CLUB CO. LTD.
The residence of the joint venture company is at Beijing Economy and
Technology Developing Zone, #2 Rongchang Xijie, 100029, P.R. China.
ARTICLE 4
All activities of the joint venture company shall be governed by the laws,
decrees and pertinent rules and regulations of the People's Republic of China.
ARTICLE 5
The organization form of the joint venture company is a limited liability
company. Each party to the joint venture company is liable to the joint venture
company within the limit of the capital subscribed by it. The profits, risks and
losses of the joint venture company shall be shared by the parties in proportion
to their con contributions of the registered capital.
CHAPTER 4
THE PURPOSE, SCOPE AND SCALE OF
PRODUCTION AND BUSINESS
ARTICLE 6
The purpose of the parties to the joint venture is in conformity with the
wish of enhancing the economic cooperation and technical exchanges, so as to
raise economic results and ensure satisfactory economic benefits for each
investor.
ARTICLE 7
The business scope of the joint venture company is as follows: Horse
racing, Jockey training, electronic shooting, tennis, swimming, singing and
dancing center, bar, recreational, on and off course social welfare lotteries
and shopping.
ARTICLE 8
The business mode of the joint venture company is to set up branches for
selling social welfare lotteries.
CHAPTER 5
TOTAL AMOUNT OF INVESTMENT AND THE
REGISTERED CAPITAL
ARTICLE 9
The total amount of the investment of the joint venture company will depend
on the financial report of the project provided by the Board of Directors of the
company.
ARTICLE 10
Investment contributed by the parties is RMB 48,000,000 which will be the
registered capital of the joint venture company.
Of which: PARTY A SHALL INVEST RMB 4,800,000, accounts for 10%, PARTY B
shall pay 43,200,000, accounts for 90%.
ARTICLE 11
Both PARTY A and PARTY B will contribute the followings as their
investment:
PARTY A:
Cash of RMB 48,000,000
PARTY A shall complete all necessary formalities to obtain land use right.
Land use RIGHT OF A TOTAL AREA of 1,500 mu located in Beijing with all necessary
services to the site including, but not limited to:
(a) electricity;
(b) water supply;
(c) sewerage;
(d) storm water drainage;
(e) telecommunication;
(f) postal service; and
(g) natural gas.
PARTY B:
Cash of U.S. Dollars equivalent to RMB 43,200,000.00
ARTICLE 12
The registered capital of the joint venture company shall be invested in
installments by PARTY A and PARTY B according to their respective proportion of
their investment. The installment shall be fulfilled according to the capital
investment plan made by both PARTY A and PARTY B.
ARTICLE 13
In case any party to the joint venture intends to assign all or part of
it's investment subscribed to a third party, consent shall be obtained from the
other party to the joint venture, and approval from the examination and approval
authority is required.
When one party to the joint venture assigns all or part of it's investment,
the other party has preemptive right.
CHAPTER 6
RESPONSIBILITIES OF EACH PARTY TO
THE JOINT VENTURE
ARTICLE 14
PARTY A and PARTY B shall be respectively responsible for the following
matters:
Responsibilities of PARTY A:
Handling of applications for approval, registration, business license and
other matters concerning the establishment of the joint venture company from
relevant departments in charge of China;
Processing for applying the right to the use of a site to the authority in
charge of the land;
Organizing the design and construction of the premises and other
engineering facilities of the joint venture company;
Assisting PARTY B for processing import customs declaration for the
machinery and equipments contributed by PARTY B as investment and arranging the
transportation within the Chinese territory;
Assisting the joint venture company in purchasing or leasing equipments,
materials, raw materials, articles for office use, means of transportation and
communication facilities, etc.;
Assisting the joint venture company in contacting and settling the
fundamental facilities such as water, electricity, transportation, etc.;
Assisting the joint venture in recruiting Chinese management personnel,
technical personnel, workers and other personnel needed;
Assisting foreign workers and staff in applying for entry visa, work
license and processing their traveling matters;
Responsible for handling other matters entrusted by the joint venture
company.
Responsibilities of PARTY B:
Providing Cash, machinery and equipment and responsible for shipping
capital goods such as machinery and equipment, etc. contributed as investment to
a Chinese port:
Training the technical personnel and workers of the joint venture company:
Responsible for other matters entrusted by the joint venture company.
CHAPTER 7
BUSINESS OPERATION
ARTICLE 15
The joint venture company will operate business inside of China and it will
set up branches outside of China approved by the Board of the Directors.
ARTICLE 16
The operation mode of the joint venture company is to sell social welfare
lotteries at branches in Beijing, China.
CHAPTER 8
THE BOARD OF DIRECTORS
ARTICLE 17
The date of registration of the joint venture company shall be the date of
the establishment of the board of directors of the joint venture company.
ARTICLE 18
The Board of Directors is composed of 7 directors, of which 3 shall be
appointed by PARTY A, 4 by PARTY B. The chairman of the board shall be appointed
by B and its vice-chairman by A. The term of office for the chairman and
vice-chairman is four years. Their term of office may be renewed if continuously
appointed by the relevant party.
ARTICLE 19
The highest authority of the joint venture company shall be its board of
directors. It shall decide all major issues concerning the joint venture
company. Unanimous approval shall be required before any decisions are made
concerning major issues. As for other matters, approval by majority or a simple
majority shall be required.
ARTICLE 20
The chairman of the board is the legal representative of the joint venture
company. Should the chairman be unable to exercise his responsibilities for some
reasons, he shall authorize the vice-chairman or any other directors to
represent the joint venture company temporarily.
ARTICLE 21
The board of directors shall convene at least one meeting every year. The
meeting shall be called and presided over by the chairman of the board. The
chairman may convene an interim meeting based on a proposal made by more than
one third of the total number of directors. Minutes of the meetings shall be
placed on file.
CHAPTER 9
BUSINESS MANAGEMENT OFFICE
ARTICLE 22
The joint venture company shall establish a management office which shall
be responsible for its daily management. The management office shall have a
general manager, appointed by PARTY B; 3 deputy general managers, 2 by PARTY A;
1 by PARTY B. The general manager and deputy general managers shall be invited
by the board of directors whose term of office is 2 years.
ARTICLE 23
The responsibility of the general manager is to carry out the decisions of
the board meeting and organize and conduct the daily management of the joint
venture company. The deputy general managers shall assist the general manager in
his work.
ARTICLE 24
Several department managers may be appointed by the management office. They
shall be responsible for the works in various department respectively, handling
the matters handed over by the general manager and deputy general managers and
shall be responsible to them.
ARTICLE 25
In case of great or serious dereliction of duty on the part of the general
manager and deputy general managers, the board of directors shall have the power
to dismiss them at any time.
CHAPTER 10
PURCHASE OF EQUIPMENT
ARTICLE 26
In its purchase of required raw materials, fuel, parts, means of
transportation and articles for office use, etc., the joint venture company
shall give first priority to purchase in China where conditions are the same.
ARTICLE 27
In case the joint venture company entrusts PARTY B to purchase equipment on
overseas market, persons appointed by PARTY A shall be invited to take part in
the purchasing.
CHAPTER 11
PREPARATION AND CONSTRUCTION
ARTICLE 28
During the period of preparation and construction, a preparation and
construction office shall be set up under the board of directors. The
preparation and construction office shall consist of 7 persons, among which 4
persons will be from PARTY A, 3 persons from PARTY B. The preparation and
construction office shall have one manager recommended by PARTY A, and one
deputy manager by PARTY B. The manager and deputy manager shall be appointed by
the board of directors.
ARTICLE 29
The preparation and construction office is responsible for the following
concrete works: examining the designs of the project, signing project
construction contract, organizing the purchasing and inspecting of relative
equipment, materials, etc., working out the general schedule of project
construction, compiling the expenditure plans, controlling project financial
payments and final accounts of the project, drawing up managerial methods and
keeping and filing documents, drawings, files and materials, etc. during the
construction period of the project.
ARTICLE 30
A technical group with several technical personnel appointed by PARTY A and
PARTY B shall be organized. The group, under the leadership of the preparation
and construction office, is in charge of the examination, supervision,
inspection, testing, checking and accepting, and performance checking for the
project design, the quality of project, the equipment and materials and the
imported technology.
ARTICLE 31
After approved upon by both parties, the establishment, remuneration and
the expenses of the staff of the preparation and construction office shall be
covered in the project budget.
ARTICLE 32
After having completed the project and finishing the turning over
procedures, the preparation and construction office shall be dissolved upon the
approval of the board of directors.
CHAPTER 12
LABOR MANAGEMENT
ARTICLE 33
Labor contract covering the recruitment, employment, dismissal and
resignation, wages, labor insurance, welfare, rewards, penalty and other matters
concerning the staff and workers of the joint venture company shall be drawn up
between the joint venture company and the Trade Union of the joint venture
company as a whole or individual employees in accordance with the "REGULATIONS
OF THE PEOPLE'S REPUBLIC OF CHINA ON LABOR MANAGEMENT IN CHINESE-FOREIGN EQUITY
JOINT VENTURES AND ITS IMPLEMENTATION RULES." The labor contracts shall, after
being signed, be filed with the local labor management department.
ARTICLE 34
The appointment of high-ranking administrative personnel recommended by
both parties, their salaries social insurance, welfare and the standard of
traveling expenses etc. shall be decided by the meeting of the board of
directors.
CHAPTER 13
TAXES, FINANCE AND AUDIT
ARTICLE 35
Joint venture company shall pay taxes in accordance with the stipulations
of Chinese laws and other relative regulations.
ARTICLE 36
Staff members and workers of the joint venture company shall pay individual
income tax according to the "INDIVIDUAL INCOME TAX LAW OF THE PEOPLE'S REPUBLIC
OF CHINA."
ARTICLE 37
Allocations for reserve funds, expansion funds of the joint venture company
and welfare funds and bonuses for staff and workers shall be set aside in
accordance with the stipulations in the "LAW OF THE PEOPLE'S REPUBLIC OF CHINA
ON CHINESE-FOREIGN EQUITY JOINT VENTURE." The annual proportion of allocations
shall be decided by the joint venture board of directors according to the
business situations of the joint venture company.
ARTICLE 38
The fiscal year of the joint venture company shall be from January 1 to
December 31. All vouchers, receipts, statistic statements and reports, account
books shall be written in Chinese.
ARTICLE 39
Financial checking and examination of the joint venture company shall be
conducted by an auditor registered in China and reports shall be submitted to
the board of directors and the general manager.
ARTICLE 40
In case PARTY B considers it is necessary to employ a foreign auditor
registered in other country to undertake annual financial checking and
examination PARTY A shall give its consent. All the expenses thereof shall be
borne by PARTY B.
ARTICLE 41
In the first three months of each fiscal year, the manager shall prepare
previous year's balance sheet, profit and loss statement and proposal regarding
the disposal of profits, and submit them to the board of directors for
examination and approval.
CHAPTER 14
DURATION OF THE JOINT VENTURE
ARTICLE 42
The duration of the joint venture company is 30 years. The establishment of
the joint venture company shall start from the date on which the business
license of the joint venture company is issued.
ARTICLE 43
An application for the extension of the duration, proposed by one party and
unanimously approved by the board of directors, shall be submitted to the
Ministry of Foreign Trade and Economic Cooperation six months prior to the
expiry date of the joint venture for the duration of 10 years.
CHAPTER 15
THE DISPOSAL OF ASSETS AFTER THE EXPIRATION
OF THE DURATION
ARTICLE 44
Upon the expiration of the duration or termination before the date of
expiration of the joint venture, liquidation shall be carried out according to
the relevant law. The
liquidated assets shall be distributed in accordance with the proportion of
investment contributed by PARTY A and PARTY B.
CHAPTER 16
INSURANCE
ARTICLE 45
Insurance policies of the joint venture company on various kinds of risks
shall be underwritten with the insurance companies set up within the boundary.
Types, the value and duration of insurance shall be decided by the board of
directors in accordance with the stipulations of the insurance companies set up
within the boundary.
CHAPTER 17
THE AMENDMENT, ALTERATION AND
DISCHARGE OF THE CONTRACT
ARTICLE 46
The amendment of the contract or other appendices shall come into force
only after the written agreement signed by PARTY A and PARTY B and approved by
the original examination and approval authority.
ARTICLE 47
In case of inability to fulfill the contract or to continue operation due
to heavy losses in successive years as a result of force majeure, the duration
of the joint venture and the contract shall be terminated before the time of
expiration after unanimously agreed upon by the board of directors and approved
by the original examination and approval authority.
ARTICLE 48
Should the joint venture company be unable to continue its operations or
achieve the business purpose stipulated in the contract due to the fact that one
of the contracting parties fails to fulfill the obligations prescribed by the
contract and articles of association, or seriously violates the stipulations of
the contract and articles of association, that party shall be deemed as
unilaterally terminates the con tract. The other party shall have the right to
terminate the contract in accordance with the provisions of the contract after
approved by the original examination and approval authority as well as to claim
damages. In case PARTY A and PARTY B of the joint venture company agree to
continue the operation, the party who fails to fulfill
the obligations shall be liable to the economic losses thus caused to the joint
venture company.
CHAPTER 18
LIABILITIES For BREACH OF CONTRACT
ARTICLE 49
Should either PARTY A or PARTY B fail to pay on schedule the contributions
in accordance with the provisions defined in Chapter 5 of this contract the
breaching party shall pay to the other party 2% of the contribution starting
from the first month after exceeding the time limit, should the breaching party
fail to pay after 3 months. 4% of the contribution shall be paid to the other
party, who shall have the right to terminate the contract and to claim damages
to the breaching party in accordance with the stipulations in Article 45 of the
contract.
ARTICLE 50
Should all or part of the contract and its appendices be unable to be
fulfilled owing to the fault of one party, the breaching party shall bear the
responsibilities thus caused. Should it be the fault of both parties, they shall
bear their respective responsibilities according to actual situations.
CHAPTER 19
FORCE MAJEURE
ARTICLE 51
Should either of the parties to the contract be prevented from executing
the contract by force majeure, such as earthquake, typhoon, flood, fire and war
and other unforseen events, and their happening and consequences are
unpreventable and unavoidable, the prevented party shall notify the other party
by cable without any delay and within 15 days thereafter provide the detailed
information of the events and a valid document for evidence issued by the
relevant public notary organization for explaining the reason of its inability
to execute or delay the execution of all or part of the contract. Both parties
shall, through consultations, decide whether to terminate the contract or to
exempt the part of obligations for implementation of the contract or whether to
delay the execution of the contract according to the defects of the events on
the performance of the contract.
CHAPTER 20
APPLICABLE LAW
ARTICLE 52
The formation of this contract, its validity, interpretation, execution and
settlement of the disputes shall be governed by the related laws of the People's
Republic of China.
CHAPTER 21
SETTLEMENT OF DISPUTES
ARTICLE 53
Any disputes arising from the execution of, or in connection with the
contract shall be settled through friendly consultations between both parties.
In case no settlement can be reached through consultations, the disputes shall
be submitted to the China International Economic and Trade Arbitration
Commission for arbitration in accordance with its rules of procedure. The
arbitrate award is final and binding upon both parties.
ARTICLE 54
During the arbitration, the contract shall be executed continuously by both
parties except for matters in disputes.
CHAPTER 22
LANGUAGE
ARTICLE 55
The contract shall be written in Chinese version and in English version.
Both above-mentioned versions, the Chinese version shall prevail.
CHAPTER 23
EFFECTIVENESS OF THE CONTRACT
AND MISCELLANEOUS
ARTICLE 56
The appendices drawn up in accordance with the principles of this contract
are integral part of this contract, including the project agreement, the
technology transfer agreement, the sales agreement....
ARTICLE 57
The contract and its appendices shall come into force beginning from the
date of approval of the Ministry of Foreign Trade and Economic Cooperation of
the People's Republic of China.
ARTICLE 58
Should notices in connection with any party's rights and obligations be
sent by either PARTY A or PARTY B by telegram or telex, etc., the written letter
notices shall be also required afterwards. The residences of PARTY B listed in
this contract shall be the posting addresses. The mailing address of PARTY A is
Room 3301, 29 Yazigiao Road, Xuan wu District, Beijing 100055, China.
ARTICLE 59
The contract is signed in Beijing, China by the authorized representatives
of both parties on April 29, 1997.
FOR PARTY A BEIJING ZHIDA DEVELOPMENT COMPANY
(signature written in Chinese)
FOR PARTY B MORCELI, LIMITED
s/s Ronald G. Sparles
- ----------------------------
Ronald G. Sparles
Date: April 29, 1997