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EXHIBIT 10.13
HUAYANG PRINTING GROUP COMPANY LIMITED
Contract for using Factory, Warehouse and Dormitories
PARTY A: Gushu Economic Development Company, Xixiang Town, Baoan Area,
Shenzhen, an enterprise legal person registered and established
according to the laws of China.
Legal representative:
Address: Gushu Village, Xixiang Town, Baoan Area,
Shenzhen City, Guangdong Province, China.
Telephone: Fax:
PARTY B: Huang Printing Group Company, Hong Kong, a limited liability company
registered and established according to the laws of Hong Kong
Legal representative:
Address: 10th Floor, Kong Nam Industrial Building, Block A,
603-609 Castle Peak Road, Tsuen Wan,
New Territories, Hong Kong.
Telephone: (852) 2416 7591 Fax: (852) 2411 0235
Party A is the owner of the Factory, Warehouse and dormitories ("Factory
Buildings") as listed in Appendix I, and is willing to provide these Factory
Buildings for the use of Party B. In accordance with the real estate management
laws of the Shenzhen Special Economic Zone and other relevant laws of the
People's Republic of China, through friendly consultations, the parties hereby
agree as follows:-
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I TERM OF USE
(1) Party A agrees to provide the Factory Buildings for the use of Party B
for five (5) years. The actual dates are 24th January 1995 to 23rd
January 2000.
(2) Three months prior to the termination of the abovementioned period of
use, Party B has the right to give written notification to Party A to
extend this contract, and the period of extension shall be three years.
The period of extension shall start from the completion of the first
five year period, i.e., from 24th January 2000 to 23rd January 2003.
(3) During the period of use, Party B shall manage the Factory Buildings,
but Party B shall not use the Factory Building for any illegal
purposes. Party B shall also have the right to further erect any
buildings and production facilities within the grounds of the Factory
Buildings in accordance with the relevant regulations.
(4) Upon expiration of the period of extension, Party B shall have priority
rights to use under the same conditions, in the event that Party A
intends to let a third party use the Factory Buildings.
(5) During the period of use, either party may terminate this Contract by
giving twelve months prior written notice to the other party. Rental is
fully payable during this notice period. Any party who terminates this
Contract in any other way shall be liable to compensate the other party
for all economic losses.
II RENTAL
(1) Party B shall pay rental during the first five-year period in
accordance with the formula below:
Rental = Total Expenses - Total Fees for Processing. "Total Expenses"
during the first year of this contract shall be Two Million Eight
Hundred Thousand Hong Kong Dollars (HK$2,800,000); thereafter to be
increased by 5% every year.
"Total Fees for Processing" refer to the total sum of usage fees,
licensing fees, processing fees and other charges payable under the
Provisions of the Original Contracts by Gaohui Company (HK) and Huayang
Printing Group Company (HK) Limited or the total sum of usage fees,
licensing fees, processing fees and other charges payable by Party B
upon its replacement of Gaohui Company (HK) and Huayang Printing Group
Company (HK) Limited under the provisions of the original contracts.
"Provisions of the Original Contracts" refer to the contracts and
agreements signed from 1986 to 1994 between Gaohui Company (HK), Huayang
Printing Group Company (HK) Limited and Baoan County Foreign Trade
Company (Shenzhen), and Gaohui Manufactory, Xinan Town, Baoan County,
Party A and Gushu Village Committee, Xinan Town, Baoan County (detailed
in Appendix II). Party A acknowledges that all rights and obligations of
Gaohui Company (HK) and Huayang Printing Group Company (HK) Limited
under the Provisions of the Original Contracts have been assumed by
Party B instead.
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(2) During the three-year extension period, Party B shall still pay usage fee
to Party A in accordance with the formula set forth above, however the
annual rate of increase shall be determined by both parties A and B after
consultations. The usage fee payable by Party B to Party A during the
extension period shall be comparable to the usage fee payable on similar
properties (including factors such as the quality of factory buildings,
use, term of use, equipment, and geographical location, etc.) on the market
at that time. However, if the parties are unable to agree one month prior
to the extension period, such increase shall be determined by arbitration
in accordance with Article 10 of this Contract, and the arbitrator shall
determine the incremental rate in accordance with the abovementioned
principles.
(3) Party B shall pay usage fee to Party A in twelve monthly instalments, and
each usage fee shall be payable in arrears within the first five working
days of the following month.
(4) Party A hereby appoints and authorizes Chen Guo Wei (HKID A292518(7)) to
collect usage fee from Party B on its behalf. During the term of this
Contract, this appointment and authorization shall not be cancelled. Party
A warrants to Party B that receipts issued to Party B by Chen Guo Wei shall
be deemed receipts issued by Party A itself; however, Party B may request
that Party A issues additional receipt to Party B, and Party A shall have
no reason whatsoever to refuse this request.
III OTHER EXPENSES
Party A shall be responsible for the management fees, real estate taxes,
land use fees and taxes, compensation charges for the grant of land,
compensation charges for seedlings, compensation for above ground
construction and related construction, labour and relocation subsidies,
agricultural land tax fees, funds for the development and construction of
new vegetable plots, funds for the re-cultivation of land, expenses for
demolition, removal and settlement, fees for the construction of the basic
facilities and infrastructure, business taxes and value added taxes for the
use or occupation of buildings or land (if any); Party B shall not be
responsible for any of these fees or taxes in relation to the use of the
Factory Buildings, but shall be responsible for the monthly water,
electricity, gas and telephone bills as well as the miscellaneous expenses
incurred in connection with manufacturing and operational activities in the
Factory Buildings.
IV MAINTENANCE AND REPAIRS
(1) Party A shall be responsible for the maintenance and the repair of the
structure of the Factory Buildings (except those structural damages
incurred as a result of improper use or actions of Party B), or Party A
shall delegate Party B to carry out maintenance on its behalf and such
maintenance and repair charges shall be deducted from the usage fee; if
Party A, by delaying carrying out the structural repairs or refuses to
delegate Party B to carry out such repairs, creates damage to the Factory
Buildings, Party B shall not be responsible for such damages and Party A
shall compensate Party B for any economic losses suffered therefrom. In the
event that there is major damage to the Factory Buildings or there exists a
danger of the Factory Buildings collapsing and Party A does not carry out
timely repairs, Party B may request early termination of the
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term of use or carry out the repairs on behalf of Party A, and shall
use such repair charges to off-set the usage fees.
(2) Party B shall be responsible for non-structural repairs of the Factory
Buildings (except problems due to the quality of construction of the
Factory Buildings or the improper action of Party A thereby creating
non-structural damages). If any damage to the Factory Buildings is
caused by Party B delaying in carrying out the non-structural repairs,
Party A shall not be responsible for the damages and Party B shall
compensate Party A for any economic losses incurred thereby.
V INTERIOR DECORATION AND FITTINGS
(1) During the term of use, and if the structure of the Factory
Buildings is not affected, Party B shall have the right to carry out
interior decoration and partitioning. Party B need not demolish these
decorations or partitionings or revert the Factory Buildings to their
original state upon the expiration of the term of use, but Party B
shall have the right to remove the fixtures and fittings that
originally belong to Party B.
(2) Party B shall have the right to use the existing facilities of the
Factory Buildings without compensation, including the supply of water,
electricity and gas utilities, telecommunications (including IDD lines)
and other facilities. If Party B needs to increase the supply of
water, electricity and gas utilities, increase telephone lines or add
other facilities, Party A shall assist Party B in procuring same, and
Party B shall pay all expenses.
VI WARRANTIES
Party A warrants to Party B:
(1) Party A is the owner of the Factory Buildings and is the legal
user of the related land. During the period of use, without the
written consent of Party B, Party A shall not transfer,
mortgage, rent, or in any way encumber by any debt or third
party rights, to the Factory Buildings or the related land
use rights, so as to affect the use of the Factory Buildings by
Party B in accordance with this Contract.
(2) Party A shall have the right to furnish the Factory Buildings
for the use of Party B, and there is no need to seek the
approval of any government departments or units. Party B shall
have no need to pay for any land use fees, location use fees,
real estate taxes or other taxes in connection with the use of
the Factory Buildings or related land; or such taxes and fees
(if any) shall be paid by Party A.
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(3) All documents of approval and certificates concerning the use of the
Factory Buildings are legally valid. During the period of use, upon
the reasonable request of Party B, Party A shall furnish relevant
materials to Party B relating to the use of the Factory Building,
including the certificates of ownership rights and related land use
rights concerning the Factory Buildings.
(4) The use by Party B of the Factory Buildings shall not be affected by
any rights and obligations of third parties. Party A shall pay on time
and in accordance with the relevant regulations all taxes and fees in
connection with the use of the Factory Buildings and the related land.
(5) The Factory Buildings have been constructed in accordance with the
relevant laws and regulations, and fulfils the State requirements of
planning, construction, infrastructure, environment and fire
prevention.
(6) Neither the Factory Buildings nor any part thereof stores or sets
aside any toxic or dangerous goods or materials or is affected by
such goods or materials (except toxic or dangerous goods or materials
stored or set aside by Party B).
(7) No fines, taxes or charges are imposed in connection with the sewage,
discharges or emissions from the Factory Buildings (except sewage,
discharges or emissions from the Factory Buildings incurred by Party B
in the course of its manufacture and operation).
Party B undertakes to Party A:
(1) Party B shall pay Party A promptly the usage fees specified in Article 2.
(2) Party B shall abide by all relevant laws and regulations of the People's
Republic of China conducting its activities in the Factory Buildings.
(3) Party B is authorized to execute and to carry out its obligations under
this Contract without any prior approval from any government organization
or department.
(4) Party B shall not store or abandon any toxic or dangerous goods or
materials in the Factory Buildings unless prior approval is obtained from
the relevant Environment Department.
(5) During the period of use, Party B shall permit Party A to inspect the
Factory Buildings at reasonable times and under reasonable circumstances,
but such inspection shall not interfere with Part B's normal operation and
production processes.
(6) Party B shall not transfer, mortgage or rent the Factory Buildings or any
related land use rights. Party B shall not permit the Factory Buildings or
its related land use rights to be affected by any debt or third party
interest.
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(7) If Party B does not extend the period of use upon expiry of the use
period in accordance with the provisions of this Contract, Party B shall
move out of the Factory Buildings and shall return the Factory Buildings
to Party A.
VII FORCE MAJEURE
(1) If during the period of use, the Factory Buildings is destroyed by any
Force Majeure event, this Contract shall terminate automatically, and
neither party shall have any liability towards the other. If any Force
Majeure event makes it impossible for Party B to use the Factory Buildings
in accordance with this Contract, then the parties may, taking into
consideration of the effect of the Force Majeure event, be released or
delayed in carrying out their respective obligations of this Contract, and
Party B is permitted to decrease or waive payment of the usage fee for the
Factory Buildings.
(2) The above "Force Majeure events" include earthquake, typhoon, flood, war,
labour strikes, vandalism, civil incidents, civil disturbance, riot, and
all other unforeseeable events which cannot be prevented or avoided, which
affects the performance of this contract or as a result of which the terms
of this Contract cannot be performed. The Party who encounters such event
shall immediately inform the other party of such event by cable, telex or
in writing, and shall within 30 days produce a detailed report with
supporting documents regarding the unenforceability of the Contract, or any
delay likely to be caused. The supporting documents shall be produced by
the relevant local government or notarial office to prove the occurrence of
such event. Immediately after the occurrence of a Force Majeure event,
both parties shall negotiate with each other to find a reasonable solution
and to mitigate the effect of the Force Majeure event.
VIII SALE OF THE FACTORY BUILDINGS
During the term of this Contract, Party A shall give 3 months prior written
notice to Party B for the sale of all or any part of the Factory Buildings,
during which time Party B shall have priority rights in purchasing the
Factory Buildings from Party A.
IX SEIZURE OF THE FACTORY BUILDINGS
In the event that the PRC government or any related department applies PRC
law to seize part or all of the Factory Buildings for government use,
compensation (actual or cash equivalent) from the government shall be
distributed to Parties A and B in accordance with the ratio of the
remaining period (including the extension period stated in clause 1(2)) and
the total period of use.
X ARBITRATION
The parties shall resolve any outstanding matters enforceability of this
Contract by negotiation. If there is any dispute as to the meaning or the
enforceability of any part of this Contract, the parties shall first
conduct friendly negotiations to seek a solution. If the dispute remains
unresolved after 30 days of such negotiations, either party may submit the
dispute to the China International Economic and Trade Arbitration Committee
(Shenzhen Branch) (hereafter referred to as the "Arbitration Committee").
The decision of the Arbitration Committee shall be final. The arbitration
shall be conducted in accordance with the
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rules of the Arbitration Committee and the following principles:
(1) The arbitration shall be conducted in Chinese, and recorded daily in
Chinese.
(2) The Arbitrator shall be someone fluent in Chinese, and shall be
chosen by both parties after negotiation. If the parties cannot agree
on such a person within 30 days of the submission of the dispute to
the Arbitration Committee, the arbitrator shall be appointed by the
Director of the Arbitration Committee.
The written decision of the arbitrator, supported by reasons, shall be final
and shall be binding on both parties. Unless specifically stated by the
Arbitrator, the arbitration costs shall be borne by the unsuccessful party.
XI GOVERNING LAW
This Contract is governed by the law of the PRC.
This Contract is signed by representatives of both parties on this 24th day
of January 1995. There are four copies. Each party has two copies. All of them
are legally binding.
Party A Party B
Shenzhen Baoan Xixiang Village Hong Kong Hua Yang Printing Holdings
Gushu Economic Development Co., Limited
Name: Name:
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Position: Position: Director
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Appendix I
Property Purpose Area
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No. 6, Zhu-ao Factory Buildings, Factory Building 5,160.90m(2)
Gushu Village, Xixiang Town,
Bacon County
Factory Building No. 13, Factory Building 1,854.44m(2)
Gushu Village, Xixiang Town,
Bacon County
Factory Building No. 22, Factory Building 6,750.00m(2)
Gushu Village, Xixiang Town,
Bacon County
Dormitory No. 12, Dormitory 1,188.00m(1)
Gushu Village, Xixiang Town,
Bacon County
Dormitory No. 39, Dormitory 3,250.80m(2)
Gushu Village, Xixiang Town,
Bacon County
Warehouse in Gaohui Manufactory, Warehouse [ ]m(2)
Gushu Village, Xixiang Town,
Bacon County
The ownership certificates of the above Factory Buildings and Dormitories
(excluding the Warehouse) are attached to this Appendix.
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APPENDIX II
PROVISIONS OF THE ORIGINAL CONTRACTS
1. Processing Agreement signed on 1st January 1996 between Baoan County
Foreign Trade Company and Gushu Gaohui Manufactory, Xinan Town, Baoan
County (Party A) and Gaohui Company (HK) (Party B) ("Processing Agreement")
2. Agreement for the Investment of Construction of Factory Buildings signed on
26th November 1987 between Gaohui Company (HK) and Gushu Village Committee
3. Agreement for the Continuation of the Processing Agreement signed on 1st
August 1990
4. Agreement or the Rental of Dormitories signed on 28th November 1992 between
Gushu Development Company, Xinan Town, Baoan County and Gaohui Company (HK)
5. Agreement for the Transfer with Compensation of Factory and Factory Address
(date unclear) between Gushu Village Development Company, Xinan Town, Baoan
County and Huayang Printing Company Limited (HK) (involving 7,772m(2))
6. Agreement for the Transfer with Compensation of Factory and Factory Address
(date unclear) between Gushu Village Development Company, Xinan Town, Baoan
County and Huayang Printing Company Limited (HK) (involving 6,020m(2))
7. Contract for Land Use Rights signed 18th January 1994 between Gushu Village
Development Company, Xinan Town, Baoan County and Huayang Printing Company
Limited (HK)
Copies of the above documents are attached to this Appendix.
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