MINGHUA GROUP INTERNATIONAL HOLDINGS LIMITED
54 Pine Street, 4th Floor
New York, New York 10005
(212) 809-8015 - Tel.
(212) 809-8016 - Fax
December 11, 2001
Mr. Li Chuquan
Guangdong Bianfang Building
10th Floor
Gujing Road, Futian District
Shenzhen 518033
Re: Repayment of Stockholder Loan
Dear Mr. Li:
As you know, you have personally made working capital loans to our
subsidiary Shenzhen Minghua Environmental Protection Vehicles Co., Ltd (the "PRC
Company"), in excess of U.S.$10,000,000. We have agreed that Minghua Group
International Holdings Limited ("Minghua") will repay to you the U.S.$8,500,000
portion of the aggregate loans you made to the PRC Company by issuing to you
8,500,000 shares (the "Shares") of Minghua's Common Stock. The Shares represent
up to $8,500,000 worth of the Minghua's Common Stock calculated as of the
average stock price over the last 20 days. Our agreement to issue the Shares to
you is conditioned on your simultaneous forgiveness of an additional $1,500,000
of the aggregate loans that you have made to the PRC Company in exchange for the
payment of $1,500,000 from Minghua Investment Co., Ltd, the PRC Company's only
other stockholder. In consideration of the mutual promises set forth herein, the
parties hereto hereby agree as follows:
1. Issuance of the Shares. As soon as practicable after the date hereof
Minghua shall issue the Shares to you in consideration of your release of the
PRC Company's obligation to repay to you U.S.$8,500,000 of the aggregate loans
that you have made to the PRC Company and in consideration of the release set
forth in Section 2 hereof. You acknowledge that the Shares will constitute
restricted stock and will contain the standard legend that refers to the
transfer restrictions of the Securities Act of 1933, as amended.
2.Release. In consideration of the issuance of the Shares as specified
in Section 1 hereof and for such other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by you, you hereby
release and forever discharge the PRC Company, Minghua, Minghua Investment Co.,
Ltd., their respective subsidiaries and affiliates (collectively, the
"Releasees") from the Releasees' obligation (the "Obligation") to repay to you
$8,500,000 of the aggregate working capital loans that you have made to the PRC
Company to date and you agree not to bring or pursue any judicial,
quasi-judicial or administrative action against any of the Releasees for any
reason whatsoever arising out of or otherwise relating to the Obligation. You
further acknowledge and agree that you have not already filed or otherwise
commenced any such action. All of your rights and obligations relating to the
Obligation will be governed solely by this Agreement.
3. Miscellaneous. The parties hereto, without the need for any
additional consideration, agree to execute such other and further instruments,
documents and agreements and to perform such other acts as may be reasonably
required to effectuate the purposes of this letter agreement. This letter
agreement constitutes the entire understanding among the parties hereto with
respect to the subject matter hereof and may not be amended, modified or
supplemented except by a written instrument signed by all of the parties hereto.
This letter agreement shall be governed by and construed according to the laws
of the State of New York without regard to the conflicts of law principles
thereof. This letter agreement may be executed in any number of counterparts,
each of which shall be deemed an original and enforceable against the parties
actually executing such counterpart, and all of which, when taken together,
shall constitute one instrument. Facsimile execution and delivery of this letter
agreement is legal, valid and binding execution and delivery for all purposes.
If the above meets with your understanding, please acknowledge your
agreement by signing below. This letter agreement is deemed to be executed by
the parties hereto as of the date first above written.
Very truly yours,
MINGHUA GROUP INTERNATIONAL HOLDINGS LIMITED
By: /s/ Ronald C. H. Lui
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Ronald C. H. Lui
President and Chief Executive Officer
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE
WRITTEN:
/s/ Li Chuquan
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Name: LI CHUQUAN