CONTRACT OF ASSURANCE
This contract is signed by and between the following parties on the 30th day of
October, 1996 in Huizhou, Guangdong Province, China:
Guarantor A: Huizhou Highway Bureau
Guarantor B: Huizhou Highway Property Development Company
Guarantee: Guanghui Highway Project Company Limited
WHEREAS Guarantor B is a wholly-owned subsidiary of Guarantor A;
WHEREAS Guarantor B and Guarantee have signed a Cooperative Contract
(hereinafter "the Cooperative Contract") on the 5th day of August, 1996
concerning the establishment of Huizhou Guanghui Highway Development Company
Limited. During the existence of the Huizhou Guanghui Highway Development
Company Limited (hereinafter "the Cooperative Company"), the Cooperative Company
shall take precedence to pay Guarantee a certain Minimum Amount of Distribution
annually according to the stipulations in the Cooperative Contract and other
agreements made by both parties,
WHEREAS Guarantor A and Guarantor B both consent to ensure Guarantee shall
receive the profit, not less than the Minimum Amount of Distribution, from the
Cooperative Company at each installment;
NOW THEREFORE, in consideration of the foregoing, the adequacy which is
hereby acknowledged, the parties hereto covenant and agree as follows:
1. Otherwise indicated in this contract, the terms shall have the
meanings as follows:
i. "Guarantor" means Guarantor A and Guarantor B;
ii. "Stipulation of Distribution" means the stipulation of the
Cooperative Company to distribute the operating revenue to those
two cooperative parties mentioned in the Cooperative Contract and
other agreements made by them;
iii. "Minimum Amount of Distribution" means, according to the
Stipulations of Distribution, the minimum amount of distribution
of the operating revenue that the Cooperative Company distributes
to Guarantee by installments;
iv. "Distribution Day" means the day that the Cooperative Company,
according to the stipulations of distribution, distributes the
operating revenue to Guarantee ;
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v. "Distribution Difference" means, according to the Stipulation of
Distribution, the difference between the actual amount and the
minimum amount of distribution given to Guarantee by the
Cooperative Company.
2. During the existence of the Cooperative Company, Guarantor shall
guarantee non-rescinding and unconditionally, if, according to the
Stipulation of Distribution, the operating revenue in any stage
distributed to Guarantee by the Cooperative Company is less than the
Minimum Amount of Distribution, Guarantor shall deposit the
Distribution Difference into the designated bank account of Guarantee
within 5 days upon the Distribution Day.
3. If Guarantor fails to pay the Distribution Difference, according to
the stipulation in paragraph 2, to Guarantee on schedule, Guarantor
shall additionally pay the interest of breach of contract to
Guarantee. The interest of breach of contract is calculated by using
0.2% of the Distribution Difference as the daily interest, starting
from the Distribution Day and until the Distribution Difference and
the interest of breach of contract owed by Guarantor have all been
paid off.
4. The average monthly revenue in 1996 of Guangshan Highway Chentang toll
booth, which is wholly-owned by Guarantor, is approximately RMB4.5
million. In order to implement the stipulation in paragraph 2,
Guarantor has agreed to use the operating revenue of Chentang toll
booth as the reserve to pay Distribution Difference. Guarantor has
also agreed to deposit all the operating revenue from Chentang toll
booth to the designated account (hereinafter "designated account")
mentioned in Appendix II of the Cooperative Contract, so as to deposit
the designated account with sufficient reserve to pay the Minimum
Amount of Distribution for 3 months. Guarantee shall, according to the
Stipulation of Distribution, calculate the Minimum Amount of
Distribution for the next 3 months and inform the bank of the
designated account, and this amount shall be the Minimum Deposit
(hereinafter " the Minimum Deposit") maintained in the designated
account. When the total cash deposit in the designated account exceeds
the Minimum Deposit, Guarantor can make use of the money in the
designated account contributed by Guarantor itself, but a total amount
exceeding the Minimum Deposit shall be maintained. When the total cash
deposit in the designated account is less than the Minimum Deposit, it
can only be withdrawn with the written consent made by both parties.
If the operating revenue from Guangshan Highway Chentang toll booth
fails to provide sufficient cash reserve, Guarantor has agreed to
deposit the designated account with its own revenues and other cash
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income source in order to maintain sufficient cash reserve to pay
Minimum Amount of Distribution.
Guarantor must prove in evidence the holding the Guangshan Highway
toll booth and other ownership and penalty right of the toll booth as
to guarantee to have the Minimum Amount of Distribution.
5. Guarantor hereby represents and guarantees:
i. Guarantor shall have the right to sign this Contract in
accordance with the laws of the PRC and have sufficient economic
and financial abilities to fulfill the obligations stipulated in
this Contract. This Contract shall be signed by Guarantor with
effective procedure and shall be binding since the date of
signing.
ii. Guarantor has taken all the appropriate actions and gained the
necessary authorization to sign and fulfill the obligations in
this Contract.
iii. In case the payment, for fulfillment of assurance obligation, to
Guarantee is paid off by Guarantor, no taxes shall be deducted.
iv. The reorganization, changes of status and financial position of
Guarantor shall not affect its fulfillment of obligations.
v. This Contract shall have the same binding effect to the merger,
acquisitor, assignee, partner, representative and any other
successor of Guarantor.
6. The assurance made between Guarantor A and Guarantor B under this
Contract shall be a joint assurance. Guarantee shall request either
Guarantor bear all or part of the assurance obligations.
7. The Contract of Assurance specifies the basic obligations and
liabilities of the guarantor. The Contract of Assurance shall be
continued to be effective regardless of any change in the ability of
the performance of the cooperative company or obligation of the
cooperative company under the cooperative contract. In addition,
should there is any further amendment in the cooperative contract or
supplementary contract in the future, the assurance obligations of the
guarantor will be accorded with the payment obligation of the
guarantee by the cooperative company specified in the supplementary
contract after amendment.
8. Solely for the Contract of Assurance, the guarantor shall not waive
any obligations of the guarantee stipulated in the Contract of
Assurance should the guarantee makes any delay on payment and
concession.
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9. The Contract of Assurance is still effective until the cooperative
corporation and guarantor settle all payments in accordance with the
provisions stipulated in the cooperative contract and the
supplementary contract.
10. The following situations shall not affect, weaken, alter, restrict or
eliminate the assurance obligations of the guarantor. The guarantor
shall continue to completely fulfill its assurance obligations.
(a) The cooperative company is allowed to extend the cooperative
period after consultation from the three parties.
(b) Part of the provisions of the cooperative agreement is invalid or
either Party A or Party B breaches the contract.
(c) The court and administrative department concerned impose
mandatory execution on the properties of the cooperative company
in order to pay for any liabilities of the cooperative company.
11. 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 Shenzhen branch of the Foreign
Economic and Trade Arbitration Commission in accordance with its rules
of procedure. The arbitrative award is final and binding upon both
parties. All expenses arising from the arbitration shall be borne by
the loser.
During the arbitration process, apart from the section of the contract
which the dispute is arisen. Both parties shall continue to fulfill
the remaining part of the contract.
12. This contract is written in Chinese with three original copies which
are all binding. The guarantor and the guarantee both keep an original
copy after the contract is signed and stamped. The duplicated copy
will be duplicated if necessary and will be delivered to the concerned
unit for filing.
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Guarantor A: Huizhou Highway Department Guarantor B: Huizhou Highway Property
Development Company
Authorized Representative: (Signature) Authorized Representative: (Signature)
Seal: Seal:
Guarantee: Guanghui Highway Project Company Limited
Authorized Representative: (Signature, Mr. Yiu Yat On)
Seal:
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NOTARIZATION
NOTARY OFFICE, HUIZHOU, GUANGZHOU PROVINCE, THE PEOPLES' REPUBLIC OF CHINA