EXHIBIT 10.2
CONSTRUCTION MANAGEMENT AGREEMENT
Part 1. Construction Management Agreement
This Construction Management Agreement (this "Agreement") is entered into
between Beijing Dahua Real Estate Development, Ltd. (the "Principal") and
Aocheng Construction Management Ltd. ("Agent")
1. The Principle hereby engage the Agent to oversee the management of
the construction project (the "Project") as described below:
Name of Project: Seven items in Dahua Garden Model A housing units
Project Location: North Qijia Township, Changping District
Project Scope: 23,188 square meters of construction area
Total investment: RMB 18,548,000 yuan
2. All defined terms herein shall have the same meaning as those in
Part 2. Standard Conditions.
3. The following documents are part of this Agreement:
1) Bidding and award documents for the management services;
2) The Standard Conditions of this Agreement;
3) The Special Conditions of this Agreement;
4) All supplements and amendments to this Agreement executed by the
parties during the performance of this Agreement.
4. The Agent hereby undertakes that, pursuant to the terms and
conditions of this Agreement, it will provide the management services
set forth in the Special Conditions of this Agreement.
5. The Principal hereby undertakes that it will compensate the Agent
for its management services on a timely basis in the manner and currency
as specified in this Agreement.
This Agreement shall take effect on October 15, 2003, the performance
of which shall be completer by June 20, 2004.
This Agreement shall be executed in four (4) counterparts, each of which
shall have the same force and effect. Each party shall hold one (1)
copy.
Beijing Dahua Real Estate Development, Ltd.
(Principal): (Corporate Seal)
By: /s/ Yonglin Du
- ---------------------
Yonglin Du, President
Aocheng Construction Management Ltd.
(Agent): (Corporate Seal)
/s/ Wenjun Wang
- -------------------------
Wenjun Wang, President
This Agreement is executed on September 24, 2003.
Part 2. Standard Conditions
Definitions, Scope, Laws and Regulations
1. Unless otherwise defined underunder, the following terms shall have
the meaning below:
1) "Project" shall mean the project to be managed by the Agent as
entrusted by the Principal.
2) "Principal" shall mean the party that made the direct investment
and entrusted the management services, including its legal
successors and assigns.
3) "Agent" shall mean the party responsible for the management of
the Project, including its legal successors and assigns.
4) "Management Office" shall mean the organization dispatched to
the site to manage the Project.
5) "Chief Management Engineer" shall mean the person dispatched to
the Management Office by the Agent and approved by the Principal
with full authority to perform this Agreement.
6) "Contractor" shall mean the party other than the Agent that enter
into contract(s) with the Principal in connection with the
construction of the Project.
7) "Agent's Normal Work" shall mean the management work specified
in the Special Conditions and entrust to the Agent by the
Principal.
8) "Agent's Additional Work" shall mean (i) the additional work
beyond the scope as entrusted, which is agreed upon by the parties
in writing; (ii) the additional work or time resulting from by
stoppage or delay caused by the Principal or Contractor.
9) "Agent's Extra Work" means the extra work in addition to normal
work and Agent's Additional Work, the work to be completed by
the Agent pursuant to Section 38, and the remaining work or
restoration work after the termination of Agent's work for
reasons unrelated to Agent's fault.
10) "Day" means the time period from 0:00 hour to 0:00 hour of the
following day.
11) "Month" means the time period from any given day of a month to
the date which is one day prior to the corresponding day of the
following month.
2. This Construction Management Agreement shall be governed by the
national laws and administrative law rules, as well as departmental and
local rules and regulations as specified in the Special Conditions hereunder.
3. This Agreement shall be written, construed and interpreted in Chinese.
In the event two or more languages are used in the Special Conditions,
Chinese shall prevail in the construction and interpretation of this
Agreement.
4. Agent shall establish a management office and appoint its staff
pursuant to this Agreement. Agent shall submit to the Principal the names
of the Chief management Engineer and key members of the management office,
management plan, the scope of the management work. During the performance
of the management services, Agent shall report to the Principal
periodically pursuant to this Agreement.
5. During the performance of this Agreement, Agent shall work diligently
and industriously, and provide Principal with advice commensurate with its
expertise, and protect the legal rights of the parties.
6. The facilities and instruments provided to the Agent by the
Principal belong to the Principal. Upon completion or termination of the
management services, Agent shall return such facilities and instruments to
the Principal in the manner and at the time as provided under this
Agreement.
7. During and after the termination of this Agreement, no party shall
disclose the confidential information relating to the Project and this
Agreement without the consent of the other party.
Principal's Obligations
8. Prior to the commencement of the management services, Principal
shall make advance payment to the Agent.
9. Principal shall be responsible for the coordination of external
relations of the Project to provide external conditions for the management
work. If such coordination is to be undertaken by the Agent in whole of in
part when needed, the coordination work to be entrusted to the Agent must
be specified in the Special Conditions and compensated accordingly.
10. Principal shall provide Agent with all engineering documentation
needed for the management work free of charge within the time frame as
specified herein.
11. Principal shall notify Agent of its decisions in writing at the
written request of the Agent with the time frame specified in the Special
Conditions of this Agreement.
12. Principal shall appoint an on-site representative who is familiar
with the Project and able to make timely decisions as liaison with Agent.
Principal shall give Agent advance notice when it changes the
representative.
13. Principal shall give Agent management authority, notify chosen
contractors of the responsibilities of the key management personnel of
Agent, and make specific provisions of such matters in Principal's
contracts with third parties.
14. Principal shall provide Agent with the following materials on a
timely basis so as not to interfere with Agent's performance of the
management work.
1) List of suppliers of raw materials, components, machinery and
equipment used in the Project.
2) List of supporting and related parties.
15. Providing, free of charge, offices, communications equipment,
accommodations at the Project site for Agent's personnel, facilities
specified in the Special conditions, and reasonable compensation for the
Agent's own equipment (compensation = time for depreciation x original
price of equipment + maintenance fee).
16. When needed and upon agreement by the parties, Principal shall
provide Agent with other personnel free of charge as specified in the
Special Conditions of this Agreement.
Agent's Rights
17. Agent shall have the following rights with the scope of the
Project:
1) Recommending the general contractor for the Project.
2) Recommending subcontractors for the Project.
3) Making suggestions to Principal regarding the scope, design
standard, planning, production process design and applications
functions of the Project.
4) Making suggestions to Principal with respect to technical
issues of the Project design to ensure safety and maximize
results. Principal's consent will be needed if such suggestions
may increase the Project's costs or time. Agent must give
Principal a written report and request a redesign upon its
discovery of any deviations in design from the quality
standards either published by the government or specified in
this Agreement.
5) Reviewing construction organization design and technical plan,
making suggestions or giving written report to Principal to
ensure quality, timely completion and cutting costs of the
Project.
6) Coordinating activities among various parties and report
important coordination issues to Principal.
7) With the consent of Principal, Agent has the right to issue
work orders, suspension orders, resume work orders. If no
report was given to Principal at the time of the order due to
special circumstances, a written report must be given within
24 hours of the order.
8) Conducting project materials and construction quality
inspection. Agent has the right to order the contractor to
stop using materials, components and equipment that fail to meet
the quality standards of issued by the government or specified
in the Agreement. For work process or Project phases not in
compliance with quality standards or unsafe practices, Agent
has the right to order contractors to stop work, rectify or
re-work. Contractors may not resume work without receiving a
order to resume work from Agent.
9) Agent has the right to inspect and supervise the work process
of the Project, and sign off on completion date, or accelerated
or delayed completion date as specified in the agreement.
10) Agent shall have the right to review and authorize payments
for work done with the scope of the Project, as well to confirm
or reject settlement. Agent shall not make any payment with
the signature and confirmation of the Chief Management
Engineer.
18. With authorization of the Principal, Agent may change the obligations
of contractor as specified in the contracts. Advance consent by Principal
is needed if such change may materially affect the Project's cost, quality
or progress. If consent cannot be obtained in case of an emergency, Agent
must notify Principal of such change as soon as possible. Upon discovery
of any instance of contractor's incompetence, Agent may request contract
to change certain personnel involved.
19. If there is any complaint or claim (including the claim for
indemnification) between the Principal and contractors within the scope of
the Project, such complaint or claim must be brought to Agent for handling
to be confirmed by the parties. In the event of a dispute between Principal
and contractor, Agent shall make independent judgment and fairly mediate the
dispute. If the dispute is arbitrated by government authorities or an
arbitrator, Agent must provide factual evidence.
Principal's Rights
20. Principal has the right to select, and sign contracts with, the
general contractor for the Project.
21. Principal has the right to confirm the scope, design standards,
planning, production process design and design functionality of the Project,
and to approve any change to the design of the Project.
22. Agent must obtain consent from Principal before changing the Chief
Management Engineer.
23. Principal has the right to request that Agent provide monthly
management report and special report within the scope of Project
management.
24. Upon discovery by Principal that Agent's personnel is not performing
its management duties pursuant to this Agreement, or Agent conspires with
contractors resulting in damages to the Project, principal has the right
to request that Agent replace its personnel, or to terminate the Agreement
and pay for damages jointly and severally.
Agent's Obligations
25. Agent's obligations shall be in effect during the term of this
Agreement. In the management process, the parties shall agree to extend
the Agreement if there is postponement or delay beyond the date provided
in the Agreement.
26. While Agent's obligations are in effect, Agent must fulfill its
obligations hereunder. If Agent's fault results in monetary damages, Agent
shall indemnify Principal (except for situations provided for in Section
24 hereof), which shall not exceed the total compensation for Agent's
management services (excluding tax).
27. Agent shall not be held liable for breaches by contractors in
Project quality and time for completion (drawing and delivery). Nor shall
Agent be held liable for failure to perform the Agreement in whole or in
part in the event of force majeure. Agent shall be held liable to
Principal for breaches as set forth in Section 5.
28. In the event any claim filed by Agent against the Principal is
dismissed, Agent shall indemnify Principal for all expenses incurred in
connection with the dismissed claim.
Principal's Obligations
29. Principal shall fulfill its obligations under this Agreement. In
the event of breach, Principal shall indemnify Agent for the damages. If
Agent sustains damages not caused by its own fault, Agent may demand
indemnification from Principal
30. In the event any claim filed by Principal against the Agent is
dismissed, Principal shall indemnify Agent for all expenses incurred in
connection with the dismissed claim.
Effectiveness, Amendment and Termination
31. If the management work is postponed or delayed caused by either
party, which results in Additional Work or extended time, Agent shall
promptly notify Principal of the situation and its potential consequences.
The management services shall be extended accordingly and Additional Work
shall be compensated.
32. If circumstances change after the execution of this Agreement, which
result in Agent's failure to perform the Agreement in whole or in part,
Agent shall promptly notify Principal. The time for the management services
shall be extended accordingly, which shall not exceed 42 days, and
compensated as agreed by the parties.
33. Upon completion of Project inspection and acceptance by the
Principal, Agent shall execute a Project Warrantee Service Agreement. This
Agreement shall terminate after payment of the remaining fees to Agent.
The obligations during the Warrant Service period shall be provided for in
the Special Conditions.
34. If a party wants to terminate this Agreement, it shall give the
other party 42 days notice. If termination of Agreement results in damages
to one party, the party responsible for the damages shall indemnify the
other, unless the party is exempted from liability by law.
Any amendment or termination of this Agreement shall be in writing, in the
absence of which the original Agreement shall remain effective.
35. If Agent does not receive payment for its service for a period of 30
days, and principal fails to give Agent an explanation in writing, or the
management services are suspended for over 6 months pursuant to Sections 33
and 34, Agent may notify Principal of its intention to terminate this
Agreement. If Principal dose not respond within 14 days after such notice,
Agent shall serve another termination notice. If Principal does not
respond with 42 days after the second termination notice, Agent may
terminate the Agreement, suspend services or performance of this Agreement
in while or in part. In such an event, Principal shall be liable for
its breach.
36. If Agent suspends or terminates the management services not due to
its own fault, the clean up work or resumption of work shall be deemed as
Extra Work. Agent shall be entitled to receive compensation for such
Extra Work.
37. If Agent fails to fulfill its management obligations without proper
justification, Principal shall notify Agent of its failure to perform.
If Agent does not respond within 21 days after the notice, Principal may
give Agent termination notice within 35 days after the first notice, upon
which this Agreement shall be terminated and Agent shall be liable for its
breach.
38. Termination of Agreement shall not affect the parties respective
rights and obligations hereunder.
Agent's Compensation
39. Compensation for normal management work, Additional Work and Extra
Work shall be calculated and paid on time pursuant to Section 40 of the
Special Conditions of this Agreement.
40. If Principal does not make payment for Agent's services on time,
it shall pay a penalty to Agent from the date as specified in the
Agreement.
41. The currency and exchange rate of the management fee shall be
specified in the Special Conditions.
42. If principal disagrees with Agent on all or part of management fee
invoiced by the Agent, it shall notify Agent of its disagreement within 24
hours after receipt of the invoice. Principal may not delay the part of
payment with which it does not disagree.
Other
43. All necessary expenses incurred by Agent's personnel in connection
with business travel, as well as material and equipment testing shall be,
upon approval by Principal, be reimbursed to Agent.
44. When expert consultation or assistance is need within the scope of
management, if the service is retained by Agent, Agent shall be responsible
for the expenses, and if the service is retained by Principal, Principal
shall be responsible for the expenses.
45. If a reasonable suggestion raised by Agent during the management
process results in savings to Principal, Principal shall give Agent a bonus
pursuant to Special conditions.
46. Agent's personnel at the Project site may not receive any
compensation or economic benefit from contractors for the Project. Agent
shall not engage in any activity in connection with this agreement which
may have a conflict of interest with Principal.
47. Agent may not disclose any confidential information provided or
claimed by the Principal, designer or contractors.
48. Agent shall retain the copyright to all the documentation compiled
by it. Principal may only use or reproduce such documentation for the
Project.
Dispute Resolution
49. Any dispute regarding damages resulting from breach or termination
of this Agreement shall be resolved through discussion. If the parties
fail to resolve the dispute, the matter shall be submitted to the
relevant authority for mediation. If the dispute still cannot be resolve,
it shall be submitted to arbitration or legal proceeding.
Part 3, Special Conditions
2. Governing laws and bases for management: Construction Law of the
People's Republic of China, Quality Management Regulations, Management
Rules, Beijing local laws and regulations, Contract Law of the People's
Republic of China, Construction Project Inspection and Acceptance
Standards, current national and local technical standards.
4. Management Scope and Work: Civil engineering, heating and electric
engineering work during the construction phase of 7 items of Model A
housing, including quality control, progress control, investment control,
contract management, information management, coordination among the
parties and construction safety.
9. External Condition shall include:
10. Principal shall provide engineering documentation by September 2003.
11. Principal shall give Agent written response with 7 days of Agent's
request.
12. Principal's representative shall be Huang Minjian.
15. Principal shall provide the following to Agent free of charge: 2
offices, 4 rooms for living accommodation, 4 computers, and various office
furniture.
The following are Agent's own facilities to be compensated by Principal:
16. During the term of management, Principal shall provide Agent with 0
personnel, whose work shall be assigned by the Chief Management Engineer.
When service is involved, such personnel shall only receive orders from
the Chief Management Engineer. Principal shall also provide Agent with
0 service personnel. Agent shall cooperate with such service personnel,
but shall not be held liable for such personnel's acts.
26. In the event of dereliction of duty by Agent, Agent agrees to be
responsible for damages not exceeding the total fees (excluding tax):
Damages = direct economic loss * compensation ratio (excluding tax)
Principal agrees to compensate Agent to be calculated as provided below at
times and in the amounts specified hereunder:
Total investment * Compensation rate = 18,548,000 RMB * 1.8% = 333,860 RMB.
Principal agrees to pay for Additional Work to be calculated as provided
below at times and in the amounts specified hereunder:
(Compensation = Additional work days * Contract Compensation / Total
management days) Additional work days * 100 RMB / additional work day.
Principal agrees to pay for Extra Work to be calculated as provided below
at times and in the amounts specified hereunder: Extra work days * 100 RMB
/ management service day.
41. The parties agree that payment shall be made in RMB, calculated at
_____exchange rate.
45. Bonus: Bonus amount = Savings * Compensation Rate
49. When there is a dispute, the parties shall promptly discuss. If
discussion fails, the parties agree to arbitration (no arbitration body is
provided for herein, if arbitration fails, the parties may bring legal
proceedings.)
Extra clause:
Management fees shall be paid in four installments: (1) 10% within 10 days
after the management personnel enters work site; (2) 60% with 1 week after
completion of roof on the main structure; (3) 25% within 14 days after
completion, inspection and acceptance; (4) 5% on the first anniversary of
completion, inspection and acceptance.