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SHANTOU CITY SHAOHE PEARL SEAWATER CULTURED CO., LTD.
CONTRACT
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CONTRACT
CHAPTER 1 - GENERAL PROVISIONS
Art. 1 In accordance with the China-Foreign Cooperative Joint Venture Law of
the People's Republic of China and other laws and regulations of China
on foreign-related matters, in adherence to the principles of equality
and mutual benefit and after friendly negotiations, Nan'ao Shaohe Pearl
Seawater Culture Co., Ltd. of Guangdong Province, Man Sang Jewellery
Co., Ltd. of Hong Kong and Xxxxx Xxxx Company o/b Golden Wheel
Jewellery Mfr. Ltd. of Hong Kong agree to jointly establish a
cooperative joint venture in Nan'ao County, Guangdong Province, the
People's Republic of China and therefore, have reached the following
terms and conditions for mutual observance.
CHAPTER 2 - COOPERATIVE JOINT VENTURE PARTIES
Art. 2 The parties to the cooperative joint venture shall be:
Party A: Nan'ao Shaohe Pearl Seawater Culture Co.,
Ltd. of Guangdong Province, registered with the Administration
for Industry and Commerce of Nan'ao County, Guangdong Province
Legal address: Zei'ao Bay, Shen'ao, Nan'ao County, Guangdong Province
Legal representative: Xie Shaohe, Chairman of Board, of Chinese
nationality
Banker: Industrial and Commercial Bank of China, Nan'ao Sub-branch
Bank account no.: 00000000-279
Telephone: 0000-0000000
Party B: Man Sang Jewellery Co., Ltd., registered in
Hong Kong, China
Legal address: 00/X, Xxxxxxx Xxxxx, 00 Xxxxxxx Xxxx South, Tsim Sha
Tsui, Kowloon, Hong Kong
Banker: The Hongkong and Shanghai Banking Corporation Limited, at
000 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxx, Xxxx Xxxx
Bank account no: 000-000000-000
Telephone: 00000-00000000
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Xxxxx xxxxxxxxxxxxxx: Xxxxx Xxx Xx, Xxxx-Xxxxxxxx of
Board, of Hong Kong, China nationality
Party C: Xxxxx Xxxx Company o/b Golden Wheel Jewellery
Mfr. Ltd., registered in Hong Kong, China
Legal representative: Xxxxxx Xxx Hung, Managing Director,
of Hong Kong, China nationality
Legal address: 16E, Alpha House, 00-00 Xxxxxx Xxxx, Xxxx Xxx Xxxx,
Xxxxxxx, Xxxx Xxxx
Banker: The Hongkong and Shanghai Banking Corporation Limited,
Kowloon Hotel Branch
Bank account no.: 000-000000-000
Telephone: 00000-00000000
CHAPTER 3 - ESTABLISHMENT OF COOPERATIVE JOINT VENTURE
Art. 3 Party A, Party B and Party C hereby agree to establish Shantou City
Shaohe Pearl Seawater Cultured Co., Ltd. (hereinafter referred to as the
"Company") as a cooperative joint venture in China according to the
Chinese-Foreign Cooperative Joint Venture Law of the People's Republic
of China and other laws and regulations of China on foreign-related
matters.
The Chinese name of the Company shall be: [ ]
The English name of the Company shall be: Shantou City Shaohe
Pearl Seawater Cultured Co., Ltd.
The legal address of the Company shall be Zei'ao Bay, Shen'ao,
Nan'ao County, Guangdong Province.
Art. 4 All activities of the Company shall comply with the laws, regulations
and decrees of the People's Republic of China.
Art. 5 The Company shall be a limited liability company. Party A, Party B and
Party C shall bear the liabilities of the Company to the extent of
their respective capital contributions to the Company and shall share
any profits, risks or losses of the Company in the ratio determined
hereunder.
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Art. 6 Objective: Adhering to the principles of equality, mutual
benefit and sincere cooperation, the Parties shall employ advanced and
appropriate techniques and scientific operation and management skills
to cultivate and process quality seawater pearls and endeavor to
achieve high competitiveness of the products in the international
market in respect of quality and price, in order that each of the
Parties can obtain satisfactory economic results.
Art. 7 Scope and scale of business of the Company: -
Scope of business: to produce and sell seawater cultured pearls and
other seawater cultivated products which are not subject to the export
quota and licensing by the State.
Scale of production: starting from the year 2002, to cultivate 5
million oysters and produce 1,000 kg of pearls per year, in order to
achieve an annual production value of RMBY.25 million.
CHAPTER 4 - TOTAL INVESTMENT AND REGISTERED CAPITAL
Art. 8 The total investment and registered capital of the Company shall be
RMBY.26.16 million, including fixed assets of RMBY.6.82 million, current
assets of RMBY.12.80 million and working capital of RMBY.6.54 million.
A China-registered accountant shall be appointed to verify the capital
contributed by each of the Parties and issue a capital verification
report.
Art. 9 The registered capital of the Company shall not be decreased during the
term of the Company. Any increase or transfer of the registered capital
of the Company shall be subject to the unanimous approval of the Board
of Directors and shall be reported to the original approval authority
for its approval. Upon such approval, the relevant registration change
procedures shall be completed with the administrative authority for
industry and commerce.
CHAPTER 5 - CONDITIONS FOR COOPERATION
Art. 10 The conditions for cooperation among the three Parties shall be as
follows:
Party A shall provide land use rights, leased sea area, buildings,
cultivation facilities, oysters under cultivation and other assets (as
more particularly described in the Capital Verification Report no. Shan
Qi Wei (1997) 45 of the Shantou City Qixin Auditors' Firm), which have a
total value of RMBY.19.62 million.
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Party B shall provide foreign exchange in cash with a value equivalent
to RMBY.5.10 million (as converted by taking the mean of the buying
rates and selling rates prevailing during the month of actual
contribution).
Party C shall provide foreign exchange in cash with a value equivalent
to RMBY.1.44 million (as converted by taking the mean of the buying
rates and selling rates prevailing during the month of actual
contribution).
Art. 11 Each Party shall pay their capital contribution in full within one
month after the date of issue of the Business License of the Company.
Art. 12 If additional capital contribution to the Company is necessary for its
production, such additional capital contribution shall be paid by
Party A, Party B and Party C in the ratio of 75 : 19.5 : 5.5
respectively after the unanimous approval of the Board of Directors
for such additional capital contribution has been obtained. Any
mortgage of the Company's assets for obtaining a loan or other
financing from overseas or a domestic financial institution shall be
valid only with the authorization of the Board of Directors of the
Company. The interest and other fees so incurred shall be deemed
expenditure of the Company and the risks so incurred shall be borne by
the Company.
Any transfer by a Party of all or part of its rights or obligations
hereunder shall be subject to the unanimous consent of the other
Parties and the approval of the original approval authority. Under the
same conditions, the other Parties shall have the right of first
refusal to such transfer.
CHAPTER 6 - RESPONSIBILITIES OF THE PARTIES
Art. 13 The parties shall perform the following responsibilities:
Party A: 1. to make registration for the Company with the relevant
governmental authorities of China and obtain the Approval
Certificate and the Business License;
2. to provide the land use rights, leased sea area,
buildings, cultivation facilities and oysters under
cultivation for the use of the Company as provided for
under Articles 10 and 11 hereof;
3. to recruit qualified management personnel, production
workers and other necessary personnel for the Company;
4. to assist the Company in purchasing (or leasing)
facilities, materials, office supplies, means of
transportation and telecommunications equipment in China;
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5. to second certain personnel to be responsible for the
daily production and operation of the Company; and
6. to be responsible for other matters as may be entrusted
by the Company.
Party B: 1. to pay its capital contribution in full
for the use of the Company as provided for under
Articles 10 and 11 hereof;
2. to assist the Company in seeking loans from financial
institutions in China or overseas;
3. to purchase products of the Company on a priority basis
under the same price condition;
4. to be responsible for technical learning and advertising
for the Company in China and abroad, and to provide the
Company with relevant economic information; and
5. to be responsible for other matters as may be entrusted
by the Company.
Party C: 1. to pay its capital contribution in full
for the use of the Company as provided for under
Articles 10 and 11 hereof; and
2. to be responsible for other matters as may be entrusted
by the Company.
CHAPTER 7 - SALE OF PRODUCTS
Art. 14 Products of the Company shall be sold in Mainland China, Hong Kong,
Macao and overseas markets. 90% of its products shall be for sale
overseas and 10% for sale in Mainland China.
Price of the products: total cost + reasonable profit = ex-factory
price
CHAPTER 8 - BOARD OF DIRECTORS
Art. 15 The Company shall establish its Board of Directors according to the
law. The date of registration of the Company shall be deemed the date
of establishment of its Board of Directors. The Board shall consist
of five Directors, three of whom shall be appointed by Party A, one by
Party B and one by Party C. The Chairman of Board shall be one of the
Directors appointed by Party A and the Vice Chairman shall be the
Director appointed by Party B.
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Art. 16 The Board of Directors shall be the highest authority of the Company
and shall decide all important matters of the Company. A decision
on any of the following important matters may be made only with the
consensus of the Board:
1. amendment of the Articles of Association of the
Company;
2. increase or transfer of the registered capital of
the Company;
3. termination or dissolution of the Company;
4. amalgamation of the Company with other economic
organizations;
5. other important matters which consensus of the
Board on a decision is required.
A decision on any other matters shall be made only with the consent
of more than half of the number of the Directors.
Art. 17 Each Director shall have a term of office for three years and shall
be eligible for another term upon reappointment. Each Party shall
have the right to appoint or replace a Director, subject to the
number of Directors which such Party shall have the right to
appoint, provided that the Board of Directors shall be notified in
writing of such appointment or replacement.
Art. 18 The Chairman of Board shall be the legal representative of the
Company. The Vice Chairman of Board shall assist the Chairman in
his work. In case the Chairman fails to perform his duties, the
Vice Chairman shall perform his duties on his behalf.
Art. 19 The Board of Directors shall meet at least once a year. The Board
meetings shall be convened and presided by the Chairman. Upon
request by more than one-third of the Directors, the Chairman may
convene an extraordinary Board meeting. Minutes of the Board
meetings shall be properly kept.
CHAPTER 9 - OPERATIONAL AND MANAGERIAL STRUCTURE
Art. 20 The Company shall have one General Manager, who shall be under the
leadership of Board. The post of the General Manager shall also
be taken up by the Chairman of Board. Functional departments
shall be set up to meet the needs of the Company in respect of
cultivation, processing and business.
Art. 21 The General Manager shall be directly responsible to the Board of
Directors, carry out the resolutions of the Board and organize the
daily operation and management of the Company in respect of
research and application of production techniques, and
cultivations, processing and sale of products.
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Art. 22 Any senior management personnel of the Company intending to resign
shall apply in writing to the Board one month in advance. In case
any of such senior management personnel has committed graft or
serious dereliction of duties, the Board may terminate his
appointment or dismiss him.
CHAPTER 10 - ACCOUNTING, TAXATION, FOREIGN EXCHANGE AND INSURANCE
Art. 23 Specific plans shall be formulated for the accounting system of the
Company in accordance with the relevant laws and regulations of
China, statutes on accounting system of foreign-invested enterprises
and the actual management requirements of the Company and shall be
submitted to the Board for its approval.
Art. 24 The calendar year shall be taken as the fiscal year of the Company.
In other words, the fiscal year of the Company shall begin on
January 1 and end on December 31 of the same year. The accounting
system of the Company shall adopt the internationally used accrual
basis and debit and credit accounting system. Renminbi shall be
taken as the base bookkeeping currency. Any transactions in a
foreign currency shall be recorded in such foreign currency and the
base bookkeeping currency as converted in the exchange rate at the
time the transaction is actually made.
Art. 25 The Company shall establish a bookkeeping system in accordance with
the relevant rules. All vouchers shall be recorded in Chinese. The
accounting department shall prepare accounting statements
periodically. The annual accounts shall be audited by a
China-registered accountant, who shall then issue an auditor's
report. The auditor's report, annual account and profits
distribution plan of each year shall be submitted to the Board of
Directors.
Art. 26 The Company shall open and maintain a relevant foreign currency
account and a Renminbi account with a bank approved to conduct
foreign exchange business by the administration for foreign exchange
in the place of registration of the Company. Except only
transactions which may be settled in cash, all transactions of the
Company shall be settled through the bank.
Art. 27 The Company shall pay taxes according to the taxation laws. Upon
application to and approval by the taxation authority according to
the taxation laws, the Company may enjoy exemption for or reduction
of enterprise income tax and/or other preferential treatments.
Art. 28 Insurance shall be obtained for the property of the Company from an
property insurance company in China. Matters relating to the
insurance for property shall be decided by the Board.
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CHAPTER 11 - DISTRIBUTION OF PROFITS AND SHARING OF RISKS
Art. 29 The Three Funds shall be appropriated in the required proportion
from the annual profits of the Company after income tax has been
paid in the tax period according to the law. Any profits or losses
shall be shared among Party A, Party B and Party C in the ratio
75% : 19.5% : 5.5%.
CHAPTER 12 - LABOR MANAGEMENT AND TRADE UNION
Art. 30 The Company shall establish a trade union organization according to
the Constitution of a Trade Union in China, provide convenience for
its necessary activities and appropriate 2% of the total salary
actually paid, as funds for the trade union.
Art. 31 Recruitment, resignation, wages, welfare, labor insurance, labor
protection and labor discipline of staff and workers of the Company
shall be dealt with according to the Provisions on Labor Management
in Enterprises with Foreign Investment and shall be reported to the
labor authority in the place of registration of the Company.
CHAPTER 13 - TERM OF JOINT VENTURE AND DISPOSAL
OF ASSETS UPON ITS EXPIRATION
Art. 32 The term of the Company shall be 11 years and shall begin from the
date of issue of the Business License of the Company.
Art. 33 If Party A, Party B and Party C unanimously consent to an
extension of the term of the Company, an application for such
extension shall be made in writing to the original approval
authority six months prior to the expiration of the original term
after the Board of Directors has passed the relevant resolution.
The term shall become extended upon approval by the original
approval authority.
Art. 34 Upon expiration or earlier termination of the term of the Company,
the Company shall be liquidated according to the law. Net assets
of the Company after its liquidation shall be distributed among
Party A, Party B and Party C according to the ratio in which any
profits of the Company are distributed among the Parties.
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CHAPTER 14 - AMENDMENT, VARIATION AND TERMINATION OF CONTRACT
Art. 35 Any amendment or variation of this Contract shall be subject to
the signing of an agreement to such effect in writing by Party A,
Party B and Party C and the approval of the original approval
authority.
Art. 36 In the event that this Contract fails to be performed because of
earthquakes, natural disasters, wars or other force majeure, or
operation of the Company fails to continue because of continual
losses, the term of the Company and this Contract may be terminated
earlier upon unanimous consent of the Board of Directors and the
approval of the original approval authority.
Art. 37 In the event that non-performance or serious breach by any Party
hereto of the obligations provided in this Contract or the Articles
of Association of the Company causes failure of the operation of
the Company to be continued, such Party shall be deemed to have
terminated this Contract unilaterally. The non-breaching Parties
shall have the right to claim damages from the breaching Party and
to apply to the original approval authority for earlier termination
of the term of the Company and this Contract, as provided in this
Contract. If Party A, Party B and Party C agree to continue the
operation of the Company, the breaching Party shall compensate the
financial losses caused to the non-breaching Parties.
CHAPTER 15 - LIABILITY FOR BREACH
Art. 38 If Party A, Party B or Party C fails to promptly and fully pay the
capital contribution as required by Articles 10 and 11 hereof, the
breaching Party shall pay the non-breaching Parties a breach
penalty equivalent to 5% of the capital contribution originally
payable, for each overdue month starting from the first month
after the original due date. If any capital contribution is overdue
for three months, the non-breaching Parties shall have the right to
terminate this Contract according to Article 37 hereof and claim
damages from the breaching Party for losses caused in addition to
the accumulative breach penalties as required above.
CHAPTER 16 - APPLICABLE LAW
Art. 39 The formation, validity, interpretation and performance of this
Contract or settlement of disputes relating to this Contract shall
be governed by the laws of the People's Republic of China.
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CHAPTER 17 - SETTLEMENT OF DISPUTES
Art. 40 Any disputes caused by or relating to the performance of this
Contract shall be settled by Party A, Party B and Party C through
friendly consultation. If any dispute fails to be settled through
friendly consultation, the dispute shall be submitted to the
Foreign Economic and Trade Arbitration Commission of the China
Council for the Promotion of International Trade for arbitration in
accordance with its arbitration rules. The award of such
arbitration shall be final and binding on each of the Parties.
The cost for arbitration shall be borne by the losing Party.
CHAPTER 18 - MISCELLANEOUS
Art. 41 This Contract shall become effective upon signing by the legal
representatives of Party A, Party B and Party C and then approval
by the approval authority. Any amendment or supplemental contract
shall have the same effect as this Contract.
Art. 42 This Contract shall be written in Chinese in four originals. Party
A, Party B and Party C shall each hold one of the originals and
the remaining original shall be filed with the approval authority.
Several copies of this Contract shall be made and they shall have
the same effect as the originals.
Party A: [Seal of Nan'ao Shaohe Pearl Seawater Culture Co., Ltd.]
Legal representative: Xie Shaohe
Party B: [Seal of Man Sang Jewellery Co., Ltd.]
Legal representative: Xxxxx Xxx Po
Party C: [Seal of Xxxxx Xxxx Company o/b Golden Wheel Jewellery Mfr. Ltd.]
Legal representative: Xxxxxx Xxx Hung
Date of signing: November 8, 1997
Place of signing: Chenghai City, Guangdong Province, China
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